in cash. As with each of its proposals, the Special Committee determined the amount and form of consideration to be proposed after discussing and analyzing AFC's then existing proposal and deliberating with its financial and legal advisors as to how best to obtain for the APY Public Stockholders the most favorable transaction available. After discussions with Xxxxxxx Xxxxx, including consideration of the impact of the increase in the trading prices of both AFC and APY since the announcement of the Initial AFC Merger Proposal, AFC management instructed Xxxxxxx Xxxxx to advise Salomon Brothers that AFC believed that merger consideration in which each share of APY Common Stock held by the APY Public Stockholders would be exchanged for 0.4 of a share of AFC Common Stock and $16.30 in cash would be more appropriate. On January 24, 1997, at a Special Meeting, the AFC Board approved the issuance of certain capital securities issued by a subsidiary trust of AFC to finance a portion of the merger consideration. At the meeting, AFC management and Xxxxxxx Xxxxx summarized for the AFC Board the status of its negotiations with the Special Committee. See "The Merger Transactions--Financing the Merger; Fees and Expenses." The Special Committee met several times between January 25th and 28th to discuss the negotiations, including AFC's response and additional information relating to the valuation of APY. The Special Committee and its advisors reviewed a number of factors relating to the valuation of APY, including the effect of recapitalizing APY, APY's 1997 projected pro forma earnings per share, the proposed financing for the Merger Transactions, and the fourth quarter and year-end results of operations for APY and AFC. The Special Committee also discussed Salomon Brothers' assessment of various alternative proposals that AFC might submit. After considering the advice of Salomon Brothers, the Special Committee concluded that merger consideration of 0.4 of a share of AFC Common Stock and $16.30 in cash was not acceptable. The Special Committee and its advisors then reviewed a range of options such as communicating only that AFC's proposed valuation of APY was not acceptable, rejecting any business combination at this time or proposing an increase in the cash portion of the merger consideration. On January 29, 1997 Salomon Brothers met with Xxxxxxx Xxxxx and indicated that the Special Committee did not consider the revised proposal of AFC to be acceptable. Salomon Brothers also indicated that the Special Committee had authorized a proposal pursuant to which each share of 22
Appears in 3 contracts
Samples: Agreement and Plan of Merger Agreement and Plan of Merger (Allmerica Financial Corp), Agreement and Plan of Merger Agreement and Plan of Merger (Allmerica Financial Corp), Agreement and Plan of Merger Agreement and Plan of Merger (Allmerica Financial Corp)
in cash. As with each of its proposals, the Special Committee determined the amount and form of consideration to be proposed after discussing and analyzing AFC's then existing proposal and deliberating with its financial and legal advisors as to how best to obtain for the APY Public Stockholders the most favorable transaction available. After discussions with Xxxxxxx Xxxxx, including consideration of the impact of the increase in the trading prices of both AFC and APY since the announcement of the Initial AFC Merger Proposal, AFC management instructed Xxxxxxx Xxxxx to advise Salomon Brothers that AFC believed that merger consideration in which each share of APY Common Stock held by the APY Public Stockholders would be exchanged for 0.4 of a share of AFC Common Stock and $16.30 in cash would be more appropriate. On January 24, 1997, at a Special Meeting, the AFC Board approved the issuance of certain capital securities issued by a subsidiary trust of AFC to finance a portion of the merger consideration. At the meeting, AFC management and Xxxxxxx Xxxxx summarized for the AFC Board the status of its negotiations with the Special Committee. See "The Merger Transactions--Financing the Merger; Fees and Expenses." The Special Committee met several times between January 25th and 28th to discuss the negotiations, including AFC's response and additional information relating to the valuation of APY. The Special Committee and its advisors reviewed a number of factors relating to the valuation of APY, including the effect of recapitalizing APY, APY's 1997 projected pro forma earnings per share, the proposed financing for the Merger Transactions, and the fourth quarter and year-end results of operations for APY and AFC. The Special Committee also discussed Salomon Brothers' assessment of various alternative proposals that AFC might submit. After considering the advice of Salomon Brothers, the Special Committee concluded that merger consideration of 0.4 of a share of AFC Common Stock and $16.30 in cash was not acceptable. The Special Committee and its advisors then reviewed a range of options such as communicating only that AFC's proposed valuation of APY was not acceptable, rejecting any business combination at this time or proposing an increase in the cash portion of the merger consideration. On January 29, 1997 Salomon Brothers met with Xxxxxxx Xxxxx and indicated that the Special Committee did not consider the revised proposal of AFC to be acceptable. Salomon Brothers also indicated that the Special Committee had authorized a proposal pursuant to which each share of 22APY Common Stock held by the APY Public Stockholders would be exchanged for .415 of a share of AFC Common Stock and $19.50 in cash. AFC then met with its advisors and considered several alternatives, including terminating merger discussions and increasing the cash portion of the merger consideration. In determining how best to proceed, AFC considered the impact of the Merger Transactions on AFC's earnings and the effect on the valuation of APY of various alternative capital structures of APY. On February 4, 1997, representatives of AFC and Xxxxxxx Xxxxx spoke by telephone with Salomon Brothers and proposed that each share of APY Common Stock held by the APY Public Stockholders be exchanged for 0.3 of a share of AFC Common Stock and $21.04 in cash. 21 On February 5th and 6th, the Special Committee met to consider AFC's latest proposal and discuss the terms of the draft Merger Agreement. The Special Committee also discussed with its advisors the possibility of including warrants as a component of the merger consideration. Following these discussions, on February 6, 1997 representatives of Salomon Brothers met with Xxxxxxx Xxxxx to convey the Special Committee's proposal that each share of APY Common Stock be exchanged for .25 of a share of AFC Common Stock, plus $22.83 in cash and a warrant to purchase 0.17 of a share of AFC Common Stock and that consummation of the merger be conditioned on the approval of the merger by a majority of the APY Public Stockholders. After discussion with AFC, Xxxxxxx Xxxxx, upon instruction from AFC, responded to Salomon Brothers that AFC management had rejected the Special Committee's proposal because the valuation of APY reflected by the proposal was in excess of what AFC believed was an appropriate valuation for APY. AFC management also indicated that AFC would not consider a transaction conditioned on approval by a majority of the APY Public Stockholders because such approval was not required under applicable law and that the interests of the APY Public Stockholders were being represented by the Special Committee. On February 7, 1997, after the Special Committee met with its advisors, Xx. Xxxxxx and representatives of Salomon Brothers telephoned Messrs. O'Brien and Parry of AFC and representatives of Xxxxxxx Xxxxx to communicate the Special Committee's latest proposal pursuant to which each share of APY Common Stock would be exchanged for 0.4 of a share of AFC Common Stock plus $18.60 in cash, with an asymmetrical collar on the price which would, between signing and closing of the merger, protect APY Public Stockholders against a decline in the price of AFC Common Stock of greater than 7.5% and allow APY Public Stockholders to participate in any increase in AFC's stock price. During this conversation Salomon Brothers recounted the Special Committee's good faith deliberations and negotiations to date and the Special Committee's desire to negotiate a transaction that was fair to the APY Public Stockholders. Later that day, after discussions among AFC and its advisors, representatives of Xxxxxxx Xxxxx, upon instruction from AFC management, spoke by telephone with Xx. Xxxxxx and representatives of Salomon Brothers and suggested 0.4 of a share of AFC Common Stock and $17.47 cash as per share merger consideration, with a 10% asymmetrical collar on the AFC Common Stock price which would, between signing and closing of the merger, protect APY Public Stockholders against a decline in AFC's stock price of greater than 10% and allow APY Public Stockholders to participate in any appreciation in AFC's stock price. On February 8, 1997, the Special Committee met with its advisors to discuss AFC's latest offer. The Special Committee considered alternative responses to AFC's offer, various conditions to signing a merger agreement with AFC and the pending litigation. On the following day, Salomon Brothers conveyed the Special Committee's proposal that the merger consideration consist of 0.4 of a share of AFC Common Stock and $17.47 in cash, with a similar asymmetrical collar of 6.5% instead of 10%. After reviewing the proposal and considering the effect of the asymmetrical collar, AFC management rejected the Special Committee's proposal. However, AFC management indicated that it would, provided the parties could finalize the terms of the Merger Agreement, consider a transaction consisting of the same terms as the Special Committee's most recent proposal, but with a symmetrical 6.5% collar which would allow APY Public Stockholders to participate in up to 6.5% appreciation in AFC's stock price, while protecting the APY Public Stockholders against a decline in AFC's stock price of more than 6.5%. The parties spent the next several days analyzing the most recent proposal and negotiating the final terms and conditions of the Merger Agreement. As a result of continued negotiations among AFC, the Special Committee, Xxxxxxx Xxxxx and Xxxxxxx Xxxxxxxx, the amount of the Standard Consideration for each share of APY Common Stock exchanged in the Merger was increased to $17.60 in cash and 0.4 of a share of AFC Common Stock. In addition, APY Public Stockholders could elect, subject to proration, to receive the merger consideration all in stock and receive 0.85714 of a share of AFC Common Stock or all in cash at $33.00. Additionally, the Merger Agreement provided that if AFC's 10-day average closing stock price on the date that ends five trading days prior to the consummation of the merger is below $36.00 per share or above $41.00 per 22 share, the Merger Consideration would be adjusted. See "The Merger Transactions--The Merger Agreement--APY Merger Consideration." Counsel for AFC also met by telephone with attorneys for the plaintiffs in the Delaware Actions (as defined below) to determine whether there was the basis for a settlement. On February 19, 1997, the parties to the lawsuits executed a Memorandum of Understanding (the "MOU") memorializing an agreement- in-principle to settle the lawsuits. Under the terms of the MOU, the parties to the lawsuits have agreed to use their best efforts to execute and present to the Delaware Chancery Court on or before April 30, 1997, a formal Stipulation of Settlement. See "Special Factors--Certain Litigation." PURPOSE OF AND REASONS FOR THE MERGER TRANSACTIONS AFC is pursuing the Merger Transactions in order to increase the proportion of its earnings from APY's property and casualty operations, which are a key element of AFC's future operations and strategy. Additionally, AFC believes that the Merger Transactions will result in a more stable surplus position for FAFLIC, since the APY Common Stock and therefore FAFLIC's surplus, would no longer be linked to a fluctuating market price. Further, the Merger Transactions would create a simplified corporate structure for AFC, allowing it greater efficiency and flexibility in its utilization of capital. Lastly, the Merger Transactions would provide AFC with certain administrative cost savings, primarily resulting from the elimination of certain APY shareholder- related expenses and the elimination of taxes on APY dividends to its direct shareholder, SMA Financial Corp. Before deciding to proceed with the Merger Transactions by means of the Merger and the Recapitalization, the AFC Board considered different structures and alternatives to accomplishing its goal of holding, directly or indirectly, all of the outstanding stock of APY. The AFC Board reviewed the different types of consideration that could be offered to APY stockholders, including all cash, all capital stock and various combinations of the components of cash and capital stock offered. AFC determined, however, that the Merger Consideration, which provides holders of APY Common Stock with the right to make an election between different forms of consideration, subject to certain limitations, provides it and the APY stockholders with the greatest flexibility and benefit while considering the interests of the AFC stockholders. DETERMINATION OF THE SPECIAL COMMITTEE; APPROVAL OF THE APY BOARD OF DIRECTORS On February 19, 1997, the Special Committee met with Salomon Brothers and LeBoeuf, Lamb, Xxxxxx & XxxXxx to discuss the terms and conditions of the Merger. At this meeting Salomon Brothers made a presentation to the Special Committee of the terms of the proposed Merger and delivered its written opinion to the Special Committee that, as of such date, the consideration to be received by the APY Public Stockholders in the Merger is fair to such holders from a financial point of view. After discussions among the members of the Special Committee and its advisors, the Special Committee determined that the terms of the Merger and the Merger Agreement were fair to, and in the best interests of, the APY Public Stockholders and that it would recommend that the APY Board approve the Merger and the Merger Agreement. Based on the recommendation of the Special Committee, the APY Board determined that the Merger Transactions are fair, to the APY Public Stockholders, and in the best interests of APY and the APY Public Stockholders and approved the Charter Amendment and the Merger Transactions. In so finding, the APY Board relied on the recommendation and report of the Special Committee. REASONS FOR THE SPECIAL COMMITTEE'S RECOMMENDATION The Merger Consideration per share of APY Common Stock to be received by APY Public Stockholders under the terms of the Merger is the result of negotiations between the Special Committee and AFC. The Special Committee based its decision to recommend that the APY Board approve the Merger and the Merger Agreement on a number of factors, including the following: 1. The assistance, advice and opinion of Salomon Brothers, including Salomon Brothers' financial analysis and review of financial matters relating to APY and AFC, and its written opinion that, as of the date of such 23
Appears in 1 contract
Samples: Agreement and Plan of Merger Agreement and Plan of Merger (Allmerica Financial Corp)
