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[BAAN LOGO]
Xxxxxx X. Xxxxxxxx
Interim Chief Executive Officer
June 14, 2000
Dear Fellow Baan Stockholder:
On behalf of Xxxx and your Supervisory and Management Boards, I am pleased
to recommend to you the Offer Agreement (entered into and announced on May 31,
2000) with Invensys plc, a global electronics and engineering company based in
England and listed on the London Stock Exchange. Under the Offer Agreement,
Invensys is offering to purchase all of the outstanding common shares of Baan
for a price of E2.85 per share subject to the terms and conditions contained in
the Offer to Purchase and the related Letter of Transmittal that are included in
its offering materials.
Your Supervisory and Management Boards have engaged in a serious, xxxxx and
often difficult examination of our company's present condition and future
prospects in light of the serious challenges we face and continue to face. In
making their decisions to enter into the Offer Agreement and recommend the
Offer, your Boards have confronted the following challenges:
1. Absent a significant restructuring or capital infusion, Baan was not
likely to survive as an independent company in light of the operating
losses incurred over the past seven quarters (which were likely to
continue for the foreseeable future), the increasing difficulties in
generating revenue because of current and potential customers' concerns
about Baan's ongoing viability and its declining share prices. Our
independent accountants also advised us that in their opinion on the
1999 financial statements, when completed, they would likely express
substantial doubt as to our company's ability to continue as a going
concern, absent a restructuring plan and adequate financing being in
place.
2. The restructuring plans under review would have required a fundamental
change in the basic nature of Baan, including: A switch to an almost
entirely indirect sales strategy away from the direct sales strategy
that built our company, significant budget reductions in research and
development (which historically has been one of our main strengths), a
dramatic scaling-back or outright sale of our consulting and education
businesses and extensive reductions in our workforce in connection with
these measures.
3. The restructuring plans under review would have required significant
additional equity or debt financing. Because of our company's financial
situation and declining share price, the sources for this funding were
uncertain. Based on our ongoing discussions, the terms of any such
funding were likely to be onerous, and any equity financing was likely
to create substantial dilution to existing shareholders.
4. Because Baan is likely to end the second quarter in a negative
shareholders' equity position, the Amsterdam Exchanges are likely to
impose "special listing conditions" on our shares, which would make
additional equity financing even more difficult to obtain and would
likely add to customer concerns regarding the viability of our company.
Since the resignations of our former Chief Executive Officer and Chief
Financial Officer in January of this year, your Boards and I have diligently
considered and sought to implement a wide range of alternatives to address the
challenges faced by our company, including:
1. Initiatives to raise additional equity, such as the (euro)150.0 million
equity Put Option Agreement with Bear Xxxxxxx and the conversion and
exchange of $50.3 million in aggregate principal amount of our
Convertible Notes due 2001 for common shares in March of this year;
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2. The sale of assets that were not a part of our core strategy, such as
the sale of Coda and our stake in Meta4 in March of this year and the
potential sale of core assets such as our consulting, education, and
parts of our research and development businesses;
3. Restructuring plans developed in conjunction with our outside advisors;
4. Equity investments by significant customers, financial investors and
financial institutions;
5. Strategic partnerships with other companies; and
6. A sale of the company.
Having considered the challenges facing our company and having evaluated
all of the alternatives to the acquisition by Invensys, your Boards strongly
believe that the Invensys offer is by a wide margin the best available solution
for our company. Your Boards have also received the written opinion of Lazard
Freres & Co. LLC, our company's financial advisor, that, as of May 30, 2000, the
price per share of (euro)2.85 to be paid in the Invensys offer is fair, from a
financial point of view to the shareholders of Baan, subject to the
qualifications and assumptions stated in that opinion. Since the Offer Agreement
was announced on May 31, 2000, we have not received a superior proposal.
We retained Lazard in January of this year and have been in discussions
with a number of potential partners, investors and acquirors since then. Prior
to receiving Invensys's offer, however, we received only one other offer to
acquire our company. That offer was for a price substantially less than the
price offered by Invensys. Therefore, your Boards believe that the offer of
Invensys is fair to you and our company and in your best interests and recommend
that all shareholders tender their shares in the offer.
In the event that the Invensys offer is not completed, there may be
alternatives to finance the restructuring of our company, and there may be other
potential buyers for all or some of our company's assets. The Supervisory and
Management Boards have no reason to believe, however, that any of those
alternatives would be economically superior to the Invensys offer and could
present certain other disadvantages for the shareholders and our company
(including substantial dilution and restrictive covenants).
I, like the other members of your management and the members of both the
Management and Supervisory Boards, currently intend to tender my shares into
Invensys's offer (a total of approximately 800,000 shares or 0.3% of our
company's issued and outstanding shares).
For more information regarding the terms of the offer, the background of
the offer and the reasons for your Boards' recommendation, we urge you to read
our Schedule 14D-9 that is enclosed with this letter and is being filed today
with the U.S. Securities and Exchange Commission.
In addition to the Schedule 14D-9, also enclosed is the Offer to Purchase,
dated June 14, 2000, of Invensys, together with related materials. These
documents set forth the terms and conditions of the offer and provide
instructions as to how to tender your shares. We urge you to read the enclosed
materials carefully.
On behalf of your Boards, your management and the employees of Xxxx, I
thank you for the support that you have given our company.
Yours sincerely,
/s/ Xxxxxx X. Xxxxxxxx
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Xxxxxx X. Xxxxxxxx
Interim Chief Executive Officer
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