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SUPPLEMENT
TO
OFFER TO PURCHASE DATED NOVEMBER 5, 1997
ALL SHARES OF COMMON STOCK
OF
GUARANTY NATIONAL CORPORATION
AT
$36.00 NET PER SHARE IN CASH
BY
ORION CAPITAL CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS, AS HEREBY EXTENDED, WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK TIME, ON FRIDAY,
DECEMBER 5, 1997, UNLESS THE OFFER IS FURTHER EXTENDED.
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THE OFFER IS BEING MADE PURSUANT TO THE AGREEMENT AND PLAN OF MERGER DATED
AS OF OCTOBER 31, 1997 (THE "MERGER AGREEMENT") BY AND BETWEEN ORION CAPITAL
CORPORATION ("ORION") AND GUARANTY NATIONAL CORPORATION ("GUARANTY"). THE BOARD
OF DIRECTORS OF GUARANTY HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE
OFFER AND THE MERGER, HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO,
AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF GUARANTY AND RECOMMENDS
ACCEPTANCE OF THE OFFER BY THE SHAREHOLDERS OF GUARANTY.
ORION'S OBLIGATION TO PURCHASE SHARES OF COMMON STOCK, PAR VALUE $1.00 PER
SHARE, OF GUARANTY (THE "SHARES") PURSUANT TO THE OFFER IS CONDITIONED UPON,
AMONG OTHER THINGS, (i) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO
THE EXPIRATION DATE A NUMBER OF SHARES WHICH, EXCLUDING SHARES OWNED BY ORION
AND ITS WHOLLY-OWNED SUBSIDIARIES (THE "TENDER SHARES") WILL CONSTITUTE AT LEAST
50.01% OF THE TOTAL NUMBER OF TENDER SHARES AS OF THE DATE THE SHARES ARE
ACCEPTED FOR PURCHASE BY ORION PURSUANT TO THE OFFER (THE "MINIMUM SHARE
CONDITION") AND (ii) ALL REGULATORY APPROVALS, IF ANY, REQUIRED TO CONSUMMATE
THE OFFER HAVING BEEN OBTAINED ON TERMS AND CONDITIONS SATISFACTORY TO THE ORION
BOARD OF DIRECTORS (THE "REGULATORY APPROVAL CONDITION"). THE OFFER IS ALSO
SUBJECT TO OTHER TERMS AND CONDITIONS. SEE "THE OFFER" -- SECTION 10 IN ORION'S
OFFER TO PURCHASE DATED NOVEMBER 5, 1997
IMPORTANT
Any shareholder desiring to tender all or any portion of such
shareholder's Shares should either (i) complete and sign the original Letter of
Transmittal previously circulated with the Offer to Purchase, dated November 5,
1997, or a facsimile thereof in accordance with the instructions in such Letter
Of Transmittal and deliver the Letter of Transmittal with the Shares and all
other required documents to the Depositary, or follow the procedure for
book-entry transfer set forth in THE OFFER -- Section 3 of the Offer to
Purchase, dated November 5, 1997, or (ii) request his broker, dealer, commercial
bank, trust company or other nominee to effect the transaction for such
shareholder. A shareholder having Shares registered in the name of a broker,
dealer, commercial bank, trust company or other nominee must contact such person
if he desires to tender his Shares.
Any shareholder who desires to tender Shares and cannot deliver such
Shares and all other required documents to the Depositary by the expiration of
the Offer must tender such Shares pursuant to the guaranteed delivery procedure
set forth in THE OFFER - Section 3 of the Offer to Purchase, dated November 5,
1997.
Questions and requests for assistance or additional copies of this
Supplement, the Letter of Transmittal, the Offer to Purchase, dated November 5,
1997, and other tender offer materials may be directed to the Information Agent
or the Dealer Manager at their respective addresses and telephone numbers set
forth on the back cover of this Supplement to the Offer to Purchase.
THIS SUPPLEMENT SHOULD BE READ IN CONJUNCTION WITH THE OFFER TO PURCHASE,
DATED NOVEMBER 5, 1997, AND THE RELATED LETTER OF TRANSMITTAL, COPIES OF WHICH
MAY BE OBTAINED AT XXXXX'S EXPENSE IN THE MANNER SET FORTH ON THE BACK COVER OF
THIS SUPPLEMENT. THE OFFER TO PURCHASE, DATED NOVEMBER 5, 1997, THIS SUPPLEMENT
AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD
BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR
MERITS OF SUCH TRANSACTION NOR
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UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
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The Dealer Manager for the Offer is:
XXXXXXXXX, XXXXXX & XXXXXXXX
SECURITIES CORPORATION
December 1, 1997
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To the Holders of Common Stock of
GUARANTY NATIONAL CORPORATION:
This Supplement dated December 1, 1997, to the Offer To Purchase (this
"Supplement") supplements the Offer to Purchase, dated November 5, 1997 (the
"Original Offer to Purchase"). Together, the Original Offer to Purchase and this
Supplement are referred to herein as the "Offer to Purchase.
Except as otherwise stated herein, the terms and conditions set forth in
the Original Offer to Purchase and the Letter of Transmittal remain applicable
in all respects to the Offer (as defined below).
This Supplement contains important information which should be read
carefully before any decision is made with respect to the Offer.
This Supplement is being delivered for the purpose of extending the time
period of the Offer as well as supplementing certain information concerning the
Offer. Capitalized terms used in this Supplement that are not defined herein
shall have the meanings ascribed to such terms in the Original Offer to Purchase
or, as appropriate, in the Solicitation/Recommendation Statement on Schedule
14D-9 of Guaranty pursuant to Section 14(d)(4) of the Securities Exchange Act,
dated November 5, 1997, which has previously been disseminated by Guaranty to
holders of Shares.
SHARES TENDERED PURSUANT TO THE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR
TO THE EXPIRATION DATE (AS DEFINED HEREIN) AND, UNLESS THERETOFORE ACCEPTED FOR
PAYMENT PURSUANT TO THE OFFER, ALSO MAY BE WITHDRAWN AT ANY TIME AFTER JANUARY
3, 1998. SEE THE OFFER -- SECTION 4 OF THE ORIGINAL OFFER TO PURCHASE FOR THE
PROCEDURES FOR WITHDRAWING SHARES TENDERED PURSUANT TO THE OFFER.
ON NOVEMBER 25, 1997, XXXXX AND GUARANTY JOINTLY FILED AMENDMENT NO. 1 TO
THE RULE 13e-3 TRANSACTION STATEMENT ON SCHEDULE 13E-3 FILED BY ORION ON
NOVEMBER 5, 1997. BY SUCH FILING NEITHER ORION NOR GUARANTY CONCEDES THAT RULE
13E-3 UNDER THE SECURITIES EXCHANGE ACT IS APPLICABLE TO THE OFFER OR THE
MERGER.
SHAREHOLDERS WHO HAVE PREVIOUSLY VALIDLY TENDERED AND NOT PROPERLY
WITHDRAWN THEIR SHARES PURSUANT TO THE OFFER ARE NOT REQUIRED TO TAKE ANY
FURTHER ACTION, EXCEPT AS MAY BE REQUIRED BY THE PROCEDURE FOR GUARANTEED
DELIVERY IF SUCH PROCEDURE WAS UTILIZED.
INTRODUCTION
Orion Capital Corporation hereby offers to purchase all of the outstanding
Shares, at $36.00 per Share, net to the seller in cash, without interest, upon
the terms and subject to the conditions set forth in the Offer to Purchase and
in the related Letter of Transmittal (which, as amended or supplemented from
time to time, together constitute the "Offer").
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, SATISFACTION OF THE
REGULATORY CONDITION AND THE MINIMUM SHARE CONDITION. SUCH CONDITIONS AND THE
OTHER CONDITIONS TO THE OFFER ARE SET FORTH IN THE OFFER -- SECTION 10.
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The information set forth under "special factors" in the original offer to
purchase is hereby supplemented as follows:
SPECIAL FACTORS
BACKGROUND OF THE TRANSACTION
From November, 1995 to March, 1996, Design Professionals Insurance
Company, a wholly-owned subsidiary of Orion, acquired an additional 80,000
Shares in open market purchases. The range of prices paid by Design
Professionals Insurance Company was between $13.38 and $14.00.
FAIRNESS OF THE OFFER
Orion's Board of Directors received a report from Xxxxxxxxx, Xxxxxx &
Xxxxxxxx Securities Corporation ("DLJ") on various techniques which might be
utilized to assist in determining the price and structure of a possible
transaction. The report consisted of discussion materials which DLJ provided on
September 12, 1997 to the Guaranty Board of Directors in connection with its
September 12 meeting, copies of which were also supplied to the Orion Directors
for their information, positing a transaction whereby Orion would purchase the
remaining 19% of Guaranty's outstanding shares not already owned by Orion and
its wholly-owned subsidiaries for a value of $30.25 per share comprised of
$20.17 in cash and $10.08 in Orion common stock (the "September Case"). These
materials discussed the benefits of consideration consisting of a combination of
both stock and cash, alternative options with respect to the equity component of
the Offer and stock performance data for Orion and Guaranty.
DLJ compared the September Case to selected publicly-announced merger and
acquisition transactions (the "Selected Acquisitions").
The September Case ratio of equity purchase price to operating net income
of 16.9x compared to a low of 10.9x, a median of 12.2x and a high of 28.6x for
the Selected Acquisitions. The September Case ratio of equity purchase price to
general accepted accounting principles ("GAAP") shareholders' equity of 1.91x
compared to a low of 0.97x, a median of 1.60x and a high of 2.88x for the
Selected Acquisitions. The September Case ratio of total purchase price to
statutory accounting principles ("SAP") net operating income ("NOI") of 18.7x
compared to a low of 10.2x, a median of 16.9x and a high of 24.2x for the
Selected Acquisitions. The September Case ratio of total purchase price to SAP
capital and surplus ("C&S") of 2.19x compared to a low of 1.16x, a median of
2.59x and a high of 3.27x for the Selected Acquisitions. These multiples
included an average implied equity valuation range with a low of $229.7 million,
a median of $415.8 million, and a high of $700.2 million and an average implied
price per share range from $15.29 to $46.60. The median of the average implied
price per share of $27.67 was lower than the hypothetical $30.25 per share
offer.
DLJ also compared public valuations of selected non-standard personal auto
insurers ("the Selected Insurers"). These valuations indicated a multiple range
of 7.5x to 22.1x for 1997 estimated operating earnings and a multiple of 6.6x to
19.3x for 1998 estimated operating earnings and a multiple range of 1.43x to
3.99x for June 30, 1997 shareholders' equity. These multiples indicated an
implied equity valuation for Guaranty from $256.7 million to $751.0 million
based on 1997 projected earnings and $258.2 million to $759.5 million based on
1998 projected earnings and $338.9 million to $949.9 million based on June 30,
1997 shareholders' equity. These multiples indicated an implied estimated price
per share range for Guaranty of $17.12 to $50.07 with a median of $30.02 based
on 1997 projected earnings and $17.10 to $50.30 with a median of $28.86 based on
1998 projected earnings and $22.54 to $63.16 with a median of $29.54 based on
June 30, 1997 shareholders' equity.
In addition, DLJ compared selected ratios of Guaranty to ratios for the
Selected Insurers. The Guaranty ratio of price to latest twelve months ("LTM")
price per share, price to 1997 estimated price per share, price to 1998
estimated price per share, and price to book value per share of 16.1x, 12.7x,
11.1x and 1.83x, respectively, compared to a median of 15.2x, 13.2x, 11.1x and
1.84x, respectively, for the Selected Insurers. The Guaranty ratio of total
enterprise value to SAP NOI of 18.0x and SAP C&S of 2.11x compared to a median
of 27.5x and 3.20x, respectively, for the Selected Insurers. The Guaranty
projected return on equity of 14.4% compared to a low of 10.7%, a median of
16.1% and a high of 24.5% for the Selected Insurers. The Guaranty projected
earnings per share growth of 15.0% compared to a low of 12.6%, a median of 14.8%
and a high of 27.7% for the Selected Insurers.
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In its discussion materials and presentation, DLJ set forth no conclusions
as to the fairness of any particular form of transaction or the consideration to
be paid to Guaranty shareholders.
The discussion materials did not address, and were not presented to the
Guaranty Board as an opinion regarding the fairness of the consideration to be
paid and received by the shareholders of Guaranty in the proposed transactions
and contained no recommendation with respect thereto. No restrictions or
limitations were imposed by the Orion Board on DLJ with respect to the
preparation of the discussion materials.
DLJ had earlier provided to the management of Orion, including Xx. X.
Xxxxxxx Xxxxxx, Chairman of the Board and CEO, certain discussion materials
dated as of June 5, 1997, outlining alternatives for effecting the purchase of
the remaining outstanding shares of Guaranty not owned directly or indirectly by
Xxxxx, including possible types of transactions, the form of consideration to be
paid and comparative time schedules. In those materials, DLJ reviewed certain
publicly available financial, operating and stock market information for
selected transactions in the non-standard automobile insurance industry since
1990 and included an analysis of comparative prices paid in other transactions.
DLJ also performed a public market valuation analysis and an analysis of the pro
forma effect of the transaction on the shareholders' equity of Orion. In July,
1997 DLJ provided Orion's management, including Xx. X. Xxxxxxx Xxxxxx, with
discussion materials on trends in the insurance industry, summarizing certain
information about insurance industry merger and acquisition activity and
valuation data, numbers of transactions, average transaction size, purchase
price/earnings data, and prices paid in selected major property/casualty
transactions. Neither the June nor July materials were prepared for or presented
to the Board of Directors of Orion. These discussion materials were intended to
focus management's deliberations with respect to various techniques that could
be utilized to assist in determining the price and structure of a possible
transaction with Guaranty.
Pursuant to the unanimous recommendation of its Special Committee,
Guaranty's Board of Directors unanimously approved the Merger Agreement, the
Offer and the Merger, determined that the Offer and the Merger are fair to, and
in the best interests of, the shareholders of Guaranty, and recommended an
acceptance of the Offer and approval and adoption of the Merger Agreement and
the Merger by the shareholders of Guaranty. The factors considered by the
Guaranty Board were referred to in a letter to the shareholders of Guaranty from
Xxxxx X. Xxxxxxx, dated November 5, 1997 and discussed in greater detail in the
Solicitation/Recommendation Statement of Guaranty Pursuant to Section 14(d)(4)
of the Securities Exchange Act of 1934 dated November 5, 1997 (see Item 4
thereof, "The Solicitation or Recommendation"). Xxxxx understands that, in
reaching its conclusions and recommendations to the Board of Directors of
Guaranty, the Special Committee considered a number of factors of which the most
important were the following:
(i) the fact that the $36.00 per Share price represents (A) a
premium of $17.50 or 94.6% over the $18.50 paid by Orion in its tender offer
completed in July 1996, (B) a premium of $20.62 or 134.1% over the 52-week low
of $15.38, (C) a premium of 48.5% over the closing sale price of $24.25 on July
7. 1997, the day prior to the commencement of discussions between Xxxxx and
Guaranty, (D) a multiple of 1.94x Guaranty's net book value per share as of
September 30, 1997, and (E) a multiple of 2.21x Guaranty's net tangible book
value per share as of September 30, 1997; and
(ii) the opinion of the Special Committee's financial advisor that
the Offer is fair, from a financial point of view, to the Non-Orion
Shareholders, and the analysis of various factors considered by the financial
advisor in reaching its opinion.
THE OFFER
1. TERMS OF THE OFFER; EXPIRATION DATE. The Expiration Date of the Offer
is extended to 12:00 Midnight, New York City time, on Friday, December 5, 1997.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is further supplemented, extended or amended, the terms and conditions
of any further supplement, extension or amendment), Xxxxx will accept for
payment and pay for all Shares validly tendered prior to the Expiration Date and
not theretofore withdrawn in accordance with THE OFFER -- Section 4 of the
Original Offer to Purchase.
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Tendering shareholders may continue to use the original Letter of
Transmittal and the original Notice of Guaranteed Delivery previously circulated
with the Original Offer to Purchase.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and
subject to the conditions of the Offer, (including the Regulatory Condition and
the Minimum Share Condition and, if the Offer is further supplemented, extended
or amended, the terms and conditions of any further supplement, extension or
amendment), Orion shall accept for payment (and thereby purchase), and Orion
will pay for, any and all Shares validly tendered prior to the Expiration Date
and not properly withdrawn in accordance with THE OFFER -- Section 4 (including
Shares validly tendered and not withdrawn during any extension of the Offer, if
the Offer is extended, upon the terms and subject to the conditions of such
extension), as promptly as practicable after the Expiration Date. Orion
expressly reserves the right to delay acceptance for payment of Shares in order
to comply in whole or in part with the Regulatory Condition and the Minimum
Share Condition but intends either to extend the Expiration Date, or to
terminate the Offer if it should appear that either the Regulatory Condition or
the Minimum Share Condition will delay for more than five (5) days the payment
for Shares accepted for payment. See THE OFFER -- Sections 10 and 11.
References in "THE OFFER -- Section 10. Certain Conditions of the Offer"
to Orion's right to terminate, amend or extend the Offer or to delay acceptance
for payment or payment if all conditions are not satisfied or waived should not
be interpreted as reserving to Orion the right to accept Shares and subsequently
to invoke the existence of a condition as a basis on which to withhold payment
for and return of the Shares tendered and accepted. The reservation by Orion of
the right to delay payment for Shares is subject to the provisions of applicable
law under Rule 14e-1 promulgated under the Exchange Act, which require that
Orion pay the consideration offered or return the Shares deposited by or on
behalf of shareholders promptly after termination or withdrawal of the Offer.
10. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision
of the Offer, and in addition to (and not in limitation of) Xxxxx's right to
amend the Offer at any time in its sole discretion, all conditions to the Offer,
other than receipt of necessary governmental approvals, must be satisfied or
waived prior to acceptance of the Shares for payment pursuant to the terms of
the Offer. When a condition has not been satisfied the existence of which is to
be determined in the sole discretion of Orion, Xxxxx will exercise its
reasonable good-faith judgment in determining whether the occurrence or
non-occurrence of the event giving rise to such condition makes it inadvisable
to proceed with the Offer or with acceptance for payment of the Shares.
11. CERTAIN LEGAL MATTERS.
MISCELLANEOUS
The action entitled Xxxxxxx Xxxxxxxxx Xxxxx v. Guaranty National
Corporation, et al. which has been filed in the Denver District Court, City and
County of Denver, Colorado, is still pending. That action was filed after
announcement of the Exchange Offer, which has since been terminated, and prior
to the commencement of the Offer. No answer has been filed and the complaint has
not been amended. Settlement discussions have taken place between counsel for
Orion and counsel for the plaintiff and a basis for agreement in principle has
been reached but a stipulation of settlement has not yet been executed or
presented to the Court for review and approval. Xxxxx anticipates that, after
appropriate notification to members of the purported class and if the Court
certifies class-action status, the litigation would be settled on the basis of
the payment to be made for Shares in the Offer, which is greater than the
consideration which might have been paid in the Exchange Offer which was the
subject matter of the original complaint. Xxxxx would agree, in that connection,
not to oppose an application by plaintiff's counsel to the Court for fees and
expenses in an amount not in excess of $500,000. No determination has yet been
made by the Court of class-action status and neither a proposed settlement nor a
fee application of plaintiff's counsel has yet been presented by plaintiff's
counsel to the Court; for review by the Court, whose approval is required.
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No person has been authorized to give any information or make any
representation on behalf of Orion not contained in the Offer to Purchase or the
Letter of Transmittal, and, if given or made, such information or representation
must not be relied upon as having been authorized.
ORION CAPITAL CORPORATION
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December 1, 1997
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Facsimile copies of the Letter of Transmittal will be accepted. The Letter
of Transmittal and certificates for Shares and any other required documents
should be sent or delivered by each shareholder of the Company or his broker,
dealer, commercial bank, trust company or other nominee to the Depositary at one
of the addresses set forth below:
The Depositary For The Offer Is:
STATE STREET BANK AND TRUST COMPANY
By Mail: By Courier: By Hand:
State Street Bank State Street Bank Securities Transfer and
and Trust Company and Trust Company Reporting Services, Inc.
Corporate Reorganization Corporate Reorganization Corporate Reorganization
P.O. Box 9061 00 Xxxxxxxxxx Xxxxx 0 Xxxxxxxx Xxxxx
Xxxxxx, XX 00000-0000 Xxxxxxxxx, XX 00000 00 Xxxxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile Transmission Copy Number:
(000) 000-0000
Confirm by Facsimile to:
(000) 000-0000
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
specified below. Additional copies of the Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent. A shareholder may also contact his broker, dealer, commercial
bank or trust company for assistance concerning the Offer.
The Information Agent Is:
X.X. XXXX & CO., INC.
00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000
(Call Collect)
or
Call Toll Free (000) 000-0000.
The Dealer Manager for the Offer is:
XXXXXXXXX, XXXXXX & XXXXXXXX
SECURITIES CORPORATION
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000 (Call Collect)
