-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K7UtCTFHeOqiMT0gyGgUrCoWcnj0eeAkKBCQukr+Juwu0lhuEFBvnNrEiuzvFZDj o0WTvduvmA/nE6aU2dR1sA== 0000950131-99-003868.txt : 19990618 0000950131-99-003868.hdr.sgml : 19990618 ACCESSION NUMBER: 0000950131-99-003868 CONFORMED SUBMISSION TYPE: SC 14D1/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19990617 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: VARLEN CORP CENTRAL INDEX KEY: 0000103071 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 132651100 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: SC 14D1/A SEC ACT: SEC FILE NUMBER: 005-11522 FILM NUMBER: 99648271 BUSINESS ADDRESS: STREET 1: 55 SHUMAN BLVD STREET 2: P O BOX 3089 CITY: NAPERVILLE STATE: IL ZIP: 60566-7089 BUSINESS PHONE: 6304200400 MAIL ADDRESS: STREET 1: 55 SHUMAN BLVD STREET 2: P O BOX 3089 CITY: NAPERVILLE STATE: IL ZIP: 60566-7089 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: AMSTED INDUSTRIES INC /DE/ CENTRAL INDEX KEY: 0000006216 STANDARD INDUSTRIAL CLASSIFICATION: IRON & STEEL FOUNDRIES [3320] IRS NUMBER: 360730380 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: SC 14D1/A BUSINESS ADDRESS: STREET 1: 205 N MICHIGAN AVE STREET 2: 44TH FL BOULEVARD TOWERS S CITY: CHICAGO STATE: IL ZIP: 60601 BUSINESS PHONE: 3126451700 MAIL ADDRESS: STREET 1: 205 NORTH MICHIGAN AVENUE STREET 2: 44TH FLOOR BOULEVARD CITY: CHICAGO STATE: IL ZIP: 60601 SC 14D1/A 1 SCHEDULE 14D1/A - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- SCHEDULE 14D-1 (Amendment No. 2) TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 ---------------- VARLEN CORPORATION (Name of Subject Company) AMSTED INDUSTRIES INCORPORATED TRACK ACQUISITION INCORPORATED (Bidders) COMMON STOCK, PAR VALUE $.10 PER SHARE (AND ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS) (Title of Class of Securities) 92224810 (CUSIP Number of Class of Securities) Thomas C. Berg, Esq. Track Acquisition Incorporated c/o Amsted Industries Incorporated 44th Floor--Boulevard Towers South 205 North Michigan Avenue Chicago, Illinois 60601 (312) 819-8470 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Bidder) ---------------- Copies to: Gary A. Goodman, Esq. Robert J. Minkus, Esq. Terrence R. Brady, Esq. Schiff Hardin & Waite Winston & Strawn 6600 Sears Tower 35 West Wacker Drive Chicago, Illinois 60606 Chicago, Illinois 60601 Telephone: (312) 258-5500 Telephone: (312) 558-5600 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This Amendment No. 2 (this "Amendment") amends and supplements the Tender Offer Statement on Schedule 14D-1, as amended, originally filed with the Securities and Exchange Commission on May 24, 1999 (the "Schedule 14D-1") by Amsted Industries Incorporated, a Delaware corporation ("Parent"), and Track Acquisition Incorporated, a Delaware corporation and a wholly owned subsidiary of Parent (the "Purchaser"). The Schedule 14D-1 and this Amendment relate to a tender offer by the Purchaser to purchase all outstanding shares of common stock, par value $.10 per share (the "Common Stock"), of Varlen Corporation, a Delaware corporation (the "Company"), including the associated preferred share purchase rights (the "Rights") issued pursuant to the Rights Agreement, dated as of June 17, 1996, as amended, between the Company and Harris Trust and Savings Bank, as Rights Agent (the Common Stock and the Rights together are referred to herein as the "Shares"), at $35.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated May 24, 1999 and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"), copies of which are filed with the Schedule 14D-1 as Exhibits (a)(1) and (a)(2), respectively. 2 Item 10. Additional Information. Item 10 is hereby amended as follows: 1. Section 2. Acceptance for Payment and Payment for Shares. The first paragraph of Section 2 is amended and restated as follows: Upon the terms and subject to the conditions of the Offer (including the Offer Conditions and, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Purchaser will accept for payment, and will pay for, Shares validly tendered and not withdrawn as promptly as practicable after the later of (i) the satisfaction of the Antitrust Condition and the date all required filings or consents, registrations, approvals, permits or authorizations of any governmental entity shall have been obtained on terms satisfactory to Purchaser in its sole discretion and (ii) the Expiration Date. 2. All references in the Offer to the sole discretion or sole judgment (or similar phrases) of Parent or the Purchaser shall be deemed to mean and refer to the reasonable discretion of Parent or the Purchaser, as the case may be. 3. On June 8, 1999, the waiting period under the HSR Act expired with respect to the acquisition of Shares pursuant to the Offer. 4. On June 11, 1999, Morgan Stanley & Co. Incorporated, the Company's financial advisor, sent a letter to Parent in the form filed as Exhibit (a)(11) to this Schedule 14D-1, which is incorporated by reference herein. 5. On June 17, 1999, Arthur W. Goetschel, Chairman, President and Chief Executive Officer of Parent, sent a letter to Raymond A. Jean, President and Chief Executive Officer of the Company, in the form filed as Exhibit (a)(12) to this Schedule 14D-1, which is incorporated by reference herein. Item 11. Material to be Filed as Exhibits. (a)(1) Offer to Purchase, dated May 24, 1999.* (a)(2) Form of Letter of Transmittal.* (a)(3) Form of letter, dated May 24, 1999, to brokers, dealers, commercial banks, trust companies and other nominees.* (a)(4) Form of letter to clients to be used by brokers, dealers, commercial banks, trust companies and other nominees.* (a)(5) Press Release, dated May 18, 1999.* (a)(6) Press Release, dated May 24, 1999.* (a)(7) Form of summary advertisement, dated May 24, 1999.* (a)(8) Notice of Guaranteed Delivery.* (a)(9) IRS Guidelines to Substitute Form W-9.* (a)(10) Press Release, dated June 7, 1999.* (a)(11) Form of letter dated June 11, 1999 from Morgan Stanley & Co. Incorporated to Parent. (a)(12) Form of letter dated June 17, 1999 from Arthur W. Goetschel, Chairman, President and Chief Executive Officer of Parent, to Raymond A. Jean, President and Chief Executive Officer of the Company. (b) Commitment Letter, dated April 29, 1999.* (c) None. (d) None. (e) Not Applicable. (f) None.
- -------- *Previously filed. 3 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: June 17, 1999 Amsted Industries Incorporated /s/ Thomas C. Berg By: _________________________________ Name: Thomas C. Berg Title: Vice President, General Counseland Secretary Track Acquisition Incorporated /s/ Thomas C. Berg By: _________________________________ Name: Thomas C. Berg Title: Vice President and Secretary 4 EXHIBIT INDEX
Exhibit Number Description ------- ----------- (a)(1) Offer to Purchase, dated May 24, 1999.* (a)(2) Form of Letter of Transmittal.* (a)(3) Form of letter, dated May 24, 1999, to brokers, dealers, commercial banks, trust companies and other nominees.* (a)(4) Form of letter to clients to be used by brokers, dealers, commercial banks, trust companies and other nominees.* (a)(5) Press Release, dated May 18, 1999.* (a)(6) Press Release, dated May 24, 1999.* (a)(7) Form of summary advertisement, dated May 24, 1999.* (a)(8) Notice of Guaranteed Delivery.* (a)(9) IRS Guidelines to Substitute Form W-9.* (a)(10) Press Release, dated June 7, 1999.* (a)(11) Form of letter dated June 11, 1999 from Morgan Stanley & Co. Incorporated to Parent (a)(12) Form of letter dated June 17, 1999 from Arthur W. Goetschel, Chairman, President and Chief Executive Officer of Parent, to Raymond A. Jean, President and Chief Executive Officer of the Company (b) Commitment Letter, dated April 29, 1999.* (c) None. (d) None. (e) Not Applicable. (f) None.
- -------- *Previously filed. 5 EX-99.11 2 FORM OF LETTER DATED JUNE 11, 1999 MORGAN STANLEY & CO. EXHIBIT (a)(11) MORGAN STANLEY DEAN WITTER ONE FINANCIAL PLACE 440 SOUTH LASALLE STREET CHICAGO, ILLINOIS 60605 (312) 706-4000 June 11, 1999 Amsted Industries Incorporated 44th Floor -- Boulevard Towers South 205 North Michigan Avenue Chicago, IL 60601 Gentlemen: Morgan Stanley & Co. Incorporated ("Morgan Stanley") recently contacted you on behalf of Varlen Corporation ("Varlen" or the "Company") about the possibility of furnishing you with certain confidential, non-public information regarding the Company (the "Evaluation Material") in connection with your consideration of a possible negotiated transaction involving the Company. In that regard, Morgan Stanley has furnished or is herewith furnishing to you, along with other interested parties, a form of confidentiality/standstill agreement acceptable to Varlen (the "Confidentiality Agreement"). Varlen's attorneys prepared the initial draft of the Confidentiality Agreement from a neutral perspective and attempted to balance the interests of Varlen and potentially interested parties. Varlen has been seeking to avoid complications and delays which would result from negotiating a different Confidentiality Agreement with each of the parties seeking access to the Evaluation Material. The straightforward nature of the initial draft of the Confidentiality Agreement was confirmed by the willingness of several parties to sign the agreement without any material modification. Nevertheless, some of the initial recipients of the initial version of the Confidentiality Agreement have proposed changes to certain provisions of the agreement. The Company has determined that it is not practicable or in the best interests of the Company and its stockholders to negotiate differing, individualized Confidentiality Agreements with each of the many potential interested parties. The Company and its counsel have reviewed the comments and suggestions of several interested parties and their legal counsel and incorporated certain of those changes into a uniform Confidentiality Agreement. A clean version of the revised and final form of the Confidentiality Agreement is enclosed. MORGAN STANLEY DEAN WITTER All parties who wish to continue the process and review the Evaluation Material will be required to sign the Confidentiality Agreement in the form enclosed. The Company is not prepared to negotiate an individual agreement with each of the parties seeking access to the Evaluation Material. Varlen and its counsel believe the enclosed agreement should be acceptable to all of the interested parties. If you have any questions regarding the enclosed Confidentiality Agreement, you may contact Kevin G. Abrams, Esq. of Richards, Layton & Finger at (302) 651-7720. Please execute the enclosed Confidentiality Agreement and return it to Morgan Stanley. Upon receipt of the confidentiality Agreement, we will send you immediately the initial set of Evaluation Materials and call you to schedule your initial due diligence meeting. We look forward to working with you and your representatives. Very truly yours, MORGAN STANLEY & CO. INCORPORATED By: /s/ Francis J. Oelerich III --------------------------------- Francis J. Oelerich III Managing Director Varlen Corporation 55 Shuman Boulevard P.O. Box 3089 Naperville, IL 60566-7089 June 11, 1999 Amsted Industries Incorporated 44th Floor - Boulevard Towers South 205 North Michigan Avenue Chicago, IL 60601 Gentleman: 1. You have requested information from Varlen Corporation (the "Company"), in connection with your consideration of a possible transaction between the Company or its stockholders and you. As a condition to your being furnished such information, you agree to treat any information (whether prepared by the Company, its advisors or otherwise, and whether oral or written) that is furnished to you or your representatives (which term shall include your directors, officers, partners, employees, agents, advisors and potential financing sources) by or on behalf of the Company (herein collectively referred to as the "Evaluation Material") in accordance with the provisions of this letter and to take or abstain from taking certain other actions herein set forth. The term "Evaluation Material" also shall include all notes, analyses, compilations, studies, interpretations or other documents (including electronic, magnetic or other forms of information storage), which contain, reflect or are based on, in whole or in part, the information furnished pursuant to this agreement. The term "Evaluation Material" does not include information that (i) is already in your possession, provided that such information is not known by you to be subject to another confidentiality agreement with or other obligation of secrecy to the Company or another party or (ii) becomes generally available to the public other than as a result of a disclosure by you or your representatives or (iii) becomes available to you on a non-confidential basis from a source other than the Company or its advisors, provided that such source is not known by you to be bound by a confidentiality agreement with or other obligation of secrecy to the Company or another party. 2. You hereby agree that the Evaluation Material will be used solely for the purpose of evaluating a possible transaction between the Company or its stockholders and you, will not be used Amsted Industries Incorporated June 11, 1999 Page 2 in any way detrimental to the Company, and will be kept confidential by you and your representatives; provided, however, that any of such information may only be disclosed to your representatives who need to know such information for the purpose of evaluating any such possible transaction between the Company or its stockholders and you and who agree with the Company in writing (such writing to be delivered to the Company prior to any disclosure) to keep such information confidential and to be bound by this agreement to the same extent as if they were parties hereto. 3. You hereby acknowledge that you are aware, and that you will advise your representatives who are informed as to the matters which are subject of this letter agreement, that the United States securities laws prohibit any person who has received from an issuer material, non-public information concerning the matters which are the subject of this letter from purchasing or selling securities of such issuer or from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities. 4. In the event that you or your representatives receive a request to disclose all or any part of the information contained in the Evaluation Material under the terms of a valid and effective subpoena or order issued by a court of competent jurisdiction or by a governmental or regulatory body, you agree to (i) immediately notify the Company of the existence, terms and circumstances surrounding such a request, so that it may seek an appropriate protective order and/or waive your compliance with the provisions of this agreement (and, if the Company seeks such an order, to provide such cooperation as the Company shall reasonably request). If failing the entry of a protective order or the receipt of a waiver hereunder, you or your representative are, in the opinion of your counsel or representative's counsel ("Counsel"), as the case may be, compelled to disclose Evaluation Material under pain of liability for contempt or other censure or penalty, you or such representative as applicable may disclose only that portion of such information as is legally required without liability hereunder; provided, that you or such representative, as applicable, agree to exercise reasonable efforts to obtain assurance that confidential treatment will be accorded such information. 5. In addition, without the prior written consent of the Company, you will not, and will cause your representatives not to, disclose to any person (other than your representatives who have entered into a confidentiality agreement with the Company regarding the Evaluation Material) either (i) the fact that Evaluation Material has been provided to you, (ii) the fact of any discussions or negotiations that take place concerning a possible transaction between the Company or its stockholders and you, or (iii) any of the terms, conditions or other facts with respect to any such possible transaction, including the status thereof, except that disclosure of such information may be made in a filing required by the Securities Exchange Act of 1934, as amended (the "Exchange Act") filed with the Securities and Exchange Commission if and to the extent, in the opinion of your Counsel, you are required to make such disclosure pursuant to the Exchange Act and the rules and regulations promulgated thereunder; provided that prior to any such disclosure, you shall first give the Company a reasonable opportunity to review the proposed disclosure and to comment thereon. Amsted Industries Incorporated June 11, 1999 Page 3 6. Without your prior written consent, the Company will not, and will cause its representatives and advisors not to, disclose to any person either (i) the fact that Evaluation Material has been provided to you, (ii) the fact of any discussions or negotiations that take place concerning a possible transaction between the Company or its stockholders and you, or (iii) any of the terms, conditions or other facts with respect to any such possible transaction, including the status thereof, except that disclosure of such information may be made in a filing required by the Exchange Act filed with the Securities and Exchange Commission if and to the extent, in the opinion of the Company's legal counsel, the Company is required to make such disclosure pursuant to the Exchange Act and the rules and regulations promulgated thereunder; provided that prior to any such disclosure, the Company shall first give you a reasonable opportunity to review the proposed disclosure and to comment thereon. 7. You hereby acknowledge that the Evaluation Material is being furnished to you in consideration of your agreement that for a period of ninety (90) days from the date hereof you and your affiliates (as defined in Rule 12b-2 under the Exchange Act) will not (and you and they will not assist, provide or arrange financing to or for others or encourage others to), directly or indirectly, acting alone or in concert with others, unless specifically requested in writing in advance by the Board of Directors of the Company: (1) accept for payment or pay for any shares of the Company pursuant to the tender offer for all the outstanding shares of the Company commenced by you on May 24, 1999 (the "Offer"), (2) apart from the Offer, which shall be governed by the preceding subparagraph, acquire or agree, offer, seek or propose to acquire (or request permission to do so), ownership (including, but not limited to, beneficial ownership as defined in Rule 13d-3 under the Exchange Act) of any of the assets or businesses of the Company or any securities issued by the Company, or any rights or options to acquire such ownership (including from a third party), or make any public announcement (or request permission to make any such announcement) with respect to any of the foregoing, (3) seek or propose to convene a special meeting of the stockholders of the Company, or to influence or control the management or the policies of the Company, or to obtain representation on the Company's Board of Directors, or to solicit or participate in the solicitation of, any proxies or consents with respect to any securities of the Company, or make any public announcement with respect to any of the foregoing or request permission to do any of the foregoing, (4) take any action which might require the Company to make a public announcement regarding the types of matters set forth in subparagraphs (i), (ii) and (iii) above, Amsted Industries Incorporated June 11, 1999 Page 4 (5) enter into any discussions, negotiations, arrangements or understandings with any third party with respect to any of the foregoing, or (6) seek to have the Company amend or waive any provision of this paragraph (the "Standstill Paragraph"). 8. You hereby acknowledge that the Evaluation Material is being furnished to you also in consideration for your agreement that, for the period beginning on the date of this letter agreement and ending one (1) year from the date of this agreement that neither you nor any of your affiliates (as such term is defined in Rule 12b-2 under the Exchange Act) will solicit to employ any of the officers or key employees of the Company, without obtaining prior written consent of the Company (it being understood that any newspaper or other public solicitation not directed specifically to such person shall not be deemed to be a solicitation for purposes of this provision), provided that this paragraph shall not prohibit you or your affiliates from discussing employment opportunities with, or hiring, any officer or key employee of the Company who initiates such discussions with you or your affiliate. 9. The Company agrees that it will not enter into a confidentiality agreement with another party which contains standstill provisions materially more favorable to such third party than those set forth in the Standstill Paragraph unless the Company also offers you substantially similar provisions. 10. If at any time during such period you are approached by any third party concerning your or their participation in a transaction involving the assets or businesses of the Company or securities issued by the Company, you will promptly inform the Company of the nature of such contact and the parties thereto. 11. Although the Company has endeavored to include in the Evaluation Material information which it believes to be relevant for the purpose of your investigation, you understand that neither the Company nor any of its representatives or advisors have made or make any representation or warranty as to the accuracy or completeness of the Evaluation Material. You agree that neither the Company nor its representatives or advisors shall have any liability to you or any of your representatives resulting from the use or contents of the Evaluation Material or from any action taken or any inaction occurring in reliance on the Evaluation Material. 12. At the request of the Company or in the event that you do not proceed with a transaction which is the subject of this letter, you and your representatives shall destroy or redeliver to the Company all Evaluation Material and any other material (whether written or stored electronically, magnetically or by any other means of information storage) containing or reflecting any information in the Evaluation Material (whether prepared by the Company, its advisors, agents or otherwise) and will not retain any copies, extracts or other reproductions in whole or in part of such material. Such destruction or redelivery to the Company of all Evaluation Material pursuant to the preceding sentence shall be certified in writing to the Company an authorized officer with Amsted Industries Incorporated June 11, 1999 Page 5 knowledge of such action. All material prepared by you or your representatives based on information in the Evaluation Material shall be destroyed, and such destruction shall be certified in writing to the Company by an authorized officer supervising such destruction. 13. It is further understood and agreed that no failure or delay by the Company in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any right, power or privilege hereunder. The agreements set forth in this letter may be modified or waived only by a separate writing by the Company and you expressly so modifying or waiving such agreements. 14. You agree that unless and until a definitive agreement between the Company and you with respect to any transaction referred to in the first paragraph of this letter has been executed and delivered, neither the Company nor you will be under any legal obligation of any kind whatsoever with respect to such a transaction by virtue of this or any written or oral expression with respect to such a transaction by any of its directors, officers, employees, agents or any other representatives or its advisors except for the matters specifically agreed to in this letter. You further agree (i) that the Company shall have no obligation to authorize or pursue with you or any other party any transaction referred to in the first paragraph of this letter and you understand that the Company has not, as of the date hereof, authorized any such transaction and (ii) that the Company and its representatives shall be free to conduct any process for any transaction involving the Company if and as they in their sole discretion shall determine (including, without limitation, negotiating with any other interested parties and entering into a definitive agreement without prior notice to you or any other person) and that any procedures relating to such process or transaction may be changed at any time without notice to you or any other person. 15. The parties hereto acknowledge that money damages are an inadequate remedy for breach of this letter agreement because of the difficulty of ascertaining the amount of damage that will be suffered by the Company in the event that this agreement is breached. Therefore, you agree that the Company may obtain specific performance of this agreement and injunctive relief against any breach hereof. In the event of litigation relating to this letter agreement, if a court of competent jurisdiction determines that you or any of your representatives has breached this letter agreement, then you shall be liable to the Company for the reasonable legal fees and costs incurred by the Company in connection with such litigation, including any appeal therefrom. 16. If any term, provision, covenant, or restriction of this letter agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. 17. Except as specified elsewhere herein, the terms of this letter agreement will remain in force until the date that is two years form the date hereof. Amsted Industries Incorporated June 11, 1999 Page 6 18. This letter agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute the same agreement and shall become a binding agreement when one or more counterparts have been signed by each party and delivered to the other party, thereby constituting the entire agreement among the parties pertaining to the subject matter hereof. This letter agreement supercedes all prior and contemporaneous agreements, understandings and representations, whether oral or written, of the parties in connection herewith. No covenant or condition or representation not expressed in this letter agreement shall affect or otherwise be effective to interpret, change or restrict this letter agreement. No prior drafts of this letter agreement and no words or phrases from any such prior drafts shall be admissible into evidence in any action, suit or other proceeding involving this letter agreement. This letter agreement shall be deemed to have been mutually prepared by the parties and shall not be construed against any of them by reason of authorship. This letter agreement may not be changed or terminated orally, nor shall any change, termination or attempted waiver of any of the provisions of this letter agreement be binding on any party unless in writing signed by the parties hereto. No modification, waiver, termination, rescission, discharge or cancellation of this letter agreement and no waiver of any provision of or default under this letter agreement shall affect the right of any party thereafter to enforce any other provision or to exercise any right or remedy in the event of any other default whether or not similar. 19. This letter shall be governed by, and construed in accordance with, the laws of the State of Delaware. All disputes related to this agreement shall be heard exclusively in the courts of the State of Delaware and the parties agree to submit to the jurisdiction of the courts of the State of Delaware for purposes of resolving any such disputes. Very truly yours, VARLEN CORPORATION (by Morgan Stanley & Co. Incorporated) By:/s/ Francis J. Oelerich III ------------------------------ Francis J. Oelerich III Managing Director Confirmed and Agreed to: AMSTED INDUSTRIES INCORPORATED By: -------------------------- Title: EX-99.12 3 FORM OF LETTER DATED JUNE 16, 1999 ARTHUR W. GOETSCHEL EXHIBIT (a)(12) Amsted Industries Incorporated 205 North Michigan Avenue - 44th Floor Chicago, IL 60601 June 17, 1999 Mr. Raymond A. Jean President and CEO Varlen Corporation 55 Shuman Boulevard Naperville, IL 60566-7089 Dear Mr. Jean: Amsted's goal has been and continues to be to negotiate a transaction to acquire Varlen Corporation. We are willing to sign a customary confidentiality agreement and commence negotiations promptly. However, your advisors have refused to provide us access to due diligence information unless we execute an agreement containing a 90-day "stand-still" provision that Morgan Stanley has advised us is not negotiable. Such a provision would unduly inhibit our ability to consummate a transaction with the company for the next 90 days, which is contrary to the best interest of your shareholders. Amsted believes that our cash tender offer at $35 per share is fully priced based on the factors set forth below. However, if Varlen has information which would justify a higher price, we are eager to review it. We urge you to reconsider your decision to exclude Amsted from your exploration of strategic alternatives. Our offer was formulated after extensive consultations with our financial advisor, Salomon Smith Barney. The price was based on the following factors: 1. Our offer of $35 per share represents a 35% premium over Varlen's closing price on the day prior to our public announcement and a 50% premium over the 60-day per share average prior to the announcement and a 55% premium over the 2 year share average. 2. Given Varlen's leading positions in its primary product niches, we believe that Varlen's future performance will be closely tied to key drivers in its major markets such as new freight car builds and new heavy duty truck production. Varlen has benefited in recent years from the strength of these markets. However, as demonstrated by the information in Exhibit A, each of these industries is near its cyclical peak. 3. We have not been permitted to conduct a due diligence review, and therefore, we have been unable to address our concerns about various matters. For example, Varlen's public filings disclose a lawsuit claiming that environmental contamination by Varlen has led to deaths and physical injuries. 4. Comparable companies in the public markets trade at lower multiples of earnings and cash flow than our offer price, as demonstrated in Exhibit B. Further, the most comparable recent sale, Johnstown America's freight car operations which was announced in May 1999 and closed earlier this month, traded for an estimated 3.0x to 3.5x EBITDA. In comparison, our offer equates to 6.3x Varlen's trailing twelve month EBITDA. Since we made our initial contact with you on May 4, 1999, Varlen and its advisors have had nearly 45 days to explore strategic alternatives and "shop" the company. Based on your continued exploration of alternatives and proposed timetables, we can only assume that no superior alternatives have been forthcoming. We do not expect that shareholders will find it attractive to wait another 90 days. We believe that the combination of Varlen and Amsted is a compelling strategic fit, with significant benefits to both of our shareholders, employees and customers. Furthermore, due to Varlen's unique composition, no other potential partner has a strong fit with its diverse businesses. Amsted is fully financed with a $900 million credit commitment. The credit facility is adequate to finance the acquisition, including transaction costs and assumption of debt, as well as our new $150 million wheel plant under construction near Tulsa, Oklahoma. We have a strong and sincere interest in consummating this transaction. Upon your agreement to initiate discussions with us, we are prepared to move expeditiously. We look forward to hearing from you. Very truly yours, /s/ Arthur W. Goetschel Arthur W. Goetschel Exhibit A HEAVY DUTY (GVW8) SUMMARY (000 Units)
- ----------------------------------------------------------------------------------- Projected 1997 1998 1999 2000 2001 2002 2003 2004 - ----------------------------------------------------------------------------------- Can / Am Factory Sales 217.7 255.3 280.9 230.5 223.0 238.1 254.2 269.4 Source: AAMA, ANPACT, WEFA
FREIGHT CAR DELIVERIES (000 Units)
- ----------------------------------------------------------------------------------- Projected 1997 1998 1999 2000 2001 2002 2003 2004 - ----------------------------------------------------------------------------------- Freight Car Deliveries 50.4 75.7 75.6 56.7 51.8 54.2 57.4 59.4 Source: ARCI, WEFA
Exhibit B
Price (a)/ Firm Value (c)/LTM ----------------------------- -------------------------- (Dollars in Millions, Except Stock Price) 1999 EPS (b) 2000 EPS (b) Revenues EBITDA EBIT ================================================================================================================ Rail Equipment Trinity Industries, Inc. (TRN) 7.8x 7.2x 0.6x 5.1x 6.4x The Greenbrier Companies, Inc. (GBX) 7.1 6.8 0.6 4.4 5.4 ABC-NACO Inc. (ABCR) 13.9 9.6 0.7 8.2 13.5 Railworks Corporation (RWKS) 8.0 6.8 0.6 5.9 8.0 "On Highway" Supply Navistar International Corp. (NAV)(d)(e) 9.9x 10.2x 0.5x 5.9x 7.3x Cummins Engine Company (CUM) 12.2 11.2 0.5 6.3 10.7 Meritor Automotive (MRA) 9.0 8.2 0.6 5.4 7.2 Detroit Diesel Corporation (DDC) 12.2 11.9 0.3 5.4 8.7 Transportation Technologies Industries (TTII)(f) 4.6 8.2 0.4 3.1 3.9 - ---------------------------------------------------------------------------------------------------------------- Average 9.4x 8.9x 0.5x 5.5x 7.9x - ---------------------------------------------------------------------------------------------------------------- ================================================================================================================ Varlen Corporation (VRLN) @ $35 12.1x 11.9x 1.0x 6.3x 8.2x ================================================================================================================
Note: EBITDA, EBIT, Net Income to Common, and EPS adjusted for unusual and nonrecurring items. LTM: Latest Twelve Months. NM: Not Meaningful. (a) Stock price as of June 15, 1999. (b) First Call estimates as of June 15, 1999. (c) Firm Value equals equity value (all fully diluted shares at the stock price less any option proceeds) plus straight debt, minority interest, straight preferred stock, all out-of-the-money convertibles, less investments in unconsolidated affiliates and cash. (d) Financial services subsidiary treated on an equity basis. (e) Firm value includes $449 MM of unfunded pension liabilities. (f) Company recently changed its name from Johnstown America Industries Inc. * Motive-Power, Westinghouse Air Brake and Harmon Industries were excluded since their primary products are more technologically oriented and related to rail outsourcing. As such, these companies have greater margin stability, experience less cyclicality and are expected to generate stronger earnings growth. -----END PRIVACY-ENHANCED MESSAGE-----