PRELIMINARY COPIES
CONFIDENTIAL, FOR USE OF
THE COMMISSION ONLY
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14C
(Rule 14C-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934
Check the appropriate box:
[x] Preliminary information [x] Confidential, for Use of the
statement Commission Only (as
permitted by Rule 14c-5(d)(2))
[ ] Definitive information
statement
CBI INDUSTRIES, INC.
(Name of Registrant as Specified in Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14c-5(g).
[x] Fee computed on table below per Exchange Act Rules 14c-5(g) and
0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $2.50 per share
(2) Aggregate number of securities to which transaction applies:
2,718,358 shares of Common Stock
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
Pursuant to the Agreement and Plan of Merger among CBI Industries,
Inc., Praxair, Inc. and PX Acquisition Corp., dated as of December
22, 1995, the price to be paid for each share to be purchased in the
merger is $33.00. Pursuant to Rule 0-11(c), the filing fee of
$17,941.16 was calculated as 1/50 of 1% of the total cash payment to
be made in the merger, which is equal to the product of $33.00 per
share and 2,718,358 shares to be purchased.
(4) Proposed maximum aggregate value of transaction:
$89,705,814.00
(5) Total fee paid:
$17,941.16
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid: N/A
(2) Form, Schedule or Registration Statement No.: N/A
(3) Filing Party: N/A
(4) Date Filed: N/A
CBI INDUSTRIES, INC.
800 JORIE BOULEVARD
OAK BROOK, ILLINOIS 60521-2261
_________, 1996
Dear Stockholder:
As announced on December 22, 1995, CBI Industries, Inc. and Praxair
Inc. have entered into a merger agreement. Pursuant to an amended tender
offer for all of CBI's outstanding common stock, Praxair has already
acquired, through a wholly owned subsidiary, approximately 94% of the
outstanding common stock of CBI. Pursuant to the merger agreement, CBI
will merge with Praxair's wholly owned subsidiary. In the merger, our
remaining stockholders will receive, in exchange for their shares of common
stock, $33.00 cash per share, without interest thereon. Praxair will
thereupon own the entire common equity interest in CBI.
A special meeting of stockholders will be held at ,
at A.M., Central Standard Time, on , 1996, to consider and vote
upon a proposal to approve the merger agreement and the merger previously
approved by our Board of Directors. Approval of the merger agreement and
the merger requires the affirmative vote of a majority of the outstanding
stock of CBI entitled to vote thereon. Because Praxair's 94% interest will
be voted in favor of the proposal, its passage is assured without the vote
of any other stockholder. In light of this, you are not being asked for a
proxy and are requested not to send one. If you so wish, you may vote your
shares by attending the special meeting in person. The accompanying
Information Statement explains in detail the terms of the merger. Please
read the Information Statement carefully.
We appreciate your loyalty and support as a stockholder of our
company in the past as we move forward with this transition to new
ownership.
Sincerely yours,
H. William Lichtenberger
1
CBI INDUSTRIES, INC.
800 JORIE BOULEVARD
OAK BROOK, ILLINOIS 60521-2261
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD , 1996
To The Stockholders of CBI INDUSTRIES, INC.:
NOTICE IS HEREBY GIVEN that a special meeting of the holders of
Shares (as defined below) of CBI Industries, Inc., a Delaware corporation
(the "Company"), will be held at , at A.M.,
Central Standard Time, on , 1996 (the "Special Meeting") for the
following purposes:
1. To consider and vote upon a proposal (the "Merger
Proposal") to approve and adopt the Agreement and Plan of Merger (the
"Merger Agreement"), attached as Exhibit A to the accompanying Information
Statement, among Praxair, Inc., a Delaware corporation ("Praxair"), PX
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Praxair (the "Purchaser"), and the Company dated as of December 22, 1995
and the Merger (as defined herein). Under the terms of the Merger
Agreement, at the Effective Time (as defined in the Merger Agreement), (i)
the Purchaser will be merged with and into the Company (the "Merger"),
(ii) each outstanding share of the Company's Common Stock, par value $2.50
per share (the "Common Stock"), and the associated Preferred Stock Purchase
Rights issued pursuant to the Rights Agreement, dated as of March 4, 1986,
as amended, between the Company and First Chicago Trust Company of New
York, as Rights Agent (the "Rights" and, together with such shares of
Common Stock, except where the context otherwise requires, the "Shares"),
(other than Shares owned by Praxair, the Purchaser or any other subsidiary
of Praxair and any Shares which are held by dissenting Stockholders
exercising appraisal rights pursuant to Section 262 of the Delaware General
Corporation Law, as amended), will be converted into the right to receive
$33.00 in cash, without interest thereon and (iii) each Share issued and
outstanding and owned by Praxair, the Purchaser or any other subsidiary of
Praxair, and each Share issued and held in the Company's treasury will
cease to be outstanding, will be canceled and retired without payment of
any consideration therefor and will cease to exist.
2. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Only the holders of Shares of record at the close of business
on , 1996, will be entitled to notice of, and to vote at, the
Special Meeting.
2
The Company's Board of Directors (the "Board") has determined
that the Merger is fair to and in the best interests of the Company and its
stockholders, has approved the Merger Agreement and the Merger and
recommends that holders of Shares vote in favor of the Merger Proposal.
By Order of the Board of Directors,
____________________
Secretary
Dated , 1996
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY.
1
TABLE OF CONTENTS
Page No.
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
THE SPECIAL MEETING . . . . . . . . . . . . . . . . . . . . . . . 4
CERTAIN INFORMATION CONCERNING THE COMPANY . . . . . . . . . . . 6
CERTAIN INFORMATION CONCERNING PRAXAIR AND THE PURCHASER . . . . 8
BACKGROUND OF THE MERGER . . . . . . . . . . . . . . . . . . . 10
RECOMMENDATION OF THE BOARD AND REASONS FOR THE MERGER . . . . . 17
OPINIONS OF FINANCIAL ADVISORS . . . . . . . . . . . . . . . . . 19
INTERESTS OF CERTAIN PERSONS . . . . . . . . . . . . . . . . . . 24
CERTAIN EFFECTS OF THE CONSUMMATION OF THE OFFER
ON THE SHARES . . . . . . . . . . . . . . . . . . . . . . . . . 27
STRUCTURE OF THE MERGER . . . . . . . . . . . . . . . . . . . . . 27
FINANCING OF THE MERGER . . . . . . . . . . . . . . . . . . . . . 28
ACCOUNTING TREATMENT OF THE MERGER . . . . . . . . . . . . . . . 28
CERTAIN LEGAL MATTERS; REQUIRED REGULATORY APPROVALS . . . . . . 28
CERTAIN FEDERAL TAX CONSEQUENCES OF THE MERGER . . . . . . . . . 29
THE MERGER AGREEMENT . . . . . . . . . . . . . . . . . . . . . . 30
TRADING PRICES . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS . . . . . . . . . 35
SECURITY OWNERSHIP OF MANAGEMENT OF THE COMPANY . . . . . . . . . 35
INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . 36
OTHER MATTERS TO COME BEFORE THE MEETING . . . . . . . . . . . . 36
INCORPORATION OF DOCUMENTS BY REFERENCE . . . . . . . . . . . . . 36
ANNEXES:
ANNEX A Appraisal Rights . . . . . . . . . . . . . . . . A-1
EXHIBITS:
EXHIBIT A Agreement and Plan of Merger
EXHIBIT B Fairness Opinion of Lehman Brothers Inc.
EXHIBIT C Fairness Opinion of Merrill Lynch & Co.
CBI INDUSTRIES, INC.
800 Jorie Boulevard
Oak Brook, IL 60521-2268
INFORMATION STATEMENT FOR SPECIAL MEETING OF STOCKHOLDERS
, 1996
INTRODUCTION
This Information Statement is being furnished to the holders of
Shares (as defined herein) (the "Stockholders") of CBI Industries, Inc. a
Delaware corporation (the "Company"), as of the Record Date (as defined
herein) to consider the proposal (the "Merger Proposal") to approve and
adopt the Agreement and Plan of Merger (the "Merger Agreement"), attached
hereto as Exhibit A, among Praxair, Inc., a Delaware corporation
("Praxair"), PX Acquisition Corp., a Delaware corporation and a wholly
owned subsidiary of Praxair (the "Purchaser"), and the Company dated as of
December 22, 1995. Pursuant to the Merger Agreement, the Purchaser amended
its then outstanding tender offer to purchase all outstanding Shares, among
other things, to increase the price to be paid pursuant thereto to $33.00
per Share, net to the seller in cash, without interest thereon, upon the
terms and subject to the conditions set forth in the Offer to Purchase
dated November 3, 1995, as amended and supplemented by the Supplement to
the Offer to Purchase dated December 28, 1995 and the revised Letter of
Transmittal (which together constitute the "Amended Praxair Offer"). The
Amended Praxair Offer expired at 12:00 midnight, New York City time, on
Thursday, January 11, 1996. The Purchaser accepted for payment 41,094,108
Shares, validly tendered pursuant to the Amended Praxair Offer and not
withdrawn, representing approximately 94% of the total number of
outstanding shares of the Company entitled to vote at the Special Meeting
(as defined herein). The Merger (as defined herein) will be consummated on
the terms and subject to the conditions set forth in the Merger Agreement.
This Information Statement is being mailed on or about
, 1996 to the holders of record of the Shares at the close of
business on , 1996.
2
SUMMARY
The following is a brief summary of certain information contained
elsewhere in this Information Statement. This summary is not intended to
be complete and is qualified in its entirety by the more detailed
information contained in this Information Statement and the Annex and
Exhibits hereto, to which reference is made for a complete statement of the
matters discussed below. Capitalized terms used in the following summary
have the meanings set forth elsewhere in this Information Statement.
Stockholders are urged to read this Information Statement and the Annex and
Exhibits hereto in their entirety.
PURPOSE OF SPECIAL MEETING To vote upon the Merger Proposal. (See
"INTRODUCTION"; "THE SPECIAL MEETING")
DATE AND TIME OF SPECIAL MEETING _______________, 1996 at ____ A.M.,
Central Standard Time
PLACE OF MEETING ____________________
____________________
____________________
RECORD DATE _______________, 1996
NUMBER OF OUTSTANDING SHARES
ENTITLED TO VOTE 43,891,766
MERGER TERMS In the Merger, the Company will become
a wholly owned subsidiary of Praxair,
and each outstanding Share (other than
Shares owned by Praxair, the Purchaser
or any other subsidiary of Praxair,
Shares held in the Company's treasury
and Dissenting Shares) will be
converted into the right to receive
$33.00 per Share in cash, without
interest thereon. (See "STRUCTURE OF
THE MERGER" and "THE MERGER
AGREEMENT").
REQUIRED VOTE The affirmative vote of a majority of
the outstanding stock of the Company
entitled to vote thereon is required
for approval of the Merger
3
Agreement and the Merger. (See
"SPECIAL MEETING--Voting at the Special
Meeting.")
RECOMMENDATION OF THE
COMPANY'S BOARD OF DIRECTORS The Company's Board of Directors has
determined that the Merger is fair to
and in the best interests of the
Company and its stockholders, has
approved the Merger Agreement and the
Merger and recommends that holders of
Shares vote in favor of the Merger
Proposal. (See "RECOMMENDATION OF THE
BOARD AND REASONS FOR THE MERGER").
OPINION OF FINANCIAL ADVISOR Lehman Brothers Inc. and Merrill Lynch
& Co., the Company's financial
advisors, have determined that as of
the date of such opinions, the $33.00
per Share consideration to be received
by the stockholders of the Company
pursuant to the Merger is fair to such
stockholders from a financial point of
view (See "RECOMMENDATION OF THE BOARD
AND REASONS FOR THE MERGER").
RIGHTS OF DISSENTING STOCKHOLDERS Under the Delaware General Corporation
Law, any Stockholder who neither votes
in favor of the Merger nor consents
thereto in writing, who delivers a
demand for appraisal prior to the vote
of the Stockholders on the Merger, and
who has otherwise complied with the
applicable requirements of Section 262
of the DGCL has the right, subject to
compliance with certain procedural
requirements, to an appraisal of, and
to receive cash payment for, the "fair
value" of his Shares. (See "THE
SPECIAL MEETING-Dissenters' Rights of
Appraisal" and Annex A).
4
THE SPECIAL MEETING
PURPOSE OF THE SPECIAL MEETING
At a special meeting of the Stockholders of CBI to be held at
at A.M., Central Standard Time on , 1996 (the "Special
Meeting"), the Stockholders of the Company will be asked to consider and
vote upon a proposal (the "Merger Proposal") to approve and adopt the
Merger Agreement and the Merger. Under the terms of the Merger Agreement,
at the Effective Time (as defined in the Merger Agreement), (i) the
Purchaser will be merged with and into the Company (the "Merger"), (ii) the
Company will be the corporation surviving the Merger (the "Surviving
Corporation"), (iii) the separate existence of the Purchaser will cease,
(iv) each issued and outstanding share of the Company's Common Stock, par
value $2.50 per share (the "Common Stock"), and the associated Preferred
Stock Purchase Rights issued pursuant to the Rights Agreement, dated as of
March 4, 1986, as amended, between the Company and First Chicago Trust
Company of New York (the "Rights Agent"), as Rights Agent (the "Rights" and
together with such shares of Common Stock, except where the context
otherwise requires, the "Shares") (other than any Shares owned by Praxair,
the Purchaser or any other subsidiary of Praxair and any Shares which are
held by dissenting stockholders exercising appraisal rights pursuant to
Section 262 of the Delaware General Corporation Law, as amended (the
"DGCL")) will be converted into the right to receive $33.00 in cash,
without interest thereon (the "Merger Consideration"), and (v) each Share
issued and outstanding and owned by Praxair, the Purchaser or any other
subsidiary of Praxair, and each Share issued and held in the Company's
treasury will cease to be outstanding, will be canceled and retired without
payment of any consideration therefor and will cease to exist.
VOTING AT THE SPECIAL MEETING
According to the Company's Restated Certificate of Incorporation, as
amended (the "Restated Company Certificate") the Stockholders are entitled
to one vote for each Share on each matter submitted to a vote of the
stockholders of the Company. In addition, the holders of shares of $2.27
Convertible Series C Preferred Stock of the Company, par value $1.00 per
share (the "Series C Preferred"), are entitled to 1.5 votes on all matters
upon which the Stockholders are entitled to vote and vote together with the
Stockholders as a single class. The Board of Directors of the Company (the
"Board") has fixed the close of business on , 1996 as the record
date (the "Record Date") for the determination of Stockholders entitled to
notice of, and to vote at, the Special Meeting. At the close of business
on the Record Date, there were Shares outstanding and entitled to
vote, held by Stockholders of record and no outstanding shares of
Series C Preferred. Accordingly, only Stockholders of record on the
Record Date will be entitled to notice of, and to vote at, the Special
Meeting. 5
Stockholders of record on the Record Date are entitled to one vote
per Share, exercisable in person, at the Special Meeting. The presence in
person of the holders of a majority of the outstanding stock of the Company
entitled to vote is necessary to constitute a quorum at the Special
Meeting.
The affirmative vote of a majority of the outstanding stock of the
Company entitled to vote thereon is required by the DGCL for approval of
the Merger Agreement and the Merger. AS PURCHASER HAS ACQUIRED 41,094,108
SHARES PURSUANT TO THE AMENDED PRAXAIR OFFER WHICH, TOGETHER WITH SHARES
PREVIOUSLY HELD BY PRAXAIR AND THE PURCHASER REPRESENT APPROXIMATELY 94% OF
THE OUTSTANDING STOCK OF THE COMPANY ENTITLED TO VOTE AS OF THE RECORD
DATE, PRAXAIR AND THE PURCHASER HAVE SUFFICIENT VOTING POWER TO APPROVE THE
MERGER AGREEMENT AND MERGER WITHOUT THE VOTE OF ANY OTHER STOCKHOLDER OF
THE COMPANY. PURSUANT TO THE TERMS OF THE MERGER AGREEMENT, PRAXAIR AND
THE PURCHASER HAVE AGREED TO VOTE SUCH SHARES FOR APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT AND THE MERGER. ABSTENTIONS FROM VOTING OF SHARES
THAT ARE PRESENT AT THE SPECIAL MEETING, BROKER NON-VOTES AND ABSTENTIONS
WILL HAVE THE SAME EFFECT AS VOTES AGAINST ADOPTION OF THE MERGER AGREEMENT
AND THE MERGER. SEE "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS".
On December 22, 1995, the Board approved the Amended Praxair Offer,
the Merger Agreement and the Merger for the purposes of Sections 203 and
251 of the DGCL and for purposes of Article Tenth and Article Fifteenth of
the Restated Company Certificate.
DISSENTERS' RIGHTS OF APPRAISAL
Under Section 262 of the DGCL, any Stockholder who neither votes in
favor of the Merger nor consents thereto in writing, who delivers a demand
for appraisal prior to the vote of the Stockholders on the Merger, and who
has otherwise complied with the applicable requirements of Section 262 of
the DGCL has the right to an appraisal of, and to receive cash payment for,
the "fair value" of his Shares (the "Dissenting Shares"), at the Effective
Time, excluding any element of value arising from the accomplishment or
expectation of the Merger. In order to exercise such right, a Stockholder
must comply with each of the procedural requirements of Section 262 of the
DGCL, a summary of and the text of which is set forth in Annex A hereto.
Stockholders should read Section 262 of the DGCL in its entirety. The
"fair value" of each Share would be determined in judicial proceedings, the
results of which cannot be predicted. The failure to take any of the steps
required under Section 262 of the DGCL in a timely manner will result in a
loss of appraisal rights.
The Merger Agreement provides that the Company shall give Praxair
prompt notice of any demands received by the Company for appraisal of
Shares and, if any holders of
6
Dissenting Shares shall be entitled to be paid the "fair value" of his or
her Shares, as provided in Section 262 of the DGCL, the Company shall give
Praxair notice thereof and Praxair shall have the right to participate in
all negotiations and proceedings with respect to any such demands. The
Company shall not, except with the prior written consent of Praxair,
voluntarily make any payment with respect to, or settle or offer to settle,
any such demand for payment. If any holder of Dissenting Shares shall fail
to perfect or shall have effectively withdrawn or lost the right to
dissent, the Dissenting Shares shall thereupon be treated as though such
Dissenting Shares had been converted into the Merger Consideration. See
Annex A hereto.
OTHER MATTERS TO BE CONSIDERED
It is not anticipated that any matter other than approval of the
Merger Proposal will be brought before the Special Meeting. If any other
matter should properly come before the Special Meeting, those present at
the Special Meeting will be entitled to vote with respect to such properly
raised matters.
CERTAIN INFORMATION CONCERNING THE COMPANY
The Company is a Delaware corporation with its principal executive
offices located at 800 Jorie Boulevard, Oak Brook, Illinois 60521-2268.
The Company has subsidiaries operating throughout the world in producing
and distributing carbon dioxide and industrial gases, in designing,
engineering, fabricating and erecting metal plate structures and executing
other contracting services, and in providing oil and refined petroleum
product storage and blending facilities.
Set forth below is certain selected information of the Company and
its consolidated subsidiaries which has been excerpted and derived from the
Company's Annual Report on Form 10-K for the fiscal years ended December 31,
1994, 1993, 1992 and 1991, and the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1995. More comprehensive
financial and other information is included in such reports (including
management's discussion and analysis of results of operations and financial
position) and in other reports and documents filed by the Company with the
Securities and Exchange Commission (the "Commission") and the financial
information set forth below is qualified in its entirety by reference to
such reports and documents filed with the Commission and all of the
financial statements and related notes contained therein. These reports
and other documents may be examined and copies thereof may be obtained in
the manner set forth in this Information Statement. See "INCORPORATION OF
DOCUMENTS BY REFERENCE". Such material should also be available for
inspection at the offices of The New York Stock Exchange, Inc., 20 Broad
Street, New York, NY 10005.
7
CBI INDUSTRIES, INC.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except per Share data)
Nine Months
Ended Year Ended December 31,
September 30,
1995 1994 1993 1992 1991
(unaudited)
SUMMARY OF EARNINGS DATA:
Revenues . . . . . . . . . . $1,385,716 $1,890,907 $1,671,744 $1,672,774 $1,614,901
Income from operations . . . 115,977 160,540 26,145<F1> 166,280 167,533
Income (loss) before taxes, minority
interest and cumulative
effect of accounting changes 79,608 118,910 (2,235)<F1> 145,500 136,965
Net income (loss) to holders of
Shares . . . . . . . . . . . 27,733 45,454 (39,846)<F1> 65,537<F2> 53,408
Net income (loss) per Share . 0.73 1.20 (1.07)<F1> 1.79<F2> 1.54
Net income (loss) per fully
diluted Share . . . . . . . 0.67 1.10 (0.89)<F1> 1.59<F2> 1.38
BALANCE SHEET DATA:<F3>
Total assets . . . . . . . . $2,124,373 2,008,712 $1,870,245 $1,685,325 $1,478,871
Current assets . . . . . . . 541,116 517,854 471,274 434,160 457,317
Current liabilities . . . . . 351,618 379,052 345,070 325,458 337,675
Long-term debt . . . . . . . 716,331 666,730 607,579 410,998 259,550
Common stockholders' equity . 696,814 677,698 643,532 688,294 645,591
<FN>
<F1> After a special charge of $91,600 ($68,400 after tax), which was
equivalent to a net loss per Share of $1.84 ($1.60 on a fully diluted
basis).
<F2> Before cumulative effect of accounting changes.
<F3> At period end.
</FN>
For the Nine Months Ended For the Year Ended
September 30, 1995 December 31, 1994
Book value
per Share . . . . . . . . . . . . . . . $18.20 $17.80
Cash dividends declared
per Share . . . . . . . . . . . . . . . 0.36 0.48
Income from continuing operations
per Share . . . . . . . . . . . . . . . 3.04 4.24
8
CERTAIN INFORMATION CONCERNING
PRAXAIR AND THE PURCHASER
Praxair is a Delaware corporation with its principal executive
offices located at 39 Old Ridgebury Road, Danbury, Connecticut 06810-5113.
Praxair is the largest supplier of industrial gases in North and
South America and one of the three largest worldwide. The gases find wide
use in the primary metals, metal fabrication, chemicals, medical,
electronics, petroleum refining, aerospace, food processing, oil and gas,
glass, environmental remediation, printing and pulp and paper industries.
Set forth below is certain selected financial information of Praxair
and its consolidated subsidiaries which has been excerpted and derived from
Praxair's Quarterly Reports on Form 10-Q for the quarter ended September
30, 1995 and the quarter ended September 30, 1994. More comprehensive
financial and other information is included in such reports (including
management's discussion and analysis of results of operations and financial
position) and in other reports and documents filed by Praxair with the
Commission and the financial information set forth below is qualified in
its entirety by reference to such reports and documents filed with the
Commission and all of the financial statements and related notes contained
therein. Such reports and other information should be available for
inspection at the public reference facilities of the Commission at 450
Fifth Street, N.W., Washington, DC 20549, and at the regional offices of
the Commission located at Seven World Trade Center, 13th Floor, New York,
NY 10048 and Citicorp Center, 500 West Madison Street (Suite 1400),
Chicago, IL 60661. Copies of such information should be obtainable, by
mail, upon payment of the Commission's customary charges, by writing to the
Commission's principal office at 450 Fifth Street, N.W., Washington, DC
20549. Such material should also be available for inspection at the
offices of The New York Stock Exchange, Inc., 20 Broad Street, New York, NY
10005.
9
PRAXAIR, INC.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
(In millions, except per share data)
Nine Months Ended
September 30, September 30,
1995 1994
(unaudited)
SUMMARY OF EARNINGS DATA:
Sales . . . . . . . . . . . . . . . . . . . . . . . . $ 2,339 $ 1,989
Income from operations . . . . . . . . . . . . . . . . 411 328
Income before taxes and minority
interests . . . . . . . . . . . . . . . . . . . . . . 323 249
Net income to common stockholders . . . . . . . . . . . 196 148
Net income per share of common stock . . . . . . . .
Book value per share (fully diluted) 1.37 1.06
BALANCE SHEET DATA: <F1>
Total assets . . . . . . . . . . . . . . . . . . . . $ 3,929 $ 3,423
Current assets . . . . . . . . . . . . . . . . . . . 890 800
Current liabilities . . . . . . . . . . . . . . . . . 1,016 747
Long-term debt . . . . . . . . . . . . . . . . . . . 936 963
Common stockholders' equity . . . . . . . . . . . . . 1,048 817
<FN>
<F1> At period end.
</FN>
The Company does not take any responsibility for the accuracy or
completeness of information contained in this Information Statement with
respect to the Purchaser or Praxair or any of their subsidiaries or
affiliates, or for any failure by the Purchaser or Praxair to disclose
events which may have occurred or may affect the significance or accuracy
of any such information.
The Purchaser, a Delaware corporation, which is a wholly owned
subsidiary of Praxair, was organized to acquire the Company and has not
conducted any unrelated activities since its organization. The principal
executive office of the Purchaser is located at the principal executive
office of Praxair.
Financial information of the Purchaser is not provided because
Purchaser is a newly formed corporation with no historical financial
information and will be merged with and into
10
the Company as of the Effective Time, at which time the separate corporate
existence of the Purchaser shall cease.
BACKGROUND OF THE MERGER
Shortly after the December 1994 unsolicited proposal by another
company to acquire certain assets of the Company, Mr. H. William
Lichtenberger, the Chairman and Chief Executive Officer of Praxair,
contacted Mr. John E. Jones, the then Chairman, President and Chief
Executive Officer of the Company, to advise him of Praxair's willingness to
consider a variety of possible transactions with the Company involving its
industrial gases business, if the Company concluded it wished to effect
some transaction in response to the unsolicited proposal. Mr. Jones
indicated he would contact Praxair if he wished to pursue such a
transaction.
Several months later Mr. Lichtenberger contacted Mr. Jones to arrange
a meeting. On May 19, 1995, Mr. Lichtenberger and Mr. Jones met in
Chicago, Illinois and Mr. Lichtenberger raised with Mr. Jones a variety of
possible transactions between Praxair and the Company, including the
possibility of a business combination between Praxair and the Company. Mr.
Jones indicated that he would consider Mr. Lichtenberger's ideas and
respond after such consideration.
Having heard no response from Mr. Jones, on August 28, 1995, Mr.
Lichtenberger telephoned Mr. Jones to solicit a response regarding the
possible transactions discussed at the May 19, 1995 meeting. During that
call they agreed to meet on August 31, 1995 in the New York area.
On August 31, 1995, Mr. Lichtenberger and Mr. John A. Clerico, Vice
President and Chief Financial Officer of Praxair, met with Mr. Jones and
Mr. A.J. Schneider, Chief Financial Officer of the Company, and discussed
further a possible business combination between Praxair and the Company.
During the course of that meeting Mr. Lichtenberger and Mr. Jones discussed
the business rationale and strategic benefits of such a business
combination as well as various possible structures and bases upon which
such a business combination might proceed. At the conclusion of the
meeting, Mr. Jones indicated he would contact Mr. Lichtenberger after the
Labor Day holiday. On September 5, 1995, Mr. Jones called Mr.
Lichtenberger to discuss further the possible business combination that had
been the subject of the August 31 meeting. Mr. Jones indicated on that
call that he wanted to consider the matter further and that they should
talk further on Mr. Lichtenberger's return from a scheduled overseas trip.
In a late September, 1995 telephone conversation, Mr. Jones indicated
that he would respond to Mr. Lichtenberger following the Company's planned
October Board meeting.
11
At a meeting of the Board on October 11, the Board considered Mr.
Lichtenberger's invitation to enter into negotiations and directed
Mr. Jones to tell Mr. Lichtenberger that the Company was not for sale and
was not interested in negotiating with Praxair. On October 20, 1995, Mr.
Jones telephoned Mr. Lichtenberger to indicate that the Company had decided
to discontinue their discussions relating to a business combination between
Praxair and the Company.
On October 27, 1995, Mr. Lichtenberger telephoned Mr. Jones to inform
him that Praxair was making a formal proposal to the Board relating to a
proposed merger. In addition, the following letter was hand delivered to
Mr. Jones:
October 27, 1995
Mr. John E. Jones
Chairman, President and Chief
Executive Officer
CBI Industries, Inc.
800 Jorie Boulevard
Oak Brook, IL 60521-7001
Dear John:
As you know, over the past six months you and I have had several
discussions regarding a possible transaction to effect a merger of our
respective companies. Based on our conversations, I think we both realize
that significant benefits could be realized by both our companies from such
a transaction. Therefore, I was greatly disappointed when you told me on
October 20 that you had decided not to continue our discussions.
As I told you during that telephone conversation, in recent weeks we
at Praxair have continued to carefully study the dynamics and potential
advantages of a business combination of Praxair and CBI. As a result, we
now feel even more strongly that such a business combination would result
in significant strategic benefits for both our companies and our respective
shareholders. In light of your current position which you communicated to
me on October 20, and given what we continue to view as the compelling
rationale for a business combination, we have decided that the best way to
proceed is for Praxair to submit a specific proposal to your Board of
Directors for its formal consideration.
Accordingly, on behalf of the Board of Directors of Praxair, I am
pleased to propose herewith the merger of Praxair and CBI pursuant to which
your shareholders would receive $32.00 for each share of CBI common stock,
which we would propose to pay in either cash or Praxair common stock. Our
proposal to effect a merger of Praxair and CBI is subject to
12
the negotiation of a mutually satisfactory definitive merger agreement
containing customary terms and closing conditions.
I hope that you will recognize the powerful business logic behind our
proposal and that you will promptly submit it to your Board of Directors
for its consideration with a favorable recommendation from you. It is our
hope that, after appropriate consideration by your Board of Directors, your
Board will authorize proceeding with the negotiation of the definitive
merger agreement on the terms we have proposed.
The price per share in our merger proposal is based on our present
knowledge of CBI, which is limited to public information. It is our view
that the price we are proposing would be both fair and highly attractive to
your shareholders. Our proposal offers your shareholders a significant
premium over the current market value of CBI.
The transaction we propose represents a clearly attractive
opportunity for Praxair to combine the leading industrial gases supplier in
North and South America and the premier world supplier of carbon dioxide.
The combined enterprise will be strongly positioned to maximize our
marketing, engineering and technological skills as it expands its
operations further into major global markets. It will also be able to
develop significant new applications for a wide range of products and
advanced technologies to enable our customers to improve their
productivity, product quality and environmental performance. Together,
Praxair's and CBI's business portfolios and synergies will provide the
enterprise with considerable opportunities to support strong future sales
and earnings growth.
We are prepared to move promptly in connection with our proposal. We
would be happy to meet with you and other members of your Board of
Directors and senior management as soon as practicable to discuss our
proposal in detail and to answer any questions you or they may have. We
realize that your Board of Directors will want to carefully consider our
proposal, but we do ask that the Board respond to us as soon as possible,
and in any event by noon, on November 1, 1995.
While we would very much prefer that a business combination of our
companies be effected pursuant to the negotiation of a merger on the terms
we have proposed, you and your Board should appreciate that if your Board
rejects our proposal to negotiate a merger, we reserve the right to propose
directly to the shareholders of CBI a cash offer for CBI by Praxair.
We look forward to hearing the response of your Board of Directors
after it has reviewed our merger proposal.
Sincerely,
/s/ H.W. Lichtenberger
H.W. Lichtenberger
13
On October 29, 1995, Praxair issued a press release, which set forth
the foregoing letter and indicated that Praxair had proposed a merger to
the Board.
On October 30, 1995, Praxair commenced litigation against the Company
and the members of the Board in the Delaware Court of Chancery, seeking
among other things, an order (i) compelling the Board to redeem the Rights
or to amend the Rights Agreement so as to make the Rights inapplicable to
any acquisition proposal which equals or exceeds Praxair's proposed merger
and (ii) declaring that the Board is in breach of its fiduciary duty by
continuing to deploy the Rights Agreement.
On October 31, 1995, Mr. Jones telephoned Mr. Lichtenberger to
indicate that (i) the Company would not respond to Mr. Lichtenberger's
October 27th letter by Praxair's deadline of noon on November 1, 1995 and
(ii) the Board would consider in due course the matters contained in Mr.
Lichtenberger's October 27th letter.
On November 1, 1995, Praxair announced that it intended to commence
and on Friday, November 3, 1995, Praxair did commence, a tender offer to
purchase all outstanding Shares at a price of $32.00 per Share, net to the
seller in cash, without interest thereon upon the terms and subject to the
conditions set forth in the Offer to Purchase dated November 3, 1995 and
the related Letter of Transmittal (which together constituted the "Praxair
Offer").
On November 6, 8 and 14, 1995, the Board met with its legal and
financial advisors to review the Praxair Offer. On November 16, 1995, the
Company filed a Solicitation/ Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9") with the Commission stating that the Board
unanimously recommended that the Company's stockholders reject the Praxair
Offer and not tender any Shares pursuant thereto. The Schedule 14D-9 also
stated that the Company was in the preliminary stages of discussion and
negotiation concerning a possible extraordinary transaction involving the
Company, having entered into confidentiality and standstill agreements
concerning the furnishing of confidential information to parties indicating
an interest in such a transaction and having responded to due diligence
inquiries. The Schedule 14D-9 stated that, in addition, the Company had
preliminary discussions with other parties regarding their potential
interest in such a transaction.
14
On November 17, 1995, Praxair sent the following letter to the Company:
November 17, 1995
Mr. John E. Jones
Chairman, President
and Chief Executive Officer
CBI Industries, Inc.
800 Jorie Boulevard
Oak Brook, Illinois 60521-2268
Dear John:
As CBI Industries, Inc. ("CBI") indicated in its
Solicitation/Recommendation Statement on Schedule 14D-9, dated November 16,
1995, CBI is actively exploring alternatives to maximize shareholder value.
In that regard, CBI has (i) entered into agreements concerning the
furnishing of confidential information to other parties, (ii) responded to
due diligence inquiries and (iii) had preliminary discussions with other
parties regarding such other parties' potential interest in entering into,
among other things, an extraordinary transaction with CBI.
As stated in my letter to you, dated October 27, 1995, our offer to
acquire CBI at $32 per share is based on publicly available information.
We object strongly to the provision by CBI of non-public information
relating to CBI or any of its subsidiaries and access to any individuals
within CBI or any of its subsidiaries to any other party interested in the
purchase of or a business combination with CBI without the contemporaneous
provision of such information and access to Praxair, Inc. ("Praxair").
We believe that in connection with any discussions regarding the
possible sale of CBI, it is the fiduciary duty of the CBI Board of
Directors to maximize the value of CBI for its shareholders. We
additionally believe that to do so (and to properly discharge such
fiduciary duty) the CBI Board of Directors must, among other things, ensure
that all interested parties are placed on a "level playing field" with
regard to non-public information and access to individuals. In this
regard, Praxair is prepared to promptly enter into a standard
confidentiality agreement, which agreement would not, of course, contain
any inappropriate provisions restricting our ability to make offers to or
otherwise communicate with CBI or its shareholders.
In addition, we are amending our complaint in Delaware to require
that CBI maintain a "level playing field" and provide non-public
information and access to individuals on a comparable and contemporaneous
basis.
15
Please provide to us such a confidentiality agreement and, subsequent
to the execution thereof, any non-public information and access to
individuals which have already been provided to other interested parties.
Additionally, please implement proper procedures to ensure that Praxair
receives at least contemporaneously all such non-public information and
access to individuals provided to other interested parties in the future.
Very truly yours,
/s/ H. William Lichtenberger
H. William Lichtenberger
On November 21, 1995, Praxair announced that it had received a
request for additional information from the Federal Trade Commission
("FTC") pursuant to the Hart-Scott-Rodino Antitrust Improvement Act of
1976, as amended ("HSR Act"), that it was in the process of complying with
such request, and that the initial 15-day waiting period under the HSR Act
had been extended.
On December 5, 1995, Praxair and the Company entered into a
confidentiality agreement. Among other things, the confidentiality
agreement granted Praxair the right to review certain non-public
information concerning the Company on a comparable basis to the access to
such information provided by the Company to other third parties. The
confidentiality agreement also provided that, except under certain
conditions, neither Praxair nor any of its affiliates would acquire any
securities of the Company pursuant to the Praxair Offer or otherwise at any
time prior to January 15, 1996, or such earlier time as the Company entered
into a definitive agreement with any party or parties, including Praxair,
with respect to a transaction or transactions for the acquisition of all or
a majority of the Company's assets or securities.
Pursuant to the terms of the confidentiality agreement, Praxair was
granted an opportunity to conduct a due diligence investigation of certain
public and nonpublic information of the Company (which investigation
included interviews with certain members of the Company's management).
During the course of its review, Praxair was provided by the Company with,
among other things, (i) certain financial information regarding each of the
Company's businesses and (ii) certain consolidated Company projections for
the period 1995 through 1998, which showed a compound annual growth rate
for the projection period of 8%, 19% and 42% for revenues, income from
operations, and net income to common stockholders, respectively.
Such projections reflect various assumptions by the Company which may
or may not prove to be accurate and there can be no assurance that such
results will be realized. The
16
Company prepared such projections in connection with its exploration of
alternatives to maximize stockholder value. Such projections were not
prepared for, or with a view toward, dissemination to the public. Such
projections were not prepared in accordance with published guidelines of
the American Institute of Certified Public Accountants or the Commission
regarding projections and forecasts, nor have such projections been
audited, examined or otherwise reviewed by independent auditors of the
Company. In addition, such projections are based upon many estimates and
are inherently subject to significant economic and competitive
uncertainties and contingencies, many of which are beyond the control of
management of the Company. Accordingly, actual results may be materially
higher or lower than those projected. The inclusion of such projections
herein should not be regarded as a representation by the Company or any
other person that the projections will prove to be correct.
On December 19, 1995 Praxair sent the following letter to the
Company:
December 19, 1995
Mr. John E. Jones
Chairman, President
and Chief Executive Officer
CBI Industries, Inc.
800 Jorie Boulevard
Oak Brook, Illinois 60522-7001
Dear John:
As indicated to you during our telephone conversation this morning,
Praxair is prepared to increase its offer to acquire CBI Industries to $33
a share subject to the Board of Directors of CBI accepting such proposal
and CBI and Praxair entering into a mutually satisfactory merger agreement
by 5:00 p.m., Thursday, December 21, 1995.
Praxair is communicating this proposal to you at this time in the
interest of bringing this matter to a prompt and satisfactory conclusion.
We think that the underlying values for the businesses and operations of
CBI can best be preserved if this matter is resolved without any further
significant delay.
We understand that your Board of Directors will want to carefully
consider our proposal and obtain the opinion of its investment bankers as
to the fairness of the proposed price of $33 per share. However, as you
can appreciate, with a proposal of this sort, time is of the essence.
Therefore, if our proposal is not accepted by the deadline set forth above,
it will be withdrawn, in which case Praxair would intend to continue with
its tender offer for shares of CBI at $32 per share. Furthermore, you
should appreciate that Praxair reserves the
17
right in the future to reduce the price it is offering in its tender offer
if the businesses and operations of CBI are impaired as a result of any
prolonged delay in the resolution of this matter.
I continue to be hopeful that you and your Board of Directors will
accept our offer, and we look forward to receiving your prompt response.
Sincerely,
/s/ H. William Lichtenberger
H. William Lichtenberger
On December 22, 1995, Praxair issued a press release announcing that,
at the request of the Board of the Company, it had extended the deadline
for its proposed expedited merger agreement at $33.00 per Share with the
Company until 1:00 p.m. Eastern time on Friday, December 22.
Also on December 22, 1995, Praxair issued a press release announcing
that discussions were underway with the Company regarding Praxair's
expedited $33.00 per Share merger offer.
Also on December 22, 1995, the Board met and unanimously approved the
Merger Agreement, the Amended Praxair Offer and the Merger, determined that
each of the Amended Praxair Offer and the Merger are fair to and in the
best interests of the Stockholders of the Company and voted to recommend
that the stockholders of the Company accept the Amended Praxair Offer. On
the same day, the Board of Directors of Praxair approved the Merger
Agreement. The Merger Agreement was thereafter executed on December 22,
1995 by Praxair, the Purchaser and the Company, and Praxair and the Company
issued a joint press release announcing the execution of the Merger
Agreement.
On December 28, 1995, the Purchaser and Praxair amended the Praxair
Offer as required by the Merger Agreement. Also on December 28, 1995, the
Company filed an amendment to its Schedule 14D-9, containing, among other
things, (i) the recommendation of the Board that the stockholders of the
Company accept the Amended Praxair Offer and (ii) the opinion of Lehman
Brothers Inc. and Merrill Lynch & Co., its financial advisors, that the
consideration to be received by the stockholders of the Company pursuant to
the Amended Praxair Offer and the Merger is fair to such stockholders from
a financial point of view.
Praxair had accepted for payment 41,094,108 Shares pursuant to the
Amended Praxair Offer.
18
RECOMMENDATION OF THE BOARD AND REASONS FOR THE MERGER
At a meeting of the Board on December 22, 1995, the Board determined
that the Amended Praxair Offer and the Merger are fair to and in the best
interests of the Company and its stockholders. The Board recommended that
the Company's stockholders accept the Amended Praxair Offer and tender
their Shares pursuant to the Amended Praxair Offer.
In reaching its conclusions with respect to the Amended Praxair
Offer, the Board considered a number of factors, including the following:
1. The terms and conditions of the Amended
Praxair Offer and the Merger Agreement, including the
price to be paid in the Amended Praxair Offer and the
Merger;
2. The written opinions of Lehman Brothers Inc.
and Merrill Lynch & Co. that as of the date of such
opinions the $33.00 per Share to be received by the
stockholders of the Company pursuant to the Amended
Praxair Offer and the Merger is fair to such
stockholders from a financial point of view (copies of
such opinions setting forth assumptions made and matters
considered and limitations set forth by Lehman Brothers
Inc. and Merrill Lynch & Co. are included as Exhibits B
and C hereto, respectively, and stockholders are urged to
read such opinions in their entirety);
3. The recommendation of management of the
Company that the Amended Praxair Offer and the Merger be
approved;
4. The directors' knowledge of the Company's
business, financial condition, results of operations,
current business strategy and future prospects, the
nature of the markets in which the Company operates, the
Company's position in such markets, and the efforts by
the Company's management, with the advice and assistance
of its legal and financial advisors, to explore other
possible transactions involving the Company; and
5. The historical and current market prices for
the Shares.
The Board also considered communications from a third party
indicating an interest in discussing an acquisition of the Company's
industrial gas business for $2.05 billion, which amount could include the
assumption of debt. Such party indicated it was interested only in
pursuing an acquisition of such business and not an acquisition of any of
the Company's other businesses or of the Company as a whole. The Board
considered the responses to its search for potential buyers of the
Company's non-gas businesses and the possibility of distributing such
businesses to the Company's stockholders by means of a dividend, including
19
the views of its financial advisors with respect to the range of potential
market values of such businesses. The Board determined to recommend the
Amended Praxair Offer after taking into account the foregoing, the fact
that there was no assurance that a definitive agreement with such third
party for the disposition of the industrial gas business could have been
negotiated, as well as the uncertainties, costs and delays associated with
a disposition of the Company's businesses in separate transactions,
including the uncertainty related to the value at which the securities of
the non-gas businesses would trade following the public distribution
thereof.
The foregoing discussion of the information and factors considered
and given weight by the Board is not intended to be exhaustive. In view of
the variety of factors considered in connection with its evaluation of the
Amended Praxair Offer, the Board did not find it practicable to, and did
not, quantify or otherwise assign relative weights to the specific factors
considered in reaching its determination. In addition, individual members
of the Board may have given different weights to different factors.
At the December 22, 1995 meeting of the Board, the Board also
approved the Amended Praxair Offer and the Merger for the purposes of
eliminating the application of Section 203 of the DGCL, and also approved
the Amended Praxair Offer and the Merger for purposes of Article Tenth and
Article Fifteenth of the Restated Company Certificate. The Board also
authorized an amendment to the Rights Agreement (the "December Rights
Agreement Amendment") to amend the definition of "Permitted Tender Offer"
such that a "Permitted Tender Offer" is any offer which the Board, in its
sole discretion and subject to any conditions the Board deems proper,
determines to be a Permitted Tender Offer. The Board further determined
that the Amended Praxair Offer constitutes a "Permitted Tender Offer" for
so long as the Merger Agreement was not terminated. The Board further
determined to defer until further action of the Board the occurrence of a
"Distribution Date". The December Rights Agreement Amendment, dated as of
December 22, 1995, was subsequently executed by the Company and the Rights
Agent.
On January 16, 1996, the directors of the Company executed a
unanimous written consent in lieu of a meeting of the Board, pursuant to
which Mr. H. William Lichtenberger, Mr. John A. Clerico, Mr. Edgar G.
Hotard and Mr. David H. Chaifetz were elected to the Board. On the same
day, all the directors of the Company (other than the four newly-elected
directors and other than Mr. John F. Riordan and Mr. Robert G. Wallace)
resigned from the Board. On January 17, 1996, the reconstituted Board
authorized an amendment to the Rights Agreement (the "January Rights
Agreement Amendment") to amend the definition of (i) "Exempt Person" such
that both Praxair and the Purchaser are included as "Exempt Persons" and
(ii) "Distribution Date" such that it shall be such date as may be
determined by action of the Board. The January Rights Agreement Amendment,
dated as of January 18, 1996, was subsequently executed by the Company and
the Rights Agent.
20
OPINIONS OF FINANCIAL ADVISORS
The Company has engaged Lehman Brothers Inc. ("Lehman Brothers") and
Merrill Lynch & Co. ("Merrill Lynch," and together with Lehman Brothers, the
"Financial Advisors") to act as its financial advisors with respect to the
proposals made by Praxair, and any alternatives thereto, and to render their
opinions as to the fairness, from a financial point of view, to the
Company's stockholders of the consideration to be offered to such
stockholders in the Amended Praxair Offer and the Merger.
On December 22, 1995, in connection with the evaluation of the Merger
Agreement, the Amended Praxair Offer and the Merger by the Board, Lehman
Brothers and Merrill Lynch made a presentation to the Board with respect to
the consideration to be offered to the stockholders of the Company in the
Amended Praxair Offer and the Merger and delivered their opinions that, as
of the date of such opinions, and subject to assumptions, factors and
limitations set forth in such written opinions as described below, the
consideration to be offered to the stockholders of the Company in the
Amended Praxair Offer and the Merger is fair, from a financial point of
view, to such stockholders.
The full text of the written opinions of Lehman Brothers and Merrill
Lynch, each dated December 22, 1995, which set forth assumptions made,
factors considered and limitations on the review undertaken by Lehman
Brothers and Merrill Lynch, are included as Exhibit B and Exhibit C,
respectively, to this Information Statement, and are incorporated herein by
reference. The summary of the opinions of the Financial Advisors set forth
in this Information Statement is qualified in its entirety by reference to
the full text of such opinions.
No limitations were imposed by the Company on the scope of the
Financial Advisors' investigation or the procedures to be followed by the
Financial Advisors in rendering their opinions. The Financial Advisors were
not requested to and did not make any recommendation to the Board as to the
form or amount of consideration to be offered to the stockholders of the
Company in the Amended Praxair Offer and the Merger, which was determined
through arm's-length negotiations between the Company and Praxair in which
the Financial Advisors assisted in the Company. The Financial Advisors'
opinions are for the use and benefit of the Board and were rendered to the
Board in connection with its consideration of the Amended Praxair Offer and
the Merger. The Financial Advisors' opinions do not constitute a recommenda-
tion to any of the Company's stockholders as to whether to accept the
consideration offered to such stockholder in the Amended Praxair Offer and the
Merger. The Financial Advisors were not requested to opine as to, and their
opinions do not address, the Company's underlying business decision to proceed
with or effect the Amended Praxair Offer and the Merger.
In arriving at their opinions, the Financial Advisors reviewed and
analyzed: (i) the Merger Agreement and the specific terms of the Amended
Praxair Offer and the Merger, (ii) such publicly available information
concerning the Company and Praxair which the Financial Advisors believed to
be relevant to their inquiry, (iii) financial and operating information with
respect
21
to the business, operations and prospects of the Company furnished to the
Financial Advisors by the Company including, without limitation, certain
projections prepared by the Company, (iv) a trading history of the Company's
common stock and a comparison of that trading history with those of other
companies that the Financial Advisors deemed relevant, (v) a comparison of
the historical financial results and present financial condition of the
Company with those of other companies that the Financial Advisors deemed
relevant, and (vi) a comparison of the financial terms of the Amended
Praxair Offer and the Merger with the financial terms of certain other
transactions that the Financial Advisors deemed relevant. In addition, in
arriving at their opinions, the Financial Advisors placed considerable
emphasis on the results of efforts to solicit indications of interest from
third parties with respect to an acquisition of all or part of the Company
or other strategic transactions involving the Company. The Financial
Advisors also had discussions with the management of the Company concerning
its business, operations, assets, financial condition and prospects and
undertook such other studies, analyses and investigations as they deemed
appropriate.
In arriving at their opinions, the Financial Advisors assumed and
relied upon the accuracy and completeness of the financial and other
information used by them without assuming any responsibility for independent
verification of such information. The Financial Advisors further relied
upon the assurances of management of the Company that they were not aware of
any facts that would make such information inaccurate or misleading. With
regard to the financial projections of the Company provided to the Financial
Advisors by the management of the Company, the Financial Advisors assumed
that such projections were reasonably prepared on a basis reflecting the
best currently available estimates and judgments of the management of the
Company as to the future financial performance of the Company and that the
Company will perform substantially in accordance with such projections. In
arriving at their opinions, the Financial Advisors did not conduct a
physical inspection of the properties and facilities of the Company and did
not make or obtain any evaluations or appraisals of the assets or
liabilities of the Company. The opinions of the Financial Advisors state
that they are necessarily based upon market, economic and other conditions
as they existed on, and could be evaluated as of, the date of the opinions.
In connection with their presentation to the Board and advising the
Board of their opinions on December 22, 1995, the Financial Advisors
performed certain financial and comparative analyses, as described below.
The preparation of a fairness opinion involves various determinations as to
the most appropriate and relevant methods of financial and comparative
analysis and the application of those methods to the particular
circumstances, and therefore, such an opinion is not readily susceptible to
summary description. Furthermore, in arriving at
22
their fairness opinions, the Financial Advisors did not attribute any
particular weight to any analysis or factor considered by it, but rather
made qualitative judgments as to the significance and relevance of each
analysis and factor. Accordingly, the Financial Advisors believe that their
analyses must be considered as a whole and that considering any portions of
such analyses and of the factors considered, without considering all
analyses and factors, could create a misleading or incomplete view of the
process underlying the opinions. In their analyses, the Financial Advisors
made numerous assumptions with respect to industry performance, general
business and economic conditions and other matters, many of which are beyond
the control of the Company. Any estimates contained in the analyses are not
necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than as set forth
therein. In addition, analyses relating to the value of businesses do not
purport to be appraisals or to reflect the prices at which businesses
actually may be sold.
Analysis of Selected Publicly Traded Comparable Companies. Using
publicly available information, the Financial Advisors compared selected
financial data of the Company with similar data of selected publicly traded
companies engaged in businesses considered by the Financial Advisors to be
comparable to those of the Company. Specifically, the Financial Advisors
included in their review AGA AB, Airgas Inc., Air Products & Chemicals, The
BOC Group, Fluor Corp., Foster Wheeler Corp., Jacobs Engineering Group,
L'Air Liquide S.A., Linde Group, Morrison Knudson Corp., Matrix Services,
McDermott Int'l., Pitt-Des Moines Inc. and Praxair, Inc. (the "Comparable
Universe"). The Financial Advisors calculated, among other things, current
market price per share as a multiple of the latest reported twelve months
("LTM") earnings per share ("EPS"), 1995 EPS estimate, 1996 EPS estimate and
the latest reported book value per share. The 1995 and 1996 EPS estimates
were based on the median of publicly-available earnings estimates made by
research analysts as provided by First Call Investor Service. The Financial
Advisors also calculated total equity market value plus net debt as a
multiple of each of LTM revenues, earnings before interest and taxes
("EBIT") and EBIT plus depreciation and amortization expenses ("EBITDA").
The results of these calculations were used to impute a range of values by
applying the multiples derived from the calculations to the Company's
financial data.
Because of the inherent differences between the businesses, operations
and prospects of the Company and the businesses, operations and prospects of
the companies included in the Comparable Universe, the Financial Advisors
believed that it was inappropriate to, and therefore did not, rely solely on
the quantitative results of the analysis, and accordingly also made
qualitative judgments concerning differences between the financial and
operating characteristics of the Company and the companies included in the
Comparable Universe that would affect
23
the public trading values of the Company and such comparable companies.
Analysis of Selected Comparable Transactions. Using publicly available
information, the Financial Advisors compared selected financial data
(including total equity market value as a multiple of LTM net income and
book value and total equity market value plus net debt as a multiple of
revenues, EBIT and EBITDA) for the Company with similar data for selected
transactions deemed by the Financial Advisors to be relevant. Using the
same methodology as in the analysis of comparable companies, the multiples
derived from this analysis were used to impute a range of values for the
Company.
Because the reasons for and the circumstances surrounding each of the
transactions analyzed were specific to each transaction and because of the
inherent differences between the businesses, operations and prospects of the
Company and the businesses, operations and prospects of the selected
acquired companies analyzed, the Financial Advisors believed that it was
inappropriate to, and therefore did not, rely solely on the quantitative
results of the analysis, and accordingly also made qualitative judgments
concerning differences between the characteristics of these transactions and
the Amended Praxair Offer and the Merger that would affect the acquisition
values of the Company and such acquired companies.
Discounted Cash Flow Analysis. The Financial Advisors calculated the
present value of the future streams of unleveraged after-tax cash flows that
the Company would be expected to produce over a ten year period. The
analysis utilized financial projections through 1998 provided by the
Company's management and relied on certain assumptions with respect to the
Company's future business and operations beyond such date reviewed by and
discussed with the Company's management. After-tax cash flows were
calculated as the after-tax EBIT before amortization ("EBITA") plus
depreciation less net changes in non-cash working capital and capital
expenditures. The Financial Advisors calculated terminal values for the
Company by applying to projected EBITA and EBITDA a range of multiples based
on the analysis of the trading multiples of the Comparable Universe,
analysis of the selected comparable transactions and on the Financial
Advisors' general experience in mergers and acquisitions. The cash flow
streams and terminal values were then discounted to present values using a
range of discount rates which were chosen based on several assumptions
regarding the cost of capital of the Company and its businesses.
24
Breakup Analysis. The Financial Advisors also analyzed the Company's
possible value under a breakup analysis, examining a wide variety of
scenarios under which the Company's different businesses could be sold for
cash or stock or could be separated and spun-off to trade publicly. These
transactions were examined under a variety of tax scenarios, including some
or all transactions being taxable transactions and subtracting estimated tax
liabilities from the value ranges. The estimated costs of breaking up the
Company were also subtracted from the value ranges, including costs related
to refinancing debt, fulfilling severance obligations, dividing the Company's
Employee Stock Ownership Plan among the employees in the respective
businesses and paying transaction fees. For purposes of the analysis, the
Financial Advisors relied upon tax data (including as to basis) provided by
the Company. The Financial Advisors marketed the separate businesses to a
number of interested parties and used the information resulting from this
process in performing this analysis to assess potential realizable values.
Each of Lehman Brothers and Merrill Lynch is an internationally
recognized investment banking firm engaged in, among other things, the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements, and
valuations for corporate and other purposes. The Board selected Lehman
Brothers and Merrill Lynch because of their expertise, reputation and
familiarity with the Company and because their investment banking
professionals have substantial experience in transactions similar to the
Amended Praxair Offer and the Merger.
Each of Lehman Brothers and Merrill Lynch has previously rendered
certain financial advisory and investment banking services to the Company,
for which it has received customary compensation. Pursuant to the terms of
an engagement letter agreement, dated November 14, 1995, between Lehman
Brothers, Merrill Lynch and the Company, the Company has paid fees totalling
$5,500,000 ($250,000 of which constituted a retainer fee) to Lehman Brothers
and fees totalling $5,500,000 ($250,000 of which constituted a retainer fee)
to Merrill Lynch as compensation for the services rendered by each in
connection with the Amended Praxair Offer and the Merger. In addition, the
Company has agreed to reimburse the Financial Advisors for their reasonable
expenses (including, without limitation, professional and legal fees and
disbursements) incurred by them in connection with their engagement, and to
indemnify the Financial Advisors and certain related persons against certain
liabilities in connection with their engagement, including certain
liabilities that may arise under the federal securities laws.
In the ordinary course of their respective businesses, each of Lehman
Brothers and Merrill Lynch actively trades in the securities of the Company
and Praxair for its own account and for the accounts of its customers and,
accordingly, may at any time hold a long or short position in such
securities.
INTERESTS OF CERTAIN PERSONS
Certain existing and former members of the Company's management and
Board (as well as other employees of the Company) have certain interests
that are described below that may present them with actual or potential
conflicts of interest in connection with the Merger.
Four designees of Praxair -- H. William Lichtenberger, John A.
Clerico, Edgar G. Hotard and David H. Chaifetz -- were elected to the Board
following consummation of the Amended Praxair Offer. Such designees did
not own any Shares as individuals as of the Record Date.
25
STOCK OPTIONS AND RESTRICTED STOCK
Pursuant to the Merger Agreement, (i) each outstanding stock option
("Company Option") under the Company's Stock Option Plan and the Company's
1995 Stock Option Plan (collectively, the "Option Plans"), which was then
not exercisable became exercisable in full immediately prior to the
consummation of the Amended Praxair Offer and (ii) each option (and related
stock appreciation right) under the Option Plans outstanding immediately
prior to the Effective Time, whether or not then exercisable, will be
canceled and only entitle the holder thereof, upon surrender thereof, to
receive an amount in cash equal to the difference between $33.00 and the
exercise price per Share of such Company Option multiplied by the number of
Shares previously subject to such Company Option (such payment to be net of
applicable withholding taxes).
Pursuant to the Merger Agreement, the CBI Restricted Stock Award Plan
(1978), the CBI 1983 Restricted Stock Award Plan, the CBI 1989 Restricted
Stock Award Plan and the CBI 1994 Restricted Stock Award Plan (the
"Restricted Stock Plans") terminated following the purchase of Shares
pursuant to the Amended Praxair Offer. Under the terms of the Restricted
Stock Plans, all restrictions on Shares granted under such plans lapsed
following a termination of such plans after a Change in Control (as defined
therein). The acquisition by Praxair of beneficial ownership of 10% or
more of the Shares constituted a "Change in Control" for purposes of the
Restricted Stock Plans.
All of the executives and officers of the Company exercised their
Company Options (other than those options that became exercisable pursuant
to the Merger Agreement) prior to the consummation of the Amended Praxair
Offer. Each of the executives and officers of the Company tendered all of
his unrestricted Shares (including Shares obtained pursuant to the
Restricted Stock Plans and the Option Plans) in connection with the Amended
Praxair Offer. All Company Options that became exercisable pursuant to the
Merger Agreement and all restricted Shares that became unrestricted Shares
upon termination of the Restricted Stock Plans shall be canceled
immediately prior to the Effective Time and entitle the holder thereof to
cash.
STOCK AWARDS
The Compensation Committee of the Board approved certain awards under
the CBI 1994 Restricted Stock Award Plan (the "1994 Restricted Stock Plan")
effective immediately prior to the termination of the 1994 Restricted Stock
Plan. Specifically, the Compensation Committee resolved that 94.1% of each
award based on 1995 performance would be deemed earned and would be paid in
cash upon termination of the 1994 Restricted Stock Plan, and all awards
based on performance for fiscal years 1996 and 1997 would be awarded as if
payable in full and would be paid in cash. Pursuant to the Merger
Agreement, the Restricted Stock Plans terminated upon purchase of Shares
pursuant to the Amended Praxair Offer. Pursuant to the terms of the
Restricted Stock Plans, restrictions on restricted stock issued under such
Restricted Stock Plans lapsed upon termination of such Restricted Stock
Plans. The following awards became payable in full and were paid in cash
to the following persons who
26
were then directors and executive officers of the Company: J.E. Jones
$489,878.40; L.E. Akin $171,457.44; C.E. Willoughby $73,481.76; A.J.
Schneider $44,089.06; C.O. Ziemer $73,481.76.
TERMINATION AGREEMENTS
Agreements between the Company and Messrs. Jones, Akin, Willoughby,
Schneider and Ziemer provide for each executive's continued employment for
a three-year period (or to age 65, if earlier) following a Change in
Control of the Company (the "Change in Control Agreements"). "Change in
Control" is defined as the occurrence at any time of any of the following
events: (a) an Acquiring Person (as defined below) has become such; or (b)
Continuing Directors (as defined below) cease to comprise a majority of the
Board. The term "Acquiring Person" means any Person (as defined therein)
who or which, together with all Affiliates (as defined therein) and Associates
(as defined therein) of such Person, shall be the Beneficial Owner (as defined
therein) of 10% or more of the Shares then outstanding (subject to certain
exceptions), but shall not include an Exempt Person (as defined therein).
The term "Continuing Director" means any member of the Board, while such
person is a member of the Board, who is not an Acquiring Person, or an
Affiliate or Associate of an Acquiring Person, or a representative of an
Acquiring Person or of any such Affiliate or Associate, and was a member of
the Board prior to March 4, 1986 and means any person who subsequently
becomes a member of the Board, while such person is a member of the Board,
who is not an Acquiring Person, or an Affiliate or Associate of an
Acquiring Person, or a representative of an Acquiring Person or of any such
Affiliate or Associate, if (a) such person's nomination for election or
election to the Board is recommended or approved by resolution of a
majority of the Continuing Directors or (b) such person is included as a
nominee in a proxy statement of the Company distributed when a majority of
the Board consists of Continuing Directors.
Compensation and benefits for the three-year period are based
generally on the executive's compensation and benefits before the Change in
Control, subject to stipulated increases, and are payable in a lump sum on
a discounted present value basis upon either (i) termination by the Company
of the executive's employment for any reason other than death, disability
or wilful and material breach of the agreement during such period, or (ii)
resignation of the executive following any of (a) a significant change in
the executive's authorities or duties, (b) a reduction in the executive's
total compensation or (c) any other breach of the executive's Change in
Control Agreement. Such benefits payable upon a termination of employment
following a Change in Control also include a cash payment equal to (a) the
fair market value of any restricted stock awards which are forfeited as a
result of such termination, and (b) with respect to any stock option that
ceases to be exercisable or which terminates, a payment equal to the excess
of the fair market value of the stock subject to such option over the
option exercise price. The Change in Control Agreements also contain
"gross up" provisions pursuant to which the executive will be paid
additional amounts to reimburse such executive for all excise taxes payable
pursuant to Code Section 4999 with respect to so-called golden parachutes,
which additional payments will also include
27
those amounts necessary to permit the executive to pay all income and
excise taxes payable with respect to all such additional payments.
Pursuant to addenda to their respective Change in Control Agreements
with the Company, L.E. Akin and C.E. Willoughby also entered into Change in
Control Agreements with their employers, Chicago Bridge & Iron Company
("CBIC") and Liquid Carbonic Industries Corporation ("LCI"), respectively,
wholly owned subsidiaries of the Company. Messrs. Akin's and Willoughby's
Change of Control Agreements become effective upon either a Change in
Control of the Company or a Change in Ownership of CBIC or LCI, as the case
may be. A "Change in Ownership" of CBIC or LCI means an occurrence of an
event pursuant to which the ultimate right to elect the directors of CBIC
or LCI, as the case may be, is not exercisable by the Company or another
entity which directly or indirectly acquires stock of CBIC or LCI, as the
case may be, in a leveraged buyout in which the senior management of the
Company participates. Upon the earlier of a Change in Control in the
Company, or a Change in Ownership of CBIC or LCI, as the case may be, the
executive officer must, within 30 days of such change, notify both its
immediate employer and the Company as to which employment arrangement the
executive wishes to apply to his employment.
The acquisition by Praxair of beneficial ownership of approximately
94% of the Shares constituted a Change in Control and a Change in Ownership
pursuant to the Change in Control Agreements. On December 29, 1995, the
following executive officers of the Company received the following lump sum
payments as a portion of payments that would be payable pursuant to the
Change in Control Agreements: J.E. Jones $4,647,298; L.E. Akin $2,014,729;
C.E. Willoughby $1,643,362; A.J. Schneider $1,041,790; C.O. Ziemer
$1,118,887; Octavo Siuto $1,345,824; Larry Cooper $1,153,683; Steve Duffy
$757,798.
CERTAIN EFFECTS OF THE CONSUMMATION
OF THE OFFER ON THE SHARES
If the Merger is consummated, Stockholders will not have an
opportunity to continue their common equity interest in the Company as an
ongoing operation and therefore will not have the opportunity to share in
its future earnings and potential growth, if any. Following the Merger,
the Company plans to take all necessary actions (i) to de-register the
Shares under the Securities Exchange Act of 1934, as amended, and (ii) to
delist and de-register the Shares from the New York Stock Exchange (the
"NYSE").
STRUCTURE OF THE MERGER
In the Merger, each issued and outstanding Share (other than Shares
owned by Praxair, Purchaser or any other subsidiary of Praxair and each
Dissenting Share) will be
28
converted into the right to receive the Merger Consideration. Each Share
issued and outstanding and owned by Praxair, the Purchaser or any other
subsidiary of Praxair and each Share issued and held in the Company's
treasury will cease to be outstanding, will be canceled and retired without
payment of any consideration therefor and will cease to exist. Each share
of Common Stock, par value $0.01 per share, of Purchaser issued and
outstanding immediately prior to the Effective Time will be converted into
and become one issued and outstanding share of common stock of the
Surviving Corporation. The Company will thereupon become a subsidiary of
Praxair and Praxair will own the entire common equity interest in the
Company.
The acquisition of the Shares is structured as a cash merger, with
the Company as the Surviving Corporation, to ensure that Praxair will
acquire all outstanding Shares from all public holders thereof without
materially disrupting the Company's operations.
FINANCING OF THE MERGER
The Purchaser estimates that the total amount of funds required to
purchase the number of Shares outstanding on a fully diluted basis and to
pay fees and expenses related to the Amended Praxair Offer and the Merger
will be approximately $1.5 billion of which approximately $1.36 billion was
paid to purchase Shares tendered pursuant to the Amended Praxair Offer.
The Purchaser has obtained such funds and plans to obtain additional
necessary funds, if any, through capital contributions or advances made by
Praxair. Praxair plans to obtain the necessary funds for such capital
contribution, together with funds necessary to refinance any existing
borrowings of Praxair and its subsidiaries and the Company and its
subsidiaries that become payable as a result of completion of the Amended
Praxair Offer or the Merger, pursuant to borrowings in the commercial paper
market or under the Credit Agreement (as defined herein).
On December 7, 1995, Praxair entered into a definitive $2,500,000,000
Credit Agreement (the "Credit Agreement") among Praxair, the banks party
thereto, Morgan Guaranty Trust Company of New York, as Documentation Agent,
and Chemical Bank, as Administrative Agent and Auction Agent. On January
12, 1996, the Credit Agreement became effective and the Commitments (as
defined in the Credit Agreement) of the banks thereunder became available
to Praxair. To date, no borrowings have been made under the Credit
Agreement.
29
ACCOUNTING TREATMENT OF THE MERGER
The Merger will be accounted for under the "purchase" method of
accounting, whereby the purchase price for the Company will be allocated to
the identifiable assets and liabilities of the Company and its subsidiaries
based on their respective fair values.
CERTAIN LEGAL MATTERS; REQUIRED REGULATORY APPROVALS
Pursuant to the Merger Agreement, Praxair, the Purchaser and the
Company dismissed, with each party bearing its own costs and litigation
expenses, all proceedings pending between themselves and their affiliates
and to sign and deliver such further papers as may be necessary in
connection with such dismissals.
On October 30, 1995, four purported Stockholders commenced litigation
in the Delaware Court of Chancery against the Company and the Board,
alleging that the Board has violated its fiduciary duties to the Company's
stockholders by failing to pursue a possible transaction with Praxair and
employing the Rights Agreement to prevent Praxair from acquiring the
Company. Two additional Stockholder complaints were filed October 31 and
November 1. Each of these complaints seeks relief on behalf of a purported
class consisting of all Stockholders. In addition to injunctive and
declaratory relief, the Stockholder plaintiffs seek to recover damages on
behalf of the alleged class and an award of attorneys' fees. The Company
believes the foregoing actions are without merit, particularly in light of
the Merger Agreement and other transactions agreed upon between Praxair and
the Company subsequent to the filing of such actions.
Antitrust. On November 21, 1995, Praxair announced that it had
received a request for additional information from the FTC pursuant to the
HSR Act, that it was in the process of complying with such request, and that
the initial 15-day waiting period under the HSR Act was extended. Praxair
has reached an agreement with the staff of the FTC concerning a settlement
and consent order, which the FTC announced on January 11, 1996 had received
the approval of the Commissioners of the FTC. Pursuant to the agreement,
Praxair has signed a consent order which requires divestiture, within 12
months, of the merchant industrial gases assets and businesses of the
Company's liquid oxygen, nitrogen and argon production facilities in
Vacaville, CA; Irwindale, CA; Bozrah, CT; and Madison, WI.
No other U.S. federal or state regulatory requirement must be
complied with and no other approval must be obtained in connection with the
Merger.
CERTAIN FEDERAL TAX CONSEQUENCES OF THE MERGER
The following is a summary of the principal federal income tax
consequences of the Merger to Stockholders who hold their Shares as capital
assets. The discussion is based on the current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the applicable Treasury
Regulations ("Regulations") and public administrative and judicial
30
interpretations of the Code and Regulations, all of which are subject to
change, which changes could be applied retroactively.
The tax consequences of the transfer of Shares by a holder pursuant
to the Merger will depend on the holder's particular facts and
circumstances. This discussion is for general information purposes only
and may not apply to Stockholders who are subject to special treatment
under the Code, such as (but not limited to) foreign persons, retirement
plans, regulated investment companies and dealers in securities. It does
not cover the special tax consequences that may apply to holders who
acquired their Shares pursuant to the exercise of employee stock options or
otherwise as compensation. This summary is not intended to address any
aspects of state, local, foreign or other tax laws. The discussion assumes
that the Company is not a collapsible corporation under section 341 of the
Code.
The receipt of cash from the Purchaser for Shares pursuant to the
Merger will be a taxable sale for federal income tax purposes (and also may
be a taxable sale under applicable state, local or foreign tax laws). In
general, a Stockholder will recognize gain or loss for federal income tax
purposes equal to the difference between the amount of cash received for
the Shares and the holder's adjusted tax basis in such Shares. Gain or
loss must be determined separately for each identifiable block of Shares
(i.e., shares acquired at the same time and at the same price in one
transaction) converted into cash in the Merger. Provided the Shares
constitute capital assets in the hands of the holder thereof such gain or
loss will be capital gain or loss and will be long-term capital gain or
loss if, on the date of the sale pursuant to the Merger, the Shares were
held for more than one year. The deduction of any capital loss may be
limited under the Code.
Unless a Stockholder complies with certain reporting and
certification procedures or is an exempt recipient under applicable
withholding provisions of the Code and Regulations, such holder may be
subject to withholding tax of 31% with respect to any cash payments
received pursuant to the Merger. This tax is not an additional tax, but is
treated as a payment of the taxpayer's federal income tax and may be
refunded if the taxpayer has otherwise satisfied its federal income tax
liability and the taxpayer complies with the applicable requirements for
obtaining a refund. Stockholders should consult their brokers or the
Paying Agent to ensure compliance with such procedures. Foreign
Stockholders should consult their own tax advisors regarding withholding
taxes in general.
THE PRECEDING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER AND DOES NOT PURPORT TO BE A
COMPLETE ANALYSIS OR DISCUSSION OF ALL THE POTENTIAL TAX EFFECTS RELEVANT
THERETO. THUS, STOCKHOLDERS ARE URGED AND EXPECTED TO CONSULT THEIR OWN
TAX ADVISORS TO DETERMINE THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO
THEM
31
UNDER FEDERAL, STATE, LOCAL OR OTHER TAX LAWS AND THE EFFECT OF ANY CHANGE
IN THE APPLICABLE TAX LAWS SINCE THE DATE HEREOF.
THE MERGER AGREEMENT
The following is a summary of the Merger Agreement, a copy of which
is attached hereto as Exhibit A. Such summary is qualified in its entirety
by reference to the text of the Merger Agreement.
The Amended Offer. Pursuant to the Merger Agreement, Praxair and the
Purchaser agreed, subject to certain conditions, to amend the Praxair Offer
(i) to increase the price per Share to be paid pursuant to the Praxair
Offer from $32.00 per Share to $33.00 per Share, net to the seller in cash,
without interest thereon , (ii) to amend and restate the conditions to the
Praxair Offer, (iii) to amend the Praxair Offer such that the Amended
Praxair Offer and withdrawal rights would expire at 12:00 midnight, New
York City time, on Thursday, January 11, 1996 and (iv) to provide for the
Merger as promptly as is practicable following the consummation of the
Amended Praxair Offer.
Company Actions. Pursuant to the Merger Agreement, the Company
approved of and consented to the Amended Praxair Offer and represented that
(i) the Board, by vote of all directors at a meeting duly called and held,
has, in light of and subject to the terms and conditions set forth in the
Merger Agreement, unanimously (x) determined that each of the Amended
Praxair Offer and the Merger is fair to, and in the best interests of, the
stockholders of the Company and (y) approved the Merger Agreement and the
transactions contemplated thereby, including the Amended Praxair Offer and
the Merger, and recommended acceptance of the Amended Praxair Offer and
approval and adoption of the Merger Agreement and the Merger by the
stockholders of the Company and (ii) Merrill Lynch & Co. and Lehman
Brothers Inc., the Company's financial advisors, rendered to the Board
their respective opinions that the consideration to be received by the
stockholders of the Company pursuant to the Amended Praxair Offer and the
Merger is fair to such stockholders from a financial point of view.
Pursuant to the Merger Agreement, promptly upon the purchase of and
payment for any Shares by the Purchaser pursuant to the Amended Praxair
Offer which represent at least a majority of the Shares (on a fully diluted
basis) and from time to time thereafter, Praxair and the Purchaser became
entitled to designate members of the Board such that Praxair and the
Purchaser would have a number of representatives on the Board, rounded up
to the next whole number, equal to the product of (x) the total number of
directors on the Board multiplied by (y) the percentage of the outstanding
Shares beneficially owned by the Purchaser or its affiliates. The Company
agreed, upon request by Praxair or the Purchaser, to promptly increase the
size of the Board to the extent permitted by the Restated Company
Certificate and, if necessary, secure the resignations of such number of
directors as would be
32
necessary to enable Praxair's designees to be elected to the Board and
cause Praxair's designees to be so elected.
Following the election or appointment of Praxair's designees and
prior to the Effective Time, any action to be taken by the Board with
respect to the Merger Agreement will require approval by a majority of
those directors of the Company who have not been designated by Praxair or
the Purchaser. Until the Effective Time, the Company and Praxair will use
all reasonable efforts to retain as members of the Board at least two
directors who at the time are neither officers of Praxair or the Company
(or any of their respective affiliates), nor designees of the Purchaser (or
any of its affiliates), nor stockholders or affiliates of Purchaser (or any
respective affiliate).
The Merger. The Merger Agreement provides that in accordance with
the provisions thereof, at the Effective Time, the Purchaser will be merged
with and into the Company, and the Company will be the Surviving
Corporation in the Merger and will continue to be governed by the laws of
the State of Delaware. At the Effective Time, the separate corporate
existence of the Purchaser shall cease.
Pursuant to the Merger Agreement, as of the Effective Time, by virtue
of the Merger and without any action on the part of the holders of the
Shares, each Share issued and outstanding immediately prior to the
Effective Time (other than any Shares owned by Praxair, the Purchaser of
any other subsidiary of Praxair or Shares which are held by dissenting
stockholders exercising appraisal rights pursuant to Section 262 of the
DGCL) will be converted into the right to receive, without interest, $33.00
in cash. Each Share issued and outstanding and owned by Praxair, the
Purchaser or any other subsidiary of Praxair, and each Share issued and
held in the Company's treasury will cease to be outstanding, will be
canceled and retired without payment of any consideration therefor and will
cease to exist. For a description of certain appraisal rights available to
stockholders under Delaware law in connection with the Merger, see "THE
SPECIAL MEETING -- Dissenters' Rights of Appraisal" and Annex A.
As of the Effective Time, by virtue of the Merger and without any
action on the part of the Purchaser or the holder thereof, each share of
Common Stock, par value $0.01 per share, of Purchaser issued and
outstanding immediately prior to the Effective Time will be converted into
one issued and outstanding share of common stock of the Surviving
Corporation.
Pursuant to the Merger Agreement, each share of 7.48% Cumulative
Preferred Stock, Series D of the Company, par value $1.00 per share, and
each share of $6.75 Cumulative Preferred Stock, Series E of the Company,
par value $1.00 per share, which immediately prior to the Effective Time is
issued and outstanding shall remain outstanding and shall be entitled to
the same dividend and other relative rights, preferences, limitations and
restrictions as are now provided by the Restated Company Certificate.
33
Under the Merger Agreement, the Company agreed to take all actions
necessary to provide that, immediately prior to the consummation of the
Amended Praxair Offer, each outstanding option ("Company Option") to
purchase Shares under the Company's Stock Plans (as defined in the Merger
Agreement) which is not then exercisable would be exercisable in full and
each Company Option (and each related stock appreciation right) outstanding
prior to the Effective Time pursuant to any of the Stock Plans, whether or
not then exercisable, will be canceled and only entitle the holder thereof,
upon surrender thereof, to receive an amount in cash equal to the
difference between $33.00 (or such greater amount which might have been
paid pursuant to the Amended Praxair Offer) and the exercise price per
Share of such Company Option multiplied by the number of Shares previously
subject to such Company Option (such payment to be net of applicable
withholding taxes).
The Merger Agreement also provides that, subject to certain
exceptions, (i) the Stock Plans would terminate immediately following the
purchase of Shares pursuant to the Amended Praxair Offer and the provisions
in any other plan, program or arrangement, providing for the issuance or
grant of any other interest in respect of the capital stock of the Company
or any of its subsidiaries will be deleted as of the Effective Time and
(ii) the Company will use all reasonable efforts to ensure that following
the Effective Time no holder of Company Options or any participant in the
Stock Plans or any other plans, programs or arrangements shall have any
right thereunder to acquire any equity securities of the Company, the
Surviving Corporation or any subsidiary thereof.
The Merger Agreement provides that the Restated Company Certificate
will be the Certificate of Incorporation of the surviving corporation until
thereafter amended as provided by law and that the by-laws of the Purchaser
in effect at the Effective Time will be the by-laws of the Surviving
Corporation until thereafter amended as provided by law.
Under the Merger Agreement, subject to applicable law, the directors
of the Purchaser at the Effective Time will be the initial directors of the
Surviving Corporation and will hold office until their respective
successors are duly elected or appointed and qualified or until their
earlier death, resignation or removal.
Pursuant to the Merger Agreement, the officers of the Company at the
Effective Time will be the initial officers of the Surviving Corporation
and will hold office until their respective successors are duly appointed
and qualified, or their earlier death, resignation or removal.
Agreements of the Company, Praxair and the Purchaser. Pursuant to
the Merger Agreement and subject to certain terms therein, from the date of
the Merger Agreement until the Effective Time, the Company has agreed to,
upon reasonable notice, afford Praxair's officers, employees, counsel,
accountants and other representatives access during normal business hours
to its properties, books, contracts and records and, during such period,
34
furnish promptly all information concerning its business, properties and
personnel as may be reasonably requested.
Under the Merger Agreement, from and after the Effective Time,
Praxair will indemnify, defend and hold harmless each present and former
officer, director and employee of the Company, determined as of the
Effective Time, against any costs or expenses, judgments, fines, losses,
claims, damages or liabilities incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of matters existing or
occurring at or prior to the Effective Time, whether asserted or claimed
prior to, at or after the Effective Time, to the fullest extent that the
Company would have been permitted under Delaware law and the Restated
Company Certificate or the Company's by-laws to indemnify such Person.
Pursuant to the Merger Agreement, for a period of not less than five
years after the Effective Time, Praxair has agreed that it shall use all
reasonable efforts to maintain the Company's existing directors' and
officers' liability insurance policy and employee benefit fiduciary
liability insurance (provided that Praxair may substitute therefor policies
of substantially similar coverage and amounts containing terms which are no
less advantageous); provided, however, that Praxair is not obligated to
make annual premium payments for such insurance to the extent such premiums
exceed 175% of the premiums paid as of the date of the Merger Agreement by
the Company for such insurance.
Pursuant to the Merger Agreement, Praxair has agreed that, for the
period of one year commencing on the consummation of the Amended Praxair
Offer, the employees of the Company and its subsidiaries and former
employees of the Company and its subsidiaries, other than employees covered
by collective bargaining agreements, will continue to be provided with
benefits under employee benefit plans with a value which is not less in the
aggregate than that currently provided by the Company and its subsidiaries
to such employees.
Conditions to the Merger. Under the Merger Agreement, the respective
obligations of Praxair and the Purchaser to consummate the Merger are
subject to the fulfillment of each of the following conditions, any or all
of which (other than the Minimum Tender Condition (as defined in the Merger
Agreement) may be waived in whole or in part by Praxair or the Purchaser,
as the case may be, to the extent permitted by applicable law: (a) the
Merger Agreement shall have been duly approved by the vote of stockholders
of the Company necessary to approve the Merger Agreement and the
transactions contemplated by the Merger Agreement, in accordance with
applicable law, the Restated Company Certificate and the by-laws of the
Company; (b) the Purchaser shall have purchased Shares pursuant to the
Amended Praxair Offer; (c) the waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated; (d) no United States or state court or other governmental
entity of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, judgment, decree,
injunction
35
or other order (whether temporary, preliminary or permanent) which is in
effect and prohibits consummation of the transactions contemplated by the
Merger Agreement; (e) the Company shall have fulfilled its obligations
under the Merger Agreement in connection with Company Options, Stock Plans
and the Rights Agreement.
Under the Merger Agreement, the obligations of the Company to
consummate the Merger are subject to the fulfillment of each of the same
conditions as stated in the previous paragraph (except for Condition (e)),
any or all of which may be waived in whole or in part by the Company to the
extent permitted by applicable law.
Termination. The Merger Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, before or after
the approval by stockholders of the Company, by the mutual consent of
Praxair and the Company, by action of their respective Boards of Directors.
Amendment. Subject to applicable law, the Merger Agreement may be
modified or amended by written agreement of Praxair, the Purchaser and the
Company at any time prior to the Effective Time with respect to any of the
terms contained therein.
TRADING PRICES
The Shares are listed and traded on the NYSE under the trading symbol
"CBI". On December 21, 1995, the last full day of trading prior to the
date of the public announcement of the execution of the Merger Agreement
and the announcement that Praxair had submitted to the Company a proposal
to acquire all outstanding Shares for $33.00 cash per Share, the high and
low sales prices per share of the Shares as reported on the NYSE were
$32.125 and $32.375, respectively.
On December 27, 1995, the last full day of trading prior to the
commencement of the Amended Praxair Offer, the high and low sales prices
per share for the Shares as reported on the NYSE were $32.875 and $32.750,
respectively. Share prices are as reported on the NYSE based on published
financial sources. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET
QUOTATIONS FOR THE SHARES.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
According to information available to the Company as of the Record
Date, the following table sets forth certain information with respect to
each person known to the Company to be the beneficial owner of more than 5%
of any class of the Company's outstanding stock.
36
Amount and
Title Name and Address Nature of Bene- Percent
of Class of Beneficial Owner ficial Ownership of Class
Common Stock Praxair, Inc. 41,173,408(1) 94%
39 Old Ridgebury Road
Danbury, CT 06810-5113
__________
(1) Praxair directly owns 79,200 Shares and indirectly owns 41,094,208
Shares through the Purchaser, including 41,094,108 Shares acquired pursuant
to the Amended Praxair Offer.
SECURITY OWNERSHIP OF MANAGEMENT
OF THE COMPANY
Mr. H. William Lichtenberger, Mr. John A. Clerico, Mr. Edgar G.
Hotard and Mr. David H. Chaifetz, who were elected to the Board as
designees of Praxair, may be deemed to beneficially own Shares. Each of
them disclaims beneficial ownership of such Shares. According to
information available to the Company as of the Record Date, each current
director and executive officer of the Company tendered his or her Shares in
the Amended Praxair Offer, and therefore has no beneficial ownership of any
Shares.
INDEPENDENT PUBLIC ACCOUNTANTS
It is not expected that representatives of Arthur Andersen will be
present at the Special Meeting.
OTHER MATTERS TO COME BEFORE THE MEETING
No other matters are intended to be brought before the meeting by the
Company nor does the Company know of any matters that are expected to be
properly brought before the meeting by others.
INCORPORATION OF DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference into this Information
Statement the following documents previously filed with the Commission
pursuant to the Exchange Act:
1. Company's Annual Report on Form 10-K for the year ended December
31, 1994;
37
2. Company's Quarterly Reports on Form 10-Q for each of the quarters
ended March 31, 1995; June 30, 1995; and September 30, 1995;
3. Company's Current Reports on Form 8-K dated April 5, 1995, April
21, 1995 and September 5, 1995.
In addition, all reports and other documents filed by the Company
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date hereof and prior to the Special Meeting shall be
deemed to be incorporated by reference herein and to be a part hereof from
the date of filing of such reports and documents. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this
Information Statement to the extent that a statement contained herein, or
in any other subsequently filed document that also is incorporated or
deemed to be incorporated by reference herein, modifies or supersedes such
statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Information Statement. A copy of any document incorporated by reference
herein (including any exhibit incorporated by reference in any such
document) may be obtained without charge by any person receiving this
Information Statement, upon written or oral request, by contacting the
Company at 800 Jorie Boulevard, Oak Brook, Illinois 60521-2268, Attention:
Secretary; telephone: (708) 572-7000. Such copy will be sent by first
class mail or other equally prompt means within one business day after
receipt of such request.
By Order of the Board of Directors,
_____________________________
Secretary
Dated _______ __, 1996
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ANNEX A
SUMMARY OF APPRAISAL RIGHTS
The holders of the Shares are entitled to appraisal rights under
Section 262 of the DGCL ("Section 262"). Section 262 is reprinted in its
entirety herewith. All references in Section 262 and in this summary to a
"Stockholder" are to the record holder of the Shares as to which appraisal
rights are asserted. A person having a beneficial interest in the Shares
that are held of record in the name of another person, such as a broker or
nominee, must act promptly to cause the record holder to follow the steps
summarized below properly and in a timely manner to perfect whatever
appraisal rights the beneficial owner may have.
The following discussion is not a complete statement of the law
relating to appraisal rights and is qualified in its entirety by reference
to Section 262. This discussion and Section 262 should be reviewed
carefully by any holder who wishes to exercise statutory appraisal rights
or who wishes to preserve the right to do so, since failure to comply with
the procedures set forth herein or therein will result in the loss of
appraisal rights.
Stockholders of record who desire to exercise their appraisal rights
must satisfy all of the following conditions. A written demand for
appraisal of the Shares must be delivered to the Company at the address set
forth below prior to the vote of the Company's Stockholders on the Merger.
Voting against, abstaining from voting or failing to vote on the Merger
Agreement and the Merger will not constitute a demand for appraisal within
the meaning of Section 262.
Stockholders electing to exercise their appraisal rights under
Section 262 must not vote for approval and adoption of the Merger Agreement
and of the Merger.
The demand for appraisal must be executed by or for the Stockholder
of record, fully and correctly, as such Stockholder's name appears on the
certificate or certificates representing his or her Shares. If the Shares
are owned of record in a fiduciary capacity, such as by a trustee,
guardian, or custodian, such demand must be executed by the fiduciary. If
the Shares are owned of record by more than one person, as in a joint
tenancy or tenancy in common, such demand must be executed by or for all
record owners. An authorized agent, including an agent for two or more
record owners, may execute the demand for appraisal for a Stockholder of
record; however, the agent must identify the record owner and expressly
disclose the fact that, in exercising the demand, such person is acting as
agent for the record owner.
A record owner, such as a broker, who holds Shares as a nominee for
others, may exercise appraisal rights with respect to the Shares held for
all or less than all beneficial Owners of Shares as to which such person is
the record owner. In such cases the written demand for appraisal must set
forth the number of Shares covered by such demand. Where the number of
Shares is not expressly stated, the demand will be presumed to cover all
Shares outstanding in the name of such record owner. Beneficial owners who
are not record
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owners and who intend to exercise appraisal rights should instruct their
record owners to comply strictly with the statutory requirements with
respect to the exercise of appraisal rights.
A Stockholder who elects to exercise appraisal rights must mail or
deliver his or her written demand to:
CBI Industries, Inc.
800 Jorie Boulevard
Oak Brook, Illinois 60521-2268
The written demand for appraisal must specify the Stockholder's name
and mailing address, the number of Shares owned, and that the Stockholder
is thereby demanding appraisal of his or her Shares.
Within 120 days after the date on which the Merger becomes effective
(the "Merger Date") any Stockholder who has complied with the required
conditions of Section 262 may file a petition in the Delaware Court of
Chancery (the "Delaware Chancery Court") demanding a determination of the
fair value of the Shares of all holders of Shares who have so complied with
such conditions. If a petition for an appraisal is timely filed, after a
hearing on such petition, the Delaware Chancery Court will determine which
Stockholders are entitled to appraisal rights and will appraise the Shares
owned by such Stockholders, determining the fair value of such Shares,
exclusive of any element of value arising from the accomplishment or
expectation of the Merger, together with a fair rate of interest, if any,
to be paid upon the amount determined to be the fair value. In
determining fair value, the Delaware Chancery Court is to take into account
all relevant factors. In Weinberger v. UOP, Inc., et al., decided February
1, 1983, the Delaware Supreme Court, in discussing the considerations that
could be taken into account in determining fair value in an appraisal
proceeding, stated that "proof of value by any techniques or methods which
are generally considered acceptable in the financial community and
otherwise admissible in court" should be considered and that "fair price
obviously requires consideration of all relevant factors involving the
value of a company." The Delaware Supreme Court stated that, in making
this determination of fair value the court must consider market value,
asset value, dividends, earnings prospects, the nature of the enterprise
and any other facts which could be ascertained as of the date of the merger
which throw any light on future prospects of the merged corporation.
Section 262 provides that fair value is to be "exclusive of any element of
value arising from the accomplishment or expectation of the merger." In
Weinberger, the Delaware Supreme Court construed Section 262 to mean that
"elements of future value, including the nature of the enterprise, which
are known or susceptible of proof as of the date of the merger and not the
product of speculation may be considered."
Within 120 days after the Merger Date, any holder of Shares who has
complied with the requirements for exercise of appraisal rights as
discussed above and stated in Section 262
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is entitled, upon written request, to receive from the Company a statement
setting forth the aggregate number of Shares not voted in favor of the
Merger and with respect to which demands for appraisal have been received
and the aggregate number of holders of such Shares. Such statement must be
mailed within 10 days after the written request therefor has been received
by the Company or, if later, within 10 days after the expiration of the
period for delivery to the Company of appraisal demands.
Stockholders considering seeking appraisal should have in mind that
the fair value of their Shares determined under Section 262 could be more
than, the same as or less than the consideration they are to receive
pursuant to the Merger if they do not seek appraisal of their Shares. The
cost of the appraisal proceeding may be determined by the Delaware
Chancery Court and assessed against such parties as the Delaware Chancery
Court deems equitable in the circumstances. Upon application of a
dissenting Stockholder, the Delaware Chancery Court may order that all or a
portion of the expenses incurred by any dissenting Stockholder in
connection with the appraisal proceeding, including without limitation
reasonable attorneys' fees and the fees and expenses of experts, be charged
pro rata against the value of all Shares entitled to appraisal.
Any Stockholder who has duly demanded appraisal in compliance with
Section 262 will not, after the Merger Date, be entitled to vote for any
purpose the Shares subject to such demand or to receive any dividends or
other distributions on such Shares, except for any dividends or
distributions payable to Stockholders of record at a date prior to the
Merger Date.
At any time within 60 days after the Merger Date, any Stockholder
will have the right to withdraw his or her demand for appraisal and to
accept the terms offered pursuant to the Merger; after this period, the
Stockholder may withdraw his or her demand for appraisal only with the
consent of the Company as the Surviving Corporation. If no petition for
appraisal is filed with the Delaware Chancery Court within 120 days after
the Merger Date by any Stockholder who has demanded appraisal, such
Stockholder's rights to appraisal will cease, and such Stockholder will be
entitled to receive the Merger Consideration. Inasmuch as the Company has
no obligation to file such a petition, and has no present intention to do
so, any stockholder who desires such a petition to be filed is advised to
file it on a timely basis. No petition timely filed in the Delaware
Chancery Court demanding appraisal shall be dismissed as to any Stockholder
without the approval of the Delaware Chancery Court, and such approval may
be conditioned upon such terms as the Delaware Chancery Court deems just.
A-4
SECTION 262 OF THE GENERAL CORPORATION
LAW OF THE STATE OF DELAWARE
Sec. 262. Appraisal Rights.
(a) Any stockholder of a corporation of this State who holds shares
of stock on the date of the making of a demand pursuant to subsection (d)
of this section with respect to such shares, who continuously holds such
shares through the effective date of the merger or consolidation, who has
otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in
writing pursuant to Sec. 228 of this title shall be entitled to an
appraisal by the Court of Chancery of the fair value of his shares of stock
under the circumstances described in subsections (b) and (c) of this
section. As used in this section, the word "stockholder" means a holder of
record of stock in a stock corporation and also a member of record of a
nonstock corporation; the words "stock" and "share" mean and include what
is ordinarily meant by those words and also membership or membership
interest of a member of a nonstock corporation; and the words "depository
receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the
depository.
(b) Appraisal rights shall be available for the shares of any class
or series of stock of a constituent corporation in a merger or
consolidation to be effected pursuant to Sec. 251, 252, 254, 257, 258, 263
or 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock,
which stock, or depository receipts in respect thereof, at the record
date fixed to determine the stockholders entitled to receive notice
of and to vote at the meeting of stockholders to act upon the
agreement of merger or consolidation, were either (i) listed on a
national securities exchange or designated as a national market
system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or (ii) held of record by
more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the holders of the surviving corporation as
provided in subsections (f) or (g) of Sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of any
class or series of stock of a constituent corporation if the holders
thereof are required by the terms of an agreement of merger or
consolidation pursuant to Sections 251, 252, 254, 257, 258, 263 and
264 of this title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock or depository
receipts at the effective date of the merger or consolidation will
be either listed on a national securities exchange or
A-5
designated as a national market system security on an interdealer
quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of
this paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a., b. and c. of
this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under Sec. 253 of this title
is not owned by the parent corporation immediately prior to the
merger, appraisal rights shall be available for the shares of the
subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation
that appraisal rights under this section shall be available for the shares
of any class or series of its stock as a result of an amendment to its
certificate of incorporation, any merger or consolidation in which the
corporation is a constituent corporation or the sale of all or
substantially all of the assets of the corporation. If the certificate of
incorporation contains such a provision, the procedures of this section,
including those set forth in subsections (d) and (e) of this section, shall
apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for
approval at a meeting of stockholders, the corporation, not less than
20 days prior to the meeting, shall notify each of its stockholders
who was such on the record date for such meeting with respect to
shares for which appraisal rights are available pursuant to
subsections (b) or (c) hereof that appraisal rights are available for
any or all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of his shares shall deliver to the
corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of his shares. A proxy or vote
against the merger or consolidation shall not constitute such a
demand. A stockholder electing to take such action must do so by a
separate written demand as herein provided. Within 10 days after the
effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each
constituent corporation who
A-6
has complied with this subsection and has not voted in favor of or
consented to the merger or consolidation of the date that the merger
or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to Sec.
228 or 253 of this title, the surviving or resulting corporation,
either before the effective date of the merger or consolidation or
within 10 days thereafter, shall notify each of the stockholders
entitled to appraisal rights of the effective date of the merger or
consolidation and that appraisal rights are available for any or all
of the shares of the constituent corporation, and shall include in
such notice a copy of this section. The notice shall be sent by
certified or registered mail, return receipt requested, addressed to
the stockholder at his address as it appears on the records of the
corporation. Any stockholder entitled to appraisal rights may,
within 20 days after the date of mailing of the notice, demand in
writing from the surviving or resulting corporation the appraisal of
his shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder
who has complied with subsections (a) and (d) hereof and who is otherwise
entitled to appraisal rights, may file a petition in the Court of Chancery
demanding a determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within 60 days
after the effective date of the merger or consolidation, any stockholder
shall have the right to withdraw his demand for appraisal and to accept
the terms offered upon the merger or consolidation. Within 120 days after
the effective date of the merger or consolidation, any stockholder who has
complied with the requirements of subsections (a) and (d) hereof, upon
written request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation, a statement
setting forth the aggregate number of shares not voted in favor of the
merger or consolidation and with respect to which demands for appraisal
have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days
after his written request for such a statement is received by the surviving
or resulting corporation or within 10 days after expiration of the period
for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service
of a copy thereof shall be made upon the surviving or resulting
corporation, which shall within 20 days after such service file in the
office of the Register in Chancery in which the petition was filed a duly
verified list containing the names and addresses of all stockholders who
have demanded payment for their shares and with whom agreements as to the
value of their shares have not been reached by the surviving or resulting
corporation. If the petition shall be filed by the surviving or resulting
corporation, the petition shall be accompanied by such a duly verified
list. The Register in Chancery, if so ordered by the Court, shall give
notice of the time and
A-7
place fixed for the hearing of such petition by registered or certified
mail to the surviving or resulting corporation and to the stockholders
shown on the list at the addresses therein stated. Such notice shall also
be given by one or more publications at least one week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The
forms of the notices by mail and by publication shall be approved by the
Court, and the costs thereof shall be borne by the surviving or resulting
corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become
entitled to appraisal rights. The Court may require the stockholders who
have demanded an appraisal for their shares and who hold stock represented
by certificates to submit their certificates of stock to the Register in
Chancery for notation thereon of the pendency of the appraisal proceedings;
and if any stockholder fails to comply with such direction, the Court may
dismiss the proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of
any element of value arising from the accomplishment or expectation of the
merger or consolidation, together with a fair rate of interest, if any, to
be paid upon the amount determined to be the fair value. In determining
such fair value, the Court shall take into account all relevant factors.
In determining the fair rate of interest, the Court may consider all
relevant factors, including the rate of interest which the surviving or
resulting corporation would have had to pay to borrow money during the
pendency of the proceeding. Upon application by the surviving or
resulting corporation or by any stockholder entitled to participate in the
appraisal proceeding, the Court may, in its discretion, permit discovery or
other pretrial proceedings and may proceed to trial upon the appraisal
prior to the final determination of the stockholder entitled to an
appraisal. Any stockholder whose name appears on the list filed by the
surviving or resulting corporation pursuant to subsection (f) of this
section and who has submitted his certificates of stock to the Register in
Chancery, if such is required, may participate fully in all proceedings
until it is finally determined that he is not entitled to appraisal rights
under this section.
(i) The Court shall direct the payment of the fair value of the
shares, together with interest, if any, by the surviving or resulting
corporation to the stockholders entitled thereto. Interest may be simple
or compound, as the Court may direct. Payment shall be so made to each
such stockholder, in the case of holders of uncertificated stock forthwith,
and the case of holders of shares represented by certificates upon the
surrender to the corporation of the certificates representing such stock.
The Court's decree may be enforced as other decrees in the Court of
Chancery may be enforced, whether such surviving or resulting corporation
be a corporation of this State or of any state.
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(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances.
Upon application of a stockholder, the Court may order all or a portion of
the expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and
the fees and expenses of experts, to be charged pro rata against the value
of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded his appraisal rights as
provided in subsection (d) of this section shall be entitled to vote such
stock for any purpose or to receive payment of dividends or other
distributions on the stock (except dividends or other distributions payable
to stockholders of record at a date which is prior to the effective date of
the merger or consolidation); provided, however, that if no petition for an
appraisal shall be filed within the time provided in subsection (e) of this
section, or if such stockholder shall deliver to the surviving or resulting
corporation a written withdrawal of his demand for an appraisal and an
acceptance of the merger or consolidation, either within 60 days after the
effective date of the merger or consolidation as provided in subsection (e)
of this section or thereafter with the written approval of the corporation,
then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of
Chancery shall be dismissed as to any stockholder without the approval of
the Court, and such approval may be conditioned upon such terms as the
Court deems just.
(l) The shares of the surviving or resulting corporation to which
the shares of such objecting stockholders would have been converted had
they assented to the merger or consolidation shall have the status of
authorized and unissued shares of the surviving or resulting corporation.