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Hercules Hercules Incorporated
Hercules Plaza
Wilmington, DE 19894-001
(302) 594-5000
News Release
RELEASE ON RECEIPT
HERCULES INCORPORATED AND ALLIANT TECHSYSTEMS
TO SIGN DEFINITIVE AGREEMENT FORMING
NEW MAJOR AEROSPACE AND DEFENSE COMPANY
October 28, 1994...Hercules Incorporated today announced that it
expects by October 31 to reach a definitive agreement with Alliant Techsystems
for that company to acquire the aerospace operations of Hercules Incorporated.
The transaction, which will be valued at approximately $412 million, represents
a premium of $66 million to book value of the Hercules assets acquired.
Hercules will receive $300 million in cash (with the $14 million paid by
Alliant in July of this year upon signing of a Letter of Intent credited toward
that amount) and 3.86 million newly issued shares of Alliant Techsystems common
stock.
Alliant has agreed with Hercules that, substantially concurrently with
the closing of the Hercules transaction, Alliant will expend approximately $50
million to repurchase approximately 1.5 million shares of its common stock
through cash election or other method, subject to financing and market
conditions. Hercules and Capstay Partners, L.P. will not participate in the
repurchase transaction. Following the acquisition and repurchase, Hercules will
own approximately 30 percent of Alliant Techsystems' outstanding common stock.
Following the acquisition, Alliant Techsystems will be a $1.4-billion
company with leading positions in strategic and tactical propulsion, ordnance
and munition, defense electronics, and marine systems, and will employ
approximately 10,200 people.
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Currently, the Alliant operations generate approximately $800 million in annual
revenue with 5 to 6 percent operating margin. The Hercules Aerospace operations
are expected to contribute approximately $600 million in annual revenue,
yielding 8 to 10 percent operating margin, under the existing Hercules overhead
structure.
Joel Greenblatt, Alliant's chairman, stated, "Alliant will implement
a comprehensive operating efficiency and cost-reduction plan over the next
year, with the goal of increasing its stand-alone operating margin by at least
1 to 2 percent, exclusive of any acquisition-related operating synergies.
"As a result of the acquisition, we expect to derive substantial
additional benefits through reduced overhead, consolidation of operations, and
combined operating efficiencies. Further, the Hercules operations have annual
depreciation well in excess of capital expenditures and are expected to
contribute significant incremental cash flows. In total, we look for the
Hercules operations and related overhead and operational synergies to
contribute very significantly to pre-tax operating cashflows."
At the closing of the transaction, Richard Schwartz, executive vice
president and president of Hercules Aerospace, will become president and chief
executive officer of the combined company. Toby G. Warson, currently president
and chief executive officer of Alliant Techsystems, will resign from his
current position. Kenneth J. Jenson, chief operating officer of Alliant
Techsystems, will serve as interim chief executive officer and upon closing of
the acquisition, president of Alliant's current businesses as well as the
ordnance and defense electronics operations of Hercules.
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Alliant will increase its Board from nine to 10 members. The two
companies have agreed that, upon closing, Hercules will hold two of the eight
nonemployee seats on the Alliant Board of Directors. Thomas L. Gossage,
Hercules chairman, president, and chief executive officer, will serve on the
Alliant Board of Directors and R. Keith Elliott, Hercules senior vice president
and chief financial officer, will become nonemployee chairman of the Alliant
Board. Schwartz and Jenson will serve as the two employee members of the board.
Four of the six current outside directors will remain on the Board and two new
outside directors will be selected.
Greenblatt said, "We have examined the transaction, as well as other
alternatives available to Alliant Techsystems, and believe the combined
acquisition and share repurchase will yield the best value to our shareholders.
We expect the transaction will be immediately additive to both earnings and
cash flow per share. Our shareholders, customers, and employees will benefit by
the combination of the respective companies' leading market positions and the
creation of a lower cost, more competitive supplier."
According to Mr. Gossage, "As we noted with the signing of the Letter
of Intent in July, the sale of Hercules Aerospace demonstrates our commitment
to enhanced shareholder value. The sale creates a new major contributor to the
aerospace and defense industries through the combined expertise of Alliant
Techsystems and Hercules Aerospace. From our perspective, Hercules Aerospace
brings to the new company several potential programs that could result in major
added future revenues
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and profit. At the same time, Hercules Incorporated and its shareholders will
benefit from the equity ownership in this new company. Equally important, the
employees of Hercules Aerospace and Alliant Techsystems will be better
positioned for future career opportunities in a company that is focused on the
aerospace and defense industries."
The transaction is subject to Government review and approval as well
as approval by Alliant Techsystems shareholders. Alliant Techsystems expects
to finance the acquisition and recapitalization with a combination of
short-term and long-term debt. The transaction is expected to close during the
first quarter of calendar 1995.
Hercules Aerospace is a fully integrated manufacturer of rocket motors
for space launch, strategic and tactical weapons systems, and ordnance for the
U.S. Army. Included in the transaction are the businesses of Space and
Strategic Propulsion, Composite Structures, Tactical Propulsion, Ordnance,
Hercules Defense Electronics Systems, Inc., and Global Environmental Solutions,
Inc. These units reported combined revenues of $660 million in 1993 and
operating profit of $105 million. They employ approximately 5,700 employees in
seven states. Operations included in the sale are located at Magna, Utah;
Clearfield, Utah; Radford, Virginia; Lawrence, Kansas; Rocket Center, West
Virginia; McGregor, Texas; Kenvil, New Jersey; and Clearwater, Florida.
Hercules Incorporated is a diversified, worldwide producer of
chemicals and related products. Upon completion of the anticipated sale of
Hercules Aerospace, Hercules revenues will be approximately $2 billion, and the
company will have
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approximately 45 plants located throughout the word, with 20 major facilities
in the United States.
Alliant Techsystems, headquartered in Hopkins, Minnesota, is a leading
supplier of defense and marine systems to the U.S. Government and its allies.
The company had sales of $775 million and operating profit of $39 million for
the fiscal year ended March 31, 1994, and employs approximately 4,500 people.
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