SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
December 14, 1995
Date of Report (Date of earliest event reported)
DISCUS ACQUISITION CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota 0-13826 41-1456350
(State or other jurisdiction (Commission File No.) (IRS Employer ID No.)
of incorporation)
2430 Metropolitan Centre, 333 South Seventh Street
Minneapolis, Minnesota 55402
(Address of principal executive offices)
(612) 305-0339
(Registrant's telephone number, including area code)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On December 14, 1995, Discus Acquisition Corporation (the "Company")
acquired from Bridgewater Resources Corp. ("Bridgewater") the outstanding stock
of Peerless Chain Company ("Peerless") pursuant to a Stock Purchase Agreement
dated initially November 22, 1995 and as amended December 7 and December 13,
1995. The stock of Peerless was purchased by the Company for $23.75 million,
subject to certain post-closing adjustments. The purchase price was paid with
subordinated financing from Bridgewater ($3.7 million); senior financing from
The CIT Group/Business Credit, Inc. ($14.133 million), and the balance
(approximately $5.1 million) by cash from the Company and application of a
reserve/credit to the purchase price. In connection with the acquisition, the
Company sold approximately $2.6 million of additional common stock to a group of
investors, including certain members of Peerless' management and obtained
$225,000 from the sale of short-term subordinated notes to a director and
affiliate of another director.
Peerless and its predecessors have been located in Winona, Minnesota
since 1917. The Company manufactures three principal product lines consisting of
chain, traction and wire form products for the consumer, hardware, industrial
and OEM markets. Peerless' net sales of these products for 1994, 1993 and 1992
were approximately $42.8 million, $36.7 million and $34.1 million, respectively.
Sales for 1995 are currently estimated to be $43.0 million.
Peerless' products consist of chain products, traction products and
wire form products produced in a variety of sizes, materials, finishes and
load-carrying capabilities. Consumer applications include utility chain for
swing sets, pet chains, border chains and decorative chains. Industrial products
include chain used in logging, agriculture and general securing applications.
OEM products include hoist chain, skidder chain, agricultural safety chain and
private label chain products. The Company also produces welded chain for such
applications as towing, hanging signs and trailer safety applications.
Traction products include tire chains, traction cables and accessories
for a broad range of passenger and commercial vehicles, farm, construction and
logging vehicles.
Wire form products include prepackaged and bulk peg hooks for consumer
use, retail store display fixtures and special order wire forms for the OEM
market.
Most chain products are manufactured by the Company at its plants in
Minnesota or Iowa. The Company markets its products primarily in the United
States, with limited distribution in Canada, Mexico and the United Kingdom. In
1994, consumer, industrial and OEM markets accounted for 49%, 19% and 32% of
sales. The Company ships products directly from its Winona or Iowa manufacturing
plants directly to customers or to five regional distribution centers located in
Georgia, Texas, Colorado, Nevada and Pennsylvania. The Company estimates that it
has a 15% market share in welded chain, 17% market share in weldless chain and
22% in tire chain.
The Company's customer base includes over 2,000 active accounts, of
which more than 85% have been customers for at least three years. Wal-Mart
Stores, Inc., a Peerless customer for over 25 years, accounted for more than 20%
of Peerless' 1994 sales. The Company is the sole supplier for Wal-Mart's chain,
traction and packaged peg wire form products. The remainder of the Company's top
ten customers accounted for 34% of 1994 sales, with no one account representing
more than 5% of total sales.
The Company believes that the U.S. welded, weldless and tire chain
market is in excess of $200 million. The Company competes with at least four
domestic chain manufacturers, with no one competitor claiming a dominant market
share position. Imported product provides another level of competition to the
Company, with most domestic manufacturers importing some portion of their
products. Independent distributors importing chain and traction products from
Asia, Europe and Africa provide additional competition and options for consumers
and industrial buyers. In addition, certain OEMs have chosen to source their
needs offshore.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
It is impractical for the Registrant to provide required
financial statements specified in Rule 3-05(b) for the
acquisition described in Item 2. The Registrant intends to
file such financial statements within 60 days.
(b) Pro forma financial information.
It is impractical for the Registrant to provide required pro
forma financial information. The Registrant intends to file
such financial statements within 60 days.
(c) Exhibits.
10.1 Stock Purchase Agreement dated November 22, 1995, as
amended December 1, 1995 and December 13, 1995,
between the Company and Bridgewater Resources Corp.
10.2 Financing Agreement dated December 13, 1995 between
The CIT Group/Business Credit, Inc. and Peerless
Chain Company and Peerless Chain of Iowa, Inc.
10.3 $2,500,000 Redemption Note dated December 13, 1995
between Peerless Chain Company and Bridgewater
Resources Corp.
10.4 $1,200,000 Stock Purchase Note dated December 13,
1995 between Discus Acquisition Corporation and
Bridgewater Resources Corp.
10.5 Stock Purchase Note dated December 13, 1995 in the
amount of $100,000 between Discus Acquisition
Corporation and Harry W. Spell.
10.6 Stock Purchase Note dated December 13, 1995 in the
amount of $125,000 between Discus Acquisition
Corporation and Pyramid Investors.
10.7 Subordination Agreement dated December 13, 1995
between Bridgewater Resources Corp. and The CIT
Group/Business Credit, Inc.
10.8 Stock Pledge Agreement dated December 13, 1995
between The CIT Group/Business Credit, Inc. and
Discus Acquisition Corporation.
10.9 Stock Pledge Agreement dated December 13, 1995
between The CIT Group/Business Credit, Inc. and
Peerless Chain Company.
10.10 Grant of security interest in patents, trademarks and
licenses dated December 13, 1995 between Peerless
Chain Company, Peerless Chain of Iowa, Inc. and The
CIT Group/Business Credit, Inc.
10.11 Guaranty of Parent Agreement dated December 13, 1995
between The CIT Group/Business Credit, Inc. and
Registrant.
10.12 Guaranty of Borrower dated December 13, 1995 between
The CIT Group Business Credit, Inc. and Peerless
Chain Company and Peerless Chain of Iowa, Inc.
10.13 Lease Agreement dated June 18, 1986, as amended,
between Peerless Chain Company and CPA Peerless
Limited Partnership.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DISCUS ACQUISITION CORPORATION
Dated: December 27, 1995. By /s/ William H. Spell
William H. Spell
Chief Executive Officer
EXHIBIT INDEX
Exhibit Sequential
Number Description Page Number
10.1 Stock Purchase Agreement dated November 22, 1995, as amended
December 1, 1995 and December 13, 1995, between the Company
and Bridgewater Resources Corp.
10.2 Financing Agreement dated December 13, 1995 between The
CIT Group/Business Credit, Inc. and Peerless Chain Company
and Peerless Chain of Iowa, Inc.
10.3 $2,500,000 Redemption Note dated December 13, 1995 between
Peerless Chain Company and Bridgewater Resources Corp.
10.4 $1,200,000 Stock Purchase Note dated December 13, 1995
between Discus Acquisition Corporation and Bridgewater
Resources Corp.
10.5 Stock Purchase Note dated December 13, 1995 in the amount
of $100,000 between Discus Acquisition Corporation and Harry
W. Spell.
10.6 Stock Purchase Note dated December 13, 1995 in the amount
of $125,000 between Discus Acquisition Corporation and
Pyramid Investors.
10.7 Subordination Agreement dated December 13, 1995 between
Bridgewater Resources Corp. and The CIT Group/Business
Credit, Inc.
10.8 Stock Pledge Agreement dated December 13, 1995 between
The CIT Group/Business Credit, Inc. and Discus Acquisition
Corporation.
10.9 Stock Pledge Agreement dated December 13, 1995 between
The CIT Group/Business Credit, Inc. and Peerless Chain
Company.
10.10 Grant of security interest in patents, trademarks and licenses
dated December 13, 1995 between Peerless Chain Company,
Peerless Chain of Iowa, Inc. and The CIT Group/Business
Credit, Inc.
10.11 Guaranty of Parent Agreement dated December 13, 1995
between The CIT Group/Business Credit, Inc. and Registrant.
10.12 Guaranty of Borrower dated December 13, 1995 between The
CIT Group Business Credit, Inc. and Peerless Chain Company
and Peerless Chain of Iowa, Inc.
10.13 Lease Agreement dated June 18, 1986, as amended, between
Peerless Chain Company and CPA Peerless Limited
Partnership.