SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14A-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [x]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Definitive Proxy Statement [ ] Confidential, for Use of the
[ ] Definitive Additional Materials Commission Only (as permitted)
[x] Soliciting Material Pursuant to by Rule 14a-6(e)(2)
Rule 14a-11(c) or Rule 14a-12
JUNO LIGHTING, INC.
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(Name of Registrant as Specified In Its Charter)
Lens Investment Management, LLC
Ram Trust Services, Inc.
Robert B. Holmes
John B. Goodrich
Nell Minow
Robert A.G. Monks
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (Check the appropriate box):
[x] No Fee Required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: Common
Stock, $.01 par value, of Juno Lighting, Inc.
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(2) Aggregate number of securities to which transaction applies: Not
applicable.
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(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): Not
applicable.
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(4) Proposed maximum aggregate value of transaction: Not applicable.
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(5) Total Fee Paid: Not applicable.
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[ ] 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: Not applicable.
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(2) Form, Schedule or Registration Statement No.: Not applicable.
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(3) Filing Party: Not applicable.
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(4) Date Filed: Not applicable.
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June 8, 1999
[EXPLANATORY NOTE: THESE REVISED PRELIMINARY PROXY MATERIALS ARE BEING FILED FOR
THE SOLE PURPOSE OF AMENDING AND RESTATING THE REVISED PRELIMINARY PROXY
MATERIALS WHICH WERE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
JUNE 7, 1999]
[LENS INVESTMENT MANAGEMENT, LLC LETTERHEAD]
June 7, 1999
To Our Fellow Stockholders of Juno Lighting, Inc.:
VOTE "NO" ON THE PROPOSED FREMONT INVESTORS MERGER
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The proposed merger of Juno Lighting, Inc. ("Juno" or the
"Company") with an affiliate of Fremont Investors I, LLC ("Fremont Investors")
cannot go forward without stockholder approval. The Lens Group(1) believes
Juno's stockholders should stop that merger, and we are asking you to join us in
voting against it.
You will be asked to approve the merger agreement among Juno,
Fremont Investors and its affiliate (the "Merger Agreement") at a Special
Meeting of Stockholders of Juno scheduled for June 29, 1999 (the "Special
Meeting").(2) Under the merger contemplated by that agreement (the "Merger"),
Juno's current stockholders would receive merger consideration that the Lens
Group believes is inadequate.
As discussed in greater detail below, we believe (i) Juno's
stock is worth more than $25 per share, (ii) the value offered in the Merger is
less than $25 per share, (iii) the timing of the Merger is bad, (iv) continuing
holders of Juno common stock after the Merger will have no meaningful say in the
Company and (v) the Merger is inappropriately conditioned upon the approval of a
new stock option plan.
As the owners of an aggregate of approximately 7.2% of Juno's
outstanding common stock, we urge our fellow stockholders to join us and VOTE
"NO" on the proposal to approve the Merger Agreement, thereby forcing the
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(1) The "Lens Group" consists of Lens Investment Management, LLC, Ram Trust
Services, Inc., Robert B. Holmes, John B. Goodrich, Nell Minow and Robert A.G.
Monks. The Lens Group has filed a preliminary proxy statement with the
Securities and Exchange Commission ("SEC") with respect to the solicitation of
proxies in connection with Juno's 1999 annual meeting of stockholders for the
election of Mr. Monks and Ms. Minow as directors of Juno and an amendment to
Juno's by-laws which, effective one year after such approval, would prohibit
more than one "inside director" from serving on Juno's Board of Directors. The
Lens Group is not seeking your vote for their election at this time. Juno has
not yet announced a time, place or date for the 1999 annual meeting. If and when
Juno makes such an announcement, the Lens Group will send stockholders a final
proxy statement, including a proxy card, at the earliest practicable date
following such announcement. However, the Fremont Investors' deal will be
submitted to stockholders for approval at the special meeting on June 29, 1999,
prior to the 1999 annual meeting.
(2) If you would like to change the voting instructions you have already given
for the Special Meeting with respect to your Juno shares, simply call your bank,
broker or other nominee with your revised voting instructions.
NY2:\564522\05\C3L605!.DOC\58531.0006
Company to hold its annual meeting of stockholders. You will then have the
chance to elect two Lens Group nominees to the Juno Board, which is currently
dominated by insiders. Our independent directors will be committed to protecting
and enhancing long-term stockholder value. Even if they are not elected,
however, we believe it is still in your interests to vote against this deal, in
order to let management and the current Juno Board know that the stockholders
expect and deserve better.
WHY YOU SHOULD JUST VOTE NO
The Lens Group believes that you should vote AGAINST approval
of the Merger Agreement for the following reasons:
1. The Price is Too Low. Even if we assume that the value of
the proposed merger consideration that would be received by Juno stockholders
amounts to $25 per share (which, as described below, we don't believe), the Lens
Group believes that this price is inadequate.
Juno Stock Is Worth More Than $25 Per Share. We believe that
Juno is worth more as a stand-alone entity than the price offered by Fremont
Investors. Juno's industry peers(3) trade, as of May 31, 1999, at an average P/E
multiple(4) of 15.25x and an average EV/EBITDA multiple(5) of 10.40x. Juno
should trade at least as high as its peers owing to the following:
(1) its superior operating margins (the highest of its peers);
(2) its superior returns on equity and assets (the highest of its
peers, when adjusted to exclude the income, as well as asset
and book values, of excess cash and equivalents); and
(3) its excellent growth prospects given both a superior market
niche presence and a recently completed plant capacity
addition.
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(3) We have assumed that Juno's "peers" consist of the following five publicly
traded companies in the lighting industry which, according to Juno's Proxy
Statement for the Special Meeting, were used by Juno's financial advisor,
William Blair & Company, L.L.C. ("Blair"), in its analysis: Advanced Lighting
Technology, Inc., Genlyte Group, Inc., Holophane Corp., LSI Industries, Inc. and
SLI Inc.
(4) P/E multiple is equal to the market price per share divided by the First
Call Corporation mean earnings per share estimate for the current fiscal year.
For purposes of computing the average P/E multiple the P/E multiple for Advanced
Lighting Technology Inc. (which was a negative 25.9x) and the P/E multiple for
Genlyte Group Inc. (for which a First Call Corporation estimate was not
available) were excluded.
(5) EV/EBITDA multiple means Enterprise Value (market value of common capital
plus total debt less cash and cash equivalents) divided by EBITDA (trailing 12
months earnings before interest, taxes, depreciation and amortization).
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Applying these multiples to our estimate of Juno's fiscal 1999 earnings(6) and
actual trailing 12-month EBITDA, Juno's shares should trade at approximately
$27.21 per share based upon the P/E multiple and $29.10 per share based upon the
EV/EBITDA multiple, or an average of $28.16 per share based upon these two
multiples.
As discussed below under "An Alternative to Enhance
Stockholder Value," the Company can also take steps now to increase stockholder
value.
The Value of the Proposed Merger Consideration May Be Less
Than $25 Per Share. Under the terms of the Merger Agreement, current Juno
stockholders would elect to receive for each share of Juno common stock, either
$25 in cash or one share of common stock of Juno as the surviving corporation in
the Merger ("New Juno Common Stock"). However, because of certain proration
requirements, it is likely that current Juno stockholders who elect to receive
all cash would be paid in both cash and shares of New Juno Common Stock.(7)
According to Juno's Proxy Statement for the Special Meeting,
Juno's financial advisor, Blair, values the New Juno Common Stock at $25 per
share. Significantly, however, Blair has expressed no opinion as to the trading
price of the New Juno Common Stock after the Merger. Blair also does not
acknowledge that a "minority discount" may apply to the shares of New Juno
Common Stock to be received by current stockholders because such shares cannot
convey control of the Company to a new buyer. Moreover, were Fremont Investors
to eventually sell its controlling interest in Juno to a third party, the
holders of New Juno Common Stock have no assurance that they will be permitted
to participate in such sale on the same terms.
In addition, Juno admits in the Juno Proxy Statement that the
reduced public float after the Merger may result in a significant decrease in
the liquidity of shares of New Juno Common Stock and could cause the market
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(6) We estimate that Juno will have fiscal 1999 earnings per share of $1.78. We
derived estimated net income based upon Juno's estimates of fiscal 1999 sales
and EBITDA contained in Juno's Proxy Statement for the Special Meeting. In
preparing our estimate of fiscal 1999 net income, we also subtracted from the
estimate of fiscal 1999 EBITDA contained in Juno's Proxy Statement for the
Special Meeting (approximately $50.6 million), our estimates of (i) depreciation
and amortization (we used $3.8 million as compared with actual depreciation and
amortization of approximately $3.7 million for fiscal 1998), (ii) net interest
and dividend income (we used approximately $5.1 million, representing four times
the actual result for the first quarter of fiscal 1999) and (iii) income taxes
(we estimated approximately $18.7 million based on our estimate of $51.9 million
of fiscal 1999 pre-tax income taxable at a 36% rate, as compared with actual
income taxes of $14.6 million in fiscal 1998).
(7) If all current stockholders elect to receive cash for all of their shares,
because of the proration provisions of the Merger Agreement, they would receive,
in effect, only $21.775 per share in cash and a continuing equity interest or
"stub" for the balance.
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price of such shares to be subject to significant fluctuations. Juno further
conceded that it cannot assure stockholders that New Juno Common Stock will
continue to be listed on NASDAQ, and that such delisting could make it more
difficult to sell shares and obtain prices that reflect its value. Additionally,
the Juno Proxy Statement makes clear that no dividends are expected to be paid
on the New Juno Common Stock after the Merger, as opposed to dividends paid by
the Company for the last two quarters at the rate of $.40 per share per annum.
There is one stockholder, however, who will get dividends -- Fremont Investors,
as the sole owner of the new series of convertible preferred stock to be issued
in connection with the Merger. Finally, Juno admits that the substantial debt
leverage of New Juno after the Merger will have a negative effect on net income.
Based on the foregoing, the Lens Group is of the opinion that
the shares of New Juno Common Stock will not be valued in the market at $25 per
share, and may be worth far less than that.
2. The Timing is Bad. There is no need to sell control of the
Company now. The Company makes no attempt to justify the timing of the sale.
Indeed, since the deal with Fremont Investors was struck, the market multiples
and the stock prices of Juno's peers have improved materially. Based on the
analysis above, the Lens Group believes that Juno should be trading at a price
in excess of $25 per share and, as discussed below, other steps can be taken to
increase stockholder value. If Juno's Board of Directors cannot obtain a better
return for stockholders than the current deal with Fremont Investors, the sale
of the Company should be postponed until market conditions are more favorable or
until its profits, which have increased steadily, lead to higher share
valuations (the Company estimates in its Proxy Statement for the Special Meeting
that EBITDA will grow by approximately 18.0% per annum over the next five
years).
3. The Selling Process was Inadequate. Once the decision is
made to sell a company, the Lens Group believes that the best way to achieve
optimal stockholder value is an open, public auction. This means that all viable
strategic and financial buyers would be contacted. The Company's secret,
selective process may have deprived stockholders of the best possible deal. We
know of at least one potential strategic buyer, which Juno itself includes in
its peer group, that was never contacted by Juno to make a bid. In a public
auction context, we would not have the problem of potential buyers being "left
off the list."
4. If the Deal Goes Through, Public Stockholders Will Have No
Meaningful Say in the New Company. If the Merger Agreement is approved, current
stockholders who receive New Juno Common Stock will have no meaningful say in
matters put to a stockholder vote because Fremont Investors will own
approximately 60.5% of the fully-diluted voting power of Juno's equity
securities. Fremont Investors will control the Board.
5. A New Stock Incentive Plan Should Not Be a Condition to the
Merger. A condition to the Fremont Investors' deal is that Juno stockholders
approve the 1999 Stock Award and Incentive Plan, which would allow up to 940,000
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additional shares of common stock to be issued by Juno to management pursuant to
option grants. If options for all those shares are issued, they would represent
approximately 28% of the New Juno Common Stock after the deal (assuming 2.4
million shares remain outstanding) and over 12% of the New Juno Common Stock on
a fully-diluted basis. The Lens Group believes that making approval of the
option plan a condition to the deal serves the interests of management at the
expense of the stockholders. The Lens Group has no problem in seeking to
incentivize management through equity ownership; however, it does not see why
adopting a new option plan should be a condition to the Merger.
AN ALTERNATIVE TO ENHANCE STOCKHOLDER VALUE
As indicated in our May 7, 1999 letter to stockholders, we
believe Juno can substantially enhance stockholder value by instituting a
meaningful share repurchase program, using a combination of modest borrowings
against the real estate and cash flow of the operating business plus excess cash
to fund substantial repurchases. For example, we believe Juno should be able to
borrow $100 million at an assumed interest rate of 8.0% per annum and combine
this borrowing with approximately $110 million of excess cash and cash
equivalents that we estimate it will have on its balance sheet by the end of its
fiscal year,(8) and use this $210 million to fund repurchases. If, for example,
Juno could use such funds to acquire 8.4 million shares (approximately 45% of
the outstanding shares) at an average price of $25 per share, the pro forma
earnings per share estimate for fiscal 1999 would rise to $2.29.(9) Applying the
P/E multiple of 15.25x and the EV/EBITDA multiple of 10.40x after such
repurchases, the shares that remain outstanding would be valued at $34.89 per
share and $32.47 per share, respectively, or an average of $33.68 per share,
based on these two multiples.
If, subsequent to such share repurchase, the market values
described above are achieved and Juno can then receive a significant premium
over such values through a sale or merger of its business, then it might well be
time to sell or merge. If not, the Company should seek to maximize its
profitability and pursue internal growth or growth through acquisition.
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(8) The Company had approximately $103.7 million of cash and marketable
securities on its balance sheet as of February 28, 1999, as reported in its
Quarterly Report on Form 10-Q for the fiscal quarter ended on such date. Based
upon Juno's estimate of 1999 EBITDA contained in Juno's Proxy Statement for the
Special Meeting, we anticipate that such amount will increase to approximately
$117 million by November 30, 1999.
(9) We derived pro-forma estimated fiscal 1999 net income by taking into account
the following effects of the use of cash and borrowings: additional interest
expense of approximately $8.1 million; reduced interest and dividend income of
approximately $5.0 million; and an income tax rate of approximately 40%.
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WHAT CAN JUNO STOCKHOLDERS DO?
VOTE NO!
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If we vote NO on the proposed Merger Agreement, Juno
management will have to abandon the deal and let current stockholders continue
to control the destiny of the Company. If stockholders vote down the approval of
the Merger Agreement, Juno will be forced to hold an annual meeting, at which
the Lens Group has proposed two director-nominees and an amendment to the
Company's by-laws which, effective one year after such approval, would prohibit
more than one "inside director" from serving on the Company's Board at any given
time. If elected, the Lens Group nominees will urge the adoption of a plan to
return excess cash to stockholders through the share repurchase program
described above.
In addition, if and when market conditions are favorable, the
Lens Group nominees would attempt to cause Juno to publicly and professionally
auction the Company. The Lens Group believes that, independent of the effects of
any share repurchase program, a future auction would be likely to yield better
results than the Fremont Investors transaction because (1) the auction would be
conducted in public, (2) the sale would not take place until the market valued
the Company at a price reflective of its true value, and (3) the presence of
bona fide independent directors on the Board would help ensure that all
potential strategic buyers will be fully pursued. As indicated above, if market
conditions for such an auction are not favorable, the Lens Group nominees would
attempt to cause Juno to focus on expansion through internal growth or
acquisition. If members of current management are not up to the task, the Lens
Group's nominees would urge the Board to find suitable replacements.
Accordingly, the Lens Group recommends that Juno stockholders
vote AGAINST the Merger Agreement and the transactions contemplated thereby,
including the purchase by Fremont Investors of $106 million of a new series of
convertible preferred stock of Juno. Additionally, the Lens Group recommends
that Juno stockholders vote AGAINST the other proposals set forth in the Juno
Proxy Statement, which include the adoption of an amended and restated
certificate of incorporation of Juno authorizing such preferred stock and the
adoption of the Juno Lighting, Inc. 1999 Stock Award and Incentive Plan.
Juno belongs to its stockholders, not to management or the
Board of Directors. We believe that the Fremont Investors deal does not reflect
Juno's current or potential value and that Juno has better alternatives. We at
the Lens Group plan to vote against the Merger Agreement at the Special Meeting
and we urge you to do the same. The time has come to JUST VOTE "NO."
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Please call us if you have any questions or comments.
Sincerely,
Your Fellow Stockholder
LENS INVESTMENT MANAGEMENT, LLC
By: /s/ Nell Minow
--------------------------------
Name: Nell Minow
Title: Member
(202) 434-8723
info@lens-inc.com
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