SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
JANUARY 29, 1997
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
HAYNES INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 333-5411 06-118540
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER) (IRS EMPLOYER
INCORPORATION) IDENTIFICATION NUMBER)
1020 WEST PARK AVENUE 46904-9013
KOKOMO, INDIANA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (317) 456-6000
2
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
Haynes Holdings, Inc., a Delaware corporation (the "Company"), and Haynes
International, Inc., a Delaware corporation ("Registrant"), entered into a
Stock Purchase Agreement on January 24, 1997 with Blackstone Capital Partners
II Merchant Banking Fund L.P., a Delaware limited partnership ("Blackstone"),
and two of Blackstone's affiliates (together with Blackstone, the
"Purchasers"), pursuant to which the Purchasers purchased from the Company on
January 29, 1997 (the "Closing") shares of the Company's common stock, $0.01
par value ("Holdings Common Stock"), representing approximately 79.9% of the
shares of Holdings Common Stock outstanding after giving effect to all of the
redemptions of Holdings Common Stock described herein at a purchase price of
$10.15 per share in cash (the "Purchase Transaction").
In connection with the Purchase Transaction, the Company entered into (a)
a Stock Redemption Agreement dated as of January 24, 1997 (the "Fund
Redemption Agreement"), with MLGA Fund II, L.P., a Connecticut limited
partnership and the majority stockholder of the Company prior to the Closing
(the "Fund"), and MLGAL Partners, L.P., a Connecticut limited partnership and
the general partner of the Fund ("MLGAL"), (b) an Exercise and Repurchase
Agreement dated as of January 24, 1997 (the "Management Redemption Agreement")
with the Management Holders (as defined herein), (c) the Redemption Offer (as
defined herein), (d) an Amended Stockholders Agreement (as defined herein) and
(e) a Loan Agreement Amendment (as defined herein). Also, in connection with
the Purchase Transaction Registrant paid fees to an affiliate of the
Purchasers in the amount of $2,300,000, to PaineWebber Incorporated, the
investment banker for the Purchasers, in the amount of $1,250,000, and to
MLGAL in the amount of $1,750,000.
The effect of the transactions referred to above is to transfer control
of the Company and Registrant from the Fund to the Purchasers, to permit the
existing stockholders to sell a majority of their shares of Holdings Common
Stock for cash at a price of $10.15 per share, to enable Registrant to
increase the maximum amount available for borrowing under Registrant's
revolving credit facility from $50 million to $60 million and give Registrant
greater access to additional sources of financing by reason of its affiliation
with the Purchasers, to amend the Existing Stockholders Agreement (as defined
herein) and to effect the other transactions described herein.
Pursuant to the Fund Redemption Agreement, the Company has agreed to
redeem that number of shares of Holdings Common Stock held by the Fund and
MLGAL which, when combined with the number of shares of Holdings Common Stock
held by the Management Holders and the Offeree Stockholders (as defined
herein) and redeemed by the Company, equals 79.9% of the issued and
outstanding shares of Holdings Common Stock.
The redemption of the shares of Holdings Common Stock pursuant to the
Fund Redemption Agreement occurs on two separate dates, the first of which has
already occurred. At the first closing, which occurred on the same date as
the Closing of the Purchase Transaction, the Company redeemed from the Fund
and MLGAL 4,393,915 shares of Holdings Common Stock, which is the number of
shares of Holdings Common Stock which, when combined with the shares of
Holdings Common Stock redeemed from the Management Holders and the maximum
number of shares to be redeemed from the Offeree Stockholders if the
Redemption Offer is fully subscribed, will equal the number of shares of
Holdings Common Stock purchased by the Purchasers. The Company will redeem
the shares of Holdings Common Stock tendered for redemption by the Offeree
Stockholders in accordance with the Redemption Offer, and such additional
shares of Holdings Common Stock held by the Fund and MLGAL so that the total
shares of Holdings Common Stock held by the Fund, MLGAL, the Management
Holders and the Offeree Stockholders and redeemed by the Company equals the
number of shares of Holdings Common Stock purchased by the Purchasers. At the
time of the first closing, the funds necessary to redeem the shares of
Holdings Common Stock from the Offeree Stockholders and to redeem the shares
of Holdings Common Stock from the Fund and MLGAL at the second closing were
placed in escrow pursuant to an Escrow Agreement between the Company and
National City Bank.
Pursuant to the Management Redemption Agreement, the Management Holders
exercised options to acquire 106,114 shares of Holdings Common Stock which
were already fully vested, and the Company redeemed the shares of Holdings
Common Stock acquired pursuant to such exercises for $10.15 per share in cash.
The members of management of the Company from whom shares of Holdings Common
Stock were redeemed (the "Management Holders") and the numbers of shares
redeemed from each such Management Holder are as follows: Michael D. Austin,
40,000 shares; Joseph F. Barker, 23,644 shares; F. Galen Hodge, 35,470 shares;
and Charles J. Sponaugle, 7,000 shares. Because of the simultaneous exercise
of options and redemption by the Company pursuant to the Management Redemption
Agreement, the aggregate exercise price with respect to the options held by
each Management Holder was deducted, together with required tax withholdings,
from the proceeds to be received by the Management Holders pursuant to the
redemption of their respective shares of Holdings Common Stock.
Pursuant to the Redemption Offer, the Company is (a) offering to redeem a
number of outstanding shares of Holdings Common Stock (determined in the
manner set forth in the following paragraph) held by certain holders of
Holdings Common Stock ("Offeree Stockholders") at $10.15 per share, net to the
seller in cash, without interest, upon the terms and subject to the conditions
set forth in the Consent Solicitation and Offer to Redeem and in the related
Letter of Transmittal (which together constitute the "Redemption Offer"), and
(b) seeking consent to the amendment of the Stockholders Agreement, dated as
of August 31, 1989, by and among the Company and the investors listed on the
signature pages thereof (the "Existing Stockholders Agreement") by adoption of
the Amended Stockholders Agreement. The Redemption Offer is being made to all
stockholders of the Company other than the Fund, MLGAL and certain members of
management of the Company who currently own options to acquire Holdings Common
Stock. Tendering Offeree Stockholders will not be obligated to pay brokerage
fees or commissions or, except as set forth in the Letter of Transmittal,
transfer taxes with respect to the redemption of Holdings Common Stock by the
Company pursuant to the Redemption Offer.
Subject to the terms and conditions of the Redemption Offer, the Company
will redeem from each Offeree Stockholder (a) first, up to 79.575% of the
outstanding shares of Holdings Common Stock held by such Offeree Stockholder,
and (b) second, to the extent that less than all of the Offeree Stockholders
tender 79.575% of their shares of Holdings Common Stock for redemption, such
additional shares of Holdings Common Stock desired to be redeemed by such
Offeree Stockholder as represent such Offeree Stockholder's pro rata portion
(based on the total number of shares of Holdings Common Stock owned by such
Offeree Stockholder prior to any redemption in relation to the total number of
shares of Holdings Common Stock owned, prior to any redemption, by all Offeree
Stockholders desiring to sell additional shares of Holdings Common Stock, plus
the total number of shares of Holdings Common Stock owned by the Fund and
MLGAL prior to the transactions described above) of the additional shares of
Holdings Common Stock needed for the Company to redeem from the Fund, MLGAL
and the Offeree Stockholders an aggregate of 5,217,685 shares of Holdings
Common Stock. The effect of the formula described in the foregoing sentence
is to give all of the Offeree Stockholders the opportunity to have redeemed
the same percentage of their shares of Holdings Common Stock as the percentage
of the shares of Holdings Common Stock owned by the Fund and MLGAL to be
redeemed. Because the exact number of shares of Holdings Common Stock which
may be redeemed from each Offeree Stockholder cannot be determined at this
time, Offeree Stockholders have been encouraged to tender for redemption the
maximum number of shares of Holdings Common Stock which such Offeree
Stockholder desires the Company to redeem without regard to the number which
may actually be redeemed.
If none of the Offeree Stockholders accept the Redemption Offer, then a
total of 5,217,685 shares of Holdings Common Stock will be purchased from the
Fund and MLGAL, and the Fund and MLGAL will continue to beneficially own
approximately 4.5% of the shares of Holdings Common Stock outstanding after
giving effect to all of the redemptions of Holdings Common Stock described
herein. If Offeree Stockholders tender for redemption the maximum number of
shares of Holdings Common Stock which will be redeemed pursuant to the
Redemption Offer, then the Fund and MLGAL will continue to beneficially own
approximately 16.7% of the shares of Holdings Common Stock outstanding after
giving effect to all of the redemptions of Holdings Common Stock described
herein.
Pursuant to an Amended Stockholders Agreement (the "Amended Stockholders
Agreement") among the Company and certain stockholders of the Company,
including the Purchasers, the Fund, MLGAL, the Management Holders and the
Offeree Stockholders who become parties thereto (collectively, the
"Investors"), the Purchasers, the Fund and MLGAL have agreed to vote all
shares of Holdings Common Stock owned by such parties in favor of the election
as members of the Board of Directors of the Company of (i) those individuals
nominated by the Purchasers and (ii) one individual nominated by the Fund and
MLGAL so long as the Fund and MLGAL continue to own 25% of the Holdings Common
Stock held by such parties immediately following the second closing under the
Fund Redemption Agreement. The Amended Stockholders Agreement imposes certain
restrictions on, and provides Investors with certain rights in connection
with, transfers of shares of Holdings Common Stock, including provisions that
(i) with certain exceptions, the parties may not grant any proxy or enter into
or agree to be bound by any voting trust with respect to the Holdings Common
Stock; (ii) if the Purchasers or certain of their transferees propose to sell
any of their shares of Holdings Common Stock, the other Investors shall,
subject to certain exceptions, have the right to participate ratably in the
proposed sale; (iii) if the Purchasers propose to sell all of their Holdings
Common Stock to a third party, the Purchasers, so long as they collectively
own a majority of the shares of Holdings Common Stock, can compel the
Investors and certain transferees of the Investors (other than transferees of
the Fund, MLGAL and their current and former partners and employees) to sell
their shares of Holdings Common Stock; (iv) give the Purchasers rights of
first refusal with respect to transfers by Management Holders; and (v) subject
to certain exceptions, require the Fund and MLGAL to obtain the consent of the
Purchasers before selling or otherwise disposing of, in one transaction or a
series of transactions, 25% or more of the shares of Holdings Common Stock
owned by the Fund and MLGAL immediately following the second closing under the
Fund Redemption Agreement. Pursuant to the Amended Stockholders Agreement,
the Investors are able to transfer shares of Holdings Common Stock in a
private transaction to any person, other than certain affiliates of the
Investors, and those transferees will have (A) the right to participate in the
sale of shares of Holdings Common Stock by the Purchasers (as described in
clause (ii) of the preceding sentence), (B) the right to participate in the
registration of shares of Holdings Common Stock (as described below) and (C)
no other material restrictions on the further transfer of such shares of
Holdings Common Stock other than those imposed by applicable securities laws.
The Amended Stockholders Agreement also contains a commitment on the part
of the Company to, under certain circumstances, register shares of Holdings
Common Stock held by the Investors under the Securities Act of 1933, as
amended (the "Securities Act"), upon request by the Fund, MLGAL or the
Purchasers, or if the Company otherwise proposes to register shares of
Holdings Common Stock, subject to certain conditions and limitations. Each
time the Company proceeds to register shares of Holdings Common Stock, each
Investor will have the right, subject to certain conditions and limitations,
to include a certain number of its shares of Holdings Common Stock in such
registration.
In addition, the Amended Stockholders Agreement provides for the payment
of a monitoring fee of $500,000 per annum to Blackstone Management Partners,
L.P. ("Blackstone Partners"), provided that Blackstone Partners shall not,
without additional approval of the Board of Directors of Registrant and a
majority of the disinterested directors of the Board of Directors of
Registrant, receive total fees pursuant to the Amended Stockholders Agreement
in excess of $2.5 million. The Amended Stockholders Agreement requires the
Company, in certain instances following an initial public offering by the
Company, to disclose information and to file reports necessary to permit the
Investors to sell shares of Holdings Common Stock pursuant to Rule 144
promulgated under the Securities Act. Furthermore, the Amended Stockholders
Agreement prohibits the Company and its subsidiaries from entering into any
transaction or conducting any business with the Purchasers and their
affiliates (other than payment of the monitoring fees and reasonable and
customary investment banking fees for services rendered by the Purchasers or
their affiliates) unless such transaction or business: (i) has been either (A)
approved by a majority of the disinterested directors of the Company, or (B)
the Company has received a written opinion from an independent investment
banking firm that such transaction is fair to the Company and its subsidiaries
from a financial point of view; and (ii) in the case of any transaction or
series of related transactions involving an aggregate payment in excess of $5
million by or to the Purchasers and their affiliates, the Company has received
a written opinion from a nationally recognized independent investment banking
firm that the transaction or the series of related transactions is fair to the
Company and its subsidiaries from a financial point of view. The Amended
Stockholders Agreement terminates upon the tenth anniversary of the initial
effective date of the Amended Stockholders Agreement.
On January 24, 1997, the Company entered into Amendment No. 2 (the "Loan
Agreement Amendment") to the Amended and Restated Loan and Security Agreement
with CoreStates Bank, N.A. and Congress Financial Corporation (Central), as
lenders (the "Lenders"), and Congress Financial Corporation (Central), as
agent (the "Agent") for the Lenders (the "Loan Agreement"). The Loan
Agreement Amendment provides that: (i) the maximum amount available for
borrowing under the Loan and Security Agreement is increased from $50 million
to $60 million, and a fee of $100,000 was paid to the Lenders in consideration
for such increase; (ii) the Lenders and the Agent consent to the Purchase
Transaction and the Fund Redemption Agreement; (iii) the commissions, fees,
costs, expenses and other charges incurred by Registrant in connection with
the Purchase Transaction and the redemptions of shares of Holdings Common
Stock contemplated in the Fund Redemption Agreement will not be considered in
determining Registrant's compliance with covenants related to the adjusted net
worth or consolidated net income of Registrant; (iv) the unused line fee will
be based upon the amount by which $48 million (instead of $40 million) exceeds
the average daily principal balance of the outstanding loans; and (v)
Registrant will be permitted to incur such indebtedness as is necessary to
finance any redemptions pursuant to the change of control offer described
below in respect of Registrant's 11 5/8% Senior Notes due 2004 (the "Senior
Notes").
The proceeds received by the Company from the Purchase Transaction, and
amounts remaining within the Company after the exercise of options by the
Management Holders and redemption of the shares thereby acquired, were and
will be applied by the Company to finance the redemptions of Holdings Common
Stock described herein and to pay certain fees. The remaining transaction
fees in connection with the purchase and redemption transactions described
herein were funded through additional borrowings under the Loan Agreement.
In connection with the consummation of the Purchase Transaction and the
other transactions contemplated thereby, all of the members of the Board of
Directors of the Company and Registrant resigned except for Michael D. Austin
and Ira Starr. Pursuant to the terms of the Amended Stockholders Agreement,
the following representatives of the Purchasers were elected to the Board of
Directors of the Company and Registrant: David A. Stockman, a Senior Managing
Director of the Blackstone Group (as hereinafter defined), Glenn Hutchins, a
Senior Managing Director of the Blackstone Group, Chinh Chu, a Managing
Director of the Blackstone Group, and David Blitzer, an Associate of the
Blackstone Group. Michael D. Austin, President and Chief Executive Officer of
the Company and Registrant, remained on the Board of Directors of the Company
and Registrant as a nominee of the Purchasers, and Ira Starr, a general
partner of MLGAL, remained on the Board of Directors of the Company and
Registrant as a nominee of the Fund and MLGAL.
The Purchase Transaction constitutes a Change of Control as defined in
the Indenture dated August 23, 1996 by and between Registrant and National
City Bank with respect to the Senior Notes (the "Indenture"). As a result,
Registrant is required to offer to redeem the Senior Notes (the "Change of
Control Offer") at the price of 101% of the principal balance of the Senior
Notes plus accrued and unpaid interest thereon on the date of redemption (the
"Note Redemption Price"). Registrant made the Change of Control Offer on
February 4, 1997, and the Change of Control Offer will expire on March 6,
1997. Because the Board of Directors of Registrant is aware that the Senior
Notes have recently been trading at prices significantly above the Note
Redemption Price, Registrant currently does not anticipate that any of the
Senior Notes will be tendered for redemption pursuant to the Change of Control
Offer. If any of the Senior Notes are tendered pursuant to the Change of
Control Offer, Registrant currently anticipates that replacement financing
will be obtained through additional borrowings under the Loan Agreement or
through the issuance of additional Senior Indebtedness, as defined in the
Indenture.
The Purchasers are affiliates of The Blackstone Group, a private
investment bank based in New York and founded in 1985 by Peter G. Peterson,
its current Chairman, and Stephen A. Schwarzman, its current Chief Executive
Officer (the "Blackstone Group"). The Blackstone Group's main businesses
include strictly friendly principal investment, real estate investing and
asset management, restructuring and merger and acquisition advisory services.
Blackstone, the group's principal investment vehicle, has approximately $1.3
billion of committed equity capital.
The total amount of funds required to finance the Purchase Transaction,
the Fund Redemption Agreement and the Redemption Offer (including estimated
fees and expenses to be paid by Registrant in connection therewith) is
estimated to be approximately $61 million. Of such amount, approximately $54
million will be obtained from the Purchase Transaction and the remainder is
expected to be obtained through borrowings by Registrant under the Loan
Agreement, as amended.
A copy of Registrant's press releases dated January 24, 1997 and January
29, 1997 are attached hereto as Exhibits No. 99.1 and 99.2, respectively and
are incorporated herein by reference.
The foregoing descriptions of documents are summaries that do not purport
to be complete and are qualified in their entirety by reference to the actual
terms and provisions of such documents filed as exhibits hereto.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Not applicable.
(b) Not applicable.
(c) Exhibits.
2.1 Stock Purchase Agreement, dated as of January 24, 1997, among
Blackstone Capital Partners II Merchant Banking Fund L.P.,
Blackstone Offshore Capital Partners II Merchant Banking
Fund L.P., Blackstone Family Investment Partnership L.P., Haynes
Holdings, Inc. and Haynes International, Inc.
2.2 Stock Redemption Agreement, dated as of January 24, 1997, among
MLGA Fund II, L.P., MLGAL Partners, L.P. and Haynes
Holdings, Inc.
2.3 Exercise and Repurchase Agreement, dated as of January 24, 1997,
among Haynes Holdings, Inc. and the holders as listed therein.
2.4 Consent Solicitation and Offer to Redeem dated January 30, 1997.
2.5 Letter of Transmittal dated January 30, 1997.
4.1 Amended Stockholders' Agreement dated as of January 29, 1997,
among Haynes Holdings, Inc. and the investors listed therein.
4.2 Fifth Amendment to Stock Subscription Agreement dated as of
January 29, 1997 among Haynes Holdings, Inc., Haynes
International, Inc. and the persons on the signature pages thereof.
10.1 Amendment No. 2 to Amended and Restated Loan and Security
Agreement, dated January 29, 1997 among CoreStates Bank, N.A.
and Congress Financial Corporation (Central), as lenders, Congress
Financial Corporation (Central), as agent for lenders, and Haynes
International, Inc.
99.1 Press Release dated January 24, 1997.
99.2 Press Release dated January 29, 1997.
SIGNATURE
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.
HAYNES INTERNATIONAL, INC.
By: /s/ Joseph F. Barker
Name: Joseph F. Barker
Title: Chief Financial Officer
February 13, 1997
EXHIBIT INDEX
Number
Assigned on
Regulation S-K
Item 601
(1) No Exhibit
(2) 2.1 Stock Purchase Agreement, dated as of January 24, 1997, among Blackstone
Capital Partners II Merchant Banking Fund L.P., Blackstone Offshore Capital
Partners II Merchant Banking Fund L.P., Blackstone Family Investment
Partnership L.P., Haynes Holdings, Inc. and Haynes International, Inc.
2.2 Stock Redemption Agreement, dated as of January 24, 1997, among MLGA
Fund II, L.P., MLGAL Partners, L.P. and Haynes Holdings, Inc.
2.3 Exercise and Repurchase Agreement, dated as of January 24, 1997, among
Haynes Holdings, Inc. and the holders as listed therein.
2.4 Consent Solicitation and Offer to Redeem dated January 30, 1997.
2.5 Letter of Transmittal dated January 30, 1997.
(4) 4.1 Amended Stockholders' Agreement dated as of January 29, 1997, among Haynes
Holdings, Inc. and the investors listed therein.
4.2 Fifth Amendment to Stock Subscription Agreement dated as of January 29, 1997
among Haynes Holdings, Inc., Haynes International, Inc. and the persons on the
signature pages thereof.
(10) 10.1 Amendment No. 2 to Amended and Restated Loan and Security Agreement,
dated January 29, 1997 among CoreStates Bank, N.A. and Congress Financial
Corporation (Central), as lenders, Congress Financial Corporation (Central), as
agent for lenders, and Haynes International, Inc.
(16) No Exhibit
(17) No Exhibit
(20) No Exhibit
(23) No Exhibit
(24) No Exhibit
(27) No Exhibit
(99) 99.1 Press Release dated January 24, 1997.
99.2 Press Release dated January 29, 1997.