SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13E-3
(Rule 13e-100)
(Amendment No. 1)
TRANSACTION STATEMENT
UNDER SECTION 13(e) OF THE SECURITIES AND EXCHANGE ACT OF 1934
SCHEDULE TO
(Rule 14d-100)
(Amendment No. 1)
TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(e)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
GIANT GROUP LTD.
(Name of Subject Company (Issuer))
GIANT GROUP LTD.
Burt Sugarman
(Name of Filing Persons (Offeror))
Common Stock
And Associated Preferred Stock Purchase Rights
(Title of Class of Securities)
374503 10 0
(CUSIP Number of Class of Securities)
Pasquale A. Ambrogio
GIANT GROUP LTD.
9440 Santa Monica Boulevard, Suite 407
Beverly Hills, CA 90210
(310) 273-5678
Copy to:
Jeffrey C. Soza
Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro LLP
2121 Avenue of the Stars, 18/th/ floor
Los Angeles, CA 90067
(310) 553-3000
1
SCHEDULE 13E-3/SCHEDULE TO
This statement amends and supplements the Transaction Statement on Schedule
13E-3 ("Schedule 13E-3") and Tender Offer Statement on Schedule TO ("Schedule
TO") both of which were filed with the Securities and Exchange Commission on
April 19, 2001, relating to the offer by GIANT GROUP, LTD., a Delaware
corporation (hereinafter referred to as the "Purchaser" or the "Company" as
applicable) to purchase all of the outstanding shares of its Common Stock, par
value $0.01 per share, and associated Preferred Stock Purchase Rights (the
"Shares"), at $0.50 per share, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated April 19,
2001 (the "Offer to Purchase"), and in the related Letter of Transmittal,
(which, together with any supplements or amendments constitute the "Offer").
Capitalized terms used herein and not defined herein have the respective
meanings assigned such terms in the Offer to Purchase and the Schedule TO.
GENERAL The Offer to Purchase is hereby amended to include the following
information. Safe Harbor protections for forward looking statements
contained in federal securities laws do not apply to statements in
connection with the Company's Offer and Company press releases
containing information on the Company's Offer pursuant to Section
21E(b)(1)(E) and (2)(C) of the Securities and Exchange Act of 1934.
Accordingly, the statements regarding the Safe Harbor protections
contained in the Offer to Purchase are of no effect.
SCHEDULE TO ITEM 2 SUBJECT COMPANY INFORMATION
SCHEDULE 13E-3, ITEM 2
(c) Trading Market and Price. Item 2 of the Schedule TO and Schedule
------------------------
13E-3 are hereby amended to include the following information.
During the first quarter of 2001, the high and low prices for the
Company's Shares were $0.22 per share and $0.156 per share
respectively.
(e) Prior Public Offerings. Item 2 of the Schedule TO and Schedule
----------------------
13E-3 are hereby amended to include the following information.
Neither the Company nor Burt Sugarman has made an underwritten
public offering of Company Shares for cash during the last three
years that was registered under the Securities Act of 1933 or
exempt from registration under Regulation A.
(f) Prior Stock Purchases. Item 2 of the Schedule TO and Schedule
---------------------
13E-3 are hereby amended to include the following information. In
July of 2000, as part of a Settlement Agreement, Glenn Sands
returned 768,691 Shares to the Company. For a description of the
Settlement Agreement see Item 3 of the Company's Form 10-K for
the year ending 2000, a copy of which is attached to the Offer to
Purchase as Schedule II. On December 13, 2000, the Company
purchased 66,200 Shares at an average price of $0.20 per share.
Neither the Company nor Burt Sugarman have made any other
purchase of Company Shares during the past two years.
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SCHEDULE TO ITEM 3. IDENTITY AND BACKGROUND OF FILING
PERSON.
SCHEDULE 13E-3, ITEM 3
(a) Name and Address. Item 3 of the Schedule TO and Schedule 13E-3
----------------
are hereby amended to add Burt Sugarman, Chairman and CEO of the
Company, as a filing person.
(c) Business and Background of Natural Persons. Item 3 of the
------------------------------------------
Schedule TO and Schedule 13E-3 are hereby amended to include the
following information. Mr. Sugarman's business address,
citizenship, present principal occupation or employment and five-
year employment history is set forth in Schedule I of the Offer
to Purchase. During the past five years, Mr. Sugarman has not
been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors), nor during such time has he
been a party to any judicial or administrative proceeding that
resulted in a judgment, decree or final order enjoining him from
future violations of, or prohibiting activities subject to,
federal or state securities law, or a finding of any material
violation of federal or state securities laws.
SCHEDULE TO ITEM 4. TERMS OF THE TRANSACTION.
SCHEDULE 13E-3, ITEM 4
(a) Material Terms.
(1) Tender Offers.
-------------
(i) Item 4 of the Schedule TO and Schedule 13E-3 are hereby
amended to include the following information. On May 9,
2001, the Company waived the condition to the Offer
requiring a sufficient number of shareholders to have
validly tendered and not withdrawn their tenders such that
there are less than 300 shareholders of record of the
Common Stock after the consummation of the Offer. The
Company also extended the expiration of the Offer to 5:00
p.m., New York City time, on May 23, 2001. Accordingly,
the Company will purchase all Shares validly tendered and
not withdrawn prior to 5:00 p.m., New York City time, on
May 23, 2001, unless the Offer is further extended by the
Company. All conditions to the Offer must be satisfied or
waived by the Company prior to the Expiration Date.
(iii) Item 4 of the Schedule TO and Schedule 13E-3 are hereby
amended to include the following information. The
Expiration Date for the Offer is May 23, 2001, at 5:00
p.m. New York time, unless otherwise extended by the
Company in its sole discretion.
(xii) Item 4 of the Schedule TO and Schedule 13E-3 are hereby
amended to include the following information.
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UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
---------------------------------------------
In General. The following summary is a general discussion of
----------
the material United States federal income tax consequences
relating to the Offer. The summary is based upon current
provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), and existing final, temporary and proposed
Treasury Regulations, published rulings of the Internal
Revenue Service (the "IRS") and judicial decisions, all of
which are subject to prospective and retroactive changes.
Except as otherwise provided, this summary deals only with
Shares held by U.S. Holders (as defined below) as capital
assets within the meaning of Section 1221 of the Code and
does not address tax consequences that may be relevant to
investors in special tax situations, such as certain
financial institutions, tax-exempt organizations, insurance
companies, dealers in securities or currencies, or
shareholders holding the Shares as part of a hedge or
hedging transaction or as a position in a straddle for tax
purposes.
The Company will not seek a ruling from the IRS with regard
to such tax matters discussed below. The tax consequences
of a sale pursuant to the Offer may vary depending upon,
among other things, the particular facts and circumstances
of the tendering shareholder. No information is provided
herein as to the state, local or foreign tax consequences of
the transaction contemplated by the Offer. Shareholders are
urged to consult their own tax advisors to determine the
particular United States federal, state, local and foreign
tax consequences of sales made by them pursuant to the
Offer, the application of the constructive ownership rules
mentioned below and the effect of tax legislative proposals.
As used herein, the term "U.S. Holder" means a beneficial
owner of Shares that is (i) a citizen or resident of the
United States, (ii) a corporation or other entity taxable as
a corporation created or organized under the laws of the
United States or any of its political subdivisions, (iii) a
trust if a U.S. court is able to exercise primary
supervision over the administration of the trust and one or
more U.S. persons have the authority to control all
substantial decisions of the trust, or (iv) an estate that
is subject to U.S. federal income tax on its income
regardless of its source. "Non-U.S. Holder" means a
beneficial owner of Shares that is not a United States
person for United States federal income tax purposes.
Characterization of the Sale. A sale of Shares by a
----------------------------
shareholder of the Company pursuant to the Offer will be a
taxable transaction for United States federal income tax
purposes and may also be a
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taxable transaction under applicable state, local and
foreign tax laws. Under Section 302 of the Code, a sale of
Shares by a shareholder to the Company pursuant to the Offer
will be treated as a "sale or exchange" of such Shares for
United States federal income tax purposes (rather than as a
distribution by the Company with respect to the Shares held
by the tendering shareholder) if the receipt of cash upon
such sale (i) results in a "complete termination" of the
shareholder's interest in the Company or (ii) is "not
essentially equivalent to a dividend" with respect to the
shareholder. Shareholders are encouraged to discuss the
application of these tests (the "Section 302 Tests") to
their own tax situation with their own tax advisor.
In determining whether either of the Section 302 Tests is
satisfied, each shareholder must take into account not only
the Shares and other stock of the Company which are actually
owned by the shareholder, but also Shares and other stock of
the Company which are constructively owned by the
shareholder within the meaning of Section 318 of the Code.
Under Section 318 of the Code, a shareholder may
constructively own (i) Shares and other stock of the Company
actually owned, and in some cases constructively owned, by
certain related individuals or entities in which the
shareholder has an interest, and, in the case of
shareholders that are entities, by certain individuals or
entities that have an interest in the shareholder, and (ii)
Shares and other stock of the Company which the shareholder
has the right to acquire by exercise of an option or by
conversion. Contemporaneous dispositions or acquisitions of
Shares or other stock of the Company by a shareholder or
related individuals or entities may be deemed to be part of
a single integrated transaction which will be taken into
account in determining whether either of the Section 302
Tests has been satisfied.
. A shareholder that sells all of its Shares and owns no
other Company shares, actually or constructively,
generally will satisfy the "complete termination" test.
. A shareholder will satisfy the "not essentially
equivalent to a dividend" test if the reduction in the
shareholder's proportionate interest in the Company
resulting from the sale of Shares pursuant to the Offer
constitutes a "meaningful reduction" given the
shareholder's particular facts and circumstances. Even
a small reduction in a shareholder's proportionate
equity interest may satisfy this test.
Although no assurance can be given that either of the
Section 302 Tests will be satisfied as to any particular
shareholder, the IRS has taken the position that a non-pro
rata redemption of the stock of a shareholder owning less
than one percent of the stock of a widely held corporation
satisfied the "not essentially
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equivalent to a dividend" test, resulting in capital gain or
loss treatment for the redeemed shareholder, provided the
redeemed shareholder's proportionate interest in the
redeeming corporation decreased. If a shareholder fails to
satisfy either of the Section 302 Tests, the U.S. federal
income tax consequences to the shareholder will be as
follows. Any cash received from the Company for Shares
pursuant to the Offer by the shareholder would be treated as
a dividend to the extent of the Company's current and
accumulated earnings and profits (without reduction for the
tax basis of the Shares sold pursuant to the Offer), and any
cash received in excess of the Company's earnings and
profits will be treated, first, as a nontaxable return of
capital to the extent of the shareholder's adjusted tax
basis for such shareholder's Shares, and, thereafter, as
capital gain, to the extent it exceeds such adjusted tax
basis. The basis in the tendering shareholder's Shares will
be reduced (but not below zero) by the amount of cash
distributed in excess of the Company's current and
accumulated earnings and profits. Any basis in the tendered
Shares remaining after such reduction will be added to the
shareholder's basis in its other stock, if any, in the
Company.
If a shareholder satisfies either of the Section 302 Tests
and the sale of the Shares is therefore treated as a "sale
or exchange" of such Shares for United States federal income
tax purposes, the shareholder will recognize capital gain or
loss equal to the difference between the amount of cash it
received pursuant to the Offer and the shareholder's
adjusted tax basis in the Shares sold pursuant to the Offer.
Any such gain or loss will be long term capital gain or loss
if the Shares have been held for more than one year. A
shareholder's holding period for capital gain purposes for
Shares it received as a distribution will commence the day
after the date that the shareholder received such Shares.
Accordingly, if a shareholder satisfies either of the
Section 302 Tests, it will recognize short-term capital gain
or loss on the sale of its Shares pursuant to the Offer to
the extent such Shares were received by it as a distribution
not more than one year prior to the sale.
Corporate Shareholder Dividend Treatment. Under current law,
----------------------------------------
if a sale of Shares by a corporate shareholder is treated as
a dividend, the corporate shareholder may be entitled to
claim a dividends-received deduction equal to a portion of
the dividend, subject to applicable limitations. The
dividends-received deduction will not be available to a
corporate shareholder that qualifies for sale or exchange
treatment under either of the Section 302 Tests. Any amount
received by a corporate shareholder pursuant to the Offer
that is treated as a dividend will likely constitute an
"extraordinary dividend" under the Code. A corporate
shareholder receiving an "extraordinary dividend" would be
required to reduce its basis (but not below zero) in its
Shares by the non-taxed portion of the extraordinary
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dividend (i.e., the portion of the dividend for which a
dividends-received deduction is allowed), and, if such
portion exceeds the shareholder's adjusted tax basis for its
Shares, to treat the excess as gain from the sale of such
Shares in the year in which the "extraordinary dividend" is
received.
Non-U.S. Holders. A Non-U.S. Holder will be subject to
----------------
withholding of federal tax at a rate of 30 percent on gross
payments received pursuant to the Offer that are treated as
dividends for U.S. federal income tax purposes unless the
Company (or applicable withholding agent) determines that a
reduced rate of withholding is applicable pursuant to a tax
treaty or that an exemption from withholding is applicable
because such gross payments are effectively connected with
the conduct of a trade or business by the Non-U.S. Holder
within the United States.
Federal Backup Withholding. To avoid federal income tax
--------------------------
backup withholding equal to 31% of the gross payments made
pursuant to the Offer, each shareholder must notify the
Depositary of such shareholder's correct taxpayer
identification number and provide certain other information
by properly completing the substitute Form W-9 included in
the Letter of Transmittal. Non-U.S. Holders may be required
to submit a properly completed Form W-8, certifying their
non-United States status, in order to avoid backup
withholding. Each shareholder is urged to consult with his
or her own tax advisor.
SCHEDULE TO ITEM 5. PAST CONTACTS, TRANSACTIONS,
NEGOTIATIONS AND AGREEMENTS.
SCHEDULE 13E-3, ITEM 5
(b) Significant Corporate Events. Item 5 of the Schedule TO and
----------------------------
Schedule 13E-3 are hereby amended to include the following
information. Following the disposition of Periscope Sportswear
in October 2000, the Company had no remaining revenue generating
operating units. Its sole assets consisted of cash and
marketable securities. At that time, the Company was also
considering filing a claim against Arthur Anderson, LLP, LH
Friend and others in connection with their actions surrounding
the Company's acquisition of Periscope.
Following the commencement of the lawsuit against Arthur Anderson
LLP, LH Friend and others, it became apparent to management that
it could take a considerable amount of time and resources to
prosecute the lawsuit. The Company did not believe that it could
devote the financial resources to the development of an operating
business at the same time it was required to devote funds to the
prosecution of the lawsuit.
In December 2000, management of the Company began exploring
alternatives to being a publicly-held corporation. On March 27,
2001,
7
Mr. Sugarman first proposed to the Board that the Company
consider making a tender offer for its outstanding common stock.
At that time, the Board discussed the proposed tender offer,
including a proposed price range of $0.40 - $0.50 per share and
the Shares were trading at $0.17 per share. The Board approved
the preparation of the Tender Offer documents, but did not
approve a price to be offered for the Shares. On April 12, 2001,
the Board again met to discuss the Offer. At this time the Board
approved the Offer at $0.50 per share which represented a premium
of over 250% to the bid price of $0.14 per share on April 10,
2001. In addition to the factors discussed in the Offer to
Purchase, the Board noted that this premium was comparable to,
and in some cases greater than, premiums paid in other tender
offers involving companies that suffered dramatic declines in
their stock prices. For example, Universal Music paid $0.57 per
share in its tender offer for Emusic, representing a premium of
approximately 250%, over the then recent trading price of $0.16
per share, to tendering stockholders. Also, NBC Television
purchased NBC Internet, Inc. for $2.14 per share representing an
approximate 46% premium to tendering stockholders.
SCHEDULE TO ITEM 7. SOURCE AND AMOUNT OF FUNDS OR OTHER
CONSIDERATION.
SCHEDULE 13E-3, ITEM 10
(a) Source of Funds. Item 7 of the Schedule TO and Item 10 of the
---------------
Schedule 13E-3 are hereby amended to include the following
information. The Company believes that a maximum of 1,936,337
Shares will be tendered in the Offer. This number represents all
of the Company's issued and outstanding Common Stock less the
1,238,420 Shares that Burt Sugarman will not be tendering. In the
event that the maximum number of shares are tendered, the Company
will be required to pay $968,169 to its shareholders. As of April
10, 2001, the Company had cash and cash equivalents of
$2,310,000.
(b) Item 7 of the Schedule TO and Item 10 of the Schedule 13E-3 are
hereby amended to include the following information. There are no
conditions to the financing of the transaction. The Company has
sufficient cash and cash equivalents on hand to purchase the
Shares should the maximum number be tendered.
SCHEDULE TO ITEM 13. INFORMATION REQUIRED BY SCHEDULE 13E-3
SCHEDULE 13E-3, ITEM 7. PURPOSES, ALTERNATIVES, REASONS AND EFFECTS.
(c) Reasons. Item 13 of the Schedule TO and Item 7 of the Schedule
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13E-3 are hereby amended to include the following information.
Several business realities led to the Company's decision to
commence the Offer to Purchase at this time. Following the
disposition of Periscope, the Company had no steady revenue
source. The absence of any cash flow has created significant
limitations for management and the Company to
8
successfully implement any material business plan or strategy to
create or purchase new revenue-generating operating entities.
Following the commencement of the lawsuit against Arthur Andersen
LLP, LH Friend and others, it became apparent to management that
it could take a considerable amount of time and resources to
prosecute the lawsuit. Given the significant financial
limitations, the Company did not believe that it could devote the
financial resources to the successful development of an operating
business at the same time it was required to devote funds to the
prosecution of the lawsuit. Additionally, the Company determined
that it could realize significant savings in administrative time
and expense if it were a privately-held corporation. As a
privately-held corporation, among other things, the Company would
not be required to prepare and file periodic reports with the
Securities and Exchange Commission and could reduce its directors
and officers insurance coverage.
Accordingly, given the coinciding absence of revenues, the
potential cost savings of being a private company, the
uncertainty as to the future outcome of the Arthur Andersen
lawsuit and the limited prospects of the Company if any, the
Board elected to proceed with the Offer as a solution to allow
the Company to pursue the litigation against Arthur Anderson LLP,
LH Friend and others, for so long as is necessary, while allowing
Shareholders who desire to do so to extract some value from the
Company by tendering their Shares. Conversely, if Shareholders
wish to accept the risks of continuing to hold their shares, they
can elect to not tender and remain a Shareholder of the Company.
(d) Effects. Item 13 of the Schedule TO and Item 7 of the Schedule
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13E-3 are hereby amended to include the following information.
Assuming all shareholders, other than Burt Sugarman, tender all
of their Shares, after the consummation of the Offer, Mr.
Sugarman will beneficially own 3,037,622 Shares (including
1,799,202 Shares which may be purchased upon the exercise of
options and 148,950 Shares owned by his wife) as the single
remaining Company Shareholder. The Company estimates that the
approximate net book value of the Company at that time will be
$4,914,831, to which Mr. Sugarman will possess a 100% interest.
The Company is currently operating at a net loss so there are no
earnings to which Mr. Sugarman can have an interest.
SCHEDULE 13E-3, ITEM 8. FAIRNESS OF TRANSACTION.
(a) Fairness. Item 13 of the Schedule TO and Item 8 of the Schedule
--------
13E-3 are hereby amended to include the following information.
The Board of Directors, including Mr. Sugarman, believe that the
Offer is procedurally fair to unaffiliated Shareholders. The
transaction was structured as a tender offer to allow those
Shareholders who desire to do so the opportunity to receive cash
for their shares. No Shareholder is required to tender their
Shares. Shareholders may make their own determination as to the
fairness of the Offer. For those Shareholders who elect not to
tender their Shares, the market for the Shares, in the event that
a
9
sufficient number of Shareholders tender such that the Company
can complete its going private transaction, will be illiquid.
However, in addition to the potential benefits for the Company,
the Offer was conceived with the intention of providing some
financial benefit to the Shareholders given the significantly
depressed market for the Shares and the risk of the Shares having
no value in the future given the Company's lack of operations and
the uncertainty of its lawsuit against Arthur Andersen LLP, LH
Friend and others. Therefore, the Board and Mr. Sugarman believe
that the Offer is procedurally fair in that it provides value to
those Shareholders choosing to tender. Those Shareholders who
elect not to tender will benefit if the Company prevails in its
lawsuit.
(b) Factors Considered in Determining Fairness. Item 13 of the
------------------------------------------
Schedule TO and Item 8 of the Schedule 13E-3 are hereby amended
to include the following information. In making the
determination that the Offer was in the best interests of the
Company and fair to the unaffiliated holders of Shares, the
Board, including Mr. Sugarman, considered a number of factors,
including those set forth in the Offer to Purchase. The Board
did not, however, consider the going concern value of the
Company. Neither the Board nor Mr. Sugarman believed that this
was a relevant factor in light of the fact that the Company had
no revenue-generating operating units. The Company's sole assets
at that time consisted of cash and investment securities and a
lawsuit in its early stages. The Company did not obtain any
opinions or appraisals from third parties.
In approving the Offer, the Board and Mr. Sugarman reviewed
possible alternatives to the Offer as set forth in the Offer to
purchase. The Board and Mr. Sugarman evaluated, among other
things, the possibility of liquidating the Company's assets. This
alternative was rejected at the time for various reasons,
including the uncertainty as to readily available purchasers, the
potentially long and drawn out liquidation process and the
difficulty in establishing an acceptable valuation model for the
speculative proceeds from a possible future legal victory.
Although the Company did not actively seek purchasers of its
assets, the Board was advised by management that the nature of
the Company's assets would have made finding a purchaser for all
of the assets difficult. The Company's sole assets consist of
cash, investment securities and a lawsuit which is in its early
stages.
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SIGNATURE
After due inquiry and to the best of his knowledge and belief, the
undersigned hereby certifies that the information set forth in this statement is
true, complete and correct.
Date: May 21, 2001
GIANT GROUP LTD.
By: /s/ Pasquale A. Ambrogio
_______________________________
Name Pasquale A. Ambrogio
Title Chief Financial Officer
/s/ Burt Sugarman
_______________________________
Burt Sugarman
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INDEX TO EXHIBITS
Item 12 of the Schedule TO and Item 16 of the Schedule 13E-3 are hereby amended
to include the following information.
EXHIBIT NO. DESCRIPTION
- ----------- -----------
(a)(1)(I) Press Release dated May 8, 2001
(a)(1)(J) Schedule III amended and incorporated by reference into
the Offer to Purchase.
(a)(1)(K) Press Release dated May 21, 2001
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