Exhibit 99.1
FOR IMMEDIATE RELEASE
DANA AND ECHLIN ANNOUNCE STOCK-FOR-STOCK TRANSACTION CREATING $13 BILLION
GLOBAL LEADER IN AUTOMOTIVE COMPONENTS
Transaction Represents $55 Per Echlin Share Or $4.2 Billion In Total
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TOLEDO, OH and BRANFORD, CT - (May 4, 1998) - Dana Corporation (NYSE: DCN) and
Echlin Inc. (NYSE: ECH) announced today that each company's board of directors
has unanimously approved a definitive merger agreement for a tax-free,
stock-for-stock transaction combining a global leader in automotive original
equipment ("OE") with a global leader in the automotive aftermarket. The
combined company would have annual sales of approximately $13 billion and a
total equity market value of approximately $10 billion. The transaction is
expected to be accounted for as a pooling of interests and to become accretive
to earnings per share during the first full year of operations after the merger.
Under the terms of the agreement, Echlin shareholders would receive 0.9293
shares of Dana for each share of Echlin they own. Based upon a closing price of
$59.1875 per share for Dana on Friday, May 1, 1998, this represents a price of
$55 per Echlin share. Dana would issue approximately $3.6 billion in common
stock to Echlin shareholders and assume approximately $570 million in net debt.
Once full integration is achieved, which will be substantially complete by the
year 2000, the companies anticipate synergies would add approximately $200
million annually to operating income. These synergies would be over and above
the Phase I and Phase II repositioning initiatives previously announced by
Echlin. 1999 pre-tax synergies from the transaction are expected to be $75
million. Savings would result from the elimination of duplicate functions,
consolidation of distribution and marketing infrastructure, improved
productivity, and the benefits of global materials and components sourcing. More
importantly, the combined company would be able to leverage its marketing
strengths - capitalizing on Echlin's premier position in the aftermarket to sell
Dana's products, while at the same time accelerating Echlin's efforts to grow
with its global OE customers where Dana has a leadership position.
The combination with Echlin would greatly expand Dana's presence in the global
automotive aftermarket and selected OE segments. The combined company will be
able to offer more comprehensive product lines to both OE and aftermarket
customers worldwide than either company could achieve individually. These
products include fuel system and engine management components, brakes, and
vehicular drivetrain components and systems. Dana and Echlin together will have
a stable of premium brand names including Raybestos(registered),
BWD(registered), Quinton Hazell(registered), Spicer(registered), Perfect
Circle(registered), Victor Reinz(registered), and Wix(registered).
The transaction fortifies Dana's position as one of the world's largest
independent manufacturers of automotive components for the passenger car, truck
and off-highway vehicle markets. Following the transaction, Dana will also be
one of the largest independent manufacturers of components for the worldwide
automotive aftermarket.
Southwood J. Morcott, chairman and chief executive officer of Dana, said, "This
transaction is a major step toward achieving our previously announced Beyond
2000 strategic goals, including improved financial performance, growth in our
core product areas, and increased emphasis on the global aftermarket. In fact,
this combination helps us to accomplish our goals of 50% diversified sales and
$10 billion in annual sales ahead of schedule. This move will have the benefit
of expanding our product line and significantly broadening and balancing our
customer base.
"The combination will benefit Dana shareholders by further diversifying the
company's business base," Mr. Morcott continued. "In addition to the substantial
synergies, by diversifying the company's business base, we expect that this
combination will enhance shareholder value relative to the historically higher
multiples accorded aftermarket businesses. We have identified a number of ways
to streamline the distribution process and to generate economies in
manufacturing, capitalizing on our proven track record of aggressive asset
management. We see opportunities to sell Echlin components to Dana customers and
to further utilize Dana's R&D and engineering capabilities to produce a broader
range of world-class quality components for the aftermarket. Dana and Echlin are
an ideal combination of products, markets, leadership, and cultures. I look
forward to closing this transaction and getting on with the business of seizing
the opportunities it creates."
Mr. Morcott added, "In short, Echlin helps us in the aftermarket. Dana helps
Echlin in original equipment. Dana gains two new core products -- brakes and
engine fluid products -- each with combined sales of over $1 billion. This
greatly enhances our engine components strategic business unit, which would now
exceed $3 billion in sales.
"This transaction also strengthens our balance sheet. By the end of this year,
the combined company is expected to have debt-to-total capital of less than 40%
- -- achieving another important goal. This positions Dana well to capitalize on
opportunities for future growth," said Mr. Morcott.
Larry McCurdy, chairman, president and chief executive officer of Echlin, said,
"Joining with Dana makes strategic sense because it will result in a financially
strong company that has a diversified business mix with leadership positions in
virtually all of its markets. This transaction with Dana is a win-win for our
shareholders, employees and customers. The transaction provides our shareholders
with an immediate premium while allowing all Echlin constituents to participate
in the upside potential of the combined company.
"Together, we will offer customers a full range of high quality automotive
products building on the combined company's strong brands and long-standing
distribution relationships. We will provide superior products, services, and
value to our customers. I know our customers will be delighted with this
combination. I am excited about the opportunities this transaction presents,"
Mr. McCurdy concluded.
Upon completion of the merger, Mr. McCurdy will become president of the Echlin
Strategic Business Unit of Dana, which will lead Dana's aftermarket activities.
Mr. Morcott added, "I am particularly pleased that Larry McCurdy will join Dana.
Larry and I have known each other for over 20 years. He is a very good
businessman, and I have great respect for his integrity, vision, industry
expertise and leadership. I look forward to working with the Echlin team to
build on their strengths in the combined company."
Dana currently pays an annualized dividend of $1.16 per share. Based on the
conversion ratio, Echlin shareholders would expect to receive an annualized
dividend of $1.08 per share compared to Echlin's current annualized dividend of
$0.90 per share, an increase of 20%. Effective with the payment of its June 1998
dividend, Dana will mark its 242nd consecutive dividend paid and continue a more
than 60-year succession of dividends paid without a decrease or missed payment.
The merger is conditioned upon the approval of Dana and Echlin shareholders and
customary regulatory approvals. The companies anticipate that the transaction
should close in the third calendar quarter of 1998.
Lehman Brothers Inc. acted as financial advisor and provided a fairness
opinion to Dana and Salomon Smith Barney acted as financial advisor and
provided a fairness opinion to Echlin.
Echlin, with annual sales of $3.5 billion, is a leading producer of quality
automotive parts, with more than 140 operations and 28,000 employees spread
across six continents. It manufactures and distributes brake, engine, power
transmission, and steering and suspension system components for the world's 650
million motor vehicles. The company sells these products to a broad base of
aftermarket customers, who, in turn, supply them to professional technicians and
do-it-yourselfers. It also sells components to original equipment customers for
factory installation on new vehicles. Echlin's home page address on the Internet
is www.echlin.com.
Dana Corporation is a global leader in the engineering, manufacture, and
distribution of products and services for the automotive, engine, heavy truck,
off-highway, industrial, and leasing markets. Founded in 1904 and based in
Toledo, Ohio, Dana operates facilities in 30 countries and employs more than
50,000 people. The company reported record sales of $8.3 billion in 1997. The
Internet address for Dana's home page is www.dana.com. Certain statements
contained herein constitute "forward-looking" statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve numerous assumptions, known and unknown risks, uncertainties
and other factors which may cause actual and future performance or achievements
of Dana or Echlin, including with respect to the proposed merger, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among other things, the following: achieving sales levels to fulfill revenue
expectations; the absence of presently unexpected costs or charges, certain of
which may be outside the control of Dana and Echlin; the cyclical nature of the
automotive industry; failure to achieve synergies or savings anticipated in the
merger; general economic and business conditions; and competition. Additional
factors are detailed in Dana's and Echlin's public filings with the Securities
and Exchange Commission. Dana and Echlin disclaim any responsibility to update
any forward-looking statement provided in this press release.
This release is neither an offer to sell nor a solicitation of an offer to buy
Dana Corporation securities, nor a solicitation of a proxy. Any such offer or
solicitation will only be made in compliance with applicable securities laws.
Contacts:
FOR DANA:
Investors: Media:
Stephen N. Superits Gary Corrigan
Vice President - Investor Relations Director - Corporate
(419) 535-4636 Communications
(419) 535-4813
Joele Frank/Daniel Katcher
Abernathy MacGregor Frank
(212) 371-5999
FOR ECHLIN:
Paul R. Ryder Lawrence Rand/Eric Berman
Vice President - Investor Relations Kekst & Co.
(203) 481-5751 (212) 521-4800
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