SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
October 13, 1999
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(Date of earliest event reported)
CINCINNATI BELL INC.
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(Exact name of registrant as specified in its charter)
Ohio 1-8519 31-1056105
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Identification
organization) Number) Number)
201 East Fourth Street
Cincinnati, Ohio 45202
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(Address of principal executive offices) (Zip Code)
(513) 397-9900
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(Registrant's telephone number, including area code)
Item 5. Other Events
Cincinnati Bell Inc., an Ohio corporation ("CBI"), IXC
Communications, Inc., a Delaware corporation ("IXC"), and Ivory Merger
Inc., a Delaware corporation and a wholly owned subsidiary of CBI,
previously entered into an Agreement and Plan of Merger dated as of July
20, 1999 (the "Merger Agreement"), pursuant to which IXC will merge (the
"Merger") with and into Ivory Merger Inc. and become a wholly owned
subsidiary of CBI.
In light of the decision of Chancellor Chandler on September 27,
1999, in the Court of Chancery of the State of Delaware in Phelps Dodge
Corporation vs. Cyprus Amax Minerals Company, CBI and IXC have entered
into Amendment No. 1 dated as of October 13, 1999 to the Merger Agreement
(the "Amendment"). While CBI does not believe that the decision is
applicable to the Merger or the Merger Agreement, CBI has decided to
amend the Merger Agreement. The Amendment amends Sections 4.03 and 4.04
of the Merger Agreement and provides that in response to an IXC Superior
Proposal or a Cincinnati Bell Superior Proposal (each as defined in the
Amendment), IXC or CBI, as the case may be, may engage in discussions to
inform itself of the terms of any such Superior Proposal. The terms and
provisions of Sections 4.03 and 4.04 of the Merger Agreement otherwise
remain unchanged.
A copy of the Amendment is attached hereto as Exhibit 2.1. Such
Exhibit is incorporated by reference to this Item 5 and the foregoing is
qualified in its entirety by reference to such Exhibit.
In connection with putative class action litigation filed by John D.
Crawford and other IXC stockholders (John D. Crawford, et al., v.
Cincinnati Bell Inc., et al. C.A. No. 17334 (the "Crawford Action") and
In re IXC Communications, Inc. Shareholders Litigation, Consolidated C.A.
No. 17324), in the Court of Chancery of the State of Delaware plaintiffs
served a Joint Opening Brief In Support Of Their Motions for Preliminary
Injunction (the "Joint Opening Brief") on October 8, 1999. On October 13,
1999, plaintiffs in the Crawford Action filed a motion for leave to file
a second amended and supplemental complaint (the "Amended Complaint"). In
the Joint Opening Brief and in the Amended Complaint, plaintiffs allege
that the joint proxy statement/prospectus (the "Proxy Statement") filed
with the Securities and Exchange Commission on September 13, 1999, and
mailed by IXC to its stockholders on or about September 14, 1999,
contained various misstatements and omissions that are misleading. CBI
does not believe that
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any of the alleged misstatements or omissions in the Proxy Statement are
misleading or material.
A copy of the relevant portion of the Joint Opening Brief regarding
the Proxy Statement is attached hereto as Exhibit 2.2. A copy of the Amended
Complaint is attached hereto as Exhibit 2.3. Exhibits 2.2 and 2.3 are
incorporated by reference to this Item 5 and the foregoing is qualified in its
entirety by reference to these Exhibits.
Certain of plaintiffs' disclosure allegations are listed numerically
below. Following each numbered paragraph, certain additional disclosures are
provided. Information relating to CBI is being provided by CBI and information
relating to IXC is being provided by IXC.
1. The Proxy Statement fails to disclose that the letter agreement
in which IXC engaged Morgan Stanley was backdated (i.e., it was
signed on July 20 or 21, 1999 but dated February 3, 1999).
o On February 4, 1999, IXC publicly announced that it had
engaged Morgan Stanley to explore strategic alternatives.
At around this time the parties negotiated the general
parameters regarding the scope of Morgan Stanley's
engagement and Morgan Stanley began performing services.
o The engagement letter was not signed by both parties,
however, until July 20, 1999, when the parties finalized
their negotiations regarding the fee to be paid to Morgan
Stanley for its services. It is not unusual in the
investment banking business for engagement letters to be
finalized immediately prior to the delivery of fairness
opinions but to be dated as of an earlier date.
2. The Proxy Statement fails to disclose that neither Morgan
Stanley nor Merrill Lynch issued fairness opinions with respect
to CBI's purchase of one half of GEPT's stock in IXC at $50 per
share.
o The fairness opinions of Morgan Stanley and Merrill Lynch
address only the fairness of the exchange ratio. These
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fairness opinions are attached as Annexes 8 and 9 to the
Proxy Statement.
3. The Proxy Statement fails to disclose that IXC shut Morgan
Stanley out for much of May and June and retained Merrill Lynch
because IXC was concerned that Morgan Stanley might refuse to
issue a fairness opinion.
o One of the reasons that Merrill Lynch was retained was
because IXC was not completely satisfied with the progress
being made in examining strategic alternatives and
believed that the addition of Merrill Lynch would assist
IXC in its efforts.
o Both Merrill Lynch and Morgan Stanley participated in the
due diligence process with respect to CBI.
o If IXC had been unable to reach an agreement with Morgan
Stanley as to fees, then Morgan Stanley would have
withdrawn from the IXC engagement and would not have
rendered a fairness opinion as to the exchange ratio
provided by the Merger.
4. The Proxy Statement fails to disclose that the amount of Morgan
Stanley's fee was contingent on the value of the deal and not
finalized until the afternoon of July 20, 1999.
o Morgan Stanley's and Merrill Lynch's respective fees were
finalized on the afternoon of July 20, 1999.
o There was disagreement as to how Morgan Stanley's fee was
to be determined. After negotiations, Morgan
Stanley and IXC finally agreed that Morgan Stanley would
receive a fee of $5 million payable upon completion of the
Merger.
5. The Proxy Statement fails to disclose that Morgan Stanley
advised the IXC directors that there were companies who would
make better strategic partners with IXC than would CBI.
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o Morgan Stanley believed that there were other companies
that may have provided a better strategic fit with IXC
than CBI. There was no expression of interest pending,
however, from any other company at the time the Merger was
approved by the IXC Board.
6. The Proxy Statement fails to disclose that Morgan Stanley
recommended that PSINet and [Company A]1 be contacted before
the IXC Board voted on a merger with CBI.
o Morgan Stanley stated that contacting PSINet and [Company
A] before voting on a merger with CBI was a course of
action available to IXC. The IXC Board considered and
rejected this course of action.
7. The Proxy Statement fails to disclose that Mr. Bragin, an IXC
director, has served since 1985 as Vice President of General
Electric Investment Corporation, a subsidiary of General
Electric Company, which also is an advisor to the Trustees of
General Electric Pension Trust ("GEPT").
o Wolfe H. Bragin is a Vice President at General Electric
Investment Corporation, which also is an advisor to GEPT.
Mr. Bragin has held this position since at least 1985.
8. The Proxy Statement fails to disclose that the Merger Agreement
was conditioned upon the GEPT Stockholders Agreement which in
turn was conditioned on CBI's purchase of GEPT's IXC shares for
$50 cash per share.
o CBI would not have entered into the Merger Agreement
without an agreement by GEPT to vote its IXC shares in
favor of the Merger.
o GEPT required that CBI agree to purchase from GEPT
approximately half of its IXC shares for cash.
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1 Not identified for confidentiality reasons.
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9. The Proxy Statement fails to disclose that Mr. Benjamin Scott
was terminated as a director of IXC just days before the IXC
Board considered the Merger Agreement because IXC was concerned
that Mr. Scott may pose an obstacle to the Merger.
o At the time Mr. Scott resigned as chief executive officer
of IXC, it was agreed that Mr. Scott would also resign
from the IXC Board at some appropriate time in the future.
o Mr. Irwin suggested that it would be appropriate for Mr.
Scott to resign from the IXC Board before the
deliberations concerning the Merger. Mr. Scott resigned
from the IXC Board effective July 17, 1999.
o Mr. Scott has stated that he fully supports the Merger.
10. The Proxy Statement fails to disclose that Mr. Irwin preferred
consideration in stock over cash because he had a tax basis in
his IXC stock of less than $5 per share.
o Mr. Irwin's IXC shares have a per share basis of less than
$5.
o A merger in which cash consideration was paid could result
in significant capital gains tax liability to Mr. Irwin,
Mr. Ralph Swett and other stockholders.
o Mr. Irwin has stated that the tax-free nature of the
Merger was important to many IXC stockholders, including
himself and Mr. Swett.
11. The Proxy Statement fails to disclose certain concerns
expressed by the IXC due diligence team to the IXC Board
regarding a merger between IXC and CBI.
o The IXC due diligence team presented a report to the IXC
Board that concluded that there would be very limited cost
synergies and limited revenue synergies in a merger with
CBI.
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o The IXC due diligence team also noted that one risk of a
merger with CBI was that the second level of management at
CBI had limited experience operating outside of the
Cincinnati, Ohio region.
o The IXC Board considered the report of the due diligence
team.
12. The Proxy Statement misrepresents the number of shares owned by
directors and officers of IXC and their affiliates.
o As of September 22, 1999, the record date for the IXC
stockholders meeting:
- Messrs. Swett and Irwin and their affiliates owned and are
entitled to vote approximately 16% of the IXC common stock
and are committed to vote, as stockholders, for the
adoption of the Merger Agreement.
- GEPT owned approximately 10% of the IXC common stock and
is committed to vote for the adoption of the Merger
Agreement.
- The other IXC directors and executive officers and their
affiliates (including Mr. Bragin but excluding Messrs.
Swett and Irwin and GEPT) owned and are entitled to vote
approximately 1% of the IXC common stock and intend to
vote for the adoption of the Merger Agreement.
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- The share ownership of these individuals and entities was:
Approximate
percentage
of IXC
IXC common common
Name or Entity stock Owned stock owned
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Richard D. Irwin (and
affiliates)........... 3,254,990 9%
Ralph J. Swett (and
affiliates)........... 2,740,716 7%
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Sub-total......... 5,995,706 16%
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GEPT.................. 3,625,172 10%
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Wolfe H. Bragin....... 4,000 *
Joe C. Culp........... 2,612 *
Dominick DeAngelo..... 0 *
David L. Hughart...... 0 *
Stanley W. Katz....... 2,000 *
Carl W. McKinzie...... 211,917 *
Jeffrey C. Smith...... 2,000 *
Stuart K. Coppens..... 0 *
Michael W. Vent....... 0 *
Phillip L. Williams... 146,762 *
John M. Zrno.......... 0 *
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Sub-total......... 369,291 1%
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Total 9,990,169 27%
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o As of September 22, 1999, CBI owned and was entitled to
vote 4,999,345 shares of IXC common stock, which it
acquired from GEPT under a stock purchase agreement
between CBI and GEPT dated as of July 20, 1999. Based on
the number of shares of IXC common stock outstanding on
September 22, 1999, CBI owned approximately 13% of the
outstanding shares of IXC common stock on that date.
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* Indicates ownership of less than 1% of IXC common stock
outstanding on September 22, 1999.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
CINCINNATI BELL INC.
by:
/s/ Thomas E. Taylor
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Name: Thomas E. Taylor
Title: General Counsel and
Secretary
Date: October 14, 1999
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Exhibit Index
Exhibit No. Exhibit
2.1 Amendment No. 1 dated as of October 13,
1999, among Cincinnati Bell Inc., an
Ohio corporation, IXC Communications,
Inc., a Delaware corporation, and Ivory
Merger Inc., a Delaware corporation, to
the Agreement and Plan of Merger dated
as of July 20, 1999, among Cincinnati
Bell Inc., IXC Communications, Inc. and
Ivory Merger Inc.
2.2 Selected portions from the Joint
Opening Brief In Support Of Their Motions For
Preliminary Injunction filed on October 8, 1999
by plaintiffs in the action styled
Crawford et al. v. Cincinnati Bell Inc.,
et al., C.A. No. 17334 and In re
IXC Communications Inc. Shareholders
Litigation, Consolidated C.A. No. 17324,
pending in the Court of Chancery for the
State of Delaware.
2.3 Proposed Second Amended and Supplemental
Complaint attached to a Motion to Amend
filed by plaintiffs in the action styled
Crawford et al. v. Cincinnati Bell, Inc.
et al., C.A. No. 17334.
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