SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Schedule 14D-9
Solicitation /Recommendation Statement
under Section 14(d)(4) of the
Securities Exchange Act of 1934
(Amendment No. ___)
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SIMON TRANSPORTATION SERVICES INC.
(Name of Subject Company)
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SIMON TRANSPORTATION SERVICES INC.
(Name of Person(s) Filing Statement)
Class A Common Stock, $.01 par value
Class B Common Stock, $.01 par value
(Title of Class of Securities)
828813105
(CUSIP Number of Class of Securities)
Kelle A. Simon
President
Simon Transportation Services Inc.
5175 West 2100 South
West Valley City, Utah 84120
(801) 924-7200
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of the Person(s) Filing Statement)
Copies to:
Brian G. Lloyd, Esq.
Parr Waddoups Brown Gee & Loveless
185 South State Street Suite 1300
Salt Lake City, Utah 84111
(801) 532-7840
|_| Check the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer.
Item 1. Subject Company Information.
The name of the subject company to which this
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
relates is Simon Transportation Services Inc., a Nevada corporation (the
"Company"). The address of the principal executive offices of the Company is
5175 West 2100 South, West Valley, City, Utah 84120. The telephone number of the
Company's principal executive offices is (801) 924-7200. The classes of equity
securities to which this Schedule 14D-9 relates are the Company's Class A Common
Stock, $.01 par value per share (the "Class A Common Stock"), and the Company's
Class B Common Stock, par value $.01 per share (the "Class B Common Stock"). As
of May 23, 2000, there were 5,372,958 shares of Class A Common Stock outstanding
and 913,751 shares of Class B Common Stock outstanding.
Item 2. Identity and Background of Filing Person.
(a) Subject Company Information.
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The name, address and telephone number of the Company, which is the person
filing this Schedule 14D-9, are set forth in Item 1 above.
(b) Identity and Background of Filing Person. This Statement relates
to a tender offer (the "Offer") by Jerry Moyes (the "Offeror") disclosed in a
tender offer statement dated May 23, 2000 to purchase all outstanding shares of
Class A Common Stock and Class B Common Stock (collectively, the "Shares") at a
price of $7.00 per Share. The address of the Offeror as set forth in a Schedule
TO dated May 23, 2000 (the "Schedule TO") filed by the Offeror is 2200 South
75th Avenue, Phoenix, Arizona 85043.
Item 3. Past Contacts, Transactions, Negotiations and Agreements.
(a) Conflicts of Interest. As of May 23, 2000, Richard D. Simon,
Chairman of the Board and Chief Executive Officer of the Company, owned 10,000
shares of Class A Common Stock and 913,751 shares of Class B Common Stock. The
Shares owned by Mr. Simon represent approximately 26.2% of the aggregate voting
power of the Company. Among other conditions, the Offer is expressly conditioned
upon the valid tender prior to the expiration of the Offer of (i) at least a
majority of the total voting power of the outstanding Shares and (ii) at least
450,000 shares of Class B Common Stock owned, directly or indirectly, by Mr.
Simon. Mr. Simon has indicated that he does not intend to sell any Shares in
response to the Offer.
In addition, as of May 23, 2000, other executive officers and
directors of the Company owned, in the aggregate, 357,895 shares of Class A
Common Stock, representing approximately 5.1% of the aggregate voting power of
the Company. Each such executive officer and director of the Company has
indicated that he or she does not intend to sell any shares of Class A Common
Stock in response to the Offer.
(b) Agreements, Arrangements or Understandings with the Offeror.
Since approximately August 1999, the Company has been aware of the Offeror's
desire to acquire additional Shares. During that period, the Company, the
Offeror and Richard D. Simon, the Company's Chairman and Chief Executive
Officer, have discussed alternate arrangements whereby the Offeror might acquire
some or all of the Shares. The following paragraphs summarize the development of
those discussions.
On October 29, 1999, the Offeror submitted to Mr. Simon an offer to
acquire all of the Shares then owned by Mr. Simon and other executive officers
and directors of the Company at a price of $7.00 per Share. Following their
review of the offer, Mr. Simon and the other executive officers and directors of
the Company declined the offer.
On November 29, 1999, the Offeror submitted to the Company's Board of
Directors (the "Board") a proposal to acquire 3,575,000 Shares at a price of
$6.80 per Share. The proposal was subject to a number of conditions, including
the agreement of Mr. Simon to sell up to 750,000 shares of Class B Common Stock,
execution of employment and non-competition agreements by certain executive
officers of the Company and the Company's execution of a tender agreement
providing, among other things, for the waiver of applicable anti-takeover
protections and the resignation of the members of the Board other than Richard
D. Simon. Following an extensive review of the Offeror's proposal, as well as
the operations and financial condition of the Company, the Board rejected the
proposal. The Board's decision was announced in a press release dated December
7, 1999.
During the remainder of 1999 and the first several months of 2000,
the Offeror pursued further discussions regarding a possible transaction. On
March 6, 2000, the Offeror submitted to the Board a proposal to acquire all of
the Shares at a price of $7.00 per Share. The proposal was conditioned upon the
agreement of Mr. Simon to sell to the Offeror all of his shares of Class B
Common Stock or convert his shares of Class B Common Stock into shares of Class
A Common Stock, the appointment of the Offeror's nominees to the Board,
resignation of the current members of the Board and certain other conditions.
Following a thorough review of the proposal, together with a review of the
Company's operating and financial position, and in consultation with the
Company's financial and legal advisors, the Board concluded that it needed
additional information in order to evaluate the proposal. On March 15, 2000, the
Company notified the Offeror that it intended to gather and review additional
information, including an independent valuation of the Company, before
responding to the proposal. The Company also invited the Offeror to join the
Board and work together with existing management to build the Company. The
Offeror declined the invitation.
On April 18, 2000, the Board met to review the pending proposal,
review the additional information gathered by the Company, including an
independent business valuation prepared by Houlihan Valuation Advisors
("Houlihan") and evaluate the Company's financial and operating position. At the
Board's invitation, the Offeror and his counsel attended the meeting for the
purpose of delivering a presentation regarding the pending proposal and
responding to questions from the Board. Following an extensive review of the
proposal, the Offeror's presentation, the Company's financial and operating
information, the Houlihan valuation and a number of other factors considered
relevant by the Board, the Board concluded that, although it could not recommend
the proposal to the Company's shareholders, it would not take action to prevent
the Company's shareholders from considering the proposal. On April 19, 2000, the
Company notified the Offeror that it would not stand in the way of the Offeror's
efforts to conduct a tender offer for all of the Shares and would be willing to
waive applicable anti-takeover statutes in order to enable the Offeror to pursue
his interest in acquiring additional Shares. The Company also informed the
Offeror that Richard D. Simon and other members of the Board and management
would not sell any Shares in response to a tender offer and again invited the
Offeror to join the Board. The Offeror again declined the invitation.
Over the next several weeks, the Company and the Offeror pursued
further discussions regarding the proposal, as well as the Offeror's request
that the existing members of the Board agree to resign upon the completion of
the prospective tender offer. The Offeror also pursued further discussions with
Richard D. Simon regarding Mr. Simon's rejection of the Offeror's proposal to
purchase Mr. Simon's Shares. In the course of those discussions, in a meeting
between the Offeror, Mr. Simon and the executive officers of the Company on May
3, 2000, the Offeror encouraged Mr. Simon and the Company to consider three
alternative arrangements: (i) Mr. Simon could convert his shares of Class B
Common Stock into shares of Class A Common Stock, thus eliminating the
super-voting rights associated with the Class B Common Stock; (ii) Mr. Simon
could agree to sell at least one-half of his Shares, thus facilitating the
proposed offer; or (iii) the Company could repurchase the Offeror's shares at
$8.00 per Share. Mr. Simon and the Company rejected all three alternatives
advanced by the Offeror.
On May 5, 2000, the Board adopted resolutions approving the Offeror
as an "interested stockholder" and waiving for a period expiring on August 31,
2000 the applicable anti-takeover and business combination statutes with respect
to the Offeror's proposal. The Board's action was taken subject to the
occurrence of the following three conditions prior to August 31, 2000: (i) the
Offeror and his affiliates would offer to purchase shares of the Class A Common
Stock at a price of $7.00 per share; (ii) the tender would be completed and
shares of Class A Common Stock would be purchased in accordance with the terms
of the tender; and (iii) the Offeror and his affiliates would acquire shares of
Class A Common Stock representing in excess of 50% of the aggregate voting power
of the Company. The Board's resolutions were delivered to the Offeror on May 8,
2000. Subsequently, on May 22, 2000, in response to Offeror's request, the
Company provided to the Offeror certain shareholder information as contemplated
by Rule 14d-5 of the Securities Exchange Act of 1934, as amended.
(c) Agreements with Executive Officers, Directors and Affiliates of
the Company. Certain contracts, agreements, arrangements and understandings
between the Company and certain of its executive officers, directors or
affiliates are described in the sections entitled "Election of Directors -
Meetings and Compensation" and "Certain Transactions" of the Company's Proxy
Statement dated January 6, 2000 relating to its Annual Meeting of Shareholders
held on February 4, 2000 (the "Proxy Statement"). Such sections of the Proxy
Statement are incorporated herein by reference.
In addition, pursuant to the Company's Stock Incentive Plan, (the
"Plan"), the vesting of awards under the Plan may be accelerated upon the
occurrence of an "Acquisition." For purposes of the Plan, an "Acquisition" is
deemed to occur if any person acquires, other than by merger or consolidation or
purchase from the Company, the beneficial ownership of shares of the Company's
stock which, when added to any other shares held by the acquirer, represent more
than 50% of the votes that are entitled to be cast at meetings of stockholders.
As of May 24, 2000, the following executive officers and directors of the
Company held options to acquire the following shares of Class A Common Stock
under the Plan:
Officer/Director Exercisable Options Unexercisable Options
Kelle A. Simon 69,200 55,800
A. Lyn Simon 69,200 55,800
Richard D. Simon, Jr. 69,200 55,800
Sherry S. Bokovoy 69,200 55,800
Alban B. Lang 69,200 55,800
Gus Paulos 0 1,000
Don Skaggs 0 1,000
Irene Warr 3,000 1,000
Total 349,000 282,000
The foregoing description of the Plan does not purport to be complete
and is qualified in its entirety by reference to the pertinent portions of the
Plan, which is filed as Exhibit (e)(1) herewith, and is incorporated herein by
reference.
To the knowledge of the Company, there are no other material
contracts, agreements, arrangements or understandings or any actual or potential
conflicts of interest between the Company and its affiliates on the one hand and
(i) the Company's executive officers, directors or affiliates or (ii) the
Offeror and his affiliates on the other hand.
Item 4. The Solicitation or Recommendation.
(a) No Recommendation by the Board of Directors. As described in Item
3 above, at a special meeting of the Board held on April 18, 2000, the Board
considered carefully the Company's business, financial condition and prospects,
the general terms and conditions of the Offer (as then described to the Board by
the Offeror) and other matters, including presentations by the Company's
management, the Offeror and the Company's financial and legal advisors. For the
reasons described below, the Board unanimously concluded that it would not make
any recommendation with respect to the Offer. The Board has declined to express
any opinion with respect to the Offer and has elected to remain neutral toward
the Offer.
(b) Reasons for No Recommendation.
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In reaching its determination that it would not make any
recommendations with respect to the Offer, the Board considered each of the
factors listed below and concluded that there are competing arguments with
respect to the Offer. Although the Board could not conclude that the Offer was
in the best interests of the Company's shareholders, the Board concluded that it
would take no position to prevent shareholders from considering the Offer.
1. Improving Financial Performance. The Board reviewed the Company's
financial performance for the second quarter of the 2000 fiscal year.
Preliminary information indicated that the Company would report a profit for the
quarter (which was subsequently confirmed and reported publicly). Additionally,
the Company anticipated that the remaining debt on its facilities would be
repaid by August 2000 and would significantly improve the Company's cash flow
position. The Company's financial ratios were improving and the market price for
the Class A Common Stock had increased. The Board noted that the book value of
the Company as of March 31, 2000 was $9.15 per share, and that the Offer of
$7.00 per share represented a discount of 23.5% from book value. The Board also
noted that the Company's management was pursuing rate increases and had received
positive feedback from its customers. Overall, the Board concluded that the
Company's financial position was improving and was optimistic that the
improvement would continue in coming quarters.
2. Improved Operations. The Board reviewed the improving operating
performance of the Company, as evidenced by improving operating ratios,
increased haul lengths, decreased numbers of unseated trucks, increased driver
retention, increased mileage on seated trucks and the negotiation of
advantageous equipment contracts. Based on its review of the Company's
operations, the Board expressed optimism that management of the Company was
turning around the Company's operational performance. The Board concluded that
the improving operating performance was likely to continue and could result in
further improvement in the market price of the Class A Common Stock.
3. Houlihan Valuation. Houlihan reported to the Board that, following
an extensive review of the Company's business, financial position and industry,
it had concluded that the price offered by the Offeror might be within an
acceptable range of valuation for the Company's shares, but that its review did
not take into account the recently improved performance of the Company, which
could argue for a higher valuation. Houlihan also advised the Board that the
Company was under no financial pressure to sell, that the $7.00 price offered by
the Offeror represented a 23.5% discount to book value, that the Company
appeared to be turning around its operations and that it might be in the best
interests of the Company's shareholders to defer discussions regarding the Offer
until the Company realized the benefit of its improving performance.
4. Advice of Morgan Keegan. The Board reviewed information prepared
by Morgan Keegan & Company, Inc. ("Morgan Keegan"), the Company's financial
advisor, which reflected the Company's troubled financial performance for eight
consecutive quarters. Morgan Keegan also provided to the Board its high opinion
of the management skills of the Offeror and its opinion that the Company could
succeed under the direction of the Offeror. The Company also referred to
materials provided by Morgan Keegan in connection with the March 2000 Board
meeting, in which Morgan Keegan concluded that the $7.00 price could be
considered acceptable in light of the Company's historical performance, although
the estimated price range was viewed by the Board as very broad.
5. The Offeror's Presentation. The Offeror outlined for the Board his
belief that, if he were permitted to acquire additional shares of the Company's
stock and control the Board, he could be instrumental in significantly improving
the Company's performance. The Board discussed at length the Offeror's
presentation, recognized that he is highly regarded in the trucking industry and
financial community and reviewed the success that he has achieved in his
management of Swift Transportation Co. Inc. The Board also reviewed information
provided by the Offeror indicating that the proposed offer of $7.00 per Share
was generally consistent with other pending transactions in the trucking
industry.
6. Shareholder Input. The Board considered various conversations with
significant shareholders of the Company, including Richard D. Simon. Mr. Simon
indicated that he was not willing to sell his Shares at a price of $7.00 per
Share, nor was he willing to convert his shares of Class B Common Stock into
shares of Class A Common Stock. The Board also considered reports from other
significant shareholders who were aware of the Company's continuing discussions
with the Offeror. The reports indicated that the Company's shareholders had
mixed opinions regarding the prospect of a tender offer, particularly given the
Company's improving financial and operating performance. Several shareholders
had expressed their confidence in the Company's management and had suggested
that the Company extend an offer to the Offeror to join the Board instead of
pursuing a tender offer.
Based upon an extensive review of the factors described above, the
Board unanimously agreed that there are arguments for and against the Offer. The
Board observed that the financial and operating performance of the Company had
improved significantly. It also recognized the skill and experience of the
Offeror and concluded that he could be a valuable asset to the Company if he
could be persuaded to join the Board and work with it to enhance the Company's
growth. The Board also observed that the proposed price of $7.00 per share was
within a broad range of acceptable values, but expressed concern that the
improved performance of the Company might justify a higher price. Ultimately,
the Board concluded that it would take no position with respect to the Offer,
but would waive the applicable anti-takeover statutes in order to permit the
Company's shareholders to consider the Offer for themselves. In addition, the
Board again extended an invitation to the Offeror to join the Board. The Board
noted that the Offeror and his group had always endorsed the present management
team by joining other shareholders who have overwhelmingly elected the present
Board at all annual meetings of shareholders since the Company went public. The
Offeror again rejected the offer to join the Board of Directors.
A letter to the shareholders of the Company dated May 26, 2000
communicating the Board's position with respect to the Offer is filed herewith
as Exhibit (a)(2) and is incorporated herein by reference.
Item 5. Person/Assets, Retained, Employed, Compensated or Used.
From time to time during the Company's discussions with the Offeror,
the Company has consulted with Morgan Keegan, who has acted as the Company's
financial adviser since the Company's initial public offering in November 1995.
Since April, 2000, the Company has not consulted with Morgan Keegan with respect
to the Offer. The Company has not requested that Morgan Keegan provide to the
Company a fairness opinion regarding the Offer.
The Company has entered into an engagement letter with Houlihan,
whereby the Company engaged Houlihan to prepare a valuation analysis of the
Company in connection with the Board's review of the Offer. Pursuant to the
engagement letter, the Company has paid to Houlihan $8,000 in exchange for the
preparation of the valuation. The Company has not requested that Houlihan
provide a fairness opinion with respect to the Offer.
Item 6. Interest in Securities of the Subject Company.
(a) During the past 60 days, no transactions in the Shares have been
effected by the Company or, to the best of the Company's knowledge, by any of
its executive officers, directors, affiliates or subsidiaries.
Item 7. Purposes of the Transaction and Plans or Proposals.
(a) Except as set forth in this Schedule 14D-9, the Company is not
engaged in any negotiation in response to the Offer that relates to or would
result in (i) an extraordinary transaction, such as a merger, reorganization or
liquidation, involving the Company or any subsidiary of the Company, (ii) a
purchase, sale or transfer of a material amount of assets by the Company or any
subsidiary of the Company, (iii) a tender offer for or other acquisition of
securities by or of the Company or (iv) any material change in the present
dividend policy or indebtedness or capitalization of the Company
(b) Except as described in Item 3 above (the provisions of which are
hereby incorporated by reference), there are no transactions, Board of Directors
resolutions, agreements in principle or signed contracts in response to the
Offer that relate to or would result in one or more of the events referred to in
Item 7(a) above.
Item 8. Additional Information.
(a) Because the Company is incorporated in the State of Nevada, the
provisions of Section 78.411 et seq. ("Combinations with Interested
Stockholders") and Section 78.378 ("Acquisition of Controlling Interest") of the
Nevada Revised Statutes (the "Nevada Law") by their terms apply to the Company.
The following paragraphs provide a summary description of these provisions.
Section 78.411 et seq. of the Nevada Law (the "Combination with
Interested Stockholders Statute") prevents an "interested stockholder" and an
applicable Nevada corporation from entering into a "combination," unless certain
conditions are met. A "combination" includes, among other transactions, any
merger or consolidation with an "interested stockholder," or any sale, lease,
exchange, mortgage, pledge, transfer, or other disposition, in one transaction
or a series of transactions, with an "interested stockholder" having: (i) an
aggregate market value equal to 5% or more of the aggregate market value of the
assets of a corporation; (ii) an aggregate market value equal to 5% or more of
the aggregate market value of all outstanding shares of a corporation; or (iii)
representing 10% or more of the earning power or net income of the corporation.
An "interested stockholder" means the beneficial owner of 10% or more of the
voting shares of a corporation, or an affiliate or associate of a corporation. A
corporation may not engage in a "combination" within three years after the
interested stockholder acquired his shares unless the combination or purchase is
approved by the board of directors before the interested stockholder acquired
such shares. After the expiration of the three-year period, the business
combination may be consummated by the approval of the board of directors before
the interested stockholder's date of acquiring shares, or by the approval of a
majority of the voting power held by the corporation's disinterested
stockholders, or if the consideration to be paid by the interested stockholder
is at least equal to the highest of: (i) the highest price per share paid by the
interested stockholder within the three years immediately preceding the date of
the announcement of the combination or in, or within three (3) years immediately
before, the transaction in which he became an interested stockholder, whichever
is higher (as adjusted for interest and dividends); (ii) the market value per
common share on the date of announcement of the combination or the date the
interested stockholder acquired the shares, whichever is higher (as adjusted for
interest and dividends); or (iii) in the case of consideration to be paid for
shares of preferred stock, the highest liquidation value per share for the
shares of preferred stock.
Section 78.378 et seq. of the Nevada Law (the "Acquisition of
Controlling Interest Statute") prohibits an acquiror, under certain
circumstances, from voting shares of a target corporation's stock after crossing
certain threshold ownership percentages, unless the acquiror obtains the
approval of the target corporation's disinterested stockholders. The Acquisition
of Controlling Interest Statute specifies three thresholds: one-fifth or more
but less than one-third, one-third or more but less than a majority, and a
majority or more, of the outstanding voting power. Once an acquiror crosses one
of the above thresholds in an offer or acquisition, those shares acquired within
90 days immediately preceding his becoming an Acquiring Person, and those shares
acquired or offered to be acquired in such offer or transaction, become "Control
Shares." The Acquiring Person is prohibited from voting the Control Shares until
disinterested stockholders restore the right. The Acquisition of Controlling
Interest Statute also provides that in the event Control Shares are accorded
full voting rights and the Acquiring Person has acquired a majority or more of
all voting power, all other stockholders who do not vote in favor of authorizing
voting rights to the Control Shares are entitled to demand payment for the fair
value of their shares. The board of directors is to notify the dissenting
stockholders as soon as practicable after such an event has occurred that they
have the right to receive the fair value of their shares. This statute is
applicable only to Nevada corporations doing business in the state and that have
at least 200 stockholders, at least 100 of whom are stockholders of record and
residents of Nevada.
In its May 5, 2000 resolutions, the Board waived the application of
the anti-takeover provisions of the Nevada Law to the Offer for a period
expiring on August 31, 2000, subject to the conditions described above.
Item 9. Exhibits.
(a)(2) Form of Letter to Shareholders dated May 26, 2000
(a)(5) Press Release dated May 23, 2000
(e)(1) Stock Incentive Plan (incorporated by reference to Exhibit
10.3 to the Company's Registration Statement on Form S-1 dated November 17,
1995.
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
By: /s/ Richard D. Simon
Title: Chairman and Chief Executive Officer
Date: May 26, 2000