Tender-Offer Statement — Third-Party Tender Offer — Schedule 14D-1
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SC 14D1 Borden Acquisition Corp. 6 48K
2: EX-11.(A)(1) Statement re: Computation of Earnings Per Share 133 731K
3: EX-11.(A)(2) Statement re: Computation of Earnings Per Share 14 69K
4: EX-11.(A)(3) Statement re: Computation of Earnings Per Share 2 20K
5: EX-11.(A)(4) Statement re: Computation of Earnings Per Share 3 24K
6: EX-11.(A)(5) Statement re: Computation of Earnings Per Share 3 23K
7: EX-11.(A)(6) Statement re: Computation of Earnings Per Share 5± 22K
8: EX-11.(A)(7) Statement re: Computation of Earnings Per Share 5 35K
9: EX-11.(A)(8) Statement re: Computation of Earnings Per Share 2 16K
10: EX-11.(C)(1) Statement re: Computation of Earnings Per Share 124 273K
11: EX-11.(C)(2) Statement re: Computation of Earnings Per Share 18 70K
12: EX-11.(C)(3) Statement re: Computation of Earnings Per Share 2 17K
13: EX-11.(C)(4) Statement re: Computation of Earnings Per Share 34 71K
14: EX-11.(G)(1) Statement re: Computation of Earnings Per Share 10 32K
23: EX-11.(G)(10) Statement re: Computation of Earnings Per Share 4 23K
24: EX-11.(G)(11) Statement re: Computation of Earnings Per Share 13 35K
25: EX-11.(G)(12) Statement re: Computation of Earnings Per Share 13 33K
26: EX-11.(G)(13) Statement re: Computation of Earnings Per Share 18 47K
27: EX-11.(G)(14) Statement re: Computation of Earnings Per Share 12 35K
28: EX-11.(G)(15) Statement re: Computation of Earnings Per Share 18 49K
29: EX-11.(G)(16) Statement re: Computation of Earnings Per Share 12 36K
30: EX-11.(G)(17) Statement re: Computation of Earnings Per Share 12 32K
31: EX-11.(G)(18) Statement re: Computation of Earnings Per Share 11 30K
32: EX-11.(G)(19) Statement re: Computation of Earnings Per Share 12 32K
15: EX-11.(G)(2) Statement re: Computation of Earnings Per Share 10 32K
33: EX-11.(G)(20) Statement re: Computation of Earnings Per Share 18 49K
34: EX-11.(G)(21) Statement re: Computation of Earnings Per Share 9 27K
35: EX-11.(G)(22) Statement re: Computation of Earnings Per Share 9 32K
16: EX-11.(G)(3) Statement re: Computation of Earnings Per Share 10 32K
17: EX-11.(G)(4) Statement re: Computation of Earnings Per Share 10 32K
18: EX-11.(G)(5) Statement re: Computation of Earnings Per Share 10 32K
19: EX-11.(G)(6) Statement re: Computation of Earnings Per Share 10 32K
20: EX-11.(G)(7) Statement re: Computation of Earnings Per Share 10 32K
21: EX-11.(G)(8) Statement re: Computation of Earnings Per Share 11 32K
22: EX-11.(G)(9) Statement re: Computation of Earnings Per Share 9 31K
EX-11.(G)(15) — Statement re: Computation of Earnings Per Share
Exhibit Table of Contents
EXHIBIT 11(g)(15)
WILENTS, GOLDMAN & SPITZER
Warren W. Wilentz, Esq.
Georgia Haglund, Esq.
90 Woodbridge Center Drive
Woodbridge, NJ 07095
Tel. (908) 636-8000
Attorneys for Plaintiffs
(Additional attorneys on signature page)
-------------------------------)
ROBERT STROUGO, THOMAS TASSONE,) SUPERIOR COURT OF NEW JERSEY
MOISE KATZ, CHARLES MILLER and ) CHANCERY DIVISION
WILLIAM STEINER on behalf of ) _______COUNTY
themselves and all others ) DOCKET No. _________
similarly situated, )
)
Plaintiffs, ) CLASS ACTION COMPLAINT
) ----------------------
-against- ) JURY TRIAL DEMANDED
)
BORDEN, INC., FREDERICK E. )
HENNIG, WILBERT J. LEMELLE, )
ROBERT P. LUCIANO, H. BARCLAY )
MORLEY, JOHN E. SEXTON, ERVIN )
R. SHAMES, PATRICIA CARRY )
STEWART, and FRANK J. TASCO )
)
Defendants. )
_______________________________)
Plaintiffs, by their attorneys, allege upon personal knowledge as to
themselves and their own acts, and upon information and belief based, in part,
upon the investigation conducted by counsel which included, among other things,
a review of the public financial filings of Borden, Inc. ("Borden") with the
Securities and Exchange Commission ("SEC"), news releases, and other publicly
published materials as follows:
SUMMARY OF THE ACTION
---------------------
1. Plaintiffs bring this action, pursuant to R 4:32 of the New Jersey
Rules Governing Civil Practice, individually and on
behalf of a class of persons, other than defendants and persons in privity with
them, who own the common stock of Borden, Inc. ("Borden" or the "Company"), to
enjoin defendants from breaching their fiduciary duties in connection with the
proposed sale of Borden to Kohlberg Kravis Roberts & Co. ("KKR") and RJR Nabisco
Inc. ("RJR") in exchange for shares of the common stock of RJR at a value of
$14.25 worth of RJR stock for every one share of Borden (the "Transaction" or
"Offer"). Plaintiff alleges that, in light of the facts set forth below,
Borden's Board of Directors (the "Board"), all of whom have been named as
defendants in this action ("Individual Defendants", defined below), have
breached and are continuing to breach their fiduciary duties to the stockholders
of Borden which require defendants to take all reasonable steps to assure the
maximization of stockholder value.
PARTIES
-------
2. Plaintiffs Robert Strougo, Thomas Tassone, Moise Katz, Charles Miller
and William Steiner are and were at all relevant times shareholders of defendant
Borden.
3. Borden is a corporation duly organized and existing under the laws of
the State of New Jersey, with its principal place of business located at 180
East Broad Street, Columbus, OH 43215. Borden is primarily engaged in the
production and sale of various processed foods including, among other things,
dairy and pasta products.
4. Defendant Frederick E. Hennig ("Hennig") has been a Director since
1990. He is a member of the Committee on Officers'
2
Compensation and of the Executive, Audit and Nominating Committees of the Borden
Board of Directors. The Audit Committee met three times in 1993. The Executive
Committee did not meet in 1993. The Nominating Committee, created in November
1993, met in February 1994 to review and propose nominees for election as
directors. The Committee on Officers' Compensation met seven times in 1993.
5. Defendant Wilbert J. Lemelle ("Lemelle") has been a Director since
1987. He is Chairman of the Audit Committee and a member of the Executive and
Nominating Committees and of the Committee on Officers' Compensation of the
Borden Board.
6. Defendant Robert P. Luciano ("Luciano") has been a Director since
1989. He is Chairman of the Nominating Committee and a member of the Audit and
Executive Committees and of the Committee on Officers' Compensation of the
Borden Board.
7. Defendant H. Barclay Morley ("Morley") has been a Director since 1992.
He is Chairman of the Committee on Officers' Compensation and a member of the
Executive, Nominating and Pension Committees of the Borden Board. The Pension
Committee met three times in 1993.
8. Defendant John E. Sexton ("Sexton") was elected to the Board in 1994.
9. Defendant Ervin R. Shames ("Shames") has been Chief Executive Officer
and a Director since 1993. He is a member of the Executive and Pension
committees of the Borden Board.
10. Defendant Patricia Carry Stewart ("Stewart") has been a Director since
1976. She is Chair of the Pension Committee
3
and a member of the Executive, Audit and Nominating Committees of the Borden
Board.
11. Defendant Frank J. Tasco has been a Director since 1988 and the
Chairman of the Board since December 9, 1993. He is Chairman of the Executive
Committee and a member of the Pension Committee of the Borden Board. In
addition to his compensation as a Director, he is to be paid $100,000 per
quarter to serve as Chairman of the Board.
12. The individuals named in paragraphs 4 through 11 are hereinafter
referred to as the "Individual Defendants." Each Director who is not currently
an employee of the Company is paid a retainer of $28,000 per annum and a per
meeting fee of $1,000 for each meeting of the Board or of any Committee thereof.
In addition, non-employee Committee Chairmen are paid an additional annual
retainer of $1,000.
13. By reason of their positions and because of their ability to control
the business and corporate affairs of Borden at all relevant times, the
Individual Defendants owed and owe Borden's shareholders fiduciary obligations
of fidelity, trust, loyalty, and due care, and were and are required to use
their utmost ability to control and supervise Borden in a fair, informed, just
and equitable manner and to act in furtherance of the best interests of Borden
and its shareholders.
4
CLASS ACTION ALLEGATIONS
------------------------
14. Plaintiffs bring this action on their own behalf and as a class
action, pursuant to R 4:32 of the New Jersey Rules Governing Civil Practice, on
behalf of all shareholders of Borden (except the defendants herein and any
person, firm, trust, corporation, or other entity related to or affiliated with
any of the defendants) who are or will be threatened with injury arising from
defendants' actions as more fully described herein (the "Class").
15. This action is properly maintainable as a class action.
16. The Class is so numerous that joinder of all members is impracticable.
As of June 30, 1994, Borden had approximately 141,424,181 shares of common stock
outstanding and approximately 41,000 shareholders of record, who are located
throughout the United States. Borden's common stock trades on the New York
Stock Exchange ("NYSE").
17. There are questions of law and fact common to the Class that
predominate over questions affecting only individual Class members. The common
questions include, inter alia, the following:
----- ----
(a) Whether the Individual Defendants have breached their fiduciary
duties owed by them to plaintiffs and to the other members of the Class;
(b) Whether the conduct of the Individual Defendants has prevented
and is preventing plaintiffs and the Class from
5
receiving the maximum value per share that could be received in a corporate
transaction free from the restraints imposed by the Individual Defendants; and
(c) Whether plaintiffs and the other members of the class will suffer
irreparable harm if the wrongful acts alleged in this complaint are not
enjoined.
18. Plaintiffs are committed to prosecuting this action and have retained
competent counsel experienced in shareholder litigation of this nature.
Plaintiffs' claims are typical of the claims of other members of the Class and
plaintiffs have the same interests as the other members of the Class.
Plaintiffs and their counsel will fairly and adequately represent the interests
of the Class.
19. Plaintiffs do not anticipate any unusual difficulties in the
management of this action as a class action.
20. A class action is superior to other available methods for the fair and
efficient adjudication of the controversy.
CLAIM FOR RELIEF
----------------
21. In the very recent past, Borden, a well known manufacturer of dairy
and other food products, has experienced a significant decline in its
profitability. Borden's recent difficulties have been tied to several primary
factors, including, mismanagement, the incurrence of excessive debt to finance
numerous acquisitions, and several recent restructurings.
22. Over the past several years, Borden, under the stewardship of its
former chief executives, Romeo J. Ventres
6
("Ventres") and Anthony S. D'Amato ("D'Amato"), has suffered an abysmal decline
in its financial performace. In fact, the Company's proxy statement dated April
8, 1994 (the "1994 Proxy") includes a comparison of Borden's performance, as
measured by cumulative total shareholder return on its common stock, with the
S&P 500 and the S&P Food and Chemical Indexes that highlights Borden's decline:
------------------------------------------------------
1991 1992 1993
------------------------------------------------------
Borden, Inc. 120.7 110.2 68.3
------------------------------------------------------
S&P 500 Stock Index 166.1 178.7 196.7
------------------------------------------------------
S&P Food Index 214.2 214.2 196.0
------------------------------------------------------
S&P Chemical 143.0 156.6 175.2
------------------------------------------------------
23. Thus, as indicated by the foregoing, while Borden has experienced
significant performance declines, the performance of market and companies in the
two primary industries in which Borden derives revenues and profits have
significantly improved. A large measure of Borden's dismal performance can be
traced to Messrs. Ventres' and D'Amato's ill fated campaign to acquire non-
synergistic companies without proper due diligence and without consideration of
the effect on Borden of incurring excessive debt to complete such acquisitions.
Between 1986 and 1991, the Company spent almost $2 billion on 91 different
acquisitions. As noted in a recent Wall Street Journal article:
Once prominent, Borden is seemingly invisible these days, with little
advertising and marketing and a hodgepodge of small products. Sales
and profits in every major division are declining. It has shed
thousands of
7
workers, slashed its dividend by 75% and, since 1989, taken $1.5 billion in
restructuring charges -- a huge sum for a company with $7.14 billion in
1992 sales. In the third quarter, the company posted its ninth consecutive
quarterly decline in operating earnings. Borden's stock, which peaked in
1991 at $38.75, closed [on January 17, 1994] at $15.
24. As detailed in the article, Borden reeled from acquisition to
acquisition, pressing senior managers to move quickly, often spending "as little
as two weeks conducting due diligence before agreeing to acquisitions",
according to one former Borden executive. As Han Kim, a twenty-year Borden
veteran notes, "we were hurriedly buying companies for the sake of buying
companies."
25. For example, in 1987, Borden acquired Laura Scudder's snack-food line
for $100 million; however, unbeknownst to Borden (due to inadequate due
diligence), Laura Scudder faced significant union difficulties which led to
Borden's closing of all Laura Scudder plants in California, roughly one year
after the acquisition.
26. In December of 1993, D'Amato, resigned his position with Borden and a
new management team led by Ervin R. Shames was brought in to re-energize the
Company, oversee a new restructuring plan and/or aid in the sale of the Company.
Although significant damage has already been visited on Borden, its many
franchise brand names and products, including the Bravo and Wise snack food
product lines and Borden dairy products continue to retain significant value.
In an effort to turn around Borden's dismal slide, new
8
management has taken substantial restructuring charges which have further driven
down Borden's stock price.
27. On or about August 30, 1994, Moody's Investors Service Inc.
("Moody's") lowered the long-term debt and commercial paper ratings of Borden to
Baa3 from Baa2 and to Prime-3 from Prime-2, respectively, and kept these ratings
on review for further possible downgrade. "The downgrade is based on Borden's
weaker than anticipated operating performance and the expectation that
bondholder protection measurements will remain weak....", according to Moody's.
28. Borden's stock, which traded as high as $29.125 in 1993 and at $19.875
only a year ago, has continued to sag in 1994, recently falling below $12 per
share to its nine year low.
29. Having taken significant restructuring charges, and terminated former
managers, Borden is now in a position to develop the full value of its many well
known brands and clearly has been trading at a discount that does not reflect
the full value of its assets. Indeed, as recently as September 13, 1994, the
Wall Street Journal reported that Borden's managers were still "hoping for time
-------------------
to turn around the company."
30. On September 12, 1994, prior to the NYSE opening, the Dow Jones
Newswire reported that Borden had agreed to a KKR offer to swap RJR stock owned
by KKR for all of Borden's outstanding common stock, valued at approximately
$14.25 per Borden share, a premium of 22.6% (Borden stock had closed at $11.625
on Friday, September 9, 1994). The exact number of RJR Nabisco shares
9
to be exchanged for each Borden share will be determined by dividing $14.25 by
the average of the high and low prices of RJR Nabisco stock for a 10-day trading
period to be established in the Offer, provided that in no event will Borden
stockholders receive greater than 2.375 RJR shares, nor less than 1.78125 RJR
shares for each Borden share.
31. In connection with its agreement with Borden, RJR has agreed in
principle that upon KKR's acquisition of 100% of Borden and subject to certain
other conditions, RJR will issue about $500 million of its newly issued common
shares for newly issued Borden shares priced at $14.25 each, representing a 20%
pro forma interest in Borden. RJR also will receive a warrant to purchase an
additional 10% interest in Borden as part of its investment.
32. KKR announced that Borden has agreed that at the time a definitive
merger agreement is entered into, Borden will grant KKR an option to purchase
from Borden up to 19.9% of the outstanding Borden common stock for $11 a share
payable in RJR Nabisco stock. If the option is exercised, KKR must purchase at
least 41% of the outstanding Borden common stock in the exchange offer if it
acquires any shares in the exchange offer. If KKR acquires at least 41%, but
less than 51% of Borden common stock in the exchange offer, the option must be
exercised by KKR, to the extent necessary for KKR to own at 51% of the
outstanding Borden common stock. KKR will not obtain any economic gain from the
option in the event any competing transaction consummated, but
10
would be paid certain amounts under the merger agreement in such circumstances.
33. Commenting on the proposed merger, the Dow Jones Newswire reported
Borden Chairman Tasco as stating:
We believe that, after a full consideration of all the risks and
opportunities confronting Borden today, this transaction is the best
outcome for Borden shareholders. The restructuring pursued since
-------------------------------
January has resulted in volume and share gains in many of Borden's
------------------------------------------------------------------
businesses. Moreover, the earnings trend is also improving, but it is
---------- ----------------------------------------------
clear that additional investment in our brands and in capital are
needed in order to capture the company's potential. Therefore, after
exploration of a full range of alternatives, the board has concluded
that KKR's proposal presents the best opportunity for Borden's
shareholders, customers and associates. (Emphasis added).
34. Thus, despite Borden's direct acknowledgement that the Company had
turned the corner and had begun to show positive signs of recovery as a result
of the change in management and the most recent restructuring, defendants are
attempting to sell the Company, at an unfair price in order to preserve their
management positions with the commensurate salary and perquisites enuring to
their benefit, while curtailing the right of Borden shareholders' to participate
in the long-awaited turnaround in the Company's fortunes. Contrary to Borden's
assertion that this is "the best outcome for shareholders", according to an
article in the September 13, 1994 New York Times, "most [analysts] agreed that
--------------
Borden was being bought at a fire-sale price." Moreover, the article continues,
"[a]lmost all Borden holders will be selling at a loss if this deal goes
through." Yet perhaps even worse, Borden shareholders will be receiving shares
of a company (RJR) that they
11
did not decide to purchase and one with significant problems and declining
value.
35. As of December, 1993, Borden has been seeking a buyer for the Company
or some form of capital infusion to fully realize its potential. Consequently,
the Board has fiduciary duties to shop the Company to the highest bidder and to
maximize shareholder value and may not blindly accept the first offer to come
along that would allow management to retain their positions with the Company.
36. The Individual Defendants' fiduciary obligations require them to:
(a) undertake an appropriate evaluation of alternatives designed to
maximize value for Borden's public stockholders; including separate sales of
Borden's dairy and/or other businesses;
(b) act independently, by, among other things, appointing a
disinterested committee so that the interests of Borden's public stockholders
would be protected, or alternatively, appointing a shareholder committee to
review all bona fide offers;
---- ----
(c) take all appropriate steps to enhance Borden's value and
attractiveness as a merger or acquisition candidate;
(d) cooperate with all persons having a bona fide interest in
---- ----
proposing any transaction that would maximize shareholder value;
12
(e) take all steps to create an active market for Borden in order to
maximize shareholder value in a free and unfettered auction; and
(g) adequately ensure that no conflicts of interest exist between the
Individual Defendants' own interests and their fiduciary obligation to the
public stockholders or, if such conflicts exist, to ensure that all such
conflicts are resolved in favor of Borden's public shareholders.
37. In failing to perform the acts set forth in paragraph 36, defendants
are not acting in good faith to the Class, and have breached and are breaching
their fiduciary duties to the Class.
38. Defendants, in violation of their fiduciary obligations, have failed
to act in a manner designed to maximize stockholder value Borden's public
stockholders.
39. The Offer by KKR will deny Class members the opportunity to share
proportionately in the true value of Borden's assets, profitable business, and
future growth in profits and earnings.
40. By reason of the foregoing acts, practices and course of conduct, the
Individual Defendants have been grossly negligent in the exercise of their
fiduciary obligations toward plaintiffs and the other Borden public
shareholders.
41. Unless enjoined by this Court, the Individual Defendants will continue
to breach their fiduciary duties owed to
13
plaintiffs and the other members of the Class, all to the irreparable harm of
the Class, as described above.
42. Plaintiffs and the other members of the Class have no adequate remedy
at law.
WHEREFORE, plaintiffs demand judgment, as follows:
(a) declaring this to be a proper class action with plaintiffs as the
representatives of the Class;
(b) declaring that the defendants and each of them have committed a gross
abuse of trust and have breached their fiduciary duties to plaintiffs and the
other members of the Class;
(c) directing the Individual Defendants to discharge their fiduciary
duties to plaintiffs and the other members of the Class by announcing their
intentions to:
(1) act independently on a fully informed basis in the best interests
of Borden's public shareholders;
(2) undertake an appropriate evaluation of alternatives designed to
maximize value for Borden's public stockholders; including separate sales of
Borden's dairy and/or other businesses;
(3) take all appropriate steps to enhance Borden's value and
attractiveness as a merger or acquisition candidate;
(4) cooperate with all persons having a bona fide interest in
---- ----
proposing any transaction that would maximize shareholder value;
(5) take all steps to create an active auction for Borden in order to
maximize shareholder value; and
14
(6) adequately ensure that no conflicts of interest exist between
defendants' own interests and their fiduciary obligation to maximize shareholder
value or, if such conflicts exist, to ensure that all such conflicts are
resolved in favor of Borden's public shareholders.
(c) preliminarily and permanently enjoining defendants and all persons
acting under, in concert with, or for them, from breaching their fiduciary
duties to plaintiff and the Class;
(d) ordering defendants to permit a stockholders' committee comprised of
Class members and their representatives to ensure a fair procedure, adequate
procedural safe-guards, and independent input by plaintiffs and the Class in
connection with any transaction for the assets and/or common stock of Borden;
(e) Awarding plaintiffs and the Class compensatory damages;
(f) awarding plaintiffs the costs and disbursements of the action,
including a reasonable allowance for attorneys' and experts' fees; and
15
(g) granting such other and further relief as may be just and proper in
the premises.
Dated: September 13, 1994
Respectfully submitted,
WILENTZ, GOLDMAN & SPITZER
By: _____________________________
Warren W. Wilentz, Esq.
Georgia Haglund, Esq.
90 Woodbridge Center Drive
Woodbridge, NJ 07095
(908) 636-8000
Liaison Counsel for Plaintiffs
OF COUNSEL:
WECHSLER SKIRNICK HARWOOD
KALEBIAN & FEFFER
Stuart D. Wechsler, Esq.
Andrew D. Friedman, Esq.
555 Madison Avenue
New York, NY 10022
Tel. (212) 935-7400
Attorneys for Robert Strougo
GARWIN, BRONSAPT, GERSTEIN
& FISHER
Scott W. Fisher, Esq.
Jerald M. Sterin, Esq.
1501 Broadway, Suite 1416
New York, NY 10036
Tel. (212) 398-0055
Fax: (212) 764-6620
Attorneys for Thomas Tassone
16
ARNOLD A. GERSHON, P.C.
Arnold A. Gershon, Esq.
295 Madison Avenue
Room 807
New York, New York 10017
(212) 684-3033
Attorney for Moise Katz
ELWOOD S. SIMON & ASSOCIATES, P.C.
Elwood S. Simon, Esq.
Bloomfield Center, Suite 315
1533 N. Woodward Avenue
Bloomfield Hills, Michigan 48304
(810) 646-9730
Attorneys for Charles Miller
LAW OFFICES OF ZACHARY A. STARR
Zachary A. Starr, Esq.
275 Madison Avenue
New York, New York 10016
(212) 808-5535
Attorneys for William Steiner
17
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RULE 4:5-1 CERTIFICATION
------------------------
I hereby certify that upon information and belief there may be other
actions now pending against Borden Inc. and the Individual Defendants for
similar relief. However, plaintiffs are not parties to any other actions.
Moreover, I am unaware of any arbitration proceeding and no such other action or
arbitration proceeding is contemplated by plaintiffs; and there are no other
parties who, to the best of my knowledge, should be joined in this action at
this time.
I hereby certify that the foregoing statements made by me are true. I am
aware that if any of the foregoing statements made by me are willfully false, I
am subject to punishment.
___________________________
GEORGIA HAGLUND, ESQ.
DATED: September 13, 1994
18
Dates Referenced Herein and Documents Incorporated by Reference
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