This
statement is filed in connection with (check the appropriate box):
a.
[X]
The filing of solicitation materials or an information statement subject to
Regulation 14A, Regulation 14C or Rule 13e-3(c) under the Securities Exchange
Act of 1934.
b.
[ ]
The filing of a registration statement under the Securities Act of 1933.
c.
[ ] A
tender offer.
d.
[ ]
None of the above.
Check
the
following box if the soliciting materials or information statement referred
to
in checking box (a) are preliminary copies: [X]
Check
the
following box if the filing is a final amendment reporting the results of the
transaction: [ ]
INTRODUCTION
This
Amendment No. 6 to Rule 13e-3 Transaction Statement (the "Statement") on
Schedule 13E-3 (the "Schedule 13E-3") is being filed by United Tennessee
Bankshares, Inc., a Tennessee corporation ("United Tennessee" or the "Company"),
United Tennessee Merger Corp., a Tennessee corporation and the Company's
wholly-owned subsidiary (the "Merger Corp."), Richard G. Harwood, J. William
Myers, Tommy C. Bible, William B. Henry, Ben W. Hooper, III, Robert L. Overholt
and Robert D. Self (collectively, the "Individuals"), who are the directors
and
executive officers of both the Company and Merger Corp., pursuant to Section
13(e) of the Securities Exchange Act of 1934, as amended, and Rule 13e-3
thereunder in connection with the Agreement and Plan of Merger dated as of
June17, 2005 (the "Merger Agreement"), by and between the Company and the Merger
Corp. A copy of the Merger Agreement is attached as Annex A to the amended
definitive proxy statement filed by the Company (the "Proxy Statement").
The
Company has filed with the Securities and Exchange Commission the definitive
Proxy Statement under Regulation 14A of the Securities Exchange Act of 1934,
as
amended (the "Exchange Act"), relating to the Annual Meeting of Shareholders
of
the Company at which the shareholders would have considered and voted upon
a proposal to approve and adopt the Merger Agreement. This meeting was scheduled
for November 10, 2005.
On
November 8, 2005,
shortly before the scheduled annual meeting, the Company received verbal
notification from its independent registered accounting firm, Pugh & Company
P.C., that the financial statements contained in its annual reports on Form
10-KSB for the year ended December 31, 2003 and 2004 and the quarterly reports
on Form 10-QSB for the quarters ended March 31, 2005 and June 30, 2005 must
be
restated to correct the recording of expense associated with the repurchase
of
its common stock from employees and directors for the affected periods.
The annual meeting was called to order on November 10, 2005 but was immediately
adjourned without any action being taken so that the Company could prepare
the
restated financial statements. The Company has now restated those financials
and
on December 6, 2005, filed the required amendments with the Securities and
Exchange Commission.
All
information contained in this Schedule 13E-3 concerning the Company and the
Merger Corp. has been supplied by the Company and all information concerning
the
Individuals has been supplied by the Individuals.
The
information contained in the Proxy Statement, including all annexes thereto,
is
hereby expressly incorporated herein by reference. As of the date hereof, the
Proxy Statement is in preliminary form and is subject to completion or
amendment. This Statement will be amended to reflect such completion or
amendment of the preliminary Proxy Statement. Capitalized terms used but not
defined herein shall have the meanings given to them in the Proxy Statement.
All
parenthetical references under the various Items contained in this Schedule
13E-3 are references to the corresponding Items contained in Regulation M-A
under the Exchange Act.
ITEM
1. SUMMARY TERM SHEET
The
information set forth in the Proxy Statement under "Summary Term Sheet Regarding
the Going Private Merger" is incorporated herein by reference.
ITEM
2. SUBJECT COMPANY INFORMATION.
(a). The
name of the subject company is United Tennessee Bankshares, Inc. The address
of
the principal executive offices of the Company is 170 W. Broadway,
Newport, Tennessee37821-0249. The Company is a registered bank
holding company.
(b). The
information set forth in the Proxy Statement under "NOTICE OF ANNUAL MEETING
OF
SHAREHOLDERS" and "Information About the Annual Meeting - Who
Can
Vote?" is incorporated herein by reference.
(a).-(b).
The information set forth in the Proxy Statement under "Directors and Executive
Officers of United Tennessee and Merger Corp." and "Determination of Fairness
by
Merger Corp. and the Directors and Officers of United Tennessee and Merger
Corp." is incorporated herein by reference.
(c).
The information set forth in the Proxy Statement under "Proposal 2 -- Election
of Directors" and "Directors and Executive Officers of United Tennessee and
Merger Corp." is incorporated herein by reference.
(d).
Not applicable.
ITEM
4. TERMS OF THE TRANSACTION.
(a).
The information set forth in the Proxy Statement under "Summary Term Sheet
Regarding the Going Private Merger"; "Background of the Going Private Merger
Proposal"; "Reasons for the Going Private Merger"; "Effects of the Going Private
Merger"; "Opinion of Financial Advisor"; "Material U.S. Federal Income Tax
Consequences of the Going Private Merger"; and "The Merger Agreement" is
incorporated herein by reference.
(b).
Not applicable.
(c).
The information set forth in the Proxy Statement under "Background of the Going
Private Merger Proposal"; "Reasons for the Going Private Merger"; "Effects
of
the Going Private Merger"; "Recommendation of the Board of Directors; Fairness
of the Going Private Merger Proposal"; and "The Merger Agreement" is
incorporated herein by reference.
(e).
No provision is being made in connection with the Going Private Merger to grant
unaffiliated shareholders access to the filing persons' files or to obtain
counsel or appraisal services at the expense of the filing persons.
(f). Not
applicable.
ITEM
5. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a).
Not applicable.
(b)-(c).
The information set forth in the Proxy Statement under "Background of the Going
Private Merger Proposal" and "Recommendation of the Board of Directors; Fairness
of the Going Private Merger Proposal" is incorporated herein by
reference.
(e).
The
information set forth in the Proxy Statement under "Stock Ownership of
United Tennessee" is incorporated herein by reference.
ITEM
6. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
(a).
The information set forth in the Proxy Statement under "Background of the Going
Private Merger Proposal"; "Reasons for the Going Private Merger";
"Recommendation of the Board of Directors; Fairness of the Going Private Merger
Proposal"; and "The Merger Agreement" is incorporated herein by
reference.
(b).
The information set forth in the Proxy Statement under "Effects of the Going
Private Merger"; "Conduct of United Tennessee's Business after the Going Private
Merger"; and "The Merger Agreement" is incorporated herein by
reference.
(c).
The information set forth in the Proxy Statement under "Background of the Going
Private Merger Proposal"; "Reasons for the Going Private Merger"; "Effects
of
the Going Private Merger"; "Recommendation of the Board of Directors; Fairness
of the Going Private Merger Proposal"; and "The Merger Agreement" is
incorporated herein by reference.
(d).
Not applicable.
ITEM
7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a).
The information set forth in the Proxy Statement under "Background of the Going
Private Merger Proposal"; "Reasons for the Going Private Merger"; "Effects
of
the Going Private Merger"; "Recommendation of the Board of Directors; Fairness
of the Going Private Merger Proposal"; and "The Merger Agreement" is
incorporated herein by reference.
(b).-(c).The
information set forth in the Proxy Statement under "Background of the Going
Private Merger Proposal"; "Reasons for the Going Private Merger"; and
"Recommendation of the Board of Directors; Fairness of the Going Private Merger
Proposal" is incorporated herein by reference.
(d). The
information set forth in the Proxy Statement under "Effects of the Going Private
Merger" and "Material U.S. Federal Income Tax Consequences of the Going Private
Merger" is incorporated herein by reference.
ITEM
8. FAIRNESS OF THE TRANSACTION.
(a)-(e).
The information set forth in the Proxy Statement under "Background of the Going
Private Merger Proposal"; "Reasons for the Going Private Merger";
"Recommendation of the Board of Directors; Fairness of the Going Private Merger
Proposal"; "Determination of Fairness by Merger Corp. and the Directors and
Officers of United Tennessee and Merger Corp."; "Per Share Market Price"; and
"Opinion of Financial Advisor" is incorporated herein by reference.
(f). Not
applicable.
ITEM
9. REPORTS, OPINIONS, APPRAISALS, AND CERTAIN NEGOTIATIONS
(a)-(b).
The information set forth in the Proxy Statement under "Background of the Going
Private Merger Proposal"; "Recommendation of the Board of Directors; Fairness
of
the Going Private Merger Proposal"; and "Opinion of Financial Advisor" is
incorporated herein by reference.
(c). The
Opinion
of Financial Advisor, attached as Annex B to the Proxy Statement is incorporated
herein by reference. The report of Howe Barnes Investments, Inc. dated December7, 2005 is filed herewith as an exhibit.
ITEM
10. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION.
(a)-(b).
The information set forth in the Proxy Statement under "Source and Amount of
Funds for the Going Private Merger" is incorporated herein by reference. No
alternative financing arrangements or plans have been made to finance the Going
Private Merger.
(c).
The information set forth in the Proxy Statement under "Fees and Expenses of
the
Going Private Merger" is incorporated herein by reference.
(d).
Not applicable.
ITEM
11. INTERESTS IN SECURITIES OF THE SUBJECT COMPANY.
(a).
The
information set forth in the Proxy Statement under "Per Share Market Price";
"Interests of Officers and Directors in the Going Private Merger"; and "Stock
Ownership of United Tennessee" is incorporated herein by reference.
(b).
Not
applicable.
ITEM
12.
THE SOLICITATION OR RECOMMENDATION.
(d)-(e).
The information set forth in the Proxy Statement under "Recommendation of the
Board of Directors; Fairness of the Going Private Merger Proposal" is
incorporated herein by reference.
ITEM
13. FINANCIAL STATEMENTS.
(a).
The financial statements, and the notes thereto, of United Tennessee set
forth
in United Tennessee's annual report on Form 10-KSB, as amended, for the year
ended December 31, 2004, filed with the SEC on December 6, 2005, and the
financial statements, and the notes thereto, of United Tennessee set forth
in
United Tennessee's quarterly report on Form 10-QSB for the quarter ended
September 30, 2005, filed with the SEC on November 21, 2005, are
incorporated herein by reference.
(b).
The information set forth in the Proxy Statement under "Summary Unaudited Pro
Forma Consolidated Financial Information"; "Selected Per Share Financial
Information"; "Effects of the Going Private Merger"; and "Index to Financial
Statements" is incorporated herein by reference.
(d)(1).
Agreement and Plan of Merger dated as of June 17, 2005 by and between the
Company and United Tennessee Merger Corp. (included as Annex A to the Company's
Proxy Statement filed as part of the Schedule 14A included as Exhibit (a)(1)
to
this Schedule 13E-3).*
(e)(1).
Form of Tax Opinion of Baker, Donelson, Bearman, Caldwell & Berkowitz, PC
(previously filed).
(f)(1).
Sections 48-21-101 through 48-23-302 of Tennessee Business Corporation Act
(included as Annex C to the Company's Proxy Statement filed as part of the
Schedule 14A included as Exhibit (a)(1) to this Schedule 13E-3).*
*Incorporated
by reference to the Company's Definitive Proxy Statement, on Schedule 14A,
as
filed with the Commission on October 7, 2005.
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.
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.
UNITED
TENNESSEE MERGER CORP.
/s/
Richard G. Harwood
President
and Chief Executive Officer
Dated: December16, 2005
Printed Name: Richard
G. Harwood
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.
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.
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.
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.
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.
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.
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.
To
establish
a range of fair value for the common stock of United Tennessee Bankshares,
Inc.
(“UTBI”), Howe Barnes Investments, Inc. (“HBI”) utilized three valuation
methodologies:
§
Comparison
to
market multiples of selected peer groups (“Comparable Company
Analysis”)
§
Dividend
discount analysis
§
Premium
to
market analysis
Ø
In
addition,
HBI reviewed the historic trading activity of UTBI’s common stock
Ø
HBI
reconciled the results of these analyses to establish a range of fair
values for
UTBI
4
Financial
Institution Indexed Market Performance
As
of the market close on 11/30/2005
Source:
SNL Financial, LC
46%
38%
38%
5
Small
Company Indexed Market Performance
As
of the market close on 11/30/2005
Source:
SNL Financial, LC
27%
65%
91%
6
UTBI
3-Year Price / Volume Analysis
As
of the market close on 11/30/2005
Source:
SNL Financial, LC
7
UTBI
Stock Trading – Twelve Months Prior to Announcement of Going Private
Transaction
(1)
Prior to announcement of going private transaction on 4/14/2005
Source:
SNL Financial, LC
8
Analysis
of Trading History Prior to Announcement of Going Private
Transaction
Source:
SNL Financial, LC
9
Selection
of Peer Groups
Ø
To
help
establish the range of fair value for the common stock of UTBI, HBI
reviewed the trading prices of the following peer groups:
§
All
publicly
traded thrifts nationwide as identified by SNL Financial,
LC
§
All
publicly
traded Southeast thrifts
§
All
publicly
traded thrifts nationwide with assets between $100 million and $200
million
§
All
publicly
traded thrifts nationwide with market capitalizations between $15 million
and
$35 million
§
All
publicly
traded thrifts nationwide with returns on average assets between 1.25%
and
1.75%
§
All
publicly
traded thrifts nationwide with returns on average equity between 8.0%
and
11.0%
§
All
publicly
traded thrifts nationwide with ratios of tangible equity / tangible assets
between 12% and 20%
Ø
The
following
pricing ratios for each peer group were reviewed:
§
Price
/ book
value
§
Price
/
tangible book value
§
Price
/
earnings – reported last twelve months
§
Price
/
earnings – core last twelve months
*Core
earnings
are net income minus after tax net non-operating income (assuming a 35%
marginal
tax rate)
10
Comparison
to Thrift Industry Median Ratios
Ø
UTBI
has more
capital and is more profitable than the median for all publicly traded U.S.
thrifts (“U.S. Thrifts”)
Ø
On
11/30/2005,
U.S. Thrifts were trading for a median of 132% of book value, 148% of
tangible book value, and approximately 17 times last twelve month’s
earnings
11
Comparison
to Southeast Thrifts
Ø
UTBI
is
smaller, has higher capital, and is more profitable than the median ratios
for Southeastern thrifts
Ø
Southeastern
thrifts tend to trade at price to book value ratios similar to U.S. Thrifts
and at higher price to earnings ratios than U.S. Thrifts
12
Comparison
to Nationwide Peer Groups based on Size
Ø
Smaller
thrifts tend to have higher levels of capital and lower profitability than
the typical publicly traded thrift
Ø
UTBI
has a
higher level of capital and is more profitable than these peer
groups
Ø
Smaller
thrifts typically trade at a discount to U.S. Thrifts in terms of price to
book value ratios
Ø
Smaller
thrifts typically trade at higher price to earnings ratios than U.S.
Thrifts
13
Comparison
to Nationwide Peer Groups based on Profitability
Ø
UTBI
is
smaller than these peer groups of thrifts with above average
profitability
Ø
UTBI
has a
much higher level of capital than the medians for these peer
groups
Ø
Thrifts
with
above average profitability tend to trade at higher price to book value
ratios but lower price to earnings multiples than U.S. Thrifts
14
Comparison
to Nationwide Peer Groups based on Capital Level
Ø
Highly
capitalized thrifts tend to be smaller in size than the average
thrift
Ø
UTBI
is much
more profitable than the peer group of overcapitalized thrifts
Ø
Thrifts
with
high levels of capital trade at lower price to book value ratios, but they
trade at above average price to earnings multiples
15
Observations
on Nationwide Peer Groups
Ø
The
data
clearly indicates that smaller thrifts tend to trade at lower price to
book
value ratios
Ø
Thrifts
with
above average profitability tend to trade at higher multiples of book
value, but
they trade at lower multiples of earnings
Ø
Thrifts
with
above average profitability are typically much larger than UTBI
Ø
The
data also
indicates that highly capitalized thrifts trade at lower price to book
value
ratios
Ø
We
believe
that the stocks of small, over-capitalized thrifts generally trade on
the basis
of book value rather than earnings
Ø
Small
thrifts
are generally perceived to have a high level of earnings volatility which
can
partially be attributed to interest rate risk
16
Guideline
Company Selection
Ø
We
reviewed
all thrifts identified as public companies by SNL Financial, LC and selected
a
group of thrift institutions that met the following criteria (the “Guideline
Companies”):
§
Total
assets
between $50 million and $500 million
§
Return
on
average equity for the last twelve months between 7.0% and 13.0%
§
Tangible
equity to tangible assets ratio greater than 8.0%
§
Non-performing
assets / total assets ratio less than 1.50%
Ø
We
excluded
companies that:
§
Were
mutual
holding companies
§
Did
not have
available pricing ratios
§
Were
targets
of merger transactions
§
Were
pursuing
a going private transaction
§
Were
traded
on the pink sheets
§
Were
in the
high-growth states of Florida, Texas or California
Ø
The
criteria
resulted in the selection of 9 Guideline Companies
17
Financial
Comparison to Guideline Companies
18
Pricing
Ratios for Guideline Companies
Source:
SNL Financial, LC
19
Observations
on Guideline Companies
Ø
The
Guideline
Companies consist of 9 thrifts which are smaller than the average actively
traded thrift but are more profitable
Ø
The
median
pricing ratios for these Guideline Companies on a price to book value
and price
to earnings basis are lower than national medians
20
Valuation
of UTBI Based on Guideline
Companies(1)
(1)
Pricing for UTBI implied by ratios of the 9 peers selected; Blue bars
represent
the inter-quartile range, medians boxed
$22.22
$22.21
$19.54
$19.96
3rd
Quartile
15.4x
16.7x
134%
148%
Median
13.3x
16.1x
118%
125%
1st
Quartile
12.7x
12.8x
108%
112%
21
Comparable
Company Analysis
Ø
In
comparison
to the typical publicly traded thrift, UTBI is smaller, more profitable
and has
a higher level of capital
Ø
The
nationwide peer groups and the Guideline Companies indicate that small
and
overcapitalized thrifts trade at below average price to book value
ratios
Ø
UTBI
had a
large securities gain in the last twelve months, so we focused more on
core
earnings when establishing our range of indicated value
Ø
Based
on a
review of the trading data for thrifts with similar financial characteristics,
HBI selected the following pricing ratios to apply to UTBI:
Range
implied by trading market analysis - $19.25 -
$23.25
22
Dividend
Discount Analysis
Ø
A
range of
fair value for a common stock can be determined based on the present
value of
the expected future dividends to be received
Ø
UTBI
provided
HBI with financial projections through 12/31/09
Ø
To
determine
the present value of future dividends beyond 12/31/09, assumptions were
made regarding an appropriate terminal multiple
23
Financial
Projections
Ø
The
management of UTBI provided HBI with the following financial
projections:
24
Dividend
Discount Analysis
Ø
HBI
discounted UTBI’s projected dividends for 2006 to 2009 to present value at
discount rates between 11% and 13%.
Ø
HBI
assumed that an appropriate terminal multiple for UTBI would be between
13x and
16x. HBI multiplied UTBI’s 2009 estimated earnings per share by the selected
terminal multiples and discounted this value using the same discount rate
selected for dividends.
Ø
The
sum of these values was the implied present value per share.
Range
implied by dividend discount analysis - $15.75 to
$20.50
(1)
Based on UTBI’s projections
25
Going
Private Premium Study
Ø
HBI
selected
23 going private transactions announced in the last two years
Ø
The
analysis
included only reverse stock splits and cash-out mergers
Ø
The
analysis
included only bank and thrift transactions
Ø
The
analysis
excluded transactions that could be deemed a change of control
Ø
HBI
analyzed
the range of premiums paid over the trading price
26
Selected
Transactions
Sources:
SNL Financial, LC and SEC filings
27
Premium
Analysis
Ø
Based
on a
review of these 23 transactions, HBI concluded that a reasonable premium
to be
paid was between 5% and 20%.
Range
implied by trading market analysis - $19.25 - $22.75
(1)
Weighted average prior to the announcement of the going private
transaction
28
Reconciliation
of Valuation Methodologies
29
Pricing
Ratios
(1)
Based
on weighted average for the last 10 trades prior to the announcement of
UTBI’s going private transaction
(2)
Based
on book value and earnings per share for UTBI at or for the twelve months
ended
September 30, 2005
Ø
HBI
concludes
that the $22.00 per share price selected by UTBI’s board is fair from a
financial point of view
30
2.
Pro Forma Analysis
31
Registered
Shareholder List Analysis
(1)
Number of shareholders represented by CEDE is estimated from the number
of
brokers on the NOBO List.
This
analysis is based on the registered shareholder list provided by the
Company for
the record date 9/30/2005.
32
Pro
Forma 1:2,500 Cash Out Merger Analysis
33
These
materials are for discussion purposes only. They should not be construed
as an offer or solicitation with respect to the purchase or sale of any
security or to enter into any particular transaction and may not be relied
on in
evaluating the merits of investing in any security or entering into any
transaction.
The
information contained herein and any supplemental information or other
documents
provided in connection herewith are submitted to you on a strictly
confidential basis, should be kept confidential and should not be used
other
than in connection with your evaluation of a proposed structure or
transaction. By accepting a copy of this presentation, the recipient
agrees that neither it nor any of its employees or advisors shall use the
information for any purpose other than evaluating a proposed structure
or
transaction or divulge the information to any other party. The
information contained herein shall not be photocopied, reproduced or
distributed
to others, in whole or in part, without the prior written consent of Howe
Barnes Investments, Inc.
34
Dates Referenced Herein and Documents Incorporated by Reference