-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EWFnmq3Dl3dImR6X9wkp/lrMBdo7CApK1W0FwQ2XIJ2cd3kGzfcnSFl2qT0826kI 8ZHSKj1fqkOyB+8DrsvSag== 0000895345-98-000134.txt : 19980313 0000895345-98-000134.hdr.sgml : 19980313 ACCESSION NUMBER: 0000895345-98-000134 CONFORMED SUBMISSION TYPE: DFAN14A PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19980312 SROS: NYSE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ECHLIN INC CENTRAL INDEX KEY: 0000031348 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 060330448 STATE OF INCORPORATION: CT FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: DFAN14A SEC ACT: SEC FILE NUMBER: 001-04651 FILM NUMBER: 98564276 BUSINESS ADDRESS: STREET 1: 100 DOUBLE BEACH RD CITY: BRANFORD STATE: CT ZIP: 06405 BUSINESS PHONE: 2034815751 MAIL ADDRESS: STREET 1: 100 DOUBLE BEACH ROAD CITY: BRANFORD STATE: CT ZIP: 06405 FORMER COMPANY: FORMER CONFORMED NAME: ECHLIN MANUFACTURING CO DATE OF NAME CHANGE: 19820602 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SPX CORP CENTRAL INDEX KEY: 0000088205 STANDARD INDUSTRIAL CLASSIFICATION: CUTLERY, HANDTOOLS & GENERAL HARDWARE [3420] IRS NUMBER: 381016240 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DFAN14A BUSINESS ADDRESS: STREET 1: 700 TERRACE POINT DR CITY: MUSKEGON STATE: MI ZIP: 49443 BUSINESS PHONE: 6167245000 MAIL ADDRESS: STREET 1: 700 TERRACE POINT DRIVE CITY: MUSKEGON STATE: MI ZIP: 49443 FORMER COMPANY: FORMER CONFORMED NAME: SEALED POWER CORP DATE OF NAME CHANGE: 19880515 DFAN14A 1 SCHEDULE 14A (Rule 14a-101) INFORMATION REQUIRED IN PROXY STATEMENT SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the Registrant [ ] Filed by a Party other than the Registrant [X] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for Use of the [ ] Definitive Proxy Statement Commission Only (as Permitted [ X ] Definitive Additional Materials by Rule 14a-6(e)(2)) [ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12 - ------------------------------------------------------------------------------- Echlin Inc. (Name of Registrant as Specified In Its Charter) - ------------------------------------------------------------------------------- SPX Corporation (Name of Person(s) Filing Proxy Statement, if other than Registrant) - ------------------------------------------------------------------------------- Payment of Filing Fee (Check the appropriate box): [X] No fee required [ ] Fee computed on table below per Exchange Act Rules 14a-6(i) and 0-11: 1) Title of each class of securities to which transaction applies: --------------------------------------------------------------- 2) Aggregate number of securities to which transaction applies: --------------------------------------------------------------- 3) Per unit price or other underlying transaction computed pursuant to Exchange Act Rule 0-11: --------------------------------------------------------------- 4) Proposed maximum aggregate value of transaction: --------------------------------------------------------------- 5) Total fee paid: --------------------------------------------------------------- [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting was paid previously. Identify the previous filing by registration statement number, or the Form of Schedule and the date of its filing: 1) Amount Previously Paid: --------------------------------------------------------------- 2) Form, Schedule or Registration Statement No.: --------------------------------------------------------------- 3) Filing Party: --------------------------------------------------------------- 4) Date Filed: --------------------------------------------------------------- SPX Corporation "Keeping Vehicles on the Road" Update March - 1998 FORWARD LOOKING STATEMENTS -------------------------- Certain statements contained in these slides that are not historical facts are forward-looking statements and are thus prospective. These forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. More information regarding such risks can be found in SPX's 1996 Form 10-K, three-month, six-month, and nine-month Forms 10-Q and SPX's Registration Statement on Form S-4, filed February 17, 1998. AGENDA ------ . Successful Turnaround Story - Stock Price Increased Over 5 Times Value in 2 Years - Exceeded Every Commitment . SPX 1998 Guidance - 30% EPS Improvement - Double Digit Sales Growth . SPX Offer for Echlin - "Win-Win" for Echlin & SPX Shareholders . SPX Roadmap for Echlin Turnaround - Significantly Accretive in First Full Year Sign Gold Card to Demand Special Meeting of Echlin Shareholders SPX Corporation Stock Price --------------------------- The Value of $100 Invested on January 1, 1992 [CHART SHOWING VALUE OF $100 INVESTED IN SPX STOCK ON 1/1/92 OVER FOUR-YEAR PERIOD] The Old SPX Similar to Echlin Today SPX Corporation Stock Price --------------------------- The Value of $100 Invested on January 1, 1992 [CHART SHOWING VALUE OF $100 INVESTED IN SPX STOCK AFTER ARRIVAL OF NEW LEADERSHIP TEAM] The New SPX Over 400% Increase Since January, 1996 Turnaround Process ------------------ Fix/Sell Grow Revenue Growth Operational Results Global Leadership Standards Growth Strategy Development Financial Strategy Strategic Review EVA(R) Implementation Right-sizing/Consolidation Speed and Execution are Key Elements SPX 1997 Performance Scorecard ------------------------------ . E.P.S. $3.01 per share 71% improvement over '96 . EVA(R)Improvement $18.8 million $45 million over two years . MVA Increased $428 million $744 million over two years . Headcount 36% fewer people Sales per employee up 30% over '96 . Operating Margin 8% 25% improvement over '96 . Revenue +7% (Pro Forma) Past several years flat . Shareholder Actions Dutch Auction Repurchased 17% in '97 Exceeding Financial Commitments E.P.S. $3.01 Per Share 71% Improvement Over '96 ------------------------ [CHART SHOWING EPS IMPROVEMENT] EPS Improvement for Eight Straight Quarters EVA(R) Improvement $18.8 million $45 Million Over Two Years ------------------------------ EVA Improvement EVA Participation [CHART SHOWING EVA IMPROVEMENT] [CHART SHOWING INCREASE IN EVA PARTICIPATION] Rapid Implementation of EVA to all Levels of Organization Drove Outstanding EVA Improvement Performance MVA Increased $428 Million in 1997 $744 Million Over Two Years ---------------------------------- [CHART SHOWING INCREASE IN MVA] 32% Reduction in Capital Employed Over 2 Years 74% Increase in Market Value Over Same Period Headcount 36% Fewer People Sales per Employee up 30% Over 1996 ----------------------------------- Headcount Sales/Employee ($000's) [CHART SHOWING DROP IN HEADCOUNT] [CHART SHOWING INCREASE IN SALES/EMPLOYEE] 45% Fewer People Over Two Years . . . Over 50% Increase in Sales per Employee in Same Period Operating Margin 8% 25% Improvement Over 1996 ------------------------- [CHART SHOWING INCREASE IN OPERATING MARGIN] Significant Improvement in Operating Margins Still Have Opportunity for Further Improvement 1997 Revenue Growth = 7% (Pro Forma) Past Several Years Flat ----------------------------------------- [CHART SHOWING SOURCES OF REVENUE AND REVENUE GROWTH] Growth Achieved in Both Segments of the Business Shareholder Actions - Dutch Auction Repurchased 17% of Equity in 1997 ----------------------------------- . Purchased 17% of stock in 1997 - Dutch Auction - Open market repurchases . Eliminated dividend in favor of share repurchases . Relaxed shareholder rights plan . Aligned compensation with shareholder wealth - Shifted Board compensation to EVA(R) based system - Eliminated board pension benefits - Out-of-the-money options for Key Leaders - Mandatory stock ownership for key executives Implemented a Series of Shareholder Friendly Actions SPX 1997 Performance Scorecard ------------------------------ E.P.S. $3.01 per share 71% improvement over '96 EVA(R)Improvement $18.8 million $45 million over two years MVA Increased $428 million $744 million over two years Headcount 36% fewer people Sales per employee up 30% over '96 Operating Margin 8% 25% improvement over '96 Revenue +7% (Pro Forma) Past several years flat Shareholder Actions Dutch Auction Repurchased 17% in '97 Exceeding Financial Commitments SPX Guidance - 1998 ------------------- . 1998 Revenue Growth guidance -- 10% (over 1997 Pro Forma) . 1998 Q1 EPS Guidance -- $0.80 - Up 50% from 1997 Q1 . 1998 FY EPS Guidance -- $3.85 to $4.00 - Up 30% over 1997 before unusual items Double-Digit Revenue Growth and 30% EPS Improvement Foundation for Continuing Success --------------------------------- [CHART SHOWING ELEMENTS NEEDED FOR GROWTH] Speed & Execution Are Key Drivers of Shareholder Wealth SPX Leadership Standards ------------------------ . An Obsession with Winning . Doing Everything Simpler and Faster . A Commitment to Diversity . A Commitment to Aggressive Growth . Exceeding Commitments with Ethics and Integrity Leadership Standards for the Entire Organization Published Sell Side Earnings Estimates -------------------------------------- Recommendation 12-Month Broker Analyst 3/7/98 1998 Target ------ ------- ------ ---- ------ Barrington A. Paris Buy 3.95 -- Research Bear Stearns E. Goldstein Buy 4.15 82-90 DLJ W. Needham Mkt. Perform 3.90 68 Goldman Sachs J. Irwin Buy 4.05 85 Lehman Brothers J. Phillippi Neutral 4.05 70 Merrill Lynch D. Kimball Accumulate 3.90 76 Schroders E. Rasmussen Outperform 3.95 76 Value Line N. Primavera Buy 3.85 -- First Call Consensus: Q1 = $0.84; 1998 = $3.99 Predominant Buy Recommendation ----------------------------------------------------------------- SPX AND ECHLIN ----------------------------------------------------------------- SPX Total Return ---------------- [CHART COMPARING SPX STOCK TOTAL RETURN TO S&P] SPX's Stock Has Increased Over 400% SPX and Echlin Total Return --------------------------- [CHART COMPARING ECHLIN STOCK TOTAL RETURN TO SPX AND S&P] Echlin Stock Underperforming Even After Nearly One Year Under New Leadership Rationale for SPX and Echlin Merger ----------------------------------- . Vehicle service industry is rapidly evolving . Combination benefits shareholders, customers and employees of SPX and Echlin . SPX's leadership experience and management techniques will be applied to Echlin . SPX will cut costs, improve profitability and position combined company for growth "Win-Win" Combination for all Constituencies Summary of SPX's Offer ---------------------- . Structure: Exchange offer for all Echlin shares . Value: $48 per Echlin share or approximately $3 billion (on February 17, 1998) . Terms: $12 in cash, 0.4796 SPX shares per Echlin share; 1/4 cash, 3/4 stock; fixed exchange ratio . Premium: 23% over Echlin's close on 2/17/98; 32% above prior 30-day average . Earnings: Expect substantial accretion in first full year Compelling Combination for Shareholders of Echlin & SPX Why This Offer Now? ------------------- . SPX had been pursuing a strategic business combination with Echlin for a year . SPX had initiated three meetings with Echlin and had sent several letters regarding proposed deal . Echlin had repeatedly rebuffed our offer to negotiate a transaction -- Echlin Board still refuses to meet with us . Rapid industry consolidation and strategic rationale for transaction make it necessary to take our offer directly to Echlin's shareholders Outstanding Value Creation Opportunity... Attempted Negotiated Deal for Over a Year Status of our Offer ------------------- . SPX owns 1.15 million Echlin shares, 1.8% of Echlin, and more than combined ownership of Echlin's officers and directors . SPX has received antitrust clearance for the transaction . SPX has received "highly confident" letter for $2.4 billion of financing from CIBC . SPX has sent a merger agreement to Echlin and filed related exchange offer materials with SEC . SPX's demand solicitation materials to call special meeting of Echlin's shareholders cleared SEC review on March 6 . SPX now seeking 35% vote to call special meeting . Echlin seeking legislative protection in Connecticut SPX has Made an Attractive Offer No Response from Echlin Anticipated Timetable --------------------- February 17, 1998 March 1998 June 1998 Collect Demands Special Meeting Announcement of from 35% of Echlin to Remove Echlin SPX Offer for [arrow] Shareholders for a [arrow] Board and Replace Echlin Special Meeting with SPX Slate Governance Requirement: Governance Removal: More Requirement: Votes For Than 35% of Outstanding Against Shares Election: Plurality of Votes Cast Process Could be Accelerated with a Negotiated Transaction Rapidly Changing Industry ------------------------- . Consolidation in $350 billion vehicle service industry . Blurring lines between OE and aftermarket . Expansion of mega-dealerships and national parts retailers . Growing importance of repair shop chains . Increasing technological complexity of vehicles . Integration of the vehicle service process necessary to compete and better serve customers in the future SPX and Echlin will have Scale and Capabilities to Excel in Rapidly Changing Industry Trends Transforming Vehicle Service Industry -------------------------------------------- Trends Impact . Aftermarket demand model .Restructuring within predicts slowing growth industry required - Plant rationalization . Weak demand creates [arrow] - Downsize distribution operational problems networks - Write-off inventories . DIY demand will continue to .Consolidation of players weaken required - OE/Aftermarket lines blurring - Economies of scale in distribution and manufacturing - Integration of vehicle service lifecycle Industry Restructuring and Consolidation Are Required Three Critical Elements of Vehicle Service ------------------------------------------ Worldwide Vehicle Service Vehicle Components $350 Billion - OE - Aftermarket Technical Know-how - Dealer Equipment programs [arrow] - Service & owner's manual development "SPX receives only $1 of every $500 Tools & Equipment per vehicle spent annually worldwide - Special warranty tools for service." - Diagnostic equipment SPX has Broad Experience in all Elements of Vehicle Service Vehicle Service Lifecycle ------------------------- [CHART DESCRIBING BUSINESS SEGMENTS AT DIFFERENT POINTS IN VEHICLE LIFECYCLE] Integration of Vehicle Service Elements is Critical for Long-Term Success Integrated Vehicle Service Process ---------------------------------- [CHART DESCRIBING VEHICLE SERVICE LIFECYCLE] Feedback of Data Drives Improved Service and Quality for Customers/Distributors, OEM's, and End-Users Shareholder Benefits --------------------- . Echlin shareholders will receive an immediate 23% premium over 2/13/98 closing price and 32% premium over prior 30-day trading average . Proposed Merger Agreement gives shareholders choice of all cash, all stock, or combination (subject to proration) . Echlin shareholders will own 70% of a combined company with upside potential . SPX shareholders will own part of larger company with increased value-creation opportunities . Combined company will be a global leader across entire vehicle service lifecycle "Win-Win" for Echlin & SPX Shareholders SPX Has "Been There, Done That" ------------------------------- . SPX had been a long time underperformer . Current leadership team successfully turned around SPX in just two years - Quickly implemented EVA as financial tool and driver of cultural change - Took many shareholder-friendly actions . Operating margins doubled . Sales per employee up more than 50% . Stock price increased more than 400% SPX Team has the Tools, Talent, and Track Record to Turnaround Echlin SPX's Program for Echlin ------------------------ . Achieve annual cost savings of at least $125 million in first full year, increasing to $175 million thereafter . Reduce headcount by approximately 3,000 positions or nearly 10% of Echlin's global workforce . Restructure or divest underperforming Echlin assets . Accelerate EVA-based compensation programs . Pursue targeted share repurchases SPX has the Road Map for Success at Echlin . . . Speed and Execution are Key Estimated Cost Savings ---------------------- (In $ Millions) Year 2 Total Annual Additional Savings, Yr. Year 1 Savings 2 and Beyond ----------- ------------ ------------ Headcount Reduction $100 $20 $120 (3,000 x $40K) Duplicate Corporate Costs 10 10 20 Manufacturing/Distribution Rationalization, Sourcing 15 20 35 ----- ----- ----- Total $125 $50 $175 ======= ======= ======= Estimated Cost Savings Will Make Transaction EPS Accretive Value/EVA Opportunity --------------------- Sales Per Employee (In $ Thousands) [CHART COMPARING SPX AND ECHLIN SALES PER EMPLOYEE TO PEER GROUP] Echlin has Lowest Sales per Employee in Peer Group Significant Opportunity for Productivity Improvement Value/EVA Opportunity ------------------------------------------ Capital Expenditures as a Percent of Sales [CHART COMPARING CAPITAL EXPENDITURES AT SPX, ECHLIN AND PEER GROUP] Echlin has Highest CapEx in Peer Group Significant Opportunity for More Efficient Use of Capital Value/EVA Opportunity ---------------------------- Dividend Yield Since 4/1/97 [CHART COMPARING DIVIDEND YIELD AT ECHLIN, SPX AND PEER GROUP] Echlin has Highest Dividend Yield in Peer Group Opportunity for More Efficient Use of Capital Strategic Rationale ------------------- SPX Echlin [CHART DESCRIBING BUSINESS [CHART DESCRIBING BUSINESS SEGMENTS AT SPX] SEGMENTS AT ECHLIN] Combination Integrates Service Process with Components Good Fit of Business -- Negligible Overlap Profile of Combined Company --------------------------- Sales Profile Combined Company [CHART DESCRIBING PROFILE OF COMBINED COMPANY] Combined Company will be Global Market Leader in Service Solutions and Vehicle Components Pro Forma 1998 --------------------------------------- (in $ millions, except per share items) Shares Net Income Outstanding EPS SPX - 1998 analysts' expectation (FN1) $51.0 12.900 $3.95 Echlin - 1998 analysts' expectation (FN1) 143.9 -- -- Transaction: $83 of incremental interest, goodwill amortization of $22 and other expense of $7 (78.0) -- -- Shares issued: 64.1 million Echlin shares @ exchange ratio of 0.4796 -- 30.700 -- -------- --------- ------ Before savings 116.9 43.600 $2.68 $90 million savings (pretax) required to be EPS neutral 55.3 -- -- ------ ------ ------ Adjusted $172.2 43.600 $3.95 ========= ======== ======= - ---------------------- [FN] (1) Numbers derived from First Call consensus of $3.95 per share for SPX and $2.28 per share for Echlin. $90 Million of Savings Required to be EPS Neutral in 1998 Analyst Reaction to SPX/Echlin Transaction ------------------------------------------ . "We believe that the leadership experience and management techniques that SPX brings to the table can have a substantial positive impact on Echlin's performance." James M. Irwin, Goldman, Sachs & Co., February 17, 1998 . "SPX has proven it can successfully turn around businesses quickly." Joseph S. Phillippi, Lehman Brothers, February 18, 1998 . "Based on management's track record, we are confident that SPX can achieve the significant cost savings targets it has set and improve the combined company's returns." Eric S. Rasmussen, John A. Casesa, Schroders, February 18, 1998 . "There is considerable evidence that Echlin has been underperforming its peers in a number of important categories that SPX should be able to improve." Alexander P. Paris, Barrington Research Associates, February 24, 1998 . "We have long maintained that Echlin's proposed restructuring could take longer and cost more than [Echlin] management had indicated." John G. Inch, Stephen J. Girsky, Morgan Stanley, February 17, 1998 Positive Reaction to Proposed Combination of SPX and Echlin SPX & Echlin - A Winning Combination ---------------------------------- Shareholder Wealth Creation Engine [CHART SHOWING ELEMENTS IN SHAREHOLDER WEALTH CREATION] Leverage EVA Culture & Leadership Values to Create Wealth for Shareholders -----END PRIVACY-ENHANCED MESSAGE-----