SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 13E-3
(Rule 13e-100)
TRANSACTION STATEMENT UNDER SECTION 13(e) OF THE
SECURITIES EXCHANGE ACT OF 1934 AND RULE 13e-3 THEREUNDER
|
(Amendment No. ___)
|
The Monarch Cement Company
|
(Name of the Issuer and Name of Person Filing Statement)
|
Capital Stock, $2.50 par value per share
Class B Capital Stock, $2.50 par value per share
|
(Title of Class of Securities)
609031109
609031208
|
(CUSIP Number of Class of Securities)
Walter H. Wulf, Jr.
President and Chairman of the Board
The Monarch Cement Company
P.O. Box 1000
Humboldt, KS 66748-0900
|
(Name, Address and Telephone Number of Persons Authorized to Receive Notices and Communications on Behalf of the Person(s) Filing Statement)
|
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.
|
CALCULATION OF FILING FEE
|
|
Transaction Valuation (*)
|
Amount of Filing Fee (**)
|
$2,995,800
|
$599.16
|
(*)
|
Calculated solely for purposes of determining the filing fee. This amount assumes the acquisition of approximately 60,693 shares of Capital Stock and approximately 39,167 shares of Class B Capital Stock, in each case, for $30.00 per share in cash in lieu of issuing fractional shares to holders of less than 600 shares of the applicable class of stock immediately before the proposed reverse stock split.
|
(**)
|
The filing fee is calculated in accordance with Rule 0-11(b) by multiplying the Transaction Valuation of $2,995,800 by 0.0002.
|
[ ]
|
Check the box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
|
(1)
|
a proposal to approve, subject to final action by the Company's Board of Directors, an amendment to the Company's Articles of Incorporation, whereby the Company will effect a 1-for-600 reverse stock split of its Capital Stock and Class B Capital Stock and as a result of which each stockholder owning of record fewer than 600 shares of either class of Stock before the reverse stock split will have the shares of such class cancelled and converted into the right to receive a cash payment for each share of such class held of record prior to the reverse stock split in lieu of receiving a fractional post-reverse stock split share of such class; and
|
(2)
|
a proposal to approve, subject to stockholder approval of proposal 1 above and final action by the Company's Board of Directors, an amendment to the Company's Articles of Incorporation to take effect immediately following the reverse stock split, whereby the Company will effect a 600-for-1 forward stock split of each one issued and outstanding share of its Capital Stock and Class B Capital Stock (and including each fractional share of such class in excess of one share).
|
Item 1.
|
Summary Term Sheet
|
·
|
SUMMARY TERM SHEET
|
·
|
QUESTIONS AND ANSWERS ABOUT THE REVERSE/FORWARD STOCK SPLIT AND THE SPECIAL MEETING
|
Item 2.
|
Subject Company Information
|
|
(a)
|
Name and Address. The name of the subject company is The Monarch Cement Company, a Kansas corporation. The Company's principal executive offices are located at 449 1200 Street, P. O. Box 1000, Humboldt, Kansas 66748. The Company's telephone number at that address is (620) 473-2222. See also the information set forth in the Proxy Statement under the following caption, which is incorporated herein by reference:
|
|
●
|
INFORMATION ABOUT THE COMPANY — Name and Address
|
|
(b)
|
Securities. The subject classes of equity securities to which this Schedule 13E-3 relates are:
|
|
(i)
|
the Company's Capital Stock, $2.50 par value per share, of which 2,599,633 shares were outstanding as of July 31, 2014; and
|
|
(ii)
|
the Company's Class B Capital Stock, $2.50 par value per share, of which 1,366,048 shares were outstanding as of July 31, 2014.
|
|
●
|
INFORMATION ABOUT THE COMPANY — Market Price of Capital Stock; Dividends
|
|
(c)
|
Trading Market and Price. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
|
|
●
|
INFORMATION ABOUT THE COMPANY — Market Price of Capital Stock; Dividends
|
|
(d)
|
Dividends. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
|
|
●
|
INFORMATION ABOUT THE COMPANY — Market Price of Capital Stock; Dividends
|
|
(e)
|
Prior Public Offerings. Not applicable. See also the information set forth in the Proxy Statement under the following caption, which is incorporated herein by reference:
|
|
●
|
INFORMATION ABOUT THE COMPANY — Prior Public Offerings
|
|
(f)
|
Prior Stock Purchases. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
|
|
●
|
INFORMATION ABOUT THE COMPANY — Stock Purchases
|
Item 3.
|
Identity and Background of Filing Person
|
|
(a)
|
Name and Address. The filing person, the Company, is also the subject company. The name, business address and business telephone number of the Company is provided in Item 2(a) above.
|
|
●
|
INFORMATION ABOUT THE COMPANY — Name and Address
|
|
●
|
INFORMATION ABOUT THE COMPANY — Certain Information Concerning the Company, the Company's Directors and Executive Officers
|
|
(b)
|
Business and Background of Entities. Not applicable.
|
|
(c)
|
Business and Background of Natural Persons. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
|
|
●
|
INFORMATION ABOUT THE COMPANY — Certain Information Concerning the Company, the Company's Directors and Executive Officers
|
Item 4.
|
Terms of the Transaction
|
|
(a)
|
Material Terms. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
|
|
●
|
SPECIAL FACTORS — Purposes of and Reasons for the Reverse/Forward Stock Split
|
|
●
|
SPECIAL FACTORS — Fairness of the Reverse/Forward Stock Split
|
|
●
|
SPECIAL FACTORS — Effects of the Reverse/Forward Stock Split
|
|
●
|
SPECIAL FACTORS — Material U.S. Federal Income Tax Consequences of the Reverse/Forward Stock Split
|
|
●
|
SPECIAL FACTORS — Sources of Funds and Expenses
|
|
●
|
SPECIAL FACTORS — Stockholder Approval
|
|
●
|
SPECIAL FACTORS — Effective Date
|
|
●
|
SPECIAL FACTORS — Termination of the Reverse/Forward Stock Split
|
|
(c)
|
Different Terms. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
|
|
●
|
SPECIAL FACTORS — Fairness of the Reverse/Forward Stock Split
|
|
●
|
SPECIAL FACTORS — Effects of the Reverse/Forward Stock Split
|
|
●
|
SPECIAL FACTORS — Material U.S. Federal Income Tax Consequences of the Reverse/Forward Stock Split
|
|
●
|
SPECIAL FACTORS — Potential Conflicts of Interests of Officers, Directors and Certain Affiliated Persons
|
|
(d)
|
Appraisal Rights. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
|
|
●
|
SPECIAL FACTORS — No Appraisal or Dissenters' Rights
|
|
(e)
|
Provisions for Unaffiliated Security Holders. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
|
|
●
|
SPECIAL FACTORS — Fairness of the Reverse/Forward Stock Split — Procedural Fairness
|
|
(f)
|
Eligibility for Listing or Trading. Not applicable.
|
Item 5.
|
Past Contacts, Transactions, Negotiations and Agreements
|
|
(a)
|
Transactions. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
|
|
●
|
INFORMATION ABOUT THE COMPANY — Transactions between the Company and Executive Officers and Directors of the Company
|
|
(b)
|
Significant Corporate Events. None.
|
|
(c)
|
Negotiations or Contacts. None.
|
|
(e)
|
Agreements Involving the Subject Company's Securities. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
|
|
●
|
INFORMATION ABOUT THE COMPANY — Stock Purchases
|
Item 6.
|
Purposes of the Transaction and Plans or Proposals
|
|
(b)
|
Use of Securities Acquired. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
|
|
●
|
SPECIAL FACTORS — Effective Date
|
|
(c)
|
Plans. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
|
|
●
|
SPECIAL FACTORS — Purposes of and Reasons for the Reverse/Forward Stock Split
|
|
●
|
SPECIAL FACTORS — Background of the Reverse/Forward Stock Split
|
|
●
|
SPECIAL FACTORS — Fairness of the Reverse/Forward Stock Split
|
|
●
|
SPECIAL FACTORS — Effects of the Reverse/Forward Stock Split
|
|
●
|
SPECIAL FACTORS — Conduct of Our Business After the Reverse/Forward Stock Split
|
|
●
|
SPECIAL FACTORS — Effective Date
|
Item 7.
|
Purposes, Alternatives, Reasons and Effects
|
|
(a)
|
Purposes. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
|
|
●
|
SPECIAL FACTORS — Purposes of and Reasons for the Reverse/Forward Stock Split
|
|
●
|
SPECIAL FACTORS — Background of the Reverse/Forward Stock Split
|
|
(b)
|
Alternatives. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
|
|
●
|
SPECIAL FACTORS — Background of the Reverse/Forward Stock Split
|
|
●
|
SPECIAL FACTORS — Alternatives Considered
|
|
(c)
|
Reasons. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
|
|
●
|
SPECIAL FACTORS — Purposes of and Reasons for the Reverse/Forward Stock Split
|
|
●
|
SPECIAL FACTORS — Background of the Reverse/Forward Stock Split
|
|
●
|
SPECIAL FACTORS — Fairness of the Reverse/Forward Stock Split
|
|
●
|
SPECIAL FACTORS — Alternatives Considered
|
|
(d)
|
Effects. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
|
|
●
|
SPECIAL FACTORS — Purposes and Reasons for the Reverse/Forward Stock Split
|
|
●
|
SPECIAL FACTORS — Background of the Reverse/Forward Stock Split
|
|
●
|
SPECIAL FACTORS — Fairness of the Reverse/Forward Stock Split
|
|
●
|
SPECIAL FACTORS — Effects of the Reverse/Forward Stock Split
|
|
●
|
SPECIAL FACTORS — Conduct of Our Business After the Reverse/Forward Stock Split
|
|
●
|
SPECIAL FACTORS — Material U.S. Federal Income Tax Consequences of the Reverse/Forward Stock Split
|
|
●
|
SPECIAL FACTORS — Effective Date
|
Item 8.
|
Fairness of the Transaction
|
|
(a)
|
Fairness. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
|
|
●
|
SPECIAL FACTORS — Background of the Reverse/Forward Stock Split
|
|
●
|
SPECIAL FACTORS — Fairness of the Reverse/Forward Stock Split
|
|
(b)
|
Factors Considered in Determining Fairness. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
|
|
●
|
SPECIAL FACTORS — Purposes of and Reasons for the Reverse/Forward Stock Split
|
|
●
|
SPECIAL FACTORS — Background of the Reverse/Forward Stock Split
|
|
●
|
SPECIAL FACTORS — Fairness of the Reverse/Forward Stock Split
|
|
●
|
SPECIAL FACTORS — Alternatives Considered
|
|
(c)
|
Approval of Security Holders. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
|
|
●
|
SPECIAL FACTORS — Fairness of the Reverse/Forward Stock Split — Procedural Fairness
|
|
(d)
|
Unaffiliated Representatives. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
|
|
●
|
SPECIAL FACTORS — Fairness of the Reverse/Forward Stock Split — Procedural Fairness
|
|
(e)
|
Approval of Directors. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
|
|
●
|
SPECIAL FACTORS — Fairness of the Reverse/Forward Stock Split — Procedural Fairness
|
|
(f)
|
Other Offers. None.
|
Item 9.
|
Reports, Opinions, Appraisals and Negotiations
|
|
(a)
|
Report, Opinion or Appraisal. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
|
|
●
|
SPECIAL FACTORS — Background of the Reverse/Forward Stock Split
|
|
(b)
|
Preparer and Summary of the Report, Opinion or Appraisal. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
|
|
●
|
SPECIAL FACTORS — Background of the Reverse/Forward Stock Split
|
|
●
|
SPECIAL FACTORS — Fairness of the Reverse/Forward Stock Split
|
|
(c)
|
Availability of Documents. The following item is available for inspection and copying at the Company's principal executive offices located at 449 1200 Street, P. O. Box 1000, Humboldt, Kansas 66748 during the Company's regular business hours by any interested stockholder of the Company or representative who has been so designated in writing:
|
|
●
|
The "Staying Public or Going Private" discussion paper prepared by Kennedy and Coe, LLC and presented to the Company's Board of Directors at its April 9, 2014 meeting
|
Item 10.
|
Source and Amounts of Funds or Other Consideration
|
|
(a)
|
Source of Funds. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
|
|
●
|
SPECIAL FACTORS — Source of Funds and Expenses
|
|
(b)
|
Conditions. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
|
|
●
|
SPECIAL FACTORS — Source of Funds and Expenses
|
|
(c)
|
Expenses. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
|
|
●
|
SPECIAL FACTORS — Source of Funds and Expenses
|
|
(d)
|
Borrowed Funds. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
|
|
●
|
SPECIAL FACTORS — Source of Funds and Expenses
|
Item 11.
|
Interest in Securities of the Subject Company
|
|
(a)
|
Securities Ownership. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
|
|
●
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
|
(b)
|
Securities Transactions. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
|
|
●
|
INFORMATION ABOUT THE COMPANY — Stock Purchases
|
Item 12.
|
The Solicitation or Recommendation
|
|
(d)
|
Intent to Tender or Vote in a Going Private Transaction. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
|
|
●
|
SPECIAL FACTORS — Potential Conflicts of Interests of Officers, Directors and Certain Affiliated Persons
|
|
●
|
SPECIAL FACTORS — Stockholder Approval
|
|
(e)
|
Recommendation of Others. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
|
|
●
|
SPECIAL FACTORS — Stockholder Approval
|
Item 13.
|
Financial Statements
|
|
(a)
|
Financial Information. The audited financial statements and unaudited interim financial statements are incorporated by reference in the Proxy Statement and are incorporated by reference in this Schedule 13E-3, in each case, from the Company's Annual Report on Form 10-K for the year ended December 31, 2013 and the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2014.
|
|
●
|
FINANCIAL INFORMATION — Summary Historical Financial Information
|
|
(b)
|
Pro forma Information. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
|
|
●
|
FINANCIAL INFORMATION — Pro Forma Consolidated Financial Information
|
Item 14.
|
Persons/Assets, Retained, Employed, Compensated or Used
|
|
(a)
|
Solicitation or Recommendation. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
|
|
●
|
QUESTIONS AND ANSWERS ABOUT THE REVERSE/FORWARD STOCK SPLIT AND THE SPECIAL MEETING — Who pays the cost of soliciting votes at the Special Meeting?
|
|
(b)
|
Employees and Corporate Assets. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
|
|
●
|
QUESTIONS AND ANSWERS ABOUT THE REVERSE/FORWARD STOCK SPLIT AND THE SPECIAL MEETING — Who pays the cost of soliciting votes at the Special Meeting?
|
Item 15.
|
Additional Information
|
|
(a)
|
None / Not applicable.
|
|
(b)
|
Other Material Information. The information contained in the Proxy Statement, including all appendices attached thereto, is incorporated herein by reference.
|
Item 16.
|
Exhibits
|
|
(a)
|
Notice of Special Meeting and Proxy Statement of the Company, including all appendices and the accompanying proxy card (incorporated herein by reference to the Company's Schedule 14A filed with the SEC on August 29, 2014).
|
|
(b)
|
Credit agreement dated December 31, 2012 between BOKF, NA dba Bank of Oklahoma and the Company (incorporated herein by reference to the Company's Current Report on Form 8-K filed with the SEC on January 7, 2013).
|
|
(c)
|
"Staying Public or Going Private" discussion paper prepared by Kennedy and Coe, LLC and presented to the Board of Directors of the Company at its April 9, 2014 meeting
|
|
(d)
|
Not applicable.
|
|
(f)
|
Not applicable.
|
|
(g)
|
Not applicable.
|
THE MONARCH CEMENT COMPANY | |||
Dated: August 29, 2014
|
By:
|
/s/ Walter H. Wulf, Jr | |
Walter H. Wulf, Jr | |||
President and Chairman of the Board | |||
Exhibit No.
|
Description
|
|
(a)
|
Notice of Special Meeting and Proxy Statement of the Company, including all appendices and the accompanying proxy card (incorporated herein by reference to the Company's Schedule 14A filed with the SEC on August 29, 2014).
|
|
(b)
|
Credit agreement dated December 31, 2012 between BOKF, NA dba Bank of Oklahoma and the Company (incorporated herein by reference to the Company's Current Report on Form 8-K filed with the SEC on January 7, 2013).
|
|
(c)
|
"Staying Public or Going Private" discussion paper prepared by Kennedy and Coe, LLC and presented to the Board of Directors of the Company at its April 9, 2014 meeting.
|
|
(d)
|
Not applicable.
|
|
(f)
|
Not applicable.
|
|
(g)
|
Not applicable.
|
|
•
|
Business model and management capability
|
|
•
|
Growth potential and market size
|
|
•
|
Financial track record
|
|
•
|
Valuation and comparative value
|
|
•
|
Shareholders’ objectives
|
|
•
|
Current stage in Monarch’s life cycle
|
|
•
|
Prospects and position within industry
|
|
•
|
Investor base and analyst coverage
|
Typical Advantages
|
Observation/Comments
|
Greater access to funds since company can likely obtain favorable terms from banks and other lenders
|
Management is not aware that they receive any favorable terms in financing transactions. It’s all about the company’s ability to repay the debt through cash flow.
|
Enhances prestige
|
Management believes they operate more like a private company and outsiders are often surprised to find out the company is public. Management believes being a good corporate citizen and sound company is what enhances their prestige
|
Facilitates future acquisitions of other businesses, which may be paid for at least partially in a public company’s shares
|
Only one acquisition in the company’s history used its publicly traded stock to consummate the transaction. Management did say the transaction could still have occurred without stock.
|
Achieves higher valuations than private enterprises since greater disclosure of information reduces uncertainty around performance and increases value
|
The company is not closely followed by any analyst and its market capitalization is basically at book value.
|
Provides a potential exit strategy and liquidity for investors, owner and (or) shareholders
|
There is liquidity to the company’s stocksince it is public. However, the trading volume is low and share price is essentially at book value such that there is little to no advantage to existing shareholders.
|
Typical Advantages
|
Observation/Comments
|
Attracts, retains and rewards valued employees through share option plans
|
The company has never had a stock option plan. The company likes to keep things simple. Stock options add to the complexity
|
Enhances benchmarking operations against other public companies from same industry
|
The company does all of its industry benchmarking through their membership in the Portland Cement Association. In contrast, certain close competitors of the company are private and they can see what Monarch is doing more rapidly due to the volume of SEC reporting requirements
|
Retains future upside potential in business
|
The company has never gone into the public markets to raise capital to fund growth
|
Opportunity for reducing debt or refinancing
|
The company has never gone into the public markets to raise capital to liquidate debt
|
Typical Advantages
|
Observation/Comments
|
Highly distracting and time consuming due to need for periodic reporting and investor relations
|
Management believes that there is little or no benefit to the company for all the effort spent to stay in compliance with ever growing SEC rules and reporting requirements
|
High costs due to initial and ongoing expenses, including payments to external advisors for regulatory compliance and maintaining a listing
|
Costs are discussed in a later section. The significance of direct costs alone is one good reason to consider going private
|
Limits on management’s freedom to act including need for approval of board or shareholders on many major matters
|
Management believes their freedom is not impacted by the board needing to approve everything that the company does. Management believes that their ability to do more timely and effective operational reporting is limited by the time needed to comply with regulation and rules
|
Potential loss of control and privacy since there is a need to reveal highly sensitive information in public reports
|
Management believes this to be an issue since competitors (as discussed above) are private and they can see what Monarch is doing but Monarch cannot see their competitors’ actions.
|
Shareholders’ expectations can create pressure on management to perform
|
Management believes that this has not been an issue.
|
Corporate governance requirements include business process improvements and non- executive directors’ oversight
|
Management is concerned that the Board may not totally appreciate the risk each board member takes upon themselves when serving on a public company board.
|
|
1.
|
A market capitalization of $250 million or less;
|
|
2.
|
A book value that substantially exceeds market capitalization;
|
|
3.
|
Fewer than two financial analysts covering the company and issuing regular research reports on it;
|
|
4.
|
A price-earnings ratio of less than 10;
|
|
5.
|
Cash on hand greater than market capitalization;
|
|
6.
|
Average trading volume of less than 50,000 shares a day.
|
|
1.
|
Market Capitalization: 100.74 million
|
|
2.
|
Book value: 114 million*
|
|
3.
|
Analysts: None
|
|
4.
|
P/E ratio: 18.65
|
|
5.
|
Cash: 6.4 million*
|
|
6.
|
Trading Volume: 0
|
Cost
|
2013
|
2012
|
2011
|
Legal
|
9,666
|
11,601
|
9,698
|
Accounting
|
293,900
|
297,900
|
297,900
|
D&O Insurance
|
49,250
|
34,650
|
31,500
|
Printing and other *
|
17,700
|
17,700
|
17,700
|
Total Direct
|
370,516
|
361,751
|
356,798
|
Indirect Costs*
|
280,000
|
280,000
|
280,000
|
Total
|
650,516
|
641,751
|
636,798
|
|
•
|
Analysis of yards per man hour.
|
|
•
|
Detailed sales forecasting by location, indicating individual customers or customer groups, including prices per units and number of units.
|
|
•
|
Detailed expense forecasting for both fixed and variable cost items.
|
|
•
|
Improved return on investment analysis for production equipment.
|
|
•
|
Increased visibility in equipment operating costs facilitating better repair/replace decisions.
|
|
•
|
Specific job pricing models factoring in key performance metrics.
|
|
•
|
Formalized customer collection processes.
|
|
•
|
Timely analysis of inventory levels and costs.
|
|
•
|
New computerized accounting system that has been delayed for 10 years.
|
|
•
|
Allow management to focus on long-term objectives rather than short-term profits to appease investors.
|
|
•
|
Stockholders will likely realize a similar price for their shares as they currently realize as a public company which historically approximates book value per share.
|
|
•
|
Enable the company to save costs and avoid the disadvantages of complying with the requirements of the Exchange Act and the Sarbanes-Oxley Act, which require, among other things, periodic disclosure of what may be competitive or strategic business information and impose inflexible corporate governance requirements.
|
|
•
|
Reduce the distraction (and potential litigation) that can result from dissatisfied public stockholders.
|
|
•
|
Remove the company’s operations from public scrutiny and minimization of the need to disclose sensitive information that competitors can utilize.
|
|
Ø
|
Management Team - A strong management team that is able to run and create a more efficient company with the same cash-generating ability.
|
|
Ø
|
Market Capitalization - Shares undervalued.
|
|
Ø
|
Inside Ownership - Significant insider ownership so that fewer shares need to be acquired.
|
|
Ø
|
Cash Flows - Stable cash flows, a strong balance sheet with a low amount of outstanding debt and an established customer base, particularly if external financing is needed.
|
|
Ø
|
Cash-out Merger - All outstanding shares of the company, other than shares held by the buyer or buying group, are converted into cash, following majority or other approval of the shareholders.
|
|
Ø
|
Cash Tender Offer - The acquirer purchases the outstanding shares directly from other shareholders, usually followed by a “squeeze-out” merger of any shareholders who did not accept the tender offer (sometimes referred to as a “two-step” approach).
|
|
Ø
|
Reverse Stock Split - Individuals with smaller holdings who otherwise would receive fractional shares are given cash in lieu of the fractional shares, so that the company ends up with fewer shareholders.
|
|
Ø
|
Creation of Multiple Stock Classes – It may be possible to create multiple classes of stock to restructure the shareholder into various class groups. The purpose of which would be to get the number of shareholders of record for the publicly traded shares below the 300 shareholder threshold.
|
|
•
|
There are no more than 300 shareholders of record.
|
|
•
|
There are no more than 500 shareholders of record and the company has not exceeded $10 million of assets as of the end of the last three fiscal years.
|
|
1.
|
The risk (and likelihood) of litigation.
|
|
2.
|
The structure of the transaction.
|
|
3.
|
Disclosure obligations.
|
|
4.
|
Timing considerations.
|
|
5.
|
Potential for competing offers once the decision to go private is known.
|