-----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, Oak+iRcqfLeWPJi//oJLtewGrhD5AqHrAq8U4wo9tsKe9+BaQMP/qLW/kD8w+pxt yZV6ljjBVsfQ7CRSMOwQLQ== 0000927016-99-000974.txt : 19990318 0000927016-99-000974.hdr.sgml : 19990318 ACCESSION NUMBER: 0000927016-99-000974 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19990317 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: REYNOLDS METALS CO CENTRAL INDEX KEY: 0000083604 STANDARD INDUSTRIAL CLASSIFICATION: PRIMARY PRODUCTION OF ALUMINUM [3334] IRS NUMBER: 540355135 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-12270 FILM NUMBER: 99567099 BUSINESS ADDRESS: STREET 1: 6601 W BROAD ST STREET 2: PO BOX 27003 CITY: RICHMOND STATE: VA ZIP: 23261 BUSINESS PHONE: 8042812000 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: HIGHFIELDS CAPITAL MANAGEMENT LP CENTRAL INDEX KEY: 0001079563 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 200 CLARENDON STREET 51ST FLOOR CITY: BOSTON STATE: MA ZIP: 02117 BUSINESS PHONE: 6178507500 SC 13D 1 SCHEDULE 13D UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. __)* REYNOLDS METALS COMPANY ____________________________________________________ (Name of issuer) COMMON STOCK, no par value ____________________________________________________ (Title of class of securities) 761763 101 ______________________________ (CUSIP number) Highfields Capital Management LP Attention: Kenneth H. Colburn 200 Clarendon Street 51st Floor Boston, MA 02117 (617) 850-7570 ______________________________________________________ (Name, address and telephone number of person authorized to receive notices and communications) March 15, 1999 _______________________________________________________ (Date of event which requires filing of this statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ]. (Continued on the following pages) (Page 1 of 14 Pages) __________________ *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act. SCHEDULE 13D - ----------------------- --------------------- CUSIP No. 761763 101 Page 2 of 14 pages - ----------------------- --------------------- - ------------------------------------------------------------------------------ 1 NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS Highfields Capital Management LP - ------------------------------------------------------------------------------ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_] (b) [_] - ------------------------------------------------------------------------------ 3 SEC USE ONLY - ------------------------------------------------------------------------------ 4 SOURCE OF FUNDS WC - ------------------------------------------------------------------------------ 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] - ------------------------------------------------------------------------------ 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ------------------------------------------------------------------------------ 7 SOLE VOTING POWER NUMBER OF 3,550,700 SHARES ----------------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY None ----------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING 3,550,700 PERSON ----------------------------------------------------------- 10 SHARED DISPOSITIVE POWER None - ------------------------------------------------------------------------------ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,550,700 - ------------------------------------------------------------------------------ 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_] - ------------------------------------------------------------------------------ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.5% ----- - ------------------------------------------------------------------------------ 14 TYPE OF REPORTING PERSON PN - ------------------------------------------------------------------------------ SCHEDULE 13D - ----------------------- --------------------- CUSIP No. 761763 101 Page 3 of 14 pages - ----------------------- --------------------- - ------------------------------------------------------------------------------ 1 NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS Highfields GP LLC - ------------------------------------------------------------------------------ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_] (b) [_] - ------------------------------------------------------------------------------ 3 SEC USE ONLY ------------------------------------------------------------------------------ 4 SOURCE OF FUNDS AF - ------------------------------------------------------------------------------ 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] - ------------------------------------------------------------------------------ 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ------------------------------------------------------------------------------ 7 SOLE VOTING POWER NUMBER OF 3,550,700 SHARES ----------------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY None ----------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING 3,550,700 PERSON ----------------------------------------------------------- 10 SHARED DISPOSITIVE POWER None - ------------------------------------------------------------------------------ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,550,700 - ------------------------------------------------------------------------------ 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_] - ------------------------------------------------------------------------------ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.5% ----- - ------------------------------------------------------------------------------ 14 TYPE OF REPORTING PERSON OO - ------------------------------------------------------------------------------ SCHEDULE 13D - ----------------------- --------------------- CUSIP No. 761763 101 Page 4 of 14 pages - ----------------------- --------------------- - ------------------------------------------------------------------------------ 1 NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS Jonathon S. Jacobson - ------------------------------------------------------------------------------ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_] (b) [_] - ------------------------------------------------------------------------------ 3 SEC USE ONLY - ------------------------------------------------------------------------------ 4 SOURCE OF FUNDS AF - ------------------------------------------------------------------------------ 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] - ------------------------------------------------------------------------------ 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States - ------------------------------------------------------------------------------ 7 SOLE VOTING POWER NUMBER OF 3,550,700 SHARES ----------------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY None ----------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING 3,550,700 PERSON ----------------------------------------------------------- 10 SHARED DISPOSITIVE POWER None - ------------------------------------------------------------------------------ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,550,700 - ------------------------------------------------------------------------------ 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_] - ------------------------------------------------------------------------------ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.5% ----- - ------------------------------------------------------------------------------ 14 TYPE OF REPORTING PERSON IN - ------------------------------------------------------------------------------ SCHEDULE 13D - ----------------------- --------------------- CUSIP No. 761763 101 Page 5 of 14 pages - ----------------------- --------------------- - ------------------------------------------------------------------------------ 1 NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS Richard L. Grubman - ------------------------------------------------------------------------------ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_] (b) [_] - ------------------------------------------------------------------------------ 3 SEC USE ONLY - ------------------------------------------------------------------------------ 4 SOURCE OF FUNDS AF - ------------------------------------------------------------------------------ 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] - ------------------------------------------------------------------------------ 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States - ------------------------------------------------------------------------------ 7 SOLE VOTING POWER NUMBER OF 3,550,700 SHARES ----------------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY None ----------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING 3,550,700 PERSON ----------------------------------------------------------- 10 SHARED DISPOSITIVE POWER None - ------------------------------------------------------------------------------ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,550,700 - ------------------------------------------------------------------------------ 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_] - ------------------------------------------------------------------------------ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.5% ----- - ------------------------------------------------------------------------------ 14 TYPE OF REPORTING PERSON IN - ------------------------------------------------------------------------------ Page 6 of 14 pages Item 1. Security and Issuer. ------------------- The securities to which this statement relates are the shares of common stock, no par value (the "Shares"), of Reynolds Metals Company, a Delaware corporation (the "Company"). The principal executive offices of the Company are located at 6601 West Broad Street, P.O. Box 27003, Richmond, Virginia 23261- 7003. Item 2. Identity and Background. ----------------------- (a), (b) and (c) This statement is being filed by the following persons: Highfields Capital Management LP, a Delaware limited partnership ("Highfields Capital Management"), Highfields GP LLC, a Delaware limited liability company ("Highfields GP"), Jonathon S. Jacobson and Richard L. Grubman. Highfields Capital Management, Highfields GP, Mr. Jacobson and Mr. Grubman are sometimes individually referred to herein as a "Reporting Person" and collectively as the "Reporting Persons" or "Highfields." Highfields Capital Management is principally engaged in the business of providing investment management services to the following investment funds: Highfields Capital I LP, a Delaware limited partnership ("Highfields I"), Highfields Capital II LP, a Delaware limited partnership ("Highfields II"), and Highfields Capital Ltd., a company organized under the laws of the Cayman Islands, B.W.I. ("Highfields Ltd." and, together with Highfields I and Highfields II, the "Funds"). The business address and principal executive offices of Highfields Capital Management are 200 Clarendon Street, 51st Floor, Boston, Massachusetts 02117. Highfields GP is the General Partner of Highfields Capital Management. Highfields GP's principal business is serving as General Partner of Highfields Capital Management. The business address and principal executive offices of Highfields GP are 200 Clarendon Street, 51st Floor, Boston, Massachusetts 02117. Mr. Jacobson is a Managing Member of Highfields GP and his business address is 200 Clarendon Street, 51st Floor, Boston, Massachusetts 02117. Mr. Jacobson also is a Managing Director of Highfields Capital Management and in such capacity acts as a portfolio manager of the Funds. Mr. Grubman is a Managing Member of Highfields GP and his business address is 200 Clarendon Street, 51st Floor, Boston, Massachusetts 02117. Mr. Grubman also is a Managing Director of Highfields Capital Management and in such capacity acts as a portfolio manager of the Funds. The Shares to which this Schedule 13D relates are owned directly by the Funds. (d) and (e) During the last five years, none of the persons identified in this Item 2 has been convicted in any criminal proceeding (excluding traffic violations or similar misdemeanors), or has been a party to any civil proceeding of a judicial or administrative body of Page 7 of 14 pages competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violations with respect to such laws. (f) Each natural person identified in this Item 2 is a citizen of the United States. Item 3. Source and Amount of Funds or Other Consideration. ------------------------------------------------- The aggregate purchase price of the 344,754 Shares owned by Highfields I was $16,996,455.91, inclusive of brokerage commissions. The aggregate purchase price of the 660,043 Shares owned by Highfields II was $32,213,446.65, inclusive of brokerage commissions. The aggregate purchase price of the 2,545,903 Shares owned by Highfields Ltd. was $125,996,342.20, inclusive of brokerage commissions. Each of Highfields I, Highfields II and Highfields Ltd. used their own assets to purchase such Shares, which may at any given time include funds borrowed in the ordinary course in their margin accounts. Item 4. Purpose of Transaction. ---------------------- From time to time, each of the Funds has acquired Shares in the ordinary course of business for investment purposes and has held Shares in such capacity. On February 16, 1999, representatives of Highfields met with management of the Company to discuss the Company's performance since the initiation in late 1996 of management's portfolio review of the Company's businesses. In particular, Highfields expressed its views concerning potential alternatives that it believed management should consider to maximize value for all shareholders of the Company. Following this meeting, by a letter dated February 16, 1999 (a copy of which is attached as an exhibit to this Schedule 13D) Highfields notified the Company in accordance with the Company's By-laws of its intent to present a proposal (the "Proposal") at the Company's 1999 Annual Meeting of Stockholders (the "1999 Annual Meeting"). The Proposal requests that the Company retain an investment banking firm to explore strategic alternatives for maximizing shareholder value. Highfields also requested that the Proposal be included in the Company's proxy statement for the 1999 Annual Meeting and the accompanying proxy card. By a letter dated February 25, 1999 (a copy of which is attached as an exhibit to this Schedule 13D), the Company informed Highfields that the Company would not include the Proposal in the proxy statement for the 1999 Annual Meeting and the accompanying proxy card, and, pursuant to a letter dated March 1, 1999 (a copy of which is attached as an exhibit to this Schedule 13D), the Company so informed the Securities and Exchange Commission (the "Commission"). However, based on conversations with the Company's management, Highfields was informed that the Company would permit it to present the Proposal at the 1999 Annual Page 8 of 14 pages Meeting in accordance with the Company's By-laws. Pursuant to a letter dated March 1, 1999 (a copy of which is attached as an exhibit to this Schedule 13D), Highfields responded to the Company's February 25, 1999 letter to confirm that the Company would permit Highfields to present the Proposal at the 1999 Annual Meeting, consistent with the conversations between Highfields and the Company's management. In its March 1, 1999 letter, Highfields also sought to confirm that disclosure of the Proposal would be contained in the Company's proxy statement for the 1999 Annual Meeting in accordance with the anti-fraud provisions of the Securities Exchange Act of 1934. In its March 1, 1999 letter to the Commission, the Company represented to the Commission that the Company's proxy statement relating to the 1999 Annual Meeting would contain certain disclosure regarding the Proposal. Pursuant to a letter dated March 5, 1999 (a copy of which is attached as an exhibit to this Schedule 13D), Highfields expressed additional views concerning the commitment of the Company's management to maximizing shareholder value. However, to date, Highfields believes that management of the Company has not indicated a willingness to follow Highfields' suggestions or recommendations. Accordingly, Highfields currently intends to attend and present the Proposal at the 1999 Annual Meeting. Highfields believes that the Company has not been fully committed to maximizing shareholder value. Beginning in late 1996, the Company initiated a portfolio review of all of its businesses and hired Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") as its financial advisor for that process. Highfields believes that management of the Company should now explicitly commit to the shareholders to direct Merrill Lynch (or retain another investment banking firm) to explore all alternatives to maximize shareholder value, including without limitation, a sale, spin-off or split-off of some or all of the Company's business units or assets, with no prejudice for or against any particular alternative. In addition, Highfields believes that the Company should establish an independent committee of the Board of Directors of the Company to assist management in monitoring Merrill Lynch's (or such other investment banking firm's) progress. In addition to the foregoing, Highfields may consider the feasibility and advisability of various alternative courses of action with respect to its investment in the Company, and Highfields reserves the right, subject to applicable law, (i) to hold its Shares as a passive investor or as an active investor (whether or not as a member of a "group" with other beneficial owners of Shares or otherwise), (ii) to acquire beneficial ownership of additional Shares in the open market, in privately negotiated transactions or otherwise, (iii) to dispose of all or part of its holdings of Shares, (iv) to take other actions which could involve one or more of the types of transactions or have one or more of the results described in Item 4 of this Schedule 13D, or (v) to change its intention with respect to any or all of the matters referred to in this Item 4. Highfields' decisions and actions with respect to such possibilities will depend upon a number of factors, including, but not limited to, the actions of the Company, market activity in the Shares, an evaluation of the Company and its prospects, general market and economic conditions, conditions specifically affecting Highfields and other factors which Highfields may deem relevant to its investment decisions. Except as set forth herein, no contract, arrangement, relationship or understanding (either oral or written) exists among the Reporting Persons as to the acquisition, disposition, voting or holding of Shares. Except as set forth herein, no Reporting Person has any present plan or proposal that would result in or relate to any of the transactions required to be described in Item 4 of Schedule 13D. Page 9 of 14 pages Item 5. Interest in Securities of Issuer. -------------------------------- (a) and (b) As of March 16, 1999, Highfields I, Highfields II and Highfields Ltd. owned beneficially 344,754, 660,043 and 2,545,903 Shares, respectively, representing approximately 0.5%, 1.0% and 4.0%, respectively, of the 64,456,697 Shares outstanding as of October 30, 1998, as reported in the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998 (the "Form 10-Q"). As of March 16, 1999, Highfields Capital Management in its capacity as investment manager of the Funds, had sole voting and dispositive power with respect to all 3,550,700 Shares owned beneficially by the Funds, representing approximately 5.5% of the 64,456,697 Shares outstanding as of October 30, 1998, as reported in the Form 10-Q. As of March 16, 1999, Highfields GP, through its control of Highfields Capital Management, had sole voting and dispositive power with respect to all 3,550,700 Shares owned beneficially by Highfields Capital Management, representing approximately 5.5% of the 64,456,697 Shares outstanding as of October 30, 1998, as reported in the Form 10-Q. As of March 16, 1999, Mr. Grubman, as a Managing Member of Highfields GP, had sole voting and dispositive power with respect to all 3,550,700 Shares owned beneficially by Highfields GP, representing approximately 5.5% of the 64,456,697 Shares outstanding as of October 30, 1998, as reported in the Form 10-Q. As of March 16, 1999, Mr. Jacobson, as a Managing member of Highfields GP, had sole voting and dispositive power with respect to all 3,550,700 Shares owned beneficially by Highlands GP, representing approximately 5.5% of the 64,456,697 Shares outstanding as of October 30, 1998, as reported in the Form 10-Q. (c) Information with respect to all transactions in the Shares beneficially owned by the Reporting Persons which were effected during the past sixty days is set forth in Schedule A hereto and incorporated herein by reference. ---------- (d) None. (e) Not applicable. Item 6. Contracts, Arrangements, Understandings or Relationships With Respect --------------------------------------------------------------------- to Securities of the Issuer. --------------------------- Except as set forth in Item 4 of this Schedule 13D, none of the Reporting Persons has any contract, arrangement, understanding or relationship (legal or otherwise) with any person with respect to any securities of the Company including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any securities of the Company, joint ventures, loan or option arrangements, puts or calls, guaranties of profits, division of profits or losses, or the giving or withholding of proxies. Page 10 of 14 pages Item 7. Material to be Filed as Exhibits. -------------------------------- The following documents are filed as exhibits to this Schedule 13D: Exhibit 99.1 - Letters from Highfields to the Company, dated February 16, ------------ 1999. Exhibit 99.2 - Letter from the Company to Highfields, dated February 25, ------------ 1999. Exhibit 99.3 - Letter from the Company to the Securities and Exchange ------------ Commission, dated March 1, 1999. Exhibit 99.4 - Letter from Highfields to the Company, dated March 1, ------------ 1999. Exhibit 99.5 - Letter from Highfields to the Company, dated March 5, 1999. ------------ Page 11 of 14 pages SIGNATURES After reasonable 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. Dated: March 17, 1999 By: Highfields Capital Management LP By: Highfields GP LLC, as General Partner By: /s/ Richard L. Grubman ------------------------------------- Richard L. Grubman, Managing Member By: Highfields GP LLC By: /s/ Richard L. Grubman -------------------------------------- Richard L. Grubman, Managing Member By: /s/ Richard L. Grubman ------------------------------------------- Richard L. Grubman, individually By: /s/ Jonathon S. Jacobson ---------------------------------------- Jonathon S. Jacobson, individually Page 12 of 14 pages Schedule A ---------- INFORMATION WITH RESPECT TO TRANSACTIONS OF THE REGISTRANT'S COMMON STOCK BY HIGHFIELDS I DURING THE PAST SIXTY DAYS
Number of Shares of Common Stock Price Date Purchased/(Sold)/1/ Per Share ---- ------------------- --------- 1/19/1999 9,353.00 $52.8694 1/19/1999 460.00 53.1025 1/20/1999 17,143.00 52.4961 1/20/1999 726.00 51.9254 1/21/1999 851.00 52.0500 1/22/1999 4,981.00 49.9365 1/22/1999 2,418.00 49.9750 1/25/1999 2,418.00 49.2844 1/25/1999 12,090.00 49.0500 1/25/1999 8,463.00 49.4480 1/26/1999 6,173.00 49.6125 1/26/1999 1,852.00 49.2900 1/27/1999 2,418.00 48.4025 1/27/1999 484.00 48.0300 2/03/1999 2,000.00 45.9633 2/04/1999 47,975.00 47.5500 2/10/1999 3,212.00 46.8319 2/10/1999 1,515.00 46.8942 2/11/1999 2,020.00 46.5459 2/11/1999 11,363.00 46.5611 3/11/1999 780.00 44.0500 3/11/1999 7,661.00 44.0576 3/12/1999 12,129.00 43.8006 3/12/1999 15,722.00 43.7557 3/12/1999 492.00 43.7388 3/15/1999 4,855.00 43.3478 3/15/1999 8,144.00 43.4250 3/15/1999 2,874.00 43.2573 3/16/1999 4,360.00 43.4250 3/16/1999 10.00 43.3640 3/16/1999 6,797.00 43.3836 3/16/1999 9,710.00 43.4352 Total: 211,449.00
/1/ All transactions were effected through open market or privately negotiated purchases. Page 13 of 14 pages INFORMATION WITH RESPECT TO TRANSACTIONS OF THE REGISTRANT'S COMMON STOCK BY HIGHFIELDS II DURING THE PAST SIXTY DAYS
Number of Shares of Common Stock Price Date Purchased/(Sold)/1/ Per Share ---- ------------------ --------- 1/19/1999 3,945.00 52.8694 1/19/1999 194.00 53.1025 1/20/1999 11,465.00 52.4961 1/20/1999 485.00 51.9254 1/21/1999 3,184.00 52.0500 1/22/1999 3,331.00 49.9365 1/22/1999 1,617.00 49.9750 1/25/1999 8,085.00 49.0500 1/25/1999 5,660.00 49.4480 1/25/1999 1,617.00 49.2844 1/26/1999 9,499.00 49.6125 1/26/1999 2,849.00 49.2900 1/27/1999 323.00 48.0300 1/27/1999 1,617.00 48.4025 1/28/1999 19,000.00 48.5500 1/29/1999 23,963.00 48.3000 2/02/1999 9,000.00 46.0285 2/03/1999 9,435.00 45.9633 2/04/1999 91,058.00 47.5500 2/10/1999 2,876.00 46.8942 2/10/1999 6,096.00 46.8319 2/11/1999 21,566.00 46.5611 2/11/1999 3,834.00 46.5459 3/11/1999 2,752.00 44.0500 3/11/1999 22,624.00 44.0576 3/12/1999 30,628.00 43.8006 3/12/1999 34,988.00 43.7557 3/12/1999 1,084.00 43.7388 3/15/1999 9,295.00 43.3478 3/15/1999 16,389.00 43.4250 3/15/1999 5,503.00 43.2573 3/16/1999 8,347.00 43.4250 3/16/1999 19.00 43.3637 3/16/1999 13,013.00 43.3836 3/16/1999 18,590.00 43.4352 Total: 403,941.00
/1/ All transactions were effected through open market or privately negotiated purchases. Page 14 of 14 pages INFORMATION WITH RESPECT TO TRANSACTIONS OF THE REGISTRANT'S COMMON STOCK BY HIGHFIELDS LTD. DURING THE PAST SIXTY DAYS
Number of Shares of Common Stock Price Date Purchased/(Sold)/1/ Per Share ---- ------------------- --------- 1/19/1999 11,102.00 52.8694 1/20/1999 32,260.00 52.4961 1/20/1999 1,365.00 51.9254 1/20/1999 10,032.00 52.4961 1/20/1999 424.00 51.9254 1/21/1999 1,415.00 52.0500 1/21/1999 4,550.00 52.0500 1/22/1999 9,373.00 49.9365 1/22/1999 4,550.00 49.9750 1/22/1999 1,415.00 49.9750 1/22/1999 2,915.00 49.9365 1/25/1999 22,750.00 49.0500 1/25/1999 15,925.00 49.4480 1/25/1999 4,550.00 49.2844 1/25/1999 4,952.00 49.4480 1/25/1999 1,415.00 49.2844 1/25/1999 7,075.00 49.0500 1/26/1999 8,001.00 49.6125 1/26/1999 2,400.00 49.2900 1/26/1999 26,327.00 49.6125 1/26/1999 7,899.00 49.2900 1/27/1999 910.00 48.0300 1/27/1999 4,550.00 48.4025 1/27/1999 1,415.00 48.4025 1/27/1999 283.00 48.0300 1/28/1999 16,000.00 48.5500 1/28/1999 65,000.00 48.5500 1/29/1999 31,612.00 48.3000 1/29/1999 69,425.00 48.3000 2/02/1999 42,000.00 46.0285 2/02/1999 9,000.00 46.0285 2/03/1999 7,831.00 45.9633 2/03/1999 24,734.00 45.9633 2/04/1999 79,752.00 47.5500 2/04/1999 256,215.00 47.5500 2/10/1999 8,091.00 46.8942 2/10/1999 17,153.00 46.8319 2/10/1999 5,339.00 46.8319 2/10/1999 2,518.00 46.8942 2/11/1999 3,358.00 46.5459 2/11/1999 18,889.00 46.5611 2/11/1999 10,788.00 46.5459 2/11/1999 60,682.00 46.5611 3/11/1999 6,468.00 44.0500 3/11/1999 44,915.00 44.0576 3/12/1999 43,990.00 43.7557 3/12/1999 49,243.00 43.8006 3/12/1999 1,324.00 43.7388 3/15/1999 15,482.00 43.4250 3/15/1999 4,277.00 43.2573 3/15/1999 7,225.00 43.3478 3/15/1999 21,840.00 43.3478 3/15/1999 12,929.00 43.2573 3/15/1999 8,637.00 43.4250 3/15/1999 6,785.00 43.3478 3/15/1999 4,017.00 43.2573 3/15/1999 6,348.00 43.4250 3/16/1999 43,680.00 43.4352 3/16/1999 19,612.00 43.4250 3/16/1999 44.00 43.3639 3/16/1999 30,576.00 43.3836 3/16/1999 14.00 43.3636 3/16/1999 9,499.00 43.3836 3/16/1999 6,093.00 43.4250 3/16/1999 13,570.00 43.4352 3/16/1999 13.00 43.3638 3/16/1999 10,115.00 43.3836 3/16/1999 14,450.00 43.4352 3/16/1999 6,488.00 43.4250 Total: 1,303,874.00
/1/ All transactions were effected through open market or privately negotiated purchases. EX-99.1 2 LETTER FROM HIGHFIELDS DATED 2/16/1999 [HIGHFIELDS CAPITAL LETTERHEAD APPEARS HERE] Exhibit 99.1 Tuesday, February 16, 1999 By Personal Delivery - -------------------- Mr. Jeremiah J. Sheehan Chairman of the Board and Chief Executive Officer Reynolds Metals Company 6601 West Broad Street Richmond, Virginia 23230 Dear Jerry: As we mentioned to you at our meeting today, Highfields Capital is submitting the attached written notice of a stockholder proposal in order to preserve our flexibility to present it at the 1999 Annual Meeting. As you are aware, we need to submit this proposal today to be sure to make the deadline for submitting such a proposal under the Company's By-Laws. We look forward to having further discussions with you in the weeks ahead and hope that our concerns as investors in the Company can be addressed. Again, thank you for taking the time to meet with us today. Sincerely, /s/ Richard L. Grubman Richard L. Grubman Managing Director [HIGHFIELDS CAPITAL LETTERHEAD APPEARS HERE] Tuesday, February 16, 1999 By Personal Delivery - -------------------- Ms. Donna C. Dabney Secretary Reynolds Metals Company 6601 West Broad Street Richmond, Virginia 23230 Dear Ms. Dabney: In accordance with Article II, Section 4 of the by-laws of Reynolds Metals Company (the "Company"), Highfields Capital I LP ("Highfields"), the record owner of 100 shares of the Company's common stock as of the date hereof, is hereby furnishing written notice of business to be brought before the Company's 1999 Annual Meeting. Highfields Capital Management LP, the investment advisor to Highfields, is the beneficial owner of 2,926,300 shares of the Company's common stock. In accordance with clause (iii) of Article II, Section 4 of the Company's by-laws, Highfields' notice hereby sets forth the following information: (a) Business Proposed to be Brought Before the Meeting. Highfields hereby -------------------------------------------------- submits the following proposal for presentation at the 1999 Annual Meeting: "Resolved, that shareholders ask the Board of Directors of the Company to retain an investment banking firm to explore strategic alternatives for maximizing shareholder value." Supporting statement: "Notwithstanding the Company's operational improvements since the initiation of management's portfolio review restructuring program in October 1996, the Company's stock has remained depressed and has been dramatically underperforming the stock of other aluminum companies for a significant period of time. Over the past five years the Company's stock has fallen approximately 11%; since October 1996, it has fallen approximately 17%. The Company's current share price does not reflect the substantial value that we believe could be realized by separating the Company's Packaging and Consumer business unit from its Base Materials and other business units. Comparable packaging and consumer companies currently trade at valuations which we believe imply that a conservative value of this business unit represents at least $35 per share of Company common stock. Alternatively, we believe that current valuations of comparable alumina and aluminum production capacity imply a conservative valuation for the Ms. Donna C. Dabney February 16, 1999 Page 2 Company's Base Materials business unit, net of the Company's debt and based on the current price and outlook for aluminum, of at least $60 per share. In addition, the Company operates business units in Construction and Distribution and Transportation. In summary, based on a sum of the parts analysis, we believe that the total value of the Company's business units net of debt exceeds its current market capitalization by over one hundred percent. Because maintaining the status quo has not and is unlikely to unlock this value, the Board of Directors should retain an investment banking firm to explore all strategic alternatives for maximizing shareholder value, including, but not limited to, a sale, spin-off or split-off of some or all of the Company's business units or assets." (b) Person Proposing to Bring Such Business Before the Meeting. ---------------------------------------------------------- Highfields Capital I LP 200 Clarendon Street Boston, MA 02117 Attention: Richard Grubman (c) Class and Number of Shares Held. Highfields is the record owner of 100 ------------------------------- shares and the beneficial owner of 271,220 shares of the Company's common stock as of the date of this notice, representing approximately .00016% and 0.42%, respectively, of the outstanding shares of the Company's common stock/1/. Highfields does not have the right to vote any other shares of the Company's common stock pursuant to a proxy or other voting arrangement. The following table sets forth the beneficial ownership of the Company's common stock by Highfields and its affiliates.
Percentage Name Amount of Class/1/ ---- ------ ----------- Highfields Capital I LP 271,220 0.42% Highfields Capital II LP 496,811 0.77% Highfields Capital Ltd. 2,158,269 3.35% ---------- ---- Highfields Capital 2,926,300/2/ 4.54% Management LP
Highfields is not aware of any announcement by the Company of a record date for the 1999 Annual Meeting. (d) Information Regarding Director Nominees(s). Not applicable. ------------------------------------------ (e) Other Information. Highfields, Highfields Capital II LP and Highfields ----------------- Capital Ltd. (collectively, the "Funds") are investment funds, and Highfields Capital Management LP, the investment advisor to the Funds (the "Investment Advisor"), is primarily engaged in the business of investment management. The principal business address of the Investment Advisor and each of the - ------------------ /1/ Based on 64,456,697 total shares outstanding as reported in the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998. /2/ Represents shares beneficially owned by Highfields, Highfields Capital II LP and Highfields Capital Ltd. Highfields Capital Management LP is the investment advisor to Highfields, Highfields Capital II LP and Highfields Capital Ltd. Ms. Donna C. Dabney February 16, 1999 Page 3 Funds, except Highfields Capital Ltd., is 200 Clarendon Street, Boston, Massachusetts 02117, and the telephone number there is (617) 850-7500. The principal business address of Highfields Capital Ltd. is c/o Goldman Sachs (Cayman) Trust Limited, Harbor Center, 2nd Floor, P.O. Box 896, George Town, Grand Cayman, Cayman Islands, B.W.I., and the telephone number there is 345-949-6770. As of the date of this notice, each of the Funds and the Investment Advisor beneficially owned the shares of Company common stock set forth in paragraph (c) above. Except as set forth in this notice, to the best knowledge of each of the Funds and the Investment Advisor, none of such persons or any associate of any of the foregoing persons (i) has a substantial interest, direct or indirect, by security holdings or otherwise, in any matter to be acted upon at the 1999 Annual Meeting, (ii) owns beneficially, directly or indirectly, or has the right to acquire, any securities of the Company or any parent or subsidiary of the Company, (iii) owns any securities of the Company of record but not beneficially, (iv) has incurred indebtedness for the purpose of acquiring or holding securities of the Company, (v) is or has been a party to any contract, arrangement or understanding with respect to any securities of the Company within the past year, (vi) has been indebted to the Company or any of its subsidiaries since the beginning of the Company's last fiscal year or (vii) has any arrangement or understanding with respect to future employment by the Company or with respect to any future transactions to which the Company or any of its affiliates will or may be a party. In addition, except as set forth in this notice, to the best knowledge of each of the Funds and the Investment Advisor, none of such persons or any associate or immediate family member of any of the foregoing persons has had or is to have a direct or indirect material interest in any transaction with the Company since the beginning of the Company's last fiscal year, or any proposed transaction, to which the Company or any of its affiliates was or is a party. Highfields presently does not intend to solicit proxies relating to the aforementioned business proposed to be brought before the Company's 1999 Annual Meeting and therefore is not filing a proxy statement. Accordingly, we respectfully request that the Company include with its proxy statement for the 1999 Annual Meeting Highfields' proposal as presented above and boxes on the accompanying proxy card to permit stockholders of the Company to express their approval or disapproval for this proposal. Thank you for your assistance. Sincerely, /s/ Kenneth H. Colburn Kenneth H. Colburn Chief Operating Officer EX-99.2 3 LETTER TO HIGHFIELDS DATED 2/25/1999 Exhibit 99.2 [REYNOLDS METALS COMPANY LETTERHEAD] February 25, 1999 By DHL - ------ Mr. Kenneth H. Colburn Chief Operating Officer Highfields Capital I LP 200 Clarendon Street Boston, Massachusetts 02117 Dear Mr. Colburn: This is in reference to your letter dated February 16, 1999 to Donna C. Dabney, furnishing written notice of business to be brought before Reynolds Metals Company's 1999 Annual Meeting of Stockholders by Highfields Capital I LP ("Highfields" or "you"). In accordance with Rule 14a-8(f) under the Securities Exchange Act of 1934, Reynolds notifies you of the following: 1. Your letter did not indicate that Highfields had continuously held Reynolds common stock for at least one year as of February 16, 1999. Reynolds' stock records show that Highfields became a holder of record on February 11, 1999. Please provide appropriate evidence that Highfields has continuously held Reynolds shares for at least one year before Highfields' submission of the proposal, as required under Rule 14a-8(b). 2. Your letter did not indicate that Highfields intends to continue to hold shares of Reynolds common stock through the date of Reynolds' 1999 Annual Meeting. Please provide an appropriate written statement that Highfields intends to continue ownership of Reynolds shares through the date of Reynolds' 1999 Annual Meeting as required under Rule 14a-8(b). 3. Reynolds has determined that your proposal was not timely received for purposes of Rule 14a-8. Under Rule 14a-8(e)(2), the deadline for receipt of stockholder proposals to be included in Reynolds' proxy materials for its 1999 Annual Meeting was November 18, 1998. This deadline was stated in Reynolds' 1998 proxy statement and in its Form 10-Q for the quarter ended June 30, 1998. Reynolds intends to exclude your proposal and supporting Highfields Capital I LP February 25, 1999 Page 2 statement from its proxy materials on this basis. Reynolds also reserves the right to exclude your proposal to the extent it is permitted to do so under any other provision of Rule 14a-8. Reynolds would appreciate receiving Highfields' response to Items 1 and 2 above by March 12, 1999. Very truly yours, /s/ Brenda Hart Brenda A. Hart EX-99.3 4 LETTER TO THE SEC Exhibit 99.3 [REYNOLDS METALS COMPANY LETTERHEAD] March 1, 1999 By DHL - ------ Mr. Kenneth H. Colburn Chief Operating Officer Highfields Capital I LP 200 Clarendon Street Boston, Massachusetts 02117 Dear Mr. Colburn: Enclosed is a copy of a letter mailed today to the Securities and Exchange Commission on behalf of Reynolds Metals Company in accordance with Rule 14a-8(j) under the Securities Exchange Act of 1934. Very truly yours, /s/ Brenda Hart ------------------------- Brenda A. Hart Enclosure [REYNOLDS METALS COMPANY LETTERHEAD] March 1, 1999 By DHL - ------ Securities and Exchange Commission 1934 Act/Rule 14a-8 Office of Chief Counsel 1934 Act/Rule 14a-4 Division of Corporation Finance 450 Fifth Street, N.W. Washington, D.C. 20549 Re: Reynolds Metals Company 1999 Annual Meeting of Stockholders Stockholder Proposal Submitted by Highfields Capital I LP Ladies and Gentlemen: On behalf of Reynolds Metals Company, a Delaware corporation (the "Company"), I respectfully request that the Commission staff concur in my opinion that: 1. the Company may properly exclude a stockholder proposal submitted by Highfields Capital I LP (the "Proponent") from the Company's proxy statement and form of proxy for the Company's 1999 Annual Meeting of Stockholders, on the bases discussed below under Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"); and 2. if the proposal is excluded under Rule 14a-8, the Company's proxy statement and form of proxy for the 1999 Annual Meeting may confer discretionary authority to vote with respect to the proposal, should it be presented at the 1999 Annual Meeting, in reliance on Rule 14a-4(c)(2) under the Exchange Act, so long as the Company advises stockholders of the nature of the proposal and how the Company intends to vote with respect to such proposal. STOCKHOLDER PROPOSAL -------------------- The Company received a letter dated February 16, 1999 from the Proponent "furnishing written notice of business to be brought before the Company's 1999 Annual Meeting." The letter stated that the Proponent was submitting the following proposal for presentation at the 1999 Annual Meeting: Securities and Exchange Commission Office of Chief Counsel March 1, 1999 Page 2 "Resolved, that shareholders ask the Board of Directors of the Company to retain an investment banking firm to explore strategic alternatives for maximizing shareholder value." The letter further stated that: "Highfields presently does not intend to solicit proxies relating to the aforementioned business proposed to be brought before the Company's 1999 Annual Meeting and therefore is not filing a proxy statement. Accordingly, we respectfully request that the Company include with its proxy statement for the 1999 Annual Meeting Highfields' proposal as presented above and boxes on the accompanying proxy card to permit stockholders of the Company to express their approval or disapproval for this proposal." THE COMPANY'S POSITION ---------------------- I. The Company believes that the proposal may be properly excluded from its proxy statement and form of proxy on each of the separately sufficient bases under Rule 14a-8 discussed below. A. THE PROPOSAL WAS NOT TIMELY RECEIVED UNDER QUESTION 5, ------------------------------------------------------ RULE 14a-8(e)(2). - ----------------- Under Question 5, Rule 14a-8(e)(2), for a company to be required to include a stockholder proposal in its proxy materials, "[t]he proposal must be received at the company's principal executive offices not less than 120 calendar days before the date of the company's proxy statement released to shareholders in connection with the previous year's annual meeting." As noted in Rule 14a-8(e)(1), the deadline for submission in most cases appears in a company's prior year's proxy statement for the prior year's annual meeting. The Company's proxy statement for its 1998 Annual Meeting stated that stockholder proposals "must be received by November 18, 1998 in order to be included in the proxy materials for the 1999 Annual Meeting." As the date of the Company's 1998 proxy statement was March 18, 1998, the proper deadline for submission of a proposal for the 1999 Annual Meeting was November 18, 1998. The Company also disclosed this deadline in its Form 10-Q for the quarter ended June 30, 1998. Securities and Exchange Commission Office of Chief Counsel March 1, 1999 Page 3 The Company received the Proponent's proposal on February 16, 1999, a date well beyond the November 18, 1998 deadline for submitting a proposal under Rule 14a-8(e)(2). As the Proponent has failed to submit the proposal by the Company's properly determined deadline, the proposal is properly excludable from the Company's proxy statement and form of proxy for the 1999 Annual Meeting under Rule 14a-8(e)(2). B. THE PROPONENT HAS NOT COMPLIED WITH THE ELIGIBILITY REQUIREMENTS UNDER ---------------------------------------------------------------------- QUESTION 2, RULE 14a-8(b). - -------------------------- Under Question 2, Rule 14a-8(b), to be eligible to submit a proposal, a proponent must furnish the company with appropriate evidence that it has continuously held the company's securities for at least one year by the date it submits the proposal and a written statement that it intends to continue to hold the securities through the date of the meeting of shareholders. Here, the Proponent has not complied with these requirements. The Company has notified the Proponent of these deficiencies in its proposal under Rule 14a-8(b) and requested its response by March 12, 1999. C. THE PROPOSAL MAY BE OMITTED UNDER QUESTION 9, RULE 14a-8(i)(3), --------------------------------------------------------------- BECAUSE IT CONTAINS STATEMENTS THAT ARE CONTRARY TO THE COMMISSION'S - -------------------------------------------------------------------- PROXY RULES. - ------------ Under Question 9, Rule 14a-8(i)(3), a company may exclude a stockholder proposal if the proposal or supporting statement is contrary to any of the Commission's proxy rules, including Rule 14a-9, which prohibits materially false or misleading statements in proxy soliciting materials. The Company believes the following portions of the supporting statement, which contain predictions of future market values, are potentially false and misleading in contravention of Rule 14a-9: Supporting Statement (second paragraph) "Comparable packaging and consumer companies currently trade at valuations which we believe imply that a conservative value of this business unit represents at least $35 per share of Company common stock. Alternatively, we believe that current valuations of comparable alumina and aluminum production capacity imply a conservative valuation for the Company's Base Materials business unit, net of the Company's debt and based on the current price and outlook for aluminum, of at least $60 per share. In addition, the Company operates business units in Construction and Distribution and Transportation. In Securities and Exchange Commission Office of Chief Counsel March 1, 1999 Page 4 summary based on a sum of the parts analysis, we believe that the total value of the Company's business units net of debt exceeds its current market capitalization by over one hundred percent." The above statements suggest that the Company's packaging and consumer business unit and its base materials business unit would have future market values of at least $35 and $60 per share, respectively, if such business units were separated from each other and from the Company's other business operations and traded separately. While these values may represent a good faith opinion of the Proponent, the Company believes such values are potentially misleading in this context. Specifically, the Proponent fails to provide information necessary to enable stockholders to judge the validity of the Proponent's valuations. For example, no statement is given of the methodology used by the Proponent in valuing the business units, nor is any basis provided for the assertion that the Proponent's value estimates are "conservative." Further, the supporting statement fails to identify the companies comprising the "[c]omparable packaging and consumer companies" or the "comparable alumina and aluminum production capacity." Also, the supporting statement fails to disclose any limitations on, or qualifications to, the Proponent's value estimates that might indicate that such values may not represent realizable values, except for the clause stating that the value of the base materials business unit is "net of the Company's debt and based on the current price and outlook for aluminum." In Exchange Act Release No. 16833 (May 23, 1980), the Commission cited the risk of misleading disclosure in situations where "those sponsoring the proposal have projected the dollar amount per share to be available to shareholders if such proposal is effected." The use of such valuation estimates was found to be "only appropriate and consonant with Rule 14a-9... when made in good faith and on a reasonable basis and where accompanied by disclosure which facilitates shareholders' understanding of the basis for and the limitations on the projected realizable values." The Commission has consistently maintained this view for valuations presented in connection with stockholder proposals to sell or merge the corporation or to consider strategic options such as divesting business units. See First Bell Bancorp, Inc. (January 28, 1999) (supporting statement which - ---------------------------- included the proponent's appraisal of the company's stock price after a sale or merger must be deleted or revised); SL Industries, Inc. (September 3, 1997) ------------------- (supporting statement which included the proponent's valuation of the company and projection of the company's price per share in connection with a sale or spinoff of certain businesses must be deleted or revised); Portsmouth Bank ---------------- Shares, Inc. (February 24, 1993) (supporting statement which included the - ------------ proponent's appraisal of the price per share of the company's stock in connection with a proposal to sell, merge or liquidate the company must be deleted or revised); and P&F Industries, Inc. (March 19, 1991) (supporting -------------------- statement which included the proponent's Securities and Exchange Commission Office of Chief Counsel March 1, 1999 Page 5 assertions regarding the book value of the company's common stock in connection with a proposal to sell certain subsidiaries must be deleted or revised). Accordingly, the Company believes the proposal is properly excludable under Rule 14a-8(i)(3) because it contains statements that are contrary to the Commission's proxy rules. D. THE PROPOSAL MAY BE OMITTED UNDER QUESTION 9, RULE 14a-8(i)(10), ---------------------------------------------------------------- BECAUSE THE COMPANY HAS ALREADY SUBSTANTIALLY IMPLEMENTED THE PROPOSAL. - ----------------------------------------------------------------------- Under Question 9, Rule 14a-8(i)(10), a company may omit a proposal from its proxy materials if the company has already substantially implemented the proposal. The proposal here asks the Board of Directors of the Company to retain an investment banking firm to explore strategic alternatives for maximizing shareholder value. As explained below, the Company has already retained an investment banking firm to evaluate various business alternatives to enhance shareholder value, including those suggested by the Proponent. The Company began a "portfolio review" of all of its businesses in late 1996. In that connection, on December 2, 1996, the Company retained the investment banking firm of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") as its financial advisor to undertake a comprehensive study and analysis of the Company's businesses and strategic alternatives, including recapitalizations, spin-offs, split-offs, tracking stock, dispositions, acquisitions or other similar transactions. Pursuant to its engagement, Merrill Lynch made a full presentation to the Company's Board of Directors in February 1997 regarding the advantages and disadvantages of spinning off portions of the Company's business, including its packaging and consumer business unit. After due consideration of the presentation, the Board of Directors-- which is composed of a majority of "non-employee" or "outside directors"-- ultimately decided to approve the sale of the Company's North American can business, along with certain other underperforming and non-core assets. The Board determined, however, that it was in the Company's best interests to retain its other businesses as a unit. Since that time, the Company has been implementing the restructuring plan approved by the Board. The Company's filings under the Exchange Act have described in detail the Company's progress to date in that regard. In late 1998, the issue of spinning off portions of the Company's business was re-examined by the Board at a strategic planning meeting, and the decision remained unchanged. Merrill Lynch is continuing to advise the Company in 1999 in connection with the Company's current strategic planning process. Securities and Exchange Commission Office of Chief Counsel March 1, 1999 Page 6 The Company believes that the above facts demonstrate that the Company has already taken the specific action called for by the proposal. Requiring the Board to repeat the process with the assistance of other or additional investment bankers would be a waste of corporate assets. The circumstances in this case are analogous to those in other recent cases in which the Division has granted no-action relief. See Baldwin Piano and Organ --------------------------- Company (March 27, 1997) (proposal for company to hire an investment banker to - ------- explore all alternatives to enhance shareholder values, including a sale, merger or other business combination, excludable where company had already retained Lehman Brothers Inc. to assist in the review, development and implementation of its strategic plan, with the focus on maximizing shareholder value); Bindley ------- Western Industries, Inc. (February 21, 1997) (proposal for company to hire an - ------------------------ investment banker to explore all alternatives to enhance the value of the company, including a sale of merger, excludable where the company had already retained Salomon Brothers Inc and Smith Barney Inc. to assist it in evaluating various business alternatives, including those suggested by the proponent); Stone & Webster, Incorporated (February 22, 1996) (proposal for company to - ----------------------------- retain an investment banking firm to explore alternatives, including a sale or merger, excludable where company had already retained Goldman, Sachs & Co. as its financial advisor to review and evaluate the company); and Borden, Inc. ------------ (February 23, 1994) (proposal for company to undertake an investment banking study to determine company's value if non-food businesses were divested excludable where company had already retained investment banking firms to evaluate various business alternatives, including the one suggested by the proponent). The circumstances in this case are distinguishable from the situations where the Division has not agreed that the company had already substantially implemented a proposal to hire an investment banking firm. See Kiddie Products, Inc. --------------------- (February 9, 1989) (where board of directors had recently twice considered the hiring of an investment banker, but never made a determination to so retain one); and EDO Corporation (February 16, 1995) (where company would consult with --------------- investment bankers when it deemed it appropriate to explore business alternatives for the company). Unlike the facts in those cases, the Company has not merely considered hiring an investment banking firm or occasionally consulted with such a firm, but instead has actually engaged an investment banking firm. Accordingly, the Company believes the proposal is properly excludable under Rule 14a-8(i)(10) because the Company has already substantially implemented the proposal. Securities and Exchange Commission Office of Chief Counsel March 1, 1999 Page 7 II. The Company's proxy statement and form of proxy for the 1999 Annual Meeting may confer discretionary authority to vote with respect to the proposal should it be presented at the 1999 Annual Meeting, in reliance on Rule 14a-4(c)(2) under the Exchange Act. Rule 14a-4(c) provided that a proxy may confer discretionary authority upon the proxy holders to vote on certain matters, including: "(2) In the case in which the registrant has received timely notice in connection with an annual meeting of shareholders (as determined under paragraph (c)(1) of this Rule 14a-4), if the registrant includes, in the proxy statement, advice on the nature of the matter and how the registrant intends to exercise its discretion to vote on each matter..." [and] "(6) Any proposal omitted from the proxy statement and form of proxy pursuant to Rule 14a-8 or 14a-9;" It is my opinion that the Company may exercise discretionary authority to vote under Rule 14a-4(c) with respect to the Proponent's proposal should it be presented at the 1999 Annual Meeting, so long as the Company advises stockholders of the nature of the proposal and how the Company intends to vote with respect to such proposal. My opinion is based on the following: 1. The Proponent's notice to the Company of its intention to bring business before the Company's 1999 Annual Meeting was "timely received" by the Company for purposes of Rule 14a-4(c), as determined under paragraph Rule 14a-4(c)(1). As discussed above, the Proponent submitted the proposal to the Company on February 16, 1999. The deadline imposed by the Company's advance notice By-Law for receipt of notice of business to be brought before the Company's 1999 Annual Meeting was February 19, 1999. (This deadline had been disclosed in the Company's March 18, 1998 proxy statement and Form 10-Q for the quarter ended June 30, 1998.) 2. The Proponent stated in its letter that it does not intend to solicit proxies relating to the proposal and is not filing a proxy statement. 3. The Company intends to include in its proxy statement disclosure substantially to the following effect: Securities and Exchange Commission Office of Chief Counsel March 1, 1999 Page 8 "We have been advised that a stockholder wishes to present a proposal at the annual meeting asking that the Board of Directors "retain an investment banking firm to explore strategic alternatives for maximizing shareholder value." This proposal was not included in the proxy statement because it was not received within the time limits prescribed by SEC rules. If this proposal is presented, the holders of the proxies will use their discretionary authority to vote against it. We believe this proposal serves no purpose. We have already retained investment bakers to assist in considering alternatives during our portfolio review process and their analyses have been presented to the Board. We are continuing to consult with them during our strategic planning process this year. The Board of Directors does not know of any other matters to be presented at the annual meeting. If any matter is properly presented for a vote at the meeting, your shares will be voted in accordance with the discretion of the holders of the proxies." 4. The Commission staff has in the past permitted companies to use their discretionary voting authority on matters as to which they have received adequate notice, if the proponent has not provided the company as part of its notice with a statement that the proponent intends to solicit the percentage of shareholder votes required to carry the proposal, followed with specified evidence that the stated percentage had actually been solicited. See --- Borg-Warner Security Corp. (March 14, 1996); and Idaho Power Co. (March 13, - -------------------------- --------------- 1996). The staff's position in these letters with respect to Rule 14a-4 was recently confirmed in the Commission's final release adopting amendments to the rules on shareholder proposals (Exchange Act Release No. 40018). REQUEST FOR PERMISSION TO FILE THIS REQUEST UNDER QUESTION 10, RULE 14a-8(j), ----------------------------------------------------------------------------- NOTWITHSTANDING 80-DAY FILING REQUIREMENT ----------------------------------------- Under Question 10, Rule 14a-8(j), if a company intends to exclude a stockholder proposal from its proxy materials, it must file its reasons with the Commission no later than 80 calendar days before it files its definitive proxy statement and form of proxy with the Commission. Rule 14a-8(j) further provides that the Commission staff may permit a later submission if the company demonstrates good cause for missing the deadline. Because the Company received the Proponent's proposal on February 16, 1999-- a date 39 days before March 26, 1999, the contemplated date of filing by the Company of its proxy materials in definitive form with the Commission-- is impossible for the Company to comply with the 80-day requirement in Rule 14a-8(j). The Company hereby respectfully requests that the Securities and Exchange Commission Office of Chief Counsel March 1, 1999 Page 9 Commission staff permit the Company to file reasons for excluding the Proponent's proposal as stated in this letter, notwithstanding the 80-day filing requirement of Rule 14a-8(j). CONCLUSION ---------- For the foregoing reasons, I respectfully request that the Commission staff not recommend any enforcement action if the proposal is excluded from the Company's proxy statement and form of proxy relating to its 1999 Annual Meeting. I further request that the Commission staff concur in my opinion that the Company may exercise discretionary voting authority in accordance with Rule 14a-4(c)(2). In accordance with Rule 14a-8(j)(2), six copies of each of (i) the Proponent's proposal, (ii) the Company's reply dated February 25, 1999 and (iii) this letter are enclosed. To the extent the Company's reasons for excluding the proposal are based on matters of law, this letter also constitutes the opinion of counsel required by Rule 14a-8(j)(2)(iii). A copy of this letter is also being sent to the Proponent in accordance with Rule 14a-8(j)(i). The Company intends to file its proxy materials in definitive form with the Commission on March 26, 1999. If the Commission staff has any questions with respect to the foregoing, or if for any reason does not agree that the Company may exclude the proposal from its proxy materials, please contact the undersigned at (804) 281-3879. Very truly yours, /s/ Brenda Hart ---------------------------------- Brenda A. Hart Enclosures PROPONENT'S PROPOSAL [HIGHFIELDS CAPITAL LETTERHEAD APPEARS HERE] Tuesday, February 16, 1999 By Personal Delivery - -------------------- Ms. Donna C. Dabney Secretary Reynolds Metals Company 6601 West Broad Street Richmond, Virginia 23230 Dear Ms. Dabney: In accordance with Article II, Section 4 of the by-laws of Reynolds Metals Company (the "Company"), Highfields Capital I LP ("Highfields"), the record owner of 100 shares of the Company's common stock as of the date hereof, is hereby furnishing written notice of business to be brought before the Company's 1999 Annual Meeting. Highfields Capital Management LP, the investment advisor to Highfields, is the beneficial owner of 2,926,300 shares of the Company's common stock. In accordance with clause (iii) of Article II, Section 4 of the Company's by-laws, Highfields' notice hereby sets forth the following information: (a) Business Proposed to be Brought Before the Meeting. Highfields hereby -------------------------------------------------- submits the following proposal for presentation at the 1999 Annual Meeting: "Resolved, that shareholders ask the Board of Directors of the Company to retain an investment banking firm to explore strategic alternatives for maximizing shareholder value." Supporting statement: "Notwithstanding the Company's operational improvements since the initiation of management's portfolio review restructuring program in October 1996, the Company's stock has remained depressed and has been dramatically underperforming the stock of other aluminum companies for a significant period of time. Over the past five years the Company's stock has fallen approximately 11%; since October 1996, it has fallen approximately 17%. The Company's current share price does not reflect the substantial value that we believe could be realized by separating the Company's Packaging and Consumer business unit from its Base Materials and other business units. Comparable packaging and consumer companies currently trade at valuations which we believe imply that a conservative value of this business unit represents at least $35 per share of Company common stock. Alternatively, we believe that current valuations of comparable alumina and aluminum production capacity imply a conservative valuation for the Ms. Donna C. Dabney February 16, 1999 Page 2 Company's Base Materials business unit, net of the Company's debt and based on the current price and outlook for aluminum, of at least $60 per share. In addition, the Company operates business units in Construction and Distribution and Transportation. In summary, based on a sum of the parts analysis, we believe that the total value of the Company's business units net of debt exceeds its current market capitalization by over one hundred percent. Because maintaining the status quo has not and is unlikely to unlock this value, the Board of Directors should retain an investment banking firm to explore all strategic alternatives for maximizing shareholder value, including, but not limited to, a sale, spin-off or split-off of some or all of the Company's business units or assets." (b) Person Proposing to Bring Such Business Before the Meeting. ---------------------------------------------------------- Highfields Capital I LP 200 Clarendon Street Boston, MA 02117 Attention: Richard Grubman (c) Class and Number of Shares Held. Highfields is the record owner of 100 ------------------------------- shares and the beneficial owner of 271,220 shares of the Company's common stock as of the date of this notice, representing approximately .00016% and 0.42%, respectively, of the outstanding shares of the Company's common stock/1/. Highfields does not have the right to vote any other shares of the Company's common stock pursuant to a proxy or other voting arrangement. The following table sets forth the beneficial ownership of the Company's common stock by Highfields and its affiliates.
Percentage Name Amount of Class/1/ ---- ------ ----------- Highfields Capital I LP 271,220 0.42% Highfields Capital II LP 496,811 0.77% Highfields Capital Ltd. 2,158,269 3.35% ---------- ---- Highfields Capital 2,926,300/2/ 4.54% Management LP
Highfields is not aware of any announcement by the Company of a record date for the 1999 Annual Meeting. (d) Information Regarding Director Nominees(s). Not applicable. ------------------------------------------ (e) Other Information. Highfields, Highfields Capital II LP and Highfields ----------------- Capital Ltd. (collectively, the "Funds") are investment funds, and Highfields Capital Management LP, the investment advisor to the Funds (the "Investment Advisor"), is primarily engaged in the business of investment management. The principal business address of the Investment Advisor and each of the - ------------------ /1/ Based on 64,456,697 total shares outstanding as reported in the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998. /2/ Represents shares beneficially owned by Highfields, Highfields Capital II LP and Highfields Capital Ltd. Highfields Capital Management LP is the investment advisor to Highfields, Highfields Capital II LP and Highfields Capital Ltd. Ms. Donna C. Dabney February 16, 1999 Page 3 Funds, except Highfields Capital Ltd., is 200 Clarendon Street, Boston, Massachusetts 02117, and the telephone number there is (617) 850-7500. The principal business address of Highfields Capital Ltd. is c/o Goldman Sachs (Cayman) Trust Limited, Harbor Center, 2nd Floor, P.O. Box 896, George Town, Grand Cayman, Cayman Islands, B.W.I., and the telephone number there is 345-949-6770. As of the date of this notice, each of the Funds and the Investment Advisor beneficially owned the shares of Company common stock set forth in paragraph (c) above. Except as set forth in this notice, to the best knowledge of each of the Funds and the Investment Advisor, none of such persons or any associate of any of the foregoing persons (i) has a substantial interest, direct or indirect, by security holdings or otherwise, in any matter to be acted upon at the 1999 Annual Meeting, (ii) owns beneficially, directly or indirectly, or has the right to acquire, any securities of the Company or any parent or subsidiary of the Company, (iii) owns any securities of the Company of record but not beneficially, (iv) has incurred indebtedness for the purpose of acquiring or holding securities of the Company, (v) is or has been a party to any contract, arrangement or understanding with respect to any securities of the Company within the past year, (vi) has been indebted to the Company or any of its subsidiaries since the beginning of the Company's last fiscal year or (vii) has any arrangement or understanding with respect to future employment by the Company or with respect to any future transactions to which the Company or any of its affiliates will or may be a party. In addition, except as set forth in this notice, to the best knowledge of each of the Funds and the Investment Advisor, none of such persons or any associate or immediate family member of any of the foregoing persons has had or is to have a direct or indirect material interest in any transaction with the Company since the beginning of the Company's last fiscal year, or any proposed transaction, to which the Company or any of its affiliates was or is a party. Highfields presently does not intend to solicit proxies relating to the aforementioned business proposed to be brought before the Company's 1999 Annual Meeting and therefore is not filing a proxy statement. Accordingly, we respectfully request that the Company include with its proxy statement for the 1999 Annual Meeting Highfields' proposal as presented above and boxes on the accompanying proxy card to permit stockholders of the Company to express their approval or disapproval for this proposal. Thank you for your assistance. Sincerely, /s/ Kenneth H. Colburn Kenneth H. Colburn Chief Operating Officer COMPANY'S REPLY DATED FEBRUARY 25, 1999 [REYNOLDS METALS COMPANY LETTERHEAD] February 25, 1999 By DHL - ------ Mr. Kenneth H. Colburn Chief Operating Officer Highfields Capital I LP 200 Clarendon Street Boston, Massachusetts 02117 Dear Mr. Colburn: This is in reference to your letter dated February 16, 1999 to Donna C. Dabney, furnishing written notice of business to be brought before Reynolds Metals Company's 1999 Annual Meeting of Stockholders by Highfields Capital I LP ("Highfields" or "you"). In accordance with Rule 14a-8(f) under the Securities Exchange Act of 1934, Reynolds notifies you of the following: 1. Your letter did not indicate that Highfields had continuously held Reynolds common stock for at least one year as of February 16, 1999. Reynolds' stock records show that Highfields became a holder of record on February 11, 1999. Please provide appropriate evidence that Highfields has continuously held Reynolds shares for at least one year before Highfields' submission of the proposal, as required under Rule 14a-8(b). 2. Your letter did not indicate that Highfields intends to continue to hold shares of Reynolds common stock through the date of Reynolds' 1999 Annual Meeting. Please provide an appropriate written statement that Highfields intends to continue ownership of Reynolds shares through the date of Reynolds' 1999 Annual Meeting as required under Rule 14a-8(b). 3. Reynolds has determined that your proposal was not timely received for purposes of Rule 14a-8. Under Rule 14a-8(e)(2), the deadline for receipt of stockholder proposals to be included in Reynolds' proxy materials for its 1999 Annual Meeting was November 18, 1998. This deadline was stated in Reynolds' 1998 proxy statement and in its Form 10-Q for the quarter ended June 30, 1998. Reynolds intends to exclude your proposal and supporting Highfields Capital I LP February 25, 1999 Page 2 statement from its proxy materials on this basis. Reynolds also reserves the right to exclude your proposal to the extent it is permitted to do so under any other provision of Rule 14a-8. Reynolds would appreciate receiving Highfields' response to Items 1 and 2 above by March 12, 1999. Very truly yours, /s/ Brenda Hart Brenda A. Hart EX-99.4 5 LETTER FROM HIGHFIELDS DATED 3/1/1999 Exhibit 99.4 Highfields Capital I LP 200 Clarendon Street Boston, MA 02117 March 1, 1999 Ms. Brenda Hart Chief Securities/Finance Counsel Reynolds Metals Company 6601 West Broad Street Richmond, VA 23230 Dear Ms. Hart: Thank you for your letter of February 25. Please be advised that our proposal was purposefully submitted in a manner whereby Rule 14a-8 of the Securities Exchange Act of 1934 would not be applicable. Rather, we complied with the requirements of Section 4 of Article II of Reynolds' By-Laws for providing written notice of business to be brought before the 1999 Annual Meeting. You will recall that the deadline in Reynolds' 1998 proxy for the delivery of such notice was February 19, 1999 and our written proposal was delivered several days prior to that date. We have complied with the requirements of Section 4 of Article II and intend on presenting our proposal at the 1999 Annual Meeting. Furthermore, we believe that the anti-fraud provisions of the 1934 Act require Reynolds to disclose in its proxy statement the existence of our proposal and all material information concerning our proposal. In this regard, Mr. Sheehan has already represented to my partner, Mr. Grubman, that our proposal would be included in the 1999 proxy, albeit not in the form presented in our written notice. Therefore we believe that answers to your questions in items 1. and 2. of your February 25 letter are not necessary since that information bears no relevance to the validity of our proposal. We would appreciate it if you would confirm Mr. Sheehan's representations that our proposal will be considered at the 1999 Annual Meeting and that disclosure of our proposal will be contained in Reynolds' forthcoming proxy statement. Sincerely, /s/ Kenneth H. Colburn - ------------------------------- Kenneth H. Colburn Chief Operating Officer, Highfields Capital Management LP EX-99.5 6 LETTER FROM HIGHFIELDS DATED 3/5/1999 Exhibit 99.5 [Highfields Capital Letterhead] By Fax : 804-281-4775 - --------------------- March 5, 1999 Mr. Jeremiah J. Sheehan Chairman of the Board and Chief Executive Officer Reynolds Metals Company 6601 West Broad Street Richmond, Virginia 23230 Dear Jerry, Thank you very much for taking the time to meet with us on February 16. Given the events of the last few weeks, I feel compelled to write you a follow-up letter. There are two significant events which have occurred since our meeting. First, Reynolds, in its March 1 letter to the SEC, claims that our proposal asking that the company hire an investment banker to explore all strategic alternatives for maximizing shareholder value is excludable because (1) Reynolds has already engaged Merrill Lynch and (2) the methodology used in valuing Reynolds' main business units was not provided with the summary valuation numbers we presented with our proposal. Second, on March 3 the Company pre- announced disappointing results for the first quarter of 1999 and, by inference, for the balance of the year. We would like to address both of these points. In our recent meeting and conversations, you have said that Merrill Lynch has been retained to explore strategic alternatives to maximize shareholder value. Our concern is that this statement is merely a confirmation of Merrill's existing role as your advisor in connection with the ongoing portfolio review restructuring program begun in late 1996. Supporting this concern is the following statement in Reynolds' March 1 letter to the SEC: "Merrill Lynch is continuing to advise the Company in 1999 in connection with the Company's strategic planning process." As you know, we continue to take issue with the results of that review i.e., we continue to question why the packaging business has not been spun off or sold. We believe that you need to openly commit to a more expanded course of action with Merrill, and that Reynolds' depressed share price in large part reflects the market's lack of confidence in management's commitment to create shareholder value. Reynolds shares are currently at a ten- year low -- everyone who bought the stock during this period (the biggest bull market in history) has lost money, while Alcoa's shares have appreciated over 150%. Portfolios managed by my partner, Jonathon Jacobson, have been significant owners of Reynolds' stock since late 1996 and have suffered accordingly. We believe that no amount of operating improvement will be able to create the amount of value in the short or intermediate term that a sale or spin-off would create today. We do not believe that the depressed share price is entirely a function of low aluminum prices. In our view, the company's two primary business units are extremely different in terms of operations and valuation methodologies. Obviously the market has not liked the combination for some time. We believe that the packaging business, with its stable cash flows, high market shares and very strong brand name, is worth at least $2.2 billion, or about $35 per share, based on an eleven times multiple on estimated trailing annual EBITDA of over $200 million. This is a consumer-oriented business for which the currently low price of aluminum is largely irrelevant. In base materials, Reynolds' 1.1 million tons of low-cost smelting capacity are worth at least $3,500 per ton by our estimation, equating to $3.9 billion, or about $60 per share. The company's 2.9 million tons of low-cost alumina capacity we believe to be worth over $650 per ton, equating to $1.9 billion, or about $30 per share. These three operations alone, net of the company's debt and other liabilities of approximately $2.0 billion (about $30 per share), we believe imply a share valuation for RLM of $95. You will recall that when we reviewed these valuations with you and suggested that Reynolds' net asset value is at least twice its market valuation, you did not disagree, and shared our frustration with the excessive discount reflected in the current share price ($41 as of today, which is about 10% lower than on the date of our February meeting). Given the persistent poor share performance and valuation discount, we do not believe that it is appropriate at this time for you to be considering growth initiatives in hopes that they and a more favorable aluminum market will improve the company's results and valuation. We recognize that aluminum is at severely depressed levels and that your management team has executed the portfolio review, selling assets, reducing debt and shares outstanding and lowering the company's operating costs. However, as you have acknowledged, tremendous unrealized value remains in Reynolds' market valuation. Continued operations in the present format may never cause the stock to reflect on a present value basis, the values that may be achievable today through a sale or spin-off. This is certainly the consensus view among Wall Street analysts, several of whom acknowledge the company's huge asset values along the lines outlined above but nevertheless rate the company an underperformer based on their skepticism that you will not take the decisive steps necessary to quickly unlock this value. If analysts and shareholders truly believed in your commitment to act specifically and swiftly to realize value, Reynolds' shares would be trading at significantly higher levels. Today's news that Reynolds is considering building a smelter with Bechtel in Turkmenistan highlights a very significant problem. The effective reinvestment of valuable free cash flows from the company's packaging business to build more aluminum assets is a mistake. This news sends your shareholders the message that you are willing to add to assets whose economic viability is subject to the vagaries of commodities prices in places with significant political and operating risks. We consider this a value-destroying exercise. The world is awash in smelting capacity. The last thing we as shareholders want to see is the use of stable cash flows to fund more investments in a low-multiple business that is not even EVA positive. Therefore it is with good reason that Wall Street will not efficiently value Reynolds on a sum-of-the-parts basis. The problem with the combination of the two main business units is your ability to allocate capital away from the highly valued one and to the low-valued one. The vast majority of our fellow shareholders must share our extreme frustration -- not with the price of aluminum and not with the company's operating improvements -- but with the lack of visible evidence of your conviction to maximize shareholder value through whatever means necessary. We strongly urge you to openly commit to your shareholders to direct Merrill Lynch to explore all alternatives to maximize shareholder value, with no prejudice for or against any option (sale, spin-off, etc.). Furthermore, we recommend that a special committee of independent Directors of the Board be formed to assist you in monitoring Merrill's progress. Although you might be reluctant to take any action that might jeopardize your independence to operate the business and pursue the growth objectives you think are achievable, the time has come to put the shareholders' wishes and interests first. As owners we expect you to exercise your duty of exclusive loyalty to Reynolds' shareholders by taking quick and decisive action to immediately enhance the value of our shares. Sincerely, /s/ Richard L. Grubman - ----------------------------- Richard L. Grubman cc: Board of Directors -----END PRIVACY-ENHANCED MESSAGE-----