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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
[ ] Definitive Proxy Statement Commission Only (as Permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
240.14a-11(c) or 240.14a-12
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Echlin Inc.
(Name of Registrant as Specified In Its Charter)
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SPX Corporation
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
- -------------------------------------------------------------------------------
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i) and 0-11:
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying transaction computed pursuant
to Exchange Act Rule 0-11:
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting was
paid previously. Identify the previous filing by registration
statement number, or the Form of Schedule and the date of its filing:
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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PRELIMINARY SOLICITATION MATERIAL DATED FEBRUARY 17, 1998
SUBJECT TO COMPLETION
SPX CORPORATION
Solicitation Statement
to Call a Special Meeting of Shareholders
of
ECHLIN INC.
SPX Corporation, a Delaware corporation ("SPX"), is asking you to
help it call a special meeting of shareholders (a "Special Meeting")
of Echlin Inc., a Connecticut corporation (the "Company"), for the
purpose of voting to remove the current members of the Board of
Directors of the Company and replace them with SPX's nominees.
SPX today delivered a letter to the Company containing a proposal
for a strategic business combination of the Company with SPX (the
"Proposed Business Combination"), in which shareholders of the Company
would receive for each of their shares of common stock, par value
$1.00, of the Company ("Shares") (together with the associated
preferred stock purchase right (the "Rights")), the amount of $12.00
net in cash and 0.4796 share of SPX's common stock, par value $10.00
("SPX Common Stock") (the "Consideration"). The SPX Common Stock
component has a value of $36.00, and the total Consideration has a
value of $48.00, based on the $75-1/16 closing price on the New York
Stock Exchange of a share of SPX Common Stock on February 13, 1998,
the last trading date preceding the date of this Solicitation
Statement. The Consideration represents a 23% premium over the $38-7/8
price at which a Share closed on the New York Stock Exchange on
February 13, 1998, and a 32% premium over the average trading price at
which a Share closed on the New York Stock Exchange during the 30
trading days preceding the date of this Solicitation Statement.
Immediately following the consummation of the Proposed Business
Combination and after giving effect to the issuance of the SPX Common
Stock in the transaction, shareholders of the Company (other than SPX)
would own approximately 70% of the then outstanding shares of SPX
Common Stock.
SPX believes that the Proposed Business Combination would be
advantageous to the shareholders of both companies. See "The Proposed
Business Combination, the Exchange Offer and the Merger." The Company,
however, in past meetings and correspondence with SPX, has
consistently advised SPX that the Company and its Board of Directors
have no interest in pursuing discussions with SPX.
The Company has Rights outstanding, issued pursuant to a Rights
Agreement dated as of June 30, 1989, between the Company and The
Connecticut Bank and Trust Company, N.A., as rights agent (the "Rights
Agreement"), which purports to prevent SPX from consummating the
Proposed Business Combination without the approval of the Company's
Board of Directors. Likewise, Sections 840-845 of the Connecticut
Business Corporation Act (the "Connecticut Business Act") governing
business combinations (the "Business Combination Statutes") present
certain obstacles to the consummation of the Proposed Business
Combination absent Board approval. See "Reason to Call a Special
Meeting."
Consequently, SPX is asking its fellow shareholders to join SPX
in executing written demands upon the Company that a special meeting
be called and held ("Demands") in order to remove the entire Board of
Directors of the Company and elect SPX's nominees to the Board in
their place. SPX expects that if SPX's nominees are elected, they will
act to facilitate the consummation of the Proposed Business
Combination, subject to their fiduciary duties as directors of the
Company.
Under applicable law, the Special Meeting must be held if
holders of outstanding Shares representing in the aggregate at least
35% of all the votes entitled to be cast on any issue proposed to be
considered at the Special Meeting demand in writing that a special
meeting of shareholders be held. Based on publicly available
information, as of December 31, 1997, the Company had 63,169,129
Shares outstanding; as of November 5, 1997, one director of the
Company owned beneficially 634,392 Shares and the other directors and
the 12 executive officers of the Company as a group owned beneficially
365,537 Shares (including 12,900 Shares and 265,870 Shares,
respectively, issuable upon exercise of stock options exercisable on
November 5, 1997 or within 60 days of that date), or, in the
aggregate, approximately 1.58% of the Shares outstanding (on a fully
diluted basis). SPX owns 1,150,150 Shares, or approximately 1.82% of
the outstanding Shares (on a fully diluted basis).
SPX has requested that the Company provide it with certain
records, including a list of shareholders of the Company, so as to
enable SPX to send this Solicitation Statement to the Company's
shareholders.
This Solicitation Statement and the GOLD DEMAND CARD are first
being mailed or furnished to the Company's shareholders on or about [
,] 1998.
AT THIS TIME SPX IS SOLICITING YOUR WRITTEN DEMAND THAT A SPECIAL
MEETING OF SHAREHOLDERS BE CALLED AND HELD. SPX IS NOT NOW SOLICITING
YOUR PROXY TO VOTE ON THE REMOVAL OF THE EXISTING DIRECTORS OR THE
ELECTION OF SPX'S NOMINEES IN THEIR PLACE. ONCE THE SPECIAL MEETING
HAS BEEN CALLED, SPX WILL SEND YOU SEPARATE PROXY MATERIALS URGING YOU
TO TAKE SUCH ACTION.
IMPORTANT NOTE: IF YOU HOLD YOUR SHARES IN THE NAME OF ONE OR
MORE BROKERAGE FIRMS, BANKS OR NOMINEES, ONLY THEY CAN EXERCISE THE
RIGHT WITH RESPECT TO YOUR SHARES TO MAKE A WRITTEN DEMAND THAT THE
SPECIAL MEETING BE CALLED AND HELD, AND ONLY UPON RECEIPT OF YOUR
SPECIFIC INSTRUCTIONS. ACCORDINGLY, IT IS CRITICAL THAT YOU PROMPTLY
SIGN AND DATE THE GOLD DEMAND CARD AND MAIL IT IN THE ENVELOPE
PROVIDED BY YOUR BROKER, BANK, OR NOMINEE SO THAT THEY CAN EXERCISE
THE RIGHT TO MAKE A DEMAND ON YOUR BEHALF.
A registration statement relating to the securities of SPX to be
issued in connection with the Exchange Offer has been filed with the
Securities and Exchange Commission but has not yet become effective.
Such securities may not be sold nor may offers to buy be accepted
prior to the time the registration statement becomes effective. This
Solicitation Statement shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any state in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the
securities laws of any such state.
SUMMARY
The information below is qualified in its entirety by the more
detailed information appearing elsewhere in this Solicitation
Statement, including any documents incorporated in this Solicitation
Statement by reference. SPX urges you to read this entire Solicitation
Statement carefully. Certain capitalized terms used in this Summary
are defined elsewhere in this Solicitation Statement. The information
below and elsewhere in this Solicitation Statement includes
forward-looking statements, including all statements about the
operations and expected benefits of the Proposed Business Combination,
and is subject to risks, uncertainties and other factors which could
cause actual results to differ materially from future results
expressed or implied by such forward-looking statements.
SPX.
SPX is a global provider of Vehicle Service Solutions to
franchised dealers of motor vehicle manufacturers and independent
service locations, Service Support to vehicle manufacturers, and
Vehicle Components to the worldwide motor vehicle industry. SPX is
comprised of two business segments. The Service Solutions segment
includes operations that primarily design, manufacture and market a
wide range of specialty service tools, equipment and services to the
global motor vehicle industry. Major customers are franchised dealers
of motor vehicle manufacturers, aftermarket vehicle service facilities
and independent distributors. Vehicle Components includes operations
that primarily design, manufacture and market transmission and
steering components for light and heavy duty vehicle markets,
principally in North America and Europe. Major customers of this
segment include vehicle manufacturers, other component manufacturers
and the aftermarket. SPX's corporate headquarters is located at 700
Terrace Point Drive, Muskegon, MI 49443-3301, telephone number (616)
724-5000.
SPX Common Stock trades on the New York Stock Exchange and the
Pacific Stock Exchange under the symbol "SPW". On February 13, 1998,
the last trading day before the date of this Solicitation Statement,
the closing price of a share of SPX Common Stock was $75-1/16.
THE PROPOSED BUSINESS COMBINATION.
SPX has proposed to enter into the Proposed Business Combination
with the Company pursuant to which the shareholders of the Company
would receive for each Share (together with the associated Right) the
Consideration in the amount of $12.00 net in cash and 0.4796 share of
SPX Common Stock for a total value of $48.00 based on the $75-1/16
closing price on the New York Stock Exchange of a share of SPX Common
Stock on February 13, 1998, the last trading date preceding the date
of this Solicitation Statement. The Consideration represents a 23%
premium over the $38-7/8 price at which a Share closed on the New York
Stock Exchange on February 13, 1998, and a 32% premium over the
average trading price at which a Share closed on the New York Stock
Exchange during the 30 trading days preceding the date of this
Solicitation Statement. Immediately following the consummation of the
Proposed Business Combination and after giving effect to the issuance
of SPX Common Stock in the transaction, shareholders of the Company
(other than SPX) would own approximately 70% of the then outstanding
shares of SPX Common Stock.
At present, it is contemplated that the Proposed Business
Combination would be effected by means of (i) an exchange offer in
which SPX is offering to pay the Consideration in exchange for each
Share (together with the associated Right) validly tendered and not
properly withdrawn (the "Exchange Offer"), and (ii) a subsequent
merger of a subsidiary of SPX into the Company (the "Merger") in which
each Share (together with the associated Right) not purchased in the
Exchange Offer would be converted into the right to receive the
Consideration. The transaction would be taxable to exchanging
shareholders. The Exchange Offer is conditioned upon, among other
things, the amendment by the Company of the Rights Agreement to render
it inapplicable to the Proposed Business Combination, the Exchange
Offer and the Merger, and the inapplicability of the restrictions
contained in the Business Combination Statutes to the Proposed
Business Combination, the Exchange Offer and the Merger. The Merger
would be conditioned, among other things, on the consummation of the
Exchange Offer. See "The Proposed Business Combination, the Exchange
Offer and the Merger." SPX has filed exchange offer materials with the
Securities and Exchange Commission and will commence the Exchange
Offer as soon as the registration statement included in those
materials has become effective. With its letter to the Board of
Directors of the Company setting forth the Proposed Business
Combination, SPX delivered a proposed merger agreement to the Company
in contemplation of arriving at a negotiated transaction. That
agreement provides for a single-step "cash election" merger of the
Company into a subsidiary of SPX in which each outstanding Share would
be converted into the right to receive the Consideration (with
shareholders able, instead, to elect to receive all cash, in the
amount of $48.00 per Share, or all stock, in the amount of 0.6395
share of SPX Common Stock per Share, subject to proration) in a
partially tax-free reorganization.
THE MERITS OF THE PROPOSED BUSINESS COMBINATION.
In SPX's letters to the Company, SPX set forth various benefits
of the Proposed Business Combination to the shareholders, customers,
suppliers, and employees of the Company and to the constituencies of
both companies. See "Background."
DEMAND FOR A SPECIAL MEETING.
SPX is asking the Company's shareholders to demand a Special
Meeting for the following purposes: (i) to repeal any provision of the
Company's By-Laws or amendment to the Company's By-Laws adopted by the
Board of Directors of the Company or any Committee thereof at any time
after April 3, 1997 (the date of the last set of By-Laws publicly
filed by the Company) and before the effectiveness of the last of the
proposals to be voted on at the Special Meeting; (ii) to vote upon a
proposal to remove all of the current members of the Board of
Directors of the Company; (iii) to vote upon a proposal to amend the
By-Laws of the Company to fix the number of directors of the Company
at five; and (iv) to elect SPX's five nominees to the Board of
Directors of the Company.
REASONS FOR THE DEMAND.
Despite repeated urgings by SPX to the Chief Executive Officer of
the Company and then directly to the Board of Directors of the
Company, the Company has steadfastly turned down requests by SPX to
meet with and make a presentation to the Company's Board of Directors
to discuss any and all aspects of a proposed business combination. The
Company has informed SPX that it and its Board of Directors have no
interest in pursuing a business combination.
In its February 17, 1998 letter to the Company's Board of
Directors, SPX reaffirmed its desire to enter into a negotiated
transaction with, rather than to effect a unilateral acquisition of,
the Company. However, if the Company's Board of Directors remains
adamant in its refusal to enter into discussions with SPX, the only
way that the Proposed Business Combination can proceed is for the
present members of the Board of Directors of the Company to be removed
and SPX's nominees to be elected in their place. See "Reason to Call a
Special Meeting." SPX expects that SPX's nominees, if elected as the
new Board of Directors, will act to facilitate the consummation of the
Proposed Business Combination, subject to their fiduciary duties as
directors of the Company.
PROPOSED SHAREHOLDER ACTION.
SPX's Exchange Offer to the Company's shareholders and the merger
proposal to the Company are conditioned upon, and will not be effected
without, certain action being taken by the Company's Board of
Directors. If the current Board of Directors persists in its position
that it will not enter into a negotiated transaction with SPX, the
only way that SPX's Proposed Business Combination can be effected is
for the existing Board to be replaced with SPX's nominees.
Under applicable law, holders of outstanding Shares representing
in the aggregate at least 35% of all the votes entitled to be cast on
any issue proposed to be considered at the Special Meeting have the
right to demand that a Special Meeting be held. By signing and sending
the GOLD DEMAND CARD you are merely demanding that a Special Meeting
be called and held. Signing and sending the GOLD DEMAND CARD will NOT
give SPX the right to vote your Shares at the Special Meeting.
SPX is not asking in this solicitation that the Company's
shareholders remove the existing Board and replace it with its
nominees. Thus, the current Board members may still reverse their
position and determine to enter into discussions with the Company for
a negotiated transaction. HOWEVER, THE FAILURE TO SIGN AND RETURN THE
GOLD DEMAND CARD WILL HAVE THE SAME EFFECT AS OPPOSING THE CALL OF A
SPECIAL MEETING, IN WHICH EVENT THE PROPOSED BUSINESS COMBINATION WILL
NOT BE ABLE TO PROCEED.
TIMING; ASSISTANCE.
We ask that you sign and date the GOLD DEMAND CARD and mail it in
the enclosed envelope to D.F. King & Co. Inc. at the address on the
back cover as soon as possible and, in any case, before March [__,]
1998. If you have any questions or need assistance, please call D.F.
King & Co., Inc. at (212) 269-5550 (collect) or (800) 758-5378 (toll
free).
PURPOSE OF THE SOLICITATION
SPX is soliciting Demands for the Company to call and hold a
Special Meeting. SPX has made a proposal for a business combination
with the Company, which SPX believes would provide exceptional value
to the Company's shareholders. See "The Proposed Business Combination,
the Exchange Offer and the Merger." The Proposed Business Combination,
the Exchange Offer and the Merger are conditioned upon, among other
things, the Board of Directors of the Company amending the Rights
Agreement so as to render it inapplicable to the Proposed Business
Combination, the Exchange Offer and the Merger, and the Board taking
such other action as may be necessary so that the restrictions
contained in the Business Combination Statutes are not applicable
thereto. See "Reason to Call a Special Meeting" and "The Proposed
Business Combination, the Exchange Offer and the Merger." The Company
has advised SPX that the Company and its Board have no interest in
pursuing discussions with SPX. Accordingly, if the Proposed Business
Combination is to proceed, the present members of the Company's Board
of Directors will have to be removed and new directors elected in
their place who will take all action necessary to facilitate the
consummation of the Proposed Business Combination, the Exchange Offer
and the Merger, subject to their fiduciary duties as directors of the
Company.
The purpose of this Solicitation Statement is to solicit Demands
from the shareholders of the Company holding outstanding Shares
representing in the aggregate at least 35% of all the votes entitled
to be cast on any issue proposed to be considered at the Special
Meeting, demanding that the Company call and hold a Special Meeting.
Based on publicly available information, there are 63,169,129 Shares
outstanding as of December 31, 1997; if that number is still accurate,
Demands from holders of an aggregate of 22,109,196 Shares would be
required. Based on publicly available information, as of November 5,
1997, one director of the Company owned beneficially 634,392 Shares
and the other directors and the 12 executive officers of the Company
together owned beneficially 365,537 Shares (including 12,900 Shares
and 265,870 Shares, respectively, issuable upon exercise of stock
options exercisable as of November 5, 1997 or within 60 days of that
date), or, in the aggregate, approximately 1.58% of the Shares
outstanding. SPX owns 1,150,150 Shares or 1.82% of the outstanding
Shares (on a fully diluted basis).
If SPX is successful in this solicitation, the Company will be
required to call and hold a Special Meeting at which the shareholders
will be asked (i) to repeal any provision of the Company's By-Laws or
amendment to the Company's By-Laws adopted by the Board of Directors
of the Company or any Committee thereof at any time after April 3,
1997 (the date of the last set of By-Laws publicly filed by the
Company) and before the effectiveness of the last of the proposals to
be voted on at the Special Meeting (the "By-Law Repeal Proposal");
(ii) to vote upon a proposal to remove all of the current members of
the Board of Directors of the Company (the "Proposal to Remove the
Current Directors"); (iii) to vote upon a proposal to amend the
By-Laws of the Company to fix the number of directors of the Company
at five (the "Proposal to Amend the By-Laws of the Company"); and (iv)
to elect SPX's five nominees (the "SPX Nominees") to the Board of
Directors of the Company.
BACKGROUND
In February 1997, John B. Blystone, Chairman and Chief Executive
Officer of SPX, met with Trevor O. Jones, then Chairman and interim
President and Chief Executive Officer of the Company, to propose that
the two companies explore a business combination. Mr. Jones did not
follow up on this meeting. In November 1997, Mr. Blystone met for
several hours with Larry W. McCurdy, who had succeeded Mr. Jones as
President and Chief Executive Officer, to discuss a strategic merger
between the two companies, and on November 24, 1997, Patrick J.
O'Leary, SPX's Vice President - Finance and Chief Financial Officer,
met with Robert F. Tobey, the Company's Vice President - Corporate
Development. These discussions were not fruitful, and SPX was advised
that the Company had no interest in being acquired by SPX.
On December 12, 1997, Mr. Blystone wrote a letter to Mr. McCurdy
setting out the strategic rationale of a business combination of the
two companies and the benefits to the Company's shareholders of the
transaction. Although the letter stated that SPX anticipated a price
in the $40's range, Mr. Blystone advised Mr. McCurdy that SPX would be
willing to revise its thinking if the Company could identify greater
value in the transaction. Mr. Blystone, in his letter, further
suggested that the letter be shared with the Company's Board of
Directors and offered to meet with and make a presentation to the
Board about any and all aspects of the proposed transaction.
On December 17, 1997, Mr. Blystone received a letter from Mr.
McCurdy stating that Mr. McCurdy had shared Mr. Blystone's views with
the Company's Board of Directors, and that the Company's and the
Board's position remained that the Company had no interest in further
discussions with SPX.
On December 18, 1997, Mr. Blystone sent a letter to each member
of the Company's Board enclosing a copy of his December 12 letter and
reiterating the merits of a strategic combination. Mr. Blystone once
again offered to meet personally with and make a presentation to the
Company's Board of Directors.
On December 23, 1997, Mr. Blystone received a letter from Mr.
McCurdy advising that the Company's Board of Directors was of the
unanimous view that the Company did not have an interest in pursuing
discussions with SPX.
On January 6, 1998, SPX notified the Company that it was that day
filing a Premerger Notification and Report Form under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR Act")
seeking to acquire up to 100% of the voting securities of the Company
(the "HSR Filing").
On January 8, 1998, Mr. McCurdy wrote to Mr. Blystone
acknowledging receipt of notice of the HSR Filing and advising SPX
that the Company and its advisors stood ready to aggressively defend
its shareholders' interests.
On February 17, 1998, SPX sent the Board of Directors of the
Company a letter setting forth the Proposed Business Combination and
its merits and reaffirming its desire to enter into a negotiated
transaction.
On the same day, SPX filed with the Securities and Exchange
Commission Exchange Offer materials and preliminary solicitation
materials to solicit Demands that a Special Meeting be called and
held.
REASON TO CALL A SPECIAL MEETING
The reason to demand that a Special Meeting be called and held is
simple. Unless the Board of Directors of the Company takes action to
remove certain obstacles, described below, to the Proposed Business
Combination, the Proposed Business Combination, the Exchange Offer and
the Merger will not proceed. Thus far, the present Board of Directors
of the Company has indicated that it has no interest in pursuing
discussions with SPX.
RIGHTS AGREEMENT. Under the Rights Agreement, if SPX were to
acquire beneficial ownership of 20% or more of the Shares, unless the
Rights are redeemed or invalidated or are otherwise inapplicable to
the Proposed Business Combination, each holder of record of a Right
(other than SPX) would, upon exercise of the Right, have the right to
purchase, at the exercise price of the Right, Shares having a value at
the time equal to twice the exercise price. As a result, the Rights
could make SPX's acquisition of the Company prohibitively expensive by
severely diluting SPX's equity interest and voting power.
The Rights Agreement provides that the Board of Directors may
redeem the Rights at any time prior to a person becoming an "Acquiring
Person." An Acquiring Person generally means a person who, together
with his or her Affiliates and Associates (each term as defined in the
Rights Agreement), beneficially owns 20% or more of the Shares
outstanding, subject to certain exceptions. Once a person has become
an Acquiring Person the Board of Directors may only redeem the Rights
if there are "Continuing Directors" in office and a majority of such
"Continuing Directors" concur in authorizing redemption of the Rights.
A "Continuing Director" means a director, while a member of the Board,
who either (A) was a member of the Board prior to an Acquiring Person
becoming such or (B) subsequently became a member of the Board, is not
an Acquiring Person or its Affiliate or Associate, representative or
nominee, and whose nomination for election or election to the Board
was recommended or approved by a majority of the Continuing Directors.
In any event, the Board of Directors may not redeem the Rights after
the tenth day following the day on which a person has become an
Acquiring Person.
The Board of Directors may amend the Rights Agreement prior to
the earlier of (i) the first date a public announcement is made that a
person has become an Acquiring Person, or (ii) the close of business
on the tenth business day (or such later date as the Board may
determine prior to such time as any person becomes an Acquiring
Person) following the commencement of a tender offer or exchange offer
which would result in a person becoming an Acquiring Person). Neither
of those events has yet occurred. The commencement of the Exchange
Offer will result in the Board of Directors of the Company no longer
being able to amend the Rights Agreements after the end of the 10
business day period unless the Board of Directors takes action to
extend such period.
If elected to the Board of Directors of the Company, the SPX
Nominees intend to amend the Rights Agreement so that the Rights
Agreement will not be applicable to the Proposed Business Combination,
the Exchange Offer or the Merger, or, if the Rights Agreement can no
longer be amended, to cause the redemption of the Rights in each case
subject to their fiduciary duties as directors of the Company.
BUSINESS COMBINATION STATUTES. Pursuant to Section 844 of the
Business Combination Statutes, a corporation may not engage in any
business combination with an "Interested Shareholder" (defined as the
beneficial owner of 10% or more of the voting power of a company) for
five years following the date on which the Interested Shareholder
became such (the "Stock Acquisition Date") unless the acquisition
which resulted in the Interested Shareholder becoming such (the "10%
Acquisition"), or the business combination, is approved by the board
of directors and by a majority of the non-employee directors, of which
there shall be at least two, before the date of the 10% Acquisition.
Pursuant to Sections 841 and 842 of the Business Combination
Statutes, any business combination with an Interested Shareholder that
was not approved by the board of directors prior to the 10%
Acquisition must be approved by the board of directors, 80% of the
voting power and two-thirds of the voting power not controlled by the
Interested Shareholder or meet certain conditions regarding minimum
price and type of consideration.
If elected to the Board of Directors of the Company, the SPX
Nominees intend to approve the Proposed Business Combination, the
Exchange Offer and the Merger or seek to take such other action so
that the restrictions contained in the Business Combination Statutes
will not be applicable thereto.
Shareholders of the Company are urged to execute the GOLD DEMAND
CARD to demand that the Special Meeting be called and held. Making a
Demand and causing the Special Meeting to be called and held is not a
vote at the Special Meeting or a vote in favor of the Proposed
Business Combination. Shareholders will have the opportunity to vote
on the Proposal to Remove the Current Directors and the election of
the SPX Nominees at the Special Meeting. Moreover, shareholders will
be able to elect whether or not to tender their Shares into the
Exchange Offer; execution of a Demand does not constitute a tender of
the shareholder's Shares or obligate the shareholder to tender his or
her Shares in the Exchange Offer. However, the failure to obtain
Demands from holders of the requisite 35% of the outstanding Shares to
call the Special Meeting is a dispositive vote against the Proposed
Business Combination. THE FAILURE TO SIGN, DATE AND MAIL A GOLD DEMAND
CARD HAS THE SAME EFFECT AS OPPOSING THE DEMAND FOR A SPECIAL MEETING
TO BE CALLED AND HELD.
THE PROPOSED BUSINESS COMBINATION,
THE EXCHANGE OFFER AND THE MERGER
By letter dated February 17, 1997 to the Company's Board of
Directors, SPX has proposed a business combination with the Company.
In the Proposed Business Combination, shareholders of the Company
would receive for each of their Shares (together with the associated
Right) Consideration in the amount of $12.00 net in cash and 0.4796
share of SPX Common Stock for a total value of $48.00 based on the
$75-1/16 closing price on the New York Stock Exchange of a share of
SPX Common Stock on February 13, 1998, the last trading date preceding
the date of this Solicitation Statement. The Consideration represents
a 23% premium over the $38-7/8 price at which a Share closed on the
New York Stock Exchange on February 13, 1998, and a 32% premium over
the average trading price at which a Share closed on the New York
Stock Exchange during the 30 trading days preceding the date of this
Solicitation Statement. Immediately following the consummation of the
Proposed Business Combination and after giving effect to the issuance
of the SPX Common Stock in the transaction, shareholders of the
Company (other than SPX) would own approximately 70% of the then
outstanding shares of SPX Common Stock.
The Proposed Business Combination would be effected by means of
(i) the Exchange Offer, in which SPX is offering to pay the
Consideration in exchange for each Share (together with the associated
Right) validly tendered and not withdrawn, and (ii) the Merger, in
which each Share (together with the associated Right) not purchased in
the Exchange Offer would be converted into the right to receive the
Consideration.
SPX has today filed Exchange Offer materials with the Securities
and Exchange Commission and intends to make the Exchange Offer as soon
as its registration statement has been declared effective by the
Securities and Exchange Commission.
The Exchange Offer will be conditioned, among other things, upon
the following:
THE MINIMUM CONDITION. The number of Shares validly tendered
and not withdrawn before the expiration date of the Exchange Offer,
together with the Shares owned by SPX and its affiliates as of such
time, must represent at least 66 2/3% of the Shares outstanding on a
fully diluted basis (the "Minimum Condition"). Based on publicly
available information, as of December 31, 1997, there were 63,169,129
Shares outstanding and options to acquire 2,044,284 Shares were also
outstanding. SPX owns 1,150,150 Shares. See Schedule II. For purposes
of the Exchange Offer, "fully-diluted basis" assumes that all
outstanding stock options are presently exercisable and exercised.
Based on the foregoing and assuming no additional Shares (or
options, warrants or rights exercisable for, or securities convertible
into, Shares) have been issued since November 30, 1997 (other than
Shares issued pursuant to the exercise of the stock options referred
to above), if at least 42,325,459 Shares were validly tendered into
and not withdrawn from the Exchange Offer, the Minimum Condition would
be satisfied.
THE RIGHTS CONDITION. SPX must be satisfied, in its sole
discretion, that a Distribution Date has not occurred under the Rights
Agreement, and that the Rights have been invalidated or are otherwise
inapplicable to the Exchange Offer and the Merger (the "Rights
Condition"). See "Reason to Call a Special Meeting - Rights
Agreement."
THE BUSINESS COMBINATION STATUTES CONDITION. SPX must be
satisfied, in its sole discretion, that the restrictions contained in
the Business Combination Statutes will not apply to the Proposed
Business Combination, the Exchange Offer, the Merger or any other
business combination to which SPX and the Company are directly or
indirectly parties (the "Business Combination Condition").
The Business Combination Condition may be satisfied if the Board
of Directors of the Company duly approved the Exchange Offer and the
Merger prior to consummation of the Exchange Offer, or if SPX, in its
sole discretion, were satisfied that the Business Combination Statutes
were invalid or their restrictions were otherwise inapplicable to SPX
in connection with the Exchange Offer and the Merger for any reason,
including, without limitation, those specified in the Business
Combination Statutes.
FINANCING CONDITION. SPX must have obtained, on terms
satisfactory to it in its sole discretion, sufficient financing to
enable the Exchange Offer and the Merger to be consummated. SPX has
received a "highly confident" letter from Canadian Imperial Bank of
Commerce and its affiliate CIBC Oppenheimer Corp. ("CIBC
Oppenheimer"), dated February 13, 1998, in which the two entities
state that they are highly confident of their ability to raise the
financing in the credit markets in an amount sufficient to consummate
the acquisition of the Company, refinance existing debt of SPX and the
Company, and provide working capital.
SPX STOCKHOLDER APPROVAL CONDITION. Pursuant to the rules
promulgated by the New York Stock Exchange, approval by stockholders
of SPX is required prior to the issuance of additional shares of SPX
Common Stock if the number of shares to be issued is or will be equal
to 20% or more of the number of shares of SPX Common Stock outstanding
before the issuance of the additional shares. Since the number of
shares of SPX Common Stock that would be required to be issued in the
Exchange Offer exceeds such 20%, consummation of the Exchange Offer
will be conditioned upon receipt of the requisite approval by SPX's
stockholders of the issuance of the shares of SPX Common Stock in the
Exchange Offer and the Merger (the "SPX Stockholder Approval
Condition"). Under the rules of the New York Stock Exchange, assuming
there is a quorum present at the stockholders meeting at which the
matter is being considered (consisting of over 50% of the stock issued
and outstanding and entitled to be voted at the stockholders meeting),
the issuance of the additional shares must be approved by a majority
of the votes entitled to be cast by the holders of SPX Common Stock
that are present or represented by proxy at the stockholders meeting.
SPX has not commenced a solicitation of its stockholders to approve
the issuance of the shares in the Exchange Offer and the Merger and
does not intend to do so at least until the required number of Demands
have been received to call the Special Meeting.
The timing of the consummation of the Exchange Offer and the
Merger will depend on a variety of factors and legal requirements, the
actions of the Board of Directors of the Company, and whether the
Minimum Condition, the Rights Condition, the Business Combination
Statutes Condition, the Financing Condition and the SPX Stockholder
Approval Condition are satisfied or (if permissible) waived. On
January 6, 1998, SPX made its HSR Filing under the HSR Act. The
waiting period under the HSR Act expired at 11:59 p.m. on February 5,
1998. Accordingly, satisfaction of the premerger notification and
waiting period requirements of the HSR Act is not a condition of
either the Exchange Offer or the Merger.
SPX reserves the right to amend the terms of the Exchange Offer
and/or the Merger (including amending the number of Shares to be
purchased in the Exchange Offer, the nature or amount of the
Consideration to be paid in the Exchange Offer and/or in the Merger,
and the surviving entity in the Merger) at any time, including upon
entering into a merger agreement with the Company. SPX further
reserves the right to negotiate and enter into a merger agreement with
the Company (and has delivered a draft of such a merger agreement with
its February 17, 1998 letter to the Board of Directors (See
"Background")) pursuant to which there would be no Exchange Offer but
rather a "single-step" merger in which the Shares would be converted
into the right to receive the Consideration, or all cash, in the
amount of $48.00 per Share, or all stock, in the amount of 0.6395
share of SPX Common Stock per Share, subject to proration, or cash and
SPX Common Stock in such other amounts as are negotiated between SPX
and the Company; provided that SPX does not presently intend to reduce
the aggregate amount of the consideration paid in respect of the
Shares from the amount of the Consideration proposed to be paid in the
Exchange Offer and the Merger.
A registration statement relating to the shares of SPX Common
Stock to be issued in connection with the Exchange Offer has been
filed with the Securities and Exchange Commission but has not yet
become effective. Such securities may not be sold nor may offers to
buy be accepted prior to the time the registration statement becomes
effective. This Solicitation Statement shall not constitute an offer
to sell or the solicitation of an offer to buy nor shall there be any
sale of these securities in any state in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such state.
SPECIAL MEETING PROPOSALS
If SPX is successful in its solicitation of Demands and a Special
Meeting is called and held, the following matters will be proposed for
action by the shareholders at the Special Meeting:
REPEAL OF BY-LAWS ADOPTED SUBSEQUENT TO APRIL 3, 1997. The By-Law
Repeal Proposal is designed to prevent the Board of Directors of the
Company or a Committee thereof from taking actions, by means of
amending the Company's By-Laws, to attempt to nullify the actions to
be voted on by the shareholders at the Special Meeting or to create
obstacles to the consummation of the Proposed Business Combination,
the Exchange Offer and the Merger. According to publicly available
information, the most recent version of the Company's By-Laws was
adopted on April 3, 1997 and no amendments subsequent to that date
have been publicly disclosed. If the Board of Directors of the Company
or any Committee thereof has adopted since April 3, 1997, or adopts
prior to the effectiveness of the proposals that are to be voted on at
the Special Meeting, any amendment to the Company's By-Laws, this
proposal would repeal such amendment. The purpose of this amendment is
to remove any existing undisclosed obstacles, and to prevent the Board
or any Committee thereof from creating new obstacles, to the
consummation of the Proposed Business Consummation, the Exchange Offer
and the Merger. Assuming there is a quorum (consisting of a majority
of the votes entitled to be cast on the matter (a "Quorum")) at the
Special Meeting, the By-Law Repeal Proposal will be adopted, and the
By-Laws and By-Law amendments covered thereby will be repealed, if the
number of votes cast in favor of adopting the proposal exceeds the
number of votes cast against such proposal.
REMOVAL OF CURRENT DIRECTORS OF THE COMPANY. Unless the Board of
Directors of the Company takes action to remove certain obstacles, the
Proposed Business Combination, the Exchange Offer and the Merger will
not proceed. Thus far, the current Board has shown no interest in
negotiating with SPX. Accordingly, SPX will propose that all of the
members of the Board (currently consisting of John F. Craemer, Richard
E. Dauch, Milton P. Devane, John E. Echlin, Jr., Donald C. Jensen,
Trevor O. Jones, Larry W. McCurdy, William P. Nussbaum, and Jerome G.
Rivard) be removed from office. Under the Connecticut Business Act,
assuming there is a Quorum at the Special Meeting, any director may be
removed if the number of votes cast in favor of removing the director
exceeds the number of votes cast against removal.
AMENDMENT OF THE BY-LAWS OF THE COMPANY. The Company's By-Laws
currently provide that the Board shall consist of not less than three
members and not more than 12 members, with the exact number of
directors to be determined from time to time by a resolution of the
Board. According to publicly available information, the Company
currently has nine directors. At the Special Meeting, SPX will propose
that the By-Laws of the Company be amended to fix the number of
directors of the Company at five by replacing the first sentence of
Article II, Section 1, which currently provides that
"The Board of Directors shall consist of not less than three nor
more than twelve members, the number to be as the directors shall
from time to time direct.",
with the following sentence:
"The Board of Directors of the Corporation shall consist of five
members."
Assuming there is a Quorum at the Special Meeting, the By-Laws will be
amended if the number of votes cast in favor of amending the By-Laws
exceeds the number of votes cast against the amendment.
ELECTION OF SPX NOMINEES AS DIRECTORS. SPX will propose at the
Special Meeting that the shareholders of the Company elect the
following persons, all of whom are nominees of SPX, to the Board of
Directors of the Company: Alan Schwartz, Sterling Professor of Yale
University Law School; James K. Ashford, a retired senior Tenneco
automotive executive; John B. Blystone, Chairman, President and Chief
Executive Officer of SPX; Patrick J. O'Leary, Chief Financial Officer
of SPX; and Christopher J. Kearney, Vice President, Secretary and
General Counsel of SPX. If the SPX Nominees are elected, SPX
anticipates that the SPX Nominees will act to facilitate the
consummation of the Proposed Business Combination, including the
actions with respect to the Rights Agreement and Business Combination
Statutes discussed above (see "Reason to Call a Special Meeting"),
subject to their fiduciary duties as directors of the Company.
Assuming there is a Quorum at the Special Meeting, directors are
elected by a plurality of the votes cast by the shareholders entitled
to vote at the Special Meeting. Shareholders of the Company do not
have cumulative voting rights.
Set forth below are the name, age, present principal occupation
and business experience for the past five years of each of the five
SPX Nominees. This information has been furnished to SPX by the
respective nominees. Each of the SPX Nominees has consented to serve
as a director. Each of the SPX Nominees is a U.S. citizen except for
Mr. O'Leary who is a dual citizen of the Irish Republic and the United
Kingdom; none of them owns any Shares. None of the corporations
referenced below is a parent or subsidiary of the Company.
JAMES K. ASHFORD, 61 Mr. Ashford is currently retired. From 1993
354 RUE DE CARAVELLE through 1995 Mr. Ashford served as the President
NAPLES, FLORIDA 33963 and CEO of AP Parts International Inc., a
manufacturer of exhaust systems and aftermarket
products. Mr. Ashford retired in 1991 as
President and CEO of JI Case, a subsidiary of
Tenneco, Inc., a worldwide manufacturing company.
JOHN B. BLYSTONE, 44 Since 1995, Mr. Blystone has served as the
700 TERRACE POINT DRIVE Chairman, President and CEO of SPX. From 1994 -
MUSKEGON, MI 49443 1995, Mr. Blystone served as the President and
CEO of General Electric Company's Nuovo Pignone
Division, an industrial company, and as the
President and CEO of General Electric Company's
Europe Power Pole Plus division of GE Power
Systems, an industrial company. From 1991 -
1994, Mr. Blystone served as Vice President -
General Manager of the GE Superabrasives division
of General Electric Company, an industrial
company. Mr. Blystone is currently a Director of
SPX and of Worthington Industries.
CHRISTOPHER J. KEARNEY, 42 Since 1997, Mr. Kearney has served as the
700 TERRACE POINT DRIVE Vice-President, Secretary and General Counsel of
MUSKEGON, MI 49443 SPX. From 1995 - 1997, Mr. Kearney served as
the Senior Vice President, Secretary and General
Counsel of Grimes Aerospace Co., a manufacturer
of aircraft lighting, engine systems and
electronic systems. From 1988 - 1995, Mr.
Kearney served as Division General Counsel for
General Electric Company, an industrial company.
PATRICK J. O'LEARY, 40 Since 1996, Mr. O'Leary has served as Chief
700 TERRACE POINT DRIVE Financial Officer of SPX. From 1994 - 1996, Mr.
MUSKEGON, MI 49443 O'Leary served as the Chief Financial Officer of
Carlisle Plastics Inc., a manufacturer of plastic
consumer products. From 1978 - 1994 Mr. O'Leary
was a Partner in the accounting firm, Deloitte &
Touche LLP.
ALAN SCHWARTZ, 57 Since 1987, Mr. Schwartz has served as Sterling
YALE LAW SCHOOL Professor of Law at Yale Law School. Mr.
127 WALL STREET Schwartz is a director of Cleveland Cliffs, Inc.
NEW HAVEN, CT 06511
Each SPX Nominee, other than the three executive officers of SPX,
will receive $25,000 from SPX for his services as a nominee for
election as a director of the Company, and, if elected, as a director
of the Company, and each SPX Nominee will be reimbursed his reasonable
out-of-pocket expenses incurred in the performance of his service as a
nominee and, if elected, as a director of the Company. SPX has agreed
to indemnify each SPX Nominee from and against any losses, claims,
charges, liabilities, costs or expenses (including reasonable legal
fees and expenses) arising out of any claim, action, suit or
proceeding to which the SPX Nominee is or is threatened to be made a
party (i) by reason of his being a nominee and a "participant in a
solicitation" (as defined in the Securities Exchange Act of 1934) or
(ii) arising out of or in connection with his service as a Company
director. SPX may, but is not obligated to, obtain insurance policies
covering any portion of such indemnification.
SPX does not expect that any of the SPX Nominees will be unable
to stand for election if the Special Meeting is held, but, in the
event that any vacancy in the slate of SPX Nominees should occur, SPX
will name a substitute nominee. In addition, SPX reserves the right
(i) to nominate additional nominees to fill any director positions
created by the Board of Directors of the Company prior to or at the
Special Meeting and (ii) to nominate substitute or additional persons
if the Company makes or announces any changes to its By-Laws or takes
or announces any other action that has, or if consummated would have,
the effect of disqualifying any or all of the SPX Nominees.
If the Special Meeting is called, SPX will furnish to the
shareholders of the Company proxy materials relating to the foregoing
proposals.
DEMAND PROCEDURES
Under the Connecticut Business Act and the Company's
By-Laws, a special meeting of the Company's shareholders may be called
by one or more holders of Shares representing in the aggregate at
least 35% of all the votes entitled to be cast on any issue proposed
to be considered at the Special Meeting. According to the Company's
By-Laws, each holder of Shares is entitled to one vote per Share held.
According to publicly available information, as of December 31, 1997,
there were 63,169,129 Shares outstanding. Based on such number (which
does not take into account any Shares that after such date may have
been repurchased by the Company or issued by the Company pursuant to
outstanding options or otherwise) and the fact that SPX owns 1,150,150
Shares, Demands from holders of an aggregate of at least 20,959,046
Shares in addition to SPX will be required to call the Special
Meeting. The By-Laws of the Company provide that, upon written request
of the requisite holders, the President of the Company shall call a
Special Meeting. Following receipt of the requisite Demands, SPX will
deliver the Demands to the Secretary of the Company and request that
officer forthwith to cause appropriate notice of the Special Meeting
to be given to the Company's shareholders entitled thereto.
Under the Connecticut Business Act, a company's by-laws may fix
or provide the manner of fixing the record date for one or more voting
groups in order to determine, among other things, the shareholders
entitled to demand a special meeting (the "Demand Record Date"). The
Connecticut Business Act provides that, if not otherwise fixed by the
by-laws or the board of directors, the record date for determining
shareholders entitled to demand a special meeting is the date the
first shareholder signs the demand. On February 17, 1998, SPX
delivered its written Demand to the Secretary of the Company.
Accordingly, SPX believes that the Demand Record Date is February 17,
1998.
You may revoke your Demand at any time before the delivery of
Demands from holders of Shares representing in the aggregate the
requisite 35% vote to the Secretary of the Company by delivering a
written notice of revocation to SPX, care of D.F. King & Co., Inc.
("D.F. King"), 77 Water Street, 20th Floor, New York, New York 10005.
Although a revocation is effective if delivered to the Secretary of
the Company, SPX requests that either the original or photostatic
copies of all revocations be mailed or faxed to SPX, care of D.F.
King, so that SPX will be aware of all revocations and can more
accurately determine if and when enough Demands have been received
from requisite holders. Any revocation will not affect any action
taken by SPX pursuant to the Demands prior to such revocation.
Under the Connecticut Business Act, the Connecticut Superior
Court may summarily order a special meeting to be held if notice of
the special meeting is not given within thirty days after the date the
demand is delivered to the corporation's secretary or if the special
meeting is not held in accordance with the notice. Moreover, a
corporation must notify shareholders of the date, time and place of
the special meeting no fewer than ten nor more than 60 days before the
meeting date. The Demands contain a request that the Special Meeting
be scheduled 35 days after delivery of the Demands so as to provide
shareholders the opportunity to vote on the Special Meeting proposals
in a reasonably prompt timeframe.
BY EXECUTING THE GOLD DEMAND CARD AND RETURNING IT TO SPX, YOU
ARE NOT COMMITTING TO CAST ANY VOTE IN FAVOR OF OR AGAINST, NOR ARE
YOU GRANTING ANY PROXY TO VOTE ON, ANY OF THE PROPOSALS TO BE BROUGHT
BEFORE THE SPECIAL MEETING. MOREOVER, EXECUTION AND DELIVERY OF THE
GOLD DEMAND CARD WILL NOT OBLIGATE YOU IN ANY WAY TO SELL YOUR SHARES
PURSUANT TO THE EXCHANGE OFFER OR ANY OTHER OFFER.
SOLICITATION OF DEMANDS
This solicitation of Demands is being made by SPX. Demands may be
solicited by mail, facsimile, telephone, telegraph, the internet, in
person and by advertisements. Solicitations may be made by certain
directors, officers and employees of SPX, none of whom will receive
additional compensation for such solicitation.
SPX has retained D.F. King for solicitation and advisory services
in connection with this solicitation, for which D.F. King will receive
a fee not to exceed $50,000, together with reimbursement for its
reasonable out-of-pocket expenses. SPX has also agreed to indemnify
D.F. King against certain liabilities and expenses, including
liabilities and expenses under federal securities laws. D.F. King will
solicit Demands from individuals, brokers, banks, bank nominees and
other institutional holders. SPX is requesting banks, brokerage houses
and other custodians, nominees and fiduciaries to forward all
solicitation materials to the beneficial owners of the Shares they
hold of record. SPX will reimburse these record holders for their
reasonable out-of-pocket expenses in so doing.
CIBC Oppenheimer is acting as financial advisor to SPX in
connection with the Proposed Business Combination, and will act as
Dealer Manager of the Exchange Offer, for which services SPX has paid
a fee of $500,000 and has agreed to pay additional fees, up to a
maximum of $8,500,000 in the aggregate (in addition to any fees which
may be paid to it in connection with arranging or participating in the
financing of the transaction), a substantial portion of which is
contingent upon the consummation of the Proposed Business Combination.
SPX has also agreed to reimburse CIBC Oppenheimer for its reasonable
out-of-pocket expenses, including reasonable legal fees up to a
specified maximum, and to indemnify CIBC Oppenheimer and certain
related persons against certain liabilities and certain expenses in
connection with its engagement, including certain liabilities under
the federal securities laws. In connection with CIBC Oppenheimer's
engagement as financial advisor, officers and employees of CIBC
Oppenheimer may communicate in person, by telephone or otherwise with
a limited number of institutions, brokers or other persons who are
shareholders of the Company for the purpose of assisting in the
solicitation of Demands for the Special Meeting. In addition, CIBC
Oppenheimer, together with CIBC, has issued a "highly confident"
letter regarding the financing of the Exchange Offer. See "The
Proposed Business Combination, the Exchange Offer and the Merger".
CIBC Oppenheimer will not receive any fee for or in connection with
such solicitation activities or for the issuance of such letter apart
from the fees which it is otherwise entitled to receive as described
above.
The entire expense of soliciting Demands is being borne by SPX.
SPX does not currently intend to seek reimbursement of the costs of
this solicitation from the Company. Costs of this solicitation of
Demands, including the fees referred to above, are expected to be
approximately $2,000,000 (exclusive of costs represented by salaries
and wages of regular officers and employees) of which approximately
$1,150,000 have been incurred to date.
ADDITIONAL INFORMATION
As of the date of this Solicitation Statement, SPX owns 1,150,150
Shares. For more detailed information regarding the directors and
executive officers and other representatives of SPX and SPX's Share
ownership, see Schedules I and II, respectively, to this Solicitation
Statement.
Schedule III to this Solicitation Statement sets forth certain
information, as made available in public documents, regarding Shares
held by the Company's management and certain beneficial owners. The
information concerning the Company contained in this Solicitation
Statement and the Schedules attached hereto has been taken from, or is
based upon, publicly available information, and SPX takes no
responsibility for the accuracy or completeness thereof. SPX has not
to date had access to the books and records of the Company.
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
The Company's Proxy Statement dated November 14, 1997 for its
1997 Annual Meeting indicates that proposals of shareholders intended
to be presented by such shareholders at the Company's 1998 Annual
Meeting must be received by the Secretary of the Company no later than
July 17, 1998 in order to be considered for inclusion in the proxy
statement and form of proxy relating to that meeting.
February 17, 1998 SPX CORPORATION
SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS
AND EXECUTIVE OFFICERS OF SPX
AND OTHER REPRESENTATIVES OF SPX
Set forth in the tables below are the present principal
occupation or employment, and the name, principal business and address
of any corporation or organization in which such employment is carried
on, for (1) each of the directors and executive officers of SPX and
(2) certain employees and other representatives of SPX who may also
solicit Demands from the shareholders of the Company. The principal
business address of SPX is 700 Terrace Point Drive, Muskegon, Michigan
49443-3301. Unless otherwise indicated, the principal business address
for each individual listed below is the address of his or her
employer. Except as otherwise provided in this Solicitation Statement
(including the Schedules hereto), neither SPX nor any of the other
participants in this Solicitation, including the SPX Nominees detailed
on Schedule II hereto, (i) directly or indirectly owns any Shares or
any other securities of the Company, (ii) was in the past ten years
convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors), or (iii) was within the past year a party to
any contracts, arrangements or understandings with any person with
respect to any securities of the Company, including but not limited to
joint ventures, loan or option arrangements, puts or calls, guarantees
against loss or guarantees of profit, division of losses or profits,
or the giving or withholding of proxies.
Directors of SPX
Present Principal
Name Occupation or Employment
- ----------------------- -----------------------------------------------
John B. Blystone Chairman, President and Chief Executive Officer
SPX
J. Kermit Campbell Chief Executive Officer
The Prince Group
Supply products and services to manufacturing
firms
2721 Nelson Road
Traverse City, MI 49686
Sarah R. Coffin Vice President, Specialty Group Manager
H.B. Fuller Company
Manufacturer of adhesives, sealants, coatings
and paints
1210 County Road "E" West
Arden Hills, MN 55112
Frank A. Ehmann Partner
RCS Healthcare Partners, L.P.
Leveraged buyout fund
390 Sabal Palm Lane
Vero Beach, FL 32963
Edward D. Hopkins Retired
Charles E. Johnson II Private Investor
474 E. Circle Drive
North Muskegon, MI 49445
Ronald L. Kerber Exec. Vice-President and
Chief Technology Officer
Whirlpool Corporation
Manufacturer of major home appliances
2000 M63
Benton Harbor, MI 49022-2692
Peter H. Merlin Partner
Gardner, Carton & Douglas
Law Firm
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795
David P. Williams President and Chief Operating Officer
The Budd Company
Manufacturer of automobile and truck body
components
3155 West Big Beaver Road
Box 2601
Troy, MI 48084
Executive Officers of SPX (Other than SPX Nominees)
Present Principal
Name Occupation or Employment
- ----------------------- -----------------------------------------------
Drew T. Ladau Vice President, Business Development
SPX
Stephen A. Lison Vice President, Human Resources
SPX
Thomas J. Riordan President, Service Solutions
SPX
Other Representatives
of SPX Who May Also Solicit Demands
Present Principal
Name Occupation or Employment
- ----------------------- -----------------------------------------------
Tina L. Betlejewski Manager, Corporate Communications
SPX
Charles A. Bowman Director, Corporate Finance
SPX
Kenneth C. Dow Corporate Controller
SPX
David M. Garrity Senior Analyst - Executive Director
CIBC Oppenheimer Corp. - New York
Investment Banking Firm
One World Financial Center, 38th Floor
New York, NY 10281
Roger C. Kahn Managing Director
CIBC Oppenheimer Corp. - New York
Investment Banking Firm
One World Financial Center, 38th Floor
New York, NY 10281
Jonathan B. Lamont Analyst
CIBC Oppenheimer Corp. - Chicago
Investment Banking Firm
200 West Madison, Suite #2300
Chicago, IL 60606
Stuart A. Taylor II Managing Director
CIBC Oppenheimer Corp.- Chicago
Investment Banking Firm
200 West Madison, Suite #2300
Chicago, IL 60606
J. Michael Whitted Director
CIBC Oppenheimer Corp. - Chicago
Investment Banking Firm
200 West Madison, Suite #2300
Chicago, IL 60606
CIBC Oppenheimer Corp. does not admit or deny that any of its
directors, officers or employees is a "participant" as defined in
Schedule 14A promulgated by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended, or that such
Schedule 14A requires the disclosure of certain information concerning
such persons.
In the normal course of its business, CIBC Oppenheimer regularly
buys and sells Shares for its own account and for the accounts of its
customers, which transactions may result from time to time in CIBC
Oppenheimer and its associates having a net "long" or net "short"
position in Shares or option contracts with other derivatives in or
relating to Shares. As of February 13, 1998, CIBC Oppenheimer had no
positions in Shares.
SCHEDULE II
SHARES HELD BY SPX
Daily-Weighted
Number of Average
Transaction Date Shares Acquired Price per Share
---------------- --------------- ---------------
12/18/97 54,000 35.4877
12/19/97 114,000 34.9047
12/22/97 240,000 36.0210
12/23/97 8,000 35.7500
01/05/98 20,000 36.8191
01/06/98 33,800 37.1444
02/06/98 76,200 37.1443
02/09/98 160,700 37.8080
02/10/98 7,400 38.9730
02/11/98 146,500 38.4826
02/12/98 87,250 38.8041
02/13/98 202,300 38.9359
--------
TOTAL 1,150,150
Funds used by SPX to purchase the Shares were drawn from SPX's
existing revolving credit facility.
SCHEDULE III
SHARE OWNERSHIP OF THE COMPANY
MANAGEMENT OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information, regarding the
beneficial ownership of Shares of the Company as of November 5, 1997
as to (a) each director, (b) the Company's four most highly
compensated executive officers whose salary and bonus exceeded
$100,000, (c) all directors and executive officers as a group and (d)
each person known to the Company to be the beneficial owner of more
than 5% of the Shares.
All such information has been taken from the Company's Proxy
Statement, dated November 14, 1997, for its 1997 Annual Meeting.
Although SPX does not have any information that would indicate that
any information contained in this Schedule or elsewhere in this
Solicitation Statement that has been taken from the Company's Proxy
Statement for its 1997 Annual Meeting or any other document on file
with the Securities and Exchange Commission is inaccurate or
incomplete, SPX does not take any responsibility for the accuracy or
completeness of such information.
Directors and Executive Officers
Name and Address Amount and Nature of Percentage of Class
of Beneficial Owner Beneficial Ownership Beneficially Owned
------------------- -------------------- ------------------
John F. Creamer, Jr. (1) 21,750 shares *
Richard E. Dauch 1,142 shares *
Milton P. DeVane (2) 13,600 shares *
John E. Echlin, Jr. (3) 634,392 shares 1.00%
Donald C. Jensen (4) 9,050 shares *
Trevor O. Jones (5) 23,350 shares *
Jon P. Leckerling (6) 34,729 shares *
Milton J. Makoski (7) 41,395 shares *
Larry W. McCurdy 3,000 shares *
William P. Nusbaum 3,000 shares *
Joseph A. Onorato (8) 40,880 shares *
Jerome G. Rivard (9) 6,800 shares *
Edward D. Toole (10) 27,264 shares *
- --------
*Less than 1 percent of class
(1) Includes 6,750 shares exercisable within 60 days of November
5, 1997 under the Echlin Inc. 1996 Non-Executive Director Stock Option
Plan.
(2) Includes 12,600 shares exercisable within 60 days of November
5, 1997 under the Echlin Inc. 1996 Non-Executive Director Stock Option
Plan.
(3) Includes 125,200 shares held in an irrevocable charitable
foundation of which Mr. Echlin is a trustee with shared voting rights
over such shares, 61,907 shares owned by Mrs. John E. Echlin, Jr. and
12,900 shares exercisable within 60 days of November 5, 1997 under the
Echlin Inc. 1996 Non-Executive Director Stock Option Plan.
(4) Shares held indirectly by the Donald C. Jensen Revocable
Living Trust dated September 6, 1990. Includes 6,050 shares
exercisable within 60 days of November 5, 1997 under the Echlin Inc.
1996 Non-Executive Director Stock Option Plan.
(5) Includes 10,850 shares exercisable within 60 days of November
5, 1997 under the Echlin Inc. 1996 Non-Executive Director Stock Option
Plan.
(6) Includes 29,729 shares either exercisable currently or within
60 days of November 5, 1997 under the Echlin Inc. 1992 Executive Stock
Option Plan or credited to Mr. Leckerling's account in the Echlin
Incentive Savings and Investment Plan as of August 31, 1997.
(7) Includes 35,045 shares either exercisable currently or within
60 days of November 5, 1997 under the Echlin Inc. 1992 Executive Stock
Option Plan or credited to Mr. Makoski's account in the Echlin
Incentive Savings and Investment Plan as of August 31, 1997.
(8) Includes 32,780 shares either exercisable currently or within
60 days of November 5, 1997 under the Echlin Inc. 1992 Executive Stock
Option Plan or credited to Mr. Onorato's account in the Echlin
Incentive Savings and Investment Plan as of August 31, 1997.
(9) Includes 3,800 shares exercisable within 60 days of November
5, 1997 under the Echlin Inc. 1996 Non-Executive Director Stock Option
Plan.
(10) Includes 22,914 shares either exercisable currently or
within 60 days of November 5, 1997 under the Echlin Inc. 1992
Executive Stock Option Plan or credited to Mr. Toole's account in the
Echlin Incentive Savings and Investment Plan as of August 31, 1997.
As of November 5, 1997, the directors and twelve executive
officers of the Company (including the Named Executive Officers other
than Mr. Mancheski who is neither a director nor executive officer of
the Company) as a group owned beneficially 999,929 shares of Common
Stock or 1.58 percent thereof. Such shares include 278,770 shares
either exercisable currently or within 60 days of November 5, 1997
under the Echlin Inc. 1992 Executive Stock Option Plan and the Echlin
Inc. 1996 Non-Executive Director Stock Option Plan or, with respect to
officers of the Company, held in their respective accounts in the
Echlin Incentive Savings and Investment Plan as of August 31, 1997.
Certain Beneficial Owners
-------------------------
Name and Address Amount and Nature of Percentage of Class
of Beneficial Owner Beneficial Ownership Beneficially Owned
------------------- -------------------- ------------------
The Capital Group 6,510,500 shares 10.27%
Companies, Inc. (1)
333 South Hope Street
Los Angeles, California
90071
FMR Corp. (2) 5,175,704 shares 8.35%
82 Devonshire Street
Boston, Massachusetts
02109-3614
Putnam Investments (3) 4,293,482 shares 7.00%
One Post Office Square
Boston, Massachusetts
02109
MacKay-Shields Financial 4,002,530 shares 6.32%
Corporation (4)
Investment Advisors
9 West 57th Street
New York, New York 10019
- --------
(1) The Capital Group Companies, Inc., through its wholly-owned
subsidiaries, including Capital Research and Management Company
(acting as an investment advisor), has sole voting power with respect
to 1,377,200 shares as reported on Schedule 13G filed with the
Securities and Exchange Commission on April 10, 1997.
(2) FMR Corp., through its wholly-owned subsidiaries, Fidelity
Management & Research Company and Fidelity Management Trust Company
(acting as an investment advisor to several investment companies,
including Fidelity Magellan Fund), has sole voting power with respect
to 754,993 shares and sole dispositive power with respect to 5,175,704
shares as reported on Schedule 13G filed with the Securities and
Exchange Commission on February 14, 1997.
(3) Putnam Investments, Inc., through its wholly-owned
subsidiaries, Putnam Investment Management, Inc. and The Putnam
Advisory Company, Inc. (acting as investment advisors), has shared
voting power with respect to 126,300 shares and shared dispositive
power with respect to 4,293,482 shares as reported on Schedule 13G
filed with the Securities and Exchange Commission on January 27, 1997.
(4) MacKay-Shields Financial Corporation, Investment Advisors,
has shared investment power and shared dispositive power with respect
to 4,002,530 shares as reported by the owner on September 15, 1997.
IMPORTANT
Your action is important. No matter how many Shares you own,
please join SPX in demanding that the Special Meeting be called and
held by:
1. SIGNING the enclosed GOLD DEMAND CARD,
2. DATING the enclosed GOLD DEMAND CARD, and
3. MAILING the enclosed GOLD DEMAND CARD TODAY in the envelope
provided (no postage is required if mailed in the United
States).
IF YOU HOLD YOUR SHARES IN THE NAME OF ONE OR MORE BROKERAGE
FIRMS, BANKS, NOMINEES OR OTHER INSTITUTION, ONLY THEY CAN EXERCISE
THE RIGHT WITH RESPECT TO YOUR SHARES TO MAKE A WRITTEN DEMAND THAT
THE SPECIAL MEETING BE CALLED AND HELD, AND ONLY UPON RECEIPT OF YOUR
SPECIFIC INSTRUCTIONS. ACCORDINGLY, IT IS CRITICAL THAT YOU PROMPTLY
SIGN AND DATE THE GOLD DEMAND CARD AND MAIL IT IN THE ENVELOPE
PROVIDED BY YOUR BROKER, BANK OR OTHER NOMINEE SO THAT THEY CAN
EXERCISE THE RIGHT TO MAKE A DEMAND ON YOUR BEHALF.
If you have any questions or require any additional information
concerning this Solicitation Statement, please contact D.F. King at
the address set forth below.
D.F. KING & CO., INC.
77 WATER STREET
NEW YORK, NEW YORK 10005
CALL TOLL FREE (800) 758-5378
BANKS AND BROKERS CALL (212) 269-5550 (COLLECT)
PRELIMINARY COPY - NOT FOR USE
A DEMAND WILL BE PROVIDED WHEN DEFINITIVE SOLICITATION MATERIALS ARE
FURNISHED TO SHAREHOLDERS OF THE COMPANY
DEMAND TO CALL A SPECIAL MEETING
OF SHAREHOLDERS
OF
ECHLIN INC.
THIS REVOCABLE DEMAND AND REQUEST IS SOLICITED
BY SPX CORPORATION
To the President and Secretary of Echlin Inc.:
The undersigned is a shareholder of common stock, par value $1.00
per share (the "Shares"), of Echlin Inc., a Connecticut corporation
(the "Company"). Pursuant to Article I, Section 3 of the Company's
By-Laws and 33-696 of the Connecticut Business Corporation Act, the
undersigned hereby (i) requests and demands that the President of the
Company call a special meeting of the shareholders of the Company (a
"Special Meeting") for the purposes described below, fix the date,
time and place of the Special Meeting and give notice of the Special
Meeting (together with a description of the purposes for which the
Special Meeting is being called) to shareholders of the Company
entitled to vote thereat and (ii) certifies that he, she or it is
entitled to vote at the Special Meeting on the issues proposed to be
considered thereat. The Special Meeting is to be held for the
following purposes:
A. To repeal any provision of the Company's By-Laws or
amendments thereto adopted by the Company's Board of Directors or
any Committee thereof subsequent to April 3, 1997 and prior to
the effectiveness of the last of the proposals to be voted on at
the Special Meeting.
B. To consider and vote upon a proposal to remove all of the
current directors of the Company. C. To consider and vote upon a
proposal to amend the By-Laws of the Company to fix the number of
directors of the Company at five. D. To consider and vote upon a
proposal to elect five directors to the Board of Directors of the
Company.
The undersigned further requests that the Special Meeting be held
thirty-five days after such date as the Company has received demands
to call a Special Meeting for the purposes listed above from
shareholders entitled to vote at such meeting, who, in the aggregate,
hold at least 35% of the Company's outstanding Shares, unless such
thirty-fifth day is not a business day in Connecticut, in which case
it is requested that the Special Meeting be called for the first such
business day after such thirty-fifth day.
The undersigned hereby authorizes SPX Corporation to collect and
deliver this demand to the Company.
On February 17, 1998, the number of Shares held by the undersigned
totaled --------.
Dated: ---------------------., 1998
----------------------------------------
(Print name)
----------------------------------------
(Print name, if held jointly)
----------------------------------------
(signature)
----------------------------------------
(signature, if held jointly)
Title: --------------------------------
Please sign exactly as your Shares are
registered. When Shares are held by
joint tenants, both should sign. When
signing as an attorney-in-fact,
executor, administrator, trustee or
guardian, give full title as such. If a
corporation, sign in full corporate name
by president or other authorized
officer. If a partnership, sign in
partnership name by authorized person.
This demand will represent all Shares
held in all capacities.
PLEASE SIGN, DATE AND MAIL IN THE ENCLOSED ENVELOPE PROMPTLY.
Contacts: Charles A. Bowman George Sard/Anna Cordasco/
SPX Director of Corporate Finance Paul Caminiti
(616) 724-5194 Sard Verbinnen & Co
(212) 687-8080
SPX MAKES OFFER TO ACQUIRE ECHLIN VALUED AT $48 PER SHARE, OR $3 BILLION
CASH-AND-STOCK EXCHANGE OFFER IS 32% ABOVE ECHLIN'S
30-DAY TRADING AVERAGE; SPX FILING PROXY MATERIALS FOR
SPECIAL SHAREHOLDER MEETING TO REPLACE ECHLIN BOARD
------------------------------------------------------
MUSKEGON, MI, FEBRUARY 17, 1998 -- SPX Corporation (NYSE: SPW)
announced today that it has made an offer to acquire Echlin Inc. (NYSE:
ECH) for cash and SPX shares valued at $48 per Echlin share based on SPX's
closing price last Friday, or a total of approximately $3.0 billion. The
SPX offer, which consists of $12.00 in cash and 0.4796 SPX share per Echlin
share, represents a 23% current premium and is 32% above Echlin's 30-day
average trading price. SPX owns 1.15 million Echlin shares, or
approximately 1.8% of its total shares outstanding.
SPX is filing a registration statement today with the Securities and
Exchange Commission, and will start an exchange offer for all outstanding
Echlin shares as soon as its registration statement is cleared. SPX
received antitrust clearance for the transaction on February 5, 1998.
Echlin has a poison pill, which purports to prevent the acquisition of
more than 20% of Echlin shares without approval by Echlin's Board.
Accordingly, SPX is filing preliminary materials today with the SEC to
solicit shareholder demands to call a special meeting to replace Echlin's
entire Board with SPX's nominees. The SPX nominees, if elected, will take
all action needed to facilitate consummation of SPX's offer, subject to
their fiduciary duties as Echlin directors.
Echlin is incorporated in Connecticut and, under that state's
law, must give notice of a special meeting within 30 days of receiving
demands by holders of 35% of its outstanding shares, and must hold the
meeting within 60 days of giving notice. Because Echlin does not have
a staggered board, the existing Board would be removed if more
shareholders vote at the meeting in favor of removal than vote against
removal; new directors are elected by a plurality vote.
SPX expects the acquisition to be substantially accretive to
earnings per share in the first full year after closing, with
significant opportunity to improve EVA(R). SPX expects to achieve cost
savings of at least $125 million in the first full year after closing,
increasing to $175 million in the second year and thereafter. SPX
plans to restructure or divest Echlin assets determined to be
underperforming, accelerate implementation of EVA-based compensation
programs and pursue share repurchases.
SPX has received a "highly confident" letter from Canadian Imperial
Bank of Commerce and its affiliate, CIBC Oppenheimer Corp., to finance the
cash portion of the offer, refinance existing debt and provide working
capital.
SPX conveyed its offer in a letter today (see attached) to the
Echlin Board from John B. Blystone, Chairman, President and CEO of
SPX, which enclosed a draft merger agreement. Should Echlin enter into
the merger agreement, in addition to the 75% stock and 25% cash
exchange offer proposal, Echlin shareholders could elect either all
cash or all stock, subject to proration, in a partially tax-free
reorganization. The exchange offer would be taxable.
The 75/25 cash/stock ratio of the proposed transaction would
result in a capital structure consistent with SPX's financial
strategy. In addition, the proposed transaction would result in Echlin
shareholders owning approximately 70% of the combined company.
"We believe the combination of SPX and Echlin can create a world-class
company with the scale and capabilities to excel in the rapidly
consolidating $350 billion vehicle service industry," said Blystone. "In
our view, this combination can create substantial value for the
shareholders of both companies, while providing superb products and
services for customers and new opportunities for the employees and
communities of both companies."
Blystone added, "We have been trying for a year to achieve a
negotiated transaction with Echlin. We have initiated three meetings with
Larry McCurdy and other senior Echlin executives, and I have sent several
letters to Mr. McCurdy. However, we have been repeatedly rebuffed in our
efforts to negotiate a transaction -- or even to meet with Echlin's Board
so that we might explain why we believe this strategic combination would
greatly benefit both companies. Given the rapid pace of industry
consolidation and the logic of this transaction, we have decided to take
the issue directly to Echlin's shareholders. We have made what we believe
is an attractive offer based on publicly available information, but if
Echlin is able to demonstrate more value, we are prepared to recognize it
in the context of a negotiated transaction."
While Echlin's stock price was essentially flat in 1996-97 - and has
never traded as high as $40 per share - SPX stock has more than quadrupled
in the same two years under its new management.
"We are confident that shareholders of both companies would benefit
from the application of our leadership experience and management techniques
to a larger platform in the vehicle components and service industry,"
Blystone continued. "Customers and suppliers would benefit from the
combined company's ability to provide more fully integrated vehicle
service, from the manufacture of components and specialty service tools to
complete service solutions. Employees would benefit from EVA-based
compensation incentives and new growth opportunities within a more dynamic
company. Communities in Connecticut and other areas where Echlin operates
would benefit from the potential to achieve a leadership position in the
global vehicle service industry."
The combined company would have annual revenues of approximately
$4.5 billion, a balanced portfolio of businesses, strong cash flow,
and substantial cost-saving opportunities. Before any divestitures,
approximately 53% of pro forma combined revenues would be from
aftermarket parts, 33% from original equipment (OE) components and 14%
from service solutions.
Blystone added, "We believe that the combined company will be well
positioned to integrate the vehicle service process and stay ahead of the
trends transforming our industry. Integration will be essential to better
serve customers in the future, given the blurring lines between original
equipment and aftermarket, the expansion of mega-dealerships and national
parts retailers, the growing importance of repair shop chains and the
increasing technological complexity of vehicles. Echlin's broad range of
aftermarket and OE components fits well with our warranty repair tool
business, dealer equipment programs, diagnostic and emissions testing
equipment, service and owner's manual development, and vehicle component
manufacturing. The combined components portfolio would be complementary,
bringing together Echlin's market-leading position in brake and engine
systems with SPX's strengths in transmission and steering components."
In addition to Mr. Blystone, SPX's director nominees to replace the
Echlin Board are Alan Schwartz, Sterling Professor at Yale University Law
School; James K. Ashford, a retired senior Tenneco automotive executive and
former Motor magazine "Automotive Aftermarket Man of the Year"; Patrick J.
O'Leary, SPX Vice President - Finance and Chief Financial Officer; and
Christopher J. Kearney, Vice President, Secretary and General Counsel of
SPX.
SPX intends to employ an aggressive shareholder-focused agenda at
Echlin, focusing on cost structure, use of capital, productivity
enhancements, selective divestitures, and EVA-based compensation. Blystone
said, "We believe Echlin is now in a very similar situation to SPX when we
arrived at the end of 1995. We intend to utilize our leadership experience
and management techniques to achieve superior growth and profitability for
the combined company."
SPX expects to achieve annual cost savings of $175 million by the
second full year after closing. It plans to eliminate duplicate
corporate costs, realize manufacturing and distribution efficiencies,
streamline Echlin's organizational structure and save on material
costs through improved sourcing. The cost-saving program will include
a headcount reduction of some 3,000 positions throughout Echlin's
operations, or nearly 10% of its global work force. Employees whose
positions are eliminated will receive severance packages and
outplacement assistance. Employees of the combined company will have
exciting career opportunities in an EVA-driven organization.
SPX will also conduct a strategic review of underperforming Echlin
businesses to determine whether they will be restructured or divested. The
restructuring at Echlin would be patterned after the restructuring
implemented at SPX in the last two years, where sales per employee is up
over 50%, operating margins have nearly doubled and nearly 80% of employees
have compensation tied to improvement in EVA.
SPX intends to integrate Echlin into SPX with sensitivity to the
interests of Connecticut and other communities where Echlin operates.
According to Echlin's filings and public records, Echlin's total U.S. and
overseas work force of approximately 31,300 includes approximately 800
employees in Connecticut. Of these Connecticut employees, approximately 115
are in Echlin's corporate headquarters in Branford. SPX intends to maintain
a significant presence in Connecticut, exploring expansion opportunities in
the State, continuing to operate Echlin's Branford manufacturing facility,
and evaluating alternatives for Echlin's corporate headquarters. SPX is
also prepared to consider issues related to any other constituencies which
Echlin might identify in the context of a negotiated transaction.
The SPX offer is subject, among other things, to approval by SPX and
Echlin shareholders, redemption or inapplicability of Echlin's poison pill,
and completion of financing arrangements.
CIBC Oppenheimer Corp. is financial advisor to SPX and will
serve as dealer-manager for the exchange offer. D.F. King & Co., Inc.
is the information agent for the offer.
SPX Corporation is a global provider of Vehicle Service Solutions to
franchised dealers and independent service locations, Service Support to
Vehicle Manufacturers, and Vehicle Components to the worldwide motor
vehicle industry. SPX's Internet address is www.spx.com.
NOTE TO EDITOR: John Blystone's Letter To The Echlin Board of Directors Is
Attached
In addition to SPX Corporation and the SPX nominees, the participants
in the planned solicitation may include the following directors and
executive officers of SPX: J. Kermit Campbell (Director), Sarah R. Coffin
(Director), Frank A. Ehmann (Director), Edward D. Hopkins (Director),
Charles E. Johnson II (Director), Ronald L. Kerber (Director), Peter H.
Merlin (Director), David P. Williams (Director), Drew T. Ladau (Vice
President, Business Development), Stephen A. Lison (Vice President, Human
Resources), and Thomas J. Riordan (President, Service Solutions).
The SPX nominees are James K. Ashford, a retired senior Tenneco
automotive executive; John B. Blystone, Chairman, Chief Executive Officer
and President of SPX; Christopher J. Kearney, Vice President, General
Counsel and Secretary of SPX; Patrick O'Leary, Chief Financial Officer of
SPX; and Alan Schwartz, Sterling Professor at Yale University Law School.
Each SPX nominee, other than Messrs. Blystone, Kearney and O'Leary, the
three executive officers of SPX, will receive a $25,000 fee from SPX for
his participation in the solicitation, and each SPX nominee will be
reimbursed his reasonable out-of-pocket expenses incurred in the
performance of his service as a nominee and, if elected, as a director of
Echlin. SPX has agreed to indemnify each SPX nominee from and against
any losses, claims, charges, liabilities, costs or expenses (including
reasonable legal fees and expenses) arising out of any claim, action, suit,
or proceeding to which the SPX nominee is or is threatened to be made a
party (i) by reason of his being a nominee and a "participant in a
solicitation" (as defined in the Securities Exchange Act of 1934) or (ii)
arising out of or in connection with his service as an Echlin director. SPX
may, but is not obligated to, obtain insurance policies covering any
portion of such indemnification.
SPX owns 1,150,150 shares of common stock of Echlin. None of the SPX
nominees or the above-named directors or executive officers of SPX owns any
shares of Echlin common stock.
CIBC Oppenheimer Corp., an investment banking firm that provides a
full range of financial services for institutional and individual clients,
is acting as financial advisor to SPX in connection with the proposed
business combination, and will act as dealer manager of the exchange offer,
for which services SPX has paid a fee of $500,000 and has agreed to pay
additional fees, up to a maximum of $8.5 million in the aggregate (in
addition to any fees which may be paid to it in connection with arranging
or participating in the financing of the transaction), a substantial
portion of which is contingent upon the consummation of the proposed
business combination. SPX has also agreed to reimburse CIBC Oppenheimer for
its reasonable out-of-pocket expenses, including reasonable legal fees up
to a specified maximum, and to indemnify CIBC Oppenheimer and certain
related persons against certain liabilities and certain expenses in
connection with its engagement, including certain liabilities under the
federal securities laws.
In connection with CIBC Oppenheimer's engagement as financial advisor,
officers and employees of CIBC Oppenheimer may communicate in person, by
telephone or otherwise with a limited number of institutions, brokers or
other persons who are shareholders of Echlin for the purpose of assisting
in the solicitation of Demands for the Special Meeting. CIBC Oppenheimer
will not receive any fee for or in connection with such solicitation
activities apart from the fees which it is otherwise entitled to receive as
described above. The following directors or employees of CIBC Oppenheimer
may solicit demands: Roger C. Kahn (Managing Director), Jonathan B. Lamont
(Analyst), Stuart A. Taylor II (Managing Director) and J. Michael Whitted
(Director). CIBC Oppenheimer does not admit or deny that any of its
directors, officers or employees is a "participant" as defined in Schedule
14A promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended, or that such Schedule 14A
requires the disclosure of certain information concerning such persons. In
the normal course of its business, CIBC Oppenheimer regularly buys and
sells Echlin's common stock for its own account and for the accounts
of its customers, which transactions may result from time to time in CIBC
Oppenheimer and its associates having a net "long" or net "short" position
in Echlin's common stock or option contracts with other derivatives in
or relating to Echlin's securities. As of February 13, 1998, CIBC
Oppenheimer had no positions in Echlin's securities.
None of the above-named directors or employees of CIBC Oppenheimer
owns any shares of Echlin common stock.
A registration statement relating to the SPX securities referred to in
this news release has been filed with the Securities and Exchange
Commission but has not yet become effective. Such securities may not be
sold nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This news release shall not constitute an
offer to sell or the solicitation of an offer to buy nor shall there be any
sale of these securities in any state in which such offer, solicitation or
sale would be unlawful prior to registration or qualification under the
securities laws of any such state.
Statements in this press release that are not strictly historical are
"forward-looking" statements within the meaning of the Safe Harbor
provisions of the federal securities laws. Investors are cautioned that
such statements are solely predictions and speak only as of the date of
this release. Actual results may differ materially due to risks and
uncertainties that are described in the company's Form 10-K for 1996, the
1996 Annual Report to shareholders, and Form 10-Q for the first, second and
third quarters of 1997. For certain cautionary statements, investors are
referred to the preliminary prospectus in the Registration Statement on
Form S-4 filed with the Securities and Exchange Commission today which is
available, among other sources, from SPX by contacting SPX's corporate
offices at 616-724-5000 and through the SEC's website at www.sec.gov.
# # #
February 17, 1998
The Board of Directors of Echlin, Inc.:
The Board of Directors of SPX Corporation has authorized us to propose a
strategic business combination of SPX and Echlin in which shareholders of
Echlin would receive $12.00 in cash and 0.4796 share of SPX Common Stock
for each outstanding Echlin Share (the "Consideration"). Based on this past
Friday's closing price on the New York Stock Exchange of $75-1/16 per share
of SPX Common Stock, the Consideration to be paid to Echlin's shareholders
has a value of $48 per Echlin share, or a total of approximately $3.0
billion. This represents a 23% current premium and is 32% above Echlin's
30-day average trading price.
Echlin's shareholders would own approximately 70% of the equity of the
combined entity, which we believe will be well positioned for future
growth. Our press release, as well as a proposed Merger Agreement
pursuant to which the transaction could be quickly effected, is
enclosed. You will note that, should Echlin enter into the Merger
Agreement, in addition to the 75% stock and 25% cash exchange offer
proposal, Echlin shareholders would be given the option of electing to
receive either all cash or all stock, subject to proration, in a
partially tax-free reorganization.
As you know, SPX first contacted Echlin close to a year ago to discuss a
strategic combination. The company has repeatedly rebuffed our offer to
negotiate a transaction -- or even to allow us to meet with the Board so we
might explain to you the substantial long- and short-term benefits of such
a combination to Echlin and its shareholders, customers, employees and
other constituencies. Given the rapid pace of consolidation in our industry
and the logic of this transaction, you leave us no choice but to take our
offer directly to Echlin's shareholders. To that end, we are today filing a
registration statement with the Securities and Exchange Commission and we
will start an exchange offer for all of the outstanding shares of Echlin
for the Consideration as soon as that registration statement is declared
effective by the SEC.
We have received a "highly confident" letter from Canadian Imperial Bank of
Commerce and its affiliate, CIBC Oppenheimer Corp., to finance the cash
portion of the offer, refinance existing debt and provide working capital.
CIBC Oppenheimer Corp. is SPX's investment banker and will serve as the
dealer-manager of the exchange offer.
The Echlin poison pill purports to prevent the acquisition of more than 20%
of Echlin shares without approval by Echlin's Board. Accordingly, we have
also filed today with the SEC our preliminary materials to solicit written
shareholder demands that a special meeting of Echlin's shareholders be
called and held in order to vote on the removal of the present Board of
Directors of Echlin and the election of SPX's nominees in their place.
SPX's nominees, if elected, will take all action needed to facilitate the
consummation of our offer, subject to their fiduciary duty as directors of
Echlin.
As you may be aware, we received antitrust clearance for our offer on
February 5, 1998. We currently own 1.15 million shares of Echlin, or
approximately 1.8% of Echlin's total shares outstanding. This is a larger
stake than the combined ownership of all of Echlin's current officers and
directors, based on publicly available information. Under separate cover,
we are sending Echlin's Secretary our written demand that a special meeting
of Echlin's shareholders be called and held as well as notices of our
nominees and proposals for the special meeting. Alternatively we ask that
you call a special meeting of shareholders yourselves so that they may
promptly consider and vote upon our acquisition proposal.
Under Connecticut law, Echlin must give notice of a special meeting within
30 days of a demand by holders of 35% of Echlin's outstanding shares and
must hold the meeting within 60 days of giving such notice. At the special
meeting, existing directors are removed if more shareholders vote in favor
of removal than vote against removal; new directors are elected by a
plurality vote.
We are confident that this combination will benefit the shareholders of
both companies, while providing superb products and services for customers
and new opportunities for employees. The transaction, which we expect to be
substantially accretive to SPX's earnings per share in the first full year
after closing, will allow the combined company to stay ahead of the
changing market dynamics transforming our industry. Together, we will be
able to provide more fully integrated vehicle service -- from the
manufacture of components and specialty service tools to complete service
solutions -- to better serve our customers.
Under our proposal, Echlin's shareholders would receive a substantial
premium to Echlin's recent share price and participate as SPX shareholders
in what we believe is significant upside potential. Echlin's stock has
underperformed for years, remaining essentially flat during the strong bull
market of 1996-97 -- while SPX's stock has more than quadrupled in the same
two years under our leadership team. Accordingly, we expect we will be able
to attract the support from your shareholders to call a special meeting at
which they can vote to replace the existing Echlin Board with our nominees.
We would still prefer a negotiated transaction and stand ready to meet with
you and your advisors to discuss the attached Merger Agreement.
We believe that the combination of SPX and Echlin represents a
tremendous opportunity to the shareholders, customers, suppliers,
communities and employees of both companies. I've briefly outlined
below the strategic rationale for combining SPX and Echlin:
Combining SPX And Echlin Will Create A Company With The Scale And
Capabilities To Excel In The Rapidly Consolidating $350 Billion Vehicle
Service Industry.
Together we could integrate the vehicle service process -- from original
equipment vehicle components to specialty repair tools and services to
replacement parts -- staying ahead of the trends transforming our industry.
This will enable us to better serve customers -- given the blurring lines
between OE and aftermarket, the expansion of mega-dealerships and national
parts retailers, the growing importance of repair shop chains and
increasing technological complexity of vehicles. Echlin's broad range of
aftermarket and original equipment components fits extremely well with
SPX's warranty repair tool business, dealer equipment programs, diagnostic
and emissions testing equipment, service and owner's manual development,
and vehicle component manufacturing. The combined components portfolio
would be complementary, bringing together Echlin's market-leading position
in brake and engine systems with our strengths in transmission and steering
components.
SPX's Team Will Apply Its Leadership Experience And Management Techniques
To Improve Echlin.
In just two years, SPX has been transformed from a laggard to a leader,
with dramatically improved operating performance, Economic Value Added
(EVA(R) - net operating profit after-tax minus a charge for the cost of
capital) and share price. While Echlin's stock was essentially flat in the
1996-97 period, SPX's stock price has more than quadrupled in the same two
years under our leadership team. We intend to employ a similar aggressive
shareholder-focused EVA agenda to Echlin, focusing on cost structure, use
of capital, productivity enhancements, selective divestitures, and
compensation based on EVA.
This Transaction Would Benefit The Shareholders Of Both Companies.
Echlin shareholders would receive a substantial cash premium and own
approximately 70% of the combined company. SPX's shareholders would own
shares in a much larger company with increased value-creation
opportunities. Both sets of shareholders will benefit from the application
of our leadership team's experience and management techniques to a larger
platform in the vehicle components and service industry. We believe your
other constituencies will benefit as well.
We are excited about the prospects for a combined SPX and Echlin,
which will be well positioned for growth and profitability. After
completion of our proposed merger, the combined company will have
annual revenues of approximately $4.5 billion, a balanced portfolio of
businesses, strong cash flow and substantial cost-saving
opportunities. Before any divestitures, approximately 53% of pro forma
combined revenues will be from aftermarket parts, 33% from original
equipment components and 14% from service solutions.
We expect to achieve annual cost savings of $175 million by the second full
year after closing. We would eliminate duplicate corporate costs, realize
manufacturing and distribution efficiencies, streamline Echlin's
organizational structure and save on material costs through improved
sourcing. This would entail a headcount reduction of approximately 3,000
positions throughout Echlin's operations, or nearly 10% of its global work
force. Those employees whose positions are eliminated will receive
severance packages and outplacement assistance. Employees of the combined
company will have exciting career opportunities in the new EVA-driven
organization.
We will also conduct a strategic review of underperforming Echlin
businesses to determine whether they will be restructured or divested. The
restructuring at Echlin would be patterned after the restructuring
implemented at SPX in the last two years, where sales per employee is up
over 50%, operating margins have nearly doubled and nearly 80% of
employees have compensation tied to improvement in EVA.
As we've done at SPX, our leadership team will quickly implement EVA
as both a financial tool and driver of cultural change. The
progressive shareholder-oriented financial strategies adopted at SPX
will be extended to the combined entity.
In addition to myself, SPX's director nominees to replace the Echlin Board
are Alan Schwartz, Sterling Professor at Yale University Law School; James
K. Ashford, a retired senior Tenneco automotive executive and former Motor
magazine "Automotive Aftermarket Man of the Year;" Patrick J. O'Leary, SPX
Vice President - Finance and Chief Financial Officer; and Christopher J.
Kearney, Vice President, Secretary and General Counsel of SPX.
We know you will be concerned with the potential effect of our
proposed transaction on local communities, so let me assure you that
SPX intends to integrate Echlin into SPX with sensitivity to the
interests of Connecticut and other communities where Echlin operates.
According to Echlin's filings and public records, Echlin's total U.S.
and overseas work force of approximately 31,300 includes approximately
800 employees in Connecticut. Of these Connecticut employees,
approximately 115 are in Echlin's corporate headquarters in Branford.
SPX intends to maintain a significant presence in Connecticut,
exploring expansion opportunities in the State, continuing to operate
Echlin's Branford manufacturing facility, and evaluating alternatives
for Echlin's corporate headquarters.
As we have repeatedly said, our strong preference is to
complete this transaction on a negotiated basis. While we believe we
have made a full and fair offer based on publicly available
information, we are prepared to recognize any additional value Echlin
can substantiate in the context of a negotiated transaction. We are
also prepared to consider issues relating to any other constituencies
you may identify to us. We are prepared to meet immediately with you
and your advisors to quickly complete a transaction that is clearly in
the best interests of both companies.
Sincerely,
John B. Blystone
Attachments
Merger Agreement
Press Release
Preliminary Solicitation Materials, as filed with the Securities and
Exchange Commission
Registration Statement on Form S-4, as filed with the Securities and
Exchange Commission
SPX Corporation
February 17, 1998
TODAY'S AGENDA
--------------
. Discuss 4Q and 1997 year end results and provide '98 guidance
. Discuss our offer for Echlin
- Industry trends
- Strategic rationale
- Financial logic
- Our track record
- Our program for Echlin
SPX EARNINGS PER SHARE UPDATE
-----------------------------
EPS (diluted) before unusual items
- Fourth Quarter = $0.83
. 159% improvement over 1996
. First Call Consensus $0.80
- Full Year 1997 = $3.01
. 71% improvement over '96
. First Call Consensus $2.99
OUT-PERFORMED ANALYST ESTIMATES
SPX 1997 PERFORMANCE SCORECARD
------------------------------
. E.P.S. $3.01 per share 71% improvement over '96
. EVA(R)Improvement $18.8 million $45 million over two years
. MVA Nearly $400 million $700+ million over two years
. Headcount 36% fewer people Sales per employee up 30%
over '96
. Operating Margin 8% 25% improvement over '96
. Revenue +7% Past several years flat
. Shareholder Actions Dutch Auction Repurchased 17% in '97
EXCEEDING FINANCIAL COMMITMENTS
SPX GUIDANCE - 1998
-------------------
. 1998 Revenue Growth guidance -- 10%
(over 1997 Pro Forma)
. 1998 Q1 EPS Guidance -- $0.80
. 1998 FY EPS Guidance -- $3.85 -- $4.00
DOUBLE-DIGIT GROWTH AND 30% EPS IMPROVEMENT
SPX AND ECHLIN
RATIONALE FOR SPX AND ECHLIN MERGER
-----------------------------------
. Vehicle service industry is rapidly evolving
. Combination benefits shareholders, customers and employees of SPX and
Echlin
. SPX's leadership experience and management techniques will be applied
to Echlin
. SPX will cut costs, improve profitability and position combined
company for growth
WHY THIS OFFER NOW?
-------------------
. SPX has been pursuing a strategic business combination with Echlin for
a year
. SPX has initiated three meetings with Echlin and has sent several
letters regarding proposed deal
. Echlin has repeatedly rebuffed our offer to negotiate a transaction --
Echlin Board refuses to meet with us
. Rapid industry consolidation and strategic rationale for transaction
make it necessary to take our offer directly to Echlin's shareholders
SUMMARY OF SPX's OFFER
----------------------
. Structure: Exchange offer for all Echlin shares
. Value: $48 per Echlin share or approximately $3 billion
. Terms: $12 in cash, 0.4796 SPX shares per Echlin share; 1/4 cash, 3/4
stock; fixed exchange ratio
. Premium: 23% over Echlin's close on Friday
32% above 30-day average
. Earnings: Expect substantial accretion in first full year
SPX POSITIONED TO COMPLETE TRANSACTION
--------------------------------------
. SPX owns 1.15 million Echlin shares, 1.8% of Echlin, and more than
combined ownership of Echlin's officers and directors
. SPX has received antitrust clearance for the transaction
. SPX has received "highly confident" letter for $2.4 billion of
financing from CIBC
. SPX has filed exchange offer materials with SEC
. SPX has filed materials with SEC to call special meeting of Echlin's
shareholders to replace the Echlin Board
ANTICIPATED TIMETABLE
---------------------
February 1998 March 1998 June 1998
- -------------- -------------- --------------
Solicitation [arrow] Collect [arrow] Special
to Call Demands from Meeting to
Special 35% of Echlin Remove Echlin
Meeting Shareholders Board and
for a Special Replace with
Meeting SPX Slate
- -------------- -------------- --------------
Governance Governance
Requirement: Requirement:
35% of Removal: More
Outstanding Votes For
Shares Than Against
Election:
Plurality of
Votes Cast
PROCESS COULD BE ACCELERATED WITH A NEGOTIATED TRANSACTION
RAPIDLY CHANGING INDUSTRY
-------------------------
. Consolidation in $350 billion vehicle service industry
. Blurring lines between OE and aftermarket
. Expansion of mega-dealerships and national parts retailers
. Growing importance of repair shop chains
. Increasing technological complexity of vehicles
. Integration of the vehicle service process necessary to compete and
better serve customers in the future
. SPX and Echlin will have scale and capabilities to excel
TRENDS TRANSFORMING VEHICLE SERVICE INDUSTRY
--------------------------------------------
TRENDS IMPACT
- -------------------------- --------------------------
. Aftermarket demand model [arrow] . Restructuring within
predicts slowing growth industry required
. Weak demand creates - Plant rationalization
operational problems
. DIY demand will continue - Downsize distribution
to weaken networks
- Write-off inventories
. Consolidation of players
required
- OE/Aftermarket lines
blurring
- Economies of scale in
distribution and
manufacturing
- Integration of vehicle
service lifecycle
AUTO AFTERMARKET GROWTH IS SLOWING
INDUSTRY RESTRUCTURING AND CONSOLIDATION IS REQUIRED
VEHICLE SERVICE LIFECYCLE
-------------------------
[CHART DESCRIBING BUSINESS SEGMENTS
AT DIFFERENT POINTS IN VEHICLE LIFECYCLE]
INTEGRATION OF VEHICLE SERVICE LIFECYCLE
IS CRITICAL FOR LONG-TERM SUCCESS
INTEGRATION OF VEHICLE SERVICE PROCESS
--------------------------------------
VEHICLE SERVICE LIFECYCLE
[CHART DESCRIBING VEHICLE SERVICE LIFECYCLE]
FEEDBACK OF DATA DRIVES IMPROVED SERVICE AND QUALITY
FOR CUSTOMERS/DISTRIBUTORS, OEM'S AND END-USERS
SHAREHOLDER BENEFITS
--------------------
. Echlin shareholders will receive an immediate 23% premium and 32%
premium over 30-day trading average
. Echlin Shareholders will own 70% of a combined company with upside
potential
. SPX shareholders will own part of larger company with increased
value-creation opportunities
. Combined company will be a global leader across entire vehicle service
lifecycle
SPX HAS "BEEN THERE, DONE THAT"
-------------------------------
. SPX had been a long time underperformer
. Current leadership team successfully turned around SPX in just two
years
- Quickly implemented EVA as financial tool and driver of cultural
change
- Took shareholder-friendly actions
. Operating margins doubled
. Sales per employee up more than 50%
. Stock price quadrupled
ECHLIN STOCK TOTAL RETURN
-------------------------
[CHART COMPARING ECHLIN STOCK TOTAL RETURN TO SPX]
ECHLIN STOCK UNDERPERFORMING EVEN AFTER
NEARLY ONE YEAR UNDER NEW LEADERSHIP
SPX AND ECHLIN TOTAL RETURN
---------------------------
[CHART COMPARING SPX AND ECHLIN STOCK
TOTAL RETURN TO SPX]
SPX's STOCK HAS QUADRUPLED WHILE ECHLIN's STOCK HAS STAYED FLAT
SPX's PROGRAM FOR ECHLIN
------------------------
. Application of an aggressive shareholder focused agenda to Echlin
. Focus on cost structure
. More effective use of capital
. Productivity enhancements
. Selective divestitures
. EVA-based compensation
SPX's PROGRAM FOR ECHLIN
------------------------
. Achieve annual cost savings of at least $125 million in first full
year, increasing to $175 million thereafter
. Reduce headcount by approximately 3,000 positions or nearly 10% of
Echlin's global workforce
. Restructure or divest underperforming Echlin assets
. Accelerate EVA-based compensation programs
. Pursue targeted share repurchases
. Speed and execution are crucial
ESTIMATED COST SAVINGS
----------------------
(In $ Millions)
Year 2 Total Annual
Additional Savings,
Year 1 Savings Yr. 2 and Beyond
------ ---------- ----------------
Headcount Reduction $100 $20 $120
(3,000 x $40K)
Duplicate Corporate 10 10 20
Costs
Manufacturing/ 15 20 35
Distribution
Rationalization,
Sourcing
------ ---------- -----------------
Total $125 $50 $175
====== ========== =================
ESTIMATED COST SAVINGS WILL MAKE
TRANSACTION EPS ACCRETIVE
VALUE/EVA OPPORTUNITY
---------------------
SALES PER EMPLOYEE
(In $ Thousands)
[CHART COMPARING SPX AND ECHLIN
SALES PER EMPLOYEE TO PEER GROUP]
LTM = Last twelve months
Peer Group Includes: Arvin, Dana, Federal Mogul, Standard Motor Products
ECHLIN HAS LOWEST SALES PER EMPLOYEE IN PEER GROUP
SIGNIFICANT OPPORTUNITY FOR PRODUCTIVITY IMPROVEMENT
VALUE/EVA OPPORTUNITY
---------------------
CAPITAL EXPENDITURES AS A PERCENT OF SALES
[CHART COMPARING CAPITAL EXPENDITURES
AT SPX, ECHLIN AND PEER GROUP]
LTM = Last twelve months
ECHLIN HAS HIGHEST CAPEX IN PEER GROUP
SIGNIFICANT OPPORTUNITY FOR MORE EFFICIENT USE OF CAPITAL
VALUE/EVA OPPORTUNITY
---------------------
DIVIDEND YIELD SINCE 4/1/97
[CHART COMPANY DIVIDEND YIELD AT ECHLIN,
SPX AND PEER GROUP]
ECHLIN HAS HIGHEST DIVIDEND YIELD IN PEER GROUP
OPPORTUNITY FOR MORE EFFICIENT USE OF CAPITAL
STRATEGIC RATIONALE
-------------------
[CHART DESCRIBING BUSINESS SEGMENTS AT SPX AND ECHLIN]
COMBINATION INTEGRATES SERVICE PROCESS WITH COMPONENTS
GOOD FIT OF BUSINESS -- NEGLIGIBLE OVERLAP
PROFILE OF COMBINED COMPANY
---------------------------
SALES PROFILE
COMBINED COMPANY
[CHART DESCRIBING PROFILE OF COMBINED COMPANY]
COMBINED COMPANY WILL BE GLOBAL MARKET LEADER
IN SERVICE SOLUTIONS AND VEHICLE COMPONENTS
PRO FORMA 1998
--------------
Net Shares
Income Outstanding EPS
------ ----------- -----
(in $ millions, except per share items)
SPX - 1998 analysts' $51.0 12.900 $3.95
expectation(1)
Echlin - 1998 analysts' 143.9 -- --
expectation(1)
Transaction: (78.0) -- --
$83 of incremental
interest, goodwill
amortization of $22
and other expense
of $7
Shares issued: -- 30.700 --
64.1 million Echlin
shares @ exchange
ratio of 0.4796
------ ----------- -----
BEFORE SAVINGS $116.9 43.600 $2.68
$90 million savings 55.3 -- --
(pretax) required to
be EPS neutral
------ ----------- -----
ADJUSTED $172.2 43.600 $3.95
====== =========== =====
(1) Numbers derived from First Call consensus of $3.95 per share for SPX
and $2.28 per share for Echlin.
$90 MILLION OF SAVINGS REQUIRED TO BE EPS NEUTRAL IN 1998
SPX AND ECHLIN
Certain statements contained in these slides that are not historical facts
are "Forward-Looking Statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 and are thus prospective. These
Forward-Looking Statements are subject to risks, uncertainties and other
factors which could cause actual results to differ materially from future
results expressed or implied by such Forward-Looking Statements. More
information regarding such risks can be found in SPX's 1996 Form 10-K,
three-month, six-month, and nine-month Forms 10-Q and SPX's Registration
Statement on Form S-4, filed February 17, 1998.