Schedule 13E-3 just came out...Looks like Aegis is going private
This summary and the remainder of this Transaction Statement on Schedule 13E-3 include information describing the “going private” merger involving Aegis Communications Group, Inc. and ACG Acquisition, Inc., how it affects you, what your rights are with respect to the merger as a stockholder of Aegis and the position of the people listed on the cover of the Schedule 13E-3 above the caption “Name of Person(s) Filing Statement,” who are referred to herein as the “Filing Persons,” on the fairness of the merger to you.
Purpose of the Merger.
Immediately prior to the merger discussed below, ACG Acquisition, Inc., a Delaware corporation and wholly-owned subsidiary of World Focus, will own approximately 94.84% of the outstanding shares of Aegis common stock upon the contribution of such shares by World Focus to ACG Acquisition. World Focus intends to cause ACG Acquisition to merge with and into Aegis, with Aegis continuing as the surviving corporation, as a means of acquiring all of the other shares of Aegis common stock not owned directly or indirectly by World Focus as well as outstanding shares of Aegis Series B Preferred Stock and providing a source of liquidity to holders of those shares.
Principal Terms of the Merger.
The Merger. World Focus is currently the direct holder of approximately 94.84% of Aegis’ common stock. World Focus plans to contribute all of the shares of Aegis common stock that it owns to ACG Acquisition. As a result of this contribution, ACG Acquisition will own approximately 94.84% of Aegis common stock. As soon as practicable after such contribution, and subject to World Focus obtaining an order from the Delaware Court of Chancery with respect to the consent of the holders of the Series B Preferred Stock, World Focus will cause ACG Acquisition to merge with and into Aegis in a “short form” merger under Section 253 of the Delaware General Corporation Law. ACG Acquisition does not intend to enter into a merger agreement with Aegis or to seek the approval of the directors or stockholders of Aegis for the merger. Holders of Aegis common stock (which constitutes the only class of capital stock of Aegis that, in the absence of Section 253 of the Delaware General Corporation Law, would be entitled to vote on the merger) will not be entitled to vote their shares with respect to the merger.
Merger Consideration. Each share of common stock of Aegis (other than shares owned by ACG Acquisition, shares held in treasury and shares with respect to which appraisal rights have been exercised) will be converted into the right to receive $0.05 in cash (an aggregate total common stock purchase price of approximately $2.96 million). Each share of Series B Preferred Stock (other than shares held in treasury and shares with respect to which appraisal rights have been exercised) shall be converted into the right to receive $3.60 per share plus accrued and unpaid dividends in accordance with the Aegis Certificate of Designation for the Series B Preferred Stock (an aggregate total Series B Preferred Stock purchase price of approximately $330,494, assuming the merger is consummated on October 31, 2006).
Aegis Shares Outstanding; Ownership by World Focus and ACG Acquisition, Inc. As of September 18, 2006, a total of 1,147,217,086 shares of Aegis common stock, and 29,778 shares of Aegis Series B Preferred Stock, were outstanding. As of September 18, 2006, there were no options or warrants to purchase Aegis common stock outstanding. World Focus owned a total of 1,087,997,075 shares, or approximately 94.84%, of the outstanding Aegis common stock, and no shares of Series B Preferred Stock, as of September 18, 2006.
Payment for Shares. You will be paid for your shares of Aegis stock promptly after the effective date of the merger. Instructions for surrendering your stock certificates will be set forth in a Notice of Merger and Appraisal Rights and a Letter of Transmittal, which will be mailed to stockholders of record of Aegis within ten calendar days following the date the merger becomes effective and should be read carefully. Please do not submit your stock certificates before you have received these documents. See Item 4 “Terms of the Transaction” beginning on page 17 of this Schedule 13E-3.
Source and Amount of Funds or Other Consideration. The total amount of funds expected to be required to pay for shares of Aegis common stock (other than shares owned by ACG Acquisition) and Series B Preferred Stock in the merger, and to pay related fees and expenses, is estimated to be approximately $3.7 million. World Focus will
i
--------------------------------------------------------------------------------
obtain such funds from its one or more of its affiliated companies by way of inter-company loan, and the merger will not be subject to any financing conditions.
Series B Preferred Stock. Pursuant to the Certificate of Designation governing the terms of the Series B Preferred Stock, the Series B Preferred Stock has no voting rights but the consent of a majority of the holders of the Series B Preferred Stock then outstanding is required prior to any merger of Aegis with any other entity. However, the holders of the Series B Preferred Stock cannot be located. World Focus, therefore, intends to obtain an order from the Delaware Court of Chancery to permit the merger to be consummated without the consent of a majority of the holders of the Series B Preferred Stock. In September 2003, Aegis received an order from the Chancery Court granting relief from the same provision of the Series B Preferred Stock Certificate of Designation in connection with a proposed prior merger. Pursuant to the Certificate of Designation, upon the liquidation, dissolution or winding up of Aegis, holders of Series B Preferred Stock are entitled to $3.60, plus accrued and unpaid dividends, for each share of Series B Preferred Stock (or an aggregate total Series B Preferred Stock purchase price of approximately $330,494, assuming the merger is consummated on October 31, 2006). Pursuant to the terms of the order of the Delaware Chancery Court to be sought in connection with the merger, the amount of consideration payable to the holders of Series B Preferred Stock will be set aside and reserved for payment upon identification of the holders of the Series B Preferred Stock following closing of the merger.
The Filing Persons’ Position of the Fairness of the Merger.
The Filing Persons have concluded that the merger is both substantively and procedurally fair to the holders of the common stock of Aegis (other than ACG Acquisition) and the holders of the Series B Preferred Stock, based primarily on the following factors:
· The going-private transaction represents an opportunity for the unaffiliated public stockholders to receive cash for each share of Aegis common stock, not subject to any financing condition, at a premium to $0.031 per share, the last sale price for a share of Aegis common stock on September 15, 2006, the last date on which the Aegis common stock traded prior to the date of the meeting of the Board of Directors of World Focus and ACG Acquisition held to discuss the merger.
· The average daily trading volume for the common stock of Aegis for the three-month period prior to September 15, 2006, the last date on which the Aegis common stock traded prior to the date of the meeting of the Board of Directors of World Focus and ACG Acquisition held to discuss the merger, was approximately 147,000 shares, which is a limited trading volume; therefore, the common stock of Aegis has limited liquidity to the unaffiliated public stockholders and it may be difficult for the unaffiliated public stockholders to sell significant blocks of common stock of Aegis without adversely impacting the trading price.
· The $0.05 per share consideration to be paid for shares of Aegis common stock entitled to receive consideration in the merger substantially exceeds the per share negative net book value of each share of Aegis common stock, calculated on a diluted basis, which, based on the most recent unaudited balance sheets of Aegis, was approximately $(0.004) at June 30, 2006.
· Our management derived a range of potential prices for Aegis’ common stock by applying average revenue and EBITDA multiples implied by the closing trading prices and enterprise values (equity market capitalization plus preferred stock and total debt less cash and equivalents) of certain publicly-traded companies. The low, mean and high prices using an average EBITDA multiple were $0.032, $0.046 and $0.075, respectively. The low, mean and high prices using an average revenue multiple were $0.024, $0.065, and $0.196, respectively.
· On September 14, 2006, World Focus entered into an agreement with Questor Partners Fund II, L.P., Questor Side-by-Side Partners II, L.P. and Questor Side-by-Side Partners II 3(c)(1), L.P. to purchase from those Questor entities 73,171,007 shares of Aegis common stock at a purchase price of $0.0268 per share, which reflects the negotiated price at which the Questor entities agreed to sell their shares
ii
--------------------------------------------------------------------------------
of common stock of Aegis. World Focus has agreed to pay the Questor entities the difference between $0.0268 per share and the highest per share price World Focus pays to acquire shares of Aegis common stock, including in connection with the merger, during the 18-month period following the acquisition of the Aegis common stock from the Questor entities.
· Aegis will no longer be subject to the costly reporting and other disclosure requirements of the Securities Exchange Act of 1934, including those instituted under the Sarbanes-Oxley Act of 2002.
· The unaffiliated stockholders of Aegis will be entitled to exercise appraisal rights and demand “fair value” for their shares as determined by the Delaware Court of Chancery, which may be determined to be more or less than (or equivalent to) the amount of cash consideration offered to such holders for such shares pursuant to the merger. The notice and other requirements under Section 262 of the Delaware General Corporation Law with respect to the Series B Preferred Stock may be extended or otherwise changed or modified pursuant to an order of the Delaware Court of Chancery. See “Special Factors - Purposes, Alternatives, Reasons and Effects of the Merger” and Item 4 “Terms of the Transaction” beginning on pages 2 and 17, respectively, of this Schedule 13E-3.
· The holders of Series B Preferred Stock of Aegis will be entitled to receive $3.60, plus all accrued and unpaid dividends, for each share of Series B Preferred Stock, which is equal to the amount to be received for each share of Series B Preferred Stock upon a liquidation, dissolution or winding up of Aegis pursuant to the Series B Preferred Stock Certificate of Designation (or an aggregate total Series B Preferred Stock purchase price of approximately $330,494, assuming the merger is consummated on October 31, 2006).
Consequences of the Merger.
Completion of the merger will have the following consequences:
· Aegis will be a privately held corporation, with World Focus owning 100% of the equity interest in Aegis and its business.
· Only the holders of the stock of World Focus will have the opportunity to participate in the future earnings and growth, if any, of Aegis. Similarly, only the holders of the stock of World Focus will face the risk of losses generated by Aegis’ operations or a decline in value of Aegis after the merger.
· The shares of Aegis common stock will no longer be publicly traded. In addition, Aegis will no longer be subject to the reporting and other disclosure requirements of the Securities Exchange Act of 1934, including requirements to file annual, periodic and other reports or to provide the type of going private disclosure contained in this Schedule 13E-3.
· Subject to the exercise of statutory appraisal rights, each share of Aegis common stock (other than shares held by ACG Acquisition or shares held in treasury) will be converted into the right to receive $0.05 per share in cash, without interest (or an aggregate total common stock purchase price of approximately $2.96 million).
· Subject to the exercise of statutory appraisal rights, each share of Series B Preferred Stock (other than shares held in treasury) will be converted into the right to receive $3.60, plus all accrued and unpaid dividends (or an aggregate total Series B Preferred Stock purchase price of approximately $330,494, assuming the merger is consummated on October 31, 2006).
Appraisal Rights.
You have a statutory right to demand payment of the fair value of your Aegis capital stock
