A. O. Smith Corporation to Complete Merger Transaction With Smith Investment Company
(NYSE: AOS) and its largest stockholder, Smith Investment Company
(Pink Sheets: SMIC), announced today that they have signed a definitive merger
agreement providing for Smith Investment to become a wholly-owned subsidiary
of A. O. Smith in a tax free exchange. As a result of the merger, the
stockholders of Smith Investment will own shares of A. O. Smith directly,
rather than through Smith Investment. Stockholders of Smith Investment will
be entitled to receive 2.396 shares of A. O. Smith Class A Common Stock and
.463 shares of
stock they hold.
Smith Investment owns approximately 97.9% of the outstanding A. O. Smith
Class A Common Stock and approximately 7.1% of the outstanding
Common Stock
significant discount to the underlying value of its A. O. Smith shares. The
merger is intended to allow the Smith Investment stockholders to realize the
underlying value of the A. O. Smith shares held by Smith Investment, and
provide enhanced liquidity for Smith Investment stockholders.
A. O. Smith and its stockholders are expected to benefit from the
transaction because its terms provide for:
— A reduction in the number of outstanding A. O. Smith shares by issuing
to Smith Investment stockholders 98.5% of the number of A. O. Smith shares
that Smith Investment holds immediately before the merger;
— An increase in the public float for A. O. Smith shares, as the A. O.
Smith shares currently held by Smith Investment will be distributed more
broadly among the Smith Investment stockholders; and
— Enhancement of A. O. Smith’s corporate governance structure with the
following new provisions:
— providing that shares of Class A Common Stock automatically convert
into Common Stock upon transfer to unaffiliated third parties;
— providing that all shares of Class A Common Stock convert into
Common Stock once the outstanding shares of Class A Common Stock fall below
approximately 8% of the total outstanding shares of Class A Common Stock and
Common Stock as of the date of the merger agreement; and
— increasing from 25% to 33-1/3% the percentage of directors the
holders of Common Stock have the right to elect.
A majority of Smith Investment’s outstanding stock is owned by members of
the Smith family, which is the founding family of A. O. Smith. To address any
potential conflicts of interest, each of A. O. Smith and Smith Investment
appointed a special committee of independent directors to negotiate the
transaction. After receiving the favorable recommendation of their respective
special committees, the board of directors of each of A. O. Smith and Smith
Investment approved the terms of the proposed merger.
Certain members of the Smith Family have agreed to vote their shares to
approve the merger agreement at a meeting of Smith Investment stockholders.
Similarly, Smith Investment has agreed to vote its shares to approve the
merger agreement at a meeting of A. O. Smith stockholders. These stockholders
have enough votes to ensure approval of the transaction at the respective
meetings of A. O. Smith and Smith Investment.
Certain members of the Smith family have indicated that they intend to act
together with respect to their interests in A. O. Smith after the merger, and
will deposit the A. O. Smith shares they receive in the merger into a voting
trust. These Smith family members have expressed their desire to continue
their long-standing and strong commitment to the growth and prosperity of
A. O. Smith. To obtain A. O. Smith’s approval for these arrangements, these
members of the Smith family have agreed to refrain for up to three years after
completion of the merger from taking certain actions with respect to A. O.
Smith, such as proposing to acquire A. O. Smith, without the prior approval of
the A. O. Smith board.
In addition to receipt of the A. O. Smith and Smith Investment stockholder
approval, the merger is subject to receipt of a favorable letter ruling from
the Internal Revenue Service, the effectiveness of an A. O. Smith registration
statement covering the shares to be issued to the Smith Investment
stockholders and other customary closing conditions. Under the terms of the
agreement, Smith Investment will reimburse A. O. Smith for substantially all
of its transaction-related expenses. In addition, a portion of
Common Stock
in escrow to satisfy indemnification claims, if any, by A. O. Smith in
connection with the transaction. The companies expect the merger to close in
the second quarter of 2009.
To facilitate the merger, Smith Investment will distribute to the
stockholders of Smith Investment, in a taxable spin-off transaction, all of
Smith Investment’s assets and liabilities, other than its shares of A. O.
Smith. The Smith Investment assets to be distributed include Smith
Investment’s operating businesses. Smith Investment will first contribute
these assets and liabilities to a newly formed limited liability company,
Smith Investment Company LLC, and the Smith Investment stockholders will
receive membership units in Smith Investment Company LLC in the spin-off
transaction. Smith Investment has established
date for determining the Smith Investment stockholders entitled to participate
in the spin-off transaction, and the spin-off transaction will be effective
of the merger.
Morgan Stanley & Co. Incorporated served as financial advisor for the
special committee of the board of directors of A. O. Smith, and Duff & Phelps,
LLC served as financial advisor for the special committee of the board of
directors of Smith Investment.
About A. O. Smith Corporation
A. O. Smith Corporation (NYSE: AOS), with 2007 sales of
global leader applying innovative technology and energy-efficient solutions to
products marketed worldwide. The company is one of the world’s leading
manufacturers of residential and commercial water heating equipment, offering
a comprehensive product line featuring the best-known brands in
and
motors for residential and commercial applications in
About Smith Investment Company
Smith Investment Company (PK: SMIC) is a diversified company with
headquarters in
printing and related services and commercial warehousing, trucking and
packaging. The company also owns a control position in A. O. Smith
Corporation.
Additional Information and Where You Can Find It
A. O. Smith will broadcast a live conference call at
Time)
Investment. The call can be heard on A. O. Smith’s website,
http://www.aosmith.com.
A. O. Smith and Smith Investment will file a joint proxy
statement/prospectus and other documents with the Securities and Exchange
Commission (the “SEC”) in relation to this transaction. Investors and
stockholders of A. O. Smith and Smith Investment are urged to read these
documents carefully when they become available because they will contain
important information regarding A. O. Smith, Smith Investment and the
transaction. A definitive joint proxy statement/prospectus will be sent to
stockholders of A. O. Smith and Smith Investment seeking their approval of the
transactions contemplated by the merger agreement. Investors and stockholders
may obtain a free copy of the joint proxy statement/prospectus (when it is
available) and other documents containing information about A. O. Smith
Corporation and Smith Investment, without charge, at the SEC’s website at
http://www.sec.gov. Copies of the joint proxy statement/prospectus and the
SEC filings that will be incorporated by reference in the joint proxy
statement/prospectus may also be obtained by stockholders free of charge by
directing a request to A. O. Smith Corporation, Attention: Investor Relations,
11270 West Park Place,
at http://www.aosmith.com.
A. O. Smith, Smith Investment and their respective directors, executive
officers and other employees may be deemed to be participants in the
solicitation of proxies from the stockholders of A. O. Smith and Smith
Investment in connection with the proposed transaction. Information about
these persons will be available in the joint proxy statement/prospectus.
In addition, in connection with Smith Investment’s distribution of
membership units in Smith Investment Company LLC, Smith Investment will
provide its stockholders with an information statement containing information
about the distribution and Smith Investment Company LLC. Smith Investment
stockholders are urged to read this document carefully when it becomes
available because it will contain important information regarding the
distribution and Smith Investment Company LLC.
This document shall not constitute an offer to sell or the solicitation of
an offer to buy any securities, nor shall there be any sale of securities in
any jurisdiction in which such offer, solicitation, or sale would be unlawful
prior to registration or qualification under the securities laws of any such
jurisdiction. No offering of securities shall be made except by means of a
prospectus meeting the requirements of the Securities Act of 1933, as amended.
Cautionary Statement Regarding Forward-Looking Statements
This press release includes “forward-looking statements” as defined in
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical facts included herein may constitute forward-looking
statements. Generally, these forward-looking statements can be identified by
the use of forward-looking terminology such as “anticipate,” “believe,”
“estimate,” “expect,” “intend,” “project,” “should,” and similar expressions.
Actual results could vary significantly from those expressed or implied in
such statements and are subject to a number of risks and uncertainties and
other factors. These factors include, among others, the following: the failure
of A. O. Smith or Smith Investment stockholders to approve the proposed
merger; the outcome of the proposed transaction; any failure to realize the
anticipated benefits of the proposed transaction, if completed; the ability to
satisfy the conditions to the proposed transaction; the impact of the proposed
transaction or any other transaction on A. O. Smith’s and Smith Investment’s
respective businesses, and the possibility of adverse publicity or litigation
and the outcome thereof and the costs and expenses associated therewith.
Although A. O. Smith and Smith Investment believe that the expectations
reflected in the forward-looking statements are reasonable, they can give no
assurance that such expectations will prove to be correct. A. O. Smith and
Smith Investment are under no obligation (and expressly disclaim any such
obligation) to update or alter their forward-looking statements whether as a
result of new information, future events, or otherwise.
SOURCE A. O. Smith Corporation