Proxy details courtship ending in agreement
August 20, 2010
by Josh Sosland
CHARLOTTE, N.C. — A routine meeting between David V. Singer and Carl E. Lee Jr., who serve as president and chief executive officer of Lance, Inc. and Snyder’s of Hanover, respectively, began the process leading to the merger agreement between the two companies.
The proxy report filed in connection with the merger contains a six-page account of the steps leading to the agreement. The section itemizes more than 50 different events beginning with an invitation to Mr. Singer from Mr. Lee for a routine meeting and ending with the July 22 public announcement of the deal.
Describing one-on-one meetings, board meetings, business trips, phone calls, special board meetings, the engagement of investment bankers and other outside experts and even meals, the proxy section offers a glimpse into how the Lance-Snyder’s deal unfolded.
According to the proxy, the two companies have had a business relationship since the 1990s when Snyder’s began marketing Cape Cod Chips and other Lance products, and the relationship expanded over time as Lance acquired additional branded products for Snyder’s to market.
Mr. Singer and Mr. Lee met on Dec. 16 to review the distribution relationship, and the two discussed ways the relationship could be expanded into “a broader business relationship,” the proxy said. In particular, the two discussed a potential joint venture and possible supply chain synergies. While the two agreed to continue this dialogue, no clear plans or next steps were identified, the proxy said.
Still, from what happened next, it was clear that the executives in the weeks that followed gave considerable thought to the discussion and to the possibility of a full-blown merger.
Other key events cited in the proxy include (all events took place over teh past dix months):
March 1 — Mr. Singer and Mr. Lee met in Harrisburg, Pa., to explore the business relationship. The two identified factors supporting such a combination, including:
1) Each company’s relative strengths with “Snyder’s position as a leading salty snack company with strong brand identity and nationwide direct-store delivery capability and Lance’s position as a strong cookie and cracker company with broad manufacturing capabilities,” the proxy said;
2) A combination would offer diversification and would represent a stronger competitor versus the large multinational companies dominating the categories in which Lance and Snyder’s operate; and
3) Synergies resulting from a combination could generate significant efficiencies and cost savings.
The executives decided to take next steps to explore a business combination. Four days later, Mr. Singer invited Mr. Lee to visit Lance’s Charlotte operations.
“For the most part, early discussions focused on operational capabilities and synergies,” the proxy said. “Later discussions in large part focused on corporate governance matters and the companies’ relative valuations.”
March 24 — Snyder’s management spoke with Wells Fargo Securities, L.L.C. about the preliminary discussions about a proposed merger.
April 9 — The two c.e.o.’s participated in a teleconference about a confidentiality and non-disclosure agreement to cover a possible exchange of information between the companies. Data were passed between the companies in the weeks that followed.
April 21 — Mr. Lee traveled to Charlotte where he spent the day in meetings with top Lance executives.
May 4 — During a regularly scheduled board meeting, Mr. Singer discussed the business case and expected synergies from a merger. The board authorized continued negotiations with Snyder’s.
May 4 — Mr. Lee met with Michael A. Warehime, Snyder’s chairman and a principal shareholder, to discuss the events of April 21 and discuss a possible transaction structure. Mr. Warehime agreed that Mr. Lee should continue discussions with Lance.
May 21 — A meeting was convened in Charlotte between Mr. Singer, Mr. Lee and other top executives of the companies. Investment banking representatives were present, and a potential timeline for a transaction and general valuation trends in the food and beverage sector were discussed.
May 25 — An outline for the strategic framework of a possible business combination was provided to the Lance board by Mr. Singer.
June 2 — The Lance board held a special meeting to consider, among other issues, whether a merger was the company's best alternative. “It was also noted at this meeting that the proposed transaction would constitute a change in control under certain of Lance’s equity and incentive compensation plans,” the proxy said. “At this meeting, the board determined that an independent financial adviser should be engaged to provide a fairness opinion.” The board authorized management to enter into a non-binding letter of intent between the companies.
June 4 — At a regular Snyder’s board meeting, the company’s directors instructed Mr. Lee to continue its assessment of the potential merger and authorized management to enter into a non-binding letter of intent. The board instituted weekly teleconferences to receive updates from management.
June 10 — An agreement on final terms and conditions of the non-binding letter of intent was reached. In the days that followed, outside organizations were engaged to conduct accounting due diligence and to draft a merger agreement. Lance retained BofA Merrill Lynch to render an opinion to the Lance board of the fairness, from a financial perspective, of the exchange ratio (determining the number of Lance shares Snyder’s shareholders would receive).
July 1 — A special Lance board meeting was held in which terms of a business combination were reviewed as were due diligence findings. The board discussed the possible pluses of the proposed merger as well as the possibility of alternative transactions that could be explored. Two weeks later, the board was further updated at another special meeting.
July 16 — At a special meeting of the Snyder’s board of directors, the proposed merger was reviewed with presentations by several outside groups offering background and due diligence reviews. “The board unanimously determined that the merger agreement was in the best interest of Snyder’s and declared it advisable to enter into the merger agreement,” the proxy said.
July 21 — Resolutions approving the merger and related agreements were unanimously adopted by the Lance board. The merger agreements were executed later that day, and a press release was jointly issued the following day.