SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Date of Report (Date of earliest event reported):
November 15,
2010
Nu Horizons Electronics Corp.
(Exact name of registrant as specified in its
charter)
DELAWARE
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1-8798
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11-2621097
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(State or other jurisdiction
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(Commission
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(I.R.S. Employer
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of incorporation)
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File Number)
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Identification No.)
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70 Maxess Road, Melville, New
York
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11747
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(Address of principal executive offices)
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(Zip Code)
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(631) 396-5000
Registrants telephone number, including area
code
Not Applicable
(Former name or former address, if changed since
last report.)
Check the appropriate box below if the Form 8-K
filing is intended to simultaneously satisfy the filing obligation of the
registrant under any of the following provisions (
see
General Instruction A.2. below):
o
Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
x
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under
the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-14(c) under
the Exchange Act (17 CFR 240.13e-4(c))
Item 8.01 Other
Events.
This Form 8-K is being filed pursuant to a memorandum of
understanding regarding the settlement of certain litigation relating to the
Agreement and Plan of Merger, dated as of September 19, 2010,
by and among
Arrow Electronics, Inc. (Arrow), Neptune Acquisition Corporation, Inc.,
a newly-formed, wholly-owned subsidiary of Arrow (Merger Sub), and Nu
Horizons Electronics Corp. (the Company, Nu Horizons, we, us or our)
.
Settlement of Certain Litigation
As
previously disclosed at pages 48-49 of the definitive proxy statement of
the Company, dated October 27, 2010, under the heading The
MergerLitigation Challenging the Merger, the Company, members of its board of
directors, Merger Sub and Arrow were named as defendants in four class actions
purportedly filed on behalf of the Companys stockholders challenging the
proposed merger. On October 14, 2010, the four class actions were
consolidated in the New York Supreme Court, Suffolk County before the Hon.
Elizabeth H. Emerson under the caption
In re
Nu Horizons Shareholder Litigation
. On October 19, 2010, the
Court (Emerson, J.) appointed the law firms of Robbins Geller Rudman &
Dowd, LLP, Robbins Umeda, LLP, and Levy &
Korsinsky, LLP as Co-Lead Counsel for the plaintiffs in the consolidated
action. Discovery commenced, the
defendants produced a large quantity of documents to the plaintiffs, and the
plaintiffs counsel reviewed these documents.
Based on this discovery, the plaintiffs counsel concluded that there
were certain additional disclosures that they believed the defendants should
make in connection with the proposed transaction. While the defendants believe that the
original proxy statement disclosed all material facts concerning the proposed
transaction, the defendants agreed to make those additional disclosures in
order to settle the consolidated action and avoid the burden, expense and
uncertainty of further litigation.
Following
is the additional information that is being mailed to the stockholders in
connection with the settlement of the above-described litigation.
2
NU HORIZONS ELECTRONICS CORP.
70 Maxess Road
Melville, New York 11747
November 15, 2010
Dear Fellow Stockholders:
On
or about October 29, 2010, Nu Horizons Electronics Corp. (the Company, Nu
Horizons, we, us or our) first began mailing to you a proxy statement
dated October 27, 2010 (the Proxy Statement) regarding its special
meeting of stockholders. At the special meeting, stockholders will vote on a
proposal to adopt the Agreement and Plan of Merger, dated as of
September 19, 2010, by and among Arrow Electronics, Inc. (Arrow),
Neptune Acquisition Corporation, Inc., a newly-formed, wholly-owned
subsidiary of Arrow, and Nu Horizons (the Merger Agreement). The meeting is
scheduled for Tuesday, December 7, 2010 at 10:00 a.m. at the Hilton Long
Island/Huntington, 598 Broadhollow Road, Melville, New York.
As
described in the Proxy Statement, four stockholders commenced class actions
challenging the merger, which actions were consolidated in the New York Supreme
Court, Suffolk County under the caption
In
re Nu Horizons Shareholder Litigation
; the consolidated class action
was pending at the time that we mailed the Proxy Statement. Since the mailing
of the Proxy Statement, we, the plaintiffs and Arrow have agreed to settle the
pending litigation and permit the stockholder vote on the merger to take place
as scheduled following our delivery of certain supplemental disclosures, which
are attached to this letter. While the board of directors believes that the
original Proxy Statement contained all necessary disclosures concerning the
proposed merger, the board of directors concluded that it was advisable to make
the supplemental disclosures in order to eliminate any possibility that the
stockholder vote would not go forward as scheduled.
The
supplemental disclosures should be read in conjunction with the Proxy
Statement.
These
additional disclosures will not affect the timing of the special meeting of
stockholders of Nu Horizons to vote upon the proposal to adopt the Merger
Agreement and to approve the merger.
After
careful consideration, Nu Horizons board of directors has unanimously
determined that the Merger Agreement and the transactions contemplated thereby
(including the merger) are advisable and fair to, and in the best interests of,
Nu Horizons stockholders, and has approved the Merger Agreement and the
transactions contemplated thereby, including the merger.
Therefore, our board of directors unanimously
recommends that you vote FOR the adoption of the Merger Agreement.
YOUR
VOTE IS VERY IMPORTANT. We have enclosed an additional proxy card. If you have
already voted in favor of the proposal to adopt the Merger Agreement and do not
want to change your vote, you need do nothing; if youve voted already and want
to change your vote, you may use this card to do so or you may otherwise vote
your shares by telephone or via the Internet in accordance with the
instructions on the proxy card; if you havent voted already, please do so now.
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Sincerely,
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Arthur Nadata
Chairman
of the Board
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SUPPLEMENT TO DEFINITIVE PROXY STATEMENT
In connection with the settlement of certain outstanding
stockholder litigation as described in the preceding letter to stockholders,
the Company has agreed to make these supplemental disclosures to the Proxy Statement
dated October 27, 2010. This supplemental information should be read in
conjunction with the Proxy Statement, which should be read in its entirety.
Background
of the Merger
The
following disclosure supplements the discussion at pages 21-22 related to
the initial contact by Strategic Party A and Arrow.
Arrow
approached the Company through Mr. Polimeni in the context of general
business discussions between Mr. Polimeni and Arrows Chief Financial
Officer concerning, among other things, the termination of Xilinxs
relationship with the Company. From 1986 to 1990, Mr. Polimeni served as
Chief Financial Officer of Arrow and from 1981 to 1982 and from 1983 until 1986
he was employed by Arrow in various management positions, including General
Manager of Arrows Systems Group. Since Mr. Polimeni left Arrows employ
20 years ago, he has remained in contact with certain of Arrows employees
and executive officers.
The
following disclosure supplements the discussion at page 22 related to the
formation of the strategic committee.
The
board appointed Messrs. Polimeni, Gardner, Bilodeau, Novick and Siegel to
serve as the members of the strategic committee because each of them was an
independent, disinterested director who was not a member of management or an
employee of the Company. The board believed that each of Messrs. Polimeni,
Gardner, Bilodeau, Novick and Siegel would effectively represent the interests
of the unaffiliated stockholders.
The
following disclosure supplements the discussion at page 22 related to the
selection of Houlihan Lokey to act as financial advisor.
The
strategic committee did not seriously consider hiring Morgan Stanley, which had
previously served as Nu Horizons financial advisor in 2007 and 2008, because
the individual who led the Morgan Stanley team for Nu Horizons was no longer
with that firm and the Company was advised by Morgan Stanley that the
transaction was below their current size criteria. Consequently, the strategic
committee conducted an interview process of potential financial advisors,
following which the strategic committee selected Houlihan Lokey to act as the
financial advisor to the Company and the strategic committee. The strategic
committee selected Houlihan Lokey for a variety of reasons, including its
knowledge of the industry; the prior favorable dealings that certain members of
the strategic committee had with members of the Houlihan Lokey team; and
Houlihan Lokeys reputation.
Interests
of the Companys Executive Officers and Directors in the Merger
The following
disclosure supplements the discussion at pages 44-45 concerning
equity-based compensation payments to be received by the Companys executive
officers and directors upon completion of the merger.
During
the time that the Company was negotiating with Arrow and Strategic Party A with
respect to a potential merger transaction, the board determined that it was
advisable to adopt the 2010 Outside Directors Stock Incentive Plan to provide
for the continued ability to induce qualified individuals to serve as non-employee
directors of Nu Horizons in the event that the board did not determine that a
merger was advisable and fair to, and in the best interests of, Nu Horizons
stockholders. Accordingly, the board approved the 2010 Outside Directors Stock
Incentive Plan and submitted the 2010 Outside Directors Stock Incentive Plan
to the stockholders for approval at the 2010 annual meeting of
2
stockholders held on
July 29, 2010. At the 2010 annual meeting of stockholders, the 2010
Outside Directors Stock Incentive Plan was adopted by the Companys
stockholders. To date, the board of directors of the Company has not granted
stock options or other forms of equity-based incentive compensation pursuant to
the 2010 Outside Directors Stock Incentive Plan.
Opinion of
Nu Horizons Financial Advisor
The
following disclosure supplements the discussion at pages 39-40 concerning
the services performed, and fees received, by Houlihan Lokey in connection with
the proposed acquisition of the Company by Arrow.
Aside
from acting as a financial advisor to the Company in connection with the
Companys analysis of its strategic alternatives, including the merger, and
rendering an opinion to its board of directors as to the fairness, from a
financial point of view, of the consideration to be received by the holders of
the Companys common stock in the merger, Houlihan Lokey did not provide any
other services to Nu Horizons. Houlihan Lokey has not previously provided
services to Arrow. In connection with acting as the Companys financial
advisor, Houlihan Lokey has received a $25,000 retainer, a $75,000 fee for
performing an analysis of the Companys various strategic alternatives, a
$200,000 fee in connection with providing the fairness opinion related to the
merger and will, upon the closing of the merger, receive a fee of $1,500,000,
less the $25,000 retainer previously paid.
One
of the managing directors of Houlihan Lokey served as a director of Joy
Global Inc. (Joy Global) at the same time that a director of Arrow
served as chairman of the board of directors of Joy Global.
The
following disclosure shall be substituted for the disclosure contained at
pages 38-39.
The
calculated multiples included: enterprise value as a multiple of
(1) revenue, (2) EBITDA, and (3) net income, in each case, for
the most recently reported twelve months for which financial information had
been made public prior to the announcement of the transactions (which are
referred to as LTM Revenue, LTM EBITDA and LTM Net Income respectively).
The analysis indicated the following implied maximum, mean, median and minimum
multiples for the selected transactions:
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Transaction Value/
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Revenue
LTM
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EBITDA
LTM
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Net Income
LTM
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Maximum
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0.5x
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23.2x
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18.4x
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Mean
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0.2x
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9.1x
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13.4x
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Median
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0.2x
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7.4x
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13.6x
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Minimum
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0.1x
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5.0x
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5.6x
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3
Financial
Projections
The
following disclosure supplements the discussion at pages 40-42 concerning
financial information provided to Arrow in connection with its due diligence
review of the Company and to Houlihan Lokey in connection with its financial
analysis of Nu Horizons.
The
consolidated financial projections from our annual operating plan for fiscal
year 2011 that the Company provided to Arrow and Houlihan Lokey are provided in
the following table.
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Fiscal Year 2011 Quarter Ending
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Fiscal Year
Ending
February 28,
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May 31
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August 31
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November 30
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February 28
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2011
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Sales
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$
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210,762,000
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$
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158,100,000
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$
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161,600,000
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$
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157,100,000
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$
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687,562,000
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Cost of Sales
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180,670,000
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132,600,000
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135,500,000
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131,700,000
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580,470,000
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Selling, general & administrative expenses
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24,917,000
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23,300,000
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24,100,000
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23,300,000
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95,617,000
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205,587,000
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155,900,000
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159,600,000
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155,000,000
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676,087,000
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Operating income
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5,175,000
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2,200,000
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2,000,000
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2,100,000
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11,475,000
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Interest expense
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648,000
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800,000
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|
700,000
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|
600,000
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2,748,000
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Income before provision for income taxes and non-controlling interest
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4,527,000
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1,400,000
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1,300,000
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1,500,000
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8,727,000
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Provision for income taxes
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986,000
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600,000
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700,000
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700,000
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2,986,000
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Consolidated net income
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3,541,000
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800,000
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|
600,000
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800,000
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5,741,000
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Net income attributable to non-controlling interest
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167,000
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200,000
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100,000
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100,000
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567,000
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Net income attributed to Nu Horizons Electronics Corp.
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$
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3,374,000
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$
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600,000
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$
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500,000
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$
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700,000
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$
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5,174,000
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Net income per share Diluted
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$
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0.18
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$
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0.03
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$
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0.03
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$
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0.04
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$
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0.28
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Weighted averages shares outstanding Diluted
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18,267,884
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18,248,000
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18,248,000
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18,248,000
|
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18,248,000
|
|
4
Our
consolidated five-year financial projections for the fiscal years ending
February 28 or 29, 2011 through 2015 that the Company provided to Houlihan
Lokey are provided in the following table.
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Fiscal Year Ending February 28 or 29
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2011
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2012
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2013
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2014
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2015
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Sales
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$
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687,562,000
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$
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653,300,000
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$
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740,100,000
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$
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840,500,000
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$
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956,800,000
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Cost
of Sales
|
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580,470,000
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|
546,800,000
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|
619,500,000
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703,500,000
|
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800,800,000
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Selling,
general & administrative expenses
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|
95,617,000
|
|
97,300,000
|
|
105,700,000
|
|
116,100,000
|
|
129,600,000
|
|
|
|
676,087,000
|
|
644,100,000
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|
725,200,000
|
|
819,600,000
|
|
930,400,000
|
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Operating
income
|
|
11,475,000
|
|
9,200,000
|
|
14,900,000
|
|
20,900,000
|
|
26,400,000
|
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Interest
expense
|
|
2,748,000
|
|
2,000,000
|
|
2,300,000
|
|
2,500,000
|
|
2,800,000
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Income
before provision for income taxes and noncontrolling interest
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8,727,000
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|
7,200,000
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12,600,000
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18,400,000
|
|
23,600,000
|
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Provision
for income taxes
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|
2,986,000
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2,500,000
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4,400,000
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6,500,000
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8,300,000
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Consolidated
net income
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5,741,000
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4,700,000
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8,200,000
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11,900,000
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15,300,000
|
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Net
income attributable to noncontrolling interest
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|
567,000
|
|
600,000
|
|
600,000
|
|
600,000
|
|
600,000
|
|
Net
income attributed to Nu Horizons Electronics Corp.
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$
|
5,174,000
|
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$
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4,100,000
|
|
$
|
7,600,000
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|
$
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11,300,000
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$
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14,700,000
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Net
income per share Diluted
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$
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0.28
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$
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0.22
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$
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0.41
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$
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0.61
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$
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0.80
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Weighted
average shares outstanding Diluted
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18,248,000
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18,380,000
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18,430,000
|
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18,430,000
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18,430,000
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EBITDA
|
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$
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13,100,000
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$
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11,000,000
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$
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16,800,000
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$
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22,800,000
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$
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28,600,000
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In
developing our one-year and five-year financial projections, we made numerous
assumptions about our industry, markets, products and ability to execute on our
business plans. In particular, we made the following assumptions:
·
The global
economic recovery would continue and accelerate over time, resulting in
increased revenues and profits in all regions.
·
The current
competitive landscape would remain materially unchanged.
·
We would not
make any significant acquisitions or divestitures.
·
Sales in currencies
other than the U.S. Dollar would be converted into U.S. Dollars using the
applicable exchanges rates as of the date that the projections were prepared.
·
We would not
incur any significant restructuring and impairment costs.
5
The following projections are provided as a supplement to
the Financial Projections contained at pages 40-42.
The
following Free Cash Flow Analysis was prepared in connection with Houlihan
Lokeys financial analysis of Nu Horizons.(1)
Free Cash Flow Analysis
($ in millions)
|
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FY2010
Actual
|
|
FY2011
Estimated
|
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FY2012
Estimated
|
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FY2013
Estimated
|
|
FY2014
Estimated
|
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FY2015
Estimated
|
|
Total Net Revenue
|
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$
|
670.7
|
|
$
|
687.6
|
|
$
|
653.3
|
|
$
|
740.1
|
|
$
|
840.5
|
|
$
|
956.8
|
|
Cost
of Goods Sold
|
|
576.0
|
|
580.6
|
|
546.8
|
|
619.5
|
|
703.5
|
|
800.8
|
|
Gross Profit
|
|
94.7
|
|
107.1
|
|
106.5
|
|
120.6
|
|
137.0
|
|
156.0
|
|
Selling
|
|
48.3
|
|
51.7
|
|
54.3
|
|
59.6
|
|
65.6
|
|
72.3
|
|
G&A
|
|
40.6
|
|
43.8
|
|
42.9
|
|
46.1
|
|
50.5
|
|
57.3
|
|
EBIT
|
|
5.8
|
|
11.5
|
|
9.2
|
|
14.9
|
|
20.9
|
|
26.4
|
|
Depreciation &
Amortization
|
|
1.8
|
|
1.6
|
|
1.8
|
|
1.9
|
|
2.0
|
|
2.2
|
|
EBITDA
|
|
7.5
|
|
13.1
|
|
11.0
|
|
16.8
|
|
22.8
|
|
28.6
|
|
Tax
Expense
|
|
1.4
|
|
3.1
|
|
2.5
|
|
4.4
|
|
6.4
|
|
8.3
|
|
Capital
Expenditures
|
|
1.4
|
|
1.5
|
|
1.5
|
|
1.5
|
|
1.5
|
|
1.5
|
|
Change,
Working Capital (source) use
|
|
23.9
|
|
(4.2
|
)
|
(1.7
|
)
|
31.0
|
|
6.6
|
|
40.9
|
|
Adjusted Free Cash Flow
|
|
$
|
(19.2
|
)
|
$
|
12.8
|
|
$
|
8.7
|
|
$
|
(20.2
|
)
|
$
|
8.3
|
|
$
|
(22.0
|
)
|
The
following Calendar Year Projections were prepared for use in the selected
companies analysis described on pages 36-37 of the Proxy Statement.
(1)
The discounted
cash flow analysis described on page 39 of the Proxy Statement used tax
expenses of $3.2, $5.2, $7.3 and $9.2 million in the estimates for fiscal
years 2012 through 2015, respectively. These differences resulted from the fact
that the Company estimates future taxes as a function of pre-tax income whereas
Houlihan Lokey estimates future taxes as a function of EBIT.
Calendar Year Projections for 2010
and 2011
($ in millions)
|
|
CY2010
Estimated
|
|
CY2011
Estimated
|
|
Total Net Revenue
|
|
$
|
717.5
|
|
$
|
655.3
|
|
Cost
of Goods Sold
|
|
$
|
609.7
|
|
$
|
548.7
|
|
Gross Profit
|
|
$
|
107.7
|
|
$
|
106.6
|
|
Selling
|
|
$
|
52.0
|
|
$
|
53.9
|
|
G&A
|
|
$
|
43.2
|
|
$
|
43.4
|
|
EBIT
|
|
$
|
12.5
|
|
$
|
9.2
|
|
Depreciation &
Amortization
|
|
$
|
1.5
|
|
$
|
1.8
|
|
EBITDA
|
|
$
|
14.0
|
|
$
|
11.0
|
|
Tax
Expense
|
|
$
|
3.2
|
|
$
|
2.7
|
|
Interest
Expense
|
|
$
|
2.7
|
|
$
|
2.1
|
|
Minority
Interest
|
|
$
|
0.6
|
|
$
|
0.5
|
|
Net
Income
|
|
$
|
6.0
|
|
$
|
3.8
|
|
EPS
|
|
0.32
|
|
0.21
|
|
6
Forward-Looking Statements
Projections
included herein are forward-looking statements and are based upon numerous
assumptions about the Company, its business, customers, capital structure, the
economy and several other factors. Actual events are difficult to predict and
beyond our control. Actual events may differ materially from those assumed.
Some important factors that could cause actual results to differ materially
from those in any forward-looking statement include changes in interest rates,
domestic and foreign business, market, financial and legal conditions.
Accordingly, there can be no assurance that actual results will not be
materially different than those estimated herein.
Additional Information about the Proposed Transaction and
Where You Can Find It
In
connection with the proposed transaction, Nu Horizons has filed the Proxy
Statement with the Securities and Exchange Commission (SEC). BEFORE MAKING
ANY VOTING OR INVESTMENT DECISION, THE COMPANYS STOCKHOLDERS AND INVESTORS ARE
URGED TO READ THE DEFINITIVE PROXY STATEMENT AND OTHER DOCUMENTS FILED WITH THE
SEC CAREFULLY AND IN THEIR ENTIRETY, BECAUSE THEY CONTAIN IMPORTANT INFORMATION
ABOUT THE PROPOSED MERGER. Investors and stockholders will be able to obtain,
without charge, a copy of the Proxy Statement, as well as other relevant
documents containing important information about the Company and Arrow at the
SECs website (http://www.sec.gov) once such documents are filed with the SEC.
The Companys stockholders are also able to obtain, without charge, a copy of
the definitive Proxy Statement and other relevant documents when they become
available by directing a request by mail or telephone to Nu Horizons
Electronics Corp., 70 Maxess Road, Melville, New York 11747, Attention:
Corporate Secretary, (631) 396-5000. Information about the Companys
directors and executive officers and other persons who may be participants in
the solicitation of proxies from the Companys stockholders is set forth in the
Companys Proxy Statement on Schedule 14A filed with the SEC on
October 29, 2010.
If
you have questions about the special meeting or the merger after reading the
Proxy Statement, or if you would like additional copies of the Proxy Statement
or the proxy card, you should contact Nu Horizons Electronics Corp., 70 Maxess
Road, Melville, New York 11747, Attention: Corporate Secretary. You may call
our proxy solicitor MacKenzie Partners toll-free at (800) 322-2885 (you
may also call collect at (212) 929-5500).
7
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, hereunto duly authorized.
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Nu Horizons Electronics Corp.
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(Registrant)
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Date: November 15, 2010
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By:
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/s/ Richard S. Schuster
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Name:
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Richard S. Schuster
|
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Title:
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Senior Executive Vice President
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NU Horizons Electronics (NASDAQ:NUHC)
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