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Official buyout offer - Exhibit 99

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  • Official buyout offer - Exhibit 99

    Here we go.... I haven't had time to go through it with a microscope... but FORSYTHE is in... and it looks like an offer to buy the company..


    Championship Auto Racing Teams, Inc.
    5350 Lakeview Parkway Drive South
    Indianapolis, IN 46268
    Attn.: Christopher R. Pook
    President, Chief Executive Officer

    Dear Chris:

    As you know, the Board of Directors of Championship Auto Racing Teams, Inc, a Delaware corporation ("CART") has invited a group involving Gerald Forsythe to make a proposal to acquire CART (the "ACQUISITION"). Mr. Forsythe, Kevin Kalkhoven, Paul Gentilozzi, Carl Russo and Motorock LLC have formed Open Wheel Racing Series LLC ("OPEN WHEEL") for the purpose of making such a proposal. This letter outlines that proposal.

    Please note that the price per share of our offer is less than the market price of CART common stock on the date of this letter. The offer price reflects the fact that CART will require significant additional capital to maintain its ongoing operations. We believe that if such capital were raised through an equity financing, even if such equity financing were possible, CART shareholders would likely suffer sufficient dilution to reduce the market price of CART common stock to less than the price per share of our offer.

    1) PROPOSED TRANSACTION. Open Wheel would acquire all the outstanding stock (with rights) and other securities convertible into or exercisable for capital stock of CART ("OTHER SECURITIES") for a total of $7.4 million in cash. Based on 14,718,134 shares outstanding as of July 1, 2003 and if all Other Securities are terminated, the consummation of the Acquisition would result in CART stockholders receiving approximately $.50 cash in exchange for each share. The Acquisition would be effected by a reverse triangular merger, tender offer or other structure as mutually agreed. The Acquisition would be subject to the approval of CART's Board of Directors, which must include approval by CART's independent directors, and, in addition to any shareholder approval required by law, Open Wheel expects to require approval of the holders of a majority of CART voting stock not held by Open Wheel or its members. Completion of the

    Acquisition would be subject to the receipt by CART of a fairness opinion from its financial advisor and the satisfaction of any applicable governmental regulatory requirements.
    2) DEFINITIVE AGREEMENT. The definitive agreement for the Acquisition would contain appropriate representations, warranties and covenants for a transaction of the size and nature of the Acquisition and other provisions that are mutually satisfactory to Open Wheel and CART. These would include a customary break-up fee. The definitive agreement would also include conditions to Open Wheel's obligation to complete the Acquisition, in addition to those noted above, including: (a) resolution in a satisfactory manner of the issues surrounding the management of CART, Inc. ("CART"), (b) no material agreements are made without the knowledge of Open Wheel, (c) termination of all outstanding options to acquire shares of CART or any of its current or dissolved subsidiaries with the consent of all optionees, (d) settlement of all ongoing disputes in arbitration or litigation, (e) the modification or termination of certain employment agreements to the satisfaction of Open Wheel, (f) the absence of litigation relating to CART or the Acquisition, and (g) the completion of due diligence, including verification of proposed sponsorships, to the satisfaction of Open Wheel.

    3) LETTER OF INTENT NOT BINDING. Open Wheel and CART both acknowledge and agree that, except for its Section 4, this letter of intent is not an agreement or contract of any kind, does not give rise to or create any binding legal rights or obligations and does not obligate Open Wheel or CART to negotiate or enter into any definitive agreement or to complete the Acquisition or any other transaction. Any obligation to complete a transaction will arise only if and when: (a) Open Wheel and CART sign and deliver a definitive written agreement regarding the Acquisition or other transaction, (b) all necessary corporate action on behalf of the parties has been taken, and (c) and all conditions precedent have been satisfied or waived. Neither Open Wheel nor CART will have any liability whatsoever to any other party for its failure to negotiate or enter into a definitive agreement for the proposed Acquisition or any other transaction, and either party may choose not to pursue the Acquisition or enter into a definitive agreement for any reason or no reason.

    4) OTHER TRANSACTIONS. CART recognizes that, in order for Open Wheel to pursue further steps with CART regarding a proposed business combination, Open Wheel will need to invest substantial time, effort and expense to, among other things, complete its due diligence of CART. Accordingly, CART agrees that until the earlier of August 31, 2003 and the date on which Open Wheel confirms in writing that it no longer wishes to pursue the Acquisition (the "TERMINATION DATE"), CART will promptly notify Open Wheel of any request,


    inquiry, proposal, solicitation, negotiation, or discussion with any third party concerning a possible sale of stock or other securities of CART or CART, or any possible disposition of all or any significant part of CART's or CART's business or assets. Such notice will identify the party or parties involved, the terms of any proposal, and the proposed process and timeline. CART agrees that, prior to the Termination Date, it will not unilaterally terminate discussions with Open Wheel, and that it will in any case provide not less than two business days notice of any determination that Open Wheel must, under terms of the August 11, 2003 letter of CART to Mr. Forsythe, disband.
    5) EXPECTATIONS; COUNTERPARTS. By signing this letter of intent, Open Wheel and CART agree that Section 4 is intended to be binding and enforceable. This letter of intent may be signed in counterparts.


    Open Wheel Racing Series LLC

    /s/ Kevin Kalkhoven
    Kevin Kalkhoven, Manager

    CART will be just fine!
    If it doesn't have wings... It isn't worth talking about!

  • #2
    CART shareholders would likely suffer sufficient dilution to reduce the market price of CART common stock to less than the price per share of our offer.
    You'd better sell Matt!
    "You have not converted a man because you have silenced him."
    -John Morley


    • #3
      CART shareholders would likely suffer sufficient dilution to reduce the market price of CART common stock to less than the price per share of our offer.
      Wait a minute. I thought the first and foremost obligation of the CEO was to the stockholder. How can this offer be considered in that light? (Just asking?)
      "You have not converted a man because you have silenced him."
      -John Morley


      • #4
        They want to buy C^RT for 7 million

        They claim the stockholders will receive about 50 cents a share...owwwwwh.

        They intend to spend 15 million to support the series.

        Am I reading this right, because it sounds pretty bizzar to me.

        Think Vannini will enjoy selling his stock for 50 cents a share?

        Think C^RT can actually rebuild with 15,000,000 million?

        Should be interesting to watch.
        Tara was the name of our cat.


        • #5
          If the company liqudates at the end of the 2003 season, how much would it be worth? If it's more than $7mn, the BoD should refuse the offer as it is screwing the shareholders.


          • #6
            For a group of big money men, they sure seem to be trying to do this deal on the cheap!


            • #7
              This is a first offer to drive down the stock price. As the stock price comes down, the offer will go up until a bargain is reached.

              The CART BoD should refuse this offer. CART still has around $40 million in the bank. If it would suspend operations and liquedate right now, shareholders would receive about five times what is being put on the table. It's all about leverage. These guys want to buy $40 million for $7 million, then liquedate the company and take the remaining assets to start a new company to play with race cars. As jjj said, if the company is going to be worth less than $7 million after the season finale, then it can be weighed then.

              The CART BoD is too inbred to do it and give a bleep about the shareholders but liquidation ASAP would benefit the shareholders a lot more than doing any kind of deal with these guys.
              "The lunatic fringes on both sides need to be written off." -- stnky pete


              • #8
                Originally posted by JBaiza
                You'd better sell Matt!
                Heck no, I am in this for the long haul, one way or another

                If this is accepted I suspect there will be a lawsuit somewhere I can join in, may even have a choice of lawsuits considering some people bought in at over $2 a share just a week ago after comments by Paul Newman.


                • #9
                  It is too late to get out now, MPH is a $1.38 and falling.
                  I wish I knew - Dennis "Cutty" Wise

                  When its game time, it's pain time! - Terrible Terry Tate


                  • #10
                    This is totally bizarre.

                    Yes, the obligation of management is to enhance enterprise value (ie shareholder wealth). So by striking a deal with a buyer for 50 cents per share when it is selling for over a buck is outragous.

                    If anyone has read "Barbarians at the Gate" (story of KKR's takeover of RJR Tobacco) you will know that the hint of a buyout drives the price up and the deal is done usually at an above market price.

                    Now since Cart is in dire straits (something that was not the case when RJR was taken private) these two deals may not compare but I am still stunned to find that the buyout is to happen at a below market price.


                    • #11
                      Let's forget the buyout price - that may actually be a true indication of what the series is worth, because other than their fancy new headquarters, and a few trucks, what do they really possess that has physical value? (IMHO, "name recognition", current contracts with venues and the like really have no value - because if CART went away tomorrow, it would be just as easy to start over.)

                      The question is how they intend to run next season for 15 mil? Forysthe must be planning to run a dozen cars himself, because without the bribe money, he's not going to find them elsewhere. Hmm. Forsythe Auto Racing Teams. Eeriely appropriate!
                      I'm from a place called the internet. Nothing disturbs me.


                      • #12
                        Silva2, think the low ball bid was designed to drive the stock price down, a negotiating strategy. Part of the announcement was that the so-called "poison pill" has been "amended" (read that, "waived").
                        Gentilozzi and Kalkhoven have already bought 10 percent of the company each. Forsythe has around 15 percent in shares he can vote. That's 35 percent. If Russo and Motorock jump in at a low price for 8 percent each or so, they have more than 51 percent of the voting shares to vote themselves their own offer.
                        What CART still has in the bank is around $40 million, burning off rapidly. If they seal this deal rapidly, then they could actually MAKE money on the deal, kill off the current company and use THAT money to start a new organization.
                        "The lunatic fringes on both sides need to be written off." -- stnky pete


                        • #13

                          Gentilozzi and Kalkhoven have already bought 10 percent of the company each. Forsythe has around 15 percent in shares he can vote. That's 35 percent.
                          It says in the SEC filing that none of the parties have bought any stock in the last 60 days. All they have to work with now is what was Forsythe's stock, variously reported at anywhere from 22 % to 24.9%.


                          • #14
                            Wall street sure doesn't like the news very much............

                            Championship Auto Racing Teams, Inc. - NYSE
                            Last Trade 12:38 PM ET - Aug 18, 2003
                            Price $1.25
                            Change $0.58
                            Volume 320,500
                            Trades 183
                            Day Low $1.25
                            Day High $1.73
                            52 Week Low $1.40
                            52 Week High $5.35
                            Market data powered by TurboFeed.
                            (delayed at least 15 min

                            OK, cart stock is now officially cheaper than toilet paper. If I can get in on a roll it would finally be useful.
                            "Is that my *** that I smell burning?" ... Helmet Stogie from "Death spasms of the Mabuchi"


                            • #15
                              Jim, correct me if I missed something here. Gentilozzi, Kalkhoven and some shell companies controlled by them and Forsythe filed last Friday for acquiring 3.3 million shares. Do you figure that was a private deal with Forsythe's shares, rather than some additional on the open market? Some of Forsythe's shares? Even with the increased volume of the last couple weeks, it doesn't add up to 3.3 million shares, so at least some of it had to be Forsythe shares in a private deal with the two of them and those four shell companies.
                              With the poison pill apparently waived for them by the BoD, their tender offer drives the price down, they buy up the stock cut rate and secure enough votes to sell themselves the company. Vannini and his Canadian investor lose and the mutual funds, Wall Street speculators and Harry and Sadie in Bozeman with their IRA are screwed. The BoD didn't do the shareholders any favors by waiving the poison pill for these guys.
                              It would appear the stock price will tank and the proxy fight has begun.
                              "The lunatic fringes on both sides need to be written off." -- stnky pete


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