View:
=====================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT
(Pursuant to Section 14(d)(1) of the Securities Exchange Act of 1934)
(Amendment No. 1)
----------------------
ROTO-ROOTER, INC.
(Name of Subject Company)
CHEMED CORPORATION
(Bidder)
----------------------
Common Stock, Par Value $1.00 Per Share
(Title of Class of Securities)
77878103
(CUSIP Number of Classes of Securities)
----------------------
Mr. Kevin J. McNamara
Chemed Corporation
2600 Chemed Center
255 East Fifth Street
Cincinnati, OH 45202
(Name, Address and Telephone Number of Person(s) Authorized
to Receive Notices and Communications
on Behalf of Bidder)
----------------------
Copy to:
Richard Hall, Esq.
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
(212) 474-1000
Page 1 of 17 Pages
Exhibit Index on Page 4
=====================================================================
Chemed Corporation hereby amends and supplements its
Tender Offer Statement on Schedule 14D-1 (the "Statement")
originally filed on August 14, 1996, with respect to its offer to
purchase any and all outstanding shares of Common Stock, par
value $1.00 per share, of Roto-Rooter, Inc., a Delaware
corporation, at a price of $41.00 net in cash per share, as set
forth in this Amendment No. 1. Capitalized terms not defined
herein have the meanings assigned thereto in the Statement.
Item 10. Additional Information.
Item 10(e) of the Statement is hereby amended to read
as follows:
(e) A putative class action complaint entitled Rand v.
Roto Rooter Inc., et al, C.A. No. 15145 (Del. Ch. filed Aug. 9,
1996) has been filed against the Company, its directors and the
Purchaser by a purported stockholder of the Company. This complaint
alleges breaches of fiduciary duty by the defendants and seeks
declaratory relief, injunctive relief and damages. The Purchaser
intends to defend vigorously against these allegations. The above
description of the complaint is qualified in its entirety by
reference to the Complaint, a copy of which is attached hereto as
Exhibit (g) and is incorporated herein by reference.
Item 11. Material to be filed as Exhibits.
Item 11 of the Statement is hereby amended to add the
following exhibit:
(g) Complaint in Rand v. Roto Rooter Inc., et al,
C.A. No. 15145 (Del. Ch. filed Aug. 9, 1996).
SIGNATURE
After due inquiry and to the best of my knowledge and
belief, I certify that the information set forth in Amendment No.
1 to the Statement is true, complete and correct.
Dated: August 19, 1996
CHEMED CORPORATION,
by /s/ Kevin J. McNamara
-------------------------------
Name: Kevin J. McNamara
Title: President
EXHIBIT INDEX
Exhibit Page
Number Exhibit Name Number
(g) Complaint in Rand v. Roto Rooter
Inc., et al, C.A. No. 15145
(Del. Ch. filed Aug. 9, 1996). 5
EXHIBIT (g)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
COUNTY OF NEW CASTLE
- ----------------------------------------x
:
HARRIETT RAND, :
on behalf of herself and all :
others similarly situated, :
: C.A. 15145NC
Plaintiff, :
: CLASS ACTION
-against- : COMPLAINT
:
ROTO ROOTER INC., EDWARD L. HUTTON, :
WILLIAM R. GRIFFIN, BRIAN A. BRUMM, :
JAMES A. CUNNINGHAM, NAOMI C. DALLOB, :
CHARLES H. ERHART, JR., NEAL GILLIATT, :
LAWRENCE J. GILLIS, DOUGLAS B. HARPER, :
WILL J. HOEKMAN, THOMAS C. HUTTON, :
PATRICK L. JOHNSON, SANDRA E. LANEY, :
KEVIN J. MCNAMARA, JOHN M. MOUNT, :
TIMOTHY S. O'TOOLE, DONALD E. SAUNDERS, :
D. WALTER ROBBINS, JR., :
GEORGE J. WALSH III, and CHEMED CORP. :
:
Defendants. :
- ----------------------------------------x
Plaintiff, by her attorneys, alleges upon information and
belief, based, in part, upon an investigation conducted by and
through the undersigned counsel, except with respect to her
ownership of Roto Rooter Inc. common stock and her suitability to
serve as a class representative, which are alleged upon personal
knowledge, as follows:
1. Plaintiff is, and has been at all relevant times, the
owner of shares of the common stock of the Company.
2. Defendant Roto Rooter Inc. ("Roto Rooter" or the
"Company") is a corporation duly organized and existing under the
laws of the State of Delaware. The Company is one of the nation's
premier providers of plumbing and drain cleaning services in the
United States and is the largest direct provider of residential
appliance and air conditioning repair services through the sale
of service contracts. The Company's common stock is traded on the
NASDAQ National Market System under the symbol ROTO. Roto Rooter
had, as of March 25, 1996, approximately 5,151,660 shares of
common stock issued and outstanding, which shares are held by at
least hundreds of shareholders of record and are traded on the
NASDAQ National Market System. The Company maintains its
principal corporate offices at 2500 Chemed Center, 255 East Fifth
Street, Cincinnati, OH 45202-6690.
3. Defendant Chemed Corp. ("Chemed") is a diversified public
corporation incorporated under the laws of the State of Delaware
with strategic positions in medical and dental disposable-product
supply and support services for the primary, acute and long-term
care markets; home healthcare services; sanitary
maintenance-product distribution services; and plumbing, drain
cleaning, and residential appliance and air conditioning repair.
Chemed maintains its principal executive offices at 2600 Chemed
Center, 255 East Fifth Street, Cincinnati, OH 45202. Chemed had,
as of April 30, 1996, approximately 9,839,229 shares of common
stock issued and outstanding, which shares are held by at least
hundreds of shareholders of record and are traded on the New York
Stock Exchange. Chemed beneficially owns approximately 58% of
Roto Rooter.
4. Defendant Edward L. Hutton ("E. Hutton") is, and at all
relevant times, has been Chairman of the Company and, from 1970
to 1993, was President, Chief Executive Officer and a director of
Chemed.
5. Defendant William R. Griffin ("Griffin") is and at all
relevant times, has been President and Chief Executive Officer of
the Company and an executive Vice President and director of
Chemed.
6. Defendant Brian A. Brumm ("Brumm") is and at all relevant
times, has been Vice President, Treasurer, Chief Financial
officer and director of the Company.
7. Defendant Naomi C. Dallob ("Dallob") is and at all
relevant times, has been Secretary, General Counsel and director
of the Company and Vice President and Secretary of Chemed.
8. Defendants James A. Cunningham ("Cunningham"), Charles E.
Erhart, Jr. ("Erhart"), Thomas C. Hutton ("T. Hutton"), Sandra E.
Laney ("Laney"), Kevin J. McNamara ("McNamara"), John M. Mount
("Mount"), Timothy S. O'Toole ("O'Toole"), D. Walter Robbins
("Robbins"), and George S. Walsh, III, ("Walsh") were at all
relevant times, directors of both the Company and Chemed.
9. Defendants Neal Gilliatt ("Gilliatt"), Lawrence J. Gillis
("Gillis"), Douglas B. Harper ("Harper"), Will J. Hoekman
("Hoekman"), Patrick L. Johnson ("Johnson") and Donald E.
Saunders ("Saunders") were at all relevant times, directors of
the Company.
10. The defendants described in paragraphs 4-9 above are
hereinafter sometimes collectively referred to as the "individual
defendants" or the "director defendants."
11. By virtue of the individual defendants' positions as
officers and/or directors of Roto Rooter, said defendants are in
a fiduciary relationship with the plaintiff and other public
shareholders of Roto Rooter and owe plaintiff and other members
of the Class the highest obligation of good faith, fair dealing,
loyalty and due care.
12. The individual defendants are members of the board of
Roto Rooter and the defendants enumerated in paragraphs 4 and 6-8
are affiliated with Chemed. As set forth above, certain of the
individual defendants are members of the board of directors of
Chemed. Chemed, by virtue of its 58% interest in Roto Rooter is a
controlling shareholder of Roto Rooter and orchestrated the
merger at issue for its own benefit, at the expense of Roto
Rooter's minority shareholders.
13. The individual defendants, by reason of their corporate
directorships, stand in a fiduciary position relative to Roto
Rooter's minority shareholders, whose fiduciary duties, at all
times relevant herein, require them to exercise their best
judgment, and to act in a prudent manner, and in the best interests
of the Company's minority shareholders. Said defendants owe the
public minority of Roto Rooter the highest duty of good faith, fair
dealing, due care, loyalty, and full, candid and adequate
disclosure.
14. Each defendant herein is sued individually as a
conspirator and aider and abettor, as well as in his capacity as
a director of the Company (in the case of the individual
defendants), or as a control person and the liability of each
arises from the fact that he has engaged in all or part of the
unlawful acts, plans, schemes, or transactions herein.
CLASS ACTION ALLEGATIONS
15. Plaintiff brings this action on her own behalf and as a
stockholders' action, pursuant to Delaware law, on behalf of all
shareholders of the common stock of the Company (except the
defendants herein and any person, firm, trust, corporation, or
other entity related to or affiliated with any of the defendants)
and their successors in interest, who are or will be threatened
with injury arising from defendants' actions as more fully
described herein.
16. This action is properly maintainable as a class action.
17. The class is so numerous that joinder of all members is
impracticable. As of March 25, 1996, there were 5,151,660 shares
of Roto Rooter common stock outstanding held by at least hundreds
of shareholders throughout the country.
18. A class action is superior to other methods for the fair
and efficient adjudication of the claims herein asserted, and no
unusual difficulties are likely to be encountered in the
management of this class action. The likelihood of individual
class members prosecuting separate claims is remote.
19. There are questions of law and fact which are common to
the class and which predominate over questions affecting any
individual class member. The common questions include, inter
alia, the following:
(a) whether defendants have breached their fiduciary
and other common law duties owed by them to plaintiff and the
members of the class;
(b) whether defendants are pursuing a scheme and course
of conduct designed to eliminate the public shareholders of Roto
Rooter in violation of the laws of the State of Delaware in order
to benefit from a proposed acquisition of Roto Rooter by Chemed
at the expense and to the detriment of the plaintiff and the
other public minority shareholders who are members of the class;
(c) whether defendants are acting on both sides of the
possible going-private transaction, thus presenting a conflict of
interest, self-dealing and overreaching;
(d) whether the said proposed acquisition, hereinafter
described, constitutes a breach of the duty of fair dealing with
respect to the members of the class; and
(e) whether the class is entitled to injunctive relief
or damages as a result of the wrongful conduct of the defendants.
20. Plaintiff is committed to prosecuting this action and
has retained competent counsel experienced in litigation of this
nature. The claims of the plaintiff are typical of the claims of
other members of the class and plaintiff has the same interests
as the other members of the class. A class action is superior to
any other type of adjudication of this controversy.
21. Defendants have acted in a manner which affects
plaintiff and all members of the class, thereby making
appropriate injunctive relief and/or corresponding declaratory
relief with respect to the class as a whole.
SUBSTANTIVE ALLEGATIONS
22. In 1995, Chemed attempted to buy out the minority
shareholders of Roto Rooter. The independent committee of the
Roto Rooter Board rejected Chemed's offer as inadequate and the
takeover offer was rescinded.
23. Roto Rooter's profits and outlook have ben on an upswing.
In an article in the June 20, 1996 Cincinnati Enquirer, an analyst
at D.A. Davidson & Co., referrin to Roto Rooter, stated "I guess I
see it as a sort of solid rock cash generator with probably 15
percent or so growth potential in terms of cash flow....Plumbing
is a cash cow." Indeed, in the same article, defendant O'Toole
stated of Roto Rooter, "[t]he future's very similar to its
excellent past with us."
24. On or about July 17, 1996, Roto Rooter reported its
financial results from the quarter ended June 30, 1996. Earnings
per share rose to 54 cents, a 23% increase over the comparable
quarter a year earlier. Defendant Griffin stated: "Looking at our
performance for the first six months of the year, we are on
target to achieve another record year of revenue and profit
growth." (Emphasis added)
25. On July 18, 1996, Chemed reported its financial results
for the quarter ended June 30, 1996. Earnings per share rose to
38 cents, only a 9% increase over the comparable quarter a year
earlier.
26. On August 8, 1996, in an attempt to boost its lagging
growth, Chemed roiled the market with its proposal to squeeze out
Roto Rooter's minority shareholders. Chemed announced that it
plans to increase its existing stake in Roto Rooter from 58% to
100%, thereby eliminating the public shareholders' investment.
Fleet Financial plans to pay $41 in cash for each share of Roto
Rooter outstanding via a tender offer scheduled to commence on
August 14, 1996. The total dollar value of the transaction is
approximately $86 million.
27. The proposed purchase price of $41 does not represent
the true value of the assets and future prospects underlying each
share of Roto Rooter.
28. By virtue of its dominance and control over Roto Rooter,
Chemed, together with the individual defendants, has engaged in a
plan involving acts which are grossly unfair to plaintiff and the
other members of the class. The purpose of the plan is to enable
Chemed to acquire 100% equity ownership of Roto Rooter and its
assets for its own benefit, and at the expense of the other Roto
Rooter minority stockholders who would be deprived of their
equity investment and the benefits to accrue thereafter, for a
grossly inadequate price.
29. Defendants' announcement of the proposed bid fails to
disclose the improving prospects for Roto Rooter due to the
growth prospects for the Company, specifically, its plumbing
business and the improving economy in its markets. The tender
offer announcement does not mention that Roto Rooter is on the
verge of reporting sustained and significant profits for the
foreseeable future.
30. Because of Chemed's 58% equity power and overwhelming
control over Roto Rooter, all of Roto Rooter's directors who will
be considering the offer, and the entire board of directors, no
third party, as a practical matter, can attempt any competing bid
for Roto Rooter, as the success of any such bid would require the
consent and cooperation of Chemed. In fact, because of the
predominant control of Roto Rooter by Chemed, it is a foregone
conclusion that whatever Chemed may offer, such offer will be
accepted.
31. The proposed transaction serves no legitimate business
purpose of Roto Rooter but rather is an attempt by defendants to
unfairly benefit Chemed from the transaction at the expense of
Roto Rooter's minority public stockholders. The proposed plan
will deny plaintiff and the other members of the class their
right to share proportionately in the future success and growth
in profitability of Roto Rooter and its valuable assets, while
permitting defendants to reap huge benefits from the contemplated
transaction.
32. The price of $41 per share to be paid to the class
members is unconscionable, unfair and grossly inadequate. The
terms of the proposed merger constitute a fraud upon the minority
stockholders because, among other things:
(a) the intrinsic value of the stock of Roto Rooter is
materially in excess of $41 per share, giving due consideration
to the possibilities of growth and profitability of Roto Rooter
in light of its business, earnings and earnings power, present
and future.
(b) The $41 per share price is not the result of arm's
length negotiations and was not based upon any independent
evaluation of the current value of Roto Rooter shares, assets or
business, but was fixed arbitrarily by defendants, as part of a
plan by Chemed to obtain complete ownership of Roto Rooter's
assets and business at the lowest possible price, to obtain for
itself benefits disproportionate with those to be received by the
public stockholders, which facts were not and perhaps will not be
disclosed since it is not in defendants' interests to disclose
such facts.
33. Because the defendants are in possession of corporate
information concerning Roto Rooter's assets, businesses and
future financial prospects, the degree of knowledge and economic
power between defendants and the public stockholders is unequal,
making it grossly and inherently unfair and comprises "unfair
dealing" for Chemed to obtain ownership of Roto Rooter's assets
from the minority public common shareholders.
34. By reason of the foregoing acts, practices and course of
conduct, Chemed has breached and continues to breach its duty as
a controlling stockholder of Roto Rooter and the individual
defendants have breached and continue to breach their duties as
directors of Roto Rooter, to the remaining stockholders including
plaintiff and the other members of the class herein.
35. Plaintiff and the class will suffer irreparable damage
unless defendants are enjoined from continuing to breach their
fiduciary duties and from carrying out the aforesaid plan and
scheme.
36. Plaintiff and the other members of the class have no
adequate remedy at law.
WHEREFORE, plaintiff demands judgment against the defendants
jointly and severally, as follows:
(1) declaring this action to be a class action and
certifying plaintiff as the class representative and her counsel
as class counsel;
(2) enjoining, preliminarily and permanently, Chemed's
offer for acquisition of the Roto Rooter stock owned by plaintiff
and the other members of the class;
(3) to the extent, if any, that the contemplated
transaction or transactions complained of are consummated prior
to the entry of this Court's final judgment, rescinding such
transaction or transactions, and granting, inter alia,
rescissionary damages;
(4) directing that defendants pay to plaintiff and the
other members of the class all damages caused to them and account
for all profits and any special benefits obtained as a result of
their unlawful conduct;
(5) awarding to plaintiff the costs and disbursements
of this action, including a reasonable allowance for the fees and
expenses of plaintiff's attorneys and experts; and
(6) Granting plaintiff and the other members of the
class such other and further relief as may be just and proper.
Dated: August 8, 1996
MORRIS and MORRIS
By: /s/ Karen L. Morris
----------------------------
Karen L. Morris
Suite 1600
1105 North Market Street
Wilmington, Delaware 19899
(302) 426-0400
Attorneys for Plaintiffs
OF COUNSEL:
STULL, STULL & BRODY
6 East 45th Street
New York, New York 10017
(212) 687-7230
ROBERT C. SUSSER, P.C.
6 East 43rd Street
Suite 1900
New York, New York 10017
(212) 808-0298