GETI Gentek, Inc. (MM)

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

 

SCHEDULE 14D-9

(RULE 14d-101)

 

SOLICITATION/RECOMMENDATION STATEMENT

UNDER SECTION 14(D)(4) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

 

 

 

GenTek Inc.

(Name of Subject Company)

 

GenTek Inc.

(Name of Person Filing Statement)

 

COMMON STOCK, NO PAR VALUE

(Title of Class of Securities)

 

37245X203

(CUSIP Number of Class of Securities)

 

William E. Redmond, Jr.

President and Chief Executive Officer

90 East Halsey Road

Parsippany, New Jersey 07054

(973) 515-0900

(Name, Address and Telephone Number of Person Authorized to Receive Notice and

Communications on Behalf of the Person Filing Statement)

 

 

 

 

With a Copy to:

 

William P. O’Neill

Raymond B. Grochowski

Latham & Watkins LLP

555 11 ^th Street, N.W., Suite 1000

Washington, D.C. 20004

(202) 637-2200

 

 

 

 

 

TABLE OF CONTENTS

 

 

(a) Name and Address.

 

The name of the subject company to which this Solicitation/Recommendation Statement on Schedule 14D-9 (together with the accompanying Exhibits and Annexes, the “Statement”) relates is GenTek Inc., a Delaware corporation (“GenTek”). The address of the principal executive offices of GenTek is 90 East Halsey Road, Parsippany, New Jersey 07054. The telephone number of GenTek at its principal executive offices is (973) 515-0900.

 

(b) Securities.

 

The title of the class of equity securities to which this Statement relates is GenTek’s common stock, no par value (the “Common Stock”). As of September 24, 2009, there were 10,196,370 shares of Common Stock outstanding. In addition, holders of certain options and warrants own securities convertible into approximately 1,416,765 shares of Common Stock.

 

 

(a) Name and Address.

 

The name, business address and telephone number of GenTek, which is the subject company and the person filing this Statement, are set forth above in Item 1, “Subject Company Information.”

 

(b) Tender Offer.

 

This Statement relates to the tender offer by ASP GT Acquisition Corp., a Delaware corporation (the “Purchaser”) and a wholly owned subsidiary of ASP GT Holding Corp., a Delaware corporation (“Parent”), to purchase all of the issued and outstanding shares of Common Stock (“Shares”), at a purchase price of $38.00 per share, net to seller in cash, without interest thereon and less any applicable withholding taxes (such price, or any such higher price per share as may be paid in the Offer (as defined below), referred to herein as the “Offer Price”), upon the terms and subject to the conditions set forth in the Offer to Purchase, dated September 29, 2009 (the “Offer to Purchase”) and in the related Letter of Transmittal (which, together with any amendments or supplements to the Offer to Purchase and the Letter of Transmittal, collectively constitute the “Offer”).

 

The Offer is described in a Tender Offer Statement on Schedule TO (as amended or supplemented from time to time, the “Schedule TO”), filed by Parent and Purchaser with the Securities and Exchange Commission (the “Commission”) on September 29, 2009. According to the Offer to Purchase, the Offer will expire at 12:00 Midnight, New York City time, on October 27, 2009. Copies of the Offer to Purchase and the Letter of Transmittal are filed as Exhibits (a)(1)(A) and (a)(1)(B) to this Statement, respectively, and are hereby incorporated in this Statement by reference.

 

The Offer is being made pursuant to the Agreement and Plan of Merger, dated as of September 28, 2009, by and among Parent, Purchaser and GenTek (the “Merger Agreement”). The Offer is conditioned upon, among other things, (i) the satisfaction of the Minimum Condition (as described below), (ii) the expiration or termination of all statutory waiting periods (and any extensions thereof) applicable to the Offer under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) (the “HSR Condition”), and (iii) the receipt of any other required governmental approvals, the lapse of any waiting periods (or extensions thereof) and the making of any mandated filings, either unconditionally or on terms reasonably satisfactory to Parent (the “Governmental Approval Condition”). The Minimum Condition requires that the number of Shares that have been validly tendered and not properly withdrawn prior to the expiration of the Offer together with the number of Shares (if any) then owned of record by Parent or the Purchaser or with respect to which Parent or the Purchaser otherwise has, directly or indirectly, sole voting power, represents at least a majority of the Shares then outstanding (determined on a fully diluted basis) and no less than a majority of the voting power of the shares of capital stock of GenTek then outstanding (determined on a fully diluted basis) and entitled to vote in the election of directors or (if a greater majority) upon the adoption of the

Merger Agreement and approval of the Merger. The Offer is also subject to other conditions as described in Section 15 — “Certain Conditions to the Offer” of the Offer to Purchase.

 

The Merger Agreement also provides that, among other things, subject to the satisfaction or waiver of certain conditions, following completion of the Offer, and in accordance with the Delaware General Corporation law (the “DGCL”), Purchaser will be merged with and into GenTek (the “Merger”). After the effective time of the Merger (the “Effective Time”), GenTek will continue as the surviving company (the “Surviving Company”) and will be a wholly owned subsidiary of Parent. At the Effective Time, each Share outstanding immediately prior to the Effective Time (other than Shares held (i) in the treasury of GenTek or by GenTek’s subsidiaries, Parent or the Purchaser, which Shares shall be cancelled and shall cease to exist or (ii) by stockholders who exercise appraisal rights under Delaware law with respect to such Shares) will be cancelled and converted into the right to receive $38.00 or any greater per Share price paid in the Offer, without interest thereon and less any applicable withholding taxes.

 

Consummation of the Merger is conditioned upon, among other things, the adoption of the Merger Agreement by the requisite vote of stockholders of GenTek, if required by Delaware law. Under Delaware law, the affirmative vote of a majority of the outstanding Shares is the only vote of any class or series of GenTek’s capital stock that would be necessary to adopt the Merger Agreement at any required meeting of GenTek’s stockholders. If the Purchaser accepts and purchases Shares in the Offer, the Purchaser will have sufficient voting power to approve the Merger without the affirmative vote of any other stockholder of GenTek. In addition, Delaware law provides that if a corporation owns at least 90% of the outstanding shares of each class of stock of a subsidiary corporation entitled to vote on a merger, the corporation holding such stock may merge such subsidiary into itself, or itself into such subsidiary, without any action or vote on the part of the board of directors or the stockholders of such other corporation. Under the Merger Agreement, if, after the expiration of the Offer or the expiration of any subsequent offering period, the Purchaser owns at least 90% of the outstanding Shares (including Shares issued pursuant to the Top-Up Option (as defined below)), Parent and GenTek are required to take all necessary and appropriate action to cause the Merger to become effective, without a meeting of the holders of Shares, in accordance with the DGCL.

 

The Merger Agreement is summarized in Section 11 — “The Merger Agreement; Other Agreements” of the Offer to Purchase, which was mailed to GenTek’s stockholders on or around September 29, 2009 and is filed as Exhibit (a)(1)(A) to this Statement. Such summary is qualified in its entirety by reference to the Merger Agreement, which has been filed as Exhibit (e)(1) to this Statement, and is hereby incorporated into this Statement by reference.

 

According to the Offer to Purchase, the Purchaser’s and Parent’s principal executive offices are located at c/o American Securities LLC, The Chrysler Center, 666 Third Avenue, New York, New York 10017 and the telephone number of their principal executive offices is (212) 476-8000.

 

 

Certain contracts, agreements, arrangements or understandings between the Company or its affiliates and certain of its executive officers or directors are, except as described below, described in the Information Statement pursuant to Section 14(f) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 14f-1 thereunder (the “Information Statement”) that is attached hereto as Annex I and is incorporated herein by reference. Except as set forth in this Item 3, Item 4 below or Annex I attached hereto, or as otherwise incorporated herein by reference, to the knowledge of GenTek, as of the date of this Statement, there are no material agreements, arrangements or understandings, and no potential or actual conflicts of interest, between the Company or its affiliates and (i) the Company’s executive officers, directors or affiliates or (ii) Purchaser, Parent or their respective executive officers, directors or affiliates.

Agreements, Arrangements and Transactions with Parent and Purchaser.

 

The Merger Agreement.

 

The summary of the Merger Agreement contained in “Section 11 — “The Merger Agreement; Other Agreements” of the Offer to Purchase, which is filed as an Exhibit (a)(1)(A) to this Statement and which was mailed to stockholders on or around September 29, 2009, is hereby incorporated herein by reference. Such summary is qualified in its entirety by reference to the Merger Agreement, which has been filed as Exhibit (e)(1) to this Statement and is hereby incorporated herein by reference.

 

Top-Up Option.

 

GenTek granted the Purchaser an irrevocable option (the “Top-Up Option”) to purchase from GenTek the number of Shares (the “Top-Up Option Shares”) equal to the number of Shares that, when added to the number of Shares owned by Parent or the Purchaser at the time of exercise of the Top-Up Option, constitutes one share more than 90% of the number of Shares that would be outstanding immediately after the issuance of Shares pursuant to the exercise of the Top-Up Option. The exercise price for each Share acquired in the Top-Up Option is equal to the Offer Price. The Merger Agreement provides that the Top-Up Option will not be exercisable until after the time for acceptance of the tendered Shares (the “Acceptance Date”) (and satisfaction of the Minimum Condition) and unless immediately after such exercise the Purchaser and Parent would own more than 90% of the Shares then outstanding and in no event will the Top-Up Option be exercisable for a number of Shares in excess of GenTek’s authorized and unissued Shares. The aggregate purchase price payable for the Shares being purchased by the Purchaser pursuant to the Top-Up Option will be payable, at the option of Parent, either in cash or by delivery of a promissory note. The Purchaser may exercise the Top-Up Option after the Acceptance Date if the Minimum Condition has been satisfied.

 

Appointment of Directors.

 

In the Merger Agreement, GenTek granted to Purchaser the right to designate for appointment or election to the Board of Directors of GenTek (the “Board”), a number of directors that is proportionate to the percentage of Shares beneficially owned by Parent and its subsidiaries, upon the consummation of the Offer. Additional information with respect to the appointment of directors is contained in the Information Statement attached to this Statement as Annex I and the summary of Purchaser’s right to appoint members to the Board contained under the caption “Plans for GenTek” in Section 12 — “Purpose of the Offer; Plans for GenTek” of the Offer to Purchase. This summary is qualified in its entirety by reference to the Merger Agreement, which has been filed as Exhibit (e)(1) to this Statement and is hereby incorporated herein by reference.

 

Other Agreements.

 

The Tender and Support Agreement.   On September 28, 2009, Hawkeye Capital LLC, Richard A. Rubin, William E. Redmond Jr., Thomas Testa, Robert Novo, Vincent J. Opalewski and Douglas Grierson, (the “Principal Stockholders”) entered into a Tender and Support Agreement with Parent and the Purchaser.

 

Pursuant to the Tender and Support Agreement, each Principal Stockholder agrees, among other things (i) to tender all Shares they beneficially own in the Offer, (ii) to vote such shares (A) in favor of adopting the Merger Agreement and the transactions contemplated thereby and (B) against any proposal, action or contract that would reasonably be expected to result in (1) a breach of any covenant, representation, warranty or any other obligation or agreement of GenTek under the Merger Agreement, (2) certain of the conditions set forth in the Merger Agreement not being fulfilled or satisfied, (3) any action, agreement or transaction that would reasonably be expected to adversely affect the consummation of the transactions contemplated by the Merger Agreement, including the Offer, (4) any Acquisition Proposal (as defined in the Merger Agreement) or (5) any merger, acquisition, sale, consolidation, reorganization, recapitalization, extraordinary dividend, dissolution, liquidation, winding up of or by GenTek, or any other extraordinary transaction involving GenTek. Each Principal Stockholder also agrees not to (i) offer to transfer, transfer or consent to any transfer of any or all Shares they beneficially own without the prior written consent of Parent, (ii) enter into any contract with respect to any transfer of any such Shares or any interest therein, (iii) grant any proxy, power-of-attorney, right of first offer or refusal or other authorization or consent in or with respect to any such Shares, (iv) deposit any

such Shares into a voting trust or enter into a voting agreement with respect to such Shares, (v) permit any liens to be created on any such Shares or (vi) take any other action that would make any representation or warranty of such Principal Stockholder contained in the Tender and Support Agreement incorrect in any material respect or restrict in any material respect the performance of such Principal Stockholder’s obligations thereunder or the transactions contemplated thereby.

 

With respect to any Principal Stockholder, the Tender and Support Agreement terminates upon the earliest of (i) the mutual written agreement of Parent and such Principal Stockholder, (ii) the Effective Time, (iii) the date of termination of the Merger Agreement and (iv) any withdrawal or modification of the Company Board Recommendation.

 

As of the date of this Statement and based on the information provided by the stockholders subject to the Tender and Support Agreement, the Shares owned by the stockholders subject to the Tender and Support Agreement represent approximately 11.5% of GenTek’s outstanding Shares or 12.7% on a fully diluted basis assuming the exercise by the individuals party to the Tender and Support Agreement of all of their “in the money” options and warrants to acquire Shares.

 

The foregoing summary is qualified in its entirety by reference to the Tender and Support Agreement, which has been filed as Exhibit (e)(2) to this Statement, and is hereby incorporated into this Statement by reference.

 

The Employment Arrangements.   At the request of American Securities Partners V, L.P., a Delaware limited partnership, American Securities Partners V(B), L.P., a Delaware limited partnership, and American Securities Partners V(C), L.P., a Delaware limited partnership (collectively, the “Sponsors”), the beneficial owners of Parent, and in conjunction with the execution of the Merger Agreement, William E. Redmond, Jr. has entered into an employment agreement (the “Redmond Agreement”) and Vincent J. Opalewski has signed an offer letter (the “Opalewski Letter”), each with a subsidiary of GenTek, both of which are subject to and effective upon the closing of the Merger.

 

Pursuant to the Redmond Agreement, dated September 28, 2009, Mr. Redmond will serve as President and Chief Executive Officer of GenTek Technologies Marketing Inc. (“GenTek Technologies”) and as Chief Executive Officer of General Chemical Performance Products LLC (“General Chemical Performance Products”), each a subsidiary of GenTek. The Opalewski Letter sets forth the principal terms of an employment agreement that Mr. Opalewski and General Chemical Performance Products intend to enter. Pursuant to the Opalewski Letter, dated September 28, 2009, Mr. Opalewski would serve as President of General Chemical Performance Products. The term of the Redmond Agreement and the Opalewski Letter commence upon the Closing Date and are effective for an indefinite period.

 

Pursuant to the terms of the Redmond Agreement, Mr. Redmond will receive an annual base salary of $400,000 for his services to GenTek Technologies and a monthly fee of $15,000 for his services to General Chemical Performance Products. Beginning in fiscal year 2010, Mr. Redmond will be entitled to an annual target cash bonus. Mr. Redmond’s annual target cash bonus will be based in equal part upon GenTek Technologies’ EBITDA and free cash flow and will be targeted at 125% of annual base salary, with a range of between 0% and 175% of base salary.

 

Under the terms of the Redmond Agreement, Mr. Redmond will continue to be entitled to an annual target cash bonus for fiscal year 2009 in accordance with his current employment agreement. The amount of the bonus will be based on actual year-end financials in accordance with the GenTek Inc. 2009 Short Term Incentive Plan.

 

Mr. Redmond will also receive, subject to his execution of a release, a one-time payment equal to three times his current annual base salary as set forth in his current employment agreement. Mr. Redmond may also receive a gross-up payment if he receives change in control benefits subject to the excise tax under Section 4999 of the Internal Revenue Code.

 

Pursuant to the Redmond Agreement, Mr. Redmond will be eligible to receive a grant of long-term incentive compensation pursuant to any equity plan established by GenTek Technologies. The Redmond

Agreement further provides that the amount and the terms of any such equity awards will be consistent with Mr. Redmond’s title and position.

 

The Redmond Agreement provides that in the event Mr. Redmond’s employment is terminated by Mr. Redmond for “Good Reason” (as defined therein) or by GenTek Technologies “without Cause” (as defined therein) following occurrence of an event constituting Good Reason and subject to his execution of a release of all claims, Mr. Redmond will be entitled to a lump sum payment equal to one times his annual base salary then in effect, plus continued medical and dental insurance coverage for a period of three years.

 

Under the terms of the Redmond Agreement, Mr. Redmond is required to purchase equity in both GenTek Technologies and General Chemical Performance Products in an amount equal to 20% of his pre-tax equity investment in GenTek Inc. that is liquidated in connection with the closing of the Merger.

 

The Redmond Agreement also includes non-solicitation, non-competition and confidentiality provisions.

 

Pursuant to the terms of the Opalewski Letter, if Mr. Opalewski and General Chemical Performance Products enter into the employment agreement contemplated in the letter, Mr. Opalewski would receive a base annual salary of $350,000. Beginning in fiscal year 2010, Mr. Opalewski would be entitled to an annual cash bonus. Mr. Opalewski’s annual cash bonus would be based in equal part upon General Chemical Performance Products EBITDA and free cash flow, and would be targeted at 75% of annual base salary, with a range of between 0% and 175% of base salary.

 

Under the terms of the Opalewski Letter, Mr. Opalewski would continue to be entitled to an annual cash bonus for fiscal year 2009 in accordance with the GenTek Inc. 2009 Short Term Incentive Plan. The amount of the bonus would be based on actual year-end financials.

 

The Opalewski Letter provides for certain termination payments and benefits in the event Mr. Opalewski’s employment were terminated by General Chemical Performance Products other than for “Cause” (as defined therein). If Mr. Opalewski’s employment were terminated under such circumstances, subject to the execution of a release, Mr. Opalewski would be paid a lump sum payment equal to the sum of one times his annual base salary then in effect, plus continued medical and dental insurance coverage for a period of one year. However, if Mr. Opalewski’s employment were terminated by General Chemical Performance Products other than for Cause at any time following a “Change in Control” of General Chemical Performance Products (as defined in the employment agreement), subject to the execution of a release, Mr. Opalewski would be paid a lump sum payment equal to the sum of two times his annual base salary and one times his annual target cash bonus then in effect, plus continued medical and dental insurance coverage for a period of two years.

 

Pursuant to the Opalewski Letter, Mr. Opalewski would be required to purchase equity in General Chemical Performance Products in an amount equal to 50% of his after tax equity investment in GenTek that is liquidated in connection with the closing of the Merger (other than in respect of his restricted stock).

 

The foregoing summary is qualified in its entirety by reference to the Redmond Agreement and the Opalewski Letter, which have been filed as Exhibits (e)(3) and (e)(4) to this Statement, respectively, and are hereby incorporated in this Statement by reference.

 

Agreements, Arrangements and Transactions between GenTek and its Directors, Executive Officers and Affiliates.

 

Treatment of Stock Options, Restricted Shares and Warrants.

 

GenTek Stock Options.   The Merger Agreement provides that prior to the Effective Time, the Board will adopt appropriate resolutions and take all other actions necessary and appropriate to provide that, immediately prior to the Effective Time, each unexpired and unexercised option to purchase Shares (the “Company Options”), under any equity incentive plan of GenTek (the “Company Stock Plans”), including GenTek’s Amended and Restated 2003 Management and Directors Incentive Plan, or any other plan, agreement or arrangement, whether or not exercisable or vested, will be cancelled and each former holder of any such cancelled Company Option will receive at the Effective Time, in consideration of the cancellation of such Company Option and in settlement therefore, a payment in cash of an amount equal to the product of (i) the

total number of Shares previously subject to such Company Option and (ii) the excess, if any, of the merger consideration over the exercise price per Share previously subject to such Company Option (the “Option Payment”) (less any applicable withholding taxes). From and after the Effective Time, any such cancelled Company Option shall no longer be exercisable by the former holder thereof, but shall only entitle such holder to the payment, if any, of the Option Payment. As a result, certain executive officers and directors of GenTek who currently hold Company Options will receive cash payments in exchange for such instruments at the Effective Time, whether or not such instruments would otherwise be exercisable.

 

The following table reflects the value of the acceleration of unvested options held by GenTek’s directors and executive officers pursuant to the terms of the Company Stock Plans and the Merger Agreement. The amounts set forth in the table are based on the difference between $38.00 and the applicable per share option exercise price of unvested options that are to be accelerated immediately prior to the Effective Time.

 

 

GenTek Restricted Stock.   The Merger Agreement provides that immediately prior to the Effective Time, each unvested Share subject to forfeiture restrictions, repurchase rights or other restrictions under the Company Stock Plans or any other plan agreement or arrangement (“Restricted Stock”) shall vest in full and all restrictions (including forfeiture restrictions or repurchase rights) otherwise applicable to such Restricted Stock shall lapse and the Restricted Stock shall be converted into the right to receive the merger consideration, without interest (less any applicable withholding taxes). As a result, certain executive officers of GenTek who currently hold shares of Restricted Stock will receive cash payments in exchange for such instruments at the Effective Time, whether or not such instruments would otherwise be exercisable.

 

The following table reflects the value of the acceleration of unvested Restricted Stock held by GenTek’s directors and executive officers pursuant to the terms of certain award agreements and the Merger Agreement. The amounts set forth in the table below are based on the assumed per share value of $38.00 of unvested restricted stock that is to be accelerated immediately prior to the Effective Time.

 

 

GenTek Warrants.   The Merger Agreement provides that at the Effective Time, each warrant to purchase Shares that is issued, unexpired and unexercised immediately prior to the Effective Time (the “Warrants”) and

not terminated pursuant to its terms in connection with the Merger shall, in accordance with its terms, entitle the holder thereof to receive a payment in cash of an amount equal to the product of (i) the total number of Shares previously subject to such Warrant and (ii) the excess, if any, of the merger consideration over the exercise price per Share previously subject to such Warrant (such amounts are referred to as the “Warrant Payments”) (less any applicable withholding taxes). As a result, certain executive officers and directors of GenTek who currently hold Warrants will receive cash payments in exchange for such instruments at the Effective Time, whether or not such instruments would otherwise be exercisable. Based solely on public filings, to the knowledge of GenTek, Mr. Redmond is the only officer or director of GenTek who currently holds Warrants and will receive a payment of $40,719.19 as a result of the conversion of his Warrants into the right to receive cash. This amount is based on the total number of Shares previously subject to Mr. Redmond’s Warrants and the excess of $38.00 over the exercise price per Share previously subject to his Warrants.

 

Indemnification; Insurance.

 

The Merger Agreement provides that for a period of six years from and after the Effective Time, the Surviving Corporation shall to the fullest extent permissible under applicable provisions of the DGCL indemnify and hold harmless all past and present directors, officers and employees of GenTek entitled to indemnification (the “Covered Persons”) to the same extent such Persons are indemnified as of the date of the Merger Agreement for acts or omissions in their capacity as directors, officers or employees of GenTek or any GenTek Subsidiary occurring at or prior to the Effective Time.

 

For a period of six years from and after the Effective Time, the Surviving Company shall maintain for the benefit of GenTek’s directors and officers, as of the date of this Agreement and as of the Effective Time, who are covered by the directors’ and officers’ liability insurance policy maintained by GenTek, an insurance and indemnification policy that provides coverage for actions or omissions of such officers and directors prior to the Effective Time in their capacities as such (the “D&O Insurance”) that is substantially equivalent to and in any event not less favorable in the aggregate than GenTek’s existing policy or, if substantially equivalent insurance coverage is unavailable, the best available coverage (“Equivalent Coverage”). GenTek may, after prior consultation with Parent, purchase six year “tail” prepaid policies prior to the Effective Time which provide such directors and officers with Equivalent Coverage.

 

Actual or Potential Conflicts of Interest.

 

In considering the recommendations of the Board with respect to the Offer, the Merger and the Merger Agreement, and the fairness of the consideration to be received in the Offer and the Merger, stockholders should be aware that certain executive officers, directors and affiliates of GenTek have interests in the Offer and the Merger which are described above. The Board was aware of these potential conflicts of interest and considered them along with the other matters described below in Item 4, “The Solicitation or Recommendation — (b)(ii) Reasons for the Recommendation of the Board of Directors.”

 

 

(a) Recommendation of the Board.

 

At a meeting of the Board held on September 24, 2009, the Board, among other things, unanimously (i) determined that the Merger Agreement and the transactions contemplated thereby, are fair to, and in the best interests of, GenTek and the stockholders of GenTek, (ii) duly approved and declared advisable the Merger Agreement and the transactions contemplated thereby, including the Merger and the Offer, (iii) recommended that the stockholders of GenTek accept the Offer, tender their Shares to the Purchaser pursuant to the Offer and, if required by applicable law, adopt the Merger Agreement and approve the Merger and (iv) authorized the execution, delivery and performance of the Merger Agreement and the transactions contemplated thereby. Based on the foregoing, the Board hereby recommends that GenTek’s stockholders accept the Offer, tender their Shares under the Offer to Purchase and, if necessary, approve the Merger and adopt the Merger Agreement.

(b)(i) Background of the Offer and Merger.

 

GenTek is a holding company whose subsidiaries manufacture specialty inorganic chemical products and valve actuation systems and other components for internal combustion engines. GenTek operates through two primary business segments: (1) performance chemicals, which provides value-added products to three principal markets: water treatment, chemical processing, and the electronics industries, and (2) automotive parts, which manufacturers components for the automotive and heavy truck engine markets. GenTek operates over 50 manufacturing facilities and technical centers and has approximately 1,100 employees. GenTek’s 2,000-plus customers include many of the world’s leading manufacturers of cars, trucks, and heavy equipment, in addition to global chemical companies and local water treatment facilities.

 

GenTek emerged from a reorganization under Chapter 11 of the U.S. Bankruptcy Code on November 10, 2003 with a newly appointed Board of Directors (the “Board”), the majority of whom continue to serve. At the time of emergence GenTek held, in addition to its performance chemicals and automotive parts businesses, a telecommunications products business, various electronic wire, cable assembly, and other subassembly manufacturing operations supporting automotive and household appliance customers, a fluid transport and handling equipment business, and a line of specialty chemical products for the pharmaceutical and personal care products industries. An objective of the new Board was to develop a coherent business strategy with these disparate product lines that included preparing various businesses for sale.

 

In 2004, GenTek sold its KRONE communications product business, and in December 2004 paid a special cash dividend of $7.00 per share funded primarily from sale proceeds. On February 28, 2005, GenTek closed a new secured financing to recapitalize GenTek and used a portion of the proceeds to pay a special cash dividend of $31.00 per share.

 

In early June 2005, GenTek’s prior Chief Executive Officer, who had served before and during the Chapter 11 process, resigned and the Board appointed William E. Redmond, Jr., a member of the Board since the reorganization, as GenTek’s new Chief Executive Officer.

 

In April 2006, GenTek completed the sale of its Canadian cable and wire manufacturing business. In February 2007, GenTek completed the sale of its Noma wire and cable harness business. In July 2007, GenTek sold its wholly owned subsidiary, Defiance Testing and Engineering Services. In February 2008, GenTek sold its Reheis antiperspirant product line. In November 2008, GenTek completed the sale of its remaining wire and cable manufacturing businesses. Finally, in July 2009, GenTek sold its fluid handling product line used in automotive service applications. GenTek is currently in discussions with two potential buyers of its electronic chemicals business.

 

During this period, GenTek used proceeds from its divestitures of non-core assets to pay down debt and to fund acquisitions related to its core specialty chemicals and valve actuation businesses. In addition, since September 2007, GenTek has repurchased 778,563 shares of its Common Stock. Also during 2007 and 2008, GenTek repurchased approximately $31.3 million of its term debt from various lenders at a discount as permitted under its credit facility.

 

Beginning in mid-2007, management and the Board began considering additional opportunities to provide value for shareholders, including a possible separation of the specialty chemical and valve actuation businesses by a spinout of one or the other to shareholders, a possible sale of either business, or if a buyer could be found who would be interested in both businesses, a possible sale of the entire company. In September 2007, the Board received an unsolicited offer from an existing stockholder, not represented on the Board, to take GenTek private at $33.50 per share. Following indications that the shareholder was not willing to raise the price, the Board rejected the offer.

 

In late 2007 and 2008, the Board contacted and interviewed several financial firms, stating that the Board would be receptive to proposals from outside investors should these firms come forth with proposals. These firms included Bank of America, JPMorgan Chase, Goldman, Sachs and Co., Greenhill & Co., and Moelis & Company LLC (“Moelis”), among others. No firm proposals from investors were forthcoming.

During the second quarter of 2008, GenTek had separate discussions with two of its competitors in specialty inorganic chemicals markets regarding a possible combination. As part of these discussions, GenTek entered into separate non-disclosure agreements with each of these two firms and exchanged confidential information including financial and operations data on specialty chemical processing. GenTek received an offer from one competitor to purchase GenTek’s specialty chemicals business at $27 per share of Common Stock, and a second offer for essentially the same business from the other competitor valued at $33.50 per share of Common Stock. GenTek rejected the first offer, but continued discussions with the second firm into the third quarter of 2008 when, due to the bankruptcy of Lehman Brothers in September 2008, that firm’s financing sources in support of its offer became unavailable, and all discussions ceased.

 

During the second quarter of 2009, GenTek commenced discussions with its lenders regarding an extension of maturities on its existing term loan and revolving credit facility. In July 2009, GenTek engaged Goldman Sachs Lending Partners LLC to act as structuring agent and joint lead arranger and joint book runner as part of that process. The discussions included a de-leveraging of GenTek’s capital structure to less than 1.0 times latest twelve month earnings before interest, taxes, depreciation and amortization, and adding greater flexibility to pay regular and special dividends and to engage in additional stock buy-backs from available cash.

 

While discussions with the lenders proceeded, GenTek authorized representatives of Goldman Sachs & Co. to contact potentially interested strategic buyers of its performance chemicals business with a focus on firms involved in industrial chemicals manufacturing. Goldman, Sachs & Co. contacted five firms. In making these contacts, Goldman Sachs & Co. advised the firms that GenTek would consider a sale of GenTek immediately following a spin-out of the valve actuation business to shareholders. Each of the potential strategic buyers contacted by Goldman Sachs & Co., signed a non-disclosure agreement and received some confidential information regarding GenTek, but only two elected to attend a further confidential presentation from management. Neither of these firms made a proposal and withdrew from further contact.

 

Goldman Sachs & Co. representatives also contacted two private equity firms to gauge interest in GenTek or its chemicals business on a stand-alone basis. One firm, after signing a non-disclosure agreement and attending a management presentation, submitted a letter on August 6, 2009 proposing an acquisition of just GenTek’s specialty inorganic chemicals business (excluding the electronic chemicals and valve actuation businesses) for a price of $31.00 per share of Common Stock.

 

During 2008 and into 2009, Mr. Redmond would occasionally receive contacts from representatives of KeyBanc Capital Markets Inc. (“KeyBanc”) regarding its interest in advising GenTek based on publicly available information, but the Board never engaged KeyBanc. In late June 2009, representatives of KeyBanc contacted Mr. Redmond regarding a potential proposal from a private equity fund to take GenTek private. Mr. Redmond advised the Board of this contact, and told the Key Banc representative that GenTek may be interested in hearing the private equity firm’s proposal. On June 29, 2009, Mr. Christopher J. Porter, a Managing Director of KeyBanc, forwarded to Mr. Redmond a letter from Matthew F. LeBaron, Managing Director of American Securities LLC (“American Securities”), offering to acquire GenTek at up to $30.00 per share subject to confirmatory due diligence. Mr. Redmond advised the Board of this proposal and, after receiving direction from the Board, informed the KeyBanc representatives later that same day that the offer was too low to commence discussions or to provide any confidential information pursuant to a non-disclosure agreement with American Securities.

 

On July 7, 2009, Mr. Porter conveyed a second letter from Mr. LeBaron to Mr. Redmond proposing an offer of $35.00 to $38.00 per share, again based on publicly available information and subject to due diligence and acceptable documentation. After advising the Board about this latest letter and at American Securities’ request, Mr. Redmond met with Messrs. Porter, and LeBaron, and Scott Wolff, Vice President of American Securities, on July 17, 2009 for lunch in New York. During that meeting, Mr. LeBaron reaffirmed the interest of American Securities in acquiring GenTek. Following this initial meeting, Mr. Redmond reported to the Board that American Securities appeared serious and anxious to proceed with due diligence on GenTek. The

Board instructed Mr. Redmond to enter into a confidentiality agreement with American Securities and continue negotiating the terms of the transaction. Thereafter:

 

 

 

 

 

 

(b)(ii) Reasons for the Recommendation of the Board of Directors.

 

In reaching its recommendation described above in paragraph (a) of this Item 4, the Board considered a number of factors, including the following:

 

1.  Offer Price in Relation to Recent Trading Prices.   The Board considered the relationship of the Offer Price to the recent market prices of the Common Stock. The Offer Price represents (a) a premium of approximately 41% over the $26.95 closing sale price of the Common Stock on Nasdaq Global Market (“Nasdaq”) on September 23, 2009, the last full trading day prior to the meeting of the Board to approve the Merger Agreement, and (b) a premium of approximately 40% over the average closing sales price of the Common Stock on the Nasdaq for the preceding 20 trading days.

 

2.  Offer for all of GenTek; Certainty of Consideration and Payment.    The Board considered that the Offer provided the stockholders an opportunity to cash-out all of their investment in GenTek as opposed to a sale or spin-out of just one of two GenTek’s principle lines of business, which might take substantially longer to accomplish and may result in less value to the stockholders given the relative small size of the valve actuation business, its recent financial performance, and the poor economic environment for automotive parts suppliers generally. The Board further considered the fact that the Offer is an all cash tender offer and, therefore, the value of consideration that GenTek’s stockholders will receive in the Offer is fixed and certain. The Board also considered size and financial position of the private equity stockholders of Parent and their ability to pay the Offer Price without the need for a financing condition.

 

3.  GenTek’s Operating and Financial Condition.   The Board considered the current and historical financial condition and results of operations of GenTek, as well as its near and long term prospects and strategic objectives, including the risks and uncertainties in achieving those prospects and objectives. In particular, the Board considered GenTek’s revenues historically and expectations over the near and long term, GenTek’s prospects for achieving sufficient revenue growth needed to offset its operating expenses, and the risks inherent in GenTek’s business model, as well as other risks and uncertainties discussed in GenTek’s filings with the Commission.

 

4.  Fairness Opinions.   GenTek’s Board considered the oral opinion of Moelis, which was subsequently confirmed in a written opinion, dated as of September 24, 2009, to the effect that, as of such date, based upon and subject to the considerations, assumptions, qualifications and limitations set forth therein, the Consideration to be received by the holders of Shares, other than Parent or its affiliates, pursuant to the terms and subject to the conditions set forth in the Merger Agreement, is fair from a financial point of view to such holders. A copy of the written opinion rendered by Moelis to the Board, setting forth the procedures followed, the matters considered and the assumptions made by Moelis in arriving at its opinion, is attached as Annex II to this Statement and is hereby incorporated in this Statement by reference. Stockholders are urged to read this opinion in its entirety. The Board was aware that Moelis became entitled to certain fees upon the delivery of its fairness opinion. See Item 5 — “Persons/Assets Retained, Employed, Compensated or Used” for a discussion of the fees payable to Moelis.

 

5.  Terms of the Merger Agreement.   The Board considered the fact that the terms of the Merger Agreement were determined through arm’s-length negotiations between GenTek and its legal advisors, on

the one hand, and Parent and Purchaser and their legal advisors, on the other. Among other provisions of the Merger Agreement considered important by the Board were:

 

 

6.  Likelihood of Success.   The Board considered the likelihood of satisfaction of all conditions to consummation of the Offer and the Merger and the likelihood of obtaining the required regulatory approvals.

 

7.  Potential Volatility of Common Stock.   The Board considered the possibility that future sales of Common Stock in the public market could lower the price of Common Stock and impair GenTek’s ability to raise funds in any new stock offerings. As of September 24, 2009, GenTek had approximately 10,196,370 outstanding shares of Common Stock that were subject to dilution by shares of Common Stock that are issuable upon conversion or exercise, as applicable, of Company Options or Warrants. The Board considered that sales of a substantial amount of Common Stock in the public market, or the perception that these sales may occur, could adversely affect the market price of the Common Stock prevailing from time to time in the public market and could impair GenTek’s ability to raise funds in additional stock offerings.

 

8.  Economic Climate.   The current regional, national and international economic climate.

 

9.  Potential Conflicts of Interest.   The Board was aware of the potential conflicts of interest between GenTek, on the one hand, and certain of GenTek’s officers, directors and affiliates, on the other hand, in the Offer and the Merger discussed in this Statement under Item 3 “— Agreements, Arrangements and Transactions between GenTek and its Directors, Executive Officers and Affiliates.”

 

10.  Appraisal Rights.   The Board considered the availability of appraisal rights with respect to the Merger for stockholders who properly exercise their rights under Delaware law, which would give these stockholders the ability to seek and be paid a judicially determined appraisal of the “fair value” of their Common Stock at the completion of the Merger.

 

The Board also considered certain negative factors, including the following:

 

 

 

The Board believes that, overall, the potential benefits of the Offer and the Merger to the GenTek stockholders outweigh the risks and provide the maximum value to stockholders. In analyzing the Offer and the Merger, GenTek’s management and the Board were assisted and advised by Moelis and GenTek’s legal counsel, who reviewed various financial, legal, and other considerations in addition to the terms of the Merger Agreement.

 

The foregoing discussion of factors considered and given weight by the Board is not intended to be exhaustive, but includes the material factors considered. In view of its many considerations, the Board did not find it practical to, and did not, quantify or otherwise assign relative weights to the various individual factors considered. In addition, individual members of the Board may have given different weights to the various factors considered. After weighing all of these considerations, the Board unanimously determined to approve the Merger Agreement and recommend that holders of Common Stock tender their Shares in the Offer.

 

(c) Intent to Tender.

 

To the knowledge of GenTek after reasonable inquiry, all of GenTek’s executive officers, directors and affiliates currently intend to tender or cause to be tendered all shares of Common Stock held of record or beneficially owned by such person or entity pursuant to the Offer and, if necessary, to vote such shares in favor of adoption of the Merger Agreement and approval of the Merger.

 

(d) Opinion of Financial Advisors.

 

Opinion

 

On September 24, 2009, at a meeting of the Board held to evaluate the Merger Agreement, including the Offer, the Merger and the other transactions contemplated thereby (together, the “Transaction”) Moelis delivered to the Board an oral opinion, confirmed by delivery of a written opinion dated September 24, 2009, to the effect that, based upon and subject to the limitations and qualifications set forth in the opinion, as of the date of the opinion, the Consideration to be received by the holders of Shares, other than Parent and its affiliates, pursuant to the terms and subject to the conditions set forth in the Merger Agreement, is fair from a financial point of view to such holders.

 

The full text of the Moelis opinion describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken by Moelis in connection with such opinion. The Moelis opinion is attached as Annex II to this Statement and is incorporated into this Statement by reference. Holders of Shares are encouraged to read the opinion carefully in its entirety. The summary of the opinion below is qualified in its entirety by reference to the full text of the opinion.

 

The Moelis opinion does not address GenTek’s underlying business decision to effect the Transaction or the relative merits of the Transaction as compared to any alternative business strategies or transactions that might be available to GenTek and does not constitute a recommendation to any holder of Shares as to whether such holder of Shares should tender Shares in the Transaction or, if applicable, how such holder of Shares should vote with respect to the Transaction. At the direction of the Board, Moelis was not asked to, nor did it, offer any opinion as to the material terms of the Merger Agreement or the form of the Transaction. Moelis has also assumed, with the consent of the Board, that the representations and warranties of all parties to the Merger Agreement are true and correct, that each party to the Merger Agreement will perform all of the covenants and agreements required to be performed by such party, that all conditions to the consummation of the Transaction will be satisfied without waiver thereof, and that the Transaction will be consummated in a timely manner in accordance with the terms described in the Merger Agreement, without any modifications or amendments thereto or any adjustment to the Consideration (through indemnification claims, offset, purchase

price adjustments or otherwise). In rendering its opinion, Moelis assumed, with the consent of the Board, that the final executed form of the Merger Agreement did not, or would not, differ in any material respect from the draft that Moelis examined, and that Parent and GenTek will comply with all the material terms of the Merger Agreement. Moelis did not participate in discussions or negotiations surrounding the Transaction among GenTek, its representatives, Parent and its representatives. As of the date of its opinion, Moelis had not been authorized to solicit, and had not solicited, indications of interest in a possible transaction with GenTek from any party; however, in accordance with the terms of Moelis’s engagement and the Merger Agreement, Moelis was authorized to undertake such activities following the announcement of the Transaction.

 

In arriving at the conclusions reached in its opinion, Moelis has, among other things:

 

 

In connection with its review, Moelis did not assume any responsibility for independent verification of any of the information supplied to, discussed with, or reviewed by it for the purpose of its opinion and, with the consent of the Board, relied on such information being complete and accurate in all material respects. In addition, at the Board’s direction, Moelis has not made any independent evaluation or appraisal of any of the assets or liabilities (contingent, derivative, off-balance-sheet, or otherwise) of GenTek, nor has Moelis been furnished with any such evaluation or appraisal. With respect to the forecasted financial information referred to above, Moelis has assumed, with the Board’s consent, that it has been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of GenTek as to the future performance of GenTek. In particular, Moelis has relied on GenTek’s management’s assessment of GenTek’s long-term ability to generate earnings before interest, taxes, depreciation, amortization and any unusual items.

 

Moelis’s opinion is necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to it as of, the date of its opinion. Moelis has assumed, with the consent of the Board, that all governmental, regulatory or other consents and approvals necessary for the consummation of the Transaction will be obtained without the imposition of any delay, limitation, restriction, divestiture or condition that would have an adverse effect on GenTek or Parent or on the expected benefits of the Transaction. With respect to potential environmental liabilities, the Board instructed Moelis to rely solely upon the judgment of the management of GenTek and its counsel that these liabilities will not have a material adverse effect on the financial condition or results or operations of GenTek.

 

The opinion was for the use and benefit of the Board in its evaluation of the Transaction. In addition, the Board has not asked Moelis to address, and its opinion does not address, the fairness to, or any other consideration of, the holders of any class of securities, creditors or other constituencies of GenTek, other than the holders of Shares (aside from Parent and its affiliates). In addition, Moelis did not express any opinion as to the fairness of the amount or nature of any compensation to be received by any of GenTek’s officers, directors or employees, or any class of such persons, relative to the Consideration. The Moelis opinion was approved by Moelis’s Fairness Opinion and Valuation Review Committee.

In order to satisfy a requirement under the Merger Agreement, GenTek requested, and Moelis provided, a written opinion dated September 28, 2009. Aside from the change in the date, Moelis’s opinion dated September 28, 2009 is identical to the Moelis opinion dated September 24, 2009, which is attached as Annex II to this Statement. No presentation was made to the Board with respect to Moelis’s opinion dated September 28, 2009.

 

Financial Analyses

 

The following is a summary of the financial and comparative analyses presented by Moelis to the Board at its meeting held on September 24, 2009 in connection with the delivery of the oral opinion of Moelis at that meeting and its subsequent written opinion, dated September 24, 2009.

 

In its evaluation of the proposed transaction, Moelis analyzed the historical and projected financial performance of GenTek and selected several valuation methodologies, including a publicly traded comparable companies analysis, a precedent transactions analysis and a discounted cash flow analysis, among others. In addition, Moelis considered undertaking a leveraged buyout analysis, but as further described below, had inadequate data to perform that analysis in a reliable manner.

 

The summary set forth below does not purport to be a complete description of the analyses performed and factors considered by Moelis in arriving at its opinion. The fact that any specific analysis has been referred to in the summary below or in this Statement is not meant to indicate that such analysis was given more weight than any other analysis. The preparation of a fairness opinion is a complex process involving various determinations and subjective judgments as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Therefore, such an opinion is not readily susceptible to partial analysis or summary description. With respect to the comparable public companies analysis and the precedent transactions analysis summarized below, no company, business or transaction used in such analyses as a comparison is either identical or directly comparable to GenTek or the Transaction, nor is an evaluation of such analyses entirely mathematical. These analyses necessarily involve complex considerations and judgments concerning financial and operating characteristics and other factors. Moelis did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis for purposes of its opinion, but rather arrived at its ultimate opinion based on the results of all analyses undertaken by it and assessed as a whole, and believes that the totality of the factors considered and analyses it performed in connection with its opinion operated collectively to support its determination as to the fairness from a financial point of view as of the date of its opinion of the Consideration to be received by holders of Shares, other than Parent and its affiliates.

 

Some of the summaries of financial analyses below include information presented in tabular format. In order to fully understand Moelis’s analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the analyses. Considering the data described below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Moelis’s analyses.

 

The analyses performed by Moelis include analyses based upon forecasts of future results, which results might be significantly more or less favorable than those upon which Moelis’s analyses were based. The analyses do not purport to be appraisals or to reflect the prices at which GenTek’s Shares might trade at any time following the announcement of the Transaction. Because the analyses are inherently subject to uncertainty, being based upon numerous factors and events, including, without limitation, factors relating to general economic and competitive conditions beyond the control of the parties or their respective advisors, neither Moelis nor any other person assumes responsibility if future results or actual values are materially different from those contemplated below.

 

Summary Table

 

The three valuation methodologies that Moelis selected (specifically, the publicly traded comparable companies analysis, the precedent transactions analysis and the discounted cash flow analysis) and one methodology that Moelis considered, but determined not to utilize (specifically, the leveraged buyout analysis), are summarized on the following pages. Set forth in the table immediately below are the implied enterprise

value (which term is defined below) ranges resulting from the application, subject to certain valuation assumptions, of the three valuation methodologies that Moelis selected. These figures compare to an implied enterprise value for GenTek based on the Consideration of $672 million.

 

In addition, the table immediately below contains certain additional data presented to the Board by Moelis that was not incorporated into, and does not constitute a part of, the three valuation methodologies utilized by Moelis in support of its opinion. These data include information relating to the 52-week trading range of the Shares and information relating to the two principal operating segments maintained by GenTek: Performance chemicals (“GCC”) and automotive parts (“GTT”).

 

Please refer to the pages that follow for definitions of certain capitalized terms appearing in the table set forth immediately below. The figures below appear in millions.

 

 

Comparable Public Companies Analysis

 

Moelis performed a comparable public companies analysis, which is intended to provide an implied value of a company by comparing certain financial information of the company with corresponding financial information of similar public companies. As described previously, GenTek has two principal operating segments, GCC and GTT. GCC is a producer of performance chemicals marketed to four primary market segments: Water treatment, chemical processing, technology and pharmaceutical and food. GTT designs, develops and supplies valve train components for gas and diesel engines.

 

Due to the dissimilarity of GenTek’s two operating segments, Moelis bifurcated its comparable public companies analysis with respect to the Transaction and separately focused on comparable specialty chemical

companies and comparable automotive manufacturing companies, which Moelis then compared to GenTek as a whole (rather than GenTek’s GCC or GTT segments on a standalone basis). Moelis selected companies whose stock was publicly traded, that shared similar business characteristics with GCC’s and GTT’s respective businesses, operations, size, growth dynamics and margins, and for which relevant financial information was publicly available. Emphasis was placed on companies with an enterprise value below $1 billion with significant operations in North America. It should be noted that GenTek’s forecast revenue growth is significantly lower than that of the companies that comprise the selected group.

 

The companies Moelis considered in its specialty chemical companies analysis include:

 

 

For GenTek and each of the companies identified above, Moelis calculated various valuation multiples, including:

 

 

For GenTek, Moelis also calculated a ratio of adjusted enterprise value to adjusted EBITDA. Moelis normalized both components of such ratio by making certain adjustments designed to (i) account for the recent restructuring of GTT and certain developments in the automotive parts manufacturing industry in which GTT operates and (ii) eliminate the effect of recent elevated prices for raw materials, which GenTek substantially avoided paying by having earlier contracted for the purchase of raw materials at relatively low prices, and resulting relatively high prices at which GenTek was able to contract for the sale of its products. As adjusted, we refer to the components of this ratio as “normalized enterprise value” and “normalized EBITDA.”

 

This analysis indicated an implied series of multiples for the selected companies, as compared to corresponding multiples implied for GenTek derived utilizing the Consideration and management projections of GenTek’s EBITDA and normalized EBITDA.

 

Moelis then identified those companies among the list set forth above that it considered to be most analytically relevant based on similarities between their operating and financial characteristics and those of GCC, which Moelis compared to GenTek as a whole (rather than GCC on a standalone basis). Among other things, Moelis sought to identify companies that, like GCC, do not possess high-value technology positions and do not rely on significant new product development to drive their growth, ultimately selecting Chemtrade

Logistics, Inc., Innophos Holdings Inc. and Koppers Holdings Inc. Calculating the valuation multiples described above for these three companies and GenTek showed the following:

 

Specialty Chemical Companies

 

 

The companies Moelis considered in its automotive manufacturing companies analysis include:

 

 

For GenTek and each of the companies identified above, Moelis calculated various valuation multiples, including:

 

 

For GenTek, Moelis also calculated the ratio of normalized enterprise value to normalized EBITDA.

 

This analysis indicated an implied series of multiples for the selected companies, as compared to corresponding multiples implied for GenTek derived utilizing the Consideration and management projections of GenTek’s EBITDA and normalized EBITDA.

 

Moelis then identified those companies among the list set forth above that it considered to be most relevant based on similarities between their operating and financial characteristics and those of GTT, which Moelis compared to GenTek as a whole (rather than GTT on a standalone basis). Among other things, Moelis sought to identify companies that, like GTT, possess precision metal-forming capabilities, ultimately selecting ATC Technology Corp. and Hawk Corp. Calculating the valuation multiples described above for these two companies and GenTek showed the following:

 

Automotive Manufacturing Companies

 

It should be noted that GenTek’s estimated EBITDA for fiscal year 2009 and its EBITDA for the last twelve months (“LTM”) have been significantly impacted by (i) raw material costs and pricing dynamics that had the effect of increasing GenTek’s EBITDA above historic or projected trends and (ii) the recent restructuring of GTT and certain developments in the automotive parts manufacturing industry in which GTT operates that had the effect of decreasing GenTek’s EBITDA below historic or projected trends. This volatility in GenTek’s financial performance makes valuation difficult when utilizing a multiple of a single year’s performance. In evaluating companies identified by Moelis as comparable to GenTek’s businesses, Moelis made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of GenTek’s businesses. Furthermore, GenTek’s closest competitors are often privately held or subsidiaries of larger corporations, in each case, making it difficult to obtain detailed information with respect to the financial performance of such competitors.

 

Precedent Transactions Analysis

 

Moelis compared selected financial and transaction metrics of GenTek and the Transaction with similar data for twenty-five and four precedent specialty chemical and manufacturing transactions, respectively. Moelis selected the transactions based on a number of criteria, including the nature of the target companies’ respective sizes and margins, as well as their respective growth profiles and technology positions.

 

The specialty chemical precedent transactions considered included the following:

 

Specialty Chemicals

 

For each of the comparable transactions identified above, Moelis calculated various valuation multiples based on information that was publicly available, including the ratio of enterprise value to EBITDA for the identified target company for the last reported LTM period as of the announcement of the transaction. Using the multiples derived from the six transactions that were deemed most relevant based on their comparability to the Transaction (the target companies in the selected transactions were Arizona Chemical, Wolff Walsrode AG, Celanese Corp. Oxo Products, Groupe Novasep SAS, Dynea North America, Inc. and Uniqema Nederland BV), this analysis indicated an implied series of multiples for the selected transactions, as compared to corresponding multiples implied for GenTek derived utilizing the Consideration and GenTek’s LTM EBITDA as well as management’s projections of GenTek’s normalized EBITDA.

 

Specialty Chemicals

 

 

The manufacturing precedent transactions considered in the precedent transactions analysis included the following:

 

Manufacturing

 

 

For each of the comparable transactions identified above, Moelis calculated various valuation multiples based on information that was publicly available, including the ratio of enterprise value to EBITDA for the identified target company for the last reported LTM period as of the announcement of the transaction. This analysis indicated an implied series of multiples for the transactions identified above, as compared to corresponding multiples implied for GenTek derived utilizing the Consideration and GenTek’s LTM EBITDA as well as management’s projections of GenTek’s normalized EBITDA.

 

Automotive Manufacturing

 

 

For purposes of performing a precedent transactions analysis with respect to the Transaction, Moelis determined that there were limitations associated with relying on transactions completed prior to the fourth quarter of 2008 in light of the significant downturn in the public markets that occurred at or around that time and the ensuing challenging operating and transaction environment that resulted.

 

It should be noted that no transaction utilized in the analyses above is identical to the Transaction. Indeed, Moelis believes that the relevance of a number of the selected transactions is limited due to their lack of comparability to the Transaction. Moelis also noted that there was a relatively limited number of comparable transactions available for use in its analysis. In evaluating transactions identified by Moelis as comparable to the Transaction, Moelis made judgments and assumptions with regard to industry performance,

general business, economic, market and financial conditions and other factors. It should also be noted that the volatility in GenTek’s LTM financial results distinguishes it from several of the companies that were the subject of Moelis’s precedent transactions analysis.

 

Discounted Cash Flow Analysis

 

Moelis performed a discounted cash flow analysis to calculate the estimated present value as of December 31, 2009 of the stand-alone unlevered, after-tax free cash flows that GenTek could generate over full fiscal years 2010 and 2011 based on projections furnished to it by management. Moelis calculated a range of terminal values by applying to GenTek’s estimated adjusted EBITDA for fiscal year 2011 a range of EBITDA terminal value multiples derived by the perpetuity growth method. The cash flows and terminal values were then discounted to present value as of December 31, 2009 using discount rates ranging from 10.0% to 12.0%, which range of discount rates was derived taking into account the estimated weighted average cost of capital of GenTek and a broader universe of comparable companies. Compared to the $38.00 per share represented by the Consideration, this analysis indicated an implied equity reference range for GenTek of $30.44 to $44.44 per share and, assuming the midpoint of the perpetuity growth rate and the discount rate range, a price per share for GenTek of $36.48. However, it should be noted that GenTek only maintains a forecast of future results through fiscal year 2011, which limits the relevance of the discounted cash flow analysis.

 

Leveraged Buyout Analysis

 

Moelis was advised by management that GenTek has only prepared projections through fiscal year 2011. Since Moelis believes that it is inappropriate to assume a 2-year investment horizon for financial sponsors such as the Sponsors, Moelis concluded that a leveraged buyout analysis would not be sufficiently reliable in this instance and determined not to perform one.

 

Other Information

 

The Consideration was determined through negotiation among GenTek and its representatives, on one hand, and Parent, Purchaser and their respective representatives, on the other hand, and the decision by the Board to enter into the Merger Agreement was solely that of the Board. The Moelis opinion and financial analyses, taken together, represented only one of many factors considered by the Board in its evaluation of the Transaction and should not be determinative of the views of the Board or management with respect to the Transaction or the Consideration.

 

GenTek retained Moelis based upon Moelis’s experience and expertise. Moelis is an investment banking firm with substantial experience in transactions similar to the Transaction. Moelis, as part of its investment banking business, is continually engaged in the valuation of businesses and securities in connection with business combinations and acquisitions and for other purposes. Moelis has consented to the inclusion in this Statement of its written opinion delivered to the Board, dated September 24, 2009.

 

Under the terms of the engagement letter between Moelis and GenTek, Moelis agreed to act as GenTek’s financial advisor in connection with the Transaction and received a retainer fee in connection with its retention. In accordance with the terms of such engagement letter, Moelis received a fee upon the delivery of its opinion, which was not contingent upon the consummation of the Transaction. If GenTek consummates a transaction with a party other than Parent or its affiliates that generates value per share in excess of the Consideration, Moelis will receive a fee of $750,000 plus 5% of such excess, receipt of which fee would be contingent on the consummation of such other transaction. In addition, GenTek has agreed to reimburse Moelis for certain expenses and indemnify Moelis for certain liabilities arising out of its engagement.

 

 

Pursuant to an engagement letter dated as of August 28, 2009, GenTek retained Moelis to provide certain services in connection with the transactions contemplated by the Merger Agreement. Such services included the rendering of an opinion as to the fairness, from a financial point of view, to the holders of Shares of the

Consideration. Pursuant to the terms of the Moelis engagement, GenTek agreed to pay Moelis for its financial advisory services: (i) a nonrefundable retainer fee of $250,000, payable upon execution of the engagement letter, (ii) a fee of $1,000,000 upon delivery by Moelis of a fairness opinion to GenTek, and (iii) a transaction fee upon completion of a Transaction (as defined in the engagement letter) between GenTek and any party or equity sponsor other than American Securities; provided, that the per share price obtained in such Transaction is greater than $38.00 per share. The transaction fee is equal to the sum of $750,000 and (ii) 5.0% of the difference between the per share price obtained in such Transaction and $38.00, multiplied by the total number of shares of Common Stock outstanding. GenTek also agreed to reimburse Moelis for out-of-pocket expenses related to its engagement (including legal fees). GenTek further agreed to indemnify Moelis for certain costs, expenses and liabilities related to or arising out of its engagement.

 

Moelis, as part of its investment banking business, is continually engaged in financial advisory roles, which may include, but are not limited to, equity and fixed income sales, investment banking, private equity, general corporate and other services.

 

 

Except as set forth below, no transactions in shares of Common Stock have been effected during the past 60 days by GenTek or any subsidiary of GenTek or, to the knowledge of GenTek, by any executive officer, director or affiliate of GenTek.

 

(a) Certain of the directors of GenTek, each in their capacity as stockholders, certain of their affiliates and certain of the officers of GenTek entered into the Tender and Support Agreement. The summary of the Tender and Support Agreement contained in Item 3 above is incorporated herein by reference. Such summary does not purport to be complete and is qualified in its entirety by reference to the Tender and Support Agreement, which has been filed as Exhibit (e)(2) to this Statement, and is hereby incorporated in this Statement by reference.

 

 

Except as set forth in this Statement, GenTek is not currently undertaking or engaged in any negotiations in response to the Offer that relate to (1) a tender offer for or other acquisition of GenTek’s securities by GenTek, any subsidiary of GenTek or any other person, (2) an extraordinary transaction, such as a merger, reorganization or liquidation, involving GenTek or any subsidiary of GenTek, (3) a purchase, sale or transfer of a material amount of assets of GenTek or any subsidiary of GenTek, or (4) any material change in the present dividend rate or policy, or indebtedness or capitalization of GenTek.

 

As described under “The Merger Agreement; Other Agreements” of the Offer to Purchase, the Board, in connection with the exercise of its fiduciary duties, is permitted by the Merger Agreement under certain conditions to engage in negotiations in response to an unsolicited takeover proposal.

 

Except as set forth in this Statement, there are no transactions, resolutions of the Board, agreements in principle, or signed contracts in response to the Offer that relate to one or more of the events referred to in the preceding paragraph.

 

 

Section 14(f) Information Statement.

 

The Information Statement attached as Annex I hereto is being furnished in connection with the possible designation by Parent, pursuant to the terms of the Merger Agreement, of certain persons to be appointed or elected to the Board of Directors other than at a meeting of the Company’s stockholders.

Top-Up Option.

 

GenTek granted the Purchaser a Top-Up Option to purchase from GenTek the number of Shares equal to the number of Shares that, when added to the number of Shares owned by Parent or the Purchaser at the time of exercise of the Top-Up Option, constitutes one share more than 90% of the number of Shares that would be outstanding immediately after the issuance of Shares pursuant to the exercise of the Top-Up Option. The exercise price for each Share acquired in the Top-Up Option is equal to the Offer Price. The Merger Agreement provides that the Top-Up Option will not be exercisable until after the Acceptance Date (and satisfaction of the Minimum Condition) and unless immediately after such exercise the Purchaser and Parent would own more than 90% of the Shares then outstanding and in no event will the Top-Up Option be exercisable for a number of Shares in excess of GenTek’s authorized and unissued Shares. The aggregate purchase price payable for the Shares being purchased by the Purchaser pursuant to the Top-Up Option will be payable, at the option of Parent, either in cash or by delivery of a promissory note. The Purchaser may exercise the Top-Up Option after the Acceptance Date if the Minimum Condition has been satisfied.

 

Vote Required to Approve the Merger and DGCL Section 253.

 

The Board has approved the Offer, the Merger and the Merger Agreement in accordance with the DGCL. Under Section 253 of the DGCL, if Purchaser acquires, pursuant to the Offer or otherwise, including the issuance by GenTek of Shares upon the exercise by Purchaser of the Top-Up Option, at least 90% of the outstanding Shares, Purchaser will be able to effect a short-form merger under the DGCL, which means that the Purchaser may effect the Merger without any further action by or vote of GenTek’s stockholders. If Purchaser acquires, pursuant to the Offer or otherwise, less than 90% of the outstanding Shares, the affirmative vote of the holders of a majority of the outstanding Shares will be required under the DGCL to effect the Merger.

 

State Takeover Laws.

 

GenTek is incorporated under the laws of the State of Delaware. In general, Section 203 of the DGCL prevents a Delaware corporation from engaging in a “business combination” (defined to include mergers and certain other actions) with an “interested stockholder” (including a person who owns or has the right to acquire 15% or more of a corporation’s outstanding voting stock) for a period of three years following the date such person became an “interested stockholder” unless, among other things, the “business combination” is approved by the board of directors of such corporation before such person became an “interested stockholder.” GenTek has elected not to be governed by Section 203 of the DGCL and, therefore, Section 203 of the DGCL is inapplicable to the Merger Agreement and the transactions contemplated therein, including without limitation the Offer and the Merger.

 

A number of states have adopted laws and regulations applicable to attempts to acquire securities of corporations that are incorporated, or have substantial assets, stockholders, principal executive offices or principal places of business, or whose business operations otherwise have substantial economic effects, in such states. In 1982, in Edgar v. MITE Corp., the Supreme Court of the United States invalidated on constitutional grounds the Illinois Business Takeover Statute which, as a matter of state securities law, made takeovers of corporations meeting certain requirements more difficult. However, in 1987, in CTS Corp. v. Dynamics Corp. of America , the Supreme Court held that the State of Indiana could, as a matter of corporate law, constitutionally disqualify a potential acquiror from voting shares of a target corporation without the prior approval of the remaining stockholders where, among other things, the corporation is incorporated, and has a substantial number of stockholders, in the state. Subsequently, in TLX Acquisition Corp. v. Telex Corp., a U.S. federal district court in Oklahoma ruled that the Oklahoma statutes were unconstitutional as applied to corporations incorporated outside Oklahoma in that they would subject such corporations to inconsistent regulations. Similarly, in Tyson Foods, Inc. v. McReynolds, a U.S. federal district court in Tennessee ruled that four Tennessee takeover statutes were unconstitutional as applied to corporations incorporated outside Tennessee. This decision was affirmed by the United States Court of Appeals for the Sixth Circuit. In December 1988, a U.S. federal district court in Florida held in Grand Metropolitan PLC v. Butterworth that

the provisions of the Florida Affiliated Transactions Act and the Florida Control Share Acquisition Act were unconstitutional as applied to corporations incorporated outside of Florida. The state law before the Supreme Court was by its terms applicable only to corporations that had a substantial number of stockholders in the state and were incorporated there.

 

GenTek, directly or through subsidiaries, conducts business in a number of states throughout the United States, some of which have enacted takeover laws. We do not know whether any of these laws will, by their terms, apply to the Offer or the Merger and have not attempted to comply with any such laws. Should any person seek to apply any state takeover law, we will take such action as then appears desirable, which may include challenging the validity or applicability of any such statute in appropriate court proceedings. In the event any person asserts that the takeover laws of any state are applicable to the Offer or the Merger, and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer or the Merger, we may be required to file certain information with, or receive approvals from, the relevant state authorities. In addition, if enjoined, we may be unable to accept for payment any Shares tendered pursuant to the Offer, or be delayed in continuing or consummating the Offer and the Merger. In such case, we may not be obligated to accept for payment any Shares tendered in the Offer.

 

Regulatory Approvals.

 

Antitrust in the United States.

 

Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and the related rules and regulations that have been issued by the Federal Trade Commission (the “FTC”), certain acquisition transactions may not be consummated until specified information and documentary material has been furnished for review by the FTC and the Antitrust Division of the Department of Justice (the “Antitrust Division”), and specified waiting period requirements have been satisfied. These requirements apply to Parent’s and Purchaser’s acquisition of the Shares in the Offer and the Merger.

 

Under the HSR Act, Purchaser’s purchase of Shares in the Offer may not be completed until the expiration of a 15 calendar day waiting period following the filing by American Securities Partners V, L.P., as the ultimate parent entity of the Purchaser, of a Premerger Notification and Report Form concerning the Offer with the FTC and the Antitrust Division, unless the waiting period is earlier terminated by the FTC and the Antitrust Division. American Securities Partners V, L.P. filed Premerger Notification and Report Forms with the FTC and the Antitrust Division in connection with the purchase of Shares in the Offer and the Merger on September 28, 2009. Accordingly, the required waiting period with respect to the Offer and the Merger will expire at 11:59 p.m., New York City time, on or about October 13, 2009, unless earlier terminated by the FTC and the Antitrust Division or unless the FTC or the Antitrust Division issues a request for additional information and documentary material (a “Second Request”) prior to that time. If within the 15 calendar day waiting period either the FTC or the Antitrust Division issues a Second Request, the waiting period with respect to the Offer and the Merger would be extended until 10 calendar days following the date of substantial compliance by American Securities Partners V, L.P. with that request, unless the FTC or the Antitrust Division terminates the additional waiting period before its expiration. After the expiration of the 10 calendar day waiting period, the waiting period could be extended only by court order or with American Securities Partners V, L.P.’s consent. In practice, complying with a Second Request can take a significant period of time. Although GenTek is required to file certain information and documentary material with the FTC and the Antitrust Division in connection with the Offer, neither GenTek’s failure to make those filings nor a request for additional documents and information issued to GenTek from the FTC or the Antitrust Division will extend the waiting period with respect to the purchase of Shares in the Offer and the Merger. The Merger will not require an additional filing under the HSR Act if the Purchaser owns more than 50 percent of the outstanding Shares at the time of the Merger or if the Merger occurs within one year after the HSR Act waiting period applicable to the Offer expires or is terminated.

 

The FTC and the Antitrust Division will scrutinize the legality under the antitrust laws of the Purchaser’s proposed acquisition of GenTek. At any time before or after the Purchaser’s acceptance for payment of Shares pursuant to the Offer, if the Antitrust Division or the FTC believes that the Offer would violate the US federal

antitrust laws by substantially lessening competition in any line of commerce affecting US consumers, the FTC and the Antitrust Division have the authority to challenge the transaction by seeking a federal court order enjoining the transaction or, if Shares have already been acquired, requiring disposition of such Shares, or the divestiture of substantial assets of the Purchaser, GenTek, or any of their respective subsidiaries or affiliates or requiring other conduct relief. US state attorneys general and private persons may also bring legal action under the antitrust laws seeking similar relief or seeking conditions to the completion of the Offer. While we believe that consummation of the Offer would not violate any antitrust laws, there can be no assurance that a challenge to the Offer on antitrust grounds will not be made or, if a challenge is made, what the result will be. If any such action is threatened or commenced by the FTC, the Antitrust Division or any state or any other person, the Purchaser may not be obligated to consummate the Offer or the Merger.

 

Other Foreign Competition Law Filings.

 

GenTek’s products are also offered in a number of foreign countries. In connection with the purchase of the Shares pursuant to the Offer, the laws of certain of these foreign countries may require the filing of information with, or the obtaining of the approval of, governmental authorities therein. We do not believe that GenTek, Purchaser and/or Parent will be required to make any such filings in foreign countries.

 

Industrial Site Recovery Act Compliance.

 

The proposed transaction will trigger the New Jersey Industrial Site Recovery Act (“ISRA”), which requires the New Jersey Department of Environmental Protection to approve the transfer of ownership or control of certain industrial establishments. The closing of the Merger is conditioned on the Company obtaining the requisite approvals required under ISRA.

 

Appraisal Rights.

 

No appraisal rights are available to holders of Shares in connection with the Offer. However, if Purchaser accepts and pays for the Shares and the Merger is consummated, holders of Shares who have not tendered their Shares in the Offer and have not voted in favor of the Merger (if a vote of stockholders is taken) will have certain rights under the DGCL to dissent and demand appraisal of, and to receive payment of in cash, the fair value of their Shares. If the Merger occurs, holders of Shares will be told how to demand appraisal of their Shares. Holders of Shares who perfect those rights by complying with the procedures set forth in Section 262 of the DGCL will have the fair value of their Shares (exclusive of any element of value arising from the accomplishment of expectation of the Merger) determined by the Delaware Court of Chancery and will be entitled to receive a cash payment equal to such fair value from the surviving corporation in the Merger . In addition, such dissenting holders of Shares would be entitled to receive payment of a fair rate of interest from the date of consummation of the Merger on the amount determined to be the fair value of their Shares. If any holder of Shares who demands appraisal under Section 262 of the DGCL fails to perfect, or effectively withdraws or loses her, his or its rights to appraisal as provided in the DGCL, the Shares of such stockholder will be converted into the right to receive the price per Share paid in the Merger in accordance with the Merger Agreement. A stockholder may withdraw a demand for appraisal by delivering to the Company a written withdrawal of the demand for appraisal by the date set forth in the appraisal notice to be delivered to the holders of the Shares as provided in the DGCL.

 

In determining the fair value of the Shares of dissenting stockholders, the court is required to take into account all relevant factors. Accordingly, the determination could be based upon considerations other than, or in addition to, the market value of the Shares, including, among other things, asset values and earning capacity. In Weinberger v. UOP, Inc., the Delaware Supreme Court stated that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered in an appraisal proceeding. The Weinberger Court also noted that, under Section 262, fair value is to be determined “exclusive of any element of value arising from the accomplishment or expectation of the Merger.” In Cede & Co. v. Technicolor, Inc., however, the Delaware Supreme Court stated that, in the context of a two-step cash merger, “to the extent that value has been added following a change in majority control before cash-out, it is still value attributable to the going concern,” to be

included in the appraisal process. As a consequence, the fair value determined in any appraisal proceeding could be more or less than the consideration to be paid in the Offer and the Merger.

 

Parent may cause the Surviving Corporation to argue in an appraisal proceeding that, for purposes of such proceeding, the fair value of each Dissenting Share is less than the price paid in the Offer and the Merger. In this regard, holders of Shares should be aware that opinions of investment banking firms as to the fairness from a financial point of view of the consideration payable in a merger are not opinions as to fair value under Section 262 of the DGCL.

 

The foregoing summary is not intended to be complete and is qualified in its entirety by reference to Section 262 of the DGCL, the text of which is set forth in Annex III hereto and incorporated by reference herein.

 

 

The following Exhibits are filed herewith:

 

 

 

 

SIGNATURE

 

After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

 

GENTEK, INC.

 

William E. Redmond, Jr.

President and CEO

 

Dated: October 2, 2009

 

ANNEX I

 

GENTEK INC.
90 East Halsey Road
Parsippany, New Jersey 07054
(973) 515-0900

 

INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER

 

NO VOTE OR OTHER ACTION OF STOCKHOLDERS OF GENTEK INC. IS
REQUIRED IN CONNECTION WITH THIS INFORMATION STATEMENT. NO PROXIES
ARE BEING SOLICITED AND YOU ARE REQUESTED NOT TO SEND A PROXY TO
GENTEK INC.

 

This Information Statement is being mailed to you on or about October 2, 2009 as part of the Solicitation/Recommendation Statement on Schedule 14D-9 (together with the accompanying Exhibits and Annexes, the “Statement”) of GenTek Inc., a Delaware corporation (“GenTek” or the “Company”) to the holders of record of GenTek Inc.’s shares of common stock, no par value (the “Common Stock”). This Information Statement is being mailed to you in accordance with Section 14(f) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 14f-1 promulgated thereunder. Capitalized terms used and not otherwise defined in this Information Statement shall have the meaning set forth in the Statement.

 

On September 28, 2009, GenTek entered into an Agreement and Plan of Merger (the “Merger Agreement”) with ASP GT Holding Corp., a Delaware corporation (“Parent”) and ASP GT Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Parent (“Purchaser”), pursuant to which Purchaser has commenced a tender offer to purchase all of the issued and outstanding shares of Common Stock (“Shares”), at a purchase price of $38.00 per share, net to seller in cash, without interest thereon and less any applicable withholding taxes (such price, or any such higher price per share as may be paid in the Offer, referred to herein as the “Offer Price”), upon the terms and subject to the conditions set forth in the Offer to Purchase, dated September 29, 2009 (the “Offer to Purchase”) and in the related Letter of Transmittal (which, together with any amendments or supplements to the Offer to Purchase and the Letter of Transmittal, collectively constitute the “Offer”).

 

The Offer is described in a Tender Offer Statement on Schedule TO (as amended or supplemented from time to time, the “Schedule TO”), filed by Parent and Purchaser with the Securities and Exchange Commission (the “Commission”) on September 29, 2009. According to the Offer to Purchase, the Offer will expire at 12:00 Midnight, New York City time, on October 27, 2009. You are receiving this Information Statement in connection with the possible election of persons designated by Parent to a majority of seats on the Board of GenTek (the “Board”). The information set forth in this Information Statement supplements certain information set forth in the Statement. Information set forth in this Information Statement related to Parent, Purchaser or the Parent Designees (as defined below) has been provided by Parent. You are urged to read this Information Statement carefully. You are not, however, required to take any action in connection with the matters set forth in this Information Statement.

 

The Offer is being made pursuant to the Merger Agreement and is conditioned upon, among other things, (i) the satisfaction of the Minimum Condition (as described below), (ii) the expiration or termination of all statutory waiting periods (and any extensions thereof) applicable to the Offer under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) (the “HSR Condition”), and (iii) the receipt of any other required governmental approvals, the lapse of any waiting periods (or extensions thereof) and the making of any mandated filings, either unconditionally or on terms reasonably satisfactory to Parent (the “Governmental Approval Condition”). The Minimum Condition requires that the number of Shares that has been validly tendered and not properly withdrawn prior to the expiration of the Offer together with the number of Shares (if any) then owned of record by Parent or the Purchaser or with respect to which Parent or the Purchaser

otherwise has, directly or indirectly, sole voting power, represents at least a majority of the Shares then outstanding (determined on a fully diluted basis) and no less than a majority of the voting power of the shares of capital stock of GenTek then outstanding (determined on a fully diluted basis) and entitled to vote in the election of directors or (if a greater majority) upon the adoption of the Merger Agreement and approval of the Merger.

 

The Merger Agreement also provides that, among other things, subject to the satisfaction or waiver of certain conditions, following completion of the Offer, and in accordance with the Delaware General Corporation Law (the “DGCL”), Purchaser will be merged with and into GenTek (the “Merger”). After the effective time of the Merger (the “Effective Time”), GenTek will continue as the surviving company (the “Surviving Company”) and will be a wholly owned subsidiary of Parent. At the Effective Time, each Share outstanding immediately prior to the Effective Time (other than Shares held (i) in the treasury of GenTek or by GenTek’s subsidiaries, Parent or the Purchaser, which Shares shall be cancelled and shall cease to exist or (ii) by stockholders who exercise appraisal rights under the DGCL with respect to such Shares) will be cancelled and converted into the right to receive $38.00 or any greater per Share price paid in the Offer, without interest thereon and less any applicable withholding taxes.

 

Consummation of the Merger is conditioned upon, among other things, the adoption of the Merger Agreement by the requisite vote of stockholders of GenTek, if required by Delaware law. Under Delaware law, the affirmative vote of a majority of the outstanding Shares is the only vote of any class or series of GenTek’s capital stock that would be necessary to adopt the Merger Agreement at any required meeting of GenTek’s stockholders. If the Purchaser accepts and purchases Shares in the Offer, the Purchaser will have sufficient voting power to approve the Merger without the affirmative vote of any other stockholder of GenTek. In addition, Delaware law provides that if a corporation owns at least 90% of the outstanding shares of each class of stock of a subsidiary corporation entitled to vote on a merger, the corporation holding such stock may merge such subsidiary into itself, or itself into such subsidiary, without any action or vote on the part of the Board or the stockholders of such other corporation. Under the Merger Agreement, if, after the expiration of the Offer or the expiration of any subsequent offering period, the Purchaser owns at least 90% of the outstanding Shares, Parent and GenTek are required to take all necessary and appropriate action to cause the Merger to become effective, without a meeting of the holders of Shares, in accordance with the DGCL.

 

In connection with the Merger Agreement, Hawkeye Capital LLC, Richard A. Rubin, William E. Redmond Jr., Thomas Testa, Robert Novo, Vincent J. Opalewski and Douglas Grierson, (the “Principal Stockholders”) entered into a Tender and Support Agreement with Parent and the Purchaser.

 

Pursuant to the Tender and Support Agreement, each Principal Stockholder agrees, among other things (i) to tender all Shares they beneficially own in the Offer, (ii) to vote such shares (A) in favor of adopting the Merger Agreement and the transactions contemplated thereby and (B) against any proposal, action or contract that would reasonably be expected to result in (1) a breach of any covenant, representation, warranty or any other obligation or agreement of GenTek under the Merger Agreement, (2) certain of the conditions set forth in the Merger Agreement not being fulfilled or satisfied, (3) any action, agreement or transaction that would reasonably be expected to adversely affect the consummation of the transactions contemplated by the Merger Agreement, including the Offer, (4) any Acquisition Proposal or (5) any merger, acquisition, sale, consolidation, reorganization, recapitalization, extraordinary dividend, dissolution, liquidation, winding up of or by GenTek, or any other extraordinary transaction involving GenTek. Each Principal Stockholder also agrees not to (i) offer to transfer, transfer or consent to any transfer of any or all Shares they beneficially own without the prior written consent of Parent, (ii) enter into any contract with respect to any transfer of any such Shares or any interest therein, (iii) grant any proxy, power-of-attorney, right of first offer or refusal or other authorization or consent in or with respect to any such Shares, (iv) deposit any such Shares into a voting trust or enter into a voting agreement with respect to such Shares, (v) permit any liens to be created on any such Shares or (vi) take any other action that would make any representation or warranty of such Principal Stockholder contained in the Tender and Support Agreement incorrect in any material respect or restrict in any material respect the performance of such Principal Stockholder’s obligations thereunder or the transactions contemplated thereby.

 

With respect to any Principal Stockholder, the Tender and Support Agreement terminates upon the earliest of (i) the mutual written agreement of Parent and such Principal Stockholder, (ii) the Effective Time, (iii) the date of termination of the Merger Agreement and (iv) any withdrawal or modification of the Company Board Recommendation.

As of the date of this Statement and based on the information provided by the stockholders subject to the Tender and Support Agreement, the Shares owned by the stockholders subject to the Tender and Support Agreement represent approximately 11.5% of GenTek’s outstanding Shares or 12.7% on a fully diluted basis assuming the exercise by the individuals party to the Tender and Support Agreement of all of their “in the money” options and warrants to acquire Shares.

 

PURCHASER DESIGNEES TO THE BOARD

 

The Merger Agreement provides that, promptly upon the acceptance for payment such number of Shares validly tendered in the Offer that represents at least a majority of the then-outstanding Shares and from time to time thereafter, Purchaser will be entitled to designate up to such number of directors (the “Purchaser Designees”), rounded up to the next whole number, to the Board as will give Purchaser representation on the Board equal to the product of the total number of directors on the Board (giving effect to the directors elected pursuant to this sentence) multiplied by the percentage that the aggregate number of Shares beneficially owned by Purchaser or any affiliate of Purchaser following such purchase bears to the total number of Shares then outstanding, and the Company will take all actions necessary to, upon Purchaser’s request, cause Purchaser’s designees to be elected or appointed as directors of the Company, including, if necessary, increasing the size of the Board or seeking the resignations of incumbent directors. Notwithstanding the foregoing, until the effective time of the Merger, the Board will always have at least two directors who are not officers, directors, employees, or designees of Parent or Purchaser or any of their affiliates. As a result, Parent will have the ability to designate a majority of the Board following the consummation of the Offer.

 

Parent has informed the Company that it will choose the Purchaser Designees from the list of persons set forth in the following table. The following table, prepared from information furnished to the Company by Parent, sets forth, with respect to each individual who may be designated by Parent as a Purchaser Designee, the name, age of the individual as of October 2, 2009, present principal occupation and employment history during the past five years. Each individual set forth in the table below is a citizen of the United States. Parent has informed the Company that each such individual has consented to act as a director of the Company, if so appointed or elected. If necessary, Parent may choose additional or other Purchaser Designees, subject to the requirements of Rule 14f-1 under the Exchange Act. Unless otherwise indicated below, the business address of each such person is c/o American Securities LLC, The Chrysler Center, 666 Third Avenue, New York, New York 10017.

 

None of the individuals listed below has, during the past five years, (i) been convicted in a criminal proceeding or (ii) been a party to any judicial or administrative proceeding that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, U.S. federal or state securities laws, or a finding of any violation of U.S. federal or state securities laws.

 

 

It is expected that the Purchaser Designees may assume office at any time following the purchase by Purchaser of a majority of outstanding Shares pursuant to the Offer, which purchase cannot be earlier than October 28, 2009, and that, upon assuming office, the Purchaser Designees will thereafter constitute at least a majority of the Board.

 

CERTAIN INFORMATION CONCERNING GENTEK

 

As of September 24, 2009, there were 10,196,370 shares of Common Stock issued and outstanding. Each share of Common Stock is entitled to one (1) vote on all matters that may properly come before a meeting of stockholders of GenTek. The Company’s Bylaws require directors to be elected by the majority of the votes cast with respect to such director in uncontested elections (number of shares voted “for” a director must exceed the number of votes cast “against” that director).

 

CURRENT BOARD OF DIRECTORS OF GENTEK

 

The Board currently has a single class of directors, each of whom is subject to annual election by the stockholders.

 

The present members of the Board are Henry L. Druker, Kathleen R. Flaherty, John G. Johnson, Jr., John F. McGovern, William E. Redmond, Jr., and Richard A. Rubin.

 

The following are brief biographies of each current member of the Board.

 

Henry L. Druker , age 55, is the Founder and Managing Principal of Druker Capital, LLC, an investment firm that he founded in 2005. Previously, Mr. Druker was a Principal of Questor Management Company from 1995 through 2004, where he specialized in investing in turnaround and special situation companies. Prior to Questor, Mr. Druker was a Principal of the turnaround advisory firm Alix Partners, a predecessor to and an associated company of Questor. He was also previously a Partner of the merchant bank, Gordon Capital, Managing Director and head of the leveraged buyout group at L.F. Rothschild, Inc. and an associate in corporate finance at Goldman Sachs & Co.

 

Kathleen R. Flaherty , age 57, retired as the Chief Marketing Officer at AT&T on December 31, 2005, a position she had held since June 2004. She currently serves as a Director of Inmarsat, plc., a global mobile

satellite services company, where she also serves as a member of the Compensation Committee. Ms. Flaherty was previously President and Chief Operating Officer of Winstar International from 1999 through 2001. From 1997 through 1998, Ms. Flaherty was the Senior Vice President, Global Product Architecture for MCI Communications, Inc. Ms. Flaherty, is a member of the McCormick Advisory Board, Northwestern University, and its executive committee.

 

John G. Johnson, Jr. , age 68, since April 2007, has served, and from 1999 through 2001, Mr. Johnson served, as Chief Executive Officer and a Director of Foamex International Inc., which filed for Chapter 11 bankruptcy protection on February 18, 2009. Since August 2007, Mr. Johnson has also served as President of Foamex. Mr. Johnson spent five years with Safety-Kleen Corporation where he served as President and Chief Executive Officer from 1995 to 1997 and President and Chief Operating Officer from 1993 to 1994 and a Director from 1993 to 1997. Prior to 1992, Mr. Johnson spent 34 years with ARCO where he was a Director and President of ARCO Chemicals America from 1987 to 1992. Mr. Johnson is a member of the Board of Trustees of Drexel University.

 

John F. McGovern , age 62, is Founder and a Partner of Aurora Capital LLC since 1999. Prior to joining Aurora Capital, Mr. McGovern worked for Georgia-Pacific Corporation from 1981 to 1999 serving in many different positions, most recently as Executive Vice President, Finance and Chief Financial Officer from 1994 to 1999. Mr. McGovern is a member of the Board of Collective Brands, Inc. (formerly Payless ShoeSource, Inc.), and Neenah Paper, Inc. In the case of Collective Brands, Inc. and Neenah Paper, Inc., Mr. McGovern is the Chairman of the Audit Committee and the Lead Director, respectively. From 1995 through October 2005, Mr. McGovern served as a Trustee and as Treasurer for the Board of Trustees of Morehouse School of Medicine, where he also served as Chairman of the Audit and Finance Committees. Mr. McGovern was formerly a director of ChanneLinx, Inc., where he also served as temporary Chief Executive Officer. ChanneLinx, Inc. filed for Chapter 11 protection in 2003, approximately one year after Mr. McGovern left the Company. Mr. McGovern also served as a member of the Board of Maxim Crane Works Holdings, Inc. from January 2005 through June 2008.

 

William E. Redmond, Jr. , age 49, has served as President and Chief Executive Officer of the Company since May 2005 and a Director of the Company since November 2003. In December, 2008, Mr. Redmond became President and Chief Executive Officer of GT Technologies, Inc., one of the Company’s wholly- owned subsidiaries. In March, 2009, Mr. Redmond was elected a Director of Mark IV Industries, Inc., a privately held diversified manufacturing company. Since June 2007, Mr. Redmond has served as a member of the Board of Eddie Bauer Holdings, Inc. where he is also a member of the Audit Committee and Chairman of the Restructuring Committee. From 2005 until June 2007, Mr. Redmond served as Chairman and a Director of Maxim Crane Works Holdings, Inc., and Chairman and a Director of Citation Corporation. Mr. Redmond previously served as President and Chief Executive Officer from December 1996 to February 2003 and as Chairman of the Board from January 1999 to February 2003 of Garden Way, Inc., a manufacturer of outdoor garden and power equipment.

 

Richard A. Rubin , age 45, is the Founder and Managing Member of Hawkeye Capital Management LLC, a provider of investment managing services, since November 1999. From August 2007 through June 2008, Mr. Rubin has served as a member of the Board of Director of Maxim Crane Works Holdings, Inc. Mr. Rubin served as a Director of Arch Wireless Inc., a wireless communications company from May 2003 through November 2004. From October 1989 to June 1996, Mr. Rubin was employed by Icahn & Co., Inc. Mr. Rubin is a certified public accountant and worked for Arthur Andersen LLP in its Audit and Corporate Finance Departments in New York from June 1986 through September 1989.

 

Meetings and Committees of the Board

 

With the exception of Mr. Rubin, each of GenTek’s current directors was initially appointed to the Board pursuant to the plan of reorganization under Chapter 11 of the Bankruptcy Code, effective as of November 10, 2003. Directors John G. Johnson, Jr., Henry L. Druker, Kathleen R. Flaherty, John F. McGovern, William E. Redmond, Jr., and Mr. Richard A. Rubin were re-elected at the 2009 Annual Meeting of the stockholders. All

of GenTek’s directors, other than Mr. Redmond, GenTek’s President and Chief Executive Officer, are “independent” under the NASDAQ Marketplace Rules.

 

During the year ended December 31, 2008, the Board held a total of five meetings, either in person or by telephone conference call. No director attended fewer than 75 percent of all meetings of the Board and the committees on which such director served that were held while such director was serving on the Board. The Board holds an executive session of independent directors at the end of each regularly scheduled meeting of the Board and as otherwise needed. At such meetings, members of management, including Mr. Redmond, GenTek’s President and Chief Executive Officer, are not present. Mr. Johnson, the Chairman of the Board, presides over these executive sessions.

 

Until March 2009, the Board had three standing committees: (i) the Audit Committee, (ii) the Compensation Committee, and (iii) the Corporate Governance and Nominating Committee. In March 2009, the Board elected to eliminate the Corporate Governance and Nominating Committee, with those duties to be discharged in the future by all Independent Directors.

 

During 2008, the Audit Committee met four times, the Compensation Committee met four times, and the Corporate Governance and Nominating Committee met one time.

 

Audit Committee.   The Audit Committee of the Board consists of Messrs. McGovern, Druker, and Rubin with Mr. McGovern serving as Chairman. The Board has determined that all of the members of the Audit Committee are “independent,” as determined under the currently effective rules of NASDAQ. The Board has determined that each member of the Audit Committee has the ability to read and understand fundamental financial statements. The Board has determined that Mr. McGovern qualifies as an “Audit Committee Financial Expert” as defined by the rules of the SEC. In 2007, the Audit Committee and the Board approved revisions to the Audit Committee’s charter. A copy of the Audit Committee’s written charter can be found in the “Investing” section of the Company’s website at www.gentek-global.com. A copy of the Audit Committee’s charter is also available in print to stockholders upon request, addressed to the Corporate Secretary at 90 East Halsey Road, Parsippany, New Jersey 07054.

 

The primary duties and responsibilities of the Audit Committee, among others, are to assist the full Board in fulfilling its legal and fiduciary obligations with respect to matters involving the accounting, auditing, financial reporting, internal control and legal compliance functions of the Company. The Audit Committee’s charter sets forth its mandate, membership requirements, obligations and duties in greater detail.

 

Compensation Committee.   The Compensation Committee consists of Ms. Flaherty and Mr. Druker, with Ms. Flaherty serving as Chairperson. The Compensation Committee is responsible for the review and recommendation of compensation arrangements for directors and officers and for the administration of certain benefit and compensation plans of GenTek and its subsidiaries. In 2007, the Compensation Committee and the Board approved revisions to the Compensation Committee’s charter. The Compensation Committee charter contains the Compensation Committee’s purpose, membership requirements and duties and responsibilities and can be found in the “Investing” section of the Company’s website at www.gentek-global.com. A copy of the Compensation Committee’s charter is also available in print to stockholders upon request, addressed to the Corporate Secretary at 90 East Halsey Road, Parsippany, New Jersey 07054. The Board has determined that each member of the Compensation Committee is “independent” within the meaning of the currently effective rules of NASDAQ.

 

Corporate Governance and Nominating Committee.   In 2008, the members of the Corporate Governance and Nominating Committee were Ms. Flaherty and Messrs. Johnson and McGovern, with Mr. Johnson serving as Chairman. The Board determined that each of the members of the Corporate Governance and Nominating Committee is an “independent” director within the meaning of the currently effective rules of NASDAQ. The functions of the Corporate Governance and Nominating Committee included the following:

 

 

 

The Corporate Governance and Nominating Committee has been governed by a written charter. In March 2009, the Board elected to eliminate the Corporate Governance and Nominating Committee, with those duties to be discharged in the future by all Independent Directors.

 

Corporate Governance

 

Overview.   GenTek emphasizes the importance of professional business conduct and ethics through its corporate governance initiatives. The Board has implemented numerous corporate governance enhancements to further strengthen the Board of Director’s capacity to oversee the Company and to serve the long-term interests of all stockholders. For example, at the Company’s 2006 Annual Meeting, on the recommendation of the Board, the stockholders approved an amendment to the Company’s Bylaws to change the vote standard for the election of directors from a plurality to a majority of votes cast in uncontested elections. The Company’s Code of Business Conduct and Ethics, committee charters and other documents setting forth the Company’s corporate governance practices can be accessed in the “Investing” section of the Company’s website at www.gentek-global.com or by writing to the Company at GenTek Inc., 90 East Halsey Road, Parsippany, New Jersey 07054, Attention: Robert Novo, Corporate Secretary.

 

Communicating with the Board.   Stockholders may send communications to the Company’s Board of Directors by writing to the Board at: GenTek Inc., 90 East Halsey Road, Parsippany, New Jersey 07054, Attention: Robert Novo, Corporate Secretary. Communications should be addressed to the Board or any individual director or group of directors, as applicable, by either name or title. All communications will be opened by the Corporate Secretary for the sole purpose of determining whether the contents of the communication represent a message to the Company’s directors. Any communication not in the nature of advertising, promotions of a product or service or patently offensive material will be promptly forwarded to the intended recipient or recipients.

 

Code of Business Conduct and Ethics.   The Board has adopted a Code of Business Conduct and Ethics that complies with the SEC’s definition of a “code of ethics” and applies to all employees, directors and officers, including the Company’s principal executive officer, principal financial officer and principal accounting officer. The purpose of the Code of Business Conduct and Ethics is to promote, among other things, honest and ethical conduct, full, fair, accurate, timely and understandable disclosure in public communications and reports and documents that the Company files with, or submits to, the SEC, compliance with applicable governmental laws, rules and regulations, accountability for adherence to the code and the reporting of violations thereof. The Code of Business Conduct and Ethics is available in the “Investing” section of the Company’s website at www.gentek-global.com, or by writing the Company at GenTek Inc., 90 East Halsey Road, Parsippany, New Jersey 07054, Attention: Robert Novo, Corporate Secretary. The Company intends to disclose any amendment to the Code or any waiver of the Code for executive officers or directors in the “Investing” section of the Company’s website.

 

Related Party Transaction Policy.   The Board and Management of the Company make it a priority to operate the Company in the best interests of the stockholders. The Board and Management also recognize that related party transactions present a heightened risk of conflict of interest and/or improper valuations of such transactions (or the perception thereof). Consequently, the Board has adopted a policy regarding related party transactions. Such transactions, as defined in the policy, are subject to approval or ratification by the Audit Committee of the Board in accordance with the procedures set forth therein. This policy is available on the Company’s website under the “Corporate Governance” section.

 

Director Independence

 

The Board presently consists of six members, including William E. Redmond, Jr., who is the President and Chief Executive Officer of the Company. On an annual basis, each director and executive officer provides

information to the Company pursuant to a Director and Officer Questionnaire. This Questionnaire is intended to elicit, among other things, any transactions with the Company in which a director or executive officer, or any member of his or her immediate family, has a direct or indirect material interest. Based on the information provided by these questionnaires, the Board has determined that, with the exception of Mr. Redmond, all of the directors qualify as independent under the applicable corporate governance rules and listing standards of the NASDAQ (the “Independent Directors”). Such information also indicates that none of the current directors has a material relationship (other than being a director and/or shareholder of the Company) with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company), including any relationship prohibited by the NASDAQ Marketplace Rules. Mr. Redmond is not independent because of his service as an executive officer of the Company and not due to any other related party transactions or conflict of interest relationships.

 

COMPENSATION DISCUSSION AND ANALYSIS

 

Compensation Objectives

 

The compensation of all named executive officers (NEOs) and all other executive officers is primarily performance-based. The Compensation Committee believes that variable compensation paid to executive officers should be aligned with the performance of the Company on both a short-term and long-term basis, linked to specific, measurable results intended to create value for stockholders, and that such compensation should assist the Company in attracting and retaining key executives critical to its long-term success. Unless otherwise noted, the references to GenTek’s executive officers includes NEOs.

 

In establishing compensation for executive officers, the following are the Compensation Committee’s objectives:

 

 

The Company believes compensation should be structured to ensure that a significant portion of compensation opportunity will be variable and directly related to Company performance that directly influences stockholder value. Accordingly, the Company sets goals designed to link each executive officer’s compensation to the Company’s performance. Consistent with GenTek’s performance-based philosophy, the Company provides a base salary to each of GenTek’s executive officers as well as a significant incentive based compensation component. For the Company’s executive management team the Company reserves the largest potential compensation awards for performance and incentive-based programs. Those programs include annual cash and long-term equity awards based on the financial performance of the Company, as well as appropriate consideration of the total direct compensation received by executive officers performing similar job functions at companies in a broad-based Comparator Group (as defined below). The Compensation Committee allocates total compensation between cash incentives and equity compensation based on reviewing and considering aggregated survey data from the broad-based Comparator Group, discussed below, while considering the balance between providing short-term incentives and long-term value creation to align the interests of management with the interests of stockholders. The balance between equity and cash compensation among executive officers is evaluated annually using the above criteria.

 

To tie compensation to performance, there is no minimum award of compensation required by either the Company’s performance-based short-term cash compensation program or the Company’s long-term equity compensation program, except in the case of the CEO, who is entitled to receive an annual equity grant with a value that is equal to at least 125% of his annual base salary under the terms of his employment agreement.

Determination of Compensation

 

In determining the level of compensation provided to GenTek’s executive officers, the Compensation Committee assesses the Company’s overall performance and GenTek’s competitiveness relative to the broad-based Comparator Group.

 

The Compensation Committee is provided with the primary authority to review and determine the compensation awards available to the Company’s executive officers. Consistent with prior years, an independent compensation consultant was retained by the Compensation Committee to assist it in the determination of the key elements of the Company’s compensation programs. The compensation consultant engaged by the Compensation Committee is an employee of Towers Perrin, an independent, nationally recognized, consulting firm specializing in compensation matters.

 

The compensation consultant provided advice to the Compensation Committee with respect to competitive practices and the amounts and nature of compensation paid to executive officers at the companies comprising the broad-based Comparator Group. The compensation consultant also advised on, among other things, structuring the Company’s various compensation programs and determining the appropriate levels of salary, bonus and other awards payable to the Company’s executive officers. Based upon the compensation consultant’s recommendations, the Company’s executive compensation package consists of a fixed base salary and variable cash and stock-based incentive awards, with a significant portion of compensation weighted towards the variable components to ensure that total compensation reflects the overall success of the Company and to motivate executive officers to meet appropriate performance measures, thereby maximizing total return to stockholders.

 

To aid the Compensation Committee in making its determination, the CEO reviews the compensation of all executive officers and provides recommendations annually to the Compensation Committee regarding the compensation of such officers. GenTek’s CEO reports directly to the Board. Other than GenTek’s CEO and Mr. Reichl, GenTek’s named executive officers report directly to the CEO. Each such named executive officer participates in an annual performance review with the CEO to provide input about the executive officer’s contributions to the Company’s success for the period being assessed. The Compensation Committee then reviews the recommendations of the CEO and the performance of the CEO’s direct reports. The Compensation Committee uses the information provided by the CEO and the performance against objectives to determine base salaries and the appropriate amounts of variable cash and stock-based incentive compensation based on the information and factors discussed above. A similar process is followed for Mr. Reichl who reports directly to VP/GM of General Chemical, Mr. Opalewski. Mr. Opalewski makes a recommendation to the CEO who uses the information provided by him to determine Mr. Reichl’s base salary and appropriate amounts of variable cash and stock based incentive compensation consistent with the information and factors discussed above.

 

Competitive Compensation and the Broad-Based Comparator Group

 

The Company targets base salary and annual incentive targets to fall within a range between the median and the 75th percentile of executive officers with similar compensation elements performing similar job functions at companies in the broad-based Comparator Group of companies that consists of general manufacturing and chemical companies. This approach minimizes the effects of changes to the group due to changes in database participation or mergers/acquisitions; lessens the impact a single entity can have on the overall data; provides more consistent results; and better reflects the market in which the Company competes for executive talent.

 

To determine the appropriate level of compensation, the Company’s independent compensation consultant annually reviews compensation surveys of that broad-based Comparator Group. GenTek’s annual review indicates that we are providing short-term annual cash and long-term equity compensation that generally falls between the median and 75th percentile of similar compensation elements of total compensation for executive officers at companies in the broad-based Comparator Group performing similar functions as the NEOs. The Company believes the design of base and incentive compensation appropriately provides market compensation

to the Company’s executive officers. Overall, GenTek’s independent compensation consultant determined that GenTek’s compensation programs, as structured, are at market relative to the broad-based Comparator Group.

 

In 2008, GenTek’s compensation consultant utilized three compensation surveys (2007 Mercer Executive Database, 2007 Towers Perrin Executive Compensation Database and 2007/2008 Watson Wyatt Top Management Compensation Report) to develop GenTek’s broad-based comparator group. The broad-based comparator group was comprised of all manufacturing and chemical companies, as classified by each of surveys previously noted.

 

GenTek’s compensation consultant created aggregated pooled data from these surveys and created an analysis that adjusted the compensation numbers for the Comparator Group to reflect the size of the Company so that the Compensation Committee could compare the compensation awarded to GenTek’s executive officers to the aggregate pooled data reviewed by the Compensation Committee. The compensation consultant’s analysis provided total compensation information based on position and responsibilities. Although the Compensation Committee reviews and considers the aggregated survey data for purposes of developing a baseline understanding of types of compensation, including compensation levels and elements derived from this supplementary pooled data, the Compensation Committee does not see the identity of any of the surveyed companies and the aggregated data was reviewed only to ensure that GenTek’s compensation levels and elements are consistent with market standards.

 

The following link provides a listing of all the companies, including the subset of manufacturing and chemical companies used, that participated in each of the three surveys: http://www.gentek-global.com/proxy/surveyparticipants.pdf

 

The Compensation Committee intends to continue using similar reports from its compensation consultant to assist the Compensation Committee with analyzing the Company’s executive compensation policies and practices.

 

Base Compensation

 

The Company provides its key executives with a base salary that falls between the median and the 75th percentile of the base salaries paid to similarly situated executives at companies in the Comparator Group. In setting base salaries for the Company’s key executives, the Compensation Committee reviewed the compensation consultant’s analyses of the pooled data derived from the compensation surveys using the broad-based Comparator Group as discussed above. While base salaries are not considered by the IRS to constitute performance-based compensation, in addition to market positioning, each year the Company determines base salary increases for direct reports to the CEO based upon their performance as assessed by the CEO and reviewed and approved by the Compensation Committee, and for the CEO, as assessed by the Compensation Committee and approved by the Board. Effective May 1, 2008, the Company implemented base salary merit increases for certain employees, including some NEOs. Mr. Testa’s base salary increased 2.0% from $309,000 to $315,200; Mr. Novo’s base salary increased 3.0% from $285,000 to $293,600; Mr. Opalewski’s base salary increased 6.5% from $263,000 to $280,000; and Mr. Reichl’s base salary increased 4.3% from $222,000 to $231,500. The percentages increases in each NEO’s salary were determined based upon the Company’s compensation objectives of attracting and retaining the key executives, and the increases were implemented to maintain the salary level for each key executive within the median to 75th percentile of the range of salaries of similarly situated executives of companies within the Comparator Group. Mr. Redmond did not receive a base salary increase in 2008 in lieu of an adjustment to his 2008 bonus target from 75% to 80% of base salary.

 

Performance-Based Short-Term Incentive Compensation

 

Performance Goals

 

The Company structures its compensation programs to reward executive officers based on the Company’s performance and the individual executive’s contribution to that performance. This allows executive officers to receive cash bonus compensation in the event certain specified operating measures are achieved. In

determining the short term incentive compensation awarded to each executive officer based on performance, the Company evaluates the Company’s and the executive’s performance and contribution in the achievement of performance targets. Performance targets are established at levels that are moderately difficult and require enhanced focus, effort and diligence to achieve.

 

The annual short-term incentive program consists of bonuses paid in cash. The general criteria for evaluating the performance of the Company and executive officers includes an internally developed EBITDA metric (50%) and Free Cash Flow metric (50%). These EBITDA and Free Cash Flow metrics, which are not reported in the Company’s audited financial statements, are calculated as follows:

 

 

Bonus targets in 2008 for all NEOs other than Mr. Redmond and Mr. Reichl were 60% of base salary. Mr. Reichl’s bonus target in 2008 was 50% of base salary. In lieu of his receiving a base salary adjustment and consistent with the Compensation Committee’s philosophy of pay for performance, Mr. Redmond’s 2008 bonus target was increased from 75% to 80% of base salary in 2008. This revised bonus target was supported by market data as supplied by the Company’s compensation consultant.

 

With respect to the EBITDA and Free Cash Flow targets, (i) the amounts payable under the Company’s short-term incentive program for executive officers at the corporate level, including all NEOs other than Mr. Opalewski and Mr. Reichl, are based upon the overall Company’s actual performance measured against such targets, and (ii) the amounts payable under the Company’s short-term incentive program for executive officers at the operating company level, including Mr. Opalewski and Mr. Reichl, are generally based upon the specific business’ actual performance measured against such targets. Mr. Opalewski (Vice President and General Manager, General Chemical) and Mr. Reichl (Vice President Sales and Marketing, General Chemical) are the only NEOs whose short-term incentive bonus was based upon the achievement of operating company level targets.

 

The following chart sets forth the performance criteria and their relative weights in determining the amounts of actual annual short-term cash incentives. The actual amounts that may be paid at threshold, target and maximum performance are set forth in the Grant of Plan-Based Awards during 2008 table below.

 

 

In 2008, the Company wide EBITDA and Free Cash Flow targets were $85.8 million and $(11.6) million, respectively. In 2008, the EBITDA and Free Cash Flow targets for the Performance Chemicals segment were $74.4 million and $19.8 million, respectively.

 

The short-term incentive program is designed to encourage “over achievement” of business objectives. Payout of annual cash bonuses requires a minimum threshold achievement level of 90% of business objectives

whereby the payout is 75% of target bonus. Payout accelerates 2.5% for each increment of achievement between 91% and 99.9% of business objectives and then remains linear to 107.5% achievement. Payout accelerates 2% for every increment of over achievement greater than 107.6% to 115% of over achievement of business objectives. At 115.1% over achievement of business objectives, the payout accelerates 3% for every increment of overachievement to a maximum payout of 175% of target bonus. The Compensation Committee may, at its sole discretion, make exceptions to this threshold and grant payments based upon business circumstances. The Compensation Committee determined that the Company’s and the Performance Chemicals segment’s performance against their EBITDA objectives were 101% and 175%, respectively, and their Free Cash Flow objectives were 175% and 175%, respectively.

 

The Compensation Committee believes that the performance based short-term incentive compensation awarded by the Company provides incentives necessary to retain executives and reward them for short-term Company performance. The Compensation Committee believes that bonuses paid for 2008 performance is consistent with this philosophy and acknowledges individual efforts, contributions and achievement to the Company’s performance in 2008. The final bonus amounts awarded to each of the NEOs with respect to the 2008 performance year are shown in the Summary Compensation Table.

 

Discretionary Long-Term Equity Incentive Awards

 

As discussed above, the Company believes, based on its performance based approach to compensation, that equity ownership in the Company is important to retain executives and to tie the ultimate level of an executive officer’s compensation to the performance of the Company’s stock and stockholder gains, while creating an incentive for sustained Company growth. To meet these objectives, the Company’s executive officers, along with certain other key executives, are eligible to receive stock option or restricted stock grants under the Company’s Amended and Restated 2003 Management and Directors’ Long Term Incentive Plan (“LTIP”).

 

LTIP awards are comprised of stock options and restricted stock, including performance contingent restricted stock. The value of an LTIP award to each key executive is determined and approved by the Compensation Committee based upon several factors, including the key executive’s past performance, performance of the Company, incenting future performance, and market survey data to determine the appropriate annual grant levels in relation to executives performing similar job functions at companies in the broad-based Comparator Group. LTIP awards have historically been determined and awarded in May of each year.

 

Stock options and restricted stock, other than performance contingent restricted stock, are subject to a three-year vesting schedule in order to provide an incentive for continued employment and performance. The 2008 awards of performance contingent restricted stock vest, if at all, in three approximately equal tranches upon the achievement by the Company (as determined by the Compensation Committee) of certain pre-determined performance metrics. In 2008, the Compensation Committee determined that the Performance Chemicals Group had achieved performance metrics consisting of EBITDA of $77 and $82 million respectively for the trailing twelve month period, and as a result, the second and third tranches of the 2007 performance contingent restricted stock award for all of the Performance Chemicals Group executives, including Mr. Opalewski and Mr. Reichl, vested. No other NEOs vested in performance contingent restricted stock in 2008.

 

Stock options expire ten years from the date of the grant. These restrictions provide a reasonable time frame in which to align the executive officer’s interests with the price appreciation of the Company’s shares. The exercise price of stock options granted under the LTIP is 100% of the closing price of the underlying stock on the date of grant.

 

Please refer to the Grant of Plan-Based Awards during 2008 table on page I-16 for specific information concerning LTIP awards granted to all NEOs during 2008.

Defined Benefit Pension Plans

 

On April 1, 2004, the Company froze the accumulation of benefits under the General Chemical Corporation Salaried Employee’s Pension Plan (the “GCC Pension Plan”). Messrs. Novo, Opalewski, Reichl and Testa are the only NEOs with accrued benefits under the GCC Pension Plan. The benefits under the GCC Pension Plan are now determined by a participant’s frozen credited years of service and frozen credited compensation. The formula under the GCC Pension Plan for determining benefits at normal retirement age (age 65) is generally the greater of (a) the sum of (i) 1.1% of monthly frozen credited compensation multiplied by frozen credited years of service, and (ii) 0.4% of monthly frozen credited compensation in excess of the social securities earnings limit multiplied by frozen credited years of service, and (b) 2.0% of monthly frozen credited compensation multiplied by frozen credited years of service (not in excess of 25), minus 64% of the primary social security benefit.

 

Employment Agreements

 

None of the executive officers other than Mr. Redmond have employment agreements with the Company.

 

Employment Agreement with Mr. Redmond

 

The Company is party to an employment agreement with Mr. Redmond, its President and Chief Executive Officer. Pursuant to this agreement, dated May 23, 2005 and as amended December 29, 2008, Mr. Redmond serves on an “at-will” basis. Mr. Redmond’s annual base salary is subject to annual review and adjustment by the Compensation Committee. Mr. Redmond is also eligible for an annual bonus, targeted at 80% (changed in 2008) of his base salary with an actual award range of zero to 200%, to be based upon accomplishment of predetermined goals and objectives, as set and agreed upon by the Compensation Committee. Mr. Redmond is also entitled to receive annual grants under the LTIP equal to a value that is 125% of his base salary consisting of grants of restricted shares of the Company’s Common Stock and stock options to purchase shares of the Company’s Common Stock. In addition, the Agreement entitles Mr. Redmond to participate in all other welfare benefit plans maintained by the Company including 401(k), life, medical, dental, disability and other.

 

The Agreement provides for certain severance payments and benefits to Mr. Redmond in the event of certain terminations of employment and in the event of certain terminations of employment in connection with a change of control, as fully described below under the section titled “Executive Benefits and Payment Upon Termination.”

 

Severance and Change of Control Arrangements

 

The Company provides NEOs with severance payments upon their termination of employment under certain circumstances, including in connection with a change of control or business sale. Such circumstances are fully described under the section titled “Executive Benefits and Payments Upon Termination”. The Company believes that providing NEOs with severance payments upon certain terminations of employment permits the Company to remain competitive with the companies comprising the Comparator Group, and is therefore essential to its objective of attracting and retaining NEOs of superior ability and managerial talent.

 

In May 2008, the Compensation Committee adopted the Executive Severance Plan upon the termination of the Company’s previously adopted Key Employee Retention Plan. Prior to approving the new Executive Severance plan, the Compensation Committee consulted with GenTek’s compensation consultant and decided to adopt the new plan, the terms of which the Compensation Committee believes are consistent with the prevailing market practice for providing severance benefits to executive officers.

 

Other Elements of Compensation and Perquisites

 

Medical Insurance.   The Company provides to each NEO and the NEO’s spouse and children, such health and dental insurance as the Company may from time to time make available to its other employees. In addition to the Company’s medical coverage, Mr. Redmond is also entitled to receive reimbursement of up to $5,000 per calendar year for out of plan expenses.

Life, Disability and Travel Insurance.   The Company provides each executive officer such disability, life and/or business travel and accident insurance as the Company in its sole discretion makes available to its other employees.

 

Automobile Allowance and Travel Reimbursement.   The Company provides Messrs. Testa Opalewski, and Reichl with an automobile allowance.

 

Policies with Respect to Equity Compensation Awards

 

The Company evaluates the allocation of equity awards to executive officers among stock option grants and restricted stock grants under the Company’s LTIP by reference to the broad-based Comparator Group discussed above. The Company grants all equity incentive awards based on the closing price as of the date of grant or the date immediately preceding the date of grant. The exercise price for stock option grants and similar awards is determined by looking at the quoted closing price on the NASDAQ Stock Market on the date of grant or the date immediately preceding the date of grant. In addition to the annual equity grants described above, the Company may also make grants of equity incentive awards at the discretion of the Compensation Committee or the Board.

 

Summary Compensation Table for 2008

 

 

 

Grant of Plan-Based Awards During 2008

 

The plans under which the awards described in the following table were made include the Company’s Short Term Incentive Plan, pursuant to which the non-equity incentive plan awards were granted, and the GenTek Inc. Amended and Restated 2003 Management and Directors’ Long Term Incentive Plan, pursuant to which the equity incentive plan awards were granted. These plans, including the performance metrics upon which awards were based, are generally described in the Compensation Discussion and Analysis preceding the Summary Compensation Table.

 

 

 

 

Outstanding Equity Awards at December 31, 2008

 

The following table provides information regarding the stock options and stock awards held by the named executive officers as of December 31, 2008, including the unexercised and unvested stock option awards and unvested restricted stock awards. The vesting dates for each grant of stock options and restricted stock are set forth in the footnotes following the table. For additional information regarding the stock options and stock awards set forth in the following table, see the section titled “Discretionary Long-Term Equity Incentive Awards” in the Compensation Discussion and Analysis.

 

 

 

 

 

Option Exercises and Stock Vested for 2008

 

The following table provides information for the named executive officers regarding the stock options each named executive officer exercised and the value realized, if any, and the number of shares of Common Stock each named executive officer acquired upon vesting of restricted stock awards and the value realized during 2008.