Arnhold and S. Bleichroeder Advisers, LLC Outlines Path to
Resolve Stewart & Stevenson Vote Impasse; Recommends Stewart &
Stevenson Board Seek Waiver of Contractual Restrictions So Shareholders
Can Make Well-Informed Decision
NEW YORK--May 1, 20061, 2006--Arnhold and S. Bleichroeder Advisers, LLC
today announced that it that it has sent the following letter to the Board
of Directors of Stewart & Stevenson:
May 11, 2006
Mr. Howard Wolf
Chairman of the Board of Directors
Stewart & Stevenson Services, Inc.
2707 Houston, Texas 77008
Dear Mr. Wolf,
At the special meeting scheduled for May 9, 2006, Stewart &
Stevenson failed to garner the required two-thirds of shares
outstanding in support of the Armor Holdings merger, necessitating an
adjournment. We believe this reflects your shareholders' natural
reluctance to support a sale of the company when a better deal at a
higher price may well be available. As we indicated in our previous
letter, we believe shareholders deserve to know all of the facts about
Oshkosh Truck's interest in Stewart & Stevenson before casting their
vote on the merger. To that end, we requested that the Stewart &
Stevenson board allow the Special Litigation Committee to complete its
inquiry into the fairness of the sale process and to disclose all
relevant findings. Whether or not the SLC remains in existence given
the latest developments in district court, we continue to believe
shareholders should not be expected to make an irreversible decision
on the Armor merger without being fully informed of Oshkosh Truck's
view of the situation.
We realize, of course, that the board of Stewart & Stevenson is
constrained by the merger agreement with Armor and may not have
complete flexibility, from a contractual perspective, when it comes to
making public disclosures about the sale process, or taking any other
actions with respect to Oshkosh that could ease shareholder concerns.
Based on our reading of the merger agreement, such legal impediments
can be eliminated if Armor Holdings were to waive certain contractual
rights. Accordingly, we encourage the board of Stewart & Stevenson to
recommend to its counterparts at Armor Holdings that it (1) permit
public disclosure of the letter from Oshkosh Truck to the Special
Litigation Committee, and (2) permit Stewart & Stevenson to waive the
standstill provisions of the confidentiality agreements it signed with
the original auction participants, providing them the same privileges
and limitations as any unsolicited third party to submit a proposal to
the Stewart & Stevenson board. We observe in Article 4.01(p) of the
merger agreement that Stewart & Stevenson did in fact contract away
its ability to "waive any of its rights... under any Existing
Confidentiality Agreement" but point out that this restriction can be
lifted with "prior written consent of Parent (which consent will not
be unreasonably withheld or delayed)." In light of the strong message
of disapproval shareholders sent this week, we think it would not be
unreasonable at all for Armor Holdings to provide such consent at this
time.
If Armor were to accommodate this request, we believe Stewart &
Stevenson shareholders would feel confident that they are making a
decision based on complete information about their options, without
concern that they are being deprived of a better deal merely because
of idiosyncratic features of the Armor merger contract, the
confidentiality agreements, and Texas corporate law. With respect to
our own record date stock in Stewart & Stevenson, we plan to abstain
from the May 16 shareholder vote, and any subsequently scheduled
votes, if the steps described above are not taken.
Yours truly,
Robert J. Hordon, Analyst
Jason B. Dahl, Portfolio Manager
Jonathan R. Spitzer, Portfolio Manager
Arnhold and S. Bleichroeder Advisers, LLC
cc:
Max L. Lukens, President and CEO, Director
Donald E. Stevenson, Director
Robert S. Sullivan, Director
Darvin M. Winick, Director
James M. Tidwell, Director
Charles R. Ofner, Director
Khleber V. Attwell, Director
Monroe M. Luther, Director
Charles S. Ream, Director
