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Exhibit (b)(1)
April 26, 1999
The Board of Directors
Hilite Industries, Inc.
0000 X. Xxxxxxxx
Xxxxxxxxxx, Xxxxx 00000
Members of the Board:
Hilite Industries, Inc., a Delaware corporation ("Hilite"), Hilite
Holdings, LLC, a Delaware limited liability company (the "Purchaser"), and
Hilite Mergeco, Inc. a Delaware corporation ("Merger Subsidiary"), have
proposed to enter into an Agreement and Plan of Merger (the "Agreement").
Pursuant to the Agreement, the implementation of which is contingent on, among
other things, completion of debt financing, Hilite will commence a tender offer
to purchase all outstanding shares of the common stock, par value $0.01 per
share, of Hilite (the "Hilite Common Stock"), other than a portion of such
shares held by certain shareholders of Hilite who will retain an equity interest
in Hilite (the "Roll-over Shareholders"), at a purchase price of $14.25 per
share, net to the seller in cash (the "Tender Offer"). The Agreement also
provides that, following such Tender Offer, the Merger Subsidiary will be merged
with and into Hilite (the "Merger" and, together with the Tender Offer, the
"Transaction") pursuant to which each outstanding share of Hilite Common Stock
not previously tendered (other than those shares held by Roll-over stockholders
and the Purchaser) will be converted into the right to receive $14.25 in cash.
We have assumed, with your consent, that the Transaction will be treated as a
recapitalization for financial reporting purposes. You have requested our
opinion as to whether the cash consideration to be received in the Transaction
by the holders of Hilite Common Stock (other than Roll-over stockholders with
respect to their retained Shares) is fair, from a financial point of view, to
such holders.
Xxxxxx Xxxxxxxxx Xxxxxx ("BHC"), a division of First Union Capital Markets
Corp. ("FUCMC"), as a part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers, acquisitions, tender offers, divestitures, leveraged buyouts, and
private placements of debt and equity securities. We have acted as financial
advisor to the Board of Directors of Hilite in connection with the Transaction
and will receive a fee for our services, a significant portion of which is
contingent upon the consummation of the Transaction. In addition, Xxxxxx has
agreed to indemnify us for certain liabilities that may arise out of such
services, including the rendering of this opinion. FUCMC and/or its affiliates
will be participating, with your consent, as documentation agent, administrative
agent, syndication agent, lender in the senior secured credit facility, and
lender holding subordinated notes with attached warrants, for the financing of
the Transaction , for which services FUCMC and/or such affiliates will receive
customary compensation. In the ordinary course of business, FUCMC and/or its
affiliates may actively trade the securities of Hilite for their own account and
the accounts of its customers and, accordingly, may at any time hold a long or
short position in securities of Hilite.
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The Board of Directors
Hilite Industries, Inc.
April 26, 1999
Page 2
In arriving at our opinion, BHC reviewed and analyzed certain publicly
available financial information and other information concerning the Company and
certain internal analyses and other information furnished to BHC by the Company.
BHC also held discussions with members of senior management of the Company
regarding the business and prospects of the Company. In addition, BHC:
(i) reviewed the reported prices and trading activity for the Hilite Common
Stock;
(ii) compared certain financial and stock market information for Hilite
with similar information for certain other companies whose securities
are publicly traded;
(iii) reviewed the financial terms of certain recent business combinations
which BHC deemed comparable in whole or in part;
(iv) reviewed the terms of the Agreement as furnished to BHC in draft form
dated April 25, 1999; and
(v) performed such other studies and analyses and considered such other
factors as BHC deemed appropriate.
We have not independently verified any of the information described above
and for purposes of this opinion have assumed the accuracy, completeness and
fairness thereof. With respect to the information relating to the prospects of
Hilite, we have assumed that such information reflects the best currently
available judgments and estimates of the management of Hilite as to the likely
future financial performance of Hilite. We also have assumed, with your consent,
that the final terms of the Agreement reviewed by us in draft form dated April
25 will not vary materially from the draft reviewed by us. In addition, we have
not made an independent evaluation or appraisal of the assets or liabilities of
Hilite, nor have we been furnished with any such evaluations or appraisals. Our
opinion is based on market, economic, and other conditions as they exist and can
be evaluated as of the date of this letter.
In connection with our engagement to provide financial advisory services to
the Board of Directors concerning strategic alternatives, we were authorized to
solicit, and did solicit, interest from third parties with respect to the
acquisition of Hilite. In arriving at our opinion, we have considered the
nature, scope, and results of such solicitation. Our advisory services and the
opinion expressed herein were prepared for the use of the Board of Directors of
Hilite and do not constitute a recommendation to any shareholder as to whether
or not any such shareholder should tender shares of Hilite Common Stock in the
Tender Offer or how such shareholder should vote
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The Board of Directors
Hilite Industries, Inc.
April 26, 1999
Page 3
on the proposed Merger. We hereby consent to the inclusion of this opinion
in its entirety as an exhibit to the tender offer or proxy statement of Hilite
distributed in connection with the Transaction.
Based upon and subject to the foregoing, it is our opinion that, as of the
date of this letter, the cash consideration to be received in the Transaction by
the holders of Hilite Common Stock (other than Roll-over stockholders with
respect to their retained Shares) is fair, from a financial point of view, to
such holders.
Sincerely,
/s/ Xxxxxx X. Xxxxx
XXXXXX XXXXXXXXX XXXXXX
