Zones amends merger agreement, CEO reduces going-private offer to $7 per share

By Lisa Kerner

Charlotte, N.C., Nov. 18 - Zones Acquisition Corp., owned by Zones, Inc. chairman, chief executive officer and majority shareholder Firoz H. Lalji, amended its merger agreement with Zones after Lalji reduced the offer price for the company to $7.00 per share from $8.65.

It was previously reported that Lalji believes the surviving corporation may not remain within the lender's financial covenants if it borrows the previously contemplated amount of debt financing required for the deal at the $8.65-per-share price.

The reduced offer price also reflects changed economic conditions, a Zones news release said.

As a result of the change, Zones said it now plans to convene and then immediately adjourn its special meeting of shareholders on Wednesday. A new meeting date will be set for December.

The amended agreement also:

• Eliminates some conditions to Zones Acquisition's obligation to close the merger;

• Eliminates the break-up fees and expenses that had been potentially payable by Zones to Zones Acquisition;

• Increases the reverse break-up fee potentially payable by Zones Acquisition to Zones to $5 million, personally guaranteed by Lalji, from $750,000; and

• Allows Zones to seek specific performance of Zones Acquisition's obligations to pursue financing for the merger in the event the currently specified financing becomes unavailable.

A new go-shop period through Nov. 28 is also permitted under the amended agreement.

The merger is expected to close on or before Dec. 31, Zones said.

Lalji said he intends to provide approximately $20 million of the merger consideration at or prior to closing, with another $15 million of the merger consideration expected to be funded at or prior to closing from a credit facility expected to be entered into with GE Capital.

The remaining $19 million or so of merger consideration is expected to be funded on Jan. 2 from the GE Capital credit facility and other sources that are available to the surviving company, the news release said.

Zones is a single-source direct marketing reseller of name-brand information technology products. The company is located in Auburn, Wash.

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