JPS Special Committee Unanimously Rejects Unsolicited Tender Offer from Handy & Harman

GREENVILLE, S.C., Feb. 5, 2015 /PRNewswire/ -- JPS Industries, Inc. (the "Company" or "JPS") JPST announced today that the Special Committee of its Board of Directors (the "Special Committee"), on behalf of the Company, after careful consideration and consultation with its advisors, unanimously determined to reject the unsolicited, highly conditional tender offer from HNH Group Acquisition LLC ("HNH Group"), a wholly owned subsidiary of  Handy & Harman Ltd. HNH ("HNH"), to acquire, together with the 4,021,580 shares of Company stock held by Steel Partners Holdings L.P. ("Steel Partners"), an affiliate of HNH (the "Steel Shares"), 10,028,724 shares of the Company's stock (approximately 96.5% of the outstanding stock), together with the associated preferred share purchase rights, for a price of $10.00 per share in cash, other than the Steel Shares (the "Offer").  The HNH Group proposes to acquire the Steel Shares, and the remaining 3.5% of the outstanding Company stock in exchange for shares of common stock of HNH.  On behalf of the Company, the Special Committee determined that the Offer is not in the best interests of the Company or its stockholders as it significantly undervalues the Company and, as such, the Special Committee recommends that JPS stockholders reject the Offer and not tender their shares into the Offer. The Special Committee noted that the consideration offered to stockholders pursuant to the Offer is not significantly different from HNH's previous unsolicited proposal made on December 30, 2014, which the Special Committee unanimously rejected after careful consideration.

"After consulting with our advisors, it is clear to the Special Committee that this tender offer is below fair value and is not in the best interests of JPS stockholders," said Alan B. Howe, a member of the Special Committee.  "HNH is taking advantage of a JPS OTC stock price that does not reflect a fair value of the Company.  There is also little certainty as to whether Steel Partners intends to close this tender offer.  Given the vast number of conditions, including conditions subject to the sole discretion of Steel Partners or its affiliates, this tender offer resembles more a fiction than reality.  Even so, the Special Committee remains, as it always has, ready at any time to re-start discussions with Steel Partners and HNH to reach a negotiated transaction for a fair price."

"The Special Committee and our highly capable management team at JPS, which has achieved strong financial results in the last few years, are confident that we can continue to create greater value for our stockholders by either continuing to execute our strategic plan or seeking a higher priced sale," said Robert J. Capozzi, a member of the Special Committee.  "We believe the Offer denies JPS stockholders the value they deserve and can expect to receive as we capitalize on our scale and growth in the market of glass and aramid substrate materials for specialty applications. While we remain open to a deal at a fair value, this offer does not reflect that value.  We urge stockholders not to tender their shares."

The reasons for the Special Committee's recommendation to reject the Offer are set forth in a letter to the stockholders of the Company, which is set forth below and is being disseminated to stockholders:

February 5, 2015

Dear Stockholders:

On January 26, 2015, HNH Group Acquisition LLC ("HNH Group"), a wholly owned subsidiary of  Handy & Harman Ltd. ("HNH"), and an affiliate of Steel Partners Holdings L.P. ("Steel Partners"), a holder of approximately 39% of the outstanding stock of JPS Industries, Inc. ("JPS" or the "Company"), launched an unsolicited, below value and highly conditional tender offer to acquire 96.5% of your shares of JPS common stock for $10.00 per share in cash (the "Offer").  The remaining 3.5% of the Company stock as well as the shares held by Steel Partners would be acquired in exchange for shares of common stock of HNH.

On behalf of your Company, your Special Committee of the Board of Directors has thoroughly reviewed the Offer, in consultation with its advisors, and unanimously determined that the Offer undervalues the Company and is not in the best interests of all JPS stockholders. Your Special Committee is confident that either the continued implementation of the Company's current business strategy or seeking a higher priced sale is the best way to generate significant value for all JPS stockholders.

YOUR SPECIAL COMMITTEE URGES YOU
NOT TO TENDER YOUR SHARES INTO THE OFFER

Since fiscal year 2012, the current management of the Company, specifically Mr. Mikel H. Williams, has made significant progress in increasing stockholder value.   Since that time, management has restructured JPS and substantially improved its financial position.  Management drove the divestiture of the Urethane division, allowing your Company to focus on the Composite Materials business and to pay off all of its bank debt with the sale proceeds.  Your Company also contributed $17.8 million to its underfunded pension plan in fiscal year 2014.  Since fiscal year 2012, your Company has reduced by over $72 million its net debt and pension obligations.

This is not the first time Steel Partners has attempted to acquire your Company.  Indeed, as recently as September 2011 Steel Partners made a series of offers for your Company.  Steel Partners expressed its willingness to acquire the Company for a purchase price of $8.00 per share only to later reduce that offer price to $7.50 per share.  After the Company attempted to engage Steel Partners in discussions, Steel Partners later dropped the offer, even at the reduced price. 

Now, Steel Partners would like you to sell your shares of Company stock to its affiliate at a price of $10.00 per share, even though an independent appraisal of the value of the Company's stock is in excess of that price.  At fiscal year-end 2014, the mid-point of the valuation range determined by the independent appraisal for a block of your Company's stock was $13.00 per share.

In addition to the Offer being below fair value, HNH Group has conditioned its Offer on numerous conditions, including the redemption of the poison pill plan, Hart-Scott-Rodino anti-trust clearance and several other conditions that are within the sole discretion of HNH Group.  Also, HNH Group can cause a condition of the Offer not to be satisfied and it will then not have to close the Offer or pay those who tendered $10.00 per share.  Given, among other things, the heavily conditioned nature of the Offer, the Special Committee has concerns regarding the sincerity of Steel Partners to close the Offer. 

Also, Steel Partners and its affiliates have a history of not closing tenders.  According to publicly available data, since 2003, Steel Partners and its affiliates[i] have made unsolicited public proposals to acquire all, or a substantial portion of, at least 14 other public companies that were not in bankruptcy proceedings at the time, and launched a tender offer in respect of 6 of these companies.  Steel Partners and its affiliates failed to consummate all of these tender offer attempts.  In fact, after Steel Partners failed to consummate one of these attempts, it entered into a negotiated transaction with the target company that closed for a higher dollar amount than its failed tender offer amount.

Since the Offer expires after the 2015 Annual Meeting of the Company's stockholders, the Special Committee is concerned that if Steel Partners succeeds in placing its hand-picked nominees on your Board of Directors at the 2015 Annual Meeting of the Stockholders, HNH Group will then determine, in its sole discretion (as is permitted under the Offer), that a condition to the Offer remains unsatisfied.  In this scenario, having not closed the Offer, but having won the proxy contest, Steel Partners thereafter, with full control of your Board of Directors, could attempt to acquire your Company for even less than $10.00 per share.       

Throughout fiscal year 2014 and the years since Mr. Williams became Chief Executive Officer, the strategies implemented by your management have delivered strong financial results.  JPS' management has worked decisively over the last several years seeing improving profitability and cash flow, with improving margins and profitability.  On January 14, 2015, your Company announced another strong fiscal year in which it recorded GAAP net income of $14.0 million, including $8.5 million in income resulting from the Urethane division that was sold, or $1.34 per share, as compared to 2013 full year net income of $2.0 million and $1.3 million in fiscal year 2012.  Your management continues to aggressively and realistically reassess your Company's opportunities and challenges and is excited about the future value available to JPS and its stockholders.

HNH Group's Offer is scheduled to expire on February 26, 2015.  We outline in this letter some of the reasons why you should reject this undervalued and highly conditional Offer.  On behalf of your Company, your Special Committee urges you not to tender your shares.  Tendering your shares into the Offer by February 26, 2015 will only encourage Steel Partners and its affiliates in their attempts to acquire the Company at the below fair value price of $10.00 per share.

Your Special Committee unanimously recommends that JPS stockholders
REJECT HNH GROUP'S OFFER and NOT TENDER your shares pursuant to the Offer.

In reaching its recommendation, the Special Committee considered numerous factors, including those described above and, as well as others, the following considerations:

1.   The Offer attempts to exploit a below fair value "Over-the-Counter" stock price of JPS

HNH Group deceptively states that the Offer represents a 44.5% premium over the Company's closing price of $6.92 on December 29, 2014, the date before HNH's offer was made public.  Given the low trading volume of JPS' stock on the OTC, and the discussion above regarding your Company's improved financial condition, the OTC stock price does not reflect a fair value of the Company.   In fact, the Offer is a reduction in value representing only 77% of the fair value of the Company's stock as determined by an independent appraisal as of the 2014 fiscal year end. 

Put simply, the Offer is not at a premium, but is at a reduction in value.  Steel Partners is exploiting a thinly traded stock and a depressed OTC stock price to acquire the Company at a bargain.

2.   The lengthy list of substantial conditions to the Offer create significant uncertainty and give HNH Group wide latitude not to consummate the Offer

As described in HNH Group's Tender Offer Statement, the Offer is subject to 19 substantive conditions.

For example, the Offer contains a no material change condition, which permits Steel Partners to not close the Offer if -- in the sole discretion of HNH Group -- it determines that there was an actual material change since the date of the Offer that occurred in, or that is threatened to, the business, condition (financial or other), assets, income, operations, restructuring, prospects or ownership of the Company or its subsidiaries.  Because the satisfaction of the condition is in the sole discretion of HNH Group, the condition operates essentially as an option for Steel Partners to acquire your Company.

The Offer is also subject to the redemption of the Company's poison pill plan. Even if Steel Partners wins the proxy contest at the 2015 Annual Meeting and then has control of your Board of Directors through its elected nominees, there is no guaranty that Steel Partners will cause its newly elected directors to redeem the poison pill plan and thus satisfy the condition.  If Steel Partners keeps the poison pill plan in place, causing the condition not to be satisfied, Steel Partners, then in control of your Board of Directors, may attempt to force through an acquisition of the Company at a lower price.

Because of the highly conditional nature of the Offer and that the satisfaction of certain of the conditions are in the sole discretion of HNH Group, the Special Committee views the Offer as a fiction.

Your Special Committee encourages stockholders to send a clear message to Steel Partners that you will not allow it to take control of JPS for a price significantly below your Company's fair value.  If Steel Partners wants to acquire the Company, it should do so on a negotiated basis with the Special Committee to ensure that it pays a fair price.  Tendering into the Offer would only encourage Steel Partners in its attempt to acquire JPS at the below value price of $10.00 per share. 

For many reasons, including the reasons described above, your Special Committee unanimously recommends that you REJECT THE OFFER and NOT TENDER your shares pursuant to the Offer.

Your Special Committee remains willing and ready to reengage in discussions with Steel Partners and HNH at any time to reach a negotiated transaction that reflects a fair value of the Company.  As the Special Committee previously stated in its letter of January 9, 2015 to HNH, based on HNH's valuation metrics (which the Special Committee has not conceded were the correct metrics), the Special Committee stated that the offer price from HNH should be at least $11.20 per share in cash, which does not yet give effect to the value of the net-operating losses of the Company.

Copies of this recommendation are available on the Company's website at www.jps-industries.com.  If you have any questions concerning this recommendation or need additional copies of this recommendation, please contact the Company's proxy solicitor, The Proxy Advisory Group, LLC, at toll-free (888) 55PROXY, or (888) 557-7699.

We appreciate your continued support as we work to protect your investment and create value for all JPS stockholders.

Sincerely, 

/s/ Alan B. Howe                                          /s/ Robert J. Capozzi
Alan B. Howe                                               Robert J. Capozzi
Member of the Special Committee                 Member of the Special Committee

[i] For this purpose, affiliates of Steel Partners Holdings L.P. includes Handy & Harman Ltd., Steel Partners, LLC, Steel Partners II, L.P., Steel Partners Japan Strategic Fund (Offshore) L.P., Steel Partners Japan Asset Management, L.P., and Steel Partners Japan Strategic - Fund SPVI LLC.

Contact: JPS Industries Investor Relations, 864-239-3900

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SOURCE JPS Industries, Inc.