American Greetings Corporation
Analysis of Proposed Merger with
Century Intermediate Holding Company
Analysis of Proposed Merger with
Century Intermediate Holding Company
July 18, 2013
TowerView LLC
TowerView LLC | 2
1) Worth More as a Standalone Company
2) Peter J. Solomon Board Presentation & Analysis - Flawed
3) PJSC Fairness Opinion is Conflicted
4) Weiss Family Conflicts
5) Alternatives
Issues with the Proposed Merger Transaction
TowerView LLC | 3
1. Worth More as a Standalone Company
§ Price movement of comparable companies yields a share price greater than
$19.00
$19.00
§ The current trading multiple of comparable companies results in a far greater
share price than $19.00
share price than $19.00
§ The Sum of the Parts analysis yields a share price greater than $19.00
§ PJSC’s discussion of factors likely to impact the company’s share price is highly
flawed
flawed
§ Recent performance of American Greetings’ business yields a company valued
significantly above $19.00 per share
significantly above $19.00 per share
AM Market Performance vs. Comparable Public Companies(a)
If the merger were rejected and American Greetings’ (AM) stock
performed in-line with the average and median of its peers, AM
shareholders could reasonably expect a trading price of $21.02-$23.68.
performed in-line with the average and median of its peers, AM
shareholders could reasonably expect a trading price of $21.02-$23.68.
TowerView LLC | 4
(a) Comparable companies from Peter J Solomon (PJSC) 7/3/13 presentation to the Special Committee
Percentage Return
9/25/12-7/15/13
32.36%
46.61%
48.65%
65.15%
0%
10%
20%
30%
40%
50%
60%
70%
American
Greetings
Average
Avg Ex Hilo
Median
AM Trading Value as Implied by Multiples of Consolidated EBITDA
based on comparable companies(a)
(a) Comparable companies from Peter J Solomon (PJSC) 7/3/13 presentation to the Special Committee
(b) Multiples based on PJSC 7/3/13 peers, eliminating negative multiples and multiples above 10x,
separated into lower, middle and upper thirds. Prices as of 7/15/13, Bloomberg LP data.
(c) PJSC presentation 7/3/13
(b) Multiples based on PJSC 7/3/13 peers, eliminating negative multiples and multiples above 10x,
separated into lower, middle and upper thirds. Prices as of 7/15/13, Bloomberg LP data.
(c) PJSC presentation 7/3/13
|
(Amounts in millions of dollars, except per share data)
|
Low
|
Mid
|
High
|
|
EBITDA
|
212.3
|
212.3
|
212.3
|
|
Multiple Range(b)
|
4.68x
|
5.57x
|
9.61x
|
|
EV Range
|
992.8
|
1182.6
|
2039.5
|
|
5/31/13 Net Debt(c)
|
(196.3)
|
(196.3)
|
(196.3)
|
|
Implied Equity Value
|
796.5
|
986.3
|
1843.2
|
|
Outstanding Shares
|
34.3
|
34.3
|
34.3
|
|
Share Price
|
$23.22
|
$28.76
|
$53.74
|
If the merger were rejected and AM’s stock traded in-line with its
peer average multiple, AM shareholders could reasonably expect a
price of $28.76.
peer average multiple, AM shareholders could reasonably expect a
price of $28.76.
TowerView LLC | 5
(a) Multiples based on peer companies selected by PJSC 7/3/13 presentation to the Special Committee, allocated by segment. See Appendix A for
breakout of segments.
breakout of segments.
AM Trading Value based on Segment Comparable Company
Market Multiples
Market Multiples
TowerView LLC | 6
|
(Amounts in millions, except per share data)
|
Multiple Range(a)
|
|
EV Range
|
|||||
|
Segment Performance
|
FY2013A EBITDA
|
Low
|
Average
|
High
|
|
Low
|
Average
|
High
|
|
NAGCD
|
202.1
|
4.01x
|
5.08x
|
11.80x
|
|
809.7
|
1,025.7
|
2,385.7
|
|
International
|
14.8
|
4.01x
|
5.08x
|
11.80x
|
|
59.3
|
75.1
|
174.7
|
|
Retail Operations (Clinton)
|
16.3
|
4.01x
|
5.08x
|
11.80x
|
|
65.3
|
82.7
|
192.4
|
|
AG Interactive
|
16.7
|
9.54x
|
9.67x
|
22.19x
|
|
159.3
|
161.5
|
370.6
|
|
In-store
|
5.4
|
4.01x
|
5.08x
|
11.80x
|
|
21.6
|
27.4
|
63.7
|
|
Properties
|
2.4
|
11.54x
|
11.67x
|
24.19x
|
|
27.7
|
28.0
|
58.1
|
|
Subtotal Pre-unallocated Overhead
|
257.7
|
4.44x
|
5.43x
|
12.59x
|
|
1,142.9
|
1,400.4
|
3,245.3
|
|
Unallocated Overhead
|
(45.4)
|
4.44x
|
5.43x
|
12.59x
|
|
(201.4)
|
(246.7)
|
(571.7)
|
|
Sum of the Parts Total Value
|
941.6
|
1,153.7
|
2,673.6
|
|
Implied EV/FY2013A EBITDA ($212.3MM) Multiple
|
4.68x
|
5.74x
|
13.30x
|
|
Less 5/31/13 Net Debt
|
(196.3)
|
(196.3)
|
(196.3)
|
|
Implied Equity Value
|
745.3
|
957.4
|
2,477.3
|
|
Outstanding Shares
|
34.3
|
34.3
|
34.3
|
|
Share Price
|
$21.73
|
$27.91
|
$72.22
|
TowerView LLC | 7
PJSC: Factors Likely to Impact AM Share Price Trading in
Absence of a Deal
Absence of a Deal
§ Orphaned public company
– Currently only one research analyst (formerly 3 analysts 2 years ago)
– Single comparable company is private
This fact is not new in the absence of a transaction. Should the stock trade
below $19.00 the strong cash flows of the company, as forecast, would
allow for significant repurchases at attractive prices benefiting all long-term
shareholders.
below $19.00 the strong cash flows of the company, as forecast, would
allow for significant repurchases at attractive prices benefiting all long-term
shareholders.
§ Controlled company
– Strategic and financial decisions continue to reflect Weiss Family ownership/
influence
influence
This fact is not new in the absence of a transaction and has always been
true of the company.
true of the company.
Source: Page 10 of Exhibit(c)(9) in 13E3 filed 7/5/13
Source: Page 10 of Exhibit(c)(9) in 13E3 filed 7/5/13
TowerView LLC | 8
PJSC: Factors Likely to Impact AM Share Price Trading in
Absence of a Deal, Cont’d
Absence of a Deal, Cont’d
§ Short interest
– Prior to announcement of take-private, AM short interest was 44%, among
the highest on the S&P 500
the highest on the S&P 500
Short interest has fluctuated significantly in the past. Recent
outperformance versus the management projections and disclosure of
projections for the first time will mitigate this issue.
outperformance versus the management projections and disclosure of
projections for the first time will mitigate this issue.
§ Thinly traded shares contribute to increased volatility
– LTM volatility has been 26 vs. S&P 400 Consumer Discretionary of 17
This is not new in the absence of a transaction and historically has not
prevented massive share repurchases.
prevented massive share repurchases.
§ Unpredictable earnings and negative reaction to earnings “misses”
Disclosure of projections and the recent outperformance of American
Greetings’ businesses will mitigate this issue.
Greetings’ businesses will mitigate this issue.
TowerView LLC | 9
PJSC: Factors Likely to Impact AM Share Price Trading in
Absence of a Deal, Cont’d
Absence of a Deal, Cont’d
§ Financials significantly impacted by non-recurring, one-time and other special
items
items
– 50% of LTM January and 34% of FY13 EBITDA, respectively, were
adjustments and one-timers
adjustments and one-timers
– FY2013 Actual outperformance relative to plan largely driven by non-
operating items
operating items
Recent disclosure of an adjustment table provides greater clarity to
investors. Though some of the outperformance may be caused by special
items, a large part is driven by better core business performance.
investors. Though some of the outperformance may be caused by special
items, a large part is driven by better core business performance.
§ Core business in accelerating decline
– Year-over-year pieces declines of -1.5%, -2.5%, -3.4%, and -3.7% over last
four calendar years
four calendar years
– “Heavy users” declined -1.5% in 2012
These are not American Greetings-specific numbers; these are industry
figures and American Greetings has been gaining market share. A new
1,000 store contract is evidence of these market share gains.
figures and American Greetings has been gaining market share. A new
1,000 store contract is evidence of these market share gains.
Source: Page 10 of Exhibit(c)(9) in 13E3 filed 7/5/13
TowerView LLC | 10
PJSC: Factors Likely to Impact AM Share Price Trading in
Absence of a Deal, Cont’d
Absence of a Deal, Cont’d
§ Scarce new profitable growth opportunities
– New account opportunities rare and costs to secure contracts makes returns
low or potentially unprofitable
low or potentially unprofitable
– ROI on digital initiatives remains unclear
Clearly management believes growth opportunities are attractive given the
company’s $400mm+ of capital investment in a new WHQ and IT system.
company’s $400mm+ of capital investment in a new WHQ and IT system.
Source: Page 10 of Exhibit(c)(9) in 13E3 filed 7/5/13
TowerView LLC | 11
Recent Developments
§ 2013 Adjusted EBITDA exceeded management’s FY2013 projections by $11mm
§ New third party fixture contract
§ New 1,000 store contract with a major national retailer will contribute $150mm
revenue
revenue
§ The newly revised June 2013 Treasury Model shows a $381.1mm increase in
revenue during FY2014 - FY2018 versus the November 2012 model. The new
1,000 store contract contributes $150mm.
revenue during FY2014 - FY2018 versus the November 2012 model. The new
1,000 store contract contributes $150mm.
TowerView LLC | 12
Conclusion
Based on the company’s recent outperformance, strong
financial guidance, greater disclosure of financial adjustments,
as well as the price movement and trading multiples of the
comparable companies, we believe American Greetings would
be trading at a significant premium to $19.00 absent a
transaction.
financial guidance, greater disclosure of financial adjustments,
as well as the price movement and trading multiples of the
comparable companies, we believe American Greetings would
be trading at a significant premium to $19.00 absent a
transaction.
TowerView LLC | 13
2. Peter J. Solomon Board Presentation & Analysis - Flawed
§ PJSC’s Sum of the Parts analysis ignores significant asset value that either
temporarily detracts from EBITDA or is not reflected in operating earnings today
temporarily detracts from EBITDA or is not reflected in operating earnings today
§ PJSC applies erroneous multiples in its Sum of the Parts analysis, artificially
deflating the indicative share price
deflating the indicative share price
§ Using appropriate comparable company multiples for each segment yields
significantly higher value than PJSC reported in its fairness opinion
significantly higher value than PJSC reported in its fairness opinion
§ In addition to being inconsistent, PJSC’s Weighed Average Cost of Capital is too
high and exit multiples are too low
high and exit multiples are too low
§ PJSC’s analysis deducts cash expenditure for New World Headquarters (WHQ)
without giving commensurate credit in the valuation analysis
without giving commensurate credit in the valuation analysis
§ PJSC’s levered recapitalization analysis utilizes inconsistent multiples and discount
rates while failing to maximize value by assuming limited incremental leverage
rates while failing to maximize value by assuming limited incremental leverage
TowerView LLC | 14
Sum of the Parts Analysis
as Presented by PJSC
as Presented by PJSC
(a) Based on Management guidance of segment performance provided on 6/24/13.
(b) International includes retail elimination.
(c) Implied multiple ranges based on subtotal enterprise value range and FY2013A EBITDA pre-unallocated overhead.
(d) NAGCD includes Cardstore financials.
(e) LTM as of 5/31/13 net debt of $196.3mm represents total debt of $260.3mm less cash of $64.0mm per Management on 6/25/13.
(f) Calculated using diluted share count including restricted stock units and performance shares and treasury stock method for options exercisable. Includes
restricted stock units anticipated to be awarded in May 2013, per Management guidance.
restricted stock units anticipated to be awarded in May 2013, per Management guidance.
|
(Amounts in millions, except per share data)
|
Multiple Range
|
|
EV Range
|
|||||
|
Segment Performance(a)
|
FY2013A EBITDA
|
Low
|
Mid
|
High
|
|
Low
|
Mid
|
High
|
|
NAGCD
|
$202.1(d)
|
3.40x
|
4.10x
|
4.80x
|
|
687.2
|
828.6
|
970.1
|
|
International(b)
|
14.8
|
3.40x
|
4.10x
|
4.80x
(164.0)
|
|
50.4
|
60.7
|
71.1
|
|
Retail Operations (Clinton)
|
16.3
|
3.40x
|
4.10x
|
4.80x
|
|
55.4
|
66.8
|
78.2
|
|
AG Interactive
|
16.7
|
6.00x
|
7.00x
|
8.00x
|
|
100.2
|
116.9
|
133.6
|
|
In-store
|
5.4
|
3.40x
|
4.10x
|
4.80x
|
|
18.3
|
22.1
|
25.8
|
|
Properties
|
2.4
|
8.00x
|
9.00x
|
10.00x
|
|
19.3
|
21.8
|
24.2
|
|
Subtotal Pre-unallocated Overhead(c)
|
257.7
|
3.61x
|
4.33x
|
5.06x
|
|
930.7
|
1,116.9
|
1,303.0
|
|
Unallocated Overhead
|
(45.4)
|
3.61x
|
4.33x
|
5.06x
|
|
(196.8)
|
(229.6)
|
|
|
Sum of the Parts Total Value
|
$766.7
|
$920.1
|
$1,073.4
|
|
Implied EV/FY2013A EBITDA ($212.3MM) Multiple
|
3.6x
|
4.3x
|
5.1x
|
|
Less LTM (5/31/13) Net Debt(e)
|
(196.3)
|
(196.3)
|
(196.3)
|
|
Implied Equity Value
|
570.4
|
723.8
|
877.1
|
|
Share Price(f)
|
$16.67
|
$21.10
|
$25.39
|
|
Unaffected Share Price ($14.34) Premium
|
(14.0%)
|
(32.0%)
|
(43.5%)
|
|
9/25/12 Initial Offer ($17.18) Premium
|
3.0%
|
(18.6%)
|
(32.3%)
|
|
1/17/13 Offer ($17.50) Premium
|
5.0%
|
(17.0%)
|
(31.1%)
|
|
3/28/13 Offer ($18.20) Premium
|
9.1%
|
(13.7%)
|
(28.3%)
|
|
7/1/13 Offer ($19.00) Premium
|
13.9%
|
(9.9%)
|
(25.2%)
|
PJSC Sum of the Parts Analysis: NAGCD
TowerView LLC | 15
TowerView’s comment:
NAGCD EBITDA contains $20mm of expense associated with Cardstore.com which
generates little to no revenue. Analysis assumes loss in perpetuity with no benefit. PJSC
low-mid-high multiples would add $1.98-$2.39-$2.80 in value per share.(g)
NAGCD EBITDA contains $20mm of expense associated with Cardstore.com which
generates little to no revenue. Analysis assumes loss in perpetuity with no benefit. PJSC
low-mid-high multiples would add $1.98-$2.39-$2.80 in value per share.(g)
(g) Assuming 34.3mm fully diluted common shares
|
(Amounts in millions, except per share data)
|
Multiple Range
|
|
EV Range
|
|||||
|
Segment Performance(a)
|
FY2013A EBITDA
|
Low
|
Mid
|
High
|
|
Low
|
Mid
|
High
|
|
NAGCD
|
$202.1(d)
|
3.40x
|
4.10x
|
4.80x
|
|
687.2
|
828.6
|
970.1
|
|
International(b)
|
14.8
|
3.40x
|
4.10x
|
4.80x
|
|
50.4
|
60.7
|
71.1
|
|
Retail Operations (Clinton)
|
16.3
|
3.40x
|
4.10x
|
4.80x
|
|
55.4
|
66.8
|
78.2
|
|
AG Interactive
|
16.7
|
6.00x
|
7.00x
|
8.00x
|
|
100.2
|
116.9
|
133.6
|
|
In-store
|
5.4
|
3.40x
|
4.10x
|
4.80x
|
|
18.3
|
22.1
|
25.8
|
|
Properties
|
2.4
|
8.00x
|
9.00x
|
10.00x
|
|
19.3
|
21.8
|
24.2
|
|
Subtotal Pre-unallocated Overhead(c)
|
257.7
|
3.61x
|
4.33x
|
5.06x
|
|
930.7
|
1,116.9
|
1,303.0
|
|
Unallocated Overhead
|
(45.4)
|
3.61x
|
4.33x
|
5.06x
|
|
(164.0)
|
(196.8)
|
(229.6)
|
|
Sum of the Parts Total Value
|
$766.7
|
$920.1
|
$1,073.4
|
|
Implied EV/FY2013A EBITDA ($212.3MM) Multiple
|
3.6x
|
4.3x
|
5.1x
|
|
Less LTM (5/31/13) Net Debt(e)
|
(196.3)
|
(196.3)
|
(196.3)
|
|
Implied Equity Value
|
570.4
|
723.8
|
877.1
|
|
Share Price(f)
|
$16.67
|
$21.10
|
$25.39
|
TowerView LLC | 16
Lack of Clarity Around Cardstore.com Investment
§ The $20mm+ investment per year in Cardstore.com should be disaggregated
from the cash flows and valued with some form of success outcome probability
tree.
from the cash flows and valued with some form of success outcome probability
tree.
§ The $20mm+ investment per year in a currently uneconomic venture would
only be pursued by a management team and endorsed by a Board of Directors if
there were a reasonable belief in a positive economic outcome.
only be pursued by a management team and endorsed by a Board of Directors if
there were a reasonable belief in a positive economic outcome.
TowerView LLC | 17
PJSC Sum of the Parts Analysis: Clinton Cards
TowerView’s comment:
AM has invested a minimum of $90-100mm in Clinton Cards in a turnaround strategy. Sum of Parts analysis values
Clinton at $55-78mm. Clinton CEO Dominique Schurman said in a BBC interview on 12/24/12 that Clinton Cards could
break even as early as this year.(h) Recently, on 5/6/13, she said that sales are up 10-15% with the unit performing
better than forecast and will be profitable.(i) However, this return to profitability is not reflected in PJSC’s Sum of
Parts analysis which implies a loss of $22-35mm in the investment value in 6 months.
AM has invested a minimum of $90-100mm in Clinton Cards in a turnaround strategy. Sum of Parts analysis values
Clinton at $55-78mm. Clinton CEO Dominique Schurman said in a BBC interview on 12/24/12 that Clinton Cards could
break even as early as this year.(h) Recently, on 5/6/13, she said that sales are up 10-15% with the unit performing
better than forecast and will be profitable.(i) However, this return to profitability is not reflected in PJSC’s Sum of
Parts analysis which implies a loss of $22-35mm in the investment value in 6 months.
(h) Simpson, Emma. "Clinton Cards Had a New Look, but Can Its Reinvention Work?" BBC News [London] 24 Dec. 2012
(i) Leroux, Marcus. "Clinton Cards Is No Longer a Bear Market, Says Its Chief." The Times [London] 6 May 2013
|
(Amounts in millions, except per share data)
|
Multiple Range
|
|
EV Range
|
|||||
|
Segment Performance(a)
|
FY2013A EBITDA
|
Low
|
Mid
|
High
|
|
Low
|
Mid
|
High
|
|
NAGCD
|
$202.1(d)
|
3.40x
|
4.10x
|
4.80x
|
|
687.2
|
828.6
|
970.1
|
|
International(b)
|
14.8
|
3.40x
|
4.10x
|
4.80x
|
|
50.4
|
60.7
|
71.1
|
|
Retail Operations (Clinton)
|
16.3
|
3.40x
|
4.10x
|
4.80x
|
|
55.4
|
66.8
|
78.2
|
|
AG Interactive
|
16.7
|
6.00x
|
7.00x
|
8.00x
|
|
100.2
|
116.9
|
133.6
|
|
In-store
|
5.4
|
3.40x
|
4.10x
|
4.80x
|
|
18.3
|
22.1
|
25.8
|
|
Properties
|
2.4
|
8.00x
|
9.00x
|
10.00x
|
|
19.3
|
21.8
|
24.2
|
|
Subtotal Pre-unallocated Overhead(c)
|
257.7
|
3.61x
|
4.33x
|
5.06x
|
|
930.7
|
1,116.9
|
1,303.0
|
|
Unallocated Overhead
|
(45.4)
|
3.61x
|
4.33x
|
5.06x
|
|
(164.0)
|
(196.8)
|
(229.6)
|
|
Sum of the Parts Total Value
|
$766.7
|
$920.1
|
$1,073.4
|
|
Implied EV/FY2013A EBITDA ($212.3MM) Multiple
|
3.6x
|
4.3x
|
5.1x
|
|
Less LTM (5/31/13) Net Debt(e)
|
(196.3)
|
(196.3)
|
(196.3)
|
|
Implied Equity Value
|
570.4
|
723.8
|
877.1
|
|
Share Price(f)
|
$16.67
|
$21.10
|
$25.39
|
TowerView LLC | 18
PJSC Sum of the Parts Analysis: Properties
TowerView’s comment:
Properties are non core businesses.(j) The 2008 agreement to sell 2 properties for $195mm(k) and the
Properties are non core businesses.(j) The 2008 agreement to sell 2 properties for $195mm(k) and the
subsequent sale transaction for $95mm in March 2009 were terminated by AM. Since then, litigation
has been resolved and no legal issues remain. With the performance of Strawberry Shortcake and
Care Bears at a trough, the brands can be monetized.(l)
(j) PJSC Presentation to the Special Committee as filed in 13E3
(k) 7/23/08 Press Release
(l) 10/26/12 PJSC Presentation to the Special Committee
|
(Amounts in millions, except per share data)
|
Multiple Range
|
|
EV Range
|
|||||
|
Segment Performance(a)
|
FY2013A EBITDA
|
Low
|
Mid
|
High
|
|
Low
|
Mid
|
High
|
|
NAGCD
|
$202.1(d)
|
3.40x
|
4.10x
|
4.80x
|
|
687.2
|
828.6
|
970.1
|
|
International(b)
|
14.8
|
3.40x
|
4.10x
|
4.80x
|
|
50.4
|
60.7
|
71.1
|
|
Retail Operations (Clinton)
|
16.3
|
3.40x
|
4.10x
|
4.80x
|
|
55.4
|
66.8
|
78.2
|
|
AG Interactive
|
16.7
|
6.00x
|
7.00x
|
8.00x
|
|
100.2
|
116.9
|
133.6
|
|
In-store
|
5.4
|
3.40x
|
4.10x
|
4.80x
|
|
18.3
|
22.1
|
25.8
|
|
Properties
|
2.4
|
8.00x
|
9.00x
|
10.00x
|
|
19.3
|
21.8
|
24.2
|
|
Subtotal Pre-unallocated Overhead(c)
|
257.7
|
3.61x
|
4.33x
|
5.06x
|
|
930.7
|
1,116.9
|
1,303.0
|
|
Unallocated Overhead
|
(45.4)
|
3.61x
|
4.33x
|
5.06x
|
|
(164.0)
|
(196.8)
|
(229.6)
|
|
Sum of the Parts Total Value
|
$766.7
|
$920.1
|
$1,073.4
|
|
Implied EV/FY2013A EBITDA ($212.3MM) Multiple
|
3.6x
|
4.3x
|
5.1x
|
|
Less LTM (5/31/13) Net Debt(e)
|
(196.3)
|
(196.3)
|
(196.3)
|
|
Implied Equity Value
|
570.4
|
723.8
|
877.1
|
|
Share Price(f)
|
$16.67
|
$21.10
|
$25.39
|
TowerView LLC | 19
PJSC Sum of the Parts Analysis: Missing Non-Earning Assets
TowerView’s comment:
Non-earning assets EXCLUDED entirely from the PJSC analysis include Schurman and
Party City equity investments, Clinton Card receivables, and the potential value from the
sale of the old headquarters. These assets may be worth $10.8mm, $11.3mm,(m) and
$12.0mm,(n) respectively, totaling $34.1mm in unaccounted value.
Non-earning assets EXCLUDED entirely from the PJSC analysis include Schurman and
Party City equity investments, Clinton Card receivables, and the potential value from the
sale of the old headquarters. These assets may be worth $10.8mm, $11.3mm,(m) and
$12.0mm,(n) respectively, totaling $34.1mm in unaccounted value.
(m) $10.8mm and $11.3mm are book value numbers taken from 2/28/13 10K filed 5/9/13
(n) As determined in the PJSC presentation to the Special Committee
(n) As determined in the PJSC presentation to the Special Committee
|
(Amounts in millions, except per share data)
|
Multiple Range
|
|
EV Range
|
|||||
|
Segment Performance(a)
|
FY2013A EBITDA
|
Low
|
Mid
|
High
|
|
Low
|
Mid
|
High
|
|
NAGCD
|
$202.1(d)
|
3.40x
|
4.10x
|
4.80x
|
|
687.2
|
828.6
|
970.1
|
|
International(b)
|
14.8
|
3.40x
|
4.10x
|
4.80x
|
|
50.4
|
60.7
|
71.1
|
|
Retail Operations (Clinton)
|
16.3
|
3.40x
|
4.10x
|
4.80x
|
|
55.4
|
66.8
|
78.2
|
|
AG Interactive
|
16.7
|
6.00x
|
7.00x
|
8.00x
|
|
100.2
|
116.9
|
133.6
|
|
In-store
|
5.4
|
3.40x
|
4.10x
|
4.80x
|
|
18.3
|
22.1
|
25.8
|
|
Properties
|
2.4
|
8.00x
|
9.00x
|
10.00x
|
|
19.3
|
21.8
|
24.2
|
|
Subtotal Pre-unallocated Overhead(c)
|
257.7
|
3.61x
|
4.33x
|
5.06x
|
|
930.7
|
1,116.9
|
1,303.0
|
|
Unallocated Overhead
|
(45.4)
|
3.61x
|
4.33x
|
5.06x
|
|
(164.0)
|
(196.8)
|
(229.6)
|
|
Sum of the Parts Total Value
|
$766.7
|
$920.1
|
$1,073.4
|
|
Implied EV/FY2013A EBITDA ($212.3MM) Multiple
|
3.6x
|
4.3x
|
5.1x
|
|
Less LTM (5/31/13) Net Debt(e)
|
(196.3)
|
(196.3)
|
(196.3)
|
|
Implied Equity Value
|
570.4
|
723.8
|
877.1
|
|
Share Price(f)
|
$16.67
|
$21.10
|
$25.39
|
PJSC Sum of the Parts Analysis: Summary Additional Value
TowerView LLC | 20
|
|
Low
|
Mid
|
High
|
|
Cardstore.com loss
|
$1.98
|
$2.39
|
$2.80
|
|
Clinton Cards- minimum(a)
|
0.64
|
1.02
|
?
|
|
Properties
|
2.06
|
4.98
|
?
|
|
Non-earning Assets on Balance Sheet
|
1.00
|
1.00
|
?
|
|
Additional Value Per Share(b)
|
$5.68
|
$9.39
|
>$10.00
|
(a) No credit for value of the turnaround, which is proceeding faster than anticipated
(b) Assuming 34.3mm fully diluted common shares
(b) Assuming 34.3mm fully diluted common shares
Irrelevant Precedent Transactions
TowerView LLC | 21
§ The 6 precedent transactions analyzed by Peter J Solomon included 4 retailers, 1 yellow pages company,
and 1 newspaper company.
and 1 newspaper company.
§ 2 of the transactions were related to bankruptcy proceedings
|
Date
|
Acquirer
|
Company
|
Deal Details
|
|
Aug-12
|
Dex One
|
SuperMedia
|
•$1.3b debt, <$200mm equity value
•Dex One had $1.8b debt, $105mm equity
•Prepack bankruptcy
|
|
May-12
|
Berkshire Hathaway
|
Media General Newspapers
|
•$152mm transaction
•Distressed seller of newspapers
•Berkshire financed remaining Media General company,
received warrants |
|
Mar-09
|
BCE, Inc.
|
The Source
|
•$135mm transaction
•Sold by Circuit City during its bankruptcy
|
|
Mar-09
|
Barnes & Noble
|
Barnes & Noble College
|
•$514mm transaction
•Not updated for current Nook valuation
|
|
Jul-05
|
Berkshire Partners
|
National Vision
|
•$103mm equity value
•Roll up transaction- National Vision purchased Consolidated
Vision at the same time •Retailer
|
|
Jan-05
|
Movie Gallery
|
Hollywood Entertainment Corp.
|
•$1b transaction
•>4.4x EBITDA
|
TowerView LLC | 22
Market Movement: S&P 500
§ From 10/26/12 PJSC Presentation to the final 7/3/13 Presentation, the EBITDA multiple range used for
analysis was lowered and the discount rate rose
analysis was lowered and the discount rate rose
– During that time the S&P 500 rallied 14.3% from 1411.94 on 10/26/12 to 1614.08 on 7/3/13(a)
(a) Data from Bloomberg LP as of 7/3/13
TowerView LLC | 23
Market Movement: S&P 500 LTM EBITDA multiple
§ From 10/26/12 PJSC Presentation to the final 7/3/13 Presentation, the EBITDA multiple range used for
analysis was lowered and the discount rate rose
analysis was lowered and the discount rate rose
– During that time the S&P 500 LTM EBITDA multiple rose from 8.85x at 2Q2012 to 9.91x(a)
(a) Data from Bloomberg LP as of 7/3/13
TowerView LLC | 24
Financing Market Movement: Leveraged Loans
§ From 10/26/12 PJSC Presentation to the final 7/3/13 Presentation, the EBITDA multiple range used for
analysis was lowered and the discount rate rose
analysis was lowered and the discount rate rose
– During this period of time, interest rates fell for leveraged loans(a)
(a) CDX.HY.19 data from Bloomberg LP as of 7/3/13. Index trades in dollar price.
TowerView LLC | 25
Weighted Average Cost of Capital Calculations(a)
§ Pre-tax cost of debt used by PJSC for their analysis was 6 - 12%
TowerView’s observations:
§ The current transaction is more highly levered and has a cost of new debt
that is less than 4%(b)
that is less than 4%(b)
§ 4/27/13 The Wall Street Journal pointed out that “on Thursday [April 25,
2013], yields on "junk" bonds slipped to a record low of 5.39%, according
to a Barclays index dating back to July 1983.”(c)
2013], yields on "junk" bonds slipped to a record low of 5.39%, according
to a Barclays index dating back to July 1983.”(c)
§ American Greetings’ WACC according to Bloomberg is 6.4%(d)
§ PJSC utilizes the median of comparable companies unlevered betas as
opposed to American Greetings’ own unlevered beta, increasing the WACC
by 50-70bps
opposed to American Greetings’ own unlevered beta, increasing the WACC
by 50-70bps
(a) Refers to Page 41 of the 7/3/13 PJSC Presentation to the Special Committee
(b) Proxy filed 7/10/13
(c) DiColo, Jerry A. "Markets Briefing Book: April 27-28: 'Junk' Debt Yields Fall to Record Low." The Wall Street Journal [New York] 27 Apr.
2013: B5.
2013: B5.
(d) Data from Bloomberg LP
TowerView LLC | 26
Future Stock Price, DCF, Levered Recap Analysis
§ Comparable company EBITDA multiples range from 4.0x to 9.7x with an average
of 6.5x.(a)
of 6.5x.(a)
§ The Weiss Family claims only BTH & CSS are comparable companies.
§ Blyth (BTH) is a multilevel marketer of candles and energy drinks. The company
experienced a failed IPO of its energy powder subsidiary which drove its common stock
price down over 50%. The IPO failure occurred 1 day prior to the Weiss Family’s
announcement of their intention to bid for American Greetings. BTH should never have
been included in the comparable companies.
experienced a failed IPO of its energy powder subsidiary which drove its common stock
price down over 50%. The IPO failure occurred 1 day prior to the Weiss Family’s
announcement of their intention to bid for American Greetings. BTH should never have
been included in the comparable companies.
§ CSS is a manufacturer of seasonal social expression products including boxed greeting
cards, ribbons and bows, tissue paper, gift boxes, stickers, etc. Not a true comp to AM.
cards, ribbons and bows, tissue paper, gift boxes, stickers, etc. Not a true comp to AM.
§ The only true comparable company to AM is private.
§ CSS, which PJSC and the Weiss Family view as the closest public comparable company,
trades at 4.6x.(b)
trades at 4.6x.(b)
§ $19.00 reflects an inappropriately low EBITDA multiple on future stock prices, DCF, and
levered recap.
levered recap.
(a) As of 7/15/13
(b) As of 7/15/13
TowerView LLC | 28
Future Stock Price Analysis Assumption Inconsistencies(a)
(a) All numbers taken from “Future Stock Price Analysis” slide in PJSC Presentation to the Special Committee on the specified dates
|
|
Adj. EBITDA Multiple Used by PJSC
|
Cost of Equity Used by PJSC
|
|
10/26/2012
|
3.50 - 5.00x
|
12.5%
|
|
11/19/2012
|
3.00 - 4.50x
|
12.5%
|
|
12/7/2012
|
3.00 - 4.50x
|
12.5%
|
|
2/24/2013
|
2.50 - 4.50x
|
13.0%
|
|
3/28/2013
|
3.25 - 4.25x
|
13.0%
|
|
6/27/3013
|
3.25 - 4.25x
|
13.5%
|
|
7/2/2013
|
3.40 - 4.80x
|
13.5%
|
|
7/3/2013
|
3.40 - 4.80x
|
13.5%
|
Price increased to $18.20
Price increased to $19.00
TowerView LLC | 29
Discounted Cash Flow Inconsistencies
§ From 10/26/12 PJSC Presentation to the Special Committee to the final
7/3/13 Presentation, the EBITDA multiple range used for analysis was
lowered from 3.5x-5.0x to 3.0x-4.0x and the discount rate rose from
9.5%-11.5% to 10.5%-12.5%
7/3/13 Presentation, the EBITDA multiple range used for analysis was
lowered from 3.5x-5.0x to 3.0x-4.0x and the discount rate rose from
9.5%-11.5% to 10.5%-12.5%
Discounted Cash Flow Analysis
|
(Amounts in millions, except per share data)
|
9mth. Stub
2014E |
2015E
|
2016E
|
2017E
|
2018E
|
|
Total Revenue
|
$1,520.2
|
$2,014.5
|
$2.019.6
|
$2,024.9
|
$2,030.5
|
|
% Growth
|
|
(0.1%)
|
0.3%
|
0.3%
|
0.3%
|
|
EBITDA
|
149.0
|
218.8
|
230.9
|
238.7
|
245.5
|
|
% of Total Revenue
|
9.8%
|
10.9%
|
11.4%
|
11.8%
|
12.1%
|
|
EBIT
|
106.1
|
158.7
|
165.1
|
173.0
|
180.7
|
|
% of Total Revenue
|
7.0%
|
7.9%
|
8.2%
|
8.5%
|
8.9%
|
|
Taxes @ 37.0%
|
(39.2)
|
(58.7)
|
(61.1)
|
(64.0)
|
(66.8)
|
|
Tax-Adjusted EBIT
|
66.8
|
100.0
|
104.0
|
109.0
|
113.8
|
|
Depreciation & Amortization
|
42.9
|
60.1
|
65.8
|
65.7
|
64.8
|
|
Capital Expenditures
|
(60.9)
|
(114.2)
|
(149.8)
|
(62.8)
|
(46.0)
|
|
Change in Net Working Capital
|
13.9
|
26.6
|
31.6
|
27.1
|
32.5
|
|
Free Cash Flow
|
$62.7
|
$72.5
|
$51.6
|
$139.0
|
$165.1
|
|
|
|
Exit Multiple
|
||||||
|
|
|
3.0x
|
3.5x
|
4.0x
|
4.5x
|
5.0x
|
5.5x
|
6.0x
|
|
Discount Rate
|
6.0%
|
$22.54
|
$25.27
|
$27.99
|
$30.72
|
$33.45
|
$36.17
|
$38.90
|
|
|
7.0%
|
$21.50
|
$24.11
|
$26.72
|
$29.33
|
$31.94
|
$34.55
|
$37.16
|
|
|
8.0%
|
$20.51
|
$23.01
|
$25.51
|
$28.01
|
$30.50
|
$33.00
|
$35.50
|
|
|
9.0%
|
$19.57
|
$21.96
|
$24.35
|
$26.75
|
$29.14
|
$31.53
|
$33.93
|
|
|
10.5%
|
$18.24
|
$20.48
|
$22.73
|
$24.97
|
$27.22
|
$29.46
|
$31.71
|
|
|
11.5%
|
$17.40
|
$19.55
|
$21.71
|
$23.86
|
$26.01
|
$28.17
|
$30.32
|
|
|
12.5%
|
$16.60
|
$18.67
|
$20.74
|
$22.80
|
$24.87
|
$26.93
|
$29.00
|
Discount rates and multiples used by PJSC
TowerView LLC | 31
New World Headquarters
§ All future stock performance, discounted cash flow analysis, and levered recapitalization
analysis assume upwards of $172mm to be spent on a new world headquarters, yet credit
is never given for this value, either discounted or undiscounted.
It is as if $172mm is spent and no value is created.
analysis assume upwards of $172mm to be spent on a new world headquarters, yet credit
is never given for this value, either discounted or undiscounted.
It is as if $172mm is spent and no value is created.
§ The value of the WHQ would be $5.01 undiscounted, $2.66 discounted at PJSC’s 13.5% rate,
or $3.41 at a more reasonable 8% discount rate from Year 5.(a)
or $3.41 at a more reasonable 8% discount rate from Year 5.(a)
§ AM expects to receive approximately $88mm in state and local incentives over a 20 year
period, not currently reflected in the Treasury Model.
period, not currently reflected in the Treasury Model.
§ The incentives are worth between $1.16 and $1.44 per share on a present value basis
§ Management has recently indicated the WHQ build is less likely to occur. It has been on
hold since the proposed merger was announced in September 2012. During the Q4FY13
conference call on 5/6/13 management said:
“Board of Directors delayed the project in light of the proposed going-private transaction,
and we believe that that is delayed until at least the closure of that transaction, if not
further… we don't know what will happen post-closing. There are a lot of things that will
be examined.” (b)
hold since the proposed merger was announced in September 2012. During the Q4FY13
conference call on 5/6/13 management said:
“Board of Directors delayed the project in light of the proposed going-private transaction,
and we believe that that is delayed until at least the closure of that transaction, if not
further… we don't know what will happen post-closing. There are a lot of things that will
be examined.” (b)
(a) Assuming 34.3mm current shares and incremental $172mm capital expenditure in FY14 through FY17 as per the PJSC presentations
(b) 5/18/13 American Greetings 4Q conference call Bloomberg LP transcript
Discounted Cash Flow Analysis: No New WHQ
|
|
|
Exit Multiple
|
||||||
|
|
|
3.0x
|
3.5x
|
4.0x
|
4.5x
|
5.0x
|
5.5x
|
6.0x
|
|
Discount Rate
|
6.0%
|
$26.89
|
$29.62
|
$32.35
|
$35.07
|
$37.80
|
$40.53
|
$43.25
|
|
|
7.0%
|
$25.75
|
$28.36
|
$30.97
|
$33.58
|
$36.19
|
$38.80
|
$41.41
|
|
|
8.0%
|
$24.67
|
$27.17
|
$29.67
|
$32.17
|
$34.67
|
$37.17
|
$39.66
|
|
|
9.0%
|
$23.64
|
$26.03
|
$28.43
|
$30.82
|
$33.21
|
$35.61
|
$38.00
|
|
|
10.5%
|
$22.18
|
$24.42
|
$26.67
|
$28.92
|
$31.16
|
$33.41
|
$35.65
|
|
|
11.5%
|
$21.26
|
$23.41
|
$25.57
|
$27.72
|
$29.87
|
$32.03
|
$34.18
|
|
|
12.5%
|
$20.39
|
$22.45
|
$24.52
|
$26.58
|
$28.65
|
$30.71
|
$32.78
|
Discount rates and multiples used by PJSC
|
(Amounts in millions, except per share data)
|
9mth. Stub
2014E |
2015E
|
2016E
|
2017E
|
2018E
|
|
Total Revenue
|
$1,520.2
|
$2,014.5
|
$2.019.6
|
$2,024.9
|
$2,030.5
|
|
% Growth
|
|
(0.1%)
|
0.3%
|
0.3%
|
0.3%
|
|
EBITDA
|
149.0
|
218.8
|
230.9
|
238.7
|
245.5
|
|
% of Total Revenue
|
9.8%
|
10.9%
|
11.4%
|
11.8%
|
12.1%
|
|
EBIT
|
106.1
|
158.7
|
165.1
|
173.0
|
180.7
|
|
% of Total Revenue
|
7.0%
|
7.9%
|
8.2%
|
8.5%
|
8.9%
|
|
Taxes @ 37.0%
|
(39.2)
|
(58.7)
|
(61.1)
|
(64.0)
|
(66.8)
|
|
Tax-Adjusted EBIT
|
66.8
|
100.0
|
104.0
|
109.0
|
113.8
|
|
Depreciation & Amortization
|
42.9
|
60.1
|
65.8
|
65.7
|
64.8
|
|
Capital Expenditures
|
(60.9)
|
(114.2)
|
(149.8)
|
(62.8)
|
(46.0)
|
|
Change in Net Working Capital
|
13.9
|
26.6
|
31.6
|
27.1
|
32.5
|
|
Addback WHQ Capital Expenditures
|
9.8
|
42.2
|
102.8
|
16.8
|
0.0
|
|
Free Cash Flow
|
72.5
|
114.7
|
154.4
|
155.8
|
165.1
|
TowerView LLC | 33
Discounted Cash Flow Inconsistencies: Summary
§ From 10/26/12 PJSC Presentation to the final 7/3/13 Presentation, the EBITDA
multiple range used for analysis was lowered and the discount rate rose
multiple range used for analysis was lowered and the discount rate rose
– During that time the S&P 500 rallied 14.3% from 1411.94 on 10/26/12 to
1614.08 on 7/3/13, and the S&P 500 LTM EBITDA multiple rose from 8.85x
at 2Q2012 to 9.91x.(a)
1614.08 on 7/3/13, and the S&P 500 LTM EBITDA multiple rose from 8.85x
at 2Q2012 to 9.91x.(a)
– During this period of time, interest rates fell for leveraged loans.
(a) Data from Bloomberg LP
§ Free cash flow in the PJSC analysis includes up to $172mm for capital
expenditures for a new World Headquarters, yet there is no credit in the valuation
for having built it
expenditures for a new World Headquarters, yet there is no credit in the valuation
for having built it
§ The Clinton Cards turnaround is excluded from the free cash flow analysis
§ Net debt in the PJSC analysis excludes any existing non-earning assets
Illustrative Levered Recap
as presented by PJSC
as presented by PJSC
TowerView LLC | 34
§ Assumes an $8.00 dividend is paid on 5/31/13,(a) incremental borrowing of $265
million dollars, resulting in a 2.4x debt / LTM EBITDA
million dollars, resulting in a 2.4x debt / LTM EBITDA
§ At 2.7x total debt / LTM EBITDA leverage, the Company would be able to effect
a $10 per share dividend
a $10 per share dividend
§ Assumes no make-whole payment on existing 7.375% Senior Notes(b)
§ Assumes suspension of regular $0.15 / quarter dividend
(a) Assumes $265mm of incremental leverage using Term Loan B at L + 450bps with 125bps floor (2.4x Total Debt/LTM EBITDA).
(b) Does not factor in potential consent fees or changes to interest rate.
TowerView LLC | 36
Levered Recapitalization Inconsistencies
§ Assumes cost of debt at L + 450 with 125bps Libor floor in the 3/28/13 debt
commitment while the 7/10/13 Proxy reveals debt costing L + 325bps and a Libor
floor of 75bps.
A reduction of 100bps not incorporated into the Levered
Recapitalization presentation
commitment while the 7/10/13 Proxy reveals debt costing L + 325bps and a Libor
floor of 75bps.
A reduction of 100bps not incorporated into the Levered
Recapitalization presentation
§ The 3/28/13 Presentation assumed an $8.00 and $10.00 dividend with leverage of
2.8x and 3.1x. The 7/3/13 Presentation assumes the same $8.00 and $10.00
dividend but the leverage is lower at 2.4x and 2.7x. AM’s results and balance sheet
have improved since 3/28/13, yet the revised Levered Recapitalization analysis
does not take advantage of this enhancement.
2.8x and 3.1x. The 7/3/13 Presentation assumes the same $8.00 and $10.00
dividend but the leverage is lower at 2.4x and 2.7x. AM’s results and balance sheet
have improved since 3/28/13, yet the revised Levered Recapitalization analysis
does not take advantage of this enhancement.
TowerView LLC | 37
TowerView’s Levered Recapitalization Analysis
§ A $10 per share special dividend would add $331.5mm of debt, which is less than
the $425mm of debt the proposed merger places on the company. A
recapitalization also excludes the usurious $240mm preferred stock, which the
rating agencies consider debt.
the $425mm of debt the proposed merger places on the company. A
recapitalization also excludes the usurious $240mm preferred stock, which the
rating agencies consider debt.
§ Given that comparable companies currently trade at a low of 4.68x EBITDA,
average of 5.57x EBITDA, and high of 9.61x EBITDA, this would imply
$14.19-$19.84-$45.36 for the stub value
$24.19-$29.84-$55.36 for the total transaction value(a)
average of 5.57x EBITDA, and high of 9.61x EBITDA, this would imply
$14.19-$19.84-$45.36 for the stub value
$24.19-$29.84-$55.36 for the total transaction value(a)
§ Utilizing the same leverage multiple as the original PJSC analysis in the $18.20
fairness opinion a dividend of $12.50 or more can be paid.
fairness opinion a dividend of $12.50 or more can be paid.
(a) Excludes negative multiples and any multiple greater than 10x
TowerView LLC | 38
Missing LBO Analysis
§ PJSC did not include an illustrative LBO analysis after the 2/24/13
presentation “based on PJSC’s professional judgment, that the base-case
scenario for a typical leveraged buyout involving a hypothetical third
party potential buyer would not be relevant…”(a)
presentation “based on PJSC’s professional judgment, that the base-case
scenario for a typical leveraged buyout involving a hypothetical third
party potential buyer would not be relevant…”(a)
§ How is it not relevant as a check on Fairness?
§ PJSC did not try and model out the Weiss Family LBO
§ A Financial Leveraged Recapitalization is the functional equivalent of a
public LBO
public LBO
(a) Page 56 of 7/10/13 Proxy
TowerView LLC | 39
Analysis of Weiss Family LBO
*All Sales, EBITDA, D&A, Capital Expenditure and Working Capital Assumptions based on 13E3/A, filed 7/5/13
|
2. Ending Equity Value
|
|
|
|
|
|
|
Ending Equity Value
|
407
|
529
|
652
|
775
|
898
|
|
|
|
|
|
|
|
|
Terminal Multiple
|
4.0
|
4.5
|
5.0
|
5.5
|
6.0
|
|
IRR
|
56.1%
|
64.5%
|
71.5%
|
77.5%
|
82.8%
|
*Does not include the value of the New World Headquarters, estimated to be $172mm
*Does not eliminate public company costs from free cash flow
*Does not eliminate public company costs from free cash flow
|
1. Summary of Assumptions (all numbers in millions)
|
||||
|
Sources
|
|
|
Uses
|
|
|
Cash
|
64
|
|
Cash for working capital
|
42
|
|
New Revolver
|
78
|
|
Purchase Equity
|
651
|
|
Term Loan B
|
350
|
|
Revolver Paydown
|
35
|
|
Rollover Notes
|
225
|
|
Rollover Notes
|
225
|
|
New Holding Company Preferred Equity
|
240
|
|
Financing Expenses
|
29
|
|
Management Equity
|
44
|
|
M&A expenses
|
19
|
|
Total Sources
|
1,001
|
|
Total Uses
|
1,001
|
TowerView LLC | 40
3. PJSC Fairness Opinion is Conflicted
TowerView LLC | 41
PJSC Compensation Conflict
§ PJSC can be compensated up to $6mm(a):
- $0.5 million retainer
- $1.5 million for the fairness opinion
- $2.0 million transaction fee to be paid contingent upon consummation of the
merger
merger
- $2.0 million at Special Committee sole discretion of which $1.0 million has been paid
to date
to date
§ At a minimum, one third of PJSC fee is for the success of this transaction, a direct
conflict with providing advice as to the transaction’s fairness then and now.
conflict with providing advice as to the transaction’s fairness then and now.
(a) Pages 63 of the Proxy filed 7/10/13
TowerView LLC | 42
Delaware’s View of Contingent Compensation
§ Judge Chandler
“A contingently paid and possibly interested financial advisor
might be more convenient and cheaper absent a deal, but its
potentially misguided recommendations could result in even
higher costs to the special committee’s shareholder
constituency in the event a deal was consummated.”(a)
“A contingently paid and possibly interested financial advisor
might be more convenient and cheaper absent a deal, but its
potentially misguided recommendations could result in even
higher costs to the special committee’s shareholder
constituency in the event a deal was consummated.”(a)
(a) In re Tele-Commc’ns, Inc. S’holders Litig., 2005 WL 3642727, at *10 (Del. Ch. Dec. 21, 2005)
TowerView LLC | 43
4. Weiss Family Conflicts
TowerView LLC | 44
Management Obfuscation
§ Historically, earnings are released via a detailed press release, followed by a conference
call. Management along with Investor Relations have made themselves available for follow
up questions from both the call and the 10-Q/10-K filing.
call. Management along with Investor Relations have made themselves available for follow
up questions from both the call and the 10-Q/10-K filing.
§ 4/12/13 Press release for full year earnings to be released via 10-K with no conference
call, no follow up
call, no follow up
§ TowerView protested to the Special Committee.
§ 5/8/13 Press release announces conference call on 5/9/13 at 9:30 am, though
no earning press release, only the 10-K filed that day at 7:37 am
no earning press release, only the 10-K filed that day at 7:37 am
§ Historically, 4Q earnings have been released April 22 - April 28 and the 10-K approximately
April 29. Due to the very late release and filing, the company claimed to be in a quiet
period for 1Q earnings and would not discuss the 4Q earnings and 10-K after the
conference call.
April 29. Due to the very late release and filing, the company claimed to be in a quiet
period for 1Q earnings and would not discuss the 4Q earnings and 10-K after the
conference call.
§ A similar 10-Q filing and earnings call with no press release or follow up calls occurred for
1QFY14 on 7/10/13.
1QFY14 on 7/10/13.
§ Management will not answer questions regarding the Proxy or 13E3.
TowerView LLC | 45
Schedule of Adjustments
as presented by PJSC
as presented by PJSC
Source: Company’s Forms 10-K for the fiscal years ended 2/28/10, 2/28/11, and 2/29/12, 2/28/13, Management guidance for LTM period ended
5/31/13 and Updated Management Treasury Model dated 6/26/13 for FY2014E, with certain adjustments based on Management guidance,
including certain reclassification of Depreciation and Amortization for FY2011 and FY2012 and normalizing LTM EBITDA for 365-day period.
5/31/13 and Updated Management Treasury Model dated 6/26/13 for FY2014E, with certain adjustments based on Management guidance,
including certain reclassification of Depreciation and Amortization for FY2011 and FY2012 and normalizing LTM EBITDA for 365-day period.
|
(Amounts in Millions)
|
Fiscal Year Ended February 28,
|
|
LTM
|
FYE 2/28,
|
|
|||
|
|
2010
|
2011
|
2012
|
2013
|
|
May- 13
|
2014E
|
|
|
Operating Income
|
$139.1
|
$174.7
|
$149.6
|
$94.2
|
|
$137.2
|
$138.8
|
|
|
Depreciation & Amortization
|
45.2
|
45.2
|
43.7
|
43.7
|
|
51.0
|
56.0
|
|
|
Unadjusted EBITDA
|
$184.3
|
$219.9
|
$193.2
|
$143.6
|
|
$188.2
|
$194.7
|
|
|
|
|
|
|
|
|
|
|
|
|
Charges Associated With Clinton Cards
|
--
|
--
|
--
|
43.7
|
|
10.9
|
0.3
|
Impairments, debt expenses, fees and closure costs
|
|
NAGCD
|
--
|
--
|
--
|
--
|
|
(6.1)
|
--
|
Timing impact of 6 extra days in quarter
|
|
AGP Cookie Jar Settlement
|
--
|
--
|
--
|
--
|
|
(0.9)
|
--
|
Reflects delayed fiscal 2013 payments into LTM period
|
|
UKG
|
--
|
--
|
--
|
--
|
|
(0.8)
|
--
|
Timing impact of 6 extra days in quarter
|
|
Profit Sharing
|
--
|
--
|
--
|
--
|
|
0.6
|
--
|
~8% of domestic earnings from timing impact
|
|
Party Goods Transaction
|
(18.4) |
--
|
--
|
--
|
|
--
|
--
|
Gain on sale
|
|
Mexico Shutdown
|
18.2
|
--
|
--
|
--
|
|
--
|
--
|
Closing of Carlton Mexico
|
|
Retail Disposition
|
29.2
|
--
|
--
|
--
|
|
--
|
--
|
Sales of stores to Schurman
|
|
RPG Integration Costs
|
--
|
10.3
|
--
|
--
|
|
--
|
--
|
Stores set up costs and other integration costs
|
|
Lawsuit
|
24.0
|
--
|
--
|
--
|
|
--
|
--
|
Settlement of a RPG lawsuit
|
|
Goodwill and Other Intangibles Impairment
|
--
|
0.3
|
27.2
|
--
|
|
--
|
--
|
Related to NAGCD, UK and Interactive
|
|
Gain from Sale of Intellectual Property
|
--
|
--
|
(4.5) |
--
|
|
--
|
--
|
Sold certain minor character properties
|
|
Gain from Liquidation of Business in France
|
(3.3) |
--
|
--
|
--
|
|
--
|
--
|
Currency translation adjustment from sale
|
|
Loss on Sale of Old WHQ
|
--
|
--
|
--
|
--
|
|
--
|
18.5
|
Estimated loss on sale of WHQ
|
|
One Time Legal Costs
|
--
|
--
|
--
|
9.5
|
|
6.5
|
--
|
Accrual for certain legal expenses
|
|
Voluntary Compliace Program
|
--
|
--
|
--
|
1.1
|
|
1.1
|
--
|
Related to prior years' underexpensing catch up
|
|
Webshots
|
(1.7) |
(0.7) |
2.4 |
(2.3) |
|
(1.9)
|
--
|
Pro forma adjustment for sale of Webshots
|
|
Properties Licensing Termination Expense
|
--
|
--
|
--
|
2.1
|
|
--
|
--
|
Termination of Certain Agency Agreements
|
|
New D&O Insurance Program
|
--
|
--
|
--
|
--
|
|
0.7
|
3.0
|
Normalization D&O insurance
|
|
Proposed Going Private Transaction Costs
|
--
|
--
|
--
|
6.9
|
|
9.5
|
--
|
Current process costs
|
|
Scan-Based Trading
|
1.5
|
5.7
|
6.8
|
7.7
|
|
9.1
|
5.0
|
Impact of scan-based trading conversions
|
|
Total Adjustment
|
$49.5
|
$15.6
|
$31.9
|
$68.7
|
|
$28.7
|
$26.8
|
|
|
Adjusted EBITDA
|
$233.8
|
$235.5
|
$225.1
|
$212.3
|
|
$216.9
|
$221.5
|
|
|
Adjusted EBIT
|
188.6
|
190.3
|
181.4
|
162.9
|
|
165.9
|
165.5
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Adjustments as a % of Unadjusted EBITDA
|
26.9%
|
7.1%
|
16.5%
|
47.9%
|
|
15.3%
|
13.7%
|
|
TowerView LLC | 46
Transaction Financing Costs
§ 7/1/13 Family letter to the Special Committee states it has all financing source consents to
increase offer to $19.00
increase offer to $19.00
§ 7/2/13 In refusing to meet the Special Committee’s demand for $19.50, the Weiss Family
informs Dr. Cowen, head of the Special Committee, that the transaction financing markets
had become less favorable than when the debt commitments were entered into in March
2013. The Family was concerned that the financing sources would not support a further
increase.
informs Dr. Cowen, head of the Special Committee, that the transaction financing markets
had become less favorable than when the debt commitments were entered into in March
2013. The Family was concerned that the financing sources would not support a further
increase.
§ Sometime after the March 2013 financing commitments, while the Weiss Family claims the
financing markets had become less favorable, the senior credit and revolver terms improved
financing markets had become less favorable, the senior credit and revolver terms improved
– March 2013:
Term Loan: Libor + 375 with a Libor floor of 125bps
Revolver: Libor + 350 with a Libor floor of 125bps
Term Loan: Libor + 375 with a Libor floor of 125bps
Revolver: Libor + 350 with a Libor floor of 125bps
– July 2013:
Term Loan: Libor + 325 with a Libor floor of 75bps
Revolver: Libor + 275 with no Libor floor
Term Loan: Libor + 325 with a Libor floor of 75bps
Revolver: Libor + 275 with no Libor floor
– A savings of 100 to 175bps
Source: Proxy filed 7/10/13
TowerView LLC | 47
LBO Analysis
§ An analysis of the Weiss Family LBO shows value creation of $600mm+
and an IRR of over 64%(a) on an investment of $44mm. This is a direct
transfer of value from public shareholders to the Weiss Family.
and an IRR of over 64%(a) on an investment of $44mm. This is a direct
transfer of value from public shareholders to the Weiss Family.
(a) Based on the Koch preferred minimum equity exit multiple of 4.5x EBITDA
TowerView LLC | 48
Family Control of the Company: Voting vs. Economic
§ “The economic rights of each class of common shares are identical, but the
voting rights differ.”(a)
voting rights differ.”(a)
§ “On September 25, 2012, the Family Shareholders determined that the best
course of action would be for the Company to return to its roots as a family
owned business.”(b)
course of action would be for the Company to return to its roots as a family
owned business.”(b)
§ Today the company is family controlled with 43% vote but with only 7.8% of the
economics ($44mm common stock ownership but securing a $15mm loan). The
top 5 family members took home $5.3mm in compensation last year.(c)(d)(e)
economics ($44mm common stock ownership but securing a $15mm loan). The
top 5 family members took home $5.3mm in compensation last year.(c)(d)(e)
§ Today the Weiss Family owns the vote, not the company
§ “The economic rights of each class of common shares are identical…”(a)
(a) Page 15 of FY2012 10K filed 5/9/2013
(b) Page 18 of the Proxy filed 7/10/13
(c) Page 3 of the Proxy filed 7/10/13
(d) Page 7 of the Guaranty and Voting Agreement
(e) 2012 Proxy
(e) 2012 Proxy
TowerView LLC | 49
Issues with the Merger Agreement
§ No Process/Auction
§ No Go Shop period
§ No solicitation permitted
§ No reduction of fees if topped
§ $7.3mm payment to the Weiss Family if unaffiliated shareholders vote down the
transaction even if there is no topping bid or no change in recommendation by
the Special Committee
transaction even if there is no topping bid or no change in recommendation by
the Special Committee
TowerView LLC | 50
5. Alternatives
TowerView LLC | 51
Alternative Transactions
Statements
§9/30/12 “The special committee was delegated the exclusive power and authority of the
board of directors to, among other things… identify, review and evaluate other
alternatives available to the Company…”(a)
board of directors to, among other things… identify, review and evaluate other
alternatives available to the Company…”(a)
§10/26/12 “The special committee and its advisors discussed potential restructuring
alternatives that might be available to the Company in lieu of engaging in a
potential transaction with the Family Shareholders.” (b)
alternatives that might be available to the Company in lieu of engaging in a
potential transaction with the Family Shareholders.” (b)
Reality
§ From 10/27/12 through today, there has been no further discussion or pursuit of
alternatives to the family buyout including “just saying no” and returning to prior history
buying back stock and paying dividends from the tremendous free cash flow outlined in the
projections.
alternatives to the family buyout including “just saying no” and returning to prior history
buying back stock and paying dividends from the tremendous free cash flow outlined in the
projections.
§ From March 2006 to August 2012, American Greetings has acquired $676mm of common
stock, reducing its shares outstanding by 46% and paying $136mm in dividends.
stock, reducing its shares outstanding by 46% and paying $136mm in dividends.
§ There did not appear to be any serious effort to pursue an alternative transaction.
(a) Page 19 of the Proxy filed 7/3/13
(b) Page 22 of the Proxy filed 7/3/13
TowerView LLC | 52
Alternative Transactions
§ Given that free cash flow normalizes at $155mm per year without a New WHQ, a return to
the prior history of common share repurchases would shrink the float to 0 at the merger
price in approximately 4 years.
the prior history of common share repurchases would shrink the float to 0 at the merger
price in approximately 4 years.
§ Alternatively, a leveraged recapitalization of $10.00 or more will provide greater value.
TowerView LLC | 53
Worth More as a Standalone Company
Based on the company’s recent outperformance, strong
financial guidance, greater disclosure of financial adjustments,
as well as the price movement and trading multiples of the
comparable companies, we believe American Greetings would
be trading at a significant premium to $19.00 absent a
transaction.
financial guidance, greater disclosure of financial adjustments,
as well as the price movement and trading multiples of the
comparable companies, we believe American Greetings would
be trading at a significant premium to $19.00 absent a
transaction.
Appendix A: Peer Companies Allocated by Segment
TowerView LLC |
|
NAGCD
|
CSS, BTH, QUAD, RRD, PAJ, SCHL, ENRO, YLO, BKS, HGG, BBY, GME
|
|
International
|
CSS, BTH, QUAD, RRD, PAJ, SCHL, ENRO, YLO, BKS, HGG, BBY, GME
|
|
Retail (Clinton)
|
CSS, BTH, QUAD, RRD, PAJ, SCHL, ENRO, YLO, BKS, HGG, BBY, GME
|
|
AG Interactive
|
SFLY, FLWS, PRSS, ICON, CHKE, MDP
|
|
In-store
|
CSS, BTH, QUAD, RRD, PAJ, SCHL, ENRO, YLO, BKS, HGG, BBY, GME
|
|
Properties(a)
|
SFLY, FLWS, PRSS, ICON, CHKE, MDP
|
(a) Using same multiples as AG Interactive plus 2x
TowerView LLC |
Appendix B: Clinton Cards Investments
|
(Amounts in millions)
|
|
|
Clinton Card Debt Purchased
|
56.5
|
|
Intersegment Operating Profit Elimination
|
2.9
|
|
Transaction Costs
|
7.1 - 15.0
|
|
Retail Inventory Increase
|
27.0
|
|
Capital Expenditure/Investment
|
?
|
|
|
93.2 - 101.1
|
Source: 2/28/13 10K filed 5/9/13
Appendix C: Blyth, Inc.
TowerView LLC |
§ Blyth, Inc. is an erroneous comparable for American Greetings. Their legacy business PartyLite sells candles and potpourri
through house parties and has tremendous competition for customers from other retailers as well as for distributors from
other home distribution businesses like Avon. This business has seen sales decline nearly 20% per year for the past three
years and double digit percentage declines in its number of independent distributors. This contrasts with American
Greetings, a duopoly business that continues to take market share.
through house parties and has tremendous competition for customers from other retailers as well as for distributors from
other home distribution businesses like Avon. This business has seen sales decline nearly 20% per year for the past three
years and double digit percentage declines in its number of independent distributors. This contrasts with American
Greetings, a duopoly business that continues to take market share.
§ Blyth’s 2008 investment in ViSalus, a multi-level marketing company that sells energy drinks and supplements, was meant
to transform this company. It, however also shares no meaningful characteristics with American Greetings. This company
showed extraordinary growth during 2011 and 2012, leading Blyth stock to climb dramatically as Blyth prepared to IPO part
of its ownership in ViSalus at a very high valuation.
to transform this company. It, however also shares no meaningful characteristics with American Greetings. This company
showed extraordinary growth during 2011 and 2012, leading Blyth stock to climb dramatically as Blyth prepared to IPO part
of its ownership in ViSalus at a very high valuation.
§ Just one month after filing the registration statement for this IPO, Moody’s put the company on negative credit watch due
to the fact that they could not figure out how, outside of this IPO, Blyth would be able to fund its obligation to purchase
the equity in ViSalus sales, reaching $271mm compared to $167mm on the company’s balance sheet.
to the fact that they could not figure out how, outside of this IPO, Blyth would be able to fund its obligation to purchase
the equity in ViSalus sales, reaching $271mm compared to $167mm on the company’s balance sheet.
§ The day after American Greetings announced the receipt of an offer to go private from the Weiss Family, Blyth announced
that they would not go forward with the IPO of ViSalus, leading the stock to drop from $32.57 to $25.68 on September 26,
2012.
that they would not go forward with the IPO of ViSalus, leading the stock to drop from $32.57 to $25.68 on September 26,
2012.
§ These events, along with the subsequent double digit decline in sales of ViSalus in early 2013, led the stock to fall from
$32.57 on the day the Weiss Family made their offer, to below $15.00 today, a decline of over 50%.
$32.57 on the day the Weiss Family made their offer, to below $15.00 today, a decline of over 50%.
§ It is clear to anyone who has spent time analyzing Blyth, Inc. that the business shares little to no similarities with American
Greetings and the use of the trading multiple or subsequent stock performance of the company is entirely misleading with
regard to analyzing where American Greetings’ stock would trade without a go-private transaction.
Greetings and the use of the trading multiple or subsequent stock performance of the company is entirely misleading with
regard to analyzing where American Greetings’ stock would trade without a go-private transaction.
TowerView LLC |
Appendix D: Financing Market Movement: Leveraged Loans
§ From 10/26/12 PJSC Presentation to the final 7/3/13 Presentation, the EBITDA multiple range used for
analysis was lowered and the discount rate rose
analysis was lowered and the discount rate rose
– During this period of time, interest rates fell for leveraged loans(a)
(a) CDX.IG.19 data from Bloomberg LP as of 7/3/13
TowerView LLC |
Appendix E: Financing Market Movement: Leveraged Loans
§ From 10/26/12 PJSC Presentation to the final 7/3/13 Presentation, the EBITDA multiple range used for
analysis was lowered and the discount rate rose
analysis was lowered and the discount rate rose
– During this period of time, interest rates fell for leveraged loans(a)
(a) CDX.LCDX.19 data from Bloomberg LP as of 7/3/13. Index trades in dollar price.
TowerView LLC |
Appendix F: Discounted Cash Flow Analysis Assumption
Inconsistencies(a)
Inconsistencies(a)
(a) All numbers taken from “DCF Summary” slide in PJSC Presentation to the Special Committee on the specified dates
|
|
Terminal EBITDA Multiple Used by
PJSC |
Weighted Average Cost of
Capital Used by PJSC |
|
10/26/2012
|
3.50 - 5.00x
|
9.50 - 11.50%
|
|
11/19/2012
|
3.00 - 4.50x
|
9.50 - 11.50%
|
|
12/7/2012
|
3.00 - 4.50x
|
9.50 - 11.50%
|
|
2/24/2013
|
2.50 - 4.50x
|
10.00 - 12.00%
|
|
3/28/2013
|
3.00 - 4.00x
|
10.50 - 12.50%
|
|
6/27/2013
|
3.00 - 4.00x
|
10.50 - 12.50%
|
|
7/3/2013
|
3.00 - 4.00x
|
10.50 - 12.50%
|
Price increased to $18.20
Price increased to $19.00
Appendix G: Leverage vs. EBITDA Trading Multiple
TowerView LLC |
(a) Data from Bloomberg LP
TowerView LLC |
Appendix H: Financial Impact of World Headquarters
as presented by PJSC
as presented by PJSC
§ Care expects to receive ~$88mm in state and local incentives over a 20 year period
– Not currently reflected in the Treasury Model
§ Only $19mm in incentive payments is projected to be received in the initial three-year
Treasury Model period
Treasury Model period
§ Financial impact of remaining in current headquarters is meaningfully positive
Source: Care Management
|
|
FY14
|
FY15
|
FY16
|
FY17
|
FY18
|
FY19
|
FY20
|
FY21
|
FY22
|
FY23
|
FY24
|
FY25
|
FY26
|
FY27
|
FY28
|
FY29
|
FY30
|
FY31
|
FY32
|
FY33
|
Total
|
|
Grants
|
$2.5
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
$2.5
|
|
State Tax Incentives
|
5.0
|
$5.0
|
$5.0
|
$5.0
|
$5.0
|
$5.0
|
$5.0
|
$5.0
|
$5.0
|
$5.0
|
$5.0
|
$5.0
|
$5.0
|
$5.0
|
$5.0
|
--
|
--
|
--
|
--
|
--
|
$75.0
|
|
Municipal Tax Incentives
|
0.5
|
0.5
|
0.5
|
0.5
|
0.5
|
0.5
|
0.5
|
0.5
|
0.5
|
0.5
|
0.5
|
0.5
|
0.5
|
0.5
|
0.5
|
0.5
|
0.5
|
0.5
|
0.5
|
0.5
|
$10.8
|
|
Total
|
$8.0
|
$5.5
|
$5.5
|
$5.5
|
$5.5
|
$5.5
|
$5.5
|
$5.5
|
$5.5
|
$5.5
|
$5.5
|
$5.5
|
$5.5
|
$5.5
|
$5.5
|
$0.5
|
$0.5
|
$0.5
|
$0.5
|
$0.5
|
$88.3
|
|
PV of Tax Incentives
|
|||||
|
|
Discount Rate
|
||||
|
|
8.5%
|
9.5%
|
10.5%
|
11.5%
|
12.5%
|
|
Total PV
|
$48.9
|
$46.2
|
$43.7
|
$41.4
|
$39.3
|
|
Per Share
|
$1.44
|
$1.36
|
$1.29
|
$1.22
|
$1.16
|
TowerView LLC |
Appendix I: Levered Recapitalization Analysis Assumption
Inconsistencies(a)
Inconsistencies(a)
(a) All numbers taken from “Future Stock Price Analysis Based on Illustrative Levered Recap” slide in PJSC Presentation to the Special Committee on
the specified dates
the specified dates
|
|
Adj. EBITDA
Multiple Used by PJSC |
Cost of Equity
Used by PJSC |
|
10/26/2012
|
3.50 - 5.00x
|
12.5%
|
|
11/19/2012
|
3.00 - 4.50x
|
12.5%
|
|
12/7/2012
|
3.00 - 4.50x
|
12.5%
|
|
2/24/2013
|
2.50 - 4.50x
|
13.0%
|
|
3/28/2013
|
3.25 - 4.25x
|
13.0%
|
|
6/27/2013
|
3.25 - 4.25x
|
13.5%
|
|
7/2/2013
|
3.40 - 4.80x
|
13.5%
|
|
7/3/2013
|
3.40 - 4.80x
|
13.5%
|
|
|
Dividend Amount Used
by PJSC that if Levered 3.1x would be $10 |
|
10/26/2012
|
$8.96
|
|
12/7/2012
|
$10.13
|
|
1/27/2013
|
$8.00
|
|
2/24/2013
|
$8.00
|
|
3/28/2013
|
$8.00
|
|
6/27/2013
|
$8.00
|
|
7/2/2013
|
$8.00
|
|
7/3/2013
|
$8.00
|
Price increased to $18.20
Price increased to $19.00
TowerView LLC |
Appendix J: Summary Financial Analysis of Illustrative LBO
as presented by PJSC
as presented by PJSC
§ Assumes illustrative capital structure targeting ~30% equity contribution at 3.0x total pro
forma leverage
forma leverage
§ Assumes no make-whole payment on existing 7.375% Senior Notes(b)
(a) Assumes transaction date of 2/28/13, exit in Year 5 and $2.3mm addback to EBITDA for public company expenses for FY14E to FY18E.
(b) Does not factor in potential consent fees or changes to interest rate.
(b) Does not factor in potential consent fees or changes to interest rate.
|
Illustrative Sources at $17.50 per Share Purchase Price
|
||||
|
|
$
|
%
|
Rate
|
Debt / FY13E
EBITDA |
|
Current Senior Notes
|
$225.2
|
27.0%
|
7.38%
|
1.2 x
|
|
Term Loan B
|
361.6
|
43.3%
|
5.75%
|
1.8 x
|
|
Equity Contribution
|
247.4
|
29.7%
|
|
|
|
Total Sources
|
$834.2
|
100.0%
|
|
3.0 x
|
|
Illustrative Uses at $17.50 per Share Purchase Price
|
||
|
|
$
|
%
|
|
Cash Purchase Price of Equity
|
$574.1
|
68.8%
|
|
Existing Debt
|
245.2
|
29.4%
|
|
Estimated Fees and Expenses
|
14.9
|
1.8%
|
|
Total Uses
|
$834.2
|
100.0%
|
|
Interest Coverage and Leverage Ratios
|
||||||
|
Fiscal Year
|
2013P
F |
2014E
|
2015E
|
2016E
|
2017E
|
2018E
|
|
EBITDA(a)
|
$195.6
|
$210.8
|
$223.8
|
$232.8
|
$240.3
|
$246.6
|
|
Debt
|
586.8
|
627.1
|
602.9
|
473.8
|
339.4
|
225.2
|
|
Cash
|
39.3
|
60.0
|
60.0
|
60.0
|
60.0
|
88.7
|
|
EBITDA / Total
Interest, Gross |
5.2 x
|
5.4 x
|
5.8 x
|
6.6x
|
8.5x
|
11.7x
|
|
(EBITDA - Cap. Ex.) /
Total Interest, Gross |
1.8 x
|
1.1 x
|
2.2 x
|
5.3 x
|
6.9 x
|
9.5 x
|
|
Total Debt / EBITDA
|
3.0 x
|
3.0 x
|
2.7 x
|
2.0 x
|
1.4 x
|
0.9 x
|
|
Implied IRR Based on Purchase Price and Exit
Multiple |
|||||
|
|
Purchase Price per Share
|
||||
|
|
$17.50
|
$18.00
|
$19.00
|
$20.00
|
$21.00
|
|
2.50 x
|
14%
|
13%
|
10%
|
8%
|
6%
|
|
3.00 x
|
20%
|
18%
|
15%
|
13%
|
11%
|
|
3.50 x
|
24%
|
22%
|
20%
|
17%
|
15%
|
|
4.00 x
|
28%
|
26%
|
23%
|
21%
|
18%
|
|
4.50 x
|
32%
|
30%
|
27%
|
24%
|
22%
|
Exit Multiple
TowerView LLC |
Appendix K: Historical Adjusted EBITDA as Publicly Reported vs.
Management
as presented by PJSC
Management
as presented by PJSC
Unadjusted EBITDA, Adjusted EBITDA as Publicly Reported and Management Adjusted EBITDA ($mm)
|
Growth Rates
|
2010
|
2011
|
2012
|
LTM Nov-12
|
Treasury Plan
2013E(d) |
|
Unadjusted EBITDA (a)
|
N M
|
17.1%
|
(-12.5%)
|
(-55.2%)
|
(-33.6%)
|
|
Public Adj. EBITDA(b)
|
161.6%
|
2.0%
|
(-6.4%)
|
(-23.9%)
|
|
|
Management Adj. EBITDA(c)
|
169.4%
|
(-1.0%)
|
(-2.7%)
|
(-12.4%)
|
(-10.7%)
|
(a) Source: Company’s Forms 10-K for the fiscal years ended 2/28/09, 2/28/10, 2/28/11, 2/29/12, and Form 10-Q for the period ended 11/23/12.
(b) Source: adjustment amounts per Company’s Forms 10-K and 8-K for the fiscal years ended 2/28/09, 2/28/10, 2/28/11 and 2/29/12, and
Company’s Form 10-Q and 8-K for LTM period ended 11/23/12.
Company’s Form 10-Q and 8-K for LTM period ended 11/23/12.
(c) Source: Company’s Forms 10-K for the fiscal years ended 2/28/09, 2/28/10, 2/28/11, 2/29/12, and Form 10-Q for the period ended 11/23/12,
with certain adjustments for FY2009-FY2012 and LTM for period ended 11/23/12, including certain reclassifications of Depreciation and
Amortization for FY2012 and LTM for period ended 11/23/12, based on Management guidance.
with certain adjustments for FY2009-FY2012 and LTM for period ended 11/23/12, including certain reclassifications of Depreciation and
Amortization for FY2012 and LTM for period ended 11/23/12, based on Management guidance.
(d) Source: Management Treasury Model dated 11/30/12, with certain adjustments to FY2013E Adjusted EBITDA based on
Management guidance.
Management guidance.
(e) Source: 13E3/A filed 5/23/13. PJSC has not provided an update to the Board.
TowerView LLC |
Appendix L: Just Say No Can Work
Target
Buyer
Date of
Offer
Offer
Price
Prior to
Offer
Prior to
Offer
Initial
Offer
Price
Offer
Price
Highest
Offer
Price
Offer
Price
Date
Terminated
Terminated
Current
Price
7/10/13
Price
7/10/13
Notes
Price vs.
Price Prior
to Offer
Price Prior
to Offer
Price vs.
Highest Offer
Price
Highest Offer
Price
Illumina
Roche
1/24/2012
$37.69
$44.50
$51.00
4/18/2012
$74.33
Roche tendered and nominated directors. Roche
directors were not elected.
directors were not elected.
97.2%
45.7%
Vulcan Materials
Martin Marietta
12/12/201
1
1
$33.55
$36.69
$36.69
5/15/2012
$46.91
Offered 0.5 MLM Shares. Received court decision
enjoining MLM from puruing exchange offer,
proxy contest, etc.
enjoining MLM from puruing exchange offer,
proxy contest, etc.
39.8%
27.9%
Taro
Pharmaceuticals
Pharmaceuticals
Sun
Pharmaceuticals
Pharmaceuticals
10/18/201
1
1
$19.45
$24.50
$39.50
2/8/2013
$57.73
Sun owned approximately 66% of the company.
Lack of shareholder support.
Lack of shareholder support.
197.0%
46.2%
Tenet Healthcare
Community
Health Systems
Health Systems
12/9/2010
$17.16
$24.00
$29.00
5/9/2011
$43.35
Originally cash and stock offer. Community health
walked away and withdrew board slate after
Tenet continued to reject the offer as grossly
inadequate. Current stock price is adjusted for
stock split.
walked away and withdrew board slate after
Tenet continued to reject the offer as grossly
inadequate. Current stock price is adjusted for
stock split.
153.0%
49.4%
Casey's General
Stores
Stores
Alimentation
Couche Tard
Couche Tard
4/9/2010
$31.59
$36.00
$38.50
9/30/2010
$63.88
Couche Tard tendered and nominated directors
who were not elected.
who were not elected.
102.2%
65.9%
Airgas
Air Products
2/5/2010
$43.53
$60.00
$70.00
2/15/2011
$97.92
Just say no defense.
124.9%
39.9%
Sauer-Danfoss
Danfoss A/S
12/21/200
9
9
$9.13
$10.10
$14.00
4/29/2010
$58.50
Special committee originally accepted $13.25.
Subsequently determined that $13.25 was
inadequate and tender expired. At the end of
2012 Danfoss made an unsoliciated proposal for
the Company at $49 per share. Despite the fact
that Danfoss said it would not be a seller, SHS
determined that a 3rd party transaction would
likely maximize value and reached out to Danfoss
to see if they would participate in such a sale.
Danfoss closed the transaction at $58.50.
Subsequently determined that $13.25 was
inadequate and tender expired. At the end of
2012 Danfoss made an unsoliciated proposal for
the Company at $49 per share. Despite the fact
that Danfoss said it would not be a seller, SHS
determined that a 3rd party transaction would
likely maximize value and reached out to Danfoss
to see if they would participate in such a sale.
Danfoss closed the transaction at $58.50.
540.7%
317.9%
Cedar Fair
Apollo
12/16/200
9
9
$9.08
$11.50
$11.50
4/6/2010
$41.83
Did not meet required level of investor support.
Terminated before shareholder meeting.
Terminated before shareholder meeting.
360.6%
263.7%
Genesco
Foot Locker
4/20/2007
$39.25
$46.00
$51.00
5/31/2007
$70.79
Rejected Foot Locker's bid and decided to run a
process. Inked deal in June 2007 with Finish Line
for $54.50.
process. Inked deal in June 2007 with Finish Line
for $54.50.
80.4%
38.8%
Disney
Comcast
2/11/2004
$23.76
$26.47
$26.47
4/28/2004
$64.71
Offered 0.78 CMCSA shares. Comcast walked
away because "it has become clear that there is
no interest on the part of Disney's management
and board."
away because "it has become clear that there is
no interest on the part of Disney's management
and board."
172.3%
144.5%