EX-99.(C) 11 a2154598zex-99_c.htm EX-99.(C)

 

[GRAPHIC]

 

Continental Materials Corp.

March 14, 2005

 

Discussion Materials

Strictly Private & Confidential

 

[LOGO]

 


 

Note: The following analysis includes future earnings estimates of the Company.  Mesirow Financial has based these calculations on the Company’s internal estimates and these calculations have not been reviewed or examined by the Company’s independent public accountant, PriceWaterhouseCoopers.  These estimates make numerous assumptions with respect to industry performance and general business and economic conditions, among others. There can be no assurance that the projected results will be realized or that actual results will not be significantly higher or lower than these estimates.  Neither the Company nor Mesirow Financial assumes any responsibility for these estimates.

 

[LOGO]

 

1


Illustrative Self-Tenders

 

Upon review of a broad sampling of recently completed self-tenders, we found that the majority were priced at a premium to the share price the day before announcement.

 

•                  In 78% of the self-tenders conducted through a Dutch Auction, shares were purchased at the upper limit of the tender price range.

 

•                  Half of the Dutch Auction precedents set the lower end of the tender price range below the pre-tender closing share price.  For those Dutch Auctions that were characterized as “going-private” transactions, the low end of the tender range was priced at a premium to the pre-tender closing share price.

 

Company Name

 

Market
Capitalization

 

Exchange

 

Date Tender
Announced

 

52 Week
Hi/Low as of
Announcement

 

Closing Price
Day Before
Announcement

 

Tender Range
(if Dutch)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Elbit Medical Imaging Ltd.

 

$

228 M

 

Nasdaq

 

11/23/2004

 

$9.60 / $6.02

 

$

9.60

 

 

 

Vertrue Incorporated

 

$

353 M

 

Nasdaq

 

11/8/2004

 

$36.77 / $24.16

 

$

35.30

 

$33.50 - $38.50

(2)

Dover Downs Gaming

 

$

269 M

 

NYSE

 

11/5/2004

 

$11.97 / $8.95

 

$

10.17

 

 

 

United Online

 

$

562 M

 

Nasdaq

 

11/3/2004

 

$20.50 / $9.03

 

$

9.28

 

$9.00-$10.50

 

Nature’s Sunshine Products

 

$

218 M

 

Nasdaq

 

10/27/2004

 

$15.98 / $7.82

 

$

14.17

 

$14.20-$16.50

 

Wells Financial Corp

 

$

34 M

 

Nasdaq

 

9/28/2004

 

$34.79 / $23.31

 

$

28.75

 

$29.50- $31.50

 

Trammell Crow

 

$

502 M

 

NYSE

 

9/1/2004

 

$14.40 / $12.25

 

$

13.28

 

$13.50-$15.75

 

Pre-Paid Legal Services, Inc.

 

$

392 M

 

NYSE

 

8/26/2004

 

$27.78 / $22.10

 

$

23.75

 

$22.50 - $26.00

 

Credit Acceptance Corp.

 

$

553 M

 

Nasdaq

 

8/11/2004

 

$19.34 / $10.21

 

$

14.10

 

$14.00-$20.00

 

Scitex Corp. Ltd.(3)

 

$

253 M

 

Nasdaq

 

4/25/2004

 

$5.87 / $1.63

 

$

5.87

 

 

 

Pressure Biosciences

 

$

20 M

 

Nasdaq

 

4/16/2004

 

$3.20 / $2.32

 

$

2.65

 

 

 

First Federal Bankshares, Inc.

 

$

59 M

 

Nasdaq

 

4/16/2004

 

$35.99 / $21.15

 

$

31.77

 

$31.00 - $34.00

 

Hemlock Federal Financial

 

$

27 M

 

Nasdaq

 

3/16/2004

 

$31.75 / $27.22

 

$

28.67

 

 

 

Watson Wyatt

 

$

787 M

 

NYSE

 

3/8/2004

 

$24.75 / $18.85

 

$

23.91

 

$23.00-$25.25

 

Century Business Services, Inc.

 

$

386 M

 

Nasdaq

 

3/4/2004

 

$5.00 / $2.50

 

$

4.50

 

 

 

Zonagen

 

$

19 M

 

Nasdaq

 

10/17/2003

 

$1.81 / $0.93

 

$

1.68

 

$1.83-$2.10

 

Bogen Communications Internation

 

$

22 M

 

Nasdaq

 

11/3/2003

 

$4.80 / $3.47

 

$

4.15

 

 

 

Crazy Woman Creek Bancorp

 

$

12 M

 

Pink Sheets

 

10/3/2003

 

$15.85 / $12.38

 

$

15.00

 

$16.00-$18.25

 

Register.com

 

$

252 M

 

Nasdaq

 

7/31/2003

 

$6.18 / $2.71

 

$

6.11

 

 

 

Superior Consultant

 

$

38 M

 

Nasdaq

 

6/9/2003

 

$5.84 / $1.77

 

$

3.52

 

$2.85-$3.60

 

Keynote Systems

 

$

204 M

 

Nasdaq

 

3/12/2003

 

$9.69 / $6.21

 

$

8.88

 

 

 

Baycorp Holdings, LTD

 

$

124 M

 

Amex

 

11/15/2002

 

$13.45 / $8.50

 

$

13.25

 

 

 

Green Mountain Power Corporation

 

$

93 M

 

NYSE

 

10/18/2002

 

$19.45 / $15.89

 

$

16.17

 

$17.00 - $21.00

 

Vermont Teddy Bear Co.

 

$

18 M

 

Nasdaq

 

8/20/2002

 

$3.95 / $2.30

 

$

2.65

 

 

 

Pubco Corporation

 

$

29 M

 

Nasdaq

 

5/23/2002

 

$7.11 / $10.50

 

$

8.20

 

 

 

Rottlund Homes(4)

 

$

45 M

 

Amex

 

1/22/2002

 

$7.75 / $4.64

 

$

7.75

 

 

 

Maritrans Inc.

 

$

98 M

 

NYSE

 

12/13/2001

 

$10.00 / $7.50

 

$

9.65

 

$11.00-$12.50

 

 

Company Name

 

Premium of Low
End of Tender
Range to
Closing Price

 

Tender
Price

 

Premium to
Closing
Price(1)

 

% of
Shares
Tendered

 

Float Pre-
Tender

 

Float Post-
Tender

 

Tender Method

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Elbit Medical Imaging Ltd.

 

 

 

$

11.40

 

18.8

%

11.5

%

54.6

%

48.5

%

Fixed Price

 

Vertrue Incorporated

 

(5.1

)%

$

38.50

 

9.1

%

5.7

%

94.0

%

93.6

%

Dutch Auction

 

Dover Downs Gaming

 

 

 

$

12.00

 

18.0

%

10.0

%

78.4

%

76.0

%

Fixed Price

 

United Online

 

(3.0

)%

$

10.50

 

13.1

%

0.1

%

97.2

%

97.2

%

Dutch Auction

 

Nature’s Sunshine Products

 

0.2

%

$

16.50

 

16.4

%

6.6

%

76.3

%

74.7

%

Dutch Auction

 

Wells Financial Corp

 

2.6

%

$

31.50

 

9.6

%

7.3

%

92.0

%

91.4

%

Dutch Auction

 

Trammell Crow

 

1.7

%

$

15.75

 

18.6

%

6.2

%

93.2

%

92.8

%

Dutch Auction

 

Pre-Paid Legal Services, Inc.

 

(5.3

)%

$

26.00

 

9.5

%

5.9

%

92.4

%

91.9

%

Dutch Auction

 

Credit Acceptance Corp.

 

(0.7

)%

$

20.00

 

41.8

%

6.8

%

25.0

%

19.6

%

Dutch Auction

 

Scitex Corp. Ltd.(3)

 

 

 

$

5.67

 

(3.4

)%

11.5

%

n/a

 

n/a

 

Fixed Price

 

Pressure Biosciences

 

 

 

$

3.50

 

32.1

%

68.2

%

90.8

%

71.1

%

Fixed Price

 

First Federal Bankshares, Inc.

 

(2.4

)%

$

33.50

 

5.4

%

30.0

%

89.2

%

82.8

%

Dutch Auction

 

Hemlock Federal Financial

 

 

 

$

29.00

 

1.2

%

22.0

%

71.9

%

65.4

%

Fixed Price

 

Watson Wyatt

 

(3.8

)%

$

25.25

 

5.6

%

2.5

%

94.2

%

96.9

%

Dutch Auction

 

Century Business Services, Inc.

 

 

 

$

5.00

 

11.1

%

8.7

%

96.9

%

96.1

%

Fixed Price

 

Zonagen

 

8.9

%

$

2.10

 

25.0

%

56.9

%

90.4

%

97.3

%

Dutch Auction

 

Bogen Communications Internation

 

 

 

$

5.00

 

20.5

%

36.6

%

37.0

%

0.7

%

Fixed Price

 

Crazy Woman Creek Bancorp

 

6.7

%

$

18.25

 

21.7

%

20.0

%

89.6

%

87.1

%

Dutch Auction

 

Register.com

 

 

 

$

6.35

 

3.9

%

43.4

%

82.4

%

83.7

%

Fixed Price

 

Superior Consultant

 

(19.0

)%

$

3.60

 

2.3

%

3.3

%

53.2

%

51.6

%

Dutch Auction

 

Keynote Systems

 

 

 

$

9.50

 

7.0

%

32.9

%

88.9

%

86.1

%

Fixed Price

 

Baycorp Holdings, LTD

 

 

 

$

14.85

 

12.1

%

92.7

%

91.9

%

70.7

%

Fixed Price

 

Green Mountain Power Corporation

 

5.1

%

$

19.75

 

22.1

%

14.2

%

98.9

%

98.7

%

Dutch Auction

 

Vermont Teddy Bear Co.

 

 

 

$

3.50

 

32.1

%

50.0

%

84.7

%

74.6

%

Fixed Price

 

Pubco Corporation

 

 

 

$

10.00

 

22.0

%

5.7

%

25.5

%

21.0

%

Fixed Price

 

Rottlund Homes(4)

 

 

 

$

9.15

 

18.1

%

100.0

%

27.4

%

0.0

%

Fixed Price

 

Maritrans Inc.

 

14.0

%

$

11.50

 

19.2

%

21.4

%

88.8

%

85.3

%

Dutch Auction

 

 

 

 

High:

 

41.8

%

100.0

%

 

 

 

 

 

 

 

 

 

 

Median:

 

16.4

%

11.5

%

 

 

 

 

 

 

 

 

 

 

Mean:

 

15.3

%

25.2

%

 

 

 

 

 

 

 

 

 

 

Low:

 

(3.4

)%

0.1

%

 

 

 

 

 

 

 

 

 

Note: Companies shaded in gray represent transactions that were characterized as going-private

(1) Premium to closing price day before tender announcement.

(2) The Company’s initial tender announcement on November 8, 2004 offered a tender price range from $30.00 - $35.00.  The share price on November 7, 2004 was $31.87.

On December 15, 2004, the Company increased the tender range to $33.50 - $38.50.

(3)  Scitex is an Israeli company; Insider holdings are not disclosed.

(4) No current stock price information is available for Rottlund Homes because the shares were delisted after the tender offer. Initial offer was for $9.00/share; shares were purchased at $9.15/share.

 

2


 

Historical Trading Volume Analysis

 

Historically, Continental Materials’ stock has been relatively illiquid.  It is therefore unlikely that a tender offer will have a material impact on liquidity.

 

Five Year Daily Trading Volume

 

[CHART]

 

 

 

Average Daily
Trading Volume
(# of shares)

 

Number of Days
During Which
No Shares Traded

 

Annualized Number
of Days Stock
Didn’t Trade

 

 

 

 

 

 

 

 

 

6 months

 

252

 

79

 

158

 

 

 

 

 

 

 

 

 

1 year

 

552

 

147

 

147

 

 

 

 

 

 

 

 

 

3 years

 

662

 

412

 

137

 

 

 

 

 

 

 

 

 

5 years

 

648

 

695

 

139

 

 

3


Historical Stock Repurchase Analysis

 

•                  Historically, Continental Materials has purchased shares from shareholders wishing to liquidate a portion of their holding

•                  The Company purchased shares in every quarter during the last two years

•                  During each of these quarters, the low end of the share repurchase price range was equal to or higher than the low trading price during the respective period

 

 

 

Total

 

Total

 

Average

 

 

 

 

 

Closing Price

 

Quarter

 

Shares

 

Price

 

Price

 

High

 

Low

 

High

 

Low

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q1 2003

 

11,686

 

$

318,651

 

$

27.27

 

$

28.00

 

$

27.00

 

$

27.30

 

$

 26.45

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q2 2003

 

27,097

 

$

632,010

 

$

23.32

 

$

23.85

 

$

20.86

 

$

26.45

 

$

 20.15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q3 2003

 

1,310

 

$

30,221

 

$

23.07

 

$

23.91

 

$

23.00

 

$

23.40

 

$

 23.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q4 2003

 

23,042

 

$

638,454

 

$

27.71

 

$

29.18

 

$

24.41

 

$

29.10

 

$

 23.25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q1 2004

 

17,036

 

$

480,297

 

$

28.19

 

$

28.87

 

$

27.50

 

$

29.40

 

$

 27.40

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q2 2004

 

33,400

 

$

956,161

 

$

28.63

 

$

29.00

 

$

28.42

 

$

29.40

 

$

 28.35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q3 2004

 

13,500

 

$

383,990

 

$

28.44

 

$

29.10

 

$

28.00

 

$

29.25

 

$

 27.80

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q4 2004

 

6,013

 

$

159,720

 

$

26.56

 

$

26.64

 

$

26.44

 

$

28.70

 

$

 26.40

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

133,084

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4


Continental Materials – Self-Tender

 

Total Amount of Tender Offer

 

 

 

 

 

 

 

 

 

 

 

$

12,000,000

 

Shares Outstanding(1)

 

 

 

 

 

 

 

 

 

 

 

$

1,683,862

 

Stock Price - March 11, 2005(2)

 

 

 

 

 

 

 

 

 

 

 

28.30

 

 

Tender Offer Sensitivity Analysis

 

 

 

 

 

 

 

 

 

 

 

 

 

Self-Tender Price per Share

 

 

 

$

27.00

 

$

28.50

 

$

30.00

 

$

31.50

 

$

33.00

 

Premium to Current Share Price

 

 

 

(4.6

)%

0.7

%

6.0

%

11.3

%

16.6

%

Number of Shares Tendered(3)

 

 

 

444,444

 

421,053

 

400,000

 

380,952

 

363,636

 

Remaining Shares Outstanding (fully diluted)

 

 

 

1,239,417

 

1,262,809

 

1,283,862

 

1,302,909

 

1,320,225

 

Percentage of Company Owned by Insiders Post-Tender(4)

 

 

 

72.2

%

70.9

%

69.7

%

68.7

%

67.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Summary Metrics

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-Tender

 

 

 

 

 

 

 

 

 

 

 

Pro-Forma Market Capitalization Post-Tender

 

$

47.7

M

$

35.1

M

$

35.7

M

$

36.3

M

$

36.9

M

$

37.4

M

2004E Net Debt

 

7.0

M

19.0

M

19.0

M

19.0

M

19.0

M

19.0

M

Pro-Forma Enterprise Value Post-Tender

 

$

54.6

M

$

54.0

M

$

54.7

M

$

55.3

M

$

55.8

M

$

56.3

M

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2004E Net Debt / LTM EBITDA(5)

 

0.7

x

1.8

x

1.8

x

1.8

x

1.8

x

1.8

x

2004E Net Debt-to-Total Capital

 

12.7

%

35.1

%

34.7

%

34.3

%

34.0

%

33.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro-Forma ROE at 12/31/05

 

7.5

%

8.9

%

8.8

%

8.6

%

8.5

%

8.4

%

Pro-Forma EPS at 12/31/05

 

$

2.12

 

$

2.53

 

$

2.48

 

$

2.44

 

$

2.40

 

$

2.37

 

% Change from Pre-Tender EPS

 

 

 

19.0

%

16.8

%

14.8

%

13.2

%

11.7

%

Pro-Forma BV per Share at 12/31/05

 

$

32.44

 

$

34.40

 

$

33.76

 

$

33.20

 

$

32.72

 

$

32.29

 

% Change from Pre-Tender BV per Share

 

 

 

6.0

%

4.1

%

2.3

%

0.9

%

(0.5

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro-Forma Float(6)

 

788,741

 

344,297

 

367,688

 

388,741

 

407,789

 

425,105

 

as a% of fully diluted shares outstanding

 

46.8

%

27.8

%

29.1

%

30.3

%

31.3

%

32.2

%

 

(1) Reflects fully diluted shares outstanding.  There were 1,647,914 shares outstanding at 1/14/05.  Insiders hold 73,400 vested options; per the treasury method, exercise of these options results in 35,948 new shares issued.

(2) Reflects the closing share price on 3/11/05.

(3) If purchase price is below $30.00, the analysis assumes tender offer will be amended so that more than 400,000 shares can be purchased at an aggregate amount of $12 million.

(4) This assumes no Insiders tender their shares.  Insiders are listed on page 9.

(5) LTM EBITDA as of October 31, 2004.

(6) Assumes no Insiders tender their shares and that all institutional shares are included in the float.

 

5


Self-Tender:  Pros and Cons

 

While there are potential downsides, we believe a self-tender would be largely beneficial to Continental Materials and its shareholders.

 

Pros

 

Cons

 

 

 

•   Increased pro-forma EPS, ROE and Book Value per Share

 

•   May result in being de-listed from the American Stock Exchange

 

 

 

•   Typically well received by the market; a self-tender signals that the Company believes its stock is under-valued

 

•   Reduced float

 

 

 

•   Good use of cash; will result in an acceptable debt-to-total capital ratio (approximately 34%)

 

•   Increases amount of debt on the balance sheet, thereby reducing the Company’s financial flexibility

 

 

 

•   Provides shareholders with the opportunity to tender their shares at a premium to the recent trading price while also avoiding broker commissions

 

 

 

6


Self Tender:  Potential De-Listing

 

•                  Should Continental Materials have fewer than 300 public shareholders after a self-tender, there is a possibility that the Company could be de-listed from the American Stock Exchange (“AMEX”)

 

•                  If the Company were de-listed from the AMEX, the Over the Counter Bulletin Board (“OTCBB”) would provide a viable trading alternative for the Company’s shares

 

•                  While shares that are quoted on the OTCBB have traditionally been known to lack liquidity, trading activity has picked up significantly in the last two years

•                  In the 12 month period ending August 31, 2004, an average of 2 billion shares traded daily, reflecting a 60% increase over the previous year

•                  The OTCBB provides quotes on 3,200 unlisted securities, as well as 230 corresponding market makers

 

Source:  Traders Magazine, January 1, 2005.

 

7


Continental Materials Stock Price Performance

 

Six Month Stock Price Chart

 

One Year Stock Price Chart

 

 

 

[CHART]

 

[CHART]

 

 

 

Three Year Stock Price Chart

 

Five Year Stock Price Chart

 

 

 

[CHART]

 

[CHART]

 

Summary Statistics

 

 

 

Current Share Price:

 

$

28.30

 

52-Week High:

 

$

29.40

 

52-Week Low:

 

$

26.40

 

 

 

 

 

5-Year High:

 

$

30.15

 

5-Year Low:

 

$

10.75

 

 

 

 

 

10-Year High:

 

$

30.15

 

10-Year Low:

 

$

5.88

 

 

8


Continental Materials – Shareholder Listing

 

Institutional Investors (1)

 

# of Shares

 

%

 

 

 

 

 

 

 

Steel Partners II (Warren Lichtenstein)

 

335,700

 

20.4

%

Franklin Advisory Services

 

99,500

 

6.0

%

Dimensional Fund Advisors

 

51,600

 

3.1

%

AXA

 

23,800

 

1.4

%

Fidelity

 

21,900

 

1.3

%

Vanguard Group

 

15,351

 

0.9

%

Mellon Bank

 

14,223

 

0.9

%

Northern Trust

 

9,589

 

0.6

%

Charles Schwab

 

7,900

 

0.5

%

CalPERS

 

6,000

 

0.4

%

Others

 

999

 

0.1

%

Total Institutional Shares

 

586,562

 

35.6

%

 

Insiders (2)

 

# of Shares

 

%

 

 

 

 

 

 

 

Gidwitz Family

 

786,720

 

47.7

%

CUO Employees Profit Sharing Retirement Plan

 

63,253

 

3.8

%

Joseph Sum

 

3,000

 

0.2

%

William Andrews

 

2,000

 

0.1

%

Peter Thieriot

 

2,000

 

0.1

%

Darrell Trent

 

2,000

 

0.1

%

Thomas Carmody

 

200

 

0.0

%

Total Insider Shares

 

859,173

 

52.1

%

 

 

 

 

 

 

Total Shares Outstanding (3)

 

1,647,914

 

100.0

%

Total Insider Shares

 

859,173

 

52.1

%

Float

 

788,741

 

47.9

%

 

Notes:

(1).         Source:  Bloomberg, 1/19/05

(2).         Source:  Company Proxy, 05/26/04

(3).         Source:  Company Management, reflects shares outstanding as of 1/14/05; does not include stock options

 

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