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EXHIBIT (e)(2)
Investment Banking
Corporate and Institutional
Client Group
World Financial Center
North Tower
New York, New York
10281-1330
[Merrill Lynch Logo] 212 449 1000
July 26, 2000
Committee of Independent Directors
Board of Directors
Brookdale Living Communities, Inc.
330 North Wabash Avenue
Suite 1400
Chicago, IL 60611
Gentlemen:
Brookdale Living Communities, Inc., a Delaware corporation (the "Company"),
Fortress Registered Investment Trust, a Delaware business trust (the
"Fortress"), Fortress Brookdale Acquisition LLC, a Delaware limited liability
company (the "Purchaser") owned by Fortress, Health Partner, a Bermuda exempted
partnership and certain of their respective affiliates, and FBZ Acquisition
Corp., a Delaware corporation and wholly owned subsidiary of the Purchaser (the
"Acquisition Sub"), propose to enter into an agreement (the "Agreement")
pursuant to which the Purchaser will make a tender offer (the "Offer") for any
and all shares of the Company's common stock, par value $0.01 per share, not
already owned by Purchaser (the "Shares"), at $15.25 per Share, net to the
seller in cash. The Offer is expected to commence on August 1, 2000. The
Agreement also provides that, following consummation of the Offer, the
Acquisition Sub will be merged with and into the Company in a transaction (the
"Merger") in which each remaining Share will be converted into the right to
receive $15.25, net in cash.
You have asked us whether, in our opinion, the proposed all cash
consideration to be received by the Company's stockholders (other than the
Purchaser and its affiliates) in the Offer and the Merger, taken as a whole, is
fair to such stockholders from a financial point of view.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial
information relating to the Company that we deemed to be relevant;
(2) Reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets, liabilities and
prospects of the Company, furnished to us by the Company;
(3) Conducted discussions with members of senior management and
representatives of the Company concerning the matters described in clauses
(1) and (2) above, as well as the Company's business and prospects before
and after giving effect to the Offer and Merger;
(4) Reviewed the market prices and valuation multiples for the common
stock of the Company and compared them with those of certain publicly
traded companies that we deemed to be relevant;
(5) Reviewed the historical and projected results of operations of the
Company;
(6) Compared the proposed financial terms of the Offer and Merger with
the financial terms of certain other transactions which we deemed to be
relevant;
(7) Reviewed the merger agreement, dated July 26, 2000, among the
Company, the Purchaser, the Acquiror and the Acquisition Sub (the "Merger
Agreement"); and
(8) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our assessment
of general economic, market and monetary conditions.
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In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available and have further
relied on the assurances of management of the Company that they are not aware of
any facts that would make such information inaccurate or misleading. In
connection with the preparation of this opinion, we have not been authorized by
the Company, the Board of Directors or its Committee of Independent Directors
(the "Independent Committee") to solicit, nor have we solicited third-party
indications of interest for the acquisition of the Company. We have not assumed
any responsibility for independently verifying such information or undertaken an
independent evaluation or appraisal of any of the liabilities of the Company or
been furnished with any such evaluation or appraisal. In addition, we have not
assumed any obligation to conduct any physical inspection of the properties or
facilities of the Company. With respect to the financial forecast information
furnished to or discussed with us by the Company, we have assumed that they have
been reasonably prepared and reflect the best currently available estimates and
judgment of the Company's management as to the expected future financial
performance of the Company. We express no opinion as to such financial forecast
information or the assumptions on which they were based.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof. We have assumed that the representations and
warranties of each party to the Merger Agreement and all related documents or
instruments contemplated thereby (collectively, the "Documents") are true and
correct, that each party to the Documents will perform all covenants and
agreements required to be performed by such party under the Documents and that
all conditions to the consummation of the Offer and Merger will be satisfied
without waiver thereof. We have also assumed that all necessary governmental,
regulatory or other consents and approvals (contractual or otherwise), if any,
will be obtained and that in the course of obtaining any such consents or
approvals, no restrictions will be imposed or amendments or modifications made
that would have a material adverse effect on the contemplated benefits of the
Offer and Merger to the Company.
We are acting as financial advisor to the Independent Committee in
connection with the Offer and Merger and will receive a fee from the Company for
our services, a portion of which fee is contingent upon the consummation of the
Offer and Merger. In addition, the Company has agreed to indemnify us for
certain liabilities arising out of our engagement. We have, in the past,
provided financial advisory and financial services to the Company and may
continue to do so and have received, and may receive, fees for the rendering of
such services. In addition, in the ordinary course of our business, we may
actively trade the shares of the Company's common stock for our own account and
for the accounts of customers and, accordingly, may at any time hold a long or
short position in such securities.
This opinion is for the use and benefit of the Independent Committee
and the Board of Directors of the Company. Our opinion does not address the
merits of the underlying decision by the Company or the Purchaser to engage in
the Offer and Merger and we are not expressing any opinion herein as to the
prices at which any class of the Company's stock will trade following the
announcement or consummation of the Offer and Merger.
This opinion shall not be reproduced, disseminated, quoted, summarized or
referred to at any time, in any manner or for any purpose, nor shall any public
references to Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch") or any of its affiliates be made by the Company, the Purchaser or any of
their affiliates, without the prior written consent of Merrill Lynch.
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On the basis of and subject to the foregoing, we are of the opinion that,
as of the date hereof, the proposed all cash consideration to be received by the
Company's stockholders (other than the Purchaser and its affiliates), the Offer
and Merger, taken as a whole, is fair from a financial point of view to the
stockholders of the Company, other than Purchaser and its affiliates.
Very truly yours,
/s/ MERRILL LYNCH, PIERCE,
FENNER & SMITH INCORPORATED
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