<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 3
TO THE
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(E) OF THE SECURITIES EXCHANGE ACT OF 1934)
--------------------------
BIG FLOWER HOLDINGS, INC.
(NAME OF THE ISSUER)
<TABLE>
<S> <C>
R. THEODORE AMMON EVERCORE PARTNERS L.L.C.
EDWARD T. REILLY EVERCORE CAPITAL PARTNERS L.P.
RICHARD L. RITCHIE EVERCORE CAPITAL PARTNERS (NQ) L.P.
BFH MERGER CORP. EVERCORE CAPITAL OFFSHORE PARTNERS L.P. (CAYMAN)
THOMAS H. LEE EQUITY FUND IV, L.P. EBF GROUP L.L.C.
THL EQUITY ADVISORS IV, LLC BIG FLOWER HOLDINGS, INC.
</TABLE>
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
089159
(CUSIP NUMBER OF CLASS OF SECURITIES)
<TABLE>
<S> <C> <C>
MARK A. ANGELSON AUSTIN M. BEUTNER ANTHONY J. DINOVI
BIG FLOWER HOLDINGS, INC. EVERCORE CAPITAL PARTNERS L.P. BFH MERGER CORP.
3 EAST 54TH STREET EVERCORE CAPITAL PARTNERS (NQ) L.P. THOMAS H. LEE
NEW YORK, NEW YORK 10022 EVERCORE CAPITAL EQUITY FUND IV, L.P.
(212) 521-1600 OFFSHORE PARTNERS THL EQUITY
L.P. (CAYMAN) ADVISORS IV, LLC
EBF GROUP L.L.C. C/O THOMAS H. LEE COMPANY
65 EAST 55TH STREET, 33RD FLOOR 75 STATE STREET, SUITE 2600
NEW YORK, NEW YORK 10022 BOSTON, MASSACHUSETTS 02109
(212) 857-3100 (617) 227-1050
</TABLE>
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF PERSON(S) FILING STATEMENT)
<TABLE>
<S> <C> <C>
COPIES TO:
JOSEPH B. FRUMKIN THOMAS C. MAZZA ERIC L. COCHRAN
SULLIVAN & CROMWELL DEWEY BALLANTINE LLP SKADDEN, ARPS, SLATE, MEAGHER & FLOM
125 BROAD STREET 1301 AVENUE OF THE AMERICAS LLP
NEW YORK, NEW YORK 10004 NEW YORK, NEW YORK 10019 919 THIRD AVENUE
(212) 558-4000 (212) 259-8000 NEW YORK, NEW YORK 10022
(212) 735-3000
</TABLE>
--------------------------
This statement is filed in connection with (check the appropriate box):
/X/(a)The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under the
Securities Exchange Act of 1934.
/ /(b)The filing of a registration statement under the Securities Exchange
Act of 1933.
/ /(c)A tender offer.
/ /(d)None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies. / /
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
TRANSACTION VALUATION*: AMOUNT OF FILING FEE**:
<S> <C>
$681,315,342.30 $136,263.07
</TABLE>
* For purposes of calculating fee only. This transaction applies to an
aggregate of 22,639,875 shares of Big Flower common stock. The underlying
value of the transaction of $681,315,342.30 has been calculated pursuant to
Exchange Act Rule 0-11 by (a) multiplying $30.0936 (the average of the high
and low prices of Big Flower common stock on November 2, 1999 on the New
York Stock Exchange) by 22,639,875.
** 1/50 of 1% of Transaction Valuation, calculated in accordance with
Rule 0-11 promulgated under the Securities Exchange Act of 1934, as amended.
/X/ CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY RULE 0-11(A)(2)
AND IDENTIFY THE FILING WITH WHICH THE OFFSETTING FEE WAS PREVIOUSLY PAID.
IDENTIFY THE PREVIOUS FILING BY REGISTRATION STATEMENT NUMBER, OR THE FORM
OR SCHEDULE AND THE DATE OF ITS FILING.
AMOUNT PREVIOUSLY PAID: __$152,974.73
FORM OR REGISTRATION NO.: FORM S-4 AND SCHEDULE 13E-3
FILING PARTY: BIG FLOWER HOLDINGS, INC.
DATE FILED: JULY 16, 1999
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<PAGE>
INTRODUCTION
This Rule 13e-3 transaction statement on Schedule 13E-3 is being filed with
the Securities and Exchange Commission (the "Commission") by Big Flower
Holdings, Inc. ("Big Flower"), BFH Merger Corp. ("BFH Merger Corp."), Thomas H.
Lee Equity Fund IV, L.P. ("THL Equity Fund IV"), THL Equity Advisors IV, LLC
("THL Advisors"), Evercore Partners L.L.C. ("Evercore Partners L.L.C."),
Evercore Capital Partners L.P. ("Evercore Capital Partners"), Evercore Capital
Partners (NQ) L.P. ("Evercore NQ"), Evercore Capital Offshore Partners L.P.
(Cayman) ("Evercore Offshore"), EBF Group L.L.C. ("EBF Group") and the following
executive officers and management directors of Big Flower: R. Theodore Ammon,
Edward T. Reilly and Richard L. Ritchie. This transaction statement relates to
the Amended and Restated Agreement and Plan of Merger, dated as of October 11,
1999 ("Merger Agreement"), between Big Flower and BFH Merger Corp., pursuant to
which BFH Merger Corp. will be merged with and into Big Flower, with Big Flower
as the surviving corporation. BFH Merger Corp. was formed by THL Equity Fund IV
and Evercore Capital Partners and their respective affiliates for the purpose of
consummating the merger.
Under the terms, and subject to the conditions of the Merger Agreement, each
outstanding share of Big Flower common stock, par value $0.01 per share ("Big
Flower Common Stock"), other than shares held by Big Flower in its treasury or
by one of its subsidiaries, certain shares retained by members of management in
the merger, and shares for which appraisal rights are perfected in accordance
with Delaware law, will be converted into the right to receive $31.50 in cash.
On October 25, 1999, Big Flower mailed to its stockholders and filed with
the Commission a definitive proxy statement on Schedule 14A (the "Proxy
Statement") relating to the annual meeting of stockholders of Big Flower. At the
Big Flower meeting, the stockholders of Big Flower will consider and vote upon:
the adoption of the Merger Agreement, the election of two directors to the Big
Flower board of directors, a proposal to permit the proxies, in their
discretion, to adjourn the meeting for the sole purpose of soliciting more votes
or proxies in favor of the Merger Agreement, and the ratification of the
appointment of Deloitte & Touche LLP as Big Flower's independent certified
public accountants. A copy of the Proxy Statement is attached hereto as
Exhibit (d)(1), and a copy of the Merger Agreement is attached as Appendix A to
the Proxy Statement.
Concurrently with the filing of this transaction statement, Big Flower is
mailing to its stockholders and filing with the Commission a supplement to the
Proxy Statement (the "Supplement"). Big Flower prepared the Supplement to
provide further information to its stockholders regarding the merger and
transactions related to the merger. A copy of the Supplement is attached hereto
as Exhibit (d)(2).
The Cross Reference Sheet herein is supplied pursuant to General Instruction
F to Schedule 13E-3 and shows the location in the Proxy Statement and Supplement
that responds to each item of this statement. The information in the Proxy
Statement and Supplement, including all exhibits thereto, is hereby expressly
incorporated by reference to this transaction statement, and the responses to
each item are qualified in their entirety by the provisions of the Proxy
Statement and Supplement. Capitalized terms used but not defined in this
statement shall have the meanings given to them in the Proxy Statement.
2
<PAGE>
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
LOCATION IN PROXY STATEMENT (OR SUPPLEMENT, WHERE INDICATED)
ITEM OF SCHEDULE 13E-3 (INCORPORATED HEREIN BY REFERENCE)
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</TABLE>
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
<TABLE>
<S> <C>
(a)............................ Cover Page; "Description of Big Flower".
(b)............................ "Summary--The Big Flower Meeting"; "Market Price and
Dividend Data--Number of Stockholders"; "The Big Flower
Meeting--Voting".
(c)............................ "Special Factors--Effect of the Merger on Big Flower Capital
Stock"; "Market Price and Dividend Data".
(d)............................ "Market Price and Dividend Data--Dividend Information".
(e)............................ "Market Price and Dividend Data".
(f)............................ Appendix E--"Transactions Involving Big Flower Common Stock
by Thomas H. Lee Equity Fund IV, L.P., THL Equity Advisors
IV, LLC, Evercore Partners L.L.C., Evercore Capital Partners
L.P., Evercore Capital Partners (NQ) L.P., Evercore Capital
Offshore Partners L.P. (Cayman), EBF Group L.L.C., Big
Flower and Executive Officers and Directors of Big Flower".
</TABLE>
ITEM 2. IDENTITY AND BACKGROUND.
This Transaction Statement is being filed by the issuer of the class of
equity securities which is the subject of the Rule 13e-3 transaction, jointly
with BFH Merger Corp., Evercore Capital Partners, Evercore Partners L.L.C.,
Evercore NQ, Evercore Offshore, EBF Group, THL Equity Fund IV, THL Advisors, R.
Theodore Ammon, Edward T. Reilly and Richard L. Ritchie.
<TABLE>
<S> <C>
(a)--(d)....................... "Questions and Answers About the Merger"; "Description of
Big Flower"; "Description of BFH Merger Corp.--Thomas H. Lee
Equity Fund IV"; "Description of BFH Merger Corp.--Evercore
Capital Partners"; Appendix F--"Information Relating to
Evercore Partners L.L.C., Evercore Capital Partners L.P.,
Evercore Capital Partners (NQ) L.P., Evercore Capital
Offshore Partners L.P. (Cayman), EBF Group L.L.C., Thomas H.
Lee Equity Fund IV, L.P., THL Equity Advisors IV, LLC, and
their Respective Principals, and the Executive Officers and
Directors of BFH Merger Corp. and Big Flower".
(e)--(f)....................... None of the directors or executive officers of Big Flower,
BFH Merger Corp., Evercore Capital Partners, Evercore
Partners L.L.C., Evercore NQ, Evercore Offshore,
EBF Group, THL Equity Fund IV or THL Advisors nor any of
Thomas H. Lee, Roger C. Altman, Austin M. Beutner or David
G. Offensend: (a) was, during the last five years, convicted
in a criminal proceeding (excluding traffic violations or
similar proceedings) or (b) was a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is
subject to a judgment, decree or final order enjoining
further violations of, or prohibiting activities subject to,
federal or state securities laws or finding any violation of
such laws.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
LOCATION IN PROXY STATEMENT (OR SUPPLEMENT, WHERE INDICATED)
ITEM OF SCHEDULE 13E-3 (INCORPORATED HEREIN BY REFERENCE)
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<S> <C>
</TABLE>
ITEM 2. IDENTITY AND BACKGROUND. (CONTINUED)
<TABLE>
<CAPTION>
LOCATION IN PROXY STATEMENT (OR SUPPLEMENT, WHERE INDICATED)
ITEM OF SCHEDULE 13E-3 (INCORPORATED HEREIN BY REFERENCE)
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<S> <C>
(g)............................ Appendix F--"Information Relating to Evercore Partners
L.L.C., Evercore Capital Partners L.P., Evercore Capital
Partners (NQ) L.P., Evercore Capital Offshore Partners L.P.
(Cayman), EBF Group L.L.C., Thomas H. Lee Equity Fund IV,
L.P., THL Equity Advisors IV, LLC, and their Respective
Principals, and the Executive Officers and Directors of BFH
Merger Corp. and Big Flower".
</TABLE>
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
<TABLE>
<S> <C>
(a)(1)......................... Appendix E--"Transactions Involving Big Flower Common Stock
by Thomas H. Lee Equity Fund IV, L.P., THL Equity Advisors
IV, LLC, Evercore Partners L.L.C., Evercore Capital Partners
L.P., Evercore Capital Partners (NQ) L.P., Evercore Capital
Offshore Partners L.P. (Cayman), EBF Group L.L.C., Big
Flower and Executive Officers and Directors of Big Flower".
(a)(2)......................... "Special Factors--Background of the Merger"; Supplement:
"Background of the Merger".
(b)............................ "Special Factors--Conflicts of Interest of Certain Members
of the Big Flower Board of Directors and Management";
"Special Factors--Background of the Merger"; Supplement:
"Background of the Merger".
</TABLE>
ITEM 4. TERMS OF THE TRANSACTION.
<TABLE>
<S> <C>
(a)............................ "Questions and Answers About the Merger"; "Summary";
"Special Factors"; "The Merger Agreement"; "Description of
Big Flower Capital Stock Following the Merger"; Appendix
A--"Amended and Restated Agreement and Plan of Merger, dated
as of October 11, 1999, between Big Flower Holdings, Inc.
and BFH Merger Corp."; Supplement: "Additional Information
Regarding the Rabbi Trust"; Supplement: "Additional
Information Regarding Columbine JDS Systems and the Internet
Investments".
(b)............................ "Questions and Answers About the Merger";
"Summary--Conflicts of Interests of Management Members of
the Big Flower Board and Management"; "Special
Factors--Conflicts of Interest of Certain Members of the Big
Flower Board of Directors and Management"; "The Merger
Agreement--Consideration to Be Received in the Merger"; "The
Merger Agreement--Covenants"; Supplement: "Additional
Information Regarding the Rabbi Trust"; Supplement:
"Additional Information Regarding Columbine JDS Systems and
the Internet Investments".
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
LOCATION IN PROXY STATEMENT (OR SUPPLEMENT, WHERE INDICATED)
ITEM OF SCHEDULE 13E-3 (INCORPORATED HEREIN BY REFERENCE)
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<S> <C>
</TABLE>
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
<TABLE>
<S> <C>
(a)............................ "Summary"; "Special Factors--Background of the Merger";
"Special Factors--Consequences of the Merger; Plans for Big
Flower After the Merger"; "The Merger Agreement--Covenants;
Columbine JDS Systems"; Appendix A--"Amended and Restated
Agreement and Plan of Merger, dated as of October 11, 1999,
between Big Flower Holdings, Inc. and BFH Merger Corp.";
Supplement: "Additional Information Regarding Columbine JDS
Systems and the Internet Investments"; Supplement:
"Background of the Merger".
(b)............................ "Summary"; "Special Factors--Background of the Merger";
"Special Factors--Consequences of the Merger; Plans for Big
Flower After the Merger"; "The Merger Agreement--Covenants;
Columbine JDS Systems"; "The Merger Agreement--Covenants;
Internet Investments"; Appendix A--"Amended and Restated
Agreement and Plan of Merger, dated as of October 11, 1999,
between Big Flower Holdings, Inc. and BFH Merger Corp.";
Supplement: "Additional Information Regarding Columbine JDS
Systems and the Internet Investments"; Supplement:
"Background of the Merger".
(c)............................ "Special Factors--Consequences of the Merger; Plans for Big
Flower After the Merger"; "The Merger Agreement--Corporate
Governance"; "Directors and Management of Big Flower
Following the Merger".
(d)............................ "Special Factors--Source and Amount of Funds"; "Special
Factors--Big Flower Press Debt Tender Offer";
"Capitalization"; "Sources and Uses"; "Description of Big
Flower Capital Stock Following the Merger"; "Market Price
and Dividend Data--Dividend Information"; Supplement:
"Additional Information Regarding the Rabbi Trust";
Supplement: "Additional Information Regarding the Big Flower
Press Debt Tender Offer".
(e)............................ "Description of Big Flower Capital Stock Following the
Merger"; "Special Factors--Consequences of the Merger; Plans
for Big Flower After the Merger"; "Special Factors--Source
and Amount of Funds"; "Capitalization"; "Sources and Uses";
Supplement: "Additional Information Regarding the Rabbi
Trust".
(f)............................ "Special Factors--Effect of the Merger on Big Flower Capital
Stock".
(g)............................ "Special Factors--Effect of the Merger on Big Flower Capital
Stock".
</TABLE>
ITEM 6. SOURCES AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
<TABLE>
<S> <C>
(a)............................ "Summary--Source and Amount of Funds and Other
Consideration"; "Special Factors--Source and Amount of
Funds"; "Sources and Uses".
(b)............................ "Special Factors--Fees and Expenses of the Merger"; "The
Merger Agreement--Fees and Expenses"; Supplement:
"Additional Information Regarding Fees and Expenses of the
Merger".
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
LOCATION IN PROXY STATEMENT (OR SUPPLEMENT, WHERE INDICATED)
ITEM OF SCHEDULE 13E-3 (INCORPORATED HEREIN BY REFERENCE)
- ---------------------- ------------------------------------------------------------
<S> <C>
</TABLE>
ITEM 6. SOURCES AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (CONTINUED)
<TABLE>
<CAPTION>
LOCATION IN PROXY STATEMENT (OR SUPPLEMENT, WHERE INDICATED)
ITEM OF SCHEDULE 13E-3 (INCORPORATED HEREIN BY REFERENCE)
- ---------------------- ------------------------------------------------------------
<S> <C>
(c)............................ "Special Factors--Source and Amount of Funds";
"Capitalization"; "Sources and Uses".
(d)............................ Not Applicable.
</TABLE>
ITEM 7. PURPOSES, ALTERNATIVES, REASONS AND EFFECTS.
<TABLE>
<S> <C>
(a)............................ "Special Factors--Background of the Merger"; "Special
Factors--Big Flower's Reasons for the Merger; Recommendation
of the Big Flower Board of Directors"; Supplement:
"Background of the Merger"; Supplement: "Additional
Information Regarding Big Flower's Reasons for the Merger;
Recommendation of the Big Flower Board of Directors".
(b)............................ "Special Factors--Background of the Merger"; "Special
Factors--Big Flower's Reasons for the Merger; Recommendation
of the Big Flower Board of Directors"; Supplement:
"Background of the Merger"; Supplement: "Additional
Information Regarding Big Flower's Reasons for the Merger;
Recommendation of the Big Flower Board of Directors".
(c)............................ "Special Factors--Background of the Merger"; "Special
Factors--Big Flower's Reasons for the Merger; Recommendation
of the Big Flower Board of Directors"; Supplement:
"Background of the Merger"; Supplement: "Additional
Information Regarding Big Flower's Reasons for the Merger;
Recommendation of the Big Flower Board of Directors";
Supplement: "Additional Information Regarding Columbine JDS
Systems and the Internet Investments".
(d)............................ "Questions and Answers About the Merger"; "Summary--What You
Will Receive in the Merger"; "Summary--Conflicts of
Interests of Management Members of the Big Flower Board and
Management"; "Special Factors--Effect of the Merger on Big
Flower Capital Stock"; "Capitalization"; "Sources and Uses";
"United States Federal Income Tax Considerations"; "Special
Factors--Accounting Treatment"; "Directors and Management of
Big Flower Following the Merger".
</TABLE>
ITEM 8. FAIRNESS OF THE TRANSACTION.
<TABLE>
<S> <C>
(a) and (b).................... "Summary--Recommendation of the Big Flower Board"; "Special
Factors--Background of the Merger"; "Special Factors--Big
Flower's Reasons for the Merger; Recommendation of the Big
Flower Board of Directors"; "Special Factors--Opinions of
Big Flower's Financial Advisors"; "Special Factors--Fairness
of the Merger"; Supplement: "Background of the Merger";
Supplement: "Additional Information Regarding Big Flower's
Reasons for the Merger; Recommendation of the Big Flower
Board of Directors"; Supplement: "Additional Information
Regarding Opinions of Big Flower's Financial Advisors";
Supplement: "Additional Information Regarding the Fairness
of the Merger".
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
LOCATION IN PROXY STATEMENT (OR SUPPLEMENT, WHERE INDICATED)
ITEM OF SCHEDULE 13E-3 (INCORPORATED HEREIN BY REFERENCE)
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<S> <C>
</TABLE>
ITEM 8. FAIRNESS OF THE TRANSACTION. (CONTINUED)
<TABLE>
<CAPTION>
LOCATION IN PROXY STATEMENT (OR SUPPLEMENT, WHERE INDICATED)
ITEM OF SCHEDULE 13E-3 (INCORPORATED HEREIN BY REFERENCE)
- ---------------------- ------------------------------------------------------------
<S> <C>
(c)............................ "The Big Flower Meeting--Voting"; "Special Factors--Fairness
of the Merger".
(d)............................ "Special Factors--Background of the Merger"; "Special
Factors--Big Flower's Reasons for the Merger; Recommendation
of the Big Flower Board of Directors"; "Special
Factors--Opinions of Big Flower's Financial Advisors";
"Special Factors--Fairness of the Merger"; Supplement:
"Background of the Merger"; Supplement: "Additional
Information Regarding Big Flower's Reasons for the Merger;
Recommendation of the Big Flower Board of Directors";
Supplement: "Additional Information Regarding Opinions of
Big Flower's Financial Advisors".
(e)............................ "Summary--Recommendation of the Big Flower Board"; "Special
Factors--Background of the Merger"; "Special
Factors--Conflicts of Interest of Certain Members of the Big
Flower Board of Directors and Management"; "Special
Factors--Fairness of the Merger"; "Special Factors--Big
Flower's Reasons for the Merger; Recommendation of the Big
Flower Board of Directors"; Supplement: "Background of the
Merger"; Supplement: "Additional Information Regarding Big
Flower's Reasons for the Merger; Recommendation of the Big
Flower Board of Directors".
(f)............................ "Special Factors--Background of the Merger"; "Special
Factors--Big Flower's Reasons for the Merger; Recommendation
of the Big Flower Board of Directors"; Supplement:
"Background of the Merger"; Supplement: "Additional
Information Regarding Big Flower's Reasons for the Merger;
Recommendation of the Big Flower Board of Directors".
</TABLE>
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
<TABLE>
<S> <C>
(a)--(c)....................... "Summary--Opinions of Financial Advisors"; "Special
Factors-- Background of the Merger"; "Special
Factors--Opinions of Big Flower's Financial Advisors";
Appendix B--"Opinion of Goldman, Sachs & Co., dated
October 11, 1999"; Appendix C--"Opinion of Berenson Minella
& Company, dated October 11, 1999"; Supplement: "Background
of the Merger"; Supplement: "Additional Information
Regarding Opinions of Big Flower's Financial Advisors";
Supplement: "Additional Information Regarding the Fairness
of the Merger".
</TABLE>
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
<TABLE>
<S> <C>
(a)............................ "Special Factors--Conflicts of Interest of Certain Members
of the Big Flower Board of Directors and Management";
"Directors and Management of Big Flower Following the
Merger"; "Other Information for the Big Flower
Meeting--Voting Securities and Principal Holders Thereof".
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
LOCATION IN PROXY STATEMENT (OR SUPPLEMENT, WHERE INDICATED)
ITEM OF SCHEDULE 13E-3 (INCORPORATED HEREIN BY REFERENCE)
- ---------------------- ------------------------------------------------------------
<S> <C>
</TABLE>
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER. (CONTINUED)
<TABLE>
<CAPTION>
LOCATION IN PROXY STATEMENT (OR SUPPLEMENT, WHERE INDICATED)
ITEM OF SCHEDULE 13E-3 (INCORPORATED HEREIN BY REFERENCE)
- ---------------------- ------------------------------------------------------------
<S> <C>
(b)............................ Appendix E--"Transactions Involving Big Flower Common Stock
by Thomas H. Lee Equity Fund IV, L.P., THL Equity Advisors
IV, LLC, Evercore Partners L.L.C., Evercore Capital Partners
L.P., Evercore Capital Partners (NQ) L.P., Evercore Capital
Offshore Partners L.P. (Cayman), EBF Group L.L.C., Big
Flower and Executive Officers and Directors of Big Flower".
</TABLE>
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.
<TABLE>
<S> <C>
"Summary--The Big Flower Meeting"; "The Big Flower Meeting--
Voting"; "Special Factors--Conflicts of Interest of Certain
Members of the Big Flower Board of Directors and
Management"; "Special Factors-- Source and Amount of Funds";
"Sources and Uses".
</TABLE>
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION.
<TABLE>
<S> <C>
(a)............................ "Summary--The Big Flower Meeting"; "Summary--Recommendation
of the Big Flower Board"; "The Big Flower Meeting--Voting";
"Special Factors--Conflicts of Interest of Certain Members
of the Big Flower Board of Directors and Management";
"Special Factors--Big Flower's Reasons for the Merger;
Recommendation of the Big Flower Board of Directors";
"Special Factors--Source and Amount of Funds"; "Special
Factors--Fairness of the Merger"; Supplement: "Additional
Information Regarding the Rabbi Trust"; Supplement:
"Additional Information Regarding Reasons for the Merger;
Recommendation of the Big Flower Board of Directors";
Supplement: "Additional Information Regarding the Fairness
of the Merger".
(b)............................ "Summary--Recommendation of the Big Flower Board"; "The Big
Flower Meeting--General"; "Special Factors--Big Flower's
Reasons for the Merger; Recommendation of the Big Flower
Board of Directors"; "Special Factors--Fairness of the
Merger"; Supplement: "Additional Information Regarding
Reasons for the Merger; Recommendation of the Big Flower
Board of Directors"; Supplement: "Additional Information
Regarding the Fairness of the Merger".
</TABLE>
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
<TABLE>
<S> <C>
(a)............................ "Summary--Appraisal Rights"; "Appraisal Rights"; Appendix
D-- "Section 262 of the Delaware General Corporation Law".
(b)............................ Not Applicable.
(c)............................ Not Applicable.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
LOCATION IN PROXY STATEMENT (OR SUPPLEMENT, WHERE INDICATED)
ITEM OF SCHEDULE 13E-3 (INCORPORATED HEREIN BY REFERENCE)
- ---------------------- ------------------------------------------------------------
<S> <C>
</TABLE>
ITEM 14. FINANCIAL INFORMATION.
<TABLE>
<S> <C>
Pursuant to General Instruction D to Schedule 13E-3, Big
Flower's Annual Report on Form 10-K for the year ended
December 31, 1998 and its Quarterly Report on Form 10-Q for
the quarters ended March 31, 1999 and June 30, 1999 are
incorporated by reference in the Proxy Statement. Big
Flower's audited financial statements for the periods
covered by the Form 10-K and unaudited financial statements
for the periods covered by the Forms 10-Q are incorporated
herein by reference.
</TABLE>
<TABLE>
<S> <C>
(a) and (b).................... "Summary--Selected Historical Financial Data".
</TABLE>
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
<TABLE>
<S> <C>
(a)............................ "Summary"; "The Big Flower Meeting--Solicitation of
Proxies"; "Special Factors--Background of the Merger";
"Special Factors--Consequences of the Merger; Plans for Big
Flower After the Merger"; "The Merger Agreement--Covenants;
Columbine JDS Systems"; "The Merger Agreement--Covenants;
Internet Investments"; Appendix A--"Amended and Restated
Agreement and Plan of Merger, dated as of October 11, 1999,
between Big Flower Holdings, Inc. and BFH Merger Corp.";
Supplement: "Additional Information Regarding Columbine JDS
Systems and the Internet Investments".
(b)............................ "The Big Flower Meeting--Solicitation of Proxies".
</TABLE>
ITEM 16. ADDITIONAL INFORMATION.
<TABLE>
<S> <C>
The Proxy Statement and Supplement and the Appendices and
Exhibits attached thereto.
</TABLE>
9
<PAGE>
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
Exhibit(a) (1) Senior Credit Facility Commitment Letter from the The
Chase Manhattan Bank, Bankers Trust Company, Bank of
America, N.A., Chase Securities Inc. and Deutsche Bank
Securities Inc. to BFH Merger Corp, dated October 11,
1999.*
(2) Bridge Loan Commitment Letter from Bankers Trust
Corporation, The Chase Manhattan Bank and Nationsbridge,
L.L.C. to BFH Merger Corp., dated October 11, 1999.*
(3) Mezzanine Financing Commitment Letter from Thomas H. Lee
Equity Fund IV, L.P. to BFH Merger Corp., dated October 11,
1999.*
(4) Alternative Senior Credit Facility Commitment Letter
from The Chase Manhattan Bank, Bankers Trust Company, Bank
of America, N.A., Chase Securities Inc. and Deutsche
Bank Securities Inc. to BFH Merger Corp., dated
October 24, 1999**
(5) Alternative Bridge Loan Commitment Letter from Bankers
Trust Corporation, The Chase Manhattan Bank and
Nationsbridge, L.L.C. to BFH Merger Corp., dated
October 22, 1999.**
(6) Alternative Mezzanine Financing Commitment Letter from
Thomas H. Lee Equity Fund IV, L.P. to BFH Merger Corp.,
dated October 24, 1999.**
Exhibit(b) (1) Opinion of Goldman Sachs & Co., dated October 11, 1999
(included as Appendix B to the Proxy Statement).
(2) Financial analysis presentation materials prepared by
Goldman Sachs & Co. for the Big Flower Board of Directors,
dated October 2, 1999.*
(3) Opinion of Berenson Minella & Company dated October 11,
1999 (included as Appendix C to the Proxy statement).
(4) Financial analysis presentation materials prepared by
Berenson Minella & Company in connection with providing its
opinion to the Big Flower Board of Directors dated
October 7, 1999.*
(5) Strategic Discussion Materials prepared by Chase
Securities Inc. for Thomas H. Lee Equity Fund IV and BFH
Merger Corp., dated April 29, 1999.***
(6) Strategic Discussion Materials prepared by Chase
Securities Inc. for Thomas H. Lee Equity Fund IV and BFH
Merger Corp., dated May 12, 1999.***
(7) Update to Strategic Discussion Materials, prepared by
Chase Securities Inc. for Thomas H. Lee Equity Fund IV and
BFH Merger Corp., dated September 28, 1999.***
Exhibit(c) Equity Contribution Commitment Letter from Thomas H. Lee
Equity Fund IV, L.P. and Evercore Capital Partners L.P.,
dated October 11, 1999.*
Exhibit(d) (1) Definitive Proxy Statement on Schedule 14A of Big Flower
Holdings, Inc.**
(2) Supplement to Definitive Proxy Statement on Schedule 14A
of Big Flower Holdings, Inc. ***
Exhibit(e) Section 262 of the Delaware General Corporation Law
(included as Appendix D to the Proxy Statement).
</TABLE>
10
<PAGE>
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS. (CONTINUED)
<TABLE>
<S> <C>
Exhibit(f) Not Applicable
</TABLE>
- ------------------------
* Filed with Amendment Number 1 to the Big Flower Holdings, Inc. Schedule
13E-3 on October 14, 1999.
** Filed with Amendment Number 2 to the Big Flower Holdings, Inc. Schedule
13E-3 on October 25, 1999.
*** Filed herewith.
11
<PAGE>
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) The information set forth in the Cover Page and "Description of Big
Flower" of the Proxy Statement is incorporated herein by reference.
(b) The information set forth in "Summary--The Big Flower Meeting"; "Market
Price and Dividend Data--Number of Stockholders"; and "Big Flower
Meeting--Voting" of the Proxy Statement is incorporated herein by
reference.
(c) The information set forth in "Special Factors--Effect of the Merger on
Big Flower Capital Stock"; and "Market Price and Dividend Data" of the
Proxy Statement is incorporated herein by reference.
(d) The information set forth in "Market Price and Dividend Data--Dividend
Information" of the Proxy Statement is incorporated herein by reference.
(e) The information set forth in "Market Price and Dividend Data" of the
Proxy Statement is incorporated herein by reference.
(f) The information set forth in Appendix E--"Transactions Involving Big
Flower Common Stock by Thomas H. Lee Equity Fund IV, L.P., THL Equity
Advisors IV, LLC, Evercore Partners L.L.C., Evercore Capital Partners
L.P., Evercore Capital Partners (NQ) L.P., Evercore Capital Offshore
Partners L.P. (Cayman), EBF Group L.L.C., Big Flower and Executive
Officers and Directors of Big Flower" of the Proxy Statement is
incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
This Transaction Statement is being filed by the issuer of the class of
equity securities which is the subject of the Rule 13e-3 transaction, jointly
with BFH Merger Corp., Evercore Capital Partners, Evercore Partners L.L.C.,
Evercore NQ, Evercore Offshore, EBF Group, THL Equity Fund IV, THL Advisors, A.
Theodore Ammon, Edward T. Reilly and Richard L. Ritchie.
(a)--(d) The information set forth in "Questions and Answers About the
Merger"; "Description of Big Flower"; "Description of BFH Merger
Corp.--Thomas H. Lee Equity Fund IV"; "Description of BFH Merger
Corp.--Evercore Capital Partners"; and Appendix F--"Information
Relating to Evercore Partners L.L.C., Evercore Capital Partners
L.P., Evercore Capital Partners (NQ) L.P., Evercore Capital
Offshore Partners L.P. (Cayman), EBF Group L.L.C., Thomas H. Lee
Equity Fund IV, L.P., THL Equity Advisors IV, LLC, and their
Respective Principals, and the Executive Officers and Directors of
BFH Merger Corp. and Big Flower" of the Proxy Statement is
incorporated herein by reference.
(e)--(f) None of the directors or executive officers of Big Flower, BFH
Merger Corp., Evercore Capital Partners, Evercore Partners L.L.C.,
Evercore NQ, Evercore Offshore, EBF Group, THL Equity Fund IV or
THL Advisors nor any of Thomas H. Lee, Roger Altman, Austin M.
Beutner or David G. Offensend: (a) was, during the last five years,
convicted in a criminal proceeding (excluding traffic violations or
similar proceedings) or (b) was a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a
result of such proceeding was or is subject to a judgment, decree
or final order enjoining further violations of, or prohibiting
activities subject to, federal or state securities laws or finding
any violation of such laws.
(g) The information set forth in Appendix F--"Information Relating to
Evercore Partners L.L.C., Evercore Capital Partners L.P., Evercore
Capital Partners (NQ) L.P., Evercore Capital Offshore Partners L.P.
(Cayman), EBF Group L.L.C., Thomas H. Lee
12
<PAGE>
ITEM 2. IDENTITY AND BACKGROUND. (CONTINUED)
Equity Fund IV, L.P., THL Equity Advisors IV, LLC, and their
Respective Principals, and the Executive Officers and Directors of
BFH Merger Corp. and Big Flower" of the Proxy Statement is
incorporated herein by reference.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a)(1) The information set forth in Appendix E--"Transactions Involving Big
Flower Common Stock by Thomas H. Lee Equity Fund IV, L.P., THL Equity
Advisors IV, LLC, Evercore Partners L.L.C., Evercore Capital Partners
L.P., Evercore Capital Partners (NQ) L.P., Evercore Capital Offshore
Partners L.P. (Cayman), EBF Group L.L.C., Big Flower and Executive
Officers and Directors of Big Flower" of the Proxy Statement, is
incorporated herein by reference.
(a)(2) The information set forth in "Special Factors--Background of the
Merger" of the Proxy Statement, and "Background of the Merger" of the
Supplement, is incorporated herein by reference.
(b) The information set forth in "Special Factors--Conflicts of Interest
of Certain Members of the Big Flower Board of Directors and
Management"; and "Special Factors--Background of the Merger" of the
Proxy Statement, and "Background of the Merger" of the Supplement, is
incorporated herein by reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a) The information set forth in "Questions and Answers About the Merger";
"Summary"; "Special Factors"; "The Merger Agreement"; "Description of Big
Flower Capital Stock Following the Merger"; and Appendix A--"Amended and
Restated Agreement and Plan of Merger, dated as of October 11, 1999,
between Big Flower Holdings, Inc. and BFH Merger Corp." of the Proxy
Statement, and "Additional Information Regarding the Rabbi Trust"; and
"Additional Information Regarding Columbine JDS Systems and the Internet
Investments" of the Supplement, is incorporated herein by reference.
(b) The information set forth in "Questions and Answers About the Merger";
"Summary--Conflicts of Interest of Management Members of the Big Flower
Board and Management"; "Special Factors--Conflicts of Interest of Certain
Members of the Big Flower Board of Directors and Management"; "The Merger
Agreement--Consideration to Be Received in the Merger"; and "The Merger
Agreement--Covenants" of the Proxy Statement, and "Additional Information
Regarding the Rabbi Trust"; and "Additional Information Regarding
Columbine JDS Systems and the Internet Investments" of the Supplement, is
incorporated herein by reference.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a) The information set forth in "Summary"; "Special Factors--Background of
the Merger"; "Special Factors--Consequences of the Merger; Plans for Big
Flower After the Merger"; "The Merger Agreement--Covenants; Columbine JDS
Systems"; Appendix A--"Amended and Restated Agreement and Plan of Merger,
dated as of October 11, 1999, between Big Flower Holdings, Inc. and BFH
Merger Corp." of the Proxy Statement, and "Additional Information
Regarding Columbine JDS Systems and the Internet Investments"; and
"Background of the Merger" of the Supplement, is incorporated herein by
reference.
13
<PAGE>
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE. (CONTINUED)
(b) The information set forth in "Summary"; "Special Factors--Background of
the Merger" "Special Factors--Consequences of the Merger; Plans for Big
Flower After the Merger"; "The Merger Agreement--Covenants; Columbine JDS
Systems"; "The Merger Agreement--Covenants; Internet Investments";
Appendix A--"Amended and Restated Agreement and Plan of Merger, dated as
of October 11, 1999, between Big Flower Holdings, Inc. and BFH Merger
Corp." of the Proxy Statement, and "Additional Information Regarding
Columbine JDS Systems and the Internet Investments"; and "Background of
the Merger" of the Supplement, is incorporated herein by reference.
(c) The information set forth in "Special Factors--Consequences of the
Merger; Plans for Big Flower After the Merger"; "The Merger
Agreement--Corporate Governance"; and "Directors and Management of Big
Flower Following the Merger" of the Proxy Statement is incorporated
herein by reference.
(d) The information set forth in "Special Factors--Source and Amount of
Funds"; "Special Factors--Big Flower Press Debt Tender Offer";
"Capitalization"; "Sources and Uses"; "Description of Big Flower Capital
Stock Following the Merger"; and "Market Price and Dividend
Data--Dividend Information" of the Proxy Statement, and "Additional
Information Regarding the Rabbi Trust"; and "Additional Information
Regarding the Big Flower Press Debt Tender Offer" of the Supplement, is
incorporated herein by reference.
(e) The information set forth in "Description of Big Flower Capital Stock
Following the Merger"; "Special Factors--Consequences of the Merger;
Plans for Big Flower After the Merger"; "Special Factors--Source and
Amount of Funds"; "Capitalization"; and "Sources and Uses" of the Proxy
Statement, and "Additional Information Regarding the Rabbi Trust" of the
Supplement, is incorporated herein by reference.
(f) The information set forth in "Special Factors--Effect of the Merger on
Big Flower Capital Stock" of the Proxy Statement is incorporated herein
by reference.
(g) The information set forth in "Special Factors--Effect of the Merger on
Big Flower Capital Stock" of the Proxy Statement is incorporated herein
by reference.
ITEM 6. SOURCES AND AMOUNT OF FUNDS AND OTHER CONSIDERATION.
(a) The information set forth in "Summary--Source and Amount of Funds and
Other Consideration"; "Special Factors--Source and Amount of Funds"; and
"Sources and Uses" of the Proxy Statement is incorporated herein by
reference.
(b) The information set forth in "Special Factors--Fees and Expenses of the
Merger"; and "The Merger Agreement--Fees and Expenses" of the Proxy
Statement, and "Additional Information Regarding Fees and Expenses of the
Merger" of the Supplement, is incorporated herein by reference.
(c) The information set forth in "Special Factors--Source and Amount of
Funds"; "Capitalization"; and "Sources and Uses" of the Proxy Statement
is incorporated herein by reference.
(d) Not Applicable.
14
<PAGE>
ITEM 7. PURPOSES, ALTERNATIVES, REASONS AND EFFECTS.
(a) The information set forth in "Special Factors--Background of the
Merger"; and "Special Factors--Big Flower's Reasons for the Merger;
Recommendation of the Big Flower Board of Directors" of the Proxy
Statement, and "Background of the Merger"; and "Additional Information
Regarding Big Flower's Reasons for the Merger; Recommendation of the Big
Flower Board of Directors" of the Supplement, is incorporated herein by
reference.
(b) The information set forth in "Special Factors--Background of the
Merger"; and "Special Factors--Big Flower's Reasons for the Merger;
Recommendation of the Big Flower Board of Directors" of the Proxy
Statement, and "Background of the Merger"; and "Additional Information
Regarding Big Flower's Reasons for the Merger; Recommendation of the Big
Flower Board of Directors" of the Supplement, is incorporated herein by
reference.
(c) The information set forth in "Special Factors--Background of the
Merger"; and "Special Factors--Big Flower's Reasons for the Merger;
Recommendation of the Big Flower Board of Directors" of the Proxy
Statement, and "Background of the Merger"; "Additional Information
Regarding Big Flower's Reasons for the Merger; Recommendation of the Big
Flower Board of Directors"; and "Additional Information Regarding
Columbine JDS Systems and the Internet Investments" of the Supplement, is
incorporated herein by reference.
(d) The information set forth in "Questions and Answers About the Merger";
"Summary--What You Will Receive in the Merger"; "Summary--Conflicts of
Interests of Management Members of the Big Flower Board and Management";
"Special Factors--Consequences of the Merger; Plans for Big Flower After
the Merger"; "Special Factors--Effect of the Merger on Big Flower Capital
Stock"; "Capitalization"; "Sources and Uses"; "United States Federal
Income Tax Considerations"; "Special Factors--Accounting Treatment"; and
"Directors and Management of Big Flower Following the Merger" of the
Proxy Statement is incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a)--(b) The information set forth in "Summary--Recommendation of the Big
Flower Board"; "Special Factors--Background of the Merger";
"Special Factors--Big Flower's Reasons for the Merger;
Recommendation of the Big Flower Board of Directors"; "Special
Factors--Opinions of Big Flower's Financial Advisors"; and "Special
Factors--Fairness of the Merger" of the Proxy Statement, and
"Background of the Merger"; "Additional Information Regarding Big
Flower's Reasons for the Merger; Recommendation of the Big Flower
Board of Directors"; "Additional Information Regarding Opinions of
Big Flower's Financial Advisors"; and "Additional Information
Regarding the Fairness of the Merger" of the Supplement, is
incorporated herein by reference.
(c) The information set forth in "The Big Flower Meeting--Voting"; and
"Special Factors--Fairness of the Merger" of the Proxy Statement is
incorporated herein by reference.
(d) The information set forth in "Special Factors--Background of the
Merger"; "Special Factors--Big Flower's Reasons for the Merger;
Recommendation of the Big Flower Board of Directors"; "Special
Factors--Opinions of Big Flower's Financial Advisors"; and "Special
Factors--Fairness of the Merger" of the Proxy Statement, and
"Background of the Merger"; "Additional Information Regarding Big
Flower's Reasons for the Merger; Recommendation of the Big Flower
Board of Directors"; and "Additional Information Regarding Opinions
of Big Flower's Financial Advisors" of the Supplement, is
incorporated herein by reference.
15
<PAGE>
ITEM 8. FAIRNESS OF THE TRANSACTION. (CONTINUED)
(e) The information set forth in "Summary--Recommendation of the Big
Flower Board"; "Special Factors--Background of the Merger"; "Special
Factors--Conflicts of Interest of Certain Members of the Big Flower
Board of Directors and Management"; "Special Factors--Fairness of
the Merger"; and "Special Factors--Big Flower's Reasons for the
Merger; Recommendation of the Big Flower Board of Directors" of the
Proxy Statement, and "Background of the Merger"; "Additional
Information Regarding Big Flower's Reasons for the Merger;
Recommendation of the Big Flower Board of Directors" of the
Supplement, is incorporated herein by reference.
(f) The information set forth in "Special Factors--Background of the
Merger"; and "Special Factors--Big Flower's Reasons for the Merger;
Recommendation of the Big Flower Board of Directors" of the Proxy
Statement, and "Background of the Merger"; "Additional Information
Regarding Big Flower's Reasons for the Merger; Recommendation of the
Big Flower Board of Directors" of the Supplement, is incorporated
herein by reference.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a)--(c) The information set forth in "Summary--Opinions of Financial
Advisors"; "Special Factors--Background of the Merger"; "Special
Factors--Opinions of Big Flower's Financial Advisors";
Appendix B--"Opinion of Goldman, Sachs & Co., dated October 11,
1999"; and Appendix C--"Opinion of Berenson Minella & Company,
dated October 11, 1999" of the Proxy Statement, and "Background of
the Merger"; "Additional Information Regarding Opinions of Big
Flower's Financial Advisors"; and "Additional Information Regarding
the Fairness of the Merger" of the Supplement, is incorporated
herein by reference.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) The information set forth in "Special Factors--Conflicts of Interest of
Certain Members of the Big Flower Board of Directors and Management";
"Directors and Management of Big Flower Following the Merger"; and "Other
Information for the Big Flower Meeting--Voting Securities and Principal
Holders Thereof" of the Proxy Statement is incorporated herein by
reference.
(b) The information set forth in Appendix E--"Transactions Involving Big
Flower Common Stock by Thomas H. Lee Equity Fund IV, L.P., THL Equity
Advisors IV, LLC, Evercore Partners L.L.C., Evercore Capital Partners
L.P., Evercore Capital Partners (NQ) L.P., Evercore Capital Offshore
Partners L.P. (Cayman), EBF Group L.L.C., Big Flower and Executive
Officers and Directors of Big Flower" of the Proxy Statement is
incorporated herein by reference.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.
The information set forth in "Summary--The Big Flower Meeting"; "The Big
Flower Meeting--Voting"; "Special Factors--Conflicts of Interest of Certain
Members of the Big Flower Board of Directors and Management"; "Special
Factors--Source and Amount of Funds"; and "Sources and Uses" of the Proxy
Statement is incorporated herein by reference.
16
<PAGE>
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION.
(a) The information set forth in "Summary--The Big Flower Meeting";
"Summary--Recommendation of the Big Flower Board"; "The Big Flower
Meeting--Voting"; "Special Factors--Conflicts of Interest of Certain
Members of the Big Flower Board of Directors and Management"; "Special
Factors--Big Flower's Reasons for the Merger; Recommendation of the Big
Flower Board of Directors"; "Special Factors--Source and Amount of
Funds"; and "Special Factors--Fairness of the Merger" of the Proxy
Statement, and "Additional Information Regarding the Rabbi Trust";
"Additional Information Regarding Reasons for the Merger; Recommendation
of the Big Flower Board of Directors"; and "Additional Information
Regarding the Fairness of the Merger" of the Supplement, is incorporated
herein by reference.
(b) The information set forth in "Summary--Recommendation of the Big Flower
Board"; "The Big Flower Meeting--General"; "Special Factors--Big Flower's
Reasons for the Merger; Recommendation of the Big Flower Board of
Directors"; and "Special Factors--Fairness of the Merger" of the Proxy
Statement, and "Additional Information Regarding Reasons for the Merger;
Recommendation of the Big Flower Board of Directors"; and "Additional
Information Regarding the Fairness of the Merger" of the Supplement, is
incorporated herein by reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth in "Summary--Appraisal Rights"; "Appraisal
Rights"; and Appendix D--"Section 262 of the Delaware General Corporation
Law" of the Proxy Statement is incorporated herein by reference.
(b) Not Applicable.
(c) Not Applicable.
ITEM 14. FINANCIAL INFORMATION.
Pursuant to General Instruction D to Schedule 13E-3, Big Flower's Annual
Report on Form 10-K for the year ended December 31, 1998 and its Quarterly
Reports on Form 10-Q for the quarters ended March 31, 1999 and June 30, 1999 are
incorporated by reference in the Proxy Statement. Big Flower's audited financial
statements for the periods covered by the Form 10-K and unaudited financial
statements for the periods covered by the Forms 10-Q are incorporated herein by
reference.
(a)--(b) The information set forth in "Summary--Selected Historical
Financial Data".
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) The information set forth in "Summary"; "The Big Flower
Meeting--Solicitation of Proxies"; "Special Factors--Background of the
Merger"; "Special Factors--Consequences of the Merger; Plans for Big
Flower After the Merger"; "The Merger Agreement--Covenants; Columbine JDS
Systems"; "The Merger Agreement--Covenants; Internet Investments";
Appendix A--"Amended and Restated Agreement and Plan of Merger, dated as
of October 11, 1999, between Big Flower Holdings, Inc. and BFH Merger
Corp." of the Proxy Statement, and "Additional Information Regarding
Columbine JDS Systems and the Internet Investments" of the Supplement, is
incorporated herein by reference.
(b) The information set forth in "The Big Flower Meeting--Solicitation of
Proxies" of the Proxy Statement is incorporated herein by reference.
17
<PAGE>
ITEM 16. ADDITIONAL INFORMATION.
The Proxy Statement and Supplement and the Appendices and Exhibits attached
thereto are incorporated herein by reference.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
Exhibit(a) (1) Senior Credit Facility Commitment Letter from the The
Chase Manhattan Bank, Bankers Trust Company, Bank of
America, N.A., Chase Securities Inc. and Deutsche Bank
Securities Inc. to BFH Merger Corp, dated October 11,
1999.*
(2) Bridge Loan Commitment Letter from Bankers Trust
Corporation, The Chase Manhattan Bank and Nationsbridge,
L.L.C. to BFH Merger Corp., dated October 11, 1999.*
(3) Mezzanine Financing Commitment Letter from Thomas H. Lee
Equity Fund IV, L.P. to BFH Merger Corp., dated October 11,
1999.*
(4) Alternative Senior Credit Facility Commitment Letter
from The Chase Manhattan Bank, Bankers Trust Company, Bank
of America, N.A., Chase Securities Inc. and Deutsche
Bank Securities Inc. to BFH Merger Corp., dated
October 24, 1999**
(5) Alternative Bridge Loan Commitment Letter from Bankers
Trust Corporation, The Chase Manhattan Bank and
Nationsbridge, L.L.C. to BFH Merger Corp., dated
October 22, 1999.**
(6) Alternative Mezzanine Financing Commitment Letter from
Thomas H. Lee Equity Fund IV, L.P. to BFH Merger Corp.,
dated October 24, 1999.**
Exhibit(b) (1) Opinion of Goldman Sachs & Co., dated October 11, 1999
(included as Appendix B to the Proxy Statement).
(2) Financial analysis presentation materials prepared by
Goldman Sachs & Co. for the Big Flower Board of Directors,
dated October 2, 1999.*
(3) Opinion of Berenson Minella & Company dated October 11,
1999 (included as Appendix C to the Proxy statement).
(4) Financial analysis presentation materials prepared by
Berenson Minella & Company in connection with providing its
opinion to the Big Flower Board of Directors dated
October 7, 1999.*
(5) Strategic Discussion Materials prepared by Chase
Securities Inc. for Thomas H. Lee Equity Fund IV and BFH
Merger Corp., dated April 29, 1999.***
(6) Strategic Discussion Materials prepared by Chase
Securities Inc. for Thomas H. Lee Equity Fund IV and BFH
Merger Corp., dated May 12, 1999.***
(7) Update to Strategic Discussion Materials, prepared by
Chase Securities Inc. for Thomas H. Lee Equity Fund IV and
BFH Merger Corp., dated September 28, 1999.***
Exhibit(c) Equity Contribution Commitment Letter from Thomas H. Lee
Equity Fund IV, L.P. and Evercore Capital Partners L.P.,
dated October 11, 1999.*
Exhibit(d) (1) Definitive Proxy Statement on Schedule 14A of Big Flower
Holdings, Inc.**
(2) Supplement to Definitive Proxy Statement on
Schedule 14A of Big Flower Holdings, Inc.***
Exhibit(e) Section 262 of the Delaware General Corporation Law
(included as Appendix D to the Proxy Statement).
Exhibit(f) Not Applicable
</TABLE>
- ------------------------
* Filed with Amendment Number 1 to the Big Flower Holdings, Inc. Schedule
13E-3 on October 14, 1999.
** Filed with Amendment Number 2 to the Big Flower Holdings, Inc. Schedule
13E-3 on October 25, 1999.
*** Filed herewith.
18
<PAGE>
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
Dated: November 3, 1999
<TABLE>
<S> <C> <C>
BFH MERGER CORP.
By: /s/ ANTHONY DINOVI
-----------------------------------------
Name: Anthony DiNovi
Title: Chairman of the Board
THOMAS H. LEE EQUITY FUND IV, L.P.
By: THL Equity Advisors IV, LLC
General Partner
</TABLE>
<TABLE>
<S> <C> <C>
By: /s/ ANTHONY DINOVI
--------------------------------------
Name: Anthony DiNovi
Title: Managing Director
</TABLE>
<TABLE>
<S> <C> <C>
THL EQUITY ADVISORS IV, LLC
By: /s/ ANTHONY DINOVI
-----------------------------------------
Name: Anthony DiNovi
Title: Managing Director
</TABLE>
19
<PAGE>
<TABLE>
<S> <C> <C>
EVERCORE PARTNERS L.L.C.
By: /s/ AUSTIN M. BEUTNER
-----------------------------------------
Name: Austin M. Beutner
Title: Managing Member
EVERCORE CAPITAL PARTNERS L.P.
EVERCORE CAPITAL PARTNERS (NQ) L.P.
EVERCORE CAPITAL OFFSHORE PARTNERS L.P.
(CAYMAN)
EBF GROUP L.L.C.
By: EVERCORE PARTNERS L.L.C., their general
partner
By: /s/ AUSTIN M. BEUTNER
-----------------------------------------
Name: Austin M. Beutner
Title: Managing Member
</TABLE>
20
<PAGE>
<TABLE>
<S> <C> <C>
BIG FLOWER HOLDINGS, INC.
By: /s/ MARK A. ANGELSON
-----------------------------------------
Name: Mark A. Angelson
Title: Executive Vice President--Office of
the Chairman, General Counsel and
Secretary
/s/ R. THEODORE AMMON
-----------------------------------------
R. Theodore Ammon
/s/ EDWARD T. REILLY
-----------------------------------------
Edward T. Reilly
/s/ RICHARD L. RITCHIE
-----------------------------------------
Richard L. Ritchie
</TABLE>
21
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C>
Exhibit(a) (1) Senior Credit Facility Commitment Letter from the The
Chase Manhattan Bank, Bankers Trust Company, Bank of
America, N.A., Chase Securities Inc. and Deutsche Bank
Securities Inc. to BFH Merger Corp, dated October 11,
1999.*
(2) Bridge Loan Commitment Letter from Bankers Trust
Corporation, The Chase Manhattan Bank and Nationsbridge,
L.L.C. to BFH Merger Corp., dated October 11, 1999.*
(3) Mezzanine Financing Commitment Letter from Thomas H. Lee
Equity Fund IV, L.P. to BFH Merger Corp., dated October 11,
1999.*
(4) Alternative Senior Credit Facility Commitment Letter
from The Chase Manhattan Bank, Bankers Trust Company, Bank
of America, N.A., Chase Securities Inc. and Deutsche
Bank Securities Inc. to BFH Merger Corp., dated
October 24, 1999**
(5) Alternative Bridge Loan Commitment Letter from Bankers
Trust Corporation, The Chase Manhattan Bank and
Nationsbridge, L.L.C. to BFH Merger Corp., dated
October 22, 1999.**
(6) Alternative Mezzanine Financing Commitment Letter from
Thomas H. Lee Equity Fund IV, L.P. to BFH Merger Corp.,
dated October 24, 1999.**
Exhibit(b) (1) Opinion of Goldman Sachs & Co., dated October 11, 1999
(included as Appendix B to the Proxy Statement).
(2) Financial analysis presentation materials prepared by
Goldman Sachs & Co. for the Big Flower Board of Directors,
dated October 2, 1999.*
(3) Opinion of Berenson Minella & Company dated October 11,
1999 (included as Appendix C to the Proxy statement).
(4) Financial analysis presentation materials prepared by
Berenson Minella & Company in connection with providing its
opinion to the Big Flower Board of Directors dated
October 7, 1999.*
(5) Strategic Discussion Materials prepared by Chase
Securities Inc. for Thomas H. Lee Equity Fund IV and BFH
Merger Corp., dated April 29, 1999.***
(6) Strategic Discussion Materials prepared by Chase
Securities Inc. for Thomas H. Lee Equity Fund IV and BFH
Merger Corp., dated May 12, 1999.***
(7) Update to Strategic Discussion Materials, prepared by
Chase Securities Inc. for Thomas H. Lee Equity Fund IV and
BFH Merger Corp., dated September 28, 1999.***
Exhibit(c) Equity Contribution Commitment Letter from Thomas H. Lee
Equity Fund IV, L.P. and Evercore Capital Partners L.P.,
dated October 11, 1999.*
Exhibit(d) (1) Definitive Proxy Statement on Schedule 14A of Big Flower
Holdings, Inc.**
(2) Supplement to Definitive Proxy Statement on
Schedule 14A of Big Flower Holdings, Inc.***
Exhibit(e) Section 262 of the Delaware General Corporation Law
(included as Appendix D to the Proxy Statement).
Exhibit(f) Not Applicable
</TABLE>
- ------------------------
* Filed with Amendment Number 1 to the Big Flower Holdings, Inc. Schedule
13E-3 on October 14, 1999.
** Filed with Amendment Number 2 to the Big Flower Holdings, Inc.
Schedule 13E-3 on October 25, 1999.
*** Filed herewith.
22
<PAGE>
EXHIBIT 99(b)(5)
Project Daisy
Strategic Discussion Materials
Strictly Private and Confidential
Chase Securities
April 29, 1999
[LOGO] CHASE
<PAGE>
Strategic Discussion Materials
Situation Overview
================================================================================
o Chase is pleased to present the following strategic observations following
the April 20th announcement by Big Flower Holdings, Inc. that it is
exploring a possible sale of all or part of the Company
o Big Flower was incorporated in 1993 and has pursued an aggressive, value
enhancing, acquisition strategy during the past five years to mold itself
into a full service advertising, marketing and information services
company
o Today, the Company is positioned as a preeminent marketing services
organization offering integrated, full service direct marketing, media and
related services to a broad spectrum of corporate customers
o The possible sale of the Company represents an attractive investment
opportunity for the following reasons:
- Significant growth potential in targeted marketing business and in
emerging media services operations
- Cross selling of integrated, technology driven advertising /
marketing solutions
- Strong cash flow generation
- Strong competitive position
- Management's proven ability to integrate acquisitions
- A proven track record operating in a leveraged environment
- Identifiable value attributable to new media / internet minority
invemstments
[LOGO] CHASE 2
<PAGE>
Strategic Discussion Materials
Company Description
================================================================================
<TABLE>
<S> <C> <C> <C>
Big Flower Press, Inc.
----------------------
Treasure Chest
Advertising Co. Webcraft, Inc. Digital Services
--------------- -------------- ----------------
Targeted Inserts Direct Mail Services Premedia Services
Stand-alone advertising designed Combines data processing with state- Sophisticated digital and multiple
to promote various goods of-the art inkjet, laser, and electronic media products for outdoor
predominately for retailers, both printing, offering clients options that billboards, magazines, Web sites,
in-store and through newspapers include packages, components, and consumer packages
brochures, and digital printing
Products &
Services Newspaper Products Database/Response Services Computer Software and Systems
TV magazines, Sunday magazines, Services include: tactical consulting, Systems and software products,
Sunday comics and supplements database development and covering invoicing, operating, and
management, modeling/analysis, and programming funtions to support
response analysis which entails lead production for broadcasting, cable
management, inbound and outbound and advertising agencies
teleservices., data entry, and
fulfillment
Targeted Inserts Direct Mail Services Premedia Services
o Retailers, merchandisers, o Block Entertainment Corp., o Kraft, Velveeta, Maxwell
grocery stores, drug and home DaimlerChrysler AG, Morgan House, Wal-Mart, Tyson
improvement stores: Wal Mart, Stanley Dean Witter, Publishers Foods, PepsiCo, and Dial
Kmart, Safeway, American Clearing House, and Reader's Corp
Drug Stores, and Home Depot Digest Association
Primary
Customers Newspaper Products Database/Response Services Computer Software and Systems
o More than 300 newspapers: o Advertising, telecommunications, o Turner Broadcasting, The New
The New York Times, The financial services, and health care York Times, MTV, Telemundo,
Philadelphia Inquirer, The Los industries T.V. Azteca, and Grey
Angeles Times, The Advertising
Washington Post, and The
Milwaukee Journal Sentinel
</TABLE>
[LOGO] CHASE 3
<PAGE>
Strategic Discussion Materials
Organization Chart
================================================================================
Big Flower Holding Inc.
Organization Chart
-----------------------
1998 Revenues $1,740 mm
1998 EBITDA(2) $228.4 mm
Big Flower Press Holding, Inc.
------------------------------
<TABLE>
<S> <C> <C>
1998 Revenues $1,102 mm 1998 Revenues $364 mm 1998 Revenues $273 mm
1998 EBITDA $190 mm 1998 EBITDA $77 mm 1998 EBITDA $63 mm
Treasure Chest Big Flower
Advertising Co. Webcraft, Inc. (1) Digital Services
- --------------- ------------------ ----------------
Riverside County Color Graphic Laser Tech Columbine JDS
Publishing Co. Direct Response Color Systems
PrintCo ColorStream Pacific Color Broadcast
Technoligies Connection, Inc. Systems
KTB Associates Software
Olwen Direct DCS,
Retail Graphics Mail Limited Incorporated DSI Datatrak
System
IMPCO Gamma One,
Enterprises Inc. Adtraq Data
System
Scanforms Fusion Group
CJDS Adserve
Enteron Group
Reach America
Imaging
Consortium
Admagic Group
</TABLE>
(1) Webcraft includes Speciality Products and Commercial Printing operations.
(2) Divisional EBITDA is estimated based on EBIT plus an assumed percentage of
D&A; $228.4 million of total EBITDA includes $14.6 million of corporate
overhead.
Source: Company Information
[LOGO] CHASE 4
<PAGE>
Strategic Discussion Materials
Strategic and Financial Evolution
================================================================================
<TABLE>
<CAPTION>
Big Flower Press, Inc.
-----------------------------------------------------------------------------
TC Advertising Webcraft, Inc.
-------------------------------- --------------------------------
Year Acquisition Contribution Acquisition Contribution
- ---- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
--------------------------------
1993 TC Advertising Big Flower Press Incorporates 7/93
--------------------------------
1994 KTB Associates Increases production
capacity
Retail Graphics Adds ad insert and
Holding Co. TV magazine business
--------------------------------
1995 Initial Public Offering 11/95
--------------------------------
1996 PrintCo, Inc. Expands Midwest Webcraft Establishes direct
presence Technologies, Inc. mail and marketing
Scanforms, Inc. Expands financial
service customers
1997 Riverside County Expands California IPMCO Enterprises Database services,
Publishing presence direct marketing
Olwen Direct Mail International direct
mail, database mgmt.
1998 Colorgraphic Direct Broadens reach in
Response Ltd. Europe, direct mail
ColorStream Increases database,
Technologies adds customized text
<CAPTION>
Digital Services Financial Performance
-------------------------------- -----------------------------------------
Year Acquisition Contribution Revenues EBITDA Share Price
- ---- ----------- ------------ -------- ------ -----------
<S> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------
1993 Big Flower Press Incorporates 7/93
--------------------------------------------------------------------------------------
1994 NA NA NA High
--------------------------------------------------------------------------------------
1995 Initial Public Offering 11/95
--------------------------------------------------------------------------------------
Laser Tech Establishes digital $920.1 $93.7 $15.50 High
services $15.38 Low
1996 Digital Dimensions Web site production $1,201.9 $122.6 $18.88 High
$12.63 Low
Designer Color Interactive and
Systems, Inc. multimedia capability
Pacific Color California premedia
Connection, Inc. presence
1997 Gamma One, Inc. Broadens Northeast $1,376.7 $164.0 $24.13 High
customer base $18.25 Low
Columbine JDS Adds media software
Systems
Broadcast Systems Expands services
Software to England
1998 Reach America Adds retail, newspaper, $1,739.7 $228.4 $30.69 High
manufacturing clients $19.50 Low
CJDS Adtraq/ Canadian operations
Adserve
DSI Datatrak Adds advertising
customers
</TABLE>
Source: Company Information, Salomon Smith Barney research dated 4/5/99
[LOGO] CHASE 5
<PAGE>
Strategic Discussion Materials
Capital Structure
================================================================================
Big Flower
Holdings, Inc. < - o BGF Common Stock
-------------
< - o Senior Credit Facilities
Big Flower < - o Other Debt
Big Flower Trust Press Holdings, Inc. < - o 8 7/8% Senior Sub Notes
- ---------------- ------------------- < - o 8 5/8% Senior Sub Notes
$112.5 million QUIPs
Treasure Chest Big Flower
Advertising Co. Webcraft, Inc. Digital Services
- --------------- -------------- ----------------
--------------------------------------------------------------------
----------------------------------------------------------------
Capitalization Table
----------------------------------------------------------------
as of December 31, 1998
Cash & Equivalents $8.7 0.5%
Senior Credit Facilities 195.6 10.6%
A/R Facility 108.4 5.8%
Other Debt 22.2 1.2%
-------- ------
Total Senior Debt $326.2 17.6%
======== ======
8 7/8% Senior Subordinated Notes 350.1 18.9%
8 5/8% Senior Subordinated Notes 250.0 13.5%
-------- ------
Total Debt(1) $926.3 50.0%
======== ======
QUIPS(2) 112.5 6.1%
Market Equity(3) 927.8 50.0%
-------- ------
Total Capitalization $1,854.1 100.0%
======== ======
--------------------------------------------------------------------
(1) Total Debt includes $108 million off-balance sheet A/R Facility.
(2) QUIPs convert into 3.902 million shares of common stock.
(3) Assumes current market price of $34.88 as of 4/28/99, and includes
converstion of QUIPs.
Source: Company public records
[LOGO] CHASE 6
<PAGE>
Strategic Discussion Materials
Current Trading Statistics
================================================================================
----------------------------------------------------------------------
Market Value and Capitalization
----------------------------------------------------------------------
Closing Share Price as of 4/28/99 $34.88
52-Week High (3/31/98) 36.19
52-Week Low (9/3/98) 15.19
Diluted Shares Outstanding (millions)(1) 26.603
Market Value of Equity 927.8
Plus: Net Debt(2) 870.7
--------
Enterprise Value $1,798.5
========
New Media / Internet Investments(3) 132.1
Adjusted Enterprise Value(4) $1,666.4
========
I/B/E/S 5-Year Growth Rate 16.3%
----------------------------------------------------------------------
------------------------------------------------------------
Financial Summary
------------------------------------------------------------
EBITDA(5) EPS(6)
------ ------
LTM $247.0 $2.05
1999E $268.1 $2.14
2000E $286.5 $2.47
------------------------------------------------------------
- --------------------------------------------------------------------------------
Trading Multiples
- --------------------------------------------------------------------------------
Adjusted Enterprise Value/ Enterprise Value/ Price/
EBITDA EBITDA EPS
------ ------ ------
LTM 6.7x 7.3x 17.0x
1999E 6.2x 6.7x 16.3x
2000E 5.8x 6.3x 14.1x
- --------------------------------------------------------------------------------
(1) Based on basic shares outstanding as per 10-K dated 12/31/98; assumes
conversion of $112.5 million QUIPs and 3.04 million options at an average
strike of $15.43 per share.
(2) Net debt equals total debt less cash, options proceeds, preferred
securities and minority interest; and includes $108 million A/R facility.
(3) New media / Internet investment value is estimated based on Salomon Smith
Barney research dated 4/5/99.
(4) Adjusted Enterprise Value reflects enterprise value adjusted for the
estimated value of BGF new media / internet investments.
(5) 1999E and 2000E EBITDA based on CSFB research dated 3/24/99.
(6) EPS estimates based on I/B/E/S.
[LOGO] CHASE 7
<PAGE>
Strategic Discussion Materials
Valuation Matrix
================================================================================
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Offer Price Adjusted Enterprise Value
as a Multiple of: as a Multiple of:
Adjusted -------------------- -----------------------------
Offer Offer Offer Net Enterprise Enterprise 1999E 2000E LTM LTM 1999E
Price Premium Value Debt(1) Value Value(2) EPS(3)(4) EPS(4) Sales EBITDA EBITDA(5)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$30.00 -14.0% $798.1 $870.7 $1,668.8 $1,536.7 14.0x 12.1x 0.83x 6.2x 5.7x
$31.00 -11.1% $824.7 $870.7 $1,695.4 $1,563.3 14.5x 12.6x 0.85x 6.3x 5.8x
$32.00 -8.2% $851.3 $870.7 $1,722.0 $1,590.0 15.0x 13.0x 0.86x 6.4x 5.9x
$33.00 -5.4% $877.9 $870.7 $1,748.6 $1,616.6 15.4x 13.4x 0.88x 6.5x 6.0x
$34.00 -2.5% $904.5 $870.7 $1,775.2 $1,643.2 15.9x 13.8x 0.89x 6.7x 6.1x
$35.00 0.4% $931.1 $870.7 $1,801.8 $1,669.8 16.4x 14.2x 0.91x 6.8x 6.2x
$36.00 3.2% $957.7 $870.7 $1,828.4 $1,696.4 16.8x 14.6x 0.92x 6.9x 6.3x
$37.00 6.1% $984.3 $870.7 $1,855.0 $1,723.0 17.3x 15.0x 0.94x 7.0x 6.4x
$38.00 9.0% $1,010.9 $870.7 $1,881.6 $1,749.6 17.8x 15.4x 0.95x 7.1x 6.5x
$39.00 11.8% $1,037.5 $870.7 $1,908.2 $1,776.2 18.2x 15.8x 0.96x 7.2x 6.6x
$40.00 14.7% $1,064.1 $870.7 $1,934.8 $1,802.8 18.7x 16.2x 0.98x 7.3x 6.7x
Data as of close 4/26/99
$34.88 0.00% $927.8 $870.7 $1,798.5 $1,666.4 16.3x 14.1x 0.90x 6.7x 6.2x
Target Data $2.14 $2.47 $1,841.8 $247.0 $268.1
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Net debt equals senior secured bank debt, plus sub debt, preferred stock
and minority interest, less cash and options proceeds; and includes $108
million A/R Facility.
(2) Adusted Enterprise Value reflects enterprise value adjusted for the $132
million estimated value of BGF new media / internet investments.
(3) Shares outstanding (26.603 MM) assumes that QUIPs and options are
exercised.
(4) EPS Estimates based on I/B/E/S.
(5) 1999E EBITDA based on CSFB research dated 3/24/99.
[LOGO] CHASE 8
<PAGE>
Strategic Discussion Materials
Share Price Performance
================================================================================
Based on closing Share Prices April 25, 1998 to April 26, 1999
[GRAPHIC OMITTED]
Source: IDD Tradeline, Bloomberg
[LOGO] CHASE 9
<PAGE>
Strategic Discussion Materials
Ownership
================================================================================
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
(Shares in Thousands) Basic Diluted (1),(2)
-------------------- ---------------------
Percent Percent
Shareholder Shares Ownership Shares Ownership
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Significant Institutional Investors
Entrust Capital Inc 3,940 20.0% 3,940 17.4%
Prudential Ins Co/Amr 1,249 6.4% 1,249 5.5%
Leon G. Cooperman 903 4.6% 903 4.0%
Kingdon Capital Mgmt 711 3.6% 711 3.1%
Fusion Capital Mgmt Inc 526 2.7% 526 2.3%
Fidelity Mgmt & Research Corp 504 2.6% 504 2.2%
Barclays Bank Plc 473 2.4% 473 2.1%
Other Institutions 5,328 27.1% 5,328 23.5%
------ ----- ------ -----
Total Institutions 13,634 69.3% 13,634 60.1%
====== ===== ====== =====
Executive Officers, Directors & Other Insiders
Theodore R. Ammon 2,217 11.3% 2,517 11.1%
Peter G. Diamandis 0 0.0% 25 0.1%
Robert M. Kimmitt 0 0.0% 24 0.1%
Joan D. Manley 3 0.0% 18 0.1%
Newton N. Minow 10 0.1% 34 0.1%
Edward T. Reilly 8 0.0% 294 1.3%
Mark A. Angelson 5 0.0% 201 0.9%
Richard L. Ritchie 0 0.0% 50 0.2%
------ ----- ------ -----
Total Executive Officers, Directors & Other Insiders 2,243 11.4% 3,162 13.9%
====== ===== ====== =====
Public Float 3,783 19.2% 5,904 26.0%
------ ----- ------ -----
Total 19,660 100.0% 22,700 100.0%
====== ===== ====== =====
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes options outstanding based on 10-K 12/31/98.
(2) Excludes $112.5 million of QUIPS.
[LOGO] CHASE 10
<PAGE>
Strategic Discussion Materials
Trading Comparatives
================================================================================
Enterprise Value(1) to LTM EBITDA Multiple Comparison
- --------------------------------------------------------------------------------
Selected Comparative Companies(1)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Ticker Enterprise Value
- --------------------------------------------------------------------------------
Advertising Inserts / Premedia
Banta Corp BN $ 718.7
Cadmus Communications CDMS 227.9
Donnelley R R & Sons C DNY 6,060.5
Quebecor Prtg Inc PRW 4,175.3
World Color Press Inc WRC 2,090.2
Premedia / Media Software
Applied Graphics Techn AGTX 401.0
Schawk Inc SGK 270.2
Enterprise Software Inc ENSW 67.7
Unidigital, Inc. UNDG 106.8
Direct Marketing
Abacus Direct ABDR $ 819.1
Acxiom Corp ACXM 2,487.8
Advo Inc AD 676.2
Amer Bus Info ABII 425.1
APAC Teleservices APAC 321.6
Harte Hanks Inc HHS 1,764.4
M/A/R/C Inc MARC 82.4
Snyder Communications SNC 2,159.2
Teletech Hds TTEC 380.6
Valassis Comm VCI 2,518.4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Direct Marketing(2)
- --------------------------------------------------------------------------------
[The following table was depicted as a bar graph in the printed material.]
------------
Mean = 11.2x
------------
ACXM 15.6x
SNC 15.6x
MARC 14.9x
VCI 13.5x
HHS 13.5x
TTEC 7.5x
AD 7.2x
ABII 6.8x
BGF 6.7x
APAC 6.4x
- --------------------------------------------------------------------------------
Advertising Inserts/Printing
- --------------------------------------------------------------------------------
[The following table was depicted as a bar graph in the printed material.]
-----------
Mean = 6.1x
-----------
PRW 7.7x
DNY 7.1x
BGF 6.7x
WRC 5.9x
CDMS 4.9x
BN 4.4x
- --------------------------------------------------------------------------------
Premedia / Media Software
- --------------------------------------------------------------------------------
[The following table was depicted as a bar graph in the printed material.]
SGK 7.5x
AGTX 7.4x
BGF 6.7x
ENSW 10.3x
UNDG 7.9x
[LOGO] CHASE 11
<PAGE>
Reflects multiples as of 4/28/99.
(1) Means exclude Big Flower Press, Inc.; BGF enterprise value has been
adjusted to reflect estimated value of new media/internet investments,
and includes $108 million A/R Facility.
(2) Abacus Direct excluded from Direct Marketing as an outlier.
[LOGO] CHASE 12
<PAGE>
Strategic Discussion Materials
Transaction Comparatives
================================================================================
Transaction Value to LTM EBITDA Multiple Comparison
- --------------------------------------------------------------------------------
Selected Comparative Companies
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Date Acquirer / Target Transaction Value
- --------------------------------------------------------------------------------
Premedia Transactions
3/22/96 IndeNet Inc. / Enterprise Systems Group Ltd. $ 27
3/22/96 IndeNet Inc. / Cable Computerized Systems Mgmt. Inc. 4
1/20/98 Applied Graphics Technologies / Flying Color Graphics 22
2/17/98 Applied Graphics Technologies / Devon Group Inc 389
Advertising Inserts / Printing Transactions
3/17/95 World Color Press / Northeast Graphics Inc 95
4/25/96 World Color Press / Ringier America Inc 415
10/9/96 Quebecor Printing Inc / Amerisig Graphics Inc 144
9/27/97 Wallace Computer Services / Graphic Industries Inc 386
5/28/98 Bowne & Co. Inc / Donnelley Enterprise Solutions 108
Direct Marketing Transactions
2/1/96 Heritage Media Corp / DIMAC Corp 258
4/30/96 Harte-Hanks Communications / DiMark Inc 146
7/11/97 Snyder Communications / American list Corp 116
4/20/98 Great Universal Stores / Metromail Corp 830
5/27/98 Acxiom Corp / May & Speh Inc 529
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Direct Marketing
- --------------------------------------------------------------------------------
[The following table was depicted as a bar graph in the printed material.]
Heritage Media / DIMAC 15.5x
Great Universal Stores / Metromail 13.9x
Acxiom / May & Speh 12.7x
Harte-Hanks / DiMark 11.5x
Snyder / American List 10.4x
- --------------------------------------------------------------------------------
Advertising Inserts/Printing
- --------------------------------------------------------------------------------
[The following table was depicted as a bar graph in the printed material.]
Quebecor / Amerisig Graphics 9.0x
Wallace / Graphic Industries 7.0x
World Color Press / Ringier America 5.8x
World Color Press / Northeast Graphics Inc 5.5x
Bowne / Donnelley NM
- --------------------------------------------------------------------------------
Premedia / Media Software
- --------------------------------------------------------------------------------
[The following table was depicted as a bar graph in the printed material.]
Applied Graphics / Flying Color 8.4x
IndeNet Inc. / Enterprise Systems Group Ltd. 8.0x
Applied Graphics / Devon Group 7.4x
IndeNet Inc. / Cable Computerized Systems Mgmt. Inc. 7.1x
[LOGO] CHASE 13
<PAGE>
- --------------------------------------------------------------------------------
Appendix
- --------------------------------------------------------------------------------
[LOGO] CHASE 14
<PAGE>
Trading Comparatives
================================================================================
(dollars in millions, except per share data)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Share % of % of Market Price Per Share / Enterprise Value /
-------------------- ------------------
Ticker Price 52-week 52-week Value of LTM CY1999E CY2000E Enterprise LTM LTM
Company Symbol 4/28/99 High Low Equity EPS EPS EPS Value Revenue EBITDA
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Advertising Inserts/Printing
Banta Corp BN $20.94 59.4% 125.0% $ 581.6 11.0x 10.2x 9.1x $ 718.7 0.54x 4.4x
Cadmus Communications CDMS 14.88 53.6 117.8 116.2 9.5 10.3 9.5 227.9 0.55 4.9
Donnelley R R & Sons C DNY 35.88 74.7 116.2 5,067.7 14.9 16.2 14.6 6,060.5 1.21 7.1
Quebecor Prtg Inc PRW 24.81 99.5 147.0 2,892.4 18.1 16.9 15.0 4,175.3 1.10 7.7
World Color Press Inc WRC 25.94 71.6 129.7 1,034.3 14.1 12.4 11.0 2,090.2 0.89 5.9
-----------------------------------------------------------------
High 18.1x 16.9x 15.0x 1.21x 7.7x
Median 14.1 12.4 11.0 0.89 5.9
Mean 13.5 13.2 11.9 0.86 6.0
Low 9.5 10.2 9.1 0.54 4.4
-----------------------------------------------------------------
Premedia and Media Software
Applied Graphics Techn AGTX 9.44 16.6 160.6 211.4 7.8 8.6 3.3 401.0 1.02 7.4
Schawk Inc SGK 11.13 64.0 156.1 243.4 13.8 13.2 10.6 270.2 1.86 7.5
Enterprise Software Inc ENSW 7.38 59.0 181.5 45.1 NM NM NM 67.7 2.25 10.3
Unidigital, Inc. UNDG 5.38 59.7 143.3 28.5 18.6 8.5 6.6 106.8 1.71 7.9
-----------------------------------------------------------------
High 18.6x 13.2x 10.6x 2.2x 10.3x
Median 13.8 8.6 6.6 1.8 7.7
Mean 13.4 10.1 6.8 1.7 8.3
Low 7.8 8.5 3.3 1.0 7.4
-----------------------------------------------------------------
Direct Marketing
Abacus Direct ABDR $78.56 90.8% 232.8% $ 842.5 73.7x 52.0x 37.2x $ 819.1 17.44x 42.2x
Acxiom Corp ACXM 26.06 83.4 158.0 2,165.1 NM 33.8 25.8 2,487.8 3.64 15.6
Advo Inc AD 21.50 63.9 143.9 497.4 13.3 13.3 11.5 676.2 0.64 7.2
Amer Bus Info ABII 7.69 47.3 384.4 379.2 NM 23.3 19.2 425.1 2.06 6.8
APAC Teleservices APAC 3.72 31.0 146.9 176.6 19.9 9.8 6.2 321.6 0.76 6.4
Harte Hanks Inc HHS 25.81 88.2 148.6 1,933.6 28.3 25.3 21.7 1,764.4 2.36 13.5
M/A/R/C Inc MARC 12.00 60.8 120.0 65.9 NM 24.0 15.0 82.4 0.93 14.9
Snyder Communications SNC 29.88 59.8 122.6 2,193.7 35.2 21.3 16.2 2,159.2 2.65 15.6
Teletech Hds TTEC 6.75 43.9 121.3 412.1 21.5 16.9 13.0 380.6 1.03 7.5
Valassis Comm VCI 55.50 98.0 190.6 2,184.8 25.9 20.0 17.2 2,518.4 3.40 13.5
-----------------------------------------------------------------
High 73.7x 52.0x 37.2x 17.44x 42.2x
Median 25.9 22.3 16.7 2.21 13.5
Mean 31.1 24.0 18.3 3.49 14.3
Low 13.3 9.8 6.2 0.64 6.4
-----------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Big Flower Hldgs Inc BGF $34.88 96.4% 229.6% $ 772.8 14.9x 16.3x 14.1x $1,558.4 0.85x 6.3x
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Big Flower Equity value excludes QUIPS
(a) Based on FY1999E EBIT; D&A estimated as a % of Sales based on LTM %.
[LOGO] CHASE 15
<PAGE>
Trading Comparatives
================================================================================
(dollars in millions, except per share data)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
5-Year LTM Margin Analysis
Projected Gross Profit EBITDA EBIT Net Income
Company EPS Growth Margin Margin Margin Margin
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Advertising Inserts/Printing
Banta Corp 13.0% 19.9% 12.3% 7.3% 4.0%
Cadmus Communications 12.5% 21.7% 11.3% 6.7% 3.0%
Donnelley R R & Sons C 11.6% 21.1% 17.1% 9.7% 6.8%
Quebecor Prtg Inc NA 21.8% 14.2% 7.9% 4.2%
World Color Press Inc 15.8% 18.2% 15.1% 9.1% 3.1%
- -----------------------------------------------------------------------------------------------------------
High 15.8% 21.8% 17.1% 9.7% 6.8%
Median 12.8% 21.1% 14.2% 7.9% 4.0%
Mean 13.2% 20.5% 14.0% 8.2% 4.2%
Low 11.6% 18.2% 11.3% 6.7% 3.0%
- -----------------------------------------------------------------------------------------------------------
Premedia
Applied Graphics Techn NM 36.8% 13.8% 8.7% 6.8%
Schawk Inc 20.0% 45.6% 24.8% 19.5% 12.2%
Enterprise Software Inc NM 66.6% 21.8% 11.1% NM
Unidigital, Inc. NM 48.3% 21.6% 12.2% 2.5%
- -----------------------------------------------------------------------------------------------------------
High 20.0% 66.6% 24.8% 19.5% 12.2%
Median 20.0% 46.9% 21.7% 11.7% 6.8%
Mean 20.0% 49.3% 20.5% 12.9% 7.2%
Low 20.0% 36.8% 13.8% 8.7% 2.5%
- -----------------------------------------------------------------------------------------------------------
Direct Marketing
Abacus Direct 40.0% 79.6% 41.3% 37.9% 24.3%
Acxiom Corp 26.0% NM 23.3% 14.6% 7.6%
Advo Inc 19.5% 27.0% 8.9% 7.1% 3.6%
Amer Bus Info 17.5% 54.6% 30.0% 13.1% 0.5%
APAC Teleservices 30.0% 16.7% 11.8% 3.5% 2.1%
Harte Hanks Inc 18.4% 22.2% 17.5% 13.6% 9.1%
M/A/R/C Inc 21.0% 0.7% 6.2% 0.7% 0.1%
Snyder Communications 35.5% 32.0% 17.0% 14.2% 7.6%
Teletech Hds 27.0% 34.6% 13.8% 8.6% 5.2%
Valassis Comm 15.9% 28.8% 25.2% 23.1% 11.4%
- -----------------------------------------------------------------------------------------------------------
High 40.0% 79.6% 41.3% 37.9% 24.3%
Median 23.5% 28.8% 17.2% 13.4% 6.4%
Mean 25.1% 32.9% 19.5% 13.6% 7.1%
Low 15.9% 0.7% 6.2% 0.7% 0.1%
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Big Flower Hldgs Inc 16.3% 27.1% 13.4% 8.2% 2.8%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
[LOGO] CHASE 16
<PAGE>
Transaction Comparatives
================================================================================
(dollars in millions, except per share data)
Advertising Inserts/Printing
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Purchase Price Multiples Transaction Value Multiples
------------------------ ---------------------------
Ann. Date/ Acquiror (Acquiror Parent)/ Purchase Transaction Book Tangible Net
Status Target (Target Parent) Price Value Value Bk. Value Income Sales EBITDA EBIT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5/28/98 Bowne & Co Inc 103.3 108.4 2.2 3.8 NM 0.98 NM NM
Completed Donnelley Enterprises Solutions Inc
2/17/98 Applied Graphics Technologies 441.5 389.4 2.3 2.4 16.7 1.39 7.4 9.3
Completed Devon Group Inc
9/29/97 Walllace Computer Services Inc 276.7 385.6 2.7 3.2 21.1 0.88 7.0 10.6
Completed Graphic Industries Inc
10/9/96 Quebecor Printing Inc 55.0 144.0 NA NA NA 0.60 9.0 NA
Completed Amerisig Graphics Inc
4/25/96 World Color Press 128.0 414.7 1.1 NM NM 0.80 5.8 14.4
Completed Ringier America Inc
3/17/95 World Color Press Inc $ 60.0 $ 94.8 1.6x 1.6x 8.3x 0.87x 5.5x 8.8x
Completed Northeast Graphics Inc
--------------------------------------------------------------------
High 2.7x 3.8x 21.1x 1.4x 9.0x 14.4x
Mean 2.0 2.8 15.4 0.9 6.9 10.8
Median 2.2 2.8 16.7 0.9 7.0 10.0
Low 1.1 1.6 8.3 0.6 5.5 8.8
--------------------------------------------------------------------
</TABLE>
Premedia / Media Software
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Purchase Price Multiples Transaction Value Multiples
------------------------ ---------------------------
Ann. Date/ Acquiror (Acquiror Parent)/ Purchase Transaction Book Tangible Net
Status Target (Target Parent) Price Value Value Bk. Value Income Sales EBITDA EBIT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2/17/98 Applied Graphics Technologies $441.5 $389.4 2.3x 2.4x 16.7x 1.39x 7.4x 9.3x
Completed Devon Group Inc
1/20/98 Applied Graphics Technologies Inc 22.2 21.9 3.1 3.1 9.4 1.24 8.4 8.5
Completed Flying Color Graphics Inc
3/22/96 IndeNet Inc. 27.4 27.4 NA NA 17.1 1.50 8.0 NA
Completed Enterprise Systems Group Ltd.
3/22/96 IndeNet Inc. 4.8 4.4 NA NA 8.1 2.40 7.1 7.6
Completed Cable Computerized Systems Mgmt.
Inc.
-------------------------------------------------------------------
High 3.1x 3.1x 17.1x 2.4x 8.4x 9.3x
Mean 2.7 2.7 12.8 1.6 7.7 8.5
Median 2.7 2.7 13.1 1.4 7.7 8.5
Low 2.3 2.4 8.1 1.2 7.1 7.6
-------------------------------------------------------------------
</TABLE>
[LOGO] CHASE 17
<PAGE>
Transaction Comparatives
================================================================================
(dollars in millions, except per share data)
Direct Marketing
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Purchase Price Multiples Transaction Value Multiples
------------------------ ---------------------------
Ann. Date/ Acquiror (Acquiror Parent)/ Purchase Transaction Book Tangible Net
Status Target (Target Parent) Price Value Value Bk. Value Income Sales EBITDA EBIT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5/27/98 Acxiom Corp $500.3 $528.6 4.9x 6.1x 35.1x 5.08x 12.7x 14.2x
Completed May & Speh Inc
5/1/98 Times Mirror Co 200.0 200.0 NA NA NA NA NA NA
Completed Los Angeles Publications
(Recycler Classifieds)
4/20/98 Great Universal Stores 776.7 829.7 2.2 9.1 79.5 2.53 13.9 38.4
Completed Metromail Corp
1/5/98 ValueVision International 88.4 102.6 1.2 3.7 NM 0.29 NM NM
Inc.
Pending National Media Corp
12/31/97 Snyder Communications 72.0 72.0 NA NA NA NA NA NA
Pending Blau Marketing Technologies
Inc
9/4/97 Reed Elsevier PLC 447.0 447.0 NA NA NA 2.20 NA 16.0
Completed Chilton Business Corp
(ABC Inc/Walt Disney Co)
7/11/97 Snyder Communications 117.1 115.9 6.9 6.9 17.4 6.28 10.4 11.1
Completed American List Corp
5/8/97 Snyder Communications 70.9 75.9 NA NA NA 1.26 NA NA
Completed Brann Holdings Ltd
9/9/96 First Data Corp NA NA NA NA NA NA NA NA
Completed Donnelley Marketing Inc.
(DM Holding)
8/7/96 CUC International 381.8 382.2 3.6 8.7 NM 1.64 NM NM
Completed Ideon Group
4/30/96 Harte-Hanks Communications 151.8 146.3 4.2 6.2 25.5 1.88 11.5 15.0
Completed DiMark Inc.
2/21/96 Heritage Media Corp 188.4 258.4 67.0 NM 45.6 2.48 15.5 21.0
Completed DIMAC Corp
6/28/95 CUC International NA NA NA NA NA NA NA NA
Completed GETKO Group Inc
11/5/93 McCown de Leeuw 49.3 49.3 NA NA NA 0.43 NA NA
Completed DIMAC Corp
2/25/91 Investor Group (LBO) 200.0 200.0 NA NA NA NA NA NA
Completed Donnelly Marketing
(Dun & Bradstreet)
------------------------------------------------------------------
High 67.0x 9.1x 79.5x 6.3x 15.5x 38.4x
Mean 12.8 6.8 40.6 2.4 12.8 19.3
Median 4.2 6.5 35.1 2.0 12.7 15.5
Low 1.2 3.7 17.4 0.3 10.4 11.1
------------------------------------------------------------------
</TABLE>
[LOGO] CHASE 18
<PAGE>
New Media / Internet Investments
================================================================================
(Dollars in millions except share prices)
- --------------------------------------------------------------------------------
New Media / Internet Investments Ticker Shares Price Value
- --------------------------------------------------------------------------------
24/7 Media TFSM 1.751 $ 43.13 75.51
Mining Company MINE 0.740 69.94 51.75
World Gate(a) WGAT 0.200 24.00 4.80
Andromedia(b) NA NA 0.00 0.00
NuTel(b) NA NA 0.00 0.00
------
Total 132.07
======
- --------------------------------------------------------------------------------
Based on closing share prices 4/28/99.
(a) Proposed offering price is $23 - $25.
200m shares is an estimate of BFG's holdings based on CSFB research dated
3/24/99.
(b) Neither Andromedia nor NuTel has filed an S1.
[LOGO] CHASE 19
<PAGE>
EXHIBIT 99(b)(6)
Project Daisy
Strategic Discussion Materials
Strictly Private and Confidential
Chase Securities
May 12, 1999
[LOGO] CHASE
<PAGE>
Table of Contents
Executive Summary........................................................... I
Treasure Chest Advertising ................................................. II
Webcraft, Inc. ............................................................. III
Laser Tech Color, Inc. ..................................................... IV
Columbine JDS Systems....................................................... V
[LOGO] CHASE 2
<PAGE>
- --------------------------------------------------------------------------------
Executive Summary
- --------------------------------------------------------------------------------
[LOGO] CHASE 3
<PAGE>
Executive Summary
Agenda
================================================================================
Chase is pleased to present to Thomas H. Lee Company, the following financial
and strategic observations regarding Big Flower
o Preliminary break-up valuation insights employing the following
methodologies for each Daisy business segment:
- Public Comparatives
- Precedent Transactions
- Discounted Cash Flow
o Review of strategic position and financial performance comparison by
segment based on relevant peer group
o Discussion of historical valuation trends
o Issues for further consideration include:
- Capital structure alternatives and return implications
- Recapitalization accounting treatment for Daisy and Columbine
- Structure of security related to new media / internet minority
interests
[LOGO] CHASE 4
<PAGE>
Executive Summary
Preliminary Valuation Analysis
================================================================================
Segment Comparative Multiples Analysis
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1998 LTM LTM 6/30/99E
Preliminary 1998 Implied EBITDA 6/30/99E Implied EBITDA
Segment Valuation Range Statistic Multiple Statistic Multiple
- ------------------------------------------------------------------------------------------------------------------------------------
Low - High Low - High
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TC Advertising $815.0 $875.0 $135.3 6.0x - 6.5x $138.6 5.9x - 6.3x
Webcraft (1) 530.0 580.0 68.6 7.7x - 8.5x 65.4 8.1x - 8.9x
Laser Tech 250.0 280.0 38.6 6.5x - 7.2x 38.1 6.6x - 7.4x
Columbine 180.0 210.0 19.3 9.3x - 10.9x 19.0 9.5x - 11.1x
- ------------------------------------------------------------------------ -------- --------
Total Segment Enterprise Value (2) $1,774.9 $1,945.0 $261.8 6.8x - 7.4x $261.0 6.8x - 7.5x
- ------------------------------------------------------------------------ -------- --------
Adjustments
Less:
Corporate Overhead (3) (133.3) (133.3)
Debt (4) (926.3) (926.3)
Plus:
Cash (4) 8.7 8.7
Option Proceeds 47.3 47.3
------ ------
Total Equity Value $771.2 $941.3
====== ======
Primary Shares 19.700 19.700
Options (5) 3.041 3.041
QUIPs (6) 3.902 3.902
------ ------
Fully-Diluted Shares 26.643 26.643
====== ======
- ------------------------------------------------------------------------
Implied Value Per Share Base Business $28.95 $35.33
- ------------------------------------------------------------------------
New Media / Internet Investments (7) 125.1 125.1
------ ------
New Media / Internet Investments per Share (7) 4.69 4.69
------ ------
- ------------------------------------------------------------------------
Total Implied Value Per Share $33.64 $40.02
- ------------------------------------------------------------------------
</TABLE>
Notes:
(1) Webcraft segment valuation includes Specialty Products. Pro Forma for the
sale of Specialty Products; (1998 EBITDA of $9.1 million), estimated at a
multiple of 5.0x, or $45.5 million, the implied pro forma multiple for Webcraft
is 8.0x to 9.0x.
(2) Total segment enterprise value is before corporate overhead.
(3) Corporate overhead of $14.8 million is capitalized at a 9.0x multiple.
(4) Cash and debt are based on 1998 management estimates. Debt includes $108.4
million off-balance sheet A/R Facility.
(5) Diluted shares includes 3.041mm outstanding options at average strike of
$15.54.
(6) $112.5 million QUIPS are convertible into 3.902 million common shares.
(7) New Media / Internet Investments are valued at $125.1 million based on
available information for public securities only. Value is not tax effected.
- --------------------------------------------------------------------------------
[LOGO] CHASE 5
<PAGE>
Executive Summary
Preliminary Valuation Considerations
================================================================================
The following table provides summary detail on the segment valuation methodology
employed herein. A more detailed analysis is provided in the following
discussion of each business segment.
- --------------- --------------------------------------------------------------
Segment Considerations
- --------------- --------------------------------------------------------------
TC Advertising Public Comparative Companies: Range assumed at 5.5x to 6.5x
EBITDA, with a market premium evident for the economies of
scale realized by larger industry players. Relevant comps
include World Color Press (5.7x), R.R. Donnelley (7.2x),
Quebecor Printing (7.4x), Cadmus (4.8x) and Banta Corp.
(4.8x).
Precedent Transactions: Historical range from 6.0x to 7.0x
(pre-synergies). Transaction detail page 18.
Segment DCF: DCF based on management estimates and calculated
based on a range of exit multiples in year 5 from 5.5x to
6.0x. Cash flows are discounted at rates from 10.00% to
12.00%.
Overall Valuation Range: Range of 6.0x to 6.5x is most
influenced by trading comparatives and by TCA's segment
leadership and scale and the degree to which the division is
transitioning to higher value added businesses.
Webcraft Public Comparative Companies: Closest comparative, Advo at
7.3x. Other comparatives include Harte Hanks (12.5x) and
Valassis Communications (13.6x), but are less relevant given
the higher value added content of each company's business
portfolio.
Precedent Transactions: Limited relevant comparative universe,
assumed range 7.0x to 9.0x. Transaction detail page 27.
Segment DCF: DCF based on management estimates and calculated
based on a range of exit multiples in year 5 from 7.0x to
8.0x, discounting cash flows at rates from 10.00% to 12.00%.
Overall Valuation Range: The range of 7.7x to 8.5x is assumed.
A discount to public comparative companies, Harte Hanks and
Acxiom, has been applied due to Webcraft's higher percentage
of lower margin mail and printing business. A premium to
public comparative, Advo (7.3x) has been applied to reflect
Webcraft's higher value added business mix and stronger
margins.
Laser Tech Public Comparative Companies: Range assumed at 7.0x to 8.0x
EBITDA. Relevant comps include Applied Graphics Technology
(7.7x), Schawk (8.0x), and Unidigital (7.7x).
Precedent Transactions: Historical range from 4.0x to 6.0x for
smaller, niche companies and 6.0x to 7.5x for larger strategic
acquisitions. Transactions detail page 36.
Segment DCF: DCF based on management estimates and calculated
based on a range of exit multiples in year 5 from 4.0x to
6.0x, discounting cash flows at rates from 10.00% to 12.00%.
Overall Valuation Range: The range of 6.5 to 7.2x is most
influenced by public comparatives, discounting for the
historical range of smaller precedent transactions.
Columbine Public Comparative Companies: Range assumed at 10.0x to 14.0x
EBITDA. Enterprise is the only public competitor. Comps
include Enterprise Software (12.6x), DST Systems (13.6x),
Epicor Software (9.8x) and Convergys (10.2x).
Precedent Transactions: Relevant range assumed from 7.5x to
below 9.5x. Transactions detail page 43.
Segment DCF: DCF based on management estimates and calculated
based on a range of exit multiples in year 5 from 7.0x to
8.0x, discounting cash flows at rates from 10.00% to 12.00%.
Overall Valuation Range: The range of 9.3 to 10.9x is most
influenced by recent multiples for comparative companies and
Columbine's relative position in media software business.
Columbine's value benefits from its platform as a potential
industry consolidator, but is discounted for the limited
broader universe of strategic acquirers in the media software
industry.
[LOGO] CHASE 6
<PAGE>
Executive Summary
Preliminary Valuation Analysis
================================================================================
Segment Valuation Summary: Implied EBITDA Multiples
- --------------------------------------------------------------------------------
Printing / Ad Inserts
- --------------------------------------------------------------------------------
[The following table was depicted as a bar chart in the printed material]
1998 EBITDA: $135.3
Low High
---------------------
Comparable Public Companies $740 - $875 5.50x 6.50x
Precedent Transactions $810 - $950 6.00x 7.00x
DCF Valuation $840 - $960 6.20x 7.10x
Implied Valuation Range $815 - $875 6.00x 6.50x
---------------------
- --------------------------------------------------------------------------------
Direct Marketing
- --------------------------------------------------------------------------------
[The following table was depicted as a bar chart in the printed material]
1998 EBITDA: $68.6
Low High
---------------------
Comparable Public Companies ADVO 7.30x ($500) 7.30x
Precedent Transactions $480 - $620 7.00x 9.00x
DCF Valuation $570 - $750 8.30x 10.90x
Implied Valuation Range $530 - $580 7.70x 8.50x
---------------------
- --------------------------------------------------------------------------------
Premedia
- --------------------------------------------------------------------------------
[The following table was depicted as a bar chart in the printed material]
1998 EBITDA: $38.3
Low High
---------------------
Comparable Public Companies $250 - $310 7.00x 8.00x
Precedent Transactions $150 - $290 4.00x 7.50x
DCF Valuation $230 - $340 6.00x 8.90x
Implied Valuation Range $250 - $280 6.50x 7.20x
---------------------
- --------------------------------------------------------------------------------
Media Software / Broadcast Services
- --------------------------------------------------------------------------------
[The following table was depicted as a bar chart in the printed material]
1998 EBITDA: $19.3
Low High
---------------------
Comparable Public Companies $190 - $270 10.00x 14.00x
Precedent Transactions $140 - $180 7.50x 9.50x
DCF Valuation $250 - $290 13.00x 15.00x
Implied Valuation Range $180 - $210 9.30x 10.90x
---------------------
[LOGO] CHASE 7
<PAGE>
Executive Summary
Summary Trading Comparatives
================================================================================
Enterprise Value to LTM EBITDA Multiple Comparison
- --------------------------------------------------------------------------------
Printing / Ad Inserts
- --------------------------------------------------------------------------------
[The following table was depicted as a bar chart in the printed material.]
PRW 7.4x
DNY 7.2x
BGF 6.5x
WRC 5.7x
CDMS 4.8x
BN 4.8x
Mean = 6.0x
- --------------------------------------------------------------------------------
Direct Marketing
- --------------------------------------------------------------------------------
[The following table was depicted as a bar chart in the printed material.]
POS 22.3x
ACXM 15.9x
SNC 15.2x
VCI 13.6x
HHS 12.5x
MARC 12.2x
AD 7.3x
BGF 6.5x
ABII 5.9x
Mean = 12.4x
- --------------------------------------------------------------------------------
Premedia
- --------------------------------------------------------------------------------
[The following table was depicted as a bar chart in the printed material.]
SGK 8.0x
AGTX 7.7x
UNDG 7.7x
BGF 6.5x
Mean = 7.8x
- --------------------------------------------------------------------------------
Media Software / Broadcast Services
- --------------------------------------------------------------------------------
[The following table was depicted as a bar chart in the printed material.]
CSGS 29.6x
DST 13.6x
ENSW 12.6x
CVG 10.2x
EPIC 9.8x
BGF 6.5x
Mean = 11.6x
[LOGO] CHASE 8
<PAGE>
Executive Summary
Summary Transaction Comparatives
================================================================================
Transaction Value to LTM EBITDA Multiple Comparison
- --------------------------------------------------------------------------------
Printing / Ad Inserts
- --------------------------------------------------------------------------------
[The following table was depicted as a bar chart in the printed material.]
World Color Press/Northeast Graphics 5.5x
World Color Press/Ringier America 5.8x
Webinvest/Watmoughs Holdings 5.9x
Cadmus/Lancaster Information 5.9x
Webinvest/British Printing Company 6.3x
World Color Press/George Rice & Sons 6.5x
Wallace Computer/Graphic Industries 7.0x
Big Flower Press/Treasure Chest 7.1x
Applied Graphics/Devon Group 7.4x
Quebecor Printing/Amerisig Graphics 9.0x
Mean = 6.6x
- --------------------------------------------------------------------------------
Direct Marketing
- --------------------------------------------------------------------------------
[The following table was depicted as a bar chart in the printed material.]
Big Flower / Webcraft Tech 6.3x
News Corp. / Heritage Media 6.6x
Snyder / Medical Marketing Detailing 7.8x
DIMAC / Americomm 8.4x
DIMAC / DIMAC Marketing 9.1x
Snyder / American List 10.4x
Great Universal Stores / Experian 10.4x
Harte-Hanks / DiMark 11.5x
Acxiom / May & Speh 12.2x
Great Universal Stores / Metromail 13.9x
Heritage Media / DIMAC 15.5x
Mean = 11.0x
- --------------------------------------------------------------------------------
Premedia
- --------------------------------------------------------------------------------
[The following table was depicted as a bar chart in the printed material.]
Laser Tech / Admagic 3.9x
Laser Tech / Imaging Consortium 4.3x
Laser Tech / Designer Color 4.9x
Laser Tech / Gamma One 5.1x
Laser Tech / Enteron 5.2x
Laser Tech / Pacific Color 5.3x
Laser Tech / Fusion Group 5.8x
Applied Graphics / Wace NM
Applied Graphics / Devon Group 7.4x
Applied Graphics / Flying Color 8.4x
Unidigital / Kwik Intl Color 9.8x
Mean = 6.0x
- --------------------------------------------------------------------------------
Media Software / Broadcast Services
- --------------------------------------------------------------------------------
[The following table was depicted as a bar chart in the printed material.]
DST Systems / USCS Intl 7.5x
IndeNet / Enterprise Systems 8.0x
Convergys / Wiztec Solutions* 13.4x
LiveWire Ventures / Enterprise Software* 14.4x
Hyperion Solutions / Hyperion Software 14.9x
Affiliated Computer Svs / Computer Data Sys 18.1x
Quintiles Transnational / Envoy 23.4x
Mean = 14.2x
[LOGO] CHASE 9
<PAGE>
Executive Summary
Summary Observations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------------ ------------------------------- --------------------------------
TC Advertising Webcraft Laser Tech
------------------------------ ------------------------------- --------------------------------
- ------------------ ------------------------------ ------------------------------- --------------------------------
<S> <C> <C> <C>
Observations Leadership position in inserts Unique in-line Diversified Product Porfolio
and circulars finishing capabilities
Strong customer relationships
National presence Currently portfolio capabilities in high margin businesses
are heavily letter-shop weighted
Scale, superior technology, Technology leader
and cross-sell opportunities Value added of Impco
technology capabilities in Leading relationships
Integrated production developing a formidable with agencies
database servics entity
Apparent synergies with
TCA and Webcraft
- ------------------ ------------------------------ ------------------------------- --------------------------------
- ------------------ ------------------------------ ------------------------------- --------------------------------
Diligence Items Market demand for Emerging database As a company formed
versioned inserts management and other from a series of acquisitions,
direct marketing capabilities needs to develop product
Barriers to entry identity across customer
1Q 99 earnings shortfall groups
Access to high margin
growth opportunities Market size for multi-pieced Relative strengths vis-a-vis
personalized packages Schawk and Southern Graphics
in consumer packaging
- ------------------ ------------------------------ ------------------------------- --------------------------------
<CAPTION>
----------------------------
Columbine
----------------------------
- ------------------ ----------------------------
<S> <C>
Observations Leader in broadcast media
technology and services
Positioned for
international growth
Strategic consolidation
opportunities
- ------------------ ----------------------------
- ------------------ ----------------------------
Diligence Items Relative competitive position
and product capability
to Enterprise Software
Donovan add-on feasability
Assessment of Paradigm
competitive position
- ------------------ ----------------------------
</TABLE>
[LOGO] CHASE 10
<PAGE>
- --------------------------------------------------------------------------------
Treasure Chest Advertising
- --------------------------------------------------------------------------------
[LOGO] CHASE 11
<PAGE>
Treasure Chest Advertising
Competitive Overview
================================================================================
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
Strategic Position
--------------------------------------------------------------------------------------------------------
- ---------------------- ---------------------- ------------------------ ------------------------ ------------------------
Company TC Advertising American Color Quebecor RR Donnelley
- ---------------------- ---------------------- ------------------------ ------------------------ ------------------------
<S> <C> <C> <C> <C>
- ---------------------- ---------------------- ------------------------ ------------------------ ------------------------
1998 Revenues $1,102 $443 $805 $1,299
- ---------------------- ---------------------- ------------------------ ------------------------ ------------------------
- ---------------------- ---------------------- ------------------------ ------------------------ ------------------------
Products & Services Advertising Inserts Advertising Inserts Inserts and Circulars Catalogs
TV Listing Guides Comics Magazines Retail Inserts
Sunday Comics Local Newspapers Catalogs, Books Magazines
Sunday Magazines TV Listing Guides Specialty Printing Books
Digital Imaging CD-ROM, Directories
Prepress Services Checks, Bonds
Geographic Coverage US Major Regional Presence US, Canada, Europe, US, Mexico,
US and Canada South America South America, Europe
China
Primary Customers American Drug Stores Major National Retailers Sears, Wal-Mart,
Office Max Regional Retailers Kmart,
The Home Depot Newspaper Publishers Mervyn's, Ames
Safeway Montgomery Ward
Lowe's Companies Radio Shack
Walgreen's, Wal-Mart Shoppers Drug Mart
Western Colorprint Canadian Tire
Strategic Strengths Nationwide network Integrated production Large global commercial Scale economies
Targeted distribution Offset lithography and printing scale Diverse revenue stream
Cost structure flexographic printing Vertical integration
Superior technology Strong customer base Modern technology
National presence
Strategic Weaknesses Limited organic Lack of nationwide Rotogravure Lack of focused
growth opportunity coverage oriented toward growth strategy
long-run, low cost
Highly leveraged production jobs
No defined growth
strategy for
- ---------------------- ---------------------- ------------------------ ------------------------ ------------------------
<CAPTION>
---------------------
Strategic Position
---------------------
- ---------------------- ---------------------
Company World Color
- ---------------------- ---------------------
<S> <C>
- ---------------------- ---------------------
1998 Revenues $2,353
- ---------------------- ---------------------
- ---------------------- ---------------------
Products & Services Commercial Printing
Brochures
Bill Stuffers
Free-Standing Inserts
Prepress
Binding
Geographic Coverage US
Primary Customers Pacific Bell
National Geographic
Conde Nast, Forbes
ESPN
Newsweek
Starbuck's
Victoria's Secret
Strategic Strengths Diversified services
Long term contracts
Leading printing
consolidator
Strategic Weaknesses Rapid acquisition pace
exposes company to
integration risk
Lack of diversification
from ink on paper
- ---------------------- ---------------------
</TABLE>
[LOGO] CHASE 12
<PAGE>
Treasure Chest Advertising
Competitive Overview
================================================================================
Relative Financial Performance
[The following table was depicted as a bar chart in the printed material]
<TABLE>
<CAPTION>
- ------------------------- ---------------------------- ---------------------------- ----------------------------
Company Treasure Chest American Color (2) Quebecor (3)
- ------------------------- ---------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------- Comics 4% Printing 85% Books 14%
Revenue Mix TV Magazines 7% Digital Imaging/Prepress 15% Magazines 29%
- ------------------------- Newspaper 4% Specialty & Other 21%
Advertising Inserts 85% Inserts and Circulars 20%
Catalogs 16%
- ------------------------- ---------------------------- ---------------------------- ----------------------------
Key Financial Statistics 1997 1998 1999E (1) 1997 1998 1999E 1997 1998 1999E (4)
- ------------------------ ---- ---- --------- ---- ---- ----- ---- ---- ---------
Revenues $1,071 $1,102 $1,156 $440 $433 NA $3,483 $3,808 NA
% growth 3% 5% -2% 9%
EBITDA $126.8 $135.3 $144.0 $49.1 $60.0 NA $479.2 $541.3 $594.9
% growth 7% 6% 22% 13% 10%
% margin 12% 12% 12% 11% 14% 14% 14%
Capital Expenditure $45.0 $46.7 $40.0 NA NA NA $325.6 $312.1 266
% Revenues 4% 4% 3% 9% 8%
% EBITDA 36% 34% 28% 68% 58% 45%
IB/E/S LT Growth Rate NA NA
- ------------------------- ---------------------------- ---------------------------- ----------------------------
<CAPTION>
- ------------------------- ------------------------------- -----------------------------
Company RR Donnelley (5) World Color (7)
- ------------------------- ------------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------- Other 15%
Revenue Mix Telecom 16% Direct & Book 25%
- ------------------------- Magazines 28% Commercial 25%
Merchandise Media 26% Catalogs 25%
Specialty/Other 15% Magazines 25%
- ------------------------- ------------------------------- -----------------------------
Key Financial Statistics 1997 1998 1999E (6) 1997 1998 1999E
- ------------------------ ---- ---- --------- ---- ---- -----
Revenues $4,896 $5,025 $5,190 $1,981 $2,353 $2,575
% growth 3% 3% 19% 9%
EBITDA $809.9 $862.2 $934.0 $310.3 $354.7 $393.7
% growth 6% 8% 14% 11%
% margin 17% 17% 18% 16% 15% 15%
Capital Expenditure $360.4 $642.8 670.975 $93.1 $90.0 $102.0
% Revenues 7% 13% 13% 5% 4% 4%
% EBITDA 45% 75% 72% 30% 25% 26%
IB/E/S LT Growth Rate 12% 16%
- ------------------------- ---------------------------- -----------------------------
</TABLE>
(1) Based on management estimates.
(2) Revenue and EBITDA represent Printing segment's LTM 12/31 results based on
Company 's public documents. 1997 and 1998 capital expenditure for the
entire company of $12.5mm and $8.7mm, respectively.
(3) Revenues from Quebecor's Inserts and Circulars division in 1997 and 1998
are $696 and $805, respectively.
(4) Financials represent the consolidated entity; Credit Suisse First Boston
research dated 3/18/99.
(5) Revenue for Donnelley's Merchandise Media division for 1997. 1998, and
1999E are $1,302, $1,209 and $1,329, respectively.
(6) Estimated statistics are presented on consolidated entity; Credit Suisse
First Boston research dated 1/27/99.
(7) Consolidated statistics based on CIBC research dated 12/29/98.
[LOGO] CHASE 13
<PAGE>
Treasure Chest Advertising
Summary Financial Performance
================================================================================
Management Projections
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
1996 1997 1998 1999E 2000E 2001E 2002E
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Revenues $1,106.5 $1,070.8 $1,101.9 $1,155.8 $1,202.0 $1,250.1 $1,300.1
% Growth NA -3.2% 2.9% 4.9% 4.0% 4.0% 4.0%
EBITDA 114.2 126.8 135.3 144.0 151.4 157.5 165.1
% Margin 10.3% 11.8% 12.3% 12.5% 12.6% 12.6% 12.7%
EBIT 67.4 79.2 90.6 100.0 108.5 114.3 121.2
% Margin 6.1% 7.4% 8.2% 8.7% 9.0% 9.1% 9.3%
Depreciation and Amortization 46.8 47.6 44.7 44.0 42.9 43.2 43.9
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------
1999E-2004E
2003E 2004E CAGR %
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Total Revenues $1,352.1 $1,406.2 4.0%
% Growth 4.0% 4.0%
EBITDA 171.7 178.6 4.4%
% Margin 12.7% 12.7%
EBIT 126.1 133.2 5.9%
% Margin 9.3% 9.5%
Depreciation and Amortization 45.6 45.4
- ---------------------------------------------------------------------------
</TABLE>
Comparison of Actual v. Budgeted Income Data
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Forecast Budget
1Q 99A 1Q 99B % Change 1Q 99A 1Q 98A % Change 1999 1999 % Change
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Revenues $245.9 $259.6 -5.3% $245.9 $251.0 -2.1% $1,120.4 $1,155.8 -3.1%
EBITDA 25.9 26.3 -1.5% 25.9 22.8 13.4% $143.0 $144.0 -0.7%
% Margin 10.5% 10.1% 10.5% 9.1% 12.8% 12.5%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
[LOGO] CHASE 14
<PAGE>
Treasure Chest Advertising
Trading Comparatives
================================================================================
- --------------------------------------------------------------------------------
Enterprise Value to LTM EBITDA Multiple Comparison
- --------------------------------------------------------------------------------
[The following table was depicted as a bar chart in the printed material.]
PRW 7.4x
DNY 7.2x
BGF 6.5x
WRC 5.7x
CDMS 4.8x
BN 4.8x
Mean = 6.0x
- --------------------------------------------------------------------------------
Enterprise Value to 1999E EBITDA Multiple Comparison
- --------------------------------------------------------------------------------
[The following table was depicted as a bar chart in the printed material.]
DNY 6.6x
PRW 6.5x
BGF 5.8x
WRC 5.1x
CDMS 4.5x
BN 4.4x
Mean = 5.4x
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Price Per Share /
Share % of % of Market -----------------------------
Ticker Price 52-week 52-week Value of LTM CY1999E CY2000E
Company Symbol 5/11/99 High Low Equity EPS EPS EPS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advertising Inserts/Printing
Banta Corp BN $23.44 66.5% 139.9% $651.0 12.3x 11.4x 10.1x
Cadmus Communications CDMS 14.69 54.4% 116.3% 114.8 9.3 10.1 9.3
RR Donnelley & Sons DNY 36.44 75.9% 118.0% 5,153.9 15.1 16.5 14.8
Quebecor Prtg Inc PRW 23.44 94.0% 138.9% 2,729.8 17.1 15.9 14.2
World Color Press Inc WRC 24.31 67.1% 121.6% 965.5 13.1 11.4 10.1
--------------------------------------------
High 17.1x 16.5x 14.8x
Median 13.1 11.4 10.1
Mean 13.4 13.1 11.7
Low 9.3 10.1 9.3
--------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Big Flower Hldgs Inc BGF $31.63 87.4% 208.2% $700.8 13.5x 14.8x 12.5x
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------
Enterprise Value /
---------------------- 5-Year
Enterprise LTM 1999E Projected
Company Value EBITDA EBITDA EPS Growth
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Advertising Inserts/Printing
Banta Corp $788.1 4.8x 4.4x 13.0%
Cadmus Communications 226.5 4.8 4.5 12.5%
RR Donnelley & Sons 6,146.7 7.2 6.6 11.7%
Quebecor Prtg Inc 4,012.7 7.4 6.5 NA
World Color Press Inc 2,021.5 5.7 5.1 15.7%
------------------------------------------------------------
High 7.4x 6.6x 15.7%
Median 5.7 5.1 12.8%
Mean 6.0 5.4 13.2%
Low 4.8 4.4 11.7%
------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Big Flower Hldgs Inc $1,601.7 6.5x 5.8 16.3%
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
[LOGO] CHASE 15
<PAGE>
Treasure Chest Advertising
Historical EV/EBITDA Multiple Analysis
================================================================================
- ---------------------
4Q EPS rises 17%, and
Company approves $500
million stock buyback
- ---------------------
- ---------------------
World Color Press
acquires Ringier
America for $415
million
- ---------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
1995 1996 1997
------------------------------- -------------------------------- --------------------------------
Company LTM 1Q LTM 2Q LTM 3Q LTM 4Q LTM 1Q LTM 2Q LTM 3Q LTM 4Q LTM 1Q LTM 2Q LTM 3Q LTM 4Q
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Banta 4.0x 3.9x 4.4x 6.8x 6.8x 5.8x 5.5x 5.2x 5.5x 5.9x 6.6x 4.9x
Cadmus 5.3 5.8 7.0 7.5 8.4 7.8 6.5 6.6 5.6 5.5 6.2 6.8
Donnelley 8.2 8.4 8.4 7.8 7.6 6.9 6.9 6.4 5.7 6.9 7.4 5.7
Quebecor Printing NA NA NA NA 6.9 6.7 6.5 6.8 7.1 6.7 6.8 6.0
World Color Press NA NA NA NA 6.6 9.2 8.0 6.6 6.4 6.5 7.2 5.9
- ---------------------------------------------------------------------------------------------------------------------------------
Mean 5.8 6.0 6.6 7.4 7.3 7.3 6.7 6.3 6.1 6.3 6.8 5.9
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------
1998
------------------------------- 5/11/99
Company LTM 1Q LTM 2Q LTM 3Q LTM 4Q LTM
- -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Banta 6.1x 6.6x 5.9x 5.2x 4.8x
Cadmus 6.8 6.8 6.4 5.1 4.8
Donnelley 8.0 8.5 7.8 7.7 7.2
Quebecor Printing 6.7 6.6 6.6 6.6 7.4
World Color Press 7.2 7.5 7.0 6.2 5.7
- -----------------------------------------------------------------
Mean 7.0 7.2 6.7 6.1 6.0
- -----------------------------------------------------------------
- -----------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
1995
- --------------------------------------------------------------------------------
Group Mean = 6.5x
[The following table was depicted as a bar chart in the printed material.]
LTM 1Q LTM 2Q LTM 3Q LTM 4Q
Banta 4.0 3.9 4.4 6.8
Cadmus 5.3 5.8 7.0 7.5
Donnelley 8.2 8.4 8.4 7.8
- --------------------------------------------------------------------------------
1996
- --------------------------------------------------------------------------------
Group Mean = 6.9x
[The following table was depicted as a bar chart in the printed material.]
LTM 1Q LTM 2Q LTM 3Q LTM 4Q
Banta 6.8 5.8 5.5 5.2
Cadmus 8.4 7.8 6.5 6.6
Donnelley 7.6 6.9 6.9 6.4
Quebecor Printing 6.9 6.7 6.5 6.8
World Color Press 6.6 9.2 8.0 6.6
- --------------------------------------------------------------------------------
1997
- --------------------------------------------------------------------------------
Group Mean = 6.3x
[The following table was depicted as a bar chart in the printed material.]
LTM 1Q LTM 2Q LTM 3Q LTM 4Q
Banta 5.5 5.9 6.6 4.9
Cadmus 5.6 5.5 6.2 6.8
Donnelley 5.7 6.9 7.4 5.7
Quebecor Printing 7.1 6.7 6.8 6.0
World Color Press 6.4 6.5 7.2 5.9
- --------------------------------------------------------------------------------
1998
- --------------------------------------------------------------------------------
Group Mean = 6.8x
[The following table was depicted as a bar chart in the printed material.]
LTM 1Q LTM 2Q LTM 3Q LTM 4Q
Banta 6.1 6.6 5.9 5.2
Cadmus 6.8 6.8 6.4 5.1
Donnelley 8.0 8.5 7.8 7.7
Quebecor Printing 6.7 6.6 6.6 6.6
World Color Press 7.2 7.5 7.0 6.2
Source: Publicly available historical financial statements.
[LOGO] CHASE 16
<PAGE>
Treasure Chest Advertising
Historical P/E Multiple Analysis
================================================================================
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
1995 Forward P/E 1996 Forward P/E 1997 Forward P/E 1998 Forward P/E
---------------- ---------------- ---------------- ----------------
Company 1996 1997 1997 1998 1998 1999 1999 2000
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Banta Corp 16.9 14.9 14.0x 11.9x 15.9x 13.4x 14.6x 13.0x
Cadmus NA NA 15.2 9.9 24.4 10.9 17.2 13.8
Donnelley 19.9 17.3 20.3 17.3 23.2 19.2 22.6 19.9
Quebecor Printing 16.6 14.3 16.2 14.0 15.5 13.8 16.8 14.8
World Color Press NA NA 14.3 11.8 16.6 15.1 16.6 14.5
- ---------------------------------------------------------------------------------------------------------------
Mean 17.8 15.5 16.0 13.0 19.1 14.5 17.6 15.2
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
1995
- --------------------------------------------------------------------------------
[The following table was depicted as a bar chart in the printed material.]
1996E 1997E
BN 16.9 14.9
DNY 19.9 17.3
PRW 16.6 14.3
S&P 500 16.3 15.3
- --------------------------------------------------------------------------------
1996
- --------------------------------------------------------------------------------
[The following table was depicted as a bar chart in the printed material.]
1997E 1998E
BN 14.0 11.9
CDMS 15.2 9.9
DNY 20.3 17.3
PRW 16.2 14.0
WRC 14.3 11.8
S&P 500 18.3 17.2
- --------------------------------------------------------------------------------
1997
- --------------------------------------------------------------------------------
[The following table was depicted as a bar chart in the printed material.]
1998E 1999E
BN 15.9 13.4
CDMS 24.4 10.9
DNY 23.2 19.2
PRW 15.5 13.8
WRC 16.6 15.1
S&P 500 21.5 19.9
- --------------------------------------------------------------------------------
1998
- --------------------------------------------------------------------------------
[The following table was depicted as a bar chart in the printed material.]
1999E 2000E
BN 14.6 13.0
CDMS 17.2 13.8
DNY 22.6 19.9
PRW 16.8 14.8
WRC 16.6 14.5
S&P 500 27.1 25.9
Source: Factset; Price as of year-end divided by mean EPS estimate.
[LOGO] CHASE 17
<PAGE>
Treasure Chest Advertising
Transaction Comparatives
================================================================================
- --------------------------------------------------------------------------------
Printing Transactions
- --------------------------------------------------------------------------------
o Historical precedent transaction multiples have remained in a tight range,
deviating very little from 6.0 to 7.0x trailing EBITDA
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Transaction
Acquirer Target Value ($MM) Date
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Quebecor World Color Press $2,671.2 Jul-99
Bowne & Co Inc Donnelley Enterprises Solutions Inc 108.4 May-98
Webinvest Ltd (Investcorp) Watmoughs Holdings Plc 482.9 Feb-98
Webinvest Ltd (Investcorp) The British Printing Company Ltd 487.1 Feb-98
Applied Graphics Technologies Devon Group Inc 389.4 Feb-98
Walllace Computer Services Inc Graphic Industries Inc 385.6 Sep-97
Quebecor Printing Inc Amerisig Graphics Inc 144.0 Oct-96
Cadmus Communications Corp Lancaster Information Group 57.0 May-96
World Color Press Inc Ringier America Inc 414.7 Apr-96
World Color Press Inc Northeast Graphics Inc 94.8 Mar-95
World Color Press Inc George Rice & Sons 90.0 Nov-93
Big Flower Press Holdings Inc Treasure Chest Advertising Co 265.8 May-93
- ------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Transaction Value to LTM EBITDA Multiple Comparison
- --------------------------------------------------------------------------------
[The following table was depicted as a bar chart in the printed material.]
World Color Press/Northeast Graphics 5.5 x
World Color Press/Ringier America 5.8 x
Cadmus/Lancaster Information 5.9 x
Webinvest/Watmoughs Holdings 5.9 x
Webinvest/British Printing Company 6.3 x
World Color Press/George Rice & Sons 6.5 x
Wallace Computer/Graphic Industries 7.0 x
Big Flower Press/Treasure Chest 7.1 x
Quebecor/World Color Press 7.3 x
Applied Graphics/Devon Group 7.4 x
Quebecor Printing/Amerisig Graphics 9.0 x
Mean = 6.7x
o On a transaction value to 1999E EBITDA basis Quebecor has offered 6.27x
estimated EBITDA of $426MM*
[LOGO] CHASE 18
<PAGE>
Treasure Chest Advertising
Preliminary Discounted Cashflow Analysis
================================================================================
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
($ in millions) 5.5x 5.8x
FY 2003P EBITDA Exit Multiple ---------------------------------- ----------------------------------
Discount Rate 10.0% 11.0% 12.0% 10.0% 11.0% 12.0%
---- ---- ---- ---- ---- ----
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Present Value of
Cash Flows - Years 1-5 $252 $247 $242 $252 $247 $242
Terminal Value 645 622 600 674 650 628
--- --- --- --- --- ---
Implied Enterprise Value $897.3 $869.1 $842.0 $926.6 $897.3 $869.3
% Value in Terminal Value 71.9% 71.6% 71.3% 72.8% 72.5% 72.2%
% Value in Cash Flows 28.1% 28.4% 28.7% 27.2% 27.5% 27.8%
Implied Enterprise Value Multiples
FY1998E Sales 0.81x 0.79x 0.76x 0.84x 0.81x 0.79x
FY1998E EBITDA 6.6 6.4 6.2 6.8 6.6 6.4
FY1998E EBIT 8.6 8.4 8.1 8.9 8.6 8.4
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------
($ in millions) 6.0x
FY 2003P EBITDA Exit Multiple ----------------------------------
Discount Rate 10.0% 11.0% 12.0%
---- ---- ----
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Present Value of
Cash Flows - Years 1-5 $252 $247 $242
Terminal Value 704 679 655
--- --- ---
Implied Enterprise Value $955.9 $925.6 $896.6
% Value in Terminal Value 73.6% 73.3% 73.0%
% Value in Cash Flows 26.4% 26.7% 27.0%
Implied Enterprise Value Multiples
FY1998E Sales 0.87x 0.84x 0.81x
FY1998E EBITDA 7.1 6.8 6.6
FY1998E EBIT 9.2 8.9 8.6
- ------------------------------------------------------------------------
</TABLE>
o Projections based on management estimates
o FY 2003 EBITDA exit multiple based on an analysis of comparative trading
multiples and precedent transactions
o No adjustment made for changes in working capital
o No adjustment for eliminations associated with corporate overhead
[LOGO] CHASE 19
<PAGE>
- --------------------------------------------------------------------------------
Webcraft, Inc.
- --------------------------------------------------------------------------------
[LOGO] CHASE 20
<PAGE>
Webcraft, Inc.
Competitive Overview
================================================================================
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
Strategic Position
-----------------------------------------------------------------------------------------------------
- --------------------------- ------------------------------- --------------------------- ---------------------------------
Company Webcraft Acxiom ADVO
- --------------------------- ------------------------------- --------------------------- ---------------------------------
<S> <C> <C> <C>
- --------------------------- ------------------------------- --------------------------- ---------------------------------
1998 Revenues $427 $569 $1,047
- --------------------------- ------------------------------- --------------------------- ---------------------------------
- --------------------------- ------------------------------- --------------------------- ---------------------------------
Products & Direct Mail Services Data Warehouse Direct Mail Services
Services Specialty Printing Data Processing Printed Advertising
Brochures, Promotions Mailing-Lists Shared Mail
Free Standing Inserts Direct Marketing Mailing Lists
Tactical Direct Marketing Information Services Coupons
Database Development Package Inserts Promotional Items
Response Management Internet Marketing
Geographic Coverage US, Europe US, UK US, Puerto Rico
Primary Customers Blockbuster Allstate Insurance Ace Hardware
DaimlerChrysler AG Trans Union Burger King, KFC
Morgan Stanley DW Citibank CVS Pharmacy
Publishers Clearing Procter & Gamble JC Penney
Reader's Digest Prudential Insurance Kmart, Wal-Mart
Advertising Industry Wal-Mart Safeway
Healthcare Industry Netscape, 3COM Sears
Strategic Strengths Integrated / full service Database technology Scale in direct mailing
marketing solutions
May & Speh acquisition Diverse customer base
Creativity, flexibility adds direct marketing
customization expertise Scale, expertise in
shared mail
New media / internet Long term contracts
Strategic Weaknesses Lack of scale in Top two customers Derives over 90% of
database development, account for over 30% revenue from
response management of total revenues shared mailing
- --------------------------- ------------------------------- --------------------------- ---------------------------------
<CAPTION>
------------------------------------------------------------------
Strategic Position
------------------------------------------------------------------
- --------------------------- ----------------------------- --------------------------------
Company Harte Hanks (1) Valassis
- --------------------------- ----------------------------- --------------------------------
<S> <C> <C>
- --------------------------- ----------------------------- --------------------------------
1998 Revenues $494 $725
- --------------------------- ----------------------------- --------------------------------
- --------------------------- ----------------------------- --------------------------------
Products & Direct Marketing Coupon Books
Services Shoppers and Inserts Impact Promotions
Database Marketing Targeted inserts
Customer Lists "Run-of-Press"
Response Management Brochures
Web Design Scratch Games
Interactive Marketing Internet Coupons
Geographic Coverage US, Canada, Brazil US
Australia, Belgium
Primary Customers Kmart, Home Depot Procter & Gamble
Gap Stores, Old Navy Beatrice Foods
Volvo McNeil Products
Staples Pizza Hut
Bank of Scotland Ocean Spray
Pacific Life Financial Services
Hewlett Packard Healthcare Industry
Strategic Strengths Integrated marketing Leader in defensive,
free standing inserts -
Strong growth, business.
organic and through Proprietary newspaper
acquisitions database
New internet coupon
Personalization venture
Strategic Weaknesses High-end direct Reliance on free -
marketing business standing insert business
fragmented and to drive growth
competitive
- --------------------------- ----------------------------- --------------------------------
</TABLE>
(1) Direct Marketing Division
[LOGO] CHASE 21
<PAGE>
Webcraft, Inc.
Competitive Overview
================================================================================
Relative Financial Perfomance
[The following table was depicted as a pie chart in the printed material.]
<TABLE>
<CAPTION>
- -------------------------- -------------------------------- ------------------------------- ------------------------------
Company Webcraft Acxiom ADVO
- -------------------------- -------------------------------- ------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
May & Speh 17%
- -------------------------- Services & Alliances 63%
Revenue Mix Direct Marketing 79% Data Products 15% Other 7%
- -------------------------- Non-Specialty 21% Intl 5.0% Shared Mail 93%
- -------------------------- -------------------------------- ------------------------------- ------------------------------
Key Financial Statistics 1997 1998 1999E (1) 1997 1998 1999E (2) 1997 1998 1999E (3)
- ------------------------ ---- ---- --------- ---- ---- --------- ---- ---- ---------
Revenues $376 $427 $458 $487 $569 $725 $1,016 $1,047 $1,085
% growth 14% 7% 17% 27% 3% 4%
EBITDA $61.7 $68.6 $77.4 $104.2 $135.2 $187.1 $76.1 $90.3 $99.0
% growth 11% 13% 30% 38% 19% 10%
% margin 16% 16% 17% 21% 24% 26% 7% 9% 9%
Capital Expenditure NA NA 38.0 $59.8 $55.8 NA $28.6 $29.3 NA
% Revenues 8% 12% 10% 3% 3%
% EBITDA 49% 57% 41% 38% 32%
I/B/E/S LT Growth Rate 26% 20%
- -------------------------- -------------------------------- ------------------------------- ------------------------------
<CAPTION>
- -------------------------- ------------------------------- ---------------------------------
Company Harte Hanks (4) Valassis
- -------------------------- ------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------- Response 25% Impact Print 15%
Revenue Mix Database 40% Inserts 76%
- -------------------------- Marketing 35% Other 9%
- -------------------------- ------------------------------- ---------------------------------
Key Financial Statistics 1997 1998 1999E (4) 1997 1998 1999E (5)
- ------------------------ ---- ---- --------- ---- ---- ---------
Revenues $425 $494 $556 $676 $725 $757
% growth 16% 13% 7% 4%
EBITDA $69.7 $89.3 $104.8 $176.0 $192.1 $217.7
% growth 28% 17% 9% 13%
% margin 16% 18% 19% 26% 26% 29%
Capital Expenditure $22.4 $18.7 NA $13.0 $12.5 $12.0
% Revenues 5% 4% 2% 2% 2%
% EBITDA 32% 21% 7% 7% 6%
I/B/E/S LT Growth Rate 18% 17%
- -------------------------- ------------------------------- ---------------------------------
</TABLE>
(1) Management estimates, no adjustment for corporate overhead.
(2) Merrill Lynch research dated 4/9/99, PF for May&Speh acquisition.
(3) Wheat First Union research dated 1/22/99.
(4) Direct Marketing Division data from Company 10K and Merrill Lynch research
dated 1/8/99.
(5) CSFB research dated 1/22/99.
[LOGO] CHASE 22
<PAGE>
Webcraft, Inc.
Summary Financial Performance
================================================================================
Management Projections
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1999E-2004E
1996 1997 1998 1999E 2000E 2001E 2002E 2003E 2004E CAGR %
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Revenues $350.9 $375.8 $426.9 $457.7 $494.0 $533.4 $574.0 $615.4 $660.0 7.6%
% Growth NA 7.1% 13.6% 7.2% 7.9% 8.0% 7.6% 7.2% 7.3%
EBITDA 54.1 61.7 68.6 77.4 85.4 92.7 100.1 107.7 115.9 8.4%
% Margin 15.4% 16.4% 16.1% 16.9% 17.3% 17.4% 17.4% 17.5% 17.6%
EBIT 30.9 37.6 44.6 49.9 57.9 63.6 69.4 74.6 80.2 10.0%
% Margin 8.8% 10.0% 10.4% 10.9% 11.7% 11.9% 12.1% 12.1% 12.2%
Depreciation and Amortization 23.2 24.2 24.0 27.5 27.5 29.1 30.8 33.2 35.7
====================================================================================================================================
</TABLE>
Comparison of Actual v. Budgeted Income Data
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Forecast Budget
1Q 99A 1Q 99B % Change 1Q 99A 1Q 98A % Change 1999 1999 % Change
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Revenues $97.3 $108.1 -10.0% $97.3 $98.2 -1.0% $457.3 $457.7 -0.1%
EBITDA 12.2 16.3 -25.7% 12.2 15.3 -20.3% $77.0 $77.4 -0.6%
% Margin 12.5% 15.1% 12.5% 15.5% 16.8% 16.9%
=======================================================================================================================
</TABLE>
[LOGO] CHASE 23
<PAGE>
Webcraft, Inc.
Trading Comparatives(1)
================================================================================
- --------------------------------------------------
Enterprise Value to LTM EBITDA Multiple Comparison
- --------------------------------------------------
[The following table was represented as a bar chart in the printed material.]
POS 22.3x
ACXM 15.9x
SNC 15.2x
VCI 13.6x
HHS 12.5x
MARC 12.2x
AD 7.3x
BGF 6.5x
ABII 5.9x
Mean = 12.4x
- ----------------------------------------------------
Enterprise Value to 1999E EBITDA Multiple Comparison
- ----------------------------------------------------
[The following table was represented as a bar chart in the printed material.]
POS 18.0x
ACXM 13.5x
VCI 11.7x
SNC 11.0x
HHS 10.9x
AD 6.9x
MARC 6.0x
BGF 5.8x
ABII 3.8x
Mean = 9.7x
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Price Per Share / Enterprise Value /
Share % of % of Market ---------------------- ------------------ 5-Year
Ticker Price 52-week 52-week Value of LTM CY1999E CY2000E Enterprise LTM 1999E Projected
Company Symbol 5/11/99 High Low Equity EPS EPS EPS Value EBITDA EBITDA EPS Growth
- ------------------------------------------------------------------------------------------------------------------------------------
Direct Marketing
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Abacus Direct ABDR $81.13 93.8% 240.4% $870.9 76.2x 54.1x 38.4x $847.6 43.7x 31.5x 40.0%
Acxiom Corp ACXM 26.50 84.8% 160.6% 2,202.7 NM 34.4 26.2 2,525.4 15.9 13.5 26.0%
Advo Inc AD 21.75 64.7% 145.6% 503.5 13.5 13.5 11.6 682.3 7.3 6.9 20.0%
Amer Bus Info ABII 6.50 40.0% 325.0% 320.6 NM 17.1 13.8 366.6 5.9 3.8 17.5%
Catalina Marketing POS 88.50 88.5% 224.8% 1,729.8 52.6 34.3 26.7 1,711.8 22.3 18.0 24.6%
Harte Hanks Inc HHS 24.13 82.5% 138.8% 1,803.2 26.4 23.7 20.3 1,634.0 12.5 10.9 18.4%
M/A/R/C Inc MARC 12.88 65.2% 128.8% 71.1 NM 25.8 16.1 87.6 12.2 6.0 21.0%
Snyder Communications SNC 29.19 58.4% 119.7% 2,136.0 34.3 20.7 15.8 2,101.5 15.2 11.0 35.0%
Valassis Communications VCI 56.00 95.5% 192.3% 2,205.3 26.2 19.2 16.3 2,538.8 13.6 11.7 17.4%
---------------------------------------------------------------------------
High 76.2x 54.1x 38.4x 43.7x 31.5x 40.0%
Median 30.3 23.7 16.3 13.6 11.0 21.0%
Mean 38.2 27.0 20.6 16.5 12.6 24.4%
Low 13.5 13.5 11.6 5.9 3.8 17.4%
---------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Big Flower Hldgs Inc BGF $31.63 87.4% 208.2% $700.8 13.5x 14.8x 12.5x $1,601.7 6.5x 5.8 16.3%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Mean calculation excludes Abacus.
[LOGO] CHASE 24
<PAGE>
Webcraft, Inc.
Historical EV/EBITDA Multiple Analysis
================================================================================
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
1995 1996 1997
--------------------------------- --------------------------------- ---------------------------------
Company LTM 1Q LTM 2Q LTM 3Q LTM 4Q LTM 1Q LTM 2Q LTM 3Q LTM 4Q LTM 1Q LTM 2Q LTM 3Q LTM 4Q
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Abacus Direct NA NA NA NA NA NA NA NA 29.6x 27.9x 26.8x 28.2x
Acxiom Corp 4.8 5.3 7.0 7.6 6.6 7.7 8.4 8.1 12.1 10.9 12.2 14.4
Advo Inc 6.1 6.9 6.5 10.4(1) 13.8(1) 6.2 7.7 8.1 7.1 6.5 7.4 8.6
Amer Bus Info NA NA 6.3 7.0(2) 4.9 5.2 4.6 6.5 8.5 6.7 8.2 6.2
Harte Hanks Inc 4.1 4.2 4.2 5.4 5.4 6.1 5.8 5.6 5.2 6.6 6.3 8.9(3)
M/A/R/C Inc 3.7 3.9 4.1 4.3 7.9 7.1 6.4 7.9 7.6 7.8 10.3 9.6
Snyder Comm. NA NA NA NA NA NA NA NA 80.3 62.7 50.6 55.2
Valassis Comm 14.9 11.7 10.2 10.8 11.2 10.7 9.2 8.6 7.8 9.1 9.3 9.4
- -----------------------------------------------------------------------------------------------------------------------------
Mean 6.7 6.4 6.4 7.6 8.3 7.2 7.0 7.5 19.8 17.3 16.4 17.6
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------
1998
--------------------------------- 5/11/99
Company LTM 1Q LTM 2Q LTM 3Q LTM 4Q LTM
- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Abacus Direct 29.3x 32.2x 25.0x 26.3x 43.7x
Acxiom Corp 15.6 16.3 18.6 17.2 15.9
Advo Inc 8.3 9.2(4) 8.6 7.3 7.3
Amer Bus Info 6.3 7.0 7.5 4.7 5.9
Harte Hanks Inc 14.1 13.1 13.0 12.9 12.5
M/A/R/C Inc 10.5 14.2(5) 14.0(5) 17.4(5) 12.2
Snyder Comm. 48.4 45.5 30.8 33.6 15.2
Valassis Comm 10.4 10.1 9.3 10.1 13.6
- ------------------------------------------------------------
Mean 17.8 18.5 15.9 16.2 15.8
- ------------------------------------------------------------
</TABLE>
1. Advo declares $10.00 cash dividend
2. American Business Info announces 3 for 2 stock split
3. October 1997, Harte Hanks generates $775 million from divestiture of
newspaper group
4. Advo gains 67% since January '98 on strength on earnings
5. M/A/R/C changes business mix with acquisition of higher margin UK digital
business
- --------------------------------------------------------------------------------
1995
- --------------------------------------------------------------------------------
Group Mean = 6.8x
[The following table was represented as a bar chart in the printed material.]
LTM 1Q LTM 2Q LTM 3Q LTM 4Q
------ ------ ------ ------
Acxiom Corp 4.8 5.3 7.0 7.6
Advo Inc. 6.1 6.9 6.5 10.4
Amer Bus Info -- -- 6.3 7.0
Harte Hanks Inc 4.1 4.2 4.2 5.4
M/A/R/C/ Inc 3.7 3.9 4.1 4.3
Valassis Comm 14.9 11.7 10.2 10.8
- --------------------------------------------------------------------------------
1996
- --------------------------------------------------------------------------------
Group Mean = 7.5x
[The following table was represented as a bar chart in the printed material.]
LTM 1Q LTM 2Q LTM 3Q LTM 4Q
------ ------ ------ ------
Acxiom Corp 6.6 7.7 8.4 8.1
Advo Inc. 13.8 6.2 7.7 8.1
Amer Bus Info 4.9 5.2 4.6 6.5
Harte Hanks Inc 5.4 6.1 5.8 5.6
M/A/R/C/ Inc 7.9 7.1 6.4 7.9
Valassis Comm 11.2 10.7 9.2 8.6
- --------------------------------------------------------------------------------
1997
- --------------------------------------------------------------------------------
Group Mean = 17.7x
[The following table was represented as a bar chart in the printed material.]
LTM 1Q LTM 2Q LTM 3Q LTM 4Q
------ ------ ------ ------
Abacus Direct 29.6 27.9 26.8 28.2
Acxiom Corp 12.1 10.9 12.2 14.4
Advo Inc. 7.1 6.5 7.4 8.6
Amer Bus Info 8.5 6.7 8.2 6.2
Harte Hanks Inc 5.2 6.6 6.3 8.9
M/A/R/C/ Inc 7.6 7.8 10.3 9.6
Snyder Comm 80.3 62.7 50.6 55.2
Valassis Comm 7.8 9.1 9.3 9.4
- --------------------------------------------------------------------------------
1998
- --------------------------------------------------------------------------------
Group Mean = 17.1x
[The following table was represented as a bar chart in the printed material.]
LTM 1Q LTM 2Q LTM 3Q LTM 4Q
------ ------ ------ ------
Abacus Direct 29.3 32.2 25.0 26.3
Acxiom Corp 15.6 16.3 18.6 17.2
Advo Inc. 8.3 9.2 8.6 7.3
Amer Bus Info 6.3 7.0 7.5 4.7
Harte Hanks Inc 14.1 13.1 13.0 12.9
M/A/R/C/ Inc 10.5 14.2 14.0 17.4
Snyder Comm 48.4 45.5 30.8 33.6
Valassis Comm 10.4 10.1 9.3 10.1
[LOGO] CHASE 25
<PAGE>
Webcraft, Inc.
Historical P/E Multiple Analysis
================================================================================
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
1995 Forward P/E 1996 Forward P/E 1997 Forward P/E 1998 Forward P/E
---------------- ---------------- ---------------- ----------------
Company 1996 1997 1997 1998 1998 1999 1999 2000
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Abacus Direct NA NA 51.1x 37.0x 58.4x 43.0x 41.1x 30.6x
Acxiom Corp NA NA 30.5 23.5 42.6 33.9 40.4 30.8
Advo Inc NA NA 13.2 NA 14.1 12.2 14.9 13.0
Amer Bus Info 24.3 20.2 24.1 19.8 17.7 11.7 11.3 12.5
Harte Hanks Inc 19.9 16.0 21.6 17.5 34.3 22.6 33.0 28.0
M/A/R/C Inc 13.3 11.2 14.8 12.5 15.0 12.9 49.4 12.6
Snyder Comm. NA NA 162.0 77.9 69.1 44.8 34.1 24.2
Valassis Comm 31.8 19.1 21.7 13.9 20.0 17.2 23.3 19.3
- --------------------------------------------------------------------------------------------------------
Mean 22.325 16.625 42.4 28.9 33.9 24.8 30.9 21.4
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
1995
- --------------------------------------------------------------------------------
[The following table was represented as a bar chart in the printed material.]
1996E 1997E
----- -----
ABII 24.3 20.2
HHS 19.9 16.0
MARC 13.3 11.2
VCI 31.8 19.1
S&P 500 16.3 15.3
- --------------------------------------------------------------------------------
1996
- --------------------------------------------------------------------------------
[The following table was represented as a bar chart in the printed material.]
1997E 1998E
----- -----
ABDR 51.1 37.0
ACXM 30.5 23.5
AD 13.2 --
ABII 24.1 19.8
HHS 21.6 17.5
MARC 14.8 12.5
SNC -- 77.9
VCI 21.7 13.9
S&P 500 18.3 17.2
- --------------------------------------------------------------------------------
1997
- --------------------------------------------------------------------------------
[The following table was represented as a bar chart in the printed material.]
1998E 1999E
----- -----
ABDR 58.4 43.0
ACXM 42.6 33.9
AD 14.1 12.2
ABII 17.7 11.7
HHS 34.3 22.6
MARC 15.0 12.9
SNC 69.1 44.8
VCI 20.0 17.2
S&P 500 21.5 19.9
- --------------------------------------------------------------------------------
1998
- --------------------------------------------------------------------------------
[The following table was represented as a bar chart in the printed material.]
1999E 2000E
----- -----
ABDR 41.1 30.6
ACXM 40.4 30.8
AD 14.9 13.0
ABII 11.3 12.5
HHS 33.0 28.0
MARC 49.4 12.6
SNC 34.1 24.2
VCI 23.3 19.3
S&P 500 27.1 25.9
[LOGO] CHASE 26
<PAGE>
Source: Factset; Price as of year-end divided by mean EPS estimate.
[LOGO] CHASE 27
<PAGE>
Webcraft, Inc.
Transaction Comparatives
================================================================================
- --------------------------------------------------------------------------------
Direct Marketing Transactions
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Acquirer Target Transaction
Company Name Company Name Value ($MM) Date
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Harte-Hanks Spectral Resources Inc. n/a Dec-98
Harte-Hanks Printing Management Systems n/a Nov-98
Snyder Communications Clinical Communications n/a Aug-98
Harte-Hanks Cornerstone n/a Aug-98
USWeb CKS Group 331.6 Aug-98
Catalina Marketing Market Logic n/a Jul-98
Harte-Hanks Cornerstone Integrated Services n/a Jul-98
May & Speh Sigma Marketing Group 20.0 Jun-98
- --------------------------------------------------------------------------------------------------------
DIMAC Americomm 203.8 Jun-98
- --------------------------------------------------------------------------------------------------------
DIMAC DIMAC Marketing 204.0 Jun-98
- --------------------------------------------------------------------------------------------------------
AC Nielsen BBI Marketing Services Inc. 65.8 Jun-98
- --------------------------------------------------------------------------------------------------------
Great Universal Stores PLC Metromail Corp. 830.0 Jun-98
- --------------------------------------------------------------------------------------------------------
Acxiom May & Speh 493.2 May-98
- --------------------------------------------------------------------------------------------------------
Mail-Well Inc. ColorGraphics Inc. n/a Mar-98
ADVO Inc. Mailhouse Inc. n/a Mar-98
Focus Direct DataMark Systems Inc. 8 Mar-98
Snyder Communications Arnold Communications Inc. 125.7 Mar-98
Intel Corp. CMG Information Services Inc. 11.0 Dec-97
Acxiom Corp. Buckley Dement, KM List Inc. 14.2 Nov-97
Harte-Hanks Mercantile n/a Nov-97
Investor Group Genesis Direct Inc. n/a Oct-97
Document Xpress Southern Marketing Services n/a Oct-97
Twenty One Group Campaign Direct n/a Sep-97
Metromail Corp. Saxe Inc. n/a Sep-97
Metromail Corp. Marketing Information n/a Aug-97
- --------------------------------------------------------------------------------------------------------
News Corp. Ltd. Heritage Media Corp. (News Corp.) 1,351.8 Aug-97
- --------------------------------------------------------------------------------------------------------
Snyder Communications American List Corp. 125.0 Jul-97
- --------------------------------------------------------------------------------------------------------
Acxiom Corp. National List Protection 0.6 Jul-97
Snyder Communications Brann Holdings Ltd. 75.9 May-97
Great Universal Stores PLC Direct Marketing Technology 299.2 Apr-97
Primedia Mailcom 9.0 Apr-97
American Business Information Walter Karl Inc. 20.0 Feb-97
Harte-Hanks Information For Marketing n/a Jan-97
- --------------------------------------------------------------------------------------------------------
Snyder Communications Medical Marketing Detailing 36.5 Jan-97
- --------------------------------------------------------------------------------------------------------
American Business Info Database American Companies 100.0 Dec-96
American Business Info BJ Hunter 3.0 Dec-96
- --------------------------------------------------------------------------------------------------------
Great Universal Stores PLC Experian Corp. 1,700.0 Nov-96
- --------------------------------------------------------------------------------------------------------
Harte-Hanks Marketing Communications Inc. 33.0 Nov-96
American Business Info County Data Corp. 11.1 Nov-96
SalesLink Corp. Pacific Link 17.0 Oct-96
First Data Corp. Donnelley Marketing 185.0 Sep-96
American Business Info Digital Directory Assistance 17.0 Sep-96
Acxiom Corp. Direct Media/DMI Inc. 25.0 May-96
- --------------------------------------------------------------------------------------------------------
Harte-Hanks DiMark Inc. 151.8 Apr-96
- --------------------------------------------------------------------------------------------------------
Acxiom Corp. Pro CD Inc. 47.3 Apr-96
McCown de Leeuw & Co. International Data Response 85.0 Mar-96
- --------------------------------------------------------------------------------------------------------
Heritage Media Corp. DIMAC Corp. 258.4 Feb-96
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Transaction Value to LTM EBITDA Multiple Comparison
- --------------------------------------------------------------------------------
Big Flower / Webcraft
Tech 6.3x
News Corp. / Heritage
Media 6.6x
Snyder / Medical
Marketing Detailing 7.8x
DIMAC / Americomm 8.4x
DIMAC / DIMAC
Marketing 9.1x
Snyder / American List 10.4x
Great Universal
Stores / Experian 10.4x
Harte-Hanks/ DiMark 11.5x
Acxiom / May & Speh 12.2x
Great Universal Stores /
Metromail 13.9x
Heritage Media / DIMAC 15.5x
Mean = 11.0x
[LOGO] CHASE 28
<PAGE>
Webcraft, Inc.
Preliminary Discounted Cashflow Analysis
================================================================================
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
($ in millions)
FY 2003P EBITDA Exit Multiple 7.0x 7.5x 8.0x
------------------------- ------------------------ ----------------------------
Discount Rate 10.0% 11.0% 12.0% 10.0% 11.0% 12.0% 10.0% 11.0% 12.0%
----- ----- ----- ----- ----- ----- ----- ----- -----
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Present Value of
Cash Flows - Years 1-5 $91 $89 $87 $91 $89 $87 $91 $89 $87
Terminal Value 515 497 479 552 532 514 589 568 548
--- --- --- --- --- --- --- --- ---
Implied Enterprise Value $606.4 $586.0 $566.6 $643.2 $621.5 $600.8 $680.0 $657.0 $635.0
% Value in Terminal Value 84.9% 84.8% 84.6% 85.8% 85.6% 85.5% 86.6% 86.4% 86.3%
% Value in Cash Flows 15.1% 15.2% 15.4% 14.2% 14.4% 14.5% 13.4% 13.6% 13.7%
Implied Enterprise Value Multiples
FY1998E Sales 1.42x 1.37x 1.33x 1.51x 1.46x 1.41x 1.59x 1.54x 1.49x
FY1998E EBITDA 8.8 8.5 8.3 9.4 9.1 8.8 9.9 9.6 9.3
FY1998E EBIT 12.4 12.0 11.6 13.1 12.7 12.3 13.9 13.4 13.0
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
o Projections based on management estimates
o FY 2003 EBITDA exit multiple based on an analysis of comparative trading
multiples and precedent transactions
o No adjustment made for changes in working capital
o No adjustment for eliminations associated with corporate overhead
[LOGO] CHASE 29
<PAGE>
--------------------------------------------------------------
Laser Tech Color, Inc.
--------------------------------------------------------------
[LOGO] CHASE 30
<PAGE>
Laser Tech Color, Inc.
Competitive Overview
================================================================================
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
Strategic Position
----------------------------------------------------------------------------------------------------------
- -------------------- ------------------------ ------------------------- ------------------------- ------------------------
Company Laser Tech Applied Graphics Schawk Unidigital
- -------------------- ------------------------ ------------------------- ------------------------- ------------------------
- -------------------- ------------------------ ------------------------- ------------------------- ------------------------
1998 Revenues $242 $395 $143 $47
- -------------------- ------------------------ ------------------------- ------------------------- ------------------------
- -------------------- ------------------------ ------------------------- ------------------------- ------------------------
<S> <C> <C> <C> <C>
Products & Design, Layout Digital Prepress Services Art Production Imaging
Services File Engineering Broadcast Media Services Electronic Retouching Reproductive Media
Content Production Greeting Cards Platemaking, Press Proofs Digital Printing
Packaging, Promotions Promotions Digital Database Large Format Printing
Image Digitization Imaging Hardware Lithography, Flexography Graphic Arts
Web Site Design Data Network System Retouching, Proofing
Consulting Satellite Distribution
Geographic Coverage US US Worldwide US, UK
Primary Customers Omnicom McGraw-Hill General Mills Advertising Agencies
Leo Burnett Newsweek, Conde Nast Coca-Cola, PepsiCo Retailers
Office Max InterPublic Group Kellogg, Nestle Financial Institutions
Grolier Publishing Walt Disney / ABC Procter & Gamble Government Agencies
Zales, Wal-Mart Time Warner Publisher's Clearing Publishers
Kraft, Reynolds General Motors ConAgra
Lowe Group Sears Bayer Corporation
Strategic Strengths Broad product offering Consolidator Global capability Positioned to capture
and presence expanding Digital
Customer relationships Superior technology Media market
Makes up 20% of total
Well positioned to consumer packaging Opportunistic
capitalize on emerging segment with competitor, consolidator
technologies Southern Graphics
Strategic Weaknesses As company formed Difficulty integrating Does not provide Large % of revenue tied
from series of Devon acquisition turn-key PrePress to advertising cycles
acquisitions, needs to Services
develop product identity Commodity nature of Lack of critical mass -
across customer groups customer base niche player
- -------------------- ------------------------ ------------------------- ------------------------- ------------------------
<CAPTION>
- --------------------
Company
- --------------------
- -------------------- ------------------ -------------------
1998 Revenues Process Competency
- -------------------- ------------------ -------------------
- --------------------
<S> <C> <C>
Products &
Services ------------------
Creative Design
------------------
------------------ Big Flower
Geographic Coverage Art Production
------------------
Primary Customers Unidigital
------------------
Image PrePress
------------------ Applied Graphics
Schawk
Strategic Strengths ------------------
Plate Making
------------------
------------------
Printing
Strategic Weaknesses ------------------
- --------------------
</TABLE>
[LOGO] CHASE 31
<PAGE>
Laser Tech Color, Inc.
Competitive Overview
================================================================================
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Relative Financial Performance
---------------------------------------------------------------------------------------------------------
- ------------------------- ------------------------- --------------------------- ------------------------ -----------------------
Company Laser Tech Applied Graphics Schawk Unidigital
- ------------------------- ------------------------- --------------------------- ------------------------ -----------------------
[The following table was represented as a pie chart in the printed material.]
<S> <C> <C> <C> <C>
Revenue Mix Professional 2% Other 9% Packaging 70% US 67%
Creative 8% Publishing 14% Other 30% UK 33%
Production 90% Content MGMT 77%
</TABLE>
<TABLE>
<CAPTION>
- ------------------------- ------------------------- --------------------------- ------------------------ -----------------------
Key Financial Statistics 1997 1998 1999E(1) 1997 1998 1999E(2) 1997 1998 1999E(3) 1997 1998 1999E(4)
- ------------------------ ---- ---- -------- ---- ---- -------- ---- ---- -------- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $217 $242 $258 $185 $395 $520 $116 $143 $181 $27 $47 $78
% growth 11% 7% 114% 32% 23% 27% 74% 66%
EBITDA $39.0 $38.2 $44.5 $31.0 $63.0 $88.0 $26.8 $36.1 $45.5 $3.1 $6.2 $11.8
% growth -2% 16% 103% 40% 35% 26% 96% 91%
% margin 18% 16% 17% 17% 16% 17% 23% 25% 25% 12% 13% 15%
Capital Expenditure 16.0 27.9 18.8 $14.0 $24.0 24 $7.1 $9.5 NA $1.4 $1.6 NA
% Revenues 7% 12% 7% 8% 6% 5% 6% 7% 5% 3%
% EBITDA 41% 73% 42% 45% 38% 27% 27% 26% 44% 26%
I/B/E/S LT Growth Rate 16% 20% NA
- ------------------------- ------------------------- --------------------------- ------------------------ -----------------------
</TABLE>
1 Management Estimates, no adjustment for corporate overhead.
2 SG Cowen research dated 11/27/98.
3 CJS Securities research dated 1/4/99.
4 CIBC research dated 1/19/99.
[LOGO] CHASE 32
<PAGE>
Laser Tech Color, Inc.
Summary Financial Performance
================================================================================
Management Projections
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
1999E-2004E
1996 1997 1998 1999E 2000E 2001E 2002E 2003E 2004E CAGR %
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Revenues $183.8 $217.3 $241.5 $258.2 $282.7 $308.2 $334.4 $361.1 $390.0 8.6%
% Growth NA 18.2% 11.1% 6.9% 9.5% 9.0% 8.5% 8.0% 8.0%
EBITDA 28.4 39.0 38.2 44.5 50.3 55.5 60.9 65.7 71.0 9.8%
% Margin 15.5% 17.9% 15.8% 17.2% 17.8% 18.0% 18.2% 18.2% 18.2%
EBIT 14.8 23.2 21.0 24.3 29.4 33.0 37.9 41.4 44.4 12.8%
% Margin 8.1% 10.7% 8.7% 9.4% 10.4% 10.7% 11.3% 11.5% 11.4%
Depreciation and
Amortization 13.6 15.8 17.2 20.2 20.9 22.5 23.0 24.3 26.6
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Comparison of Actual v. Budgeted Income Data
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Forecast Budget
1Q 99A 1Q 99B % Change 1Q 99A 1Q 98A % Change 1999 1999 % Change
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Revenues $61.1 $62.2 -1.8% $61.1 $57.4 -11.1% $253.9 $258.2 -1.7%
EBITDA 8.6 9.9 -13.3% 8.6 9.0 -5.1% $41.4 $44.5 -7.1%
% Margin 14.0% 15.9% 16.8% 15.7% 16.3% 17.3%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[LOGO] CHASE 33
<PAGE>
Laser Tech Color, Inc.
Trading Comparatives
================================================================================
- --------------------------------------------------------------------------------
Enterprise Value to LTM EBITDA Multiple Comparison
- --------------------------------------------------------------------------------
[The following table was represented as a bar chart in the printed material.]
SGK 8.0x
AGTX 7.7x
UNDG 7.7x
BGF 6.5x
Mean = 7.8x
- --------------------------------------------------------------------------------
Enterprise Value to 1999E EBITDA Multiple Comparison
- --------------------------------------------------------------------------------
[The following table was represented as a bar chart in the printed material.]
SGK 6.3x
BGF 5.8x
UNDG 5.7x
AGTX 4.8x
Mean = 5.7x
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Price Per Share / Enterprise Value/
Share % of % of Market ------------------------ ----------------- 5-Year
Ticker Price 52-week 52-week Value of LTM CY1999E CY2000E Enterprise LTM 1999E Projected
Company Symbol 5/11/99 High Low Equity EPS EPS EPS Value EBITDA EBITDA EPS Growth
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Premedia
Applied Graphics Techn AGTX 10.38 18.2 176.6 232.3 8.6 9.4 3.6 422.0 7.7 4.8 16.0%
Schawk Inc SGK 11.88 68.3 166.7 260.2 14.7 13.6 11.3 287.1 8.0 6.3 20.0%
Unidigital, Inc. UNDG 4.88 54.2 130.0 25.8 16.9 8.4 6.0 104.2 7.7 5.7 NA
--------------------------------------------------------------
High 16.9x 13.6x 11.3x 8.0x 6.3x
Median 14.7 9.4 6.0 7.7 5.7
Mean 13.4 10.5 7.0 7.8 5.7
Low 8.6 8.4 3.6 7.7 4.8
--------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Big Flower Hldgs Inc BGF $31.63 87.4% 208.2% $700.8 13.5x 14.8x 12.5x $1,601.7 6.5x 5.8 16.3%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[LOGO] CHASE 34
<PAGE>
Laser Tech Color, Inc.
Historical EV/EBITDA Multiple Analysis
================================================================================
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
1995 1996 1997
------------------------------ ------------------------------ ------------------------------
Company LTM 1Q LTM 2Q LTM 3Q LTM 4Q LTM 1Q LTM 2Q LTM 3Q LTM 4Q LTM 1Q LTM 2Q LTM 3Q LTM 4Q
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Applied Color Graphics NA NA NA NA NA NA NA NA 20.1x 21.3x 22.0x 26.9x
Schawk 7.6 8.3 8.2 7.8 9.1 8.4 7.6 7.7 5.8 7.3 9.2 10.7
UNDG NA NA NA NA NA NA NA NA 5.8 6.3 6.9 6.8
- -----------------------------------------------------------------------------------------------------------------------------
Mean 7.6 8.3 8.2 7.8 9.1 8.4 7.6 7.7 10.6 11.6 12.7 14.8
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------
1998
------------------------------ 5/11/99
Company LTM 1Q LTM 2Q LTM 3Q LTM 4Q LTM
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Applied Color Graphics 24.2x 28.8x 17.6x 7.9x 7.7x
Schawk 9.4 11.4 10.6 8.7 8.0
UNDG 7.3 7.4 8.0* 9.2* 7.7
- ----------------------------------------------------------------------
Mean 13.6 15.9 12.1 8.6 7.8
- ----------------------------------------------------------------------
</TABLE>
* Unidigital makes three
strategic acquisitions during
2Q and 3Q '98, Kwik Color,
Megaart, and Zazula
- --------------------------------------------------------------------------------
1995
- --------------------------------------------------------------------------------
Group Mean = 8.0x
[The following table was represented as a bar chart in the printed material.]
LTM 1Q LTM 2Q LTM 3Q LTM 4Q
------ ------ ------ ------
Schawk 7.6 8.3 8.2 7.8
- --------------------------------------------------------------------------------
1996
- --------------------------------------------------------------------------------
Group Mean = 8.2x
[The following table was represented as a bar chart in the printed material.]
LTM 1Q LTM 2Q LTM 3Q LTM 4Q
------ ------ ------ ------
Schawk 9.1 8.4 7.6 7.7
- --------------------------------------------------------------------------------
1997
- --------------------------------------------------------------------------------
Group Mean = 12.4x
[The following table was represented as a bar chart in the printed material.]
LTM 1Q LTM 2Q LTM 3Q LTM 4Q
------ ------ ------ ------
Applied Color
Graphics 20.1 21.3 22.0 26.9
Schawk 5.8 7.3 9.2 10.7
UNDG 5.8 6.3 6.9 6.8
- --------------------------------------------------------------------------------
1998
- --------------------------------------------------------------------------------
Group Mean = 12.5x
LTM 1Q LTM 2Q LTM 3Q LTM 4Q
------ ------ ------ ------
Applied Color
Graphics 24.2 28.8 17.6 7.9
Schawk 9.4 11.4 10.6 8.7
UNDG 7.3 7.4 8.0 9.2
[LOGO] CHASE 35
<PAGE>
Laser Tech Color, Inc.
Historical P/E Multiple Analysis
================================================================================
- --------------------------------------------------------------------------------
1996 Forward P/E 1997 Forward P/E 1998 Forward P/E
---------------- ---------------- ----------------
Company 1997 1998 1998 1999 1999 2000
- --------------------------------------------------------------------------------
Applied Graphics 58.8x 33.1x 59.3x 37.1x 15.5x 12.4x
Schawk 10.3 NA 21.6 18.1 18.8 16.1
Unidigital NA NA NA NA 7.1 5.3
- --------------------------------------------------------------------------------
Mean 34.6 33.1 40.5 27.6 13.8 11.3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1996
- --------------------------------------------------------------------------------
[The following table was represented as a bar chart in the printed material.]
1997E 1998E
----- -----
AGTX 58.8 33.1
SGK 10.3 --
S&P 500 18.3 17.2
- --------------------------------------------------------------------------------
1997
- --------------------------------------------------------------------------------
[The following table was represented as a bar chart in the printed material.]
1998E 1999E
----- -----
AGTX 59.3 37.1
SGK 21.6 18.1
S&P 500 21.5 19.9
- --------------------------------------------------------------------------------
1998
- --------------------------------------------------------------------------------
[The following table was represented as a bar chart in the printed material.]
1999E 2000E
----- -----
AGTX 15.5 12.4
SGK 18.8 16.1
UDG 7.1 5.3
S&P 500 27.1 25.9
Source: Factset; Price as of year end divided by mean EPS estimate.
[LOGO] CHASE 36
<PAGE>
[LOGO] CHASE 37
<PAGE>
Laser Tech Color, Inc.
Transaction Comparatives
================================================================================
- --------------------------------------------------------------------------------
Premedia Transactions
- --------------------------------------------------------------------------------
o The Premedia industry is consolidating quickly, Applied Graphics, Schawk
and Laser Tech have actively pursued aggressive acquisition strategies to
enhance existing premedia capabilities and add new technologically
oriented services
o Listed below are selected recent premedia transactions, including 3 years
of Laser Tech acquisition history
o In March, Schawk abandoned its efforts to acquire Wace Group PLC, paving
the way for Applied Graphics to acquire the London based premedia company
for approximately $180 million. Wace recorded pre-tax losses in 1997 and
1998 of $68 million and $124 million, respectively
- --------------------------------------------------------------------------------
Acquirer Target Transaction
Company Name Company Name Value ($MM) Date
- --------------------------------------------------------------------------------
Applied Graphics Tech Wace 180.1 Pending
Unidigital Kwik International Color 27.4 Mar-98
Applied Graphics Tech Flying Color Graphics 22.2 Jan-98
Applied Graphics Tech Devon Group 441.5 Feb-98
Laser Tech Admagic n/a Nov-98
Laser Tech Imaging Consortium n/a Jul-98
Laser Tech Enteron n/a May-98
Laser Tech Fusion Group n/a Mar-98
Laser Tech Gamma One n/a Nov-97
Laser Tech Designer color n/a Dec-96
Laser Tech Pacific Color n/a Oct-96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Transaction Value to LTM EBITDA Multiple Comparison
- --------------------------------------------------------------------------------
[The following table was represented as a bar chart in the printed material.]
Laser Tech/
Admagic 3.9x
Laser Tech/
Image Consortium 4.3x
Laser Tech/
Designer Color 4.9x
Laser Tech/
Gamma One 5.1x
Laser Tech/
Enteron 5.2x
Laser Tech/ Pacific
Color 5.3x
Laser Tech/ Fusion
Group 5.8x
Applied Graphics/
Wace NM
Applied Graphics/
Devon Group 7.4x
Applied Graphics/
Flying Color 8.4x
Unidigital/ Kwik Intl
Color 9.8x
Mean = 6.0x
[LOGO] CHASE 38
<PAGE>
Laser Tech Color, Inc.
Preliminary Discounted Cashflow Analysis
================================================================================
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
($ in millions)
FY 2003P EBITDA Exit Multiple 4.0x 5.5x 6.0x
------------------------- -------------------------- --------------------------
Discount Rate 10.0% 11.0% 12.0% 10.0% 11.0% 12.0% 10.0% 11.0% 12.0%
----- ----- ----- ----- ----- ----- ----- ----- -----
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Present Value of
Cash Flows - Years 1-5 $71 $69 $67 $71 $69 $67 $71 $69 $67
Terminal Value 180 173 167 247 238 230 269 260 251
--- --- --- --- --- --- --- --- ---
Implied Enterprise Value $250.2 $242.2 $234.6 $317.5 $307.1 $297.2 $340.0 $328.8 $318.1
% Value in Terminal Value 71.8% 71.5% 71.2% 77.8% 77.5% 77.3% 79.2% 79.0% 78.8%
% Value in Cash Flows 28.2% 28.5% 28.8% 22.2% 22.5% 22.7% 20.8% 21.0% 21.2%
Implied Enterprise Value Multiples
FY1998E Sales 1.04x 1.00x 0.97x 1.31x 1.27x 1.23x 1.41x 1.36x 1.32x
FY1998E EBITDA 6.5 6.3 6.1 8.3 8.0 7.8 8.9 8.6 8.3
FY1998E EBIT 10.3 10.0 9.7 13.1 12.7 12.3 14.0 13.6 13.1
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
o Projections based on management estimates
o FY 2003 EBITDA exit multiple based on an analysis of comparative trading
multiples and precedent transactions
o No adjustment made for changes in working capital
o No adjustment for eliminations associated with corporate overhead
[LOGO] CHASE 39
<PAGE>
- --------------------------------------------------------------------------------
Columbine JDS Systems
- --------------------------------------------------------------------------------
[LOGO] CHASE 40
<PAGE>
Columbine JDS Systems
Competitive Overview
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
Strategic Position
------------------------------------------------------------------------------------------------
- -------------------- ----------------------------- ------------------------------ --------------------------
Company Columbine JDS Systems Enterprise Software Donovan Data Systems
- -------------------- ----------------------------- ------------------------------ --------------------------
- -------------------- ----------------------------- ------------------------------ --------------------------
<S> <C> <C> <C>
1998 Revenues $80 $30 NA
- -------------------- ----------------------------- ------------------------------ --------------------------
- -------------------- ----------------------------- ------------------------------ --------------------------
Products & Services Electronic Media Mission Critical Enterprise Data Processing
Management Software Management Software Information Management
Services
Media Buying, Program Management Software Media Buying,
Trafficking & Billing Systems Media Buying, Trafficking & Billing
Systems
Internet Invoicing Trafficking & Billing Systems Production and
Corporate
Back Office Administration Accounting Solutions
Geographic Coverage US, 33 Countries US, UK, Western Europe, US, Canada, UK, France
New Zealand, Australia, Germany, Ireland
Southeast Asia and S. Africa
Primary Customers Turner Broadcasting NBC Television Stations Bates USA
The New York Times Tribune Television Stations Ogilvy & Mather
MTV Time-Warner Cable J. Walter Thompson
Telemundo TCI Cable Saatchi & Saatchi
T.V. Azteca Laser Sales Young & Rubicam
Grey Advertising Network 10
Time Warner TVNZ
Strategic Strengths Broad product spectrum Broad product spectrum Dominance in workflow
Expertise in process Integrated media support with top advertising
integration services agencies
Traffic & billing leader Leader in electronic data
Strong longstanding interchange technology
customer relationships
International presence
Strategic Weaknesses No significant presence in Limited global presence
agency, national rep sales Customer concentration
and radio sectors (ie. advertising agencies and
rep sales)
- -------------------- ----------------------------- ------------------------------ --------------------------
</TABLE>
[LOGO] CHASE 41
<PAGE>
Columbine JDS Systems
Competitive Overview
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Relative Financial Performance
----------------------------------------------------------------------------
- ------------------------- ----------------------------------- ---------------------------------
Company Columbine JDS Systems Enterprise Software(2)
- ------------------------- ----------------------------------- ---------------------------------
- -------------------------
<S> <C> <C>
Revenue Mix Other Products 15% Domestic 53%
- ------------------------- Paradigm 10% International 47%
BIAS 27%
CSI 18%
JDS 9%
MCAS 5%
Agency 16%
<CAPTION>
- ------------------------- ----------------------------------- ---------------------------------
Key Financial Statistics 1997 1998 1999E(1) 1997 1998 1999
---- ---- -------- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues $71 $80 $87 $25 $30 NA
% growth 13% 9% 22%
EBITDA $13.8 $19.2 $23.8 $3.5 $6.1 NA
% growth 39% 24% 73%
% margin 20% 24% 27% 14% 20%
Capital Expenditure NA NA NA $0.5 $0.5 NA
% Revenues 2% 2%
% EBITDA 15% 8%
- ------------------------- ----------------------------------- ---------------------------------
</TABLE>
(1) Based on management estimates.
(2) Based on LTM financials.
[LOGO] CHASE 42
<PAGE>
Columbine JDS Systems
Summary Financial Performance
- --------------------------------------------------------------------------------
Management Projections
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1999E-2004E
1996 1997 1998 1999E 2000E 2001E 2002E 2003E 2004E CAGR %
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Revenues $68.9 $70.7 $79.5 $86.6 $99.6 $114.5 $125.7 $136.0 $146.9 11.1%
% Growth NA 2.6% 12.4% 8.9% 15.0% 15.0% 9.8% 8.2% 8.0%
EBITDA 11.7 13.8 19.2 23.8 26.9 34.4 37.8 40.8 44.1 13.1%
% Margin 17.0% 19.5% 24.2% 27.5% 27.0% 30.0% 30.1% 30.0% 30.0%
EBIT 3.2 5.5 11.2 13.9 16.9 23.5 26.3 28.6 31.5 17.8%
% Margin 4.6% 7.8% 14.1% 16.1% 17.0% 20.5% 20.9% 21.0% 21.4%
Depreciation and Amortization 8.5 8.3 8.0 9.9 10.0 10.9 11.5 12.2 12.6
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Comparison of Actual v. Budgeted Income Data
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Forecast Budget
1Q 99A 1Q 99B % Change 1Q 99A 1Q 98A % Change 1999 1999 % Change
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Revenues $18.9 $20.3 -7.2% $18.9 $18.5 1.7% $83.8 $86.6 -3.2%
EBITDA 4.1 5.1 -20.2% 4.1 3.9 4.8% $21.7 $23.8 -9.0%
% Margin 21.5% 25.0% 21.5% 20.9% 25.9% 27.5%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
[LOGO] CHASE 43
<PAGE>
Columbine JDS Systems
Trading Comparatives
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Enterprise Value to LTM EBITDA Multiple Comparison
- --------------------------------------------------------------------------------
[The following table was represented as a bar chart in the printed material.]
CSGS 29.6x
DST 13.6x
ENSW 12.6x
CVG 10.2x
EPIC 9.8x
BGF 6.5x
Mean = 11.6x
- --------------------------------------------------------------------------------
Enterprise Value to 1999E EBITDA Multiple Comparison
- --------------------------------------------------------------------------------
[The following table was represented as a bar chart in the printed material.]
CSGS 18.9x
DST 11.7x
EPIC 8.7x
CVG 8.4x
BGF 5.8x
ENSW NA
Mean = 9.6x
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Share % of 5 of
Ticker Price 52-week 52-week
Company Symbol 5/11/99 High Low
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Media Software/Broadcast Services
Convergys Corp CVG $17.56 73.9% 182.5%
CSG Sys Intl Inc CSGS 37.75 81.6% 206.8%
DST Sys Inc. Del DST 53.75 76.2% 158.1%
Enterprise Software Inc ENSW 8.50 68.0% 209.2%
Epicor Software Corp EPIC 7.25 26.6% 134.9%
- ---------------------------------------------------------------------------------
Big Flower Hldgs Inc BGF $31.63 87.4% 208.2%
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Price Per Share/ Enterprise Value/
Market ------------------------------- ----------------- 5-Year
Value of LTM CY1999E CY2000E LTM 1999E Projected
Company Equity EPS EPS EPS EBITDA EBITDA EPS Growth
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Media Software/Broadcast Services
Convergys Corp $2,720.3 21.7x 18.3x 14.8x 10.2x 8.4x 20.7%
CSG Sys Intl Inc 2,076.2 NM 35.0 27.2 29.6 18.9x 37.0%
DST Sys Inc Del 3,515.0 36.0 28.1 23.8 13.6 11.7x 10.0%
Enterprise Software Inc 56.9 NM NA NA 12.6 NA NA
Epicor Software Corp 293.1 18.8 13.9 9.1 9.8 8.7x 5.1%
---------------------------------------------------------------------------------------
High 36.0x 35.0x 27.2x 29.6x 18.9x 37.0%
Median 21.7 23.2 19.3 12.6 10.2 15.4%
Mean(1) 25.5 23.8 18.7 11.6 9.6 18.2%
Low 18.8 13.9 9.1 9.8 8.4 5.1%
---------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Big Flower Hldgs Inc $700.8 13.5x 14.8x 12.5x 6.5x 5.8x 16.3%
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Mean calculation excludes CSGS LTM and 1999E EBITDA multiples.
[LOGO] CHASE 44
<PAGE>
Columbine JDS Systems
Transaction Comparatives
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Media Software/Broadcast Services Transactions
- --------------------------------------------------------------------------------
o The Media Software and Broadcast Services Industry is highly fragmented
and consolidating, with Columbine, Enterprise Software and Donovan Data
Systems dominating the market share.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Transaction
Acquiror Target Value ($MM) Date
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LiveWire Ventures LLC Enterprise Software Inc $88.4 May-89
Convergys Corp Wiztec Solutions Inc 71.4 Feb-99
Quintiles Transnational Corp Envoy Corp 1389.5 Dec-98
DST Systems Inc USCS International Inc 900.4 Sep-98
Hyperion Solutions Corp Hyperion Software Corp 751.5 May-98
Enterprise Software Inc REVIVE Technologies Inc 14.1 Aug-98
Big Flower Press Holdings, Inc Columbine JDS Systems NA Sep-97
Affiliated Computer Services Inc Computer Data Systems Inc 325.0 Sep-97
CSG Systems International Inc. Tele-Communications Inc (Summitrack) 106.0 Aug-97
IndeNet Inc Enterprise Systems Group Ltd 27.4 Mar-96
- ------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Transaction Value to LTM EBITDA Multiple Comparison
- --------------------------------------------------------------------------------
[The following table was represented as a bar chart in the printed material.]
DST Systems / USCS Intl 7.5x
IndeNet / Enterprise Systems 8.0x
Convergys / Wiztec Solutions* 13.4x
LiveWire Ventures / Enterprise Software* 14.4x
Hyperion Solutions / Hyperion Software 14.9x
Affiliated Computer Svs / Computer Data Sys 18.1x
Quintiles Transnational / Envoy 23.4x
Mean=14.2x
* Pending
[LOGO] CHASE 45
<PAGE>
Columbine JDS Systems
Preliminary Discounted Cashflow Analysis
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
($ in millions)
FY 2003P EBITDA Exit Multiple 7.0x 7.5x 8.0x
-------------------------- -------------------------- --------------------------
Discount Rate 10.0% 11.0% 12.0% 10.0% 11.0% 12.0% 10.0% 11.0% 12.0%
----- ----- ----- ----- ----- ----- ----- ----- -----
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Present Value of
Cash Flows - Years 1-5 $73 $72 $70 $73 $72 $70 $73 $72 $70
Terminal Value 191 185 178 205 198 191 219 211 203
--- --- --- --- --- --- --- --- ---
Implied Enterprise Value $264.7 $256.2 $248.1 $278.4 $269.4 $260.9 $292.0 $282.6 $273.6
% Value in Terminal Value 72.3% 72.0% 71.7% 73.8% 73.4% 73.l% 74.9% 74.6% 74.4%
% Value in Cash Flows 27.7% 28.0% 28.3% 26.4% 26.6% 26.9% 25.1% 25.4% 25.6%
Implied Enterprise Value Multiples
FY1998E Sales 3.29x 3.18x 3.08x 3.46x 3.35x 3.24x 3.63x 3.51x 3.40x
FY1998E EBITDA 13.5 13.0 12.6 14.2 13.7 13.3 14.9 14.4 13.9
FY1998E EBIT 17.7 17.1 l6.6 18.6 18.0 17.4 19.5 18.9 18.3
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
o Projections based on management estimates
o FY 2003 EBITDA exit multiple based on an analysis of comparative trading
multiples and precedent transactions
o No adjustment made for changes in working capital
o No adjustment for eliminations associated with corporate overhead
[LOGO] CHASE 46
<PAGE>
EXHIBIT 99(b)(7)
Project Daisy Update
September 28, 1999
Strictly Private and Confidential
[LOGO] CHASE 1
<PAGE>
Project Daisy Update
Situation Overview
================================================================================
Chase is pleased to present the following valuation perspectives relating to
Thomas H. Lee's investment in Daisy
We believe this analysis should provide assistance in evaluating alternatives
for restructuring the proposed merger consideration to achieve:
> Reduced all-in cost
> Improved debt market execution
> Increased probability of a successful shareholder vote
This analysis details recent material events that could impact the pending
acquisition of Daisy, including:
- Deterioration of Webcraft operating performance
- Lack of liquidity in the high yield market has led to a 75 bps
widening in the single B HY Index and average yields of 12.3% for
single B issuers (630 bps spread does not include deals w/ attached
warrants)
- An update in the value of Daisy's internet / new media investment
portfolio
- Changes in public comparative valuations
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Share Performance EV/EBITDA EV/EBITDA
Business Segment Comparative 6/29 to 9/26 Multiple 6/26 Multiple 9/26 Comment
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Treasure Chest RR Donnelley (21.2%) 7.2x 5.8x DNY and other sector leaders'
strategic position weakened by
PRW/WRC merger.
Cadmus (29.4%) 4.7x 5.2x CDMS increased leverage from 2.4x
EBITDA and 50% Debt/Cap to 3.9x
EBITDA and 75% Debt/Cap to fund
Melham acquisition.
Webcraft Harte Hanks (11.1%) 14.2x 12.2x EBITDA up 7.5% over period but
sector has traded lower.
Advo (10.5%) 7.0x 6.3x AD shares have moved lower on
weaker 3Q revenues, despite margin
improvements.
Laser Tech Applied Graphics (33.9%) 8.3x 6.9x Shares have been heavily discounted
on news of trouble assimilating Wace
acquisition.
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Other analysis in the enclosed materials includes:
- Updated segment break-up valuation analysis ($27.25 to $33.00) and
review of purchase price multiples at a range of acquisition prices
- Assessment of unaffected trading valuation ($23.50 to $25.50)
[LOGO] CHASE 2
<PAGE>
Project Daisy Update
Treasure Chest Advertising Trading Comparatives
================================================================================
- --------------------------------------------------------------------------------
Enterprise Value to LTM EBITDA Multiple Comparison
- --------------------------------------------------------------------------------
[The following table was depicted as bar graph in the printed materials.]
DNY PRW BGF WRC(4) CDMS BN
as of 6/29/88 7.2x 7.0x 6.7x 6.1x 4.7x 4.6x
as of 9/24/99 5.8x 6.8x 7.1x 6.9x 5.2x 4.5x
-------------------
Mean(2):
as of 6/29/99: 5.9x
as of 9/24/99: 5.9x
-------------------
- --------------------------------------------------------------------------------
2000E PE Multiple Comparison(1)
- --------------------------------------------------------------------------------
[The following table was depicted as bar graph in the printed materials.]
DNY PRW BGF WRC(4) BN CDMS
as of 6/29/99 14.7x 13.2x 12.4x 11.6x 9.7x 9.6x
as of 9/24/99 11.6x 12.6x 11.0x 14.8x 9.1x 5.7x
---------------------
Mean(2):
as of 6/29/99: 11.8x
as of 9/24/99: 11.0x
---------------------
- --------------------------------------------------------------------------------
Share Share
Ticker Price Price %
Company Symbol 6/29/99 9/24/99 Change
- --------------------------------------------------------------------------------
Advertising Inserts/Printing ----------------------------
Banta Corp BN $ 22.50 $ 21.31 (5.3%)
Cadmus Comunications(3) CDMS 14.25 10.06 (29.4%)
Quebecor Prtg Inc PRW 21.75 21.88 0.6%
RR Donnelley & Sons DNY 36.50 28.75 (21.2%)
World Color Press Inc(4) WRC 27.94 35.50 27.1%
----------------------------
Big Flower Hldgs Inc BGF $ 31.56 28.00 (11.3%)
- --------------------------------------------------------------------------------
(1) Based on IBES estimates.
(2) Mean calculation excludes Big Flower Hldgs Inc.
(3) Pro forma for sale of $125 million of subordinated notes and acquisition of
Melham Holdings Inc.
(4) Price and trading multiples relect pending acquisition by Quebecor.
[LOGO] CHASE 3
<PAGE>
Project Daisy Update
Webcraft Trading Comparitives
================================================================================
- --------------------------------------------------------------------------------
Enterprise Value to LTM EBITDA Multiple Comparison
- --------------------------------------------------------------------------------
[The following table was depicted as bar graph in the printed materials.]
<TABLE>
<CAPTION>
Catalina Snyder Big Flower
Marketing M/A/R/C Inc. Acxiom Corp Communications Harte Hanks Inc. Valassis Comm Advo Inc Hldgs Inc
<S> <C> <C> <C> <C> <C> <C> <C> <C>
as of 6/29/99 24.1x 16.9x 15.9x 15.7x 14.2x 9.7x 7.0x 6.7x
as of 9/24/99 20.0x 10.8x 9.8x 8.4x 12.2x 13.0x 6.3x 7.1x
--------------------
Mean(2):
as of 6/29/99: 14.8x
as of 9/24/99: 11.2x
--------------------
</TABLE>
- --------------------------------------------------------------------------------
2000E PE Multiple Comparison (1,2)
- --------------------------------------------------------------------------------
[The following table was depicted as bar graph in the printed materials.]
<TABLE>
<CAPTION>
Catalina Snyder Big Flower
Marketing Harte Hanks Inc. Acxiom Corp M/A/R/C Inc. Valassis Comm Communications Hldgs Inc Advo Inc
<S> <C> <C> <C> <C> <C> <C> <C> <C>
as of 6/29/99 28.5x 22.6x 20.8x 17.3x 16.5x 16.3x 12.4x 11.1x
as of 9/24/99 25.0x 20.1x 13.3x 17.4x 18.0x 14.0x 11.0x 9.9x
--------------------
Mean(2):
as of 6/29/99: 19.0x
as of 9/24/99: 16.4x
--------------------
</TABLE>
- --------------------------------------------------------------------------------
Share Share
Ticker Price Price %
Company Symbol 6/29/99 9/24/99 Change
- --------------------------------------------------------------------------------
Direct Marketing --------------------------------
Acxiom Corp ACXM 26.56 17.00 (36.0%)
Advo Inc AD 20.81 18.63 (10.5%)
Catalina Marketing POS 95.13 83.44 (12.3%)
Harte Hanks Inc HHS 27.00 24.00 (11.1%)
M/A/R/C Inc MARC 13.88 14.13 1.8%
Snyder Comunications SNC 30.00 18.56 (38.1%)
Valassis Comm VCI 38.25 43.13 12.7%
--------------------------------
Big Flower Hldgs Inc BGF $ 31.56 28.00 (11.3%)
- --------------------------------------------------------------------------------
(1) Based on I/B/E/S estimates.
(2) Mean calculation excludes Big Flower Inc.
[LOGO] CHASE 4
<PAGE>
Project Daisy Update
Laser Tech Trading Comparatives
================================================================================
- --------------------------------------------------------------------------------
Enterprise Value to LTM EBITDA Multiple Comparison
- --------------------------------------------------------------------------------
[The following table was depicted as bar graph in the printed materials.]
AGTX UDG BGF SGK
as of 6/29/99 8.3x 7.9x 6.7x 6.2x
as of 9/24/99 6.9x 6.9x 7.1x 6.0x
-------------------
Mean(2):
as of 6/29/99: 7.5x
as of 9/24/99: 6.6x
-------------------
- --------------------------------------------------------------------------------
2000E PE Multiple Comparison(1)
- --------------------------------------------------------------------------------
[The following table was depicted as bar graph in the printed materials.]
BGF SGK AGTX UDG
as of 6/29/99 12.4x 10.0x 9.5x 6.6x
as of 9/24/99 11.0x 9.7x 6.9x 6.3x
-------------------
Mean(2):
as of 6/29/99: 8.7x
as of 9/24/99: 7.8x
-------------------
- --------------------------------------------------------------------------------
Share Share
Ticker Price Price %
Company Symbol 6/29/99 9/24/99 Change
- --------------------------------------------------------------------------------
Premedia -------------------------------
Applied Graphics Techn(3) AGTX $ 11.81 $ 7.81 (33.9%)
Schawk Inc SGK 9.00 8.69 (3.5%)
Unidigital, Inc. UDG 5.38 5.06 (5.8%)
-------------------------------
Big Flower Hldgs Inc BGF $ 31.56 $ 28.00 (11.3%)
(1) Based on IBES estimates.
(2) Mean calculation excludes Big Flower Hldgs Inc.
(3) Not Pro forma for Wace acquisition.
[LOGO] CHASE 5
<PAGE>
Project Daisy Update
Segment Break-Up Valuation
================================================================================
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Preliminary 1999E 1999E
Segment Valuation Range EBITDA Statistic Implied EBITDA Multiple
- ------------------------------------------------------------------------------------------------------------------
Low - High Low - High
<S> <C> <C> <C> <C> <C>
TC Advertising $900.0 $975.0 $147.5 6.1x - 6.6x
Webcraft 435.0 465.0 60.0 7.3x - 7.8x
Laser Tech 260.0 280.0 39.8 6.5x - 7.0x
Columbine 165.0 165.0 26.5 6.2x - 6.2x
- ---------------------------------------------------------- ------
Total Segment Enterprise Value(1) $1,760.0 $1,885.0 $273.8 6.4x - 6.9x
- ---------------------------------------------------------- ------
Adjustments
Less:
Corporate Overhead(2) (130.5) (101.5)
Debt(3) (1025.3) (1025.3)
Plus:
Cash(3) 0.0 0.0
Option Proceeds 26.2 26.2
Total Equity Value $630.5 $784.5
======= =======
Primary Shares 20.433 20.433
Options(4) 1.789 1.789
QUIPs(5) 3.937 3.937
------- -------
Fully-Diluted Shares 26.159 26.159
======= =======
- ---------------------------------------------------------- ----------------------------
Implied Value Per Share $24.10 $29.99 Internet Taxed at a 35% rate
- ---------------------------------------------------------- ----------------------------
New Media / Internet Investments(6) $127.41 $127.41 $82.82 $82.82
New Media / Internet
Investments per Share $4.87 $4.87 $3.17 $3.17
- ---------------------------------------------------------- ----------------------------
Implied Value Per Share $28.97 $34.86 $27.27 $33.15
- ---------------------------------------------------------- ----------------------------
</TABLE>
Assumptions
(1) Total segment enterprise value is before corporate overhead.
(2) Corporate overhead of $14.5 million is capitalized at a 7.0x blended to a
9.0x multiple.
(3) Cash and debt are based on current THLee estimates.
Debt includes $84.6 million off-balance sheet A/R Facility.
(4) 1.789 million options at an average strike of $14.66.
(5) QUIPs are convertible into 3.937 million common shares.
(6) New Media / Internet Investments are valued based on publicly available
information and on management estimates. Value is pre-tax.
- --------------------------------------------------------------------------------
[LOGO] CHASE 6
<PAGE>
Project Daisy Update
Implied EV Multiple Analysis
================================================================================
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
-------------- ------------ -------------- ------------
Announced Case Current Case Announced Case Implied
Case 6/29/99 9/23/99 Multiples Shared Price
-------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
Acquisition Price $35.25 $35.25
Enterprise Value(1) 1,852.1 1,921.1
1999E Statistics
------------- ----------- -------------
Revenue $1,910.0 $1,868.1 $1,868.1
EBITDA 266.9 259.7 259.7
EPS $2.15 $2.00 $2.00
------------- ----------- -------------
Implied Multiples
-------------- ------------ -------------- ------------
Revenue 0.97x 1.03x 0.97x $31.06
EBITDA 6.9x 7.4x 6.9x $30.70
EPS 16.4x 17.6x 16.4x $32.79
-------------- ------------ -------------- ------------
- ---------------------------------------------------------------------------------------------------
Adjustments
- ---------------------------------------------------------------------------------------------------
Columbine(2)
-------------- ------------
Realized Value $165.0 $165.0
Revenue 82.9 115.0
EBITDA 20.68 26.5
-------------- ------------
Internet Investments(3)
-------------- ------------
$127.4 $127.4
-------------- ------------
Adjusted Implied Multiples
-------------- ------------ -------------- ------------
Revenue 0.85x 0.93x 0.85x $30.20
EBITDA 6.3x 7.0x 6.3x $29.46
-------------- ------------ -------------- ------------
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) Enterprise value at 6/29/99 included $930 million of net debt, at 9/24/99
includes $999 million of net debt. EV figures do not include transaction
fees & expenses.
(2) Columbine revenue and EBITDA based on management projections. Assumed
value of Columbine is $165.0 million.
(3) Internet Investment value based on publicly available information and
management estimates as of 9/21/99.
[LOGO] CHASE 7
<PAGE>
Project Daisy Update
Assessment of Unaffected Trading Valuation
================================================================================
- --------------------------------------------------------------------------------
Historical EV/LTM EMBITDA(1)
- --------------------------------------------------------------------------------
[The following table was depicted as bar graph in the printed materials.]
1996 1997 1998 1999
LTM 1Q 6.4x 5.8x 7.3x 6.5x
LTM 2Q 5.9x 5.7x 7.8x 6.4x
LTM 3Q 5.7x 5.9x 6.6x
LTM 4Q 5.6x 6.7x 5.9x
THL 9/24 7.1x
- --------------------------------------------------------------------------------
Implied Share Price
- --------------------------------------------------------------------------------
EV/EBITDA Enterprise Implied Plus A/T
Multiple Value Shared Price Internet(4)
- --------------------------------------------------------------------------------
5.7x $ 1,381.8 $ 14.63 $ 17.80
5.9x 1,430.2 16.49 19.65
6.1x 1,478.7 18.34 21.50
6.3x 1,527.2 20.19 23.36
6.5x 1,575.7 22.05 25.21
6.7x 1,624.2 23.90 27.06
6.9x 1,672.7 25.75 28.92
7.1x 1,731.6 28.00 31.17
7.3x 1,780.0 29.86 33.02
7.5x 1,828.5 31.71 34.88
7.7x 1,877.0 33.56 36.73
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Average Price / Forward EPS Multiple(2)
- --------------------------------------------------------------------------------
[The following table was depicted as bar graph in the printed materials.]
<TABLE>
<CAPTION>
6/30/96 12/31/96 6/30/97 12/31/97 6/30/98 12/31/98 6/30/99 9/24/99
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Current Fiscal 18.8x 24.5x 14.6x 16.6x 16.8x 13.8x 12.4x 13.0x
Next Fiscal 9.9x 11.1x 12.0x 13.7x 13.4x 11.6x 10.4x 11.0x
</TABLE>
- --------------------------------------------------------------------------------
Implied Share Price(3)
- --------------------------------------------------------------------------------
Avg. Price/ Market Implied Plus A/T
Current FY EPS Capitalization Share Price Internet(4)
- --------------------------------------------------------------------------------
10.0x $ 523.2 $ 20.00 $ 23.17
10.5x 549.3 21.00 24.17
11.0x 575.5 22.00 25.17
11.5x 601.7 23.00 26.17
12.0x 627.8 24.00 27.17
12.5x 654.0 25.00 28.17
13.0x 680.1 26.00 29.17
13.5x 706.3 27.00 30.17
14.0x 732.5 28.00 31.17
14.5x 758.6 29.00 32.17
15.0x 784.8 30.00 33.17
- --------------------------------------------------------------------------------
(1) Historical EV / EBITDA multiple derived by dividing LTM EBITDA for defined
period into enterprise value for that period based on the average stock
price over the quarter and balance sheet data from the relevant quarterly
financial report. Enterprise value is not adjusted for the value of new
media / internet investments.
(2) Average Price / Forward EPS multiple derived for the defined periods by
dividing the average Daisy stock price for the period by the average
forward EPS estimate for the current fiscal and next fiscal years.
(3) Implied Share Price data assumes 26.159 million diluted shares
outstanding, net debt of $999 million, including options proceeds, and LTM
EBITDA of $242.4 million. No adjustment has been made for new media /
internet investments. Current fiscal EPS of $2.00 represents estimate
based on revised EBITDA (calculated p.10) which is $0.16 lower than the
I/B/E/S mean.
(4) New media / internet investments, valued at $127.4 million pre-tax, are
taxed at 35% and added to the implied share price of the base business.
[LOGO] CHASE 8
<PAGE>
Project Daisy Update
Valuation Matrix
================================================================================
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Offer Price Adjusted Enterprise Value
as a Multiple of: as a Multiple of:
Adjusted ------------------ -------------------------
Offer Offer Offer Net Enterprise Enterprise 1999E 2000E LTM LTM 1999E
Price Premium Value Debt(1) Value(2) Value(3) EPS(4,5) EPS(5) Sales EBITDA EBITDA(6)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$28.00 0.0% $732.5 $999.0 $1,731.5 $1,604.1 14.0x 11.0x 0.88x 6.6x 6.2x
$28.50 1.8% $745.5 $999.0 $1,744.6 $1,617.2 14.3x 11.2x 0.89x 6.7x 6.2x
$29.00 3.6% $758.6 $999.0 $1,757.6 $1,630.2 14.5x 11.4x 0.90x 6.7x 6.3x
$29.50 5.4% $771.7 $999.0 $1,770.7 $1,643.3 14.8x 11.6x 0.90x 6.8x 6.3x
$30.00 7.1% $784.8 $999.0 $1,783.8 $1,656.4 15.0x 11.8x 0.91x 6.8x 6.4x
$30.50 8.9% $797.9 $999.0 $1,796.9 $1,669.5 15.3x 11.9x 0.92x 6.9x 6.4x
$31.00 10.7% $810.9 $999.0 $1,810.0 $1,682.6 15.5x 12.1x 0.93x 6.9x 6.5x
$31.50 12.5% $824.0 $999.0 $1,823.0 $1,695.6 15.8x 12.3x 0.93x 7.0x 6.5x
$32.00 14.3% $837.1 $999.0 $1,836.1 $1,708.7 16.0x 12.5x 0.94x 7.1x 6.6x
$32.50 16.1% $850.2 $999.0 $1,849.2 $1,721.8 16.3x 12.7x 0.95x 7.1x 6.6x
$33.00 17.9% $863.3 $999.0 $1,862.3 $1,734.9 16.5x 12.9x 0.95x 7.2x 6.7x
$33.50 19.6% $876.3 $999.0 $1,875.4 $1,747.9 16.8x 13.1x 0.96x 7.2x 6.7x
$34.00 21.4% $889.4 $999.0 $1,888.4 $1,761.0 17.0x 13.3x 0.97x 7.3x 6.8x
$34.50 23.2% $902.5 $999.0 $1,901.5 $1,774.1 17.3x 13.5x 0.98x 7.3x 6.8x
Acquisition Price Data
- ----------------------------------------------------------------------------------------------------------------------
$35.25 25.9% $922.1 $999.0 $1,921.1 $1,793.7 17.6x 13.8x 0.99x 7.4x 6.9x
- ----------------------------------------------------------------------------------------------------------------------
Daisy Data (6) $2.00 $2.55 $1,817.3 $242.2 $259.7
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Net debt equals $940.7 million assumed debt plus $84.6 million A/R
facility, less $26.2 million options proceeds.
(2) Enterprise value does not include fees and expenses associated with
transaction.
(3) Adjusted Enterprise Value reflects enterprise value adjusted for the
$127.4 million estimated value of BGF new media / internet investments.
(4) Shares outstanding (26.159 MM) based on 20.433 million basic shares, 3.937
million QUIPs and 1.789 million options at average strike of $14.66.
(5) 1999E EPS estimate adjusted for shortfall in 3Q EBITDA, 2000E EPS
estimates based on I/B/E/S.
(6) 1999E EBITDA based on management estimates.
[LOGO] CHASE 9
<PAGE>
Project Daisy Update
1999E EPS Bridge
================================================================================
The following table calculates estimated 1999 EPS, employing revised 1999E
EBITDA assumptions, and other operating assumptions derived from analyst reports
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Revised Analyst
Comparison of 1999E Analyst and Management Estimates Estimate(1) Estimate(2)
----------- -----------
- --------------------------------------------------------------------------------
TC Advertising $147.5 $150.0
Webcraft 60.0 69.3
Lasertech 39.8 38.7
CJDS 26.5 26.5
Reach America 0.4 0.0
------ ------
Total $274.2 $284.5
------ ------
Corp. Overhead (14.5) (17.4)
Total EBITDA $259.7 $267.1
------ ------
Dep & Amort 102.0 102.0
Operating Income $157.7 $165.1
------ ------
Net Interest Expense (70.6) (70.6)
Other (3.6) (3.6)
Provision for Income Taxes (38.4) (41.8)
Rate 46.0% 46.0%
After-Tax Int. on Pref. Stock 4.1 4.1
------ ------
Net Income $49.2 $53.2
------ ------
Diluted Shares Outstanding 24.7 24.7
- --------------------------------------------------------------------------------
EPS $2.00 $2.16
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) EBITDA estimates based on revised projections. All other assumptions
employed in calculating revised EPS are based on analyst estimates.
(2) Based on CSFB estimates dated 5/6/99. Current I/B/E/S consensus EPS
estimate is $2.15.
[LOGO] CHASE 10
<PAGE>
Project Daisy Update
BGF Internet Investment Valuation
================================================================================
As of September 24, 1999:
- --------------------------------------------------------------------------------
New Media / Internet Investments Ticker Shares Price Value
- --------------------------------------------------------------------------------
24/7 Media Inc. TFSM 1.751 $36.00 $63.03
About.Com Inc (former MiningCo.Com)(1) BOUT 0.738 44.31 32.69
WorldGate Communications(2) WGAT 0.182 23.75 4.32
Andromedia(3) NA NA 0.00 4.00
NuTel(4) NA NA 0.00 0.50
Other(5) NM NM NM 22.88
--------
Total $127.41
========
BGF Total Shares Outstanding 24.85
Implied Value Per Share (Pre-Tax) $5.13
========
- --------------------------------------------------------------------------------
On June 28 1999 (1 Day Prior to Announcement Date):
- --------------------------------------------------------------------------------
New Media / Internet Investments Ticker Shares Price Value
- --------------------------------------------------------------------------------
24/7 Media Inc. TFSM 1.751 $31.63 $55.37
About.Com Inc.(former MiningCo.Com)(1) BOUT 0.738 40.00 29.51
WorldGate Communications(2) WGAT 0.183 40.75 7.46
Andromedia(3) NA NA 0.00 0.00
NuTel(4) NA NA 0.00 0.50
Total $92.85
========
BGF Total Shares Outstanding 24.85
Implied Value Per Share (Pre-Tax) $3.74
========
- --------------------------------------------------------------------------------
On April 28,1999:
- --------------------------------------------------------------------------------
New Media / Internet Investments Ticker Shares Price Value
- --------------------------------------------------------------------------------
24/7 Media Inc. TFSM 1.751 $43.13 $75.51
About.Com Inc.(former MiningCo.Com)(1) BOUT 0.738 69.94 51.61
WorldGate Communications(2) WGAT 0.182 24.00 4.36
Andromedia(3) NA NA 0.00 0.00
NuTel(4) NA NA 0.00 0.00
Total $131.48
========
BGF Total Shares Outstanding 24.85
Implied Value Per Share (Pre-Tax) 5.29
========
- --------------------------------------------------------------------------------
Valuation data regarding investments in Andromedia, NuTel, and "Other
Investments" was unavailable on April 28, 1999 and June 28, 1999. No value was
assigned to those assets for the April and June periods.
(1) MiningCo.Com changed its name to About.Com Inc. on 5/20/99. Valuation on
April 28, 1999 based on MiningCo.Com closing share price.
(2) 183,000 shares is an estimate of BGF's holdings based on CSFB research
dated 3/24/99. Price on April 28, 1999 based on average of proposed
offering price of $23-$25.
(3) Andromedia has filed an S1 and plans to raise as much as $40 million.
(4) Nutel has not filed an S1.
(5) Other investments include Webstakes, Solbright, Galileo and Naviant. Value
is based on management estimates.
[LOGO] CHASE 11
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<S> <C> <C> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule
14a-11(c) or Rule 14a-12
</TABLE>
BIG FLOWER HOLDINGS, INC.
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/ / No fee required.
/X/ Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
Common Stock, par value $0.01 per share, of Big Flower
Holdings, Inc.
(2) Aggregate number of securities to which transaction applies:
22,639,875 shares of Common Stock expected to be canceled in
the transaction.
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
The underlying value of the transaction of $681,315,342 has
been calculated pursuant to Exchange Act Rule 0-11 by
multiplying $30.0936 (the average of the high and low
prices of Common Stock on November 2, 1999 on the New York
Stock Exchange) by 22,639,875 (the aggregate number of
shares expected to be canceled in the transaction).
(4) Proposed maximum aggregate value of transaction:
$681,315,342
(5) Total fee paid:
$136,263.07
/ / Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by
/X/ Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
(1) Amount Previously Paid: $152,974.73
(2) Form, Schedule or Registration Statement No.: Form S-4 and
Schedule 13E-3
(3) Filing Party: Big Flower Holdings, Inc.
(4) Date Filed: July 16, 1999
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
BIG FLOWER HOLDINGS, INC.
SUPPLEMENT TO
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF STOCKHOLDERS
[LOGO]
TUESDAY, NOVEMBER 23, 1999
AT 9:00 A.M.
HOTEL INTER-CONTINENTAL NEW YORK
111 EAST 48TH STREET
NEW YORK, NEW YORK
<PAGE>
[LOGO]
BIG FLOWER HOLDINGS, INC.
3 EAST 54(TH) STREET
NEW YORK, NEW YORK 10022
November 3, 1999
Dear Fellow Stockholders:
On October 25, 1999 we sent you a proxy statement relating to the annual
meeting of stockholders of Big Flower Holdings, Inc. to be held on Tuesday,
November 23, 1999. At this meeting, Big Flower's stockholders will be asked to
consider and vote upon a proposal to approve the merger of Big Flower with BFH
Merger Corp. on the terms and conditions set forth in the Amended and Restated
Agreement and Plan of Merger, dated as of October 11, 1999, between Big Flower
and BFH Merger Corp. In the merger, Big Flower stockholders, other than some
members of Big Flower management, will receive $31.50 in cash for each share of
Big Flower common stock they own. Some members of Big Flower management will be
retaining equity interests in Big Flower or its subsidiaries in lieu of
receiving cash for their equity interests in Big Flower. The proxy statement
describes this transaction in detail. You will also be asked to vote on the
election of directors, a grant of discretionary authority to vote for
adjournment and ratification of appointment of independent accountants.
Enclosed with this letter is a supplement to the proxy statement. This
supplement includes additional information concerning the merger. We urge you to
read this supplement and the proxy statement carefully. If you would like
another copy of the proxy statement, please contact Georgeson Shareholder
Communications Inc. at (800) 223-2064 (banks and other brokers call
(212) 440-9800). A copy will be mailed to you promptly.
Your vote is important, and we urge you to give the proxy statement and this
supplement your immediate attention. You have already received a proxy card on
which you can vote, and you may have already returned it to us. HOWEVER, WE HAVE
ENCLOSED A SECOND PROXY CARD (AND A RETURN ENVELOPE) FOR YOUR USE, IN CASE YOU
HAVE MISPLACED THE PROXY CARD PREVIOUSLY SENT TO YOU OR YOU WISH TO CHANGE YOUR
VOTE. IF YOU HAVE ALREADY VOTED YOUR PROXY AND YOU DO NOT WISH TO CHANGE YOUR
VOTE, YOU DO NOT NEED TO RETURN THIS SECOND PROXY CARD.
YOUR VOTE IS VERY IMPORTANT. Big Flower cannot complete the merger unless
the stockholders of Big Flower adopt the merger agreement at the stockholders
meeting. Whether or not you plan to attend the stockholders meeting, please take
the time to submit your proxy with voting instructions by mail.
<TABLE>
<S> <C>
/s/ R. Theodore Ammon /s/ Edward T. Reilly
R. Theodore Ammon Edward T. Reilly
CHAIRMAN OF THE BOARD CHIEF EXECUTIVE OFFICER
</TABLE>
The date of this proxy statement supplement is November 3, 1999 and was
first mailed to Big Flower stockholders on November 3, 1999.
<PAGE>
SUPPLEMENT
DATED NOVEMBER 3, 1999
TO
BIG FLOWER HOLDINGS, INC.
PROXY STATEMENT DATED OCTOBER 25, 1999
INTRODUCTION
This supplement is provided for the purpose of supplementing the proxy
statement, dated October 25, 1999, of Big Flower Holdings, Inc., a Delaware
corporation.
This supplement is being furnished to the holders of the common stock, par
value $0.01 per share, of Big Flower in connection with the solicitation of
proxies by the Big Flower board of directors for use at a meeting of Big Flower
stockholders scheduled to be held on Tuesday, November 23, 1999 at 9 a.m., New
York time, at the Hotel Inter-Continental New York, 111 East 48(th) Street, New
York, New York. As described in the proxy statement, stockholders are being
asked to consider and vote on the proposal to approve the merger of Big Flower
with BFH Merger Corp., an affiliate of Thomas H. Lee Company and Evercore
Capital Partners, on the terms and conditions contained in the Amended and
Restated Agreement and Plan of Merger, dated as of October 11, 1999 between Big
Flower and BFH Merger Corp. and the transactions contemplated by the merger
agreement.
This supplement is first being mailed to Big Flower stockholders on or about
November 3, 1999. Capitalized terms used in this supplement that are not
otherwise defined have the meaning given to them in the proxy statement. This
supplement should be read in conjunction with the proxy statement.
ADDITIONAL INFORMATION REGARDING THE RABBI TRUST
As discussed in the proxy statement, some members of management of Big
Flower, including Messrs. Reilly and Ritchie, are expected to surrender Big
Flower stock options for interests in a rabbi trust that will hold shares of Big
Flower common stock. A rabbi trust is a grantor trust utilized in connection
with deferred compensation plans. Big Flower expects that Messrs. Reilly and
Ritchie will hold a 20.1% and 11.5% interest, respectively, in the rabbi trust.
The remaining interest in the trust will be held by other members of Big Flower
management. As stated in the proxy statement, Big Flower expects the rabbi trust
to hold approximately 4.3% of Big Flower's common stock after the merger.
ADDITIONAL INFORMATION REGARDING COLUMBINE JDS SYSTEMS AND THE INTERNET
INVESTMENTS
The affiliate of BFH Merger Corp. that is purchasing all of the outstanding
shares of capital stock of Columbine JDS Systems, Inc. will pay $37 million for
these shares of stock. The value of Columbine JDS Systems was based upon the
acquisition costs of each entity comprised within Columbine JDS Systems plus a
small premium reflecting synergies. As stated in the proxy statement, this
transaction will occur after Columbine JDS Systems has borrowed approximately
$135 million and paid a dividend of approximately $128 million to its parent,
Big Flower Digital Services, who will in turn dividend these amounts to either
Big Flower Press or Big Flower to be used as necessary to effect the merger and
related recapitalization. Big Flower has been advised that the percentage
interests of Thomas H. Lee Company, Evercore Capital Partners, Mr. Ammon and
other members of Columbine JDS Systems' management in Columbine JDS Systems
after this purchase are still under discussion among them, but are expected to
be approximately 59.4%, 17.1%, 12.9% and 10.6%, respectively.
The private Internet investments that an affiliate or affiliates of BFH
Merger Corp. are purchasing consist of interests in Dawntreader Fund I, LP,
Nutel Corp., Solbright, Inc., Galileo Communications Ltd., InterAdNet, Inc. and
Naviant, Inc., and any private Internet investment Big Flower acquires after the
date of the merger agreement at the price paid by Big Flower for the investment.
The merger agreement provides that the aggregate purchase price for Dawntreader,
Nutel, Solbright, Galileo, InterAdNet and Naviant is $19,126,000, although Big
Flower expects that this will be reduced to $18,626,000 because the $500,000
convertible bridge note owed to XL Ventures by Nutel, and representing part of
the investment in Nutel by XL Ventures as described in Schedule 5.15(a) of the
merger agreement, has been repaid by Nutel. Big Flower has been advised that the
percentage interest
<PAGE>
of Thomas H. Lee Company, Evercore Capital Partners and Mr. Ammon in the entity
purchasing the private Internet investments are still under discussion among
them but are expected to be approximately 66.4%, 19.2% and 14.4%, respectively.
The affiliate of BFH Merger Corp. that actually purchases Columbine JDS
Systems is expected to be different from the affiliate of BFH Merger Corp. that
actually purchases the private Internet investments, although the ultimate
controlling party of each of these affiliates may be the same. As indicated in
the proxy statement, Big Flower and BFH Merger Corp. expect that the investment
in the entities holding the public Internet investments, currently provided for
in the merger agreement, will not occur and that the merger agreement will be
amended to reflect this.
Big Flower understands that the sale of Columbine JDS Systems separate from
the merger was proposed by Thomas H. Lee Equity Fund IV, Evercore Capital
Partners and Mr. Ammon because they believe that Columbine JDS Systems does not
fit well from an operational perspective within the Big Flower corporate
structure. Big Flower understands this position is based primarily on the fact
that, although Big Flower's other principal operating units--Treasure Chest
Advertising, Webcraft and Laser Tech Color--have the same or similar customer
bases and therefore there are benefits to having these companies operate within
the same corporate structure, the customer base of Columbine JDS Systems is
entirely different to the customer bases of Treasure Chest Advertising, Webcraft
and Laser Tech Color.
Similarly, Big Flower understands that the separate sale of the private
Internet investments was proposed because the private Internet investments also
do not fit well within the Big Flower corporate structure. Big Flower's core
businesses are operational in nature, while the private Internet investments
were made purely for investment purposes. In addition, the independent ownership
of the private Internet investments by Thomas H. Lee Equity Fund IV, Evercore
Capital Partners and Mr. Ammon could potentially increase such investors'
after-tax returns with respect to any subsequent dispositions of the private
Internet investments.
Separation of Columbine JDS Systems and the private Internet investments
also provides a possibility of greater flexibility for future business
combinations or securities offerings, but Big Flower is not aware of any
definitive plans by Thomas H. Lee Equity Fund IV, Evercore Capital Partners and
Mr. Ammon with respect to a business combination or sale of securities. However,
Thomas H. Lee Equity Fund IV is an investor, with others, in a business that
could benefit from a combination with Columbine JDS Systems and Big Flower
understands that Thomas H. Lee Equity Fund IV may seek to combine these
businesses in some manner after the merger. Any such combination would require
the approval of the other investors in each company.
Further, while none of Thomas H. Lee Equity Fund IV, Evercore Capital
Partners or Mr. Ammon have expressed an interest in taking public in the short
to medium term either Columbine JDS Systems or the entities holding Big Flower's
public Internet investments, namely XL Ventures and Big Flower Digital, LLC,
this is one of the many possible business decisions which these parties could
make in the future.
As noted in the proxy statement, BFH Merger Corp. may amend the terms of the
Columbine JDS Systems and Internet transactions in any manner it reasonably
requests, except that no such amendment may either impose any cost on Big Flower
if the merger is not completed or result in any delay in the completion of the
merger.
BACKGROUND OF THE MERGER
SET FORTH BELOW IS A DESCRIPTION OF THE BACKGROUND OF THE MERGER. THIS
REPEATS, WITH SOME CHANGES, THE ENTIRE BACKGROUND SECTION FROM THE PROXY
STATEMENT. THIS HAS BEEN DONE TO MAKE IT EASIER TO REVIEW THE SUPPLEMENTED
INFORMATION.
From time to time in recent years the board of directors and management of
Big Flower have considered transactions that could increase the value of the
common equity of Big Flower. These have included potential acquisitions of or
mergers with other companies, spin-offs of parts of Big Flower and
2
<PAGE>
the sale of all or part of Big Flower. Ultimately, the board of directors
determined that these strategic alternatives were inferior to the merger for a
variety of reasons, including concerns related to future trading values,
illiquidity and taxes. In addition, the board of directors considered an initial
public offering or spin-off of each of Treasure Chest Advertising, Webcraft and
Columbine JDS Systems, along with an analysis of combinations with other
companies and the strategic rationale for each. Based upon presentations of
various investment banks during these years, and after taking into account taxes
and probable trading values for such offerings and combinations, the board of
directors did not believe that any of these alternatives was likely to result in
Big Flower's stock price being greater than the merger consideration in the
foreseeable future. During this time, the Big Flower board did not consider an
initial public offering of XL Ventures.
Since 1994, Big Flower has made 28 acquisitions, primarily outside its
original Treasure Chest Advertising printing business. These acquisitions have
added significantly higher growth and higher margin businesses than the original
Treasure Chest Advertising printing business. Management of Big Flower believed
that further acquisitions both within and outside the traditional Treasure Chest
Advertising business were desirable. Increasingly, however, these acquisitions,
especially in businesses that involve higher technology or direct marketing, or
both, could not be effected on a basis that was non-dilutive to the reported
earnings of Big Flower because companies involved in those businesses tend to
trade, if publicly held, or are sold to third parties, if privately held, at
higher multiples to earnings than Big Flower. The Big Flower board believed that
its earnings would be diluted, even when the trading price of Big Flower shares
was higher than its average trading price range, if it consistently purchased
companies with higher trading multiples than its own because Big Flower would
need to issue a greater number of Big Flower shares to pay for these companies
because the Big Flower stock traded at a lower multiple. The Big Flower board
believed that its trading history demonstrated that Big Flower was not generally
awarded a higher trading multiple even as it diversified itself through
acquisitions into higher growth, higher multiple businesses. Consequently, the
board believed that any material dilution to Big Flower's earnings per share
would adversely affect Big Flower's stock price.
In response to this determination that future acquisitions are likely to be
dilutive, and in an effort to create value for its stockholders, in 1998 and
early 1999 Big Flower began exploring various strategic alternatives, including
equity issuances, public offerings of the stock of each of its main operating
units, the mergers of each of its main operating units with other companies and
the spin-offs of one or more business units to Big Flower's stockholders. In
exploring the various strategic alternatives, the management of Big Flower met
with a number of entities to determine the best strategic alternatives to
pursue, including Mr. Ammon's initial meeting with Mr. Thomas H. Lee of Thomas
H. Lee Company in October 1998. At this meeting, Mr. Ammon gave Mr. Lee an
overview of the business of Big Flower. No further discussions ensued at that
time. Subsequently, management of Big Flower met with three financial sponsors,
including representatives of Thomas H. Lee Company, and explored with them on a
preliminary basis various strategic alternatives with respect to Big Flower. On
March 17, 1999 Big Flower formally retained Berenson Minella to assist Big
Flower in exploring strategic alternatives.
On April 20, 1999, Big Flower publicly announced that its board of directors
had authorized management to explore Big Flower's strategic alternatives. In
addition to relying on Berenson Minella, which had been advising Big Flower
since early 1999, Big Flower retained Goldman Sachs as a financial advisor to
assist in the exploration of strategic alternatives. Big Flower retained Goldman
Sachs to act as its financial advisor based upon Goldman Sachs' qualifications,
experience and expertise, as well as its knowledge of Big Flower's business.
Following the April 20 announcement, approximately ten parties contacted
both Big Flower and its financial advisors directly without solicitation. In
addition, Big Flower instructed its financial advisors to contact the likely
potential strategic and financial parties that might be interested in a
transaction involving Big Flower and who had either financial strength or access
to capital markets to complete such a transaction. The contacted parties were
chosen based upon publicly available information regarding their financial
resources, record for completing transactions and interest in Big Flower's lines
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of business. In all, Big Flower's financial advisors had extensive conversations
with 13 potential strategic parties and 15 potential financial parties about
their possible interests in Big Flower. One strategic party and six financial
parties entered into confidentiality agreements and received non-public
information concerning the business of Big Flower and its subsidiaries designed
to permit those parties to determine what interests they might have in Big
Flower. Nine other parties requested a package of non-confidential public
information only and did not need to sign a confidentiality agreement.
Three parties, Thomas H. Lee Company, Evercore Capital Partners and one
potential strategic party, performed more detailed due diligence during the
month of May and received detailed presentations from management of Big Flower,
including Mr. Reilly, Mr. Ritchie, and the chief executive officers of each of
Big Flower's four main operating units, concerning its business. During the
month of May, Berenson Minella held telephonic conversations daily and, along
with representatives of Big Flower's senior management, including
Messrs. Ammon, Reilly and Ritchie, met with those parties to discuss Big Flower
and to determine whether the parties could make a proposal that would be
attractive to Big Flower's stockholders. The nature of these discussions
revolved around resolving issues necessary to permit the parties to submit a
proposal. The principal topics of discussion included resolving outstanding due
diligence questions and requests for information, possible transaction
structures, including the involvement of management, the amount and form of
consideration and financing plans.
At the conclusion of this process in mid-June, Thomas H. Lee Company
submitted a written proposal, and Evercore Capital Partners indicated an
interest in submitting a proposal, but only if Big Flower's senior management,
including Mr. Ammon, indicated a willingness to invest a significant portion of
their Big Flower equity interest in the merger transaction. Evercore Capital
Partners had also communicated this desire to Mr. Ammon prior to submitting its
indication of interest. At this time, the potential strategic party indicated
that it would not submit a proposal involving the entire company, although it
indicated that it might be interested in some parts of the business of Big
Flower. The potential strategic party advised Big Flower that it was not
interested in acquiring Treasure Chest Advertising, as it did not fit within its
business plan. Thereafter, there were no further negotiations with the potential
strategic party, although Goldman Sachs, on behalf of Big Flower, sought to
obtain a proposal from the strategic party. The strategic party never indicated
an amount it would pay for any or all of Big Flower's subsidiaries. The other
parties who had received information but did not submit a proposal either gave
no reason for their decision not to submit a proposal or indicated any one or
more of the following reasons:
- the total amount of money it would take to pay the merger consideration to
all of the unaffiliated stockholders and to arrange financing for the
additional working capital needs of Big Flower was too large and would
either cause excessive leverage or the issuance of an excessive number of
shares,
- valuation, and/or
- a lack of interest in one or more of Big Flower's subsidiaries.
Big Flower continued to consider its strategic alternatives, including the
possibility of a spin-off or a sale of less than the entire company. After
discussing these matters with its financial advisors, who orally advised the Big
Flower board that it would not be tax efficient for Big Flower to sell less than
all of Big Flower and that a spin-off of part of Big Flower would not likely
enhance stockholder value, and after taking into account financial, tax and
operational factors, the Big Flower board of directors concluded that it would
not be tax-efficient for Big Flower to sell less than all of Big Flower and that
a spin-off of parts of Big Flower would not likely enhance stockholder value.
The principal financial factors that the board took into account included the
expected sale proceeds and expected trading values from these transaction(s).
The principal tax factors that the board took into account included the
corporate tax implications to Big Flower from pursuing these transaction(s). The
principal operating factors that the board took into account included the
existing business and cross-selling relationships that existed among Big
Flower's subsidiaries.
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Big Flower also continued to evaluate a stand-alone strategy, focusing on
its historic stock price and business prospects and taking note of the fact that
the trading price of Big Flower common stock had risen approximately 30% in the
three weeks leading up to a March 22, 1999 report by a Credit Suisse First
Boston analyst. This report had focused on Big Flower's venture capital
investments in a variety of Internet-related companies, estimating the then
current value of these investments to be approximately $4.50 per share before
taxes and other expenses. In the six months prior to that report, the trading
price of Big Flower common stock had ranged between $15.375 and $28.438. On
March 22, the Credit Suisse First Boston initial report was released and the
trading price of Big Flower common stock closed at $30.13, an increase from the
$27 trading price on March 19, the preceding trading day. The Credit Suisse
First Boston report was published in its entirety on March 24, on which day the
trading price of Big Flower common stock closed at $29.50. On March 25, the
trading price of Big Flower common stock closed at $32.38. In evaluating the
effect on Big Flower and its stockholders of continuing as a stand-alone
company, Big Flower also considered, as reported in its public filings and
stated to financial analysts, that it would likely pursue acquisitions in
businesses involving higher technology or direct marketing, or both, which
acquisitions could be significantly dilutive to Big Flower's reported earnings.
On June 8, 1999, the Big Flower board of directors met to review the status
of discussions with third parties and the indications of interest received. At
the outset of the meeting Mr. Ammon, chairman of the board of Big Flower,
advised the board that because the possibility existed that he would, under some
circumstances, consider retaining a significant interest in Big Flower in
connection with a proposal from a financial sponsor, he would recuse himself
from board deliberations on the proposals. Mr. Ammon left the meeting and did
not return. Following Mr. Ammon's departure, Peter G. Diamandis, Newton N.
Minow, Robert M. Kimmitt and Joan D. Manley discussed the potential conflicts of
interest involved in the fact that certain members of the management, including
Mr. Ammon, might be treated differently than other Big Flower stockholders in a
proposed transaction because they might continue to retain their ownership in
Big Flower. The board of directors concluded that the independent directors,
constituting a majority of the board of directors, were in a position to fairly
represent the interest of Big Flower's stockholders. Messrs. Minow and Kimmitt
and Ms. Manley selected Mr. Diamandis as the lead independent director to
control the work of Big Flower's outside financial and legal advisors.
Mr. Reilly, while present for these deliberations, did not participate in them.
The independent directors did not ask Mr. Reilly to leave the meeting because at
that time, neither Mr. Reilly nor the other members of the board had any
information regarding his participation in any transaction.
During the June 8 meeting of Big Flower's board of directors, Berenson
Minella reported that Thomas H. Lee Company had submitted a proposal for a
recapitalization of Big Flower under which public holders of Big Flower common
stock would receive a per share consideration of $27.00 in cash and $7.00 in
liquidation preference of PIK preferred stock with a warrant to purchase a
fraction of a share of Big Flower common stock representing in the aggregate
approximately five percent of the Big Flower common stock after the
recapitalization. It was also reported that Evercore Capital Partners had
indicated an interest in submitting a proposal for a recapitalization of Big
Flower at a per share price of $35.00 in cash plus a contingent value right that
would offer holders a to be agreed-upon percentage of after-tax proceeds of Big
Flower's publicly traded venture capital investments in 24/7 Media, Inc.,
About.com, Inc. (formerly known as Miningco.com) and WorldGate
Communications, Inc. Both the Thomas H. Lee Company proposal and Evercore
Capital Partners' indication of interest were subject to financing
contingencies. In addition, the Evercore Capital Partners indication of interest
was conditioned on Mr. Ammon's retaining a substantial portion of his equity in
Big Flower. The Thomas H. Lee Company proposal was made with the expectation
that Mr. Ammon would retain a substantial portion of his equity in Big Flower,
but was not expressly conditioned on his doing so.
During the ensuing discussion, the Big Flower board of directors discussed
the financial terms and certainty of the Thomas H. Lee Company proposal and
Evercore Capital Partners' indication of
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interest in making a proposal under certain circumstances. The board also
discussed whether an appropriate number of potential bidders had been contacted
to obtain the best available offer in the marketplace. The financial advisors
reported to the board the number of entities who had been contacted or who had
contacted the financial advisors and the status of discussions with each of
them. The financial advisors also reported that they believed they and Big
Flower had run a thorough auction process because of the public announcement of
the process, the number of people contacted, the amount of time and effort
devoted to the auction process and the amount of time the auction process had
remained open. After these discussions with its financial advisors, the board of
directors determined that in light of Big Flower's public announcement of its
interest in pursuing its strategic alternatives, the extensive amount of time
which had passed since such announcement was made and the fact that 28 parties
had contacted, or been contacted by, Big Flower, Berenson Minella or Goldman
Sachs, an appropriate number of potential bidders had been contacted to ensure
that the financially responsible parties likely to be interested in Big Flower
had been contacted or put on notice. The Big Flower board of directors also
agreed that determining to pursue none of the available transactions was an
alternative to be considered by the board of directors. Mr. Diamandis requested
that the board of directors take some additional time to consider the proposals
but that in the meantime, Goldman Sachs and Berenson Minella should continue
discussions with both Thomas H. Lee Company and Evercore Capital Partners with a
view to improving the Thomas H. Lee Company proposal, to attempt to transform
Evercore Capital Partners' indication of interest into a proposal and to report
further at a meeting of the board of directors scheduled for June 14.
From shortly before the June 8, 1999 meeting of the Big Flower board,
Mr. Ammon began to consider it likely that if a transaction were to occur he
would retain an equity interest in Big Flower and Mr. Ammon ceased having any
role in the board's deliberations concerning the Thomas H. Lee Company and
Evercore Capital Partners proposals. Between June 8 and June 14, Mr. Ammon
discussed with Evercore Capital Partners their proposed capitalization structure
and in particular his belief that there was too much debt in their proposed
capitalization structure. Mr. Ammon also discussed regularly with Thomas H. Lee
Company the terms of their proposals to Big Flower, their proposed
capitalization structures and, in the days just prior to signing the original
merger agreement, the amount and terms of his retained equity interest in Big
Flower. Messrs. Reilly's and Ritchie's contact during this time period with
Thomas H. Lee Company and Evercore Capital Partners was limited to due diligence
conversations, although each had conversations with Mr. Ammon in which
Mr. Ammon indicated that he, Thomas H. Lee Company and Evercore Capital Partners
hoped they would continue with Big Flower and that if they chose to do so they
would be expected to retain an equity investment in the post-recapitalization
Big Flower.
After the June 8 board of directors meeting, Berenson Minella and
representatives of Thomas H. Lee Company continued discussions on improving the
Thomas H. Lee Company proposal. During these discussions, Berenson Minella
sought to increase the cash component and the total consideration offered by
Thomas H. Lee Company. Berenson Minella also discussed with Evercore Capital
Partners whether it could be in a position to make a firm proposal to Big
Flower.
The Big Flower board of directors, other than Messrs. Ammon and Reilly, who
recused themselves, met again on June 14, 1999 and received a report from its
financial advisors on the status of negotiations with Thomas H. Lee Company and
Evercore Capital Partners. Mr. Reilly recused himself from the meeting because
he believed, based on conversations with Mr. Ammon, that the possibility existed
that he would continue with Big Flower after the merger. The Evercore Capital
Partners indication of interest to make a proposal was unchanged at a per share
consideration of $35.00 in cash plus a contingent value right, and it remained
contingent on Mr. Ammon's retention of a significant interest in Big Flower.
Berenson Minella representatives indicated that the Evercore Capital Partners'
indication of interest would result in a substantial increase in the leverage of
Big Flower, such that Big Flower's ratio of total debt at the time of the merger
to Big Flower's projected EBITDA for the last twelve months ending at the time
of the merger would be 6.2 to 1. Berenson Minella
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representatives reported that they had been advised by Mr. Ammon that he had
concerns regarding such a high degree of leverage, and would not be willing to
retain a significant interest in Big Flower in connection with any Evercore
Capital Partners proposal that might be made on that basis. Mr. Ammon had also
expressed these concerns directly to Evercore Capital Partners. The Thomas H.
Lee proposal, on the other hand, involved a ratio of total debt at the time of
the merger to Big Flower's last twelve months' EBITDA projected as of the time
of the merger of 5.5 to 1. In addition, the Thomas H. Lee Company proposal
offered greater promise of making available to Big Flower additional capital to
grow Big Flower's business on a going-forward basis. The board of directors
directed Berenson Minella to determine whether Evercore Capital Partners would
be willing to proceed with equity from non-management stockholders rather than
Mr. Ammon.
During the June 14, 1999 meeting, the board of directors, other than
Mr. Ammon and Mr. Reilly, who recused themselves, heard from outside counsel
regarding their fiduciary duties and from outside financial advisors concerning
the status of discussions with Thomas H. Lee Company. The board of directors
determined to retain additional counsel to act for the independent directors and
thereafter retained the firm of Dewey Ballantine LLP. The financial advisors
reported that Thomas H. Lee Company had agreed to improve its proposal and was
now prepared to offer a per share price of $29.00 in cash plus $6.00 in
liquidation preference of PIK preferred stock with warrants attached.
Representatives of Berenson Minella expressed their opinion that Thomas H. Lee
Company was sensitive to increasing the cash portion of the proposed
consideration, but advised that Big Flower should nonetheless try to improve
both the cash and the PIK preferred stock portions. In light of this, the board
of directors determined to request that management of Big Flower make a
presentation to the Big Flower board of directors concerning Big Flower's
business prospects and strategic plans. The board of directors directed the Big
Flower financial advisors to continue to seek to improve the Thomas H. Lee
Company proposal and to determine whether an Evercore Capital Partners proposal
capable of completion could be developed and scheduled a meeting for June 17 to
receive a further update from its advisors.
On June 14, 1999 Berenson Minella spoke with representatives of Thomas H.
Lee Company and explained that the Big Flower board of directors was seeking a
higher value level for its stockholders than offered by the current Thomas H.
Lee Company proposal. Berenson Minella continued discussions with
representatives of Thomas H. Lee Company during June 15 and June 16 in an
attempt to improve the Thomas H. Lee Company proposal. Discussions between them
continued to focus on increasing the cash component and the total consideration.
On June 16, 1999, Thomas H. Lee Company submitted its first written proposal
to Big Flower. The proposal was for a recapitalization of Big Flower, whereby
public shareholders of Big Flower would receive $30.00 per share in cash plus
$5.00 in liquidation preference of PIK preferred stock with warrants attached.
On June 17, 1999, the Big Flower board of directors, other than
Messrs. Ammon and Reilly, who recused themselves, met to review the status of
discussions with Thomas H. Lee Company and Evercore Capital Partners.
Representatives of Berenson Minella reported that Evercore Capital Partners had
improved its financing somewhat, but that its indication of interest was still
conditioned upon Mr. Ammon's retention of a significant interest in Big Flower.
A representative from Berenson Minella reported that he had been advised by
Mr. Ammon that Mr. Ammon was still unsatisfied with the amount of leverage
included in the capital structure in the Evercore Capital Partners' indication
of interest as well as the prospects for additional capital that Evercore
Capital Partners could offer on a going-forward basis and had stated that he
would not be willing to retain a significant interest in Big Flower in
connection with such a transaction. Having been informed of Mr. Ammon's concerns
regarding the high degree of leverage in Evercore Capital Partners' own
indication of interest and the fact that Mr. Ammon would not be willing to
retain a significant interest in Big Flower under the terms of such indication
of interest, Evercore Capital Partners decided not to submit its own proposal to
acquire Big Flower.
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The Goldman Sachs and Berenson Minella representatives then summarized the
current proposal from Thomas H. Lee Company, including the terms of the PIK
preferred stock and warrants being offered by Thomas H. Lee Company. Thomas H.
Lee Company had increased the cash portion of its proposal to $30.00 and reduced
the PIK preferred stock portion of the purchase price to a $5.00 liquidation
preference PIK preferred stock, but representatives of Goldman Sachs and
Berenson Minella indicated that the proposed PIK preferred stock/warrant package
contained terms that they believed to be unfavorable compared to market practice
and that those terms could be enhanced. These unfavorable terms included a high
warrant exercise price, extensive restrictions on the ability to exercise the
warrants, and the ability of Big Flower to redeem the PIK preferred stock in a
relatively short time frame, each of which the financial advisors advised was
contrary to prevailing market practice, and a low level of PIK preferred stock
offered in exchange for Big Flower common stock. After discussion with its
financial advisors, the board of directors instructed its financial advisors to
attempt to improve the terms of the PIK preferred stock and warrants in the
following ways:
- lowering the exercise price on the warrants to a nominal amount,
- eliminating or reducing restrictions on when the warrants could be
exercised,
- protecting against Big Flower's ability to redeem the PIK preferred stock
in a relatively short time frame, and
- increasing the amount of the PIK preferred stock being offered per share
of Big Flower common stock.
The directors wished to reach a prompt determination as to the best proposal
available from Thomas H. Lee Company and directed representatives of Goldman
Sachs and Berenson Minella to contact Thomas H. Lee Company and seek to improve
the amount and terms of the PIK preferred stock/warrant package. The financial
advisors left the meeting to have discussions with Thomas H. Lee Company. At
this time, Messrs. Ammon and Reilly joined the meeting, along with Mr. Ritchie,
solely to give a presentation to the board of directors concerning the current
financial and operating status and business plans and prospects of Big Flower.
Although Messrs. Ammon and Reilly had recused themselves from all board
deliberations regarding the transaction, they, along with Mr. Ritchie, were the
most appropriate and knowledgeable persons to address the board on Big Flower's
current status and business plans and prospects. In addition, Messrs. Ammon,
Reilly and Ritchie had addressed the board on these very same matters in the
past. In the presentation, these members of management reported to the board
that Big Flower's operating units were performing consistent with past reports
and consistent with management's expectations for the financial results of the
business as reflected in the then current management projections. This inquiry
was relevant both to determine whether a potential improvement in expected
results might be used to negotiate a better price and whether there was risk of
a deterioration in results that could jeopardize completion of any agreed
transaction. The Big Flower Board of Directors recognized that in presenting
this financial information Messrs. Ammon, Reilly and Ritchie had a conflict of
interest arising out of their possible retention of equity interests and
continued employment in any transaction with Thomas H. Lee Company.
After the management presentation, Messrs. Ammon, Reilly and Ritchie left
the meeting and the representatives of Goldman Sachs and Berenson Minella
rejoined the meeting and advised the directors that the only change Thomas H.
Lee Company was willing to make was to reduce the exercise price of the warrant
from $35.00 per share to a nominal amount. Because this was the sole improvement
offered to the terms of the PIK preferred stock and the warrants, the Big Flower
board of directors unanimously decided to reject the proposal from the Thomas H.
Lee Company and to adjourn the meeting and resolved that in the absence of an
improved offer there would be no transaction.
After the June 17 board of directors meeting, representatives of Big
Flower's financial advisors and of Thomas H. Lee Company continued to discuss
ways to improve the Thomas H. Lee Company proposal. Thomas H. Lee Company agreed
to increase, from $5.00 to $5.25, the liquidation value of the PIK preferred
stock offered per share of Big Flower common stock and to make a number of
changes
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to the terms of the PIK preferred stock and warrants that the financial advisors
believed would improve the value of the security. During this time, Mr. Ammon
also had conversations with Thomas H. Lee Company regarding the terms of his
possible participation in Big Flower following the merger. These conversations
continued throughout the bidding process. The transaction contemplated by the
original merger agreement involved a ratio of total debt at the projected time
of the merger to Big Flower's projected EBITDA for the last twelve months ending
at the time of the merger of approximately 5.9x.
The Big Flower board of directors, other than Messrs. Ammon and Reilly, who
recused themselves, convened again on June 18, 1999 to receive an update on the
status of negotiations with Thomas H. Lee Company. Berenson Minella and Goldman
Sachs reported on the improvements in the Thomas H. Lee Company proposal,
including an increase in the PIK preferred stock liquidation value per share
from $5.00 to $5.25, protection against Big Flower's unrestricted ability to
redeem the PIK preferred stock within the first five years, a lowered exercise
price of the attached warrants to a nominal amount, an increase in the number of
events that would permit a holder to exercise the warrants, and a longer term
for exercising the warrants. With the advice of Goldman Sachs, the board of
directors discussed the market practice with respect to making a market in
securities such as the PIK preferred stock and concluded that market practice
was such that there could be no guarantees that any investment bank would
actively make a market in the PIK preferred stock or warrants, although in
conversations with Big Flower and its financial advisors, the financial
institutions providing financing for the merger and related recapitalization
indicated their intent to make a market in such securities in accordance with
customary market practice, which does not provide an assurance of a continuous
bid. The board of directors discussed the advisability of proceeding with a
transaction on the basis of the Thomas H. Lee Company proposal as compared to
continuing with Big Flower's current business plan. At this time, the board of
directors considered the advice of its financial advisors that the then current
trading price of Big Flower's stock, $34.25 on June 18, 1999, reflected an
expectation of a transaction that was created with the April 20, 1999
announcement that Big Flower was studying its strategic alternatives. The board
of directors also discussed the fact that the consideration offered by Thomas H.
Lee Company was near the all-time trading high of Big Flower common stock and
that if no transaction were consummated, the trading range of Big Flower common
stock likely would fall to a level below its recent elevated trading price
resulting from the April 20th announcement. The trading price of Big Flower
common stock ranged from $27.88 to $33.75 a full month prior to the April 20,
1999 announcement and in the six months prior to March 22, 1999 had traded in a
range between $15.375 and $28.438. The board of directors also considered the
dilutive effect on Big Flower's reported earnings of potential acquisitions if
Big Flower continued its current business plan. After discussion on all of these
factors, including the improvements on Thomas H. Lee Company's proposal outlined
above, the board of directors authorized Big Flower's legal and financial
advisors to commence detailed negotiations of the terms of a possible
transaction. The board of directors was unanimous in the view that a merger
agreement should contain terms and conditions that would permit Big Flower to
negotiate and enter into an agreement with another party in the event of a
proposal from that party which was superior to the Thomas H. Lee Company
proposal. This was communicated to Thomas H. Lee Company.
After Big Flower communicated to Thomas H. Lee Company that its board of
directors had determined to pursue Thomas H. Lee Company's proposed transaction
with Big Flower, Thomas H. Lee Company contacted Evercore Capital Partners, at
the suggestion of Mr. Ammon, to offer Evercore Capital Partners an interest in
the proposed transaction. Mr. Ammon made this suggestion because while he had
been concerned with the high degree of leverage that would result from Evercore
Capital Partners' indication of interest, he believed that Evercore Capital
Partners could provide Big Flower with useful strategic advice and assist Big
Flower in identifying business opportunities in the future.
Negotiations followed between Thomas H. Lee Company and Evercore Capital
Partners in which Evercore Capital Partners requested a larger percentage of the
equity investment than was ultimately
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agreed upon and Thomas H. Lee Company offered Evercore Capital Partners a
smaller percentage of the equity investment than was ultimately agreed upon. The
parties ultimately negotiated an agreement whereby Evercore Capital Partners
would have the right to invest up to $65 million in Big Flower.
Big Flower's financial advisors and representatives of Thomas H. Lee Company
continued detailed discussions concerning the terms of the PIK preferred stock
and warrants. A draft merger agreement was delivered to representatives of Big
Flower on June 19. Respective counsel for Big Flower and Thomas H. Lee Company
discussed issues arising out of the draft on June 20 and daily thereafter until
the agreement was finalized. The contract negotiations focused primarily on the
following issues:
- the circumstances in which Big Flower could provide information to and
negotiate with third parties,
- whether Big Flower would be permitted to terminate the merger agreement to
accept a superior proposal from a third party,
- the circumstances under which the Thomas H. Lee Company acquisition entity
would be permitted not to close the merger,
- the scope of the representations and warranties of Big Flower and the
Thomas H. Lee Company entity,
- the circumstances in which the Thomas H. Lee Company entity would be
entitled to reimbursement of expenses and the cap on such reimbursement,
and
- the date when the parties could terminate the merger agreement if no
merger has occurred prior to such date.
During the course of these negotiations, Thomas H. Lee Company advised Big
Flower that Evercore Capital Partners would participate with the Thomas H. Lee
Company entity in the recapitalization transaction. The inclusion, however, of
Evercore Capital Partners did not affect the structure or terms of the Thomas H.
Lee Company proposal, and therefore did not affect Big Flower's analysis of the
proposal. Big Flower's financial advisors continued to have daily discussions
with Thomas H. Lee Company regarding the financial terms of the merger,
including the terms of the PIK preferred stock and attached warrants and the
financing commitments with respect to the proposal. These discussions included
whether the warrants would be exercisable for 5% of the equity before or after
giving effect to the exercise of the warrants and Big Flower's efforts to reduce
the number of financing contingencies in the financing commitment with respect
to the proposal.
The Big Flower board of directors, other than Messrs. Ammon and Reilly, who
recused themselves, met on June 24 at which time it received an update on the
status of negotiations. Big Flower's legal advisors summarized the following key
terms of the merger agreement:
- scope of the representations and warranties of Big Flower and BFH Merger
Corp.,
- the ability of Big Flower to enter into transactions with other parties,
including transactions for the sale of 15% or more of Big Flower's assets
or securities or a merger with a party other than BFH Merger Corp.,
- conditions to consummation of the transaction with BFH Merger Corp.,
- the ability of Big Flower or BFH Merger Corp. to terminate the agreement,
including the ability of either of them to terminate the agreement if the
merger is not completed by the later of October 31, 1999 and the date
determined by adding to October 31, 1999 the number of days after
September 1, 1999 that this proxy statement is mailed to Big Flower
stockholders, but in no event later than December 31, 1999, and
- fees and expenses payable by Big Flower to BFH Merger Corp. upon
termination of the agreement in some circumstances.
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Representatives of Goldman Sachs and Berenson Minella also described in
detail the board presentation materials prepared by them and distributed to the
board prior to the meeting, focusing on the financial terms of the Thomas H. Lee
Company proposal, including the PIK preferred stock and warrant, and Big
Flower's alternative as a stand-alone entity. Following their presentation,
Berenson Minella and Goldman Sachs informed the board of directors that their
respective firms were prepared to deliver oral opinions, which were subsequently
confirmed on June 29 in writing, to the effect that, assuming the negotiation
and execution of a definitive merger agreement, that the merger consideration to
be received by stockholders, other than the members of management retaining
shares of Big Flower common stock in the merger, as to whom they did not deliver
an opinion, was fair to those stockholders from a financial point of view.
After the June 24 board of directors meeting, Big Flower's legal advisors
continued to negotiate the merger agreement with counsel to Thomas H. Lee
Company. At the same time, Big Flower's financial advisors continued discussions
with Thomas H. Lee Company regarding the financial terms of the merger,
including discussions to clarify the terms of the PIK preferred stock and
attached warrants, and the terms of the financing commitments with respect to
the proposed merger.
The Big Flower board of directors, other than Messrs. Ammon and Reilly, who
recused themselves, met on June 27 at which time it received an update on the
status of negotiations. Big Flower's legal advisors reported that most of the
issues had been resolved, but that there were still some issues with respect to
closing conditions, conditions under which expenses would be payable and a small
number of relatively minor issues. The board of directors directed its legal
advisors to continue negotiations with Thomas H. Lee Company.
The Big Flower board of directors, other than Messrs. Ammon and Reilly, who
recused themselves, met on June 29 at which time it unanimously approved the
original merger agreement and the transactions contemplated in the original
merger agreement. On June 29, 1999 the original merger agreement was signed and
publicly announced.
Following announcement of the original merger, several stockholders,
including Big Flower's largest stockholder, expressed disappointment with the
terms of the original merger agreement, on the grounds that the overall merger
consideration should have been greater and that the preferred stock with
warrants was unattractive to them. In addition, the trading price of Big
Flower's stock remained well below the nominal $35.25 price per share which was
being offered to stockholders in the original merger agreement. In early August,
at the request of Mr. Diamandis, representatives of Big Flower contacted Thomas
H. Lee Company and asked that Thomas H. Lee Company consider revising the terms
of the merger to provide $35.25 in cash. Representatives of Thomas H. Lee
Company indicated that they were not willing to do so at that time but might be
open to considering an all cash proposal at a later time.
After signing the original merger agreement, Mr. Ammon continued to work
regularly with Thomas H. Lee Company and Evercore Capital Partners on planning
arrangements for participation of management of Big Flower and its operating
subsidiaries in the post recapitalization company, including the use of a rabbi
trust, the possibility of modifying the transaction terms to all cash and the
amount of cash and the financing arrangements for the recapitalization,
including the possibility of tendering for the high yield bonds of Big Flower's
subsidiary, Big Flower Press Holdings, Inc. and separately purchasing Columbine
JDS Systems and the Internet investments. Messrs. Reilly and Ritchie were not
involved in these matters.
Thereafter, Thoms H. Lee Company and Evercore Capital Partners, in
consultation with Mr. Ammon, decided to reconsider and make an all cash bid.
During the week of September 6, 1999, representatives of Thomas H. Lee Company
indicated to representatives of Big Flower that Thomas H. Lee Company and
Evercore Capital Partners were working on developing an all cash proposal but
that it would be at a level below $35.25 per share. The Thomas H. Lee Company
representatives indicated that they would attempt to have a proposal for
consideration by the Big Flower board of directors at
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<PAGE>
the time of its regularly scheduled meeting on September 14, 1999. The Thomas H.
Lee Company representatives also indicated that they were attempting to obtain
financing commitments for a $34.00 cash offer.
On September 13, 1999, representatives of Thomas H. Lee Company indicated to
representatives of Big Flower that negotiations for obtaining financing
commitments for a $34.00 cash deal were continuing, but that they were having
difficulty obtaining the necessary commitments on terms acceptable to Thomas H.
Lee Company and Evercore Capital Partners. In particular, the Thomas H. Lee
Company representatives indicated that their financing sources were seeking to
re-benchmark the lending terms agreed upon in June 1999 to reflect the market
conditions existing in September 1999, which were less favorable to borrowers in
the high yield and bank markets.
On September 14, 1999, the Big Flower board of directors held a regularly
scheduled meeting at which management, including Messrs. Ammon, Reilly and
Ritchie, reported on financial results through the end of July 1999 and
expectations for the third quarter and the year. The expected results were
somewhat weaker, both in terms of earnings and EBITDA, than had been expected at
the time the original merger agreement was entered into because of slower than
expected integration of recent marketing acquisitions, accompanied by weakness
in the direct mail sector arising from business with consumer products and
publishing companies. On September 14, 1999, management estimated that third
quarter earnings per share would be $0.58 per share, compared with $0.69 per
share reflected in consensus securities analyst estimates, and that full year
earnings per share would be approximately $2.07 per share compared with the
approximately $2.14 estimated at the time of the original merger agreement.
Management also estimated that full year 1999 EBITDA would be approximately
$264 million as compared to the approximately $267 million estimated at the time
of the original merger agreement.
Following the completion of regular board business, Messrs. Ammon and Reilly
left the meeting, and the board of directors received a report on the status of
communications from Thomas H. Lee Company. The board of directors also received
a presentation from Goldman Sachs analyzing a potential $34.00 cash offer and
discussed it with Goldman Sachs and Berenson Minella. Goldman Sachs summarized
the recent trading price of Big Flower and comparable companies and re-presented
its comparable transaction analysis from June 24. The board of directors
discussed the advisability of amending the original merger agreement to provide
for an all cash consideration but did not make any decision with respect to such
a transaction because Thomas H. Lee Company had not yet submitted any proposal.
In the discussion, the board of directors noted that:
- holders of Big Flower common stock had expressed a desire for an all cash
transaction,
- Big Flower common stock had been trading below $30.00 a share, and the
theoretical value, based on the return required by investors for a
security issued by a company having Big Flower's anticipated post
recapitalization credit rating, and without regard to the impact of supply
and demand in the market for this particular security), of the preferred
stock and warrants had declined as a result of an overall decline in the
market for high yield securities which was causing investors in that
market to require higher yields that would, because the dividend rate on
the preferred stock was fixed, be expected to result in lower trading
prices for the preferred stock and warrants, and
- Big Flower's financial results had deteriorated.
The Board of Directors did not discuss at this time the effect of the
deterioration in financial results on the value of the warrants attached to the
preferred stock. After the meeting on September 14, 1999, Big Flower informed
Thomas H. Lee Company about the revised projections, and Thomas H. Lee Company
indicated that it was continuing to seek financing for an all cash proposal.
On September 17, 1999, the board of directors, other than Messrs. Ammon and
Reilly who recused themselves, held a telephonic meeting and were advised that
Thomas H. Lee Company had thus far
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<PAGE>
been unable to obtain financing for a $34.00 cash proposal. The board of
directors was also advised that Big Flower management had determined that
results of the direct mail business were going to be even weaker than expected
on September 14, 1999. The change from the results reported on September 14 had
occurred because, in accordance with its usual practice, Webcraft's August
results and forecast for the following three months were prepared after
September 14. Webcraft's management informed Messrs. Reilly and Ritchie of the
August results and three month forecast and they in turn had the change reported
to the board of directors on September 17 and advised that work was being done
to revise the earnings and EBITDA projections. Thereafter, Webcraft's and Big
Flower's management, including Messrs. Reilly and Ritchie, lowered Webcraft's
estimated full year 1999 EBITDA by approximately $8.5 million, resulting in a
decline in Big Flower's estimated full year 1999 EBITDA to approximately
$256.5 million.
Thomas H. Lee Company was advised of this additional shortfall on
September 20, 1999. At that time, representatives of Thomas H. Lee Company
indicated that while they would continue working on a proposal for an all cash
transaction, given Big Flower's recent performance, the proposal likely would be
at a level below $34.00 per share.
During the weeks of September 20 and 27, 1999, representatives of Thomas H.
Lee Company communicated that they were working to be in a position to present a
proposal for a revised transaction. They also indicated their view that the high
yield debt markets and Big Flower's financial performance and prospects could
give the financial institutions that provided commitments in connection with the
original merger agreement a basis for seeking not to provide funding. The board
of directors, other than Messrs. Ammon and Reilly who recused themselves, held a
telephonic meeting on September 29, 1999 and received reports from Big Flower's
financial and legal advisors on the status of discussions with Thomas H. Lee
Company.
On September 30, 1999, representatives of Thomas H. Lee Company advised Big
Flower's financial and legal advisors that Thomas H. Lee Company's proposal for
a revised transaction was $28.00 in cash plus $4.00 in PIK preferred stock
WITHOUT warrants attached. The representatives of Big Flower advised the Thomas
H. Lee Company representatives against taking that proposal to the board of
directors to consider. Later that day, the Thomas H. Lee Company representatives
indicated that they were considering making a proposal of $29.00 in cash plus
$3.00 in PIK preferred stock without warrants attached. The Big Flower
representatives agreed to take this proposal to the board of directors for
consideration. The Big Flower representatives approached Mr. Diamandis, who
declined to convene a board meeting to consider such a proposal, rejecting it
outright.
On October 1, 1999, representatives of Thomas H. Lee Company indicated that
they were prepared to propose a $30.00 all cash transaction and this was the
best proposal they were able to make under the circumstances. The board of
directors, other than Messrs. Ammon and Reilly who recused themselves, held
telephonic meetings on October 1, 1999 and October 2, 1999. At the October 1,
1999 meeting, the board of directors rejected this proposal. On October 2, 1999,
after receipt of a financial presentation from Goldman Sachs presenting
information of the type presented on September 14, the board discussed amongst
itself and with Goldman Sachs and Berenson Minella possible proposals from
Thomas H. Lee Company and based on a number of factors--including the enhanced
certainty of completing a revised transaction, particularly if re-benchmarking
of closing conditions could be obtained, the possible decrease in the trading
price of Big Flower common stock if a merger was not completed, and uncertainty
of any alternative transaction--believed it could support a transaction in the
$31.00 to $32.00 range. On October 2, 1999, representatives of Big Flower
notified Thomas H. Lee Company of the board's rejection of the $30.00 proposal
and the board's determination that a higher offer may be acceptable if coupled
with an increased certainty of the merger occurring and enhanced speed of
closing. Representatives of Thomas H. Lee Company indicated that they wished to
have their financing sources update their due diligence on Big Flower and to
seek to submit an improved proposal.
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<PAGE>
On October 4, 1999, representatives of Thomas H. Lee Company, Evercore
Capital Partners, their financing sources, Goldman Sachs and Berenson Minella
met with representatives of Big Flower and received detailed updates on the
financial results and operations of Big Flower and its subsidiaries. These
updates focused on management's full year 1999 EBITDA estimate based upon each
of Big Flower's main operating units.
On October 5, 1999, representatives of Thomas H. Lee Company indicated they
were seeking financing for a $31.00 cash transaction. On October 6, 1999,
representatives of Big Flower, in consultation with the independent directors,
stated that the board of directors would not support a $31.00 cash transaction
that conditioned completion of the merger on the absence of adverse market
conditions. On October 7, 1999, representatives of Thomas H. Lee Company
indicated that they could agree to a $31.50 cash transaction and believed they
could obtain financing for a transaction at that level. The transaction
contemplated by the amended and restated merger agreement involves a ratio of
total debt at the projected time of the merger to Big Flower's projected EBITDA
for the last twelve months ending at the time of the merger of approximately
5.7x.
On October 7, 1999, the board of directors, other than Messrs. Ammon and
Reilly, who recused themselves, met by telephone and received a description of
the proposed terms of a $31.50 all cash transaction. In response to Big Flower's
statement that it would not agree to condition completion of the merger on the
absence of adverse market conditions, Thomas H. Lee Company proposed to
benchmark this condition and the condition relating to the financial position of
Big Flower to the date of the signing of the revised merger agreement. Thomas H.
Lee Company also proposed to purchase Columbine JDS Systems and the Internet
investments separately but at or around the effective time of the merger. After
receipt of a financial presentation from Berenson Minella and after referring to
the financial presentation previously received from Goldman Sachs on October 4,
the board of directors authorized the negotiation and execution of a revised
merger agreement on the terms described to them. In doing so, the board directed
that the proposed purchase of Columbine JDS Systems and the Internet investments
should be subject to the board's receipt, prior to the purchase, of fairness
opinions from a reputable investment bank. The Big Flower board did not require
these fairness opinions as a condition to execute the revised merger agreement
because the possibility existed that the terms could change and it believed that
conditioning its obligation to sell Columbine JDS Systems and the Internet
investments upon the receipt of fairness opinions was adequate. The board also
reiterated the importance of the proposed re-benchmarking of the conditions
relating to market conditions and the financial condition of the Company to a
current time period.
On October 11, 1999 the amended and restated merger agreement was signed and
publicly announced.
ADDITIONAL INFORMATION REGARDING BIG FLOWER'S REASONS FOR THE MERGER;
RECOMMENDATION OF THE BIG FLOWER BOARD OF DIRECTORS
In reaching its decision to declare advisable and fair to unaffiliated
stockholders and approve the amended and restated merger agreement and the
transactions contemplated by the amended and restated merger agreement and to
recommend that Big Flower stockholders vote for the adoption of the amended and
restated merger agreement, the board of directors of Big Flower took into
account the amount of consideration to be paid to Big Flower stockholders. The
Big Flower board considered that Big Flower stock had, during the period shortly
before its April 20, 1999 announcement to explore strategic alternatives, traded
at prices in excess of $31.50, that the stock had historically traded over a
fairly wide range of prices, including prices substantially lower than $31.50,
and that trading prices of comparable public companies had declined
substantially since April 20, 1999. The management projections of future
performance that the Big Flower board of directors used in analyzing whether or
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<PAGE>
not to remain independent were prepared in the ordinary course of Big Flower's
business for internal purposes and were reviewed and approved by Messrs. Reilly
and Ritchie.
As disclosed in the proxy statement, one of the factors considered by the
Big Flower board of directors in connection with its determination to approve
and recommend the amended and restated merger agreement was the opinions of Big
Flower's financial advisors, Goldman Sachs and Berenson Minella, to the effect
that the merger consideration is fair, from a financial point of view, to
holders of Big Flower common stock, other than members of management who are
retaining shares of Big Flower common stock in the merger, together with the
financial and comparative analyses and presentations of Goldman Sachs and
Berenson Minella with respect to the merger and the consideration offered to
stockholders. These opinions, presentations and analyses are summarized in the
proxy statement at pages 31 to 46. In considering the analyses and presentations
of Goldman Sachs and Berenson Minella, the Big Flower board of directors took
into account, among other thing, that many of the analyses resulted in large
valuation ranges, that the $31.50 proposed to be paid in the merger is at the
low end of, and in one case below, the valuation ranges resulting from the
analyses, and that many of the analyses are based upon Big Flower management
projections, which are highly uncertain in years after 1999 because, in addition
to the uncertainties inherent in predicting future financial results, those
projections are significantly affected by the results of Big Flower's
acquisition strategy.
As noted in the proxy statement, one of the factors considered by the Big
Flower Board of Directors in connection with the merger was the prior
consideration of possible spin-off transactions. In this regard, Berenson
Minella previously had calculated, based on operating assumptions provided by
Big Flower, that if Treasure Chest Advertising was spun off, its estimated
trading price would be between $0.48 and $3.55 and the trading price of Big
Flower's remaining operating businesses would be between $20.89 and $24.74 and
the trading price, assuming a 20% discount to their current after tax value, of
XL Ventures would be between $2.12 and $2.65 for a total value ranging from
$23.48 to $30.93.
ADDITIONAL INFORMATION REGARDING THE FEES AND EXPENSES OF THE MERGER
As is discussed on pages 61 and 71 of the proxy statement, in connection
with the merger, Thomas H. Lee Company and its affiliates are expected to
receive from Big Flower a one-time transaction fee of $20 million in the
aggregate and Evercore Capital Partners and its affiliates are expected to
receive from Big Flower a one-time transaction fee of $4.3 million in the
aggregate. These fees are not payable to either Thomas H. Lee Company and its
affiliates or Evercore Capital Partners and its affiliates if the merger does
not occur. However, as is discussed on pages 88 and 89 of the proxy statement,
the merger agreement provides that Big Flower must pay up to $10 million of the
out-of-pocket expenses of Thomas H. Lee Company, Evercore Capital Partners and
BFH Merger Corp., or a termination fee of $30 million, less out-of-pocket
expenses already paid up to $10 million, following termination of the merger
agreement in certain circumstances.
ADDITIONAL INFORMATION REGARDING THE OPINIONS OF BIG FLOWER'S FINANCIAL ADVISORS
GOLDMAN, SACHS & CO.
As disclosed in the proxy statement, Goldman Sachs analyzed the effect of
the decrease in projected 1999 EBITDA on Big Flower's equity value per share by
multiplying the amount of the decrease times a multiple equal to the equity
value of Big Flower at $35.25 per share divided by the 1999 EBITDA projected as
of June 29, 1999. Although Goldman Sachs did not present to the Big Flower board
of directors a discounted cash flow analysis, Goldman Sachs advised the board
that a discounted cash flow analysis produced a similar result as the EBITDA
multiple valuation analysis. The discounted cash flow analysis indicated that
Big Flower's equity value had declined $3 to $4 per share. In reaching its
fairness determination, Goldman Sachs, among other things, took into account the
value
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<PAGE>
of Big Flower's Internet investments. The value of the public Internet
investments was based upon their respective trading prices as of October 2,
1999. The value of the private Internet investments was based upon their
historical cost.
As disclosed in the proxy statement, in connection with its October 11, 1999
fairness opinion, Goldman Sachs did not update all of the analyses contained in
its June 29, 1999 presentation. For example, the Selected Companies Analysis
included in the June 29, 1999 presentation should be understood to be "as of"
such date so that updating data such as LTM EBITDA would not be meaningful.
Similarly, Goldman Sachs considered stock price expressed as a multiple of price
to earnings to be the most appropriate measure to indicate the effect of changes
in market conditions upon the valuation of the selected companies. As noted
above, Goldman Sachs did not consider it necessary to update all of the analyses
contained in the June 29, 1999 presentation.
BERENSON, MINELLA & COMPANY
In addition to the report to the Big Flower board that is summarized on
pages 39 to 46 of the proxy statement, Berenson Minella also delivered a report
to the Big Flower board on June 29, 1999 with respect to the original merger
agreement. On June 24, 1999, at the board of directors meeting held to evaluate
the merger, Berenson Minella presented to the board of directors the financial
analyses performed by Berenson Minella in connection with the preparation of its
opinion. Berenson Minella informed the Big Flower board of directors that
Berenson Minella was prepared to deliver an oral opinion with respect to the
fairness, from a financial point of view, of the merger consideration to be
received by the holders of Big Flower common stock other than the members of
management retaining shares of Big Flower common stock in the merger, as to whom
Berenson Minella did not deliver an opinion, assuming the negotiation and
execution of a definitive merger agreement. On June 29, 1999, Berenson Minella
delivered a written opinion to the Big Flower board of directors that, as of
that date, the merger consideration to be received by the holders of Big Flower
common stock, other than the members of management retaining shares of Big
Flower common stock in the merger, as to whom Berenson Minella did not deliver
an opinion, was fair, from a financial point of view.
In arriving at its June 29, 1999 opinion, Berenson Minella, among other
things:
-- reviewed the latest draft of the original merger agreement dated
June 27, 1999,
-- reviewed, and discussed with members of management of Big Flower, certain
business and financial information relating to Big Flower that Berenson
Minella deemed relevant, including Big Flower's recent public filings and
financial statements,
-- reviewed, and discussed with members of management of Big Flower, certain
information, including budgets and financial forecasts relating to the
businesses, earnings, cash flows, assets, liabilities and prospects of
Big Flower,
-- reviewed the historical stock prices and trading volumes of Big Flower's
common stock,
-- reviewed certain information and documentation regarding the terms of the
PIK preferred stock and reviewed certain valuation methodologies relating
to the PIK preferred stock,
-- reviewed certain publicly available information regarding publicly traded
companies that Berenson Minella deemed reasonably comparable to Big
Flower,
-- reviewed certain publicly available information regarding comparable
merger and acquisition transactions that Berenson Minella deemed
relevant, including, without limitation, premiums paid in such
transactions,
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-- performed discounted cash flow analyses based on the financial forecasts
for Big Flower, as applicable,
-- participated in certain discussions among management of Big Flower,
Thomas H. Lee Company and their financial advisors regarding Big Flower
and the merger,
-- reviewed the potential pro forma impact of the merger, and
-- reviewed such other information, performed such other analyses and took
into account such other factors as Berenson Minella deemed relevant.
In its review and analysis and in formulating its opinion, Berenson Minella
assumed and relied upon the accuracy and completeness of all information
supplied or otherwise made available to it by Big Flower or obtained by Berenson
Minella from other sources, and upon the assurance of Big Flower's management
that they were not aware of any information or facts that would make the
information provided to Berenson Minella by Big Flower incomplete or misleading.
Berenson Minella did not attempt to verify independently any of the information
supplied or otherwise made available to Berenson Minella by Big Flower or
obtained by Berenson Minella from other sources. Berenson Minella did not
undertake an independent valuation or appraisal of assets or liabilities,
contingent or otherwise, of Big Flower, nor was Berenson Minella furnished with
any such valuations or appraisals of assets or liabilities, contingent or
otherwise, of Big Flower. Berenson Minella did not assume any obligation to, and
accordingly did not, conduct any physical inspection of the properties or
facilities of Big Flower. Berenson Minella assumed, without independent
verification, the accuracy of all representations and statements made by
officers and management of Big Flower. With respect to the financial forecasts
for Big Flower, Berenson Minella was advised by Big Flower and assumed, without
independent investigation, that they had been reasonably prepared and reflected
management's most currently available estimates and judgments as to the expected
future financial performance of Big Flower. Berenson Minella noted that its
opinion was necessarily based upon financial, economic, market and other
conditions as they existed and could be evaluated by Berenson Minella on the
date of its written opinion. Additionally, Berenson Minella noted that Big
Flower announced publicly, by a press release dated April 20, 1999, that it was
exploring certain strategic alternatives and a substantial number of financial
and strategic buyers were either contacted by, or contacted, Big Flower and its
financial advisors and studied a potential acquisition of Big Flower. Although
Berenson Minella evaluated the merger consideration from a financial point of
view, it was not asked to and did not recommend the specific type of
consideration payable in the merger, which was determined through negotiations
between Big Flower and Thomas H. Lee Company.
In preparing its opinion, Berenson Minella performed a variety of financial
and comparative analyses, including those described below. The summary of these
analyses does not purport to be a complete description of the analyses
underlying Berenson Minella's opinion. The preparation of a fairness opinion is
a complete analytic process involving various determinations as to the most
appropriate and relevant methods of financial analyses and the application of
those methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to summary description. Furthermore, in arriving at its
opinion, Berenson Minella did not attribute any particular weight to any
analysis or factor considered by it, but rather made qualitative judgments as to
the significance and relevance of each analysis and factor. Accordingly,
Berenson Minella believes that its analyses must be considered as a whole and
that selecting portions of its analyses and factors, without considering all
analyses and factors, could create a misleading or incomplete view of the
process underlying such analyses and opinion. In its analyses, Berenson Minella
made numerous assumptions with respect to Big Flower, industry performance,
general business, economic, market and financial conditions and other matters,
many of which are beyond Big Flower's control. The estimates contained in these
analyses and the valuation ranges resulting from any particular analysis are not
necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or
17
<PAGE>
less favorable than those suggested by these analyses. In addition, analyses
relating to the value of businesses or securities do not purport to be
appraisals or to reflect the prices at which businesses or securities actually
may be sold. Accordingly, these analyses and estimates are inherently subject to
substantial uncertainty. Berenson Minella's opinion and analyses were only one
of various factors considered by the Big Flower board of directors in its
evaluation of the merger and should not be viewed as determinative of the view
of the board of directors of Big Flower with respect to the merger consideration
to be received by the holders of common stock of Big Flower, other than the
members of management retaining shares of Big Flower common stock in the merger,
as to whom Berenson Minella did not deliver an opinion, or the merger.
The following is a summary of the material analyses performed by Berenson
Minella in connection with its June 29 opinion. Some of the summaries of the
financial analyses include information presented in tabular format. The tables
must be read together with the text accompanying each summary, in order to fully
understand the financial analyses. The tables do not constitute a complete
description of the financial analyses.
STOCK TRADING HISTORY. Berenson Minella reviewed Big Flower's market
statistics, including Big Flower's price to earnings (PE) multiple as of
June 22, 1999, and Big Flower's earnings per share (EPS) for the last twelve
months (LTM). Berenson Minella also reviewed Big Flower's total enterprise
value, and calculated multiples of LTM 1999 and 2000 revenues, operating income:
earnings before interest and taxes (EBIT) and EBITDA based on the enterprise
value.
Berenson Minella reviewed the stock trading history of Big Flower,
including:
-- the price per share of Big Flower common stock at Big Flower's initial
public offering in 1995,
-- the 52-week high and low prices per share of Big Flower common stock as
of June 29, 1999,
-- the trading volumes of Big Flower common stock over the six-month period
preceding June 29, 1999,
-- the daily prices per share of Big Flower common stock for the period
December 29, 1998 through June 29, 1999,
-- the weekly prices per share of Big Flower common stock for the period
July 1, 1998 through June 29, 1999, and
-- the price per share of Big Flower common stock immediately preceding the
announcement, on April 20, 1999, that Big Flower was authorized by its
board of directors to explore strategic alternatives.
In addition, Berenson Minella reviewed Big Flower's investments in both
public and private Internet-related entities. Given the movement of Big Flower's
stock price following the March 22, 1999 Credit Suisse First Boston research
report, which highlighted the value of Big Flower's Internet investments, as
well as the significant volatility in the stock price of these Internet
securities, in reviewing the 1999 stock price performance of the Big Flower
common stock, Berenson Minella considered the estimated value of the Internet
investments per share of Big Flower common stock, assuming the Internet
investments could be liquidated at the prevailing market prices. In estimating
this per share value, Berenson Minella calculated the after-tax market value of
the Internet investments. The net value was based on the daily closing prices
for public investments and Big Flower's cost basis for private investments less
estimated capital gains tax due upon the sale of such securities, less any
sharing interests in profits held by some employees of Big Flower. The after-tax
market value of the Internet investments as of June 22, 1999 was approximately
$82.5 million, or approximately $3.24 per share, and has been treated like cash
and marketable securities in calculating the valuation per fully diluted share
of Big Flower common stock in each of Berenson Minella's valuation analyses. As
is
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disclosed in the proxy statement, the value of the Internet investments as of
October 7, 1999 was approximately $109.1 million, or approximately $4.32 per
share.
COMPARISON WITH SELECTED COMPARABLE PUBLICLY TRADED COMPANIES. Berenson
Minella reviewed and compared certain financial data of each of nine printing
companies deemed similar to Big Flower, based upon financial information
publicly available and stock prices as of June 22, 1999. The companies compared
were Banta Corp., Cadmus Communications Corp., Consolidated Graphics, Inc.,
Cunningham Graphics International Inc., RR Donnelly & Sons Company,
Mail-Well Inc., Master Graphics Inc., Quebecor Printing Inc. and World Color
Press, Inc. For each comparable printing company, Berenson Minella calculated:
-- the equity value,
-- the PE multiples for the LTM, estimated for 1999 and estimated for 2000,
-- the enterprise value,
-- the ratio of the enterprise value to EBITDA for the LTM, estimated for
1999 and estimated for 2000, and
-- the ratio of the enterprise value to the LTM revenues.
The following table presents Berenson Minella's observations with regard to
the calculations it performed for the printing companies that Berenson Minella
deemed similar to Big Flower.
PRINTING COMPANIES
<TABLE>
<CAPTION>
RANGE MEDIAN MEAN
---------------------- -------- --------
<S> <C> <C> <C>
PE MULTIPLE
LTM......................................................... 9.0x - 19.0x 14.7x 14.7x
1999 Estimated.............................................. 8.3x - 16.9x 12.6x 12.6x
2000 Estimated.............................................. 6.2x - 15.1x 11.0x 10.7x
</TABLE>
<TABLE>
<CAPTION>
RANGE MEDIAN MEAN
---------------------- -------- --------
<S> <C> <C> <C>
RATIO OF ENTERPRISE VALUE TO:
LTM EBITDA.................................................. 4.7x - 10.3x 7.1x 7.4x
1999 Estimated EBITDA....................................... 4.0x - 7.3x 6.2x 6.1x
2000 Estimated EBITDA....................................... 3.6x - 6.5x 5.4x 5.3x
LTM Revenues................................................ 0.58x - 1.90x 1.02x 1.07x
</TABLE>
Of the larger printing companies that Berenson Minella deemed most similar
to Big Flower, Berenson Minella reviewed the median and mean:
- - PE multiples for the LTM, estimated for 1999 and estimated for 2000,
- - ratio of the enterprise value to EBITDA for the LTM, estimated for 1999 and
estimated for 2000, and
- - ratio of the enterprise value to the LTM revenues.
Excluded from this review were Consolidated Graphics, Inc., Cunningham
Graphics International Inc. and Master Graphics Inc., all of which were viewed
as regional consolidators of independent sheet fed printers and not directly
comparable to Big Flower.
The following table presents Berenson Minella's observations with regard to
the calculations it performed for the larger printing companies.
19
<PAGE>
LARGER PRINTING COMPANIES
<TABLE>
<CAPTION>
RANGE MEDIAN MEAN
---------------------- -------- --------
<S> <C> <C> <C>
PE MULTIPLE
LTM......................................................... 9.0x - 18.8x 14.7x 14.5x
1999 Estimated.............................................. 8.3x - 16.9x 12.6x 12.8x
2000 Estimated.............................................. 7.6x - 15.1x 11.0x 11.3x
</TABLE>
<TABLE>
<CAPTION>
RANGE MEDIAN MEAN
---------------------- -------- --------
<S> <C> <C> <C>
RATIO OF ENTERPRISE VALUE TO:
LTM EBITDA.................................................. 4.7x - 7.4x 6.7x 6.4x
1999 Estimated EBITDA....................................... 4.0x - 7.0x 6.0x 5.7x
2000 Estimated EBITDA....................................... 3.6x - 6.5x 5.4x 5.3x
LTM Revenues................................................ 0.58x - 1.19x 0.88x 0.88x
</TABLE>
Berenson Minella calculated the implied valuation per fully diluted share of
Big Flower common stock by applying the larger printing companies' median and
mean multiples to Big Flower's LTM EBITDA, 1999 estimated EBITDA, 2000 estimated
EBITDA, LTM EPS, 1999 estimated EPS and 2000 estimated EPS and observed that the
range of valuations per fully diluted share of Big Flower common stock was
$27.25 to $33.50, including the value of Big Flower's Internet investments.
COMPARISON WITH SELECTED COMPARABLE MERGER AND ACQUISITION
TRANSACTIONS. Berenson Minella reviewed certain recent business combinations
involving North American companies engaged in businesses deemed relatively
comparable to those of Big Flower and reviewed selected financial data and
valuation parameters, to the extent publicly available, including total
enterprise value as a multiple of LTM sales, EBITDA and EBIT, and equity market
value as a multiple of LTM net income and book value.
The merger and acquisition transactions that Berenson Minella compared were:
- - UP/Graphics, Inc. / World Color Press, Inc.
- - Infiniti Graphics, Inc. / World Color Press, Inc.
- - Katz Digital Technologies, Inc. / Photobition Group plc
- - Quebecor Printing Inc.'s Check & Card Division / MDC Communications
Corporation
- - Port City Press, Inc. / Mack Printing Company
- - Anderson Lithograph Company / Mail-Well Inc.
- - Devon Group, Inc. / Applied Graphics Technologies, Inc.
- - Artistic Greetings, Inc. / MDC Communications Company
- - Acme Printing Company / World Color Press, Inc.
- - Century Graphics Corporation / World Color Press, Inc.
- - Uarco Incorporated / The Standard Register Company
- - Graphic Industries Inc. / Wallace Computer Services Inc.
- - Judd's, Incorporated / Perry Graphic Communications, Inc.
20
<PAGE>
- - Brown Printing-Franklin Division / Quebecor Printing Inc.
- - Riverside County Publishing Company / Big Flower Holdings, Inc.
- - Johnson & Hardin / World Color Press, Inc.
Given the lack of precedent transactions involving companies with a
comparable mix of businesses to Big Flower and similar transaction value to the
merger, Berenson Minella analyzed transaction multiples for a broad group of
mergers and acquisitions in the North American printing and related industries
completed over the last three years.
The following table presents Berenson Minella's observations with regard to
recent merger and acquisition transactions involving North American companies
engaged in businesses that Berenson Minella deemed relatively comparable to
those of Big Flower.
COMPARABLE NORTH AMERICAN COMPANIES INVOLVED IN RECENT
MERGER AND ACQUISITION TRANSACTIONS
<TABLE>
<CAPTION>
RANGE
----------------------
<S> <C>
TOTAL ENTERPRISE VALUE AS A MULTIPLE OF:
LTM Sales................................................... 0.4x - 1.6x
EBITDA...................................................... 5.5x - 11.6x
EBIT........................................................ 6.7x - 17.6x
</TABLE>
<TABLE>
<CAPTION>
RANGE
----------------------
<S> <C>
EQUITY MARKET VALUES AS A MULTIPLE OF:
LTM Net Income.............................................. 9.8x - 57.5x
Book Value.................................................. 1.7x - 12.9x
</TABLE>
Based upon its review of companies involved in comparable merger and
acquisition transactions, Berenson Minella calculated the implied valuation per
fully diluted share of Big Flower common stock using Big Flower's LTM revenues,
LTM EBITDA and LTM EBIT and concluded that the implied valuation per fully
diluted share of Big Flower common stock was $32.00 to $39.25, including the
value of Big Flower's Internet investments, but noted that many of these
precedent transactions involved competitors being acquired by larger strategic
buyers who could recognize significant synergies or cost savings or eliminate
duplicative operations and that no strategic buyer submitted any offer to
acquire Big Flower or any indication of interest in making such an offer.
Berenson Minella observed that, in the absence of interest from strategic buyers
able to recognize significant synergies or cost savings, it is typically more
difficult to achieve premium valuation multiples in a sale transaction. Berenson
Minella did not make any conclusions as to whether the valuation amounts it
computed should be adjusted based on this observation.
DISCOUNTED CASH FLOW ANALYSIS. Berenson Minella utilized a discounted cash
flow analysis to calculate the implied equity values per fully diluted share of
Big Flower common stock based upon the discounted net present value, utilizing
discount rates ranging from 10% to 14%, of the sum of management's projections
of after-tax unlevered free cash flows of Big Flower for the period from
March 1999 through 2004 and of the terminal value of Big Flower at 2004 by
applying multiples ranging from 6.0x to 7.0x to Big Flower's projected EBITDA in
2004. In performing its discounted cash flow analysis, Berenson Minella used
discount rates based upon Big Flower's estimated weighted average cost of
capital and EBITDA multiples based on Big Flower's historical valuation range.
Based on its analysis, Berenson Minella calculated that the implied value per
fully diluted share of Big Flower
21
<PAGE>
common stock ranged from a low of $30.92 to a high of $50.86, including the
value of Big Flower's Internet investments.
PREMIUMS PAID ANALYSIS. In performing its premium paid analysis, Berenson
Minella screened 74 transactions analyzed based on the following criteria:
- - the transactions were announced after January 1, 1997 and closed after
January 1, 1997,
- - only completed or unconditional transactions were analyzed, and
- - the value of each transaction analyzed was between $1.5 billion and
$2.5 billion.
Berenson Minella compared the premiums paid relative to the acquired
companies' stock values one day prior to announcement of the transaction, five
days prior to announcement of the transaction and 30 days prior to announcement
of the transaction, and observed the following:
PREMIUMS PAID SINCE JANUARY 1997
<TABLE>
<CAPTION>
RANGE MEDIAN
------------------------------- --------
<S> <C> <C>
1 Day Prior to Announcement.................... 16.11% - 100.85% 19.2%
1 Week Prior to Announcement................... 11.49% - 154.07% 23.7%
1 Month Prior to Announcement.................. -27.35% - 163.14% 39.5%
</TABLE>
Based upon its review of comparable premiums, Berenson Minella calculated
the implied valuation per fully diluted share of Big Flower common stock using
Big Flower's closing price one day, one week and one month before the date of
the public announcement on April 20 and concluded that the implied valuation per
fully diluted Big Flower common stock was $32.50 to $41.75, including the value
of Big Flower's Internet investments.
Berenson Minella was not asked, and did not undertake, to value separately
the PIK preferred stock and the warrants apart from the overall merger
consideration. As part of its analysis, however, Berenson Minella calculated a
range of implied theoretical values for the PIK preferred stock and warrants to
be received in exchange for one share of Big Flower common stock. In performing
its analysis, Berenson Minella calculated the projected future value of the PIK
preferred stock and the warrants in the year 2004 based on Big Flower
management's projections and the proposed capital structure following the
merger. Berenson Minella calculated the projected future value using EBITDA
multiples ranging from 6.0x to 8.0x and discounted the implied future values
using discount rates from 14.0% to 20.0%, resulting in a range of implied
present values for the PIK preferred stock and warrants per share of Big Flower
common stock of $4.42 to $6.55. Alternatively, Berenson Minella calculated the
value of the non-cash merger consideration based on the implied present value of
the PIK preferred stock based on the projected future value in years 2004
through maturity in year 2012 and discount rates from 14.0% to 20.0% plus the
implied value of the warrants based on the $35.25 purchase price per common
share by the new equity investors, resulting in a range of implied values for
the PIK preferred stock and warrants per share of Big Flower stock of $2.50 to
$5.23.
In connection with its October 7, 1999 report, Berenson Minella did not
perform a premiums paid analysis as it had in June 1999. It was Berenson
Minella's view that the price of Big Flower common stock had reflected the
market expectation of a transaction since the April 20, 1999 announcement that
Big Flower was considering strategic alternatives and, as such, the premiums
paid analysis based on stock prices leading up to the date of the report was not
applicable to the determination of fairness from a financial point of view. In
addition, given fluctuations in general market conditions and the company's
financial performance during the approximately five and one-half months since
the April 20 announcement, Berenson Minella believed that the financial analysis
of stock prices prior to the April
22
<PAGE>
20 period did not necessarily reflect the company's status quo value per share
as of the date of the report.
In connection with its analysis of how Big Flower might trade as a public
company if no transaction were effected, Berenson Minella calculated an implied
value per share of Big Flower common stock based upon a range of possible LTM
EBITDA multiples ended September 30, 1999. The LTM EBITDA amount was
$248.6 million and the multiples ranged from 5.5x to 7.0x and yielded an implied
value per share of $16.27 to $32.27. In connection with this analysis, Berenson
Minella noted that R.R. Donnelly was currently trading at approximately 5.87x
its LTM EBITDA. As the largest company in the industry for many years, it was
Berenson Minella's view that R.R. Donnelly is viewed as an industry bellweather
and therefore an important valuation benchmark. The implied price per share of
Big Flower common stock at a 5.87x EBITDA multiple was $20.58.
ADDITIONAL INFORMATION REGARDING THE FAIRNESS OF THE MERGER
The proxy statement describes the belief of Thomas H. Lee Equity Fund IV and
Messrs. Ammon, Reilly and Ritchie that the merger agreement was the product of
arms length bargaining between Big Flower, on the one hand, and Thomas H. Lee
Company and Evercore Capital Partners, on the other. Although each of those
parties, and Big Flower, believes that this is a correct characterization of the
negotiations, it is also true that the participation of members of Big Flower
management with Thomas H. Lee Company and Evercore Capital Partners resulted in
a circumstance not customarily found in arms length negotiations and it would be
more appropriate to say, as Evercore Capital Partners said, that the merger
agreement was the result of active bargaining rather than characterize the
negotiations as arms length.
THOMAS H. LEE COMPANY AND ITS AFFILIATES
In the discussion on pages 46 to 48 of the proxy statement as to the reasons
why Thomas H. Lee Equity Fund IV believes that the merger is fair to Big
Flower's unaffiliated stockholders, factor (15) refers to the fact that Thomas
H. Lee Equity Fund IV performed a number of quantitative financial analyses
based upon projections developed by Thomas H. Lee Equity Fund IV.
The financial analyses which were performed were:
-- a leveraged buyout financial model, which considered possible capital
structures in light of projected financial results,
-- a comparable company analysis, which reviewed the financial and trading
ratios of public companies in the same or similar industries to the
principal Big Flower operating units,
-- a premium-paid analysis, which reviewed business combinations,
acquisitions and other similar transactions in the industries in which
Big Flower operates, and
-- a sum-of-the-parts financial analysis which considered the financial
performance and worth of each principal Big Flower operating unit
separately.
Prior to the signing of the original merger agreement on June 29, 1999,
these financial analyses produced the following valuation ranges of Big Flower:
-- the leveraged buyout financial model, which incorporated comparable
company and premium-paid analyses, produced a valuation range of $32-$36
per share, and
-- the sum-of-the-parts analysis, which also incorporated comparable company
and premium-paid analyses, produced a valuation range of $30-$45 per
share.
23
<PAGE>
Subsequent to the signing of the original merger agreement, and as a result
of the deterioration in the financial performance of Big Flower and a reduction
in the aggregate trading valuation of Big Flower's public Internet investments,
Thomas H. Lee Equity Fund IV perfomed a revised analysis of Big Flower. This
revised analysis was based solely on its leveraged buyout financial model and
produced a valuation range for Big Flower of $28-$32 per share.
The projections developed by Thomas H. Lee Equity Fund IV were based on
projections provided by management, Thomas H. Lee Equity Fund IV's careful
review of management's projections as a financial buyer, and Thomas H. Lee
Equity Fund IV's due diligence of Big Flower and own assessment of future
events. Thomas H. Lee Equity Fund IV's projections, which were primarily of
sales and EBITDA, were lower than management's projections disclosed in the
section "Certain Estimates of Future Operations and Other Information" on page
57 of the proxy statement by, on average, approximately 5%.
On page 48 of the proxy statement, factor (18) states that Thomas H. Lee
Equity Fund IV reviewed reports prepared by its financing sources in the merger
which did not address the fairness of the merger consideration to unaffiliated
stockholders of Big Flower and were not material to its decision to proceed with
the merger.
These reports, of which there were three, were prepared by Chase Securities,
Inc. Chase Securities is a nationally recognized investment banking division of
The Chase Manhattan Bank. Chase Securities was selected as BFH Merger Corp.'s
financial advisor based on Chase Securities' experience in transactions of this
type and its knowledge of Big Flower and the industry in which Big Flower
operates. As provided on page 67 of the proxy statement in the section "Special
Factors--Source and Amount of Funds--Debt Financings--High Yield Financing,"
Chase Securities has also been engaged by BFH Merger Corp. in connection with
the high yield notes which may be issued in connection with the transaction. An
affiliate of Chase Securities, The Chase Manhattan Bank, is involved in
providing the senior bank and the bridge loan financings with respect to the
merger.
During the past two years, Chase Securities has provided from time to time,
and currently provides, numerous investment banking services to Big Flower,
Thomas H. Lee Equity Fund IV and Evercore Capital Partners and their respective
affiliates. The compensation to be received by Chase Securities in connection
with any of these relationships varies depending on the nature of the services
to be provided. In connection with the merger, Chase Securities is expected to
receive for its investment banking services to BFH Merger Corp. compensation in
the amount of $4,000,000 if the merger is consummated. This compensation forms
part of the fees and expenses of the merger disclosed on page 71 of the proxy
statement under the heading "Fees and Expenses of the Merger".
The first report is dated April 29, 1999 and was provided to Thomas H. Lee
Equity Fund IV by Chase Securities in anticipation of BFH Merger Corp.'s
engagement of Chase Securities in this transaction. This report was of a
preliminary nature and did not result in a valuation of Big Flower, but did
provide the following background information:
-- a general overview and description of Big Flower and its principal
operating units, including its current trading statistics and capital
structure;
-- earnings and EBITDA multiples of Big Flower based on illustrative share
prices and current debt levels; and
-- trading and transaction comparisons with entities in similar industries
to Big Flower's principal operating units.
The second report is dated May 12, 1999 and was provided after Chase
Securities was engaged as BFH Merger Corp.'s financial advisor in this
transaction. This report provided summaries of
24
<PAGE>
quantitative financial analyses with respect to Big Flower's primary operating
units, including preliminary discounted cash flow analysis and, with respect to
both Big Flower and its competitors, historical enterprise value/EBITDA multiple
analysis and historical Price/Earnings multiple analysis. Based on these
analyses, Chase Securities completed a segment-by-segment valuation analysis,
resulting in an aggregate valuation of Big Flower of $33.64-$40.02 per share.
The third report is dated September 28, 1999 and updated the previous
reports in light of certain material developments that could impact the
consummation of the merger, including deterioration in Big Flower's overall
results of operation, lack of liquidity in the high yield market, changes in Big
Flower's Internet/new media investment portfolio and changes in public
comparative valuations. As a result of these developments, Chase Securities
revised its earlier segment-by-segment valuation analysis, resulting in an
aggregate valuation of Big Flower of $28.97-$34.86 per share. In addition, Chase
Securities valued Big Flower based on Big Flower's historical trading multiples
of EBITDA and earnings per share to assess the unaffected trading level of Big
Flower's common stock--that is, the trading level excluding any change as a
result of Big Flower's announcement that it was exploring strategic
alternatives--and this analysis produced a valuation range of Big Flower of
$23.36-$27.17 per share.
Except with respect to the first report, Chase Securities produced the
reports in response to Thomas H. Lee Equity Fund IV's request. With respect to
the requested reports, Thomas H. Lee Equity Fund IV requested that Chase
Securities provide it with analyses, based on publicly available information,
and any other information known by Chase Securities and available to Thomas H.
Lee Equity Fund IV, that would be helpful in analyzing an investment in Big
Flower.
None of these reports involved any specific findings and recommendations by
Chase Securities with respect to the transaction which were relied upon by BFH
Merger Corp. or Thomas H. Lee Equity Fund IV in deciding to proceed with the
merger. They were designed as background or overview materials.
These reports will be filed with the Securities and Exchange Commission as
an exhibit to Amendment No. 3 to Schedule 13E-3, which is expected to be filed
with the Commission on November 3, 1999. A copy of this filing will be publicly
available on the Securities and Exchange Commission's Internet site, located at
http://www.sec.gov. In addition, these reports will be made available for
inspection and copying at the principal executive offices of Big Flower during
regular business hours by any interested equity securityholder of Big Flower or
its representative who has been so designated in writing.
In the final paragraph commencing on page 48 of the proxy statement, it is
noted that Thomas H. Lee Equity Fund IV filed a "Schedule 13E-3". A
Schedule 13E-3 is a filing made with the Securities and Exchange Commission
which is only required to be signed by an issuer of securities, here Big Flower,
or affiliates of the issuer. While Thomas H. Lee Equity Fund IV does not believe
that it was an affiliate of Big Flower at the time the Schedule 13E-3 was filed,
and therefore would not strictly be required to make this filing with the
Securities and Exchange Commission, Thomas H. Lee Equity Fund IV made the filing
because:
-- it was aware that the issue of whether or not an entity is an affiliate
of another entity can be difficult to determine,
-- in some instances in similar transactions persons similarly situated to
Thomas H. Lee Equity Fund IV have filed a Schedule 13E-3 with the
Securities and Exchange Commission, and
-- when complying with federal securities laws, it is prudent to take a
cautious approach.
25
<PAGE>
EVERCORE CAPITAL PARTNERS AND ITS AFFILIATES
Evercore Capital Partners, in forming its belief that the merger is fair to
Big Flower's unaffiliated stockholders, conducted an analysis to value Big
Flower on a going concern basis. In conducting its analysis, Evercore Capital
Partners used methodologies based on discounted cash flow and comparable
companies analyses to create a leveraged recapitalization model. Although this
leveraged recapitalization model was not constructed to determine a per share
value for Big Flower, but rather to determine whether, under a leveraged
operating structure, the proposed deal price would yield a return which was
acceptable to Evercore Capital Partners, per share values for Big Flower can be
implied from this analysis.
Prior to the signing of the original merger agreement on June 29, 1999, the
leveraged recapitalization model produced an implied valuation range of $31-$36
per share for Big Flower.
Subsequent to the signing of the original merger agreement, and as a result
of the deterioration in the financial performance of Big Flower, Evercore
Capital Partners performed a revised analysis of Big Flower. This revised
leveraged recapitalization model produced an implied valuation range for Big
Flower of $27-$34 per share.
The projections developed by Evercore Capital Partners were based on
projections provided by management, as disclosed in the section "Certain
Estimates of Future Operations and Other Information" on page 57 of the proxy
statement but discounted, on average, by approximately 5%. Evercore Capital
Partners discounted management's projections because of its cautious review of
management's projections as a financial buyer, including consideration of the
high degree of operating leverage that would be placed on the business, and its
own assessment of future events.
While the purposes of these analyses was not to determine what would be a
fair amount of consideration, from a financial point of view, to be paid by
Evercore Capital Partners to the unaffiliated stockholders of Big Flower, in the
view of Evercore Capital Partners, the results of these analyses support the
conclusion that the merger consideration is fair to unaffiliated stockholders of
Big Flower.
In the first paragraph on page 51 of the proxy statement, it is noted that
Evercore Capital Partners filed a "Schedule 13E-3". A Schedule 13E-3 is a filing
made with the Securities and Exchange Commission which is only required to be
signed by an issuer of securities, here Big Flower, or affiliates of the issuer.
While Evercore Capital Partners does not believe that it was an affiliate of Big
Flower at the time the Schedule 13E-3 was filed with the Securities and Exchange
Commission, Evercore Capital Partners made the filing because:
- it was aware that the issue of whether or not an entity is an affiliate of
another entity can be difficult to determine,
- in some instances in similar transactions persons similarly situated to
Evercore Capital Partners have filed a Schedule 13E-3 with the Securities
and Exchange Commission, and
- when complying with federal securities laws, it is prudent to take a
cautious approach.
ADDITIONAL INFORMATION REGARDING THE BIG FLOWER PRESS DEBT TENDER OFFER
On October 29, 1999, in connection with Big Flower Press Holdings, Inc.
offers to purchase and consent solicitations with respect to its outstanding
8 7/8% senior subordinated notes due 2007 and 8 5/8% senior subordinated notes
due 2008, Big Flower Press increased the consent payment payable to each holder
of the notes who validly consents to certain proposed amendments from $10.00 to
$20.00 for each $1,000 principal amount of the notes. Big Flower Press also
extended the date prior to which consents to the proposed amendments may be
revoked to the later of (i) the date on which the
26
<PAGE>
supplemental indentures for both series of the notes are executed and (ii)
November 15, 1999, unless extended.
ADDITIONAL INFORMATION REGARDING CERTAIN ESTIMATES OF FUTURE OPERATIONS AND
OTHER INFORMATION
One of the material assumptions underlying the estimates reflecting
management's views as to the possible future performance of Big Flower is that
Big Flower's future expenses will remain consistent with past practice other
than for certain cost savings, including a reduction in overhead costs. This
assumption was reflected in the projections included in the proxy statement and
the cost reductions in those projections did not result from the merger, but
rather were expected to result from elimination of duplication costs in Big
Flower's ongoing acquisitions.
The projections provided in the proxy statement differ from those that were
provided to Big Flower's financial advisors. This difference exists because the
projections provided in the proxy statement take into account Big Flower's
acquisition of Drake Automation Limited and J.J. Grace Incorporated and the
reduction in overhead costs resulting from various acquisitions, and also
include updated, actual results of operation for the time period since the
projections were provided to Big Flower's financial advisors.
The summary of the estimates as of October 11, 1999 that Big Flower included
in the proxy statement are set forth below:
FORECAST
FISCAL YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1999(1) 2000 2001 2002 2003 2004
(AMOUNTS IN 000'S) ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Sales.................. $1,879,445 $1,997,514 $2,117,760 $2,242,954 $2,369,788 $2,504,692
% Growth............... 0.3% 6.3% 6.0% 5.9% 5.7% 5.7%
EBITDA................. $ 260,244 $ 298,606 $ 328,671 $ 351,793 $ 373,433 $ 395,683
% Margin............... 13.8% 14.9% 15.5% 15.7% 15.8% 15.8%
EBIT................... $ 158,183 $ 192,050 $ 217,766 $ 239,650 $ 258,314 $ 279,631
% Margin............... 8.4% 9.6% 10.3% 10.7% 10.9% 11.2%
Net Income............. $ 44,290 $ 61,726 $ 82,896 $ 103,002 $ 122,966 $ 141,855
Basic EPS.............. $ 2.22 $ 2.61 $ 3.50 $ 4.35 $ 5.19 $ 5.99
Diluted EPS............ $ 1.94 $ 2.57 $ 3.27 $ 4.04 $ 4.81 $ 5.54
</TABLE>
- ------------------------
(1) Fiscal year 1999 estimates are pro forma for the Drake Automation Limited
acquisition completed July 1, 1999 and the J.J. Grace Incorporated
acquisition completed August 3, 1999.
The estimates, which were provided to Big Flower's financial advisors on a
confidential basis, are summarized below:
FORECAST
FISCAL YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
(AMOUNTS IN 000'S) 1999 2000 2001 2002 2003 2004
- ------------------ ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Sales.................. $1,922,565 $2,037,142 $2,157,761 $2,283,065 $2,410,483 $2,545,898
EBITDA................. $ 267,681 $ 294,919 $ 318,336 $ 339,930 $ 360,359 $ 381,716
EBIT................... $ 165,639 $ 192,859 $ 212,885 $ 232,985 $ 250,402 $ 270,316
Net Income............. $ 49,656 $ 64,750 $ 81,731 $ 100,006 $ 118,642 $ 135,432
Basic EPS.............. $ 2.49 $ 2.73 $ 3.44 $ 4.21 $ 4.99 $ 5.70
Diluted EPS............ $ 2.15 $ 2.69 $ 3.22 $ 3.92 $ 4.64 $ 5.28
</TABLE>
27
<PAGE>
Similarly, the projections provided to Big Flower's financial advisors
differ from those that were provided to third party bidders at the beginning of
Big Flower's sale process. This difference exists because the projections
provided to third party bidders only reflected results as of December 31, 1998
and did not take into account Big Flower's recent acquisitions. The estimates,
which were provided to the third party bidders on a confidential basis, are
summarized below:
FORECAST
FISCAL YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
(AMOUNTS IN 000'S) 1999 2000 2001 2002 2003 2004
- ------------------ ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Sales.................. $1,950,388 $2,070,703 $2,198,839 $2,327,300 $2,457,789 $2,596,500
EBITDA................. $ 274,140 $ 298,750 $ 324,061 $ 347,024 $ 368,408 $ 391,890
EBIT................... $ 170,975 $ 196,863 $ 217,782 $ 237,275 $ 252,479 $ 270,866
Net Income............. $ 52,000 $ 67,100 $ 83,856 $ 101,242 $ 117,674 $ 132,922
Basic EPS.............. $ 2.60 $ 2.81 $ 3.51 $ 4.24 $ 4.92 $ 5.56
Diluted EPS............ $ 2.23 $ 2.75 $ 3.26 $ 3.91 $ 4.52 $ 5.09
</TABLE>
In addition, because these estimates are inherently subject to significant
economic and competitive uncertainties and other contingencies beyond Big
Flower's control, there can be no assurance that these estimates will be
realized; actual results may be higher or lower than those estimated. Given the
fact that each year since 1994 Big Flower has acquired in excess of 5 entities
per year on average, any year over year comparison beyond 1999 is unlikely to
provide a realistic view of Big Flower's business or performance. Big Flower
does not generally publish its business plans and strategies or make external
disclosures of its anticipated financial position or results of operations.
Accordingly, Big Flower does not intend to, and specifically declines any
obligation to, update or otherwise revise the prospective financial information
to reflect circumstances existing since their preparation or to reflect the
occurrence of unanticipated events, even if any or all of the underlying
assumption s are shown to be in error. Also, Big Flower does not intend to, and
specifically declines any obligation to, update or revise the prospective
financial information to reflect changes in general economic or industry
conditions. Neither Big Flower's auditors nor any other independent accountants
have compiled, examined or performed any procedures with respect to information
or its achievability, and assume no responsibility for, and disclaim any
association with, this prospective financial information. Further, Thomas H. Lee
Equity Fund IV, Evercore Capital Partners and their affiliates were not involved
in the preparation of these estimates in any manner.
The proxy statement includes additional projections and a disclaimer to the
effect that none of Big Flower, Thomas H. Lee Company, Evercore Capital Partners
or their respective affiliates or Big Flower's independent auditors assume any
responsibility for the accuracy of the financial forecasts. Big Flower withdraws
its disclaimer of responsibility and instead Big Flower confirms that these
forecasts are the actual internal forecasts of Big Flower and were not prepared
by Thomas H. Lee Equity Fund IV, Evercore Capital Partners or their affiliates.
ADDITIONAL INFORMATION REGARDING LITIGATION CHALLENGING THE MERGER
As disclosed on page 71 of the proxy statement under the caption "Special
Factors--Litigation Challenging the Merger", there is pending in the Delaware
Court of Chancery a class action lawsuit arising out of the original merger
agreement. On October 29, 1999, the plaintiffs in that action filed a second
amended class action complaint relating to the merger agreement. The second
amended class action complaint also alleges that the proxy statement is
deficient because, among other things, it does not include adequate information
concerning effect of the earnings shortfall on future years' results, does not
quantify the differences between June and October projections, does not disclose
a range of values determination by Goldman Sachs or Berenson Minella or why such
a range was not calculated by them, does not disclose that Goldman Sachs did not
perform a discounted cash flow analysis with
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respect to the merger agreement or why they did not, does not disclose that
Goldman Sachs did not separately value Big Flower's Internet investments and
does not include an analysis of the reasoning and work performed by Berenson
Minella regarding the original merger agreement. On November 2, 1999, Big Flower
entered into an oral agreement in principle with representatives of the
plaintiffs in the shareholders litigation to settle the action by providing
additional disclosure relating to the transaction, which disclosure is contained
herein.
VOTING PROCEDURES
FOR STOCKHOLDERS WHO HAVE ALREADY VOTED: We have enclosed a second proxy
card (and a return envelope) for your use, in case you wish to change your vote.
If you have already voted your proxy and you do not wish to change your vote,
you do not need to return this second proxy card. If Big Flower receives the
enclosed proxy card, properly executed and dated, prior to the Big Flower
meeting, any proxy previously granted by you will be, without further action on
your part, revoked. Any proxy granted to Big Flower may be revoked before it is
exercised by submitting to Big Flower written notice of revocation or a properly
executed proxy of a later date, or by attending the Big Flower meeting and
electing to vote in person. Written notices of revocation and other
communications with respect to the revocation of proxies should be addressed to
Irene B. Fisher, Associate General Counsel, Big Flower Holdings, Inc., 3 East
54(th) Street, New York, New York 10022. All shares of Big Flower common stock
represented by valid proxies received pursuant to this solicitation, and not
revoked before they are exercised, will be voted in the manner specified by the
proxy. If no specification is made, the proxies will be voted in favor of the
matters to be voted upon at the Big Flower meeting, including approval of the
merger agreement.
IF YOU HAVE ALREADY RETURNED A PROXY CARD AND DO NOT WISH TO CHANGE YOUR
VOTE, NO FURTHER ACTION IS REQUIRED.
FOR STOCKHOLDERS WHO HAVE NOT ALREADY VOTED: Enclosed for your convenience
is a duplicate proxy card and a return envelope for your use. You may use either
the proxy card which was originally sent to you, or you may use the second proxy
card which is enclosed. You do not need to return both the original and this
second proxy card. If Big Flower receives the enclosed proxy card, property
executed and dated, prior to the Big Flower meeting, any proxy previously
granted by you will be, without further action, revoked. Any proxy granted to
Big Flower may be revoked before it is exercised, by submitting to Big Flower
written notice of revocation or a properly executed proxy of a later date, or by
attending the Big Flower meeting and electing to vote in person. Written notices
of revocation and other communications with respect to the revocation of proxies
should be addressed to Irene B. Fisher, Associate General Counsel, Big Flower
Holdings Inc., 3 East 54(th) Street, New York, New York 10022. All shares of
Common Stock represented by valid proxies received pursuant to this
solicitation, and not revoked before they are exercised, will be voted in the
manner specified by the proxy. If no specification is made, the proxies will be
voted in favor of the matters to be voted upon at the Big Flower meeting,
including approval of the merger agreement.
INFORMATION ABOUT VOTING. Stockholders of record may vote by signing,
dating and mailing the proxy card in the postage-paid envelope provided. If your
shares of Big Flower common stock are held by a bank, broker or other nominee,
you will receive instructions from them. Whichever of these methods you select
to transmit your instructions, the persons named on the enclosed proxy card will
vote your shares in accordance with your instructions. If you sign a proxy card
without giving specific voting instructions, your shares will be voted in favor
of the merger agreement, unless your shares of Big Flower common stock are held
by a bank, broker or other nominee, in which case your shares will not be voted.
The method by which you vote will not limit your right to vote at the Big
Flower meeting if you decide to attend in person. If your shares of common stock
are held by a bank, broker or other holder
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of record, you will need proof of ownership to be admitted to the Big Flower
meeting. A recent brokerage statement or letter from your bank or broker are
examples of proof of ownership. Even though proof of ownership will entitle you
to admission to the Big Flower meeting, if you are a beneficial owner of Big
Flower common stock and want to vote your shares in person, you must obtain a
completed and executed proxy in your name from your bank, broker or other holder
of record in order to vote at the Big Flower meeting.
If you have questions or require an additional copy of the Proxy Statement,
please contact Big Flower Holdings, Inc. at (212) 521-1600.
Dated November 3, 1999
New York, New York
By order of the Board of Directors,
/s/ Mark A. Angelson
Mark A. Angelson
Executive Vice President--Office of
the
Chairman, General Counsel and
Secretary
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