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<PAGE>
Contact: Lynne Reaves FOR IMMEDIATE RELEASE
(602) 808-8091
DEL WEBB SAYS J. F. SHEA DISTORTS FACTS
Bankers Suggest $300-$400 Million of Additional Equity
Needed for Acquisition
Phoenix, AZ (October 24, 2000) - Del Webb Corporation said today information
released by competitor J.F. Shea Co. to the media is a distortion of the facts
surrounding communications between the two companies, and in the Company's view
"misleading" to shareholders.
"We believe John Shea's letter to Del Webb chairman Phil Dion asserting that we
are impeding the process of bringing their $30 per share "offer" to our
shareholders mischaracterizes the facts and is simply not true," said LeRoy
Hanneman, president and CEO of Del Webb. "In our last letter we made two basic
requests for additional information to determine whether their offer was
credible. Shea has failed to respond to either. The written communications
between us will bear this out."
Hanneman cited the two fundamental requests for information Webb has asked of
Shea:
o To provide evidence of Shea's ability to finance its so-called
$30-per-share proposal, a price only slightly above Del Webb's book value
at September 30, 2000.
o To provide the assumptions on which Shea based its proposal, which they
say they need to "confirm" in their due diligence.
-more-
<PAGE>
22222 Del Webb Says J. F. Shea Distorts Facts 22222
--------------------------------------------------------------------------------
Hanneman said Shea's replies to Webb's requests have been general in nature and
not responsive to legitimate concerns. He emphasized that Credit Suisse First
Boston, Webb's financial advisers, completed a financial analysis based on the
limited information Shea had made available to date. Credit Suisse First Boston
determined that Shea would need substantial additional equity - $300 - $400
million -- to finance an acquisition of Webb and Shea has provided no
information on the source of the equity or willingness of any possible equity
participants to invest at this level. "Before our Board of Directors would even
consider such a proposal, we need evidence that such an acquisition is capable
of being financed and is not just a fishing expedition by a competitor,"
Hanneman said.
"For Shea to claim that `financing is not an issue' in light of the Credit
Suisse First Boston analysis is in our opinion highly unsatisfactory," said
Hanneman.
"We are today releasing the recent letters of communication to Shea requesting
information, as well as their responses," Hanneman said. "We also are releasing
the analysis by Credit Suisse First Boston. A careful reading will demonstrate
Shea has not even attempted to answer our questions, and their purported
evidence of financing from an outside source is not a commitment of any kind."
Del Webb Corporation, based in Phoenix, is the nation's leading builder of
active adult communities for people age 55 and older. The company operates 12
active adult communities in markets including Phoenix and Tucson, Ariz.; Las
Vegas, Nev; Palm Desert, Lincoln and Cloverdale, Calif.; Hilton Head, S.C.;
Georgetown, Texas; Ocala, Fla; and Chicago, Il. The company also builds family
and country club communities in Phoenix and Las Vegas.
-30-
<PAGE>
[Letterhead of J.F. Shea Co., Inc.]
October 25, 2000
Mr. Philip J. Dion
Del Webb Corp.
6001 North 24th Street
Phoenix, AZ 85016
Dear Mr. Dion:
We have received your letter dated October 18, 2000 and are puzzled by its
tone and content. Your statements in recently filed proxy materials and in the
press imply that a constructive dialogue is taking place between Del Webb and
J.F, Shea Co. This is in fact not the case, as you are well aware. Your approach
and repeated delays appear more intent on impeding the process of bringing our
$30 offer to your shareholders. It is time to drop the smokescreen.
We have publicly confirmed our offer to pay $30 per share for all of the
outstanding common stock of Del Webb Corp, subject to limited confirmatory due
diligence.
At our September 20, 2000 meeting, Phil, you said that there was "no
doubt" about our ability to finance this transaction. You were right. Nothing
has changed since then. Although we are a private, family-owned company, we
provided, at your request, documentation of financial capacity to consummate
this business combina tion. Financing is simply not an issue and your continuing
requests for more information will not change that fact.
We have provided the board with a list of only eight information items we
require to complete our limited due diligence. If given an opportunity, we will
complete this due diligence promptly. Our request is customary and should not
present any concern in the context of a constructive process. As for your
concerns about confidentiality, we sent you a signed confidentiality agreement
several weeks ago and are still awaiting a response.
We have stated as clearly as we can - we are willing to pay $30 per share
for Del Webb. Our offer represents a 55% premium over your stock price prior to
<PAGE>
Pacific Partners' first public announcement of its stock position and
intentions. We remain committed to pursuing a mutually beneficial business
combination of our companies. We stand ready to make our financial advisors
available for any con structive dialogue with your advisors. In fact, we have
instructed our advisors to call and arrange a meeting first thing on Wednesday
morning, October 25. Further, I respectfully request the board to hear our
proposal in person, grant us access to limited confirmatory due diligence and
give your shareholders the opportunity to avail themselves of our best offer.
Sincerely,
/s/ John F. Shea
------------------------
John F. Shea
cc: Board of Directors
Robertson C. Jones
Frank M. Placenti
2
<PAGE>
[LETTERHEAD OF DEL WEBB CORPORATION]
October 18, 2000
Mr. John F. Shea
J.F. Shea Co., Inc.
655 Brea Canyon Road
Walnut, CA 91788-0489
Dear Mr. Shea:
Each of the members of the Board of Directors have reviewed your October 10
letter and an analysis from our financial adviser, and have commented on those
materials and a draft of this letter. To a person they support the approach
outlined below.
Your Ability to Finance the Proposed Transaction
You provided December 31, 1999 audited financial statements of J. F. Shea Co.,
Inc. and a letter from Wells Fargo to support your statement that you "have the
capability to acquire Del Webb's equity and refinance the company's outstanding
debt."
No indication of the willingness or ability of family members or others to
financially support the proposal was provided, so we have assumed you would
intend to rely solely on J.F.Shea Co., Inc.
Financial Analysis
We immediately forwarded the Wells Fargo letter and the financial statements to
our financial advisers at Credit Suisse First Boston for their review and
advice. They have indicated that, based on their knowledge of the debt markets
and their analysis of the information provided:
o Your company has lower revenues than Del Webb and already has substantial
debt. The pro forma combined company would not have cash flow sufficient
to cover the substantial additional debt involved in an cash acquisition
at $30 a share.
o The high yield market is extremely selective at this time, making
leveraged buyouts more difficult, particularly for cyclical industries
such as homebuilding.
<PAGE>
Mr. John F. Shea
October 18, 2000
Page 2
o Financing an all-cash purchase of Del Webb by J. F. Shea Co, Inc. at $30
per share would be extremely difficult in today's markets, due to the
following pro forma combined financial metrics and their implications for
completion of any transaction:
o Debt to book capital would be approximately 70%, one of the highest
ratios for any single B homebuilder; the leverage would hinder the
flexibility to capitalize on future opportunities.
o EBITDA/Interest would be approximately 2:1, assuming a rate of 10%
on the new debt. This metric would be one of the lowest in the
industry.
o Debt/EBITDA would be 4.5:1, also over leveraged.
o To make the combination financially feasible, substantial additional
equity capital from sources other than the J. F. Shea Co., Inc
assets would be necessary. As much as $300-$400 million in outside
equity would be required.
The Wells Fargo Letter
We and our advisers have also reviewed the Wells Fargo letter, and offer the
following observations:
o It is clearly not a commitment of any kind. This is expressly stated in
the letter.
o Rather, it is nothing more than an expression of interest in structuring a
syndicated debt package.
o It is conditioned on Wells Fargo's satisfaction with the terms of the
transaction, capital structure, market conditions and satisfactory due
diligence of an undefined nature.
If you wish to discuss these observations further, we would be pleased to make
our financial advisers available to you or your advisers. If you wish to
supplement the information provided, we would promptly respond to such
information.
Due Diligence Requests
Your response to the concerns expressed by our Board in my letter of October 4
is bewildering. You have repeatedly indicated that only "limited, confirmatory"
<PAGE>
Mr. John F. Shea
October 18, 2000
Page 3
due diligence was needed to make your offer firm, and stated that your diligence
to date "has allowed Shea to preliminarily ascertain a value for the Company."
Now, you provide a list of requests that lead us to further question the
credibility of your offer and the extent of your investigation through public
due diligence. More specifically:
o In order to set the initial $30 price you suggest, you must have done
significant financial modeling and made a number of assumptions about our
operations. We asked that you provide the assumptions so we could address
making the appropriate information available. You provided no assumptions.
o A number of your requests seek publicly available information. Information
about Del Webb in SEC reports, our website, court records, real estate
recordings, departments of real estate, county and city records, and at
our sales offices are readily available to the public, and would permit
substantial analysis. Your capable advisers can gather this information
with little effort. Please demonstrate your serious commitment by showing
the assumptions resulting from these investigations.
o As you know, certain information you requested is highly sensitive
competitive data. Given the effort you have demonstrated to date, we
wonder whether your "offer" of $30 (our book value at June 30, 2001 should
exceed $30) is an attempt to obtain a "free look" at the records and
business model of the leader of a market segment you are trying to enter.
Conclusion
When you provide reasonable assumptions and demonstrate your ability to finance
a transaction at your proposed purchase price, we will respond to your due
diligence request and evaluate the financial terms of your offer.
Sincerely,
/s/ Philip J. Dion
------------------------
PJD/cjk
cc: Members of the Board of Directors
<PAGE>
[Letterhead of J.F. Shea Co., Inc.]
October 10, 2000
Mr. Phillip J. Dion
Del Webb Corp.
6001 North 24th Street
Phoenix, AZ 85016
Dear Mr. Dion:
In response to Mr. Dion's letter dated October 4, 2000, I am pleased to address
the expressed concerns regarding our offer to purchase all of the outstanding
common shares of Del Webb for $30 per share, subject to limited confirmatory due
diligence. Each of the issues raised in Mr. Dion's letter is addressed below.
1. We require confirmation concerning certain aspects of the company's finan
cial position, current status of projects, contingent or potential
liabilities, and transactional liabilities. Specifically, we expect that
our due diligence requirement can be satisfied by access to the following
information listed. We have segregated our list into two groups. "Group 1"
items will allow us to confirm our value. Access to the "Group 2"
materials may be deferred temporarily if you prefer, but reviewing the
information may allow us to increase our offer. As you may recall, we have
previously executed a confidentiality agreement that was included in the
package of materials sent to the board of directors on September 25, 2000.
Group 1
o Projected monthly cash flow analysis by product and project through
project completion, including major cost categories and underlying
assumptions
o Contracts for all optioned land
o Schedule of all costs triggered by a "change of control"
transaction, both contingent and non-contingent, including payments
to all SERP participants. Please provide detail of any amounts
already included as liabilities on the balance sheet
o Details on any current or potential litigation, insurance coverages,
unin sured claims, proposed or pending acquisitions or sales of
assets, and off balance sheet liabilities.
<PAGE>
Group 2
o Current sales backlog report by project showing units in backlog,
pricing per plan and estimated dates of completion and delivery
o Copy of all purchase and/or development obligations related to land
owned either in the form of municipal development conditions or
Webb's obligation as buyer in the purchase and sale agreements
o A schedule reflecting, by job description and location, the
company's compensation structure including employee benefits
o List of all properties and other assets owned by the Company with a
schedule of the debt outstanding on such mortgages
2. In order to give you further assurance on our ability to finance this
transaction, I enclosed the 1999 audited financial statements for J.F.
Shea Co., Inc., as well as an executed letter from Wells Fargo Bank
expressing their desire and our joint ability to execute this transaction
as currently proposed. As you can see from this information, we have a
very strong financial position, affording us the capability to acquire Del
Webb's equity and refinance the company's outstanding debt.
3. By separate letter to Mr. Dion, dated October 6, 2000, I have addressed
his assertions as to my characterization of our prior meetings.
I believe the information above is responsive to your request. If you require
any further materials or have any additional concerns, please do not hesitate to
contact me and I will respond promptly to your requests.
I sincerely appreciate the board's careful consideration of our offer. We
continue to believe our proposal is in the best interests of Del Webb
shareholders and employees and we remain committed to pursuing a mutually
beneficial business combination of our companies.
Sincerely,
/s/ John F. Shea
--------------------
John F. Shea
JFS:slc
Enclosure
<PAGE>
[Letterhead of Wells Fargo]
October 10, 2000
VIA FACSIMILE
(909) 594-0935
Mr. John F. Shea
CEO and President
J.F. Shea Company, Inc.
655 Brea Canyon Road
Walnut, CA 91789
Re: Del Webb Acquisition
Dear John:
As you know, we have had numerous discussions and strategy sessions with
senior officers of J.F. Shea Co. relative to the potential acquisition of Del
Webb, Inc. While this potential transaction has not yet been agreed to by Del
Webb, and with the full understanding that our interest is in all ways subject
to our concurrence with the salient terms of the ultimate transaction a whole
(for example, the purchase price, overall capital structure, organization
structure, etc.), this letter will confirm Wells Fargo's interest and ability to
structure a comprehensive, syndicated debt package to finance this acquisition,
including, as necessary, the refinancing of Del Webb's publicly traded debt.
You understand that this is not a commitment to lend. Such a commitment
could be made only after the terms of the deal are known and analyzed and
satisfac tory due diligence has been accomplished. This would be a syndicated
transaction and would be further subject to normal issues relative to that
process, including the capital markets at the time of commitment and closing.
John, based on our role as sole arranger, and underwriter for J.F. Shea in
the previous two significant acquisitions (Mission Viejo Co. and UDC), we are
confident
<PAGE>
that this is a transaction that could be satisfactorily structured and closed in
a timely manner.
We look forward to working with you on this possible acquisition.
Sincerely,
/s/
-----------------------------------
2
<PAGE>
[LETTERHEAD OF CREDIT SUISSE FIRST BOSTON CORPORATION]
October 13, 2000
As requested by Del Webb Corporation ("Del Webb") management, we have reviewed
the above referenced information with respect to the ability of J. F. Shea Co.,
Inc. ("J. F. Shea") to complete the acquisition of Del Webb Corporation
contemplated by them.
Overview
We believe that based on the December 31, 1999 audited financials provided to
you by J.F. Shea a cash purchase of Del Webb at $30 per share by J.F. Shea
should not be financeable given current capital market conditions without a
significant equity contribution.
We also have reviewed the letter provided by Wells Fargo and note that it does
not in any way represent a commitment to provide such financing.
Discussion of Credit Statistics
At $30 per share, a cash purchase of Webb without an equity infusion would
result in the following credit statistics: Net debt/ EBITDA of 4.5x and net
debt/ book capitalization of 70%. EBITDA/ Interest would be approximately 2.1x
assuming the new debt is financed at a blended rate of 10%. We believe that this
entity, based on these credit statistics and the cyclical nature of the
homebuilding industry, would be rated weak single B.
Moreover, in determining the credit statistics, we treated the $341 million of
marketable securities on J.F. Shea's books at December 31, 1999 as cash
equivalents and assumed that the fair market value of these securities remained
unchanged; given recent stock market volatility, this assumption would have to
be confirmed. If the value of these securities has declined, the credit
statistics above would be even weaker.
In addition, these pro forma credit statistics are weaker than almost all of the
homebuilders with public debt outstanding and are particularly troublesome given
the cyclicality of the homebuilding industry. In fact, these credit statistics
would be viewed as weak even in the context of an attempted LBO of a diversified
industrial company, which generally can support higher debt levels than a more
cyclical homebuilder.
Existing High-Yield Debt Market; Bank Market
The high yield new issue market today is very difficult and almost non-existent
for single B credits. This is reflected in the fact that the average yield on a
single B credit for the week ended October 5 has risen to approx 13 percent from
12.3
<PAGE>
Page 2
percent the week of September 7. Rising treasury rates and the recent problems
in the telecom sector have caused continued deterioration in this market. For
example, last week a major financial institution stated that it may take the
unusual step of exercising a "material adverse change" clause to walk away from
an existing financing commitment.
The bank market also has become more difficult. Volume is down approximately 20%
over last year and non-performing loans and default rates are up significantly.
The bank market is experiencing a flight to quality. As a result, the appetite
for larger size transactions is almost exclusively for double B credits.
Conclusion
In conclusion, we believe that for J.F. Shea to finance the cash purchase of Del
Webb, it would need to make an equity infusion (in addition to the equity on its
books) of $300-$400 million.
Of course, we are available to discuss our perspectives on the situation with
you or representatives of J. F. Shea in more detail.
<PAGE>
In addition to the foregoing press release and attachments, the following
material was sent to Institutional Shareholders Services:
[Letterhead of J.F. Shea Co., Inc.]
October 23, 2000
Mr. Philip J. Dion
Del Webb Corp.
6001 North 24th Street
Phoenix, AZ 85016
Dear Mr. Dion:
We have received your letter dated October 18, 2000 and are puzzled by its
tone and content. Your statements in recently filed proxy materials and in the
press imply that a constructive dialogue is taking place between Del Webb and
J.F, Shea Co. This is in fact not the case, as you are well aware. Your approach
and repeated delays appear more intent on impeding the process of bringing our
$30 offer to your shareholders. It is time to drop the smokescreen.
We have publicly confirmed our offer to pay $30 per share for all of the
outstanding common stock of Del Webb Corp, subject to limited confirmatory due
diligence.
At our September 20, 2000 meeting, Phil, you said that there was "no
doubt" about our ability to finance this transaction. You were right. Nothing
has changed since then. Although we are a private, family-owned company, we
provided, at your request, documentation of financial capacity to consummate
this business combina tion. Financing is simply not an issue and your continuing
requests for more information will not change that fact.
We have provided the board with a list of only eight information items we
require to complete our limited due diligence. If given an opportunity, we will
complete this due diligence promptly. Our request is customary and should not
present any concern in the context of a constructive process. As for your
concerns about confidentiality, we sent you a signed confidentiality agreement
several weeks ago and are still awaiting a response.
We have stated as clearly as we can - we are willing to pay $30 per share
for Del Webb. Our offer represents a 55% premium over your stock price prior to
<PAGE>
Pacific Partners' first public announcement of its stock position and
intentions. We remain committed to pursuing a mutually beneficial business
combination of our companies. We stand ready to make our financial advisors
available for any con structive dialogue with your advisors. In fact, we have
instructed our advisors to call and arrange a meeting first thing on Wednesday
morning, October 25. Further, I respectfully request the board to hear our
proposal in person, grant us access to limited confirmatory due diligence and
give your shareholders the opportunity to avail themselves of our best offer.
Sincerely,
/s/ John F. Shea
------------------------
John F. Shea
cc: Board of Directors
Robertson C. Jones
Frank M. Placenti
2
<PAGE>
[LETTERHEAD OF DEL WEBB CORPORATION]
October 18, 2000
Mr. John F. Shea
J.F. Shea Co., Inc.
655 Brea Canyon Road
Walnut, CA 91788-0489
Dear Mr. Shea:
Each of the members of the Board of Directors have reviewed your October 10
letter and an analysis from our financial adviser, and have commented on those
materials and a draft of this letter. To a person they support the approach
outlined below.
Your Ability to Finance the Proposed Transaction
You provided December 31, 1999 audited financial statements of J. F. Shea Co.,
Inc. and a letter from Wells Fargo to support your statement that you "have the
capability to acquire Del Webb's equity and refinance the company's outstanding
debt."
No indication of the willingness or ability of family members or others to
financially support the proposal was provided, so we have assumed you would
intend to rely solely on J.F.Shea Co., Inc.
Financial Analysis
We immediately forwarded the Wells Fargo letter and the financial statements to
our financial advisers at Credit Suisse First Boston for their review and
advice. They have indicated that, based on their knowledge of the debt markets
and their analysis of the information provided:
o Your company has lower revenues than Del Webb and already has substantial
debt. The pro forma combined company would not have cash flow sufficient
to cover the substantial additional debt involved in an cash acquisition
at $30 a share.
o The high yield market is extremely selective at this time, making
leveraged buyouts more difficult, particularly for cyclical industries
such as homebuilding.
<PAGE>
Mr. John F. Shea
October 18, 2000
Page 2
o Financing an all-cash purchase of Del Webb by J. F. Shea Co, Inc. at $30
per share would be extremely difficult in today's markets, due to the
following pro forma combined financial metrics and their implications for
completion of any transaction:
o Debt to book capital would be approximately 70%, one of the highest
ratios for any single B homebuilder; the leverage would hinder the
flexibility to capitalize on future opportunities.
o EBITDA/Interest would be approximately 2:1, assuming a rate of 10%
on the new debt. This metric would be one of the lowest in the
industry.
o Debt/EBITDA would be 4.5:1, also over leveraged.
o To make the combination financially feasible, substantial additional
equity capital from sources other than the J. F. Shea Co., Inc
assets would be necessary. As much as $300-$400 million in outside
equity would be required.
The Wells Fargo Letter
We and our advisers have also reviewed the Wells Fargo letter, and offer the
following observations:
o It is clearly not a commitment of any kind. This is expressly stated in
the letter.
o Rather, it is nothing more than an expression of interest in structuring a
syndicated debt package.
o It is conditioned on Wells Fargo's satisfaction with the terms of the
transaction, capital structure, market conditions and satisfactory due
diligence of an undefined nature.
If you wish to discuss these observations further, we would be pleased to make
our financial advisers available to you or your advisers. If you wish to
supplement the information provided, we would promptly respond to such
information.
Due Diligence Requests
Your response to the concerns expressed by our Board in my letter of October 4
is bewildering. You have repeatedly indicated that only "limited, confirmatory"
<PAGE>
Mr. John F. Shea
October 18, 2000
Page 3
due diligence was needed to make your offer firm, and stated that your diligence
to date "has allowed Shea to preliminarily ascertain a value for the Company."
Now, you provide a list of requests that lead us to further question the
credibility of your offer and the extent of your investigation through public
due diligence. More specifically:
o In order to set the initial $30 price you suggest, you must have done
significant financial modeling and made a number of assumptions about our
operations. We asked that you provide the assumptions so we could address
making the appropriate information available. You provided no assumptions.
o A number of your requests seek publicly available information. Information
about Del Webb in SEC reports, our website, court records, real estate
recordings, departments of real estate, county and city records, and at
our sales offices are readily available to the public, and would permit
substantial analysis. Your capable advisers can gather this information
with little effort. Please demonstrate your serious commitment by showing
the assumptions resulting from these investigations.
o As you know, certain information you requested is highly sensitive
competitive data. Given the effort you have demonstrated to date, we
wonder whether your "offer" of $30 (our book value at June 30, 2001 should
exceed $30) is an attempt to obtain a "free look" at the records and
business model of the leader of a market segment you are trying to enter.
Conclusion
When you provide reasonable assumptions and demonstrate your ability to finance
a transaction at your proposed purchase price, we will respond to your due
diligence request and evaluate the financial terms of your offer.
Sincerely,
/s/ Philip J. Dion
------------------------
PJD/cjk
cc: Members of the Board of Directors
<PAGE>
[Letterhead of J.F. Shea Co., Inc.]
October 10, 2000
Mr. Phillip J. Dion
Del Webb Corp.
6001 North 24th Street
Phoenix, AZ 85016
Dear Mr. Dion:
In response to Mr. Dion's letter dated October 4, 2000, I am pleased to address
the expressed concerns regarding our offer to purchase all of the outstanding
common shares of Del Webb for $30 per share, subject to limited confirmatory due
diligence. Each of the issues raised in Mr. Dion's letter is addressed below.
1. We require confirmation concerning certain aspects of the company's finan
cial position, current status of projects, contingent or potential
liabilities, and transactional liabilities. Specifically, we expect that
our due diligence requirement can be satisfied by access to the following
information listed. We have segregated our list into two groups. "Group 1"
items will allow us to confirm our value. Access to the "Group 2"
materials may be deferred temporarily if you prefer, but reviewing the
information may allow us to increase our offer. As you may recall, we have
previously executed a confidentiality agreement that was included in the
package of materials sent to the board of directors on September 25, 2000.
Group 1
o Projected monthly cash flow analysis by product and project through
project completion, including major cost categories and underlying
assumptions
o Contracts for all optioned land
o Schedule of all costs triggered by a "change of control"
transaction, both contingent and non-contingent, including payments
to all SERP participants. Please provide detail of any amounts
already included as liabilities on the balance sheet
o Details on any current or potential litigation, insurance coverages,
unin sured claims, proposed or pending acquisitions or sales of
assets, and off balance sheet liabilities.
<PAGE>
Group 2
o Current sales backlog report by project showing units in backlog,
pricing per plan and estimated dates of completion and delivery
o Copy of all purchase and/or development obligations related to land
owned either in the form of municipal development conditions or
Webb's obligation as buyer in the purchase and sale agreements
o A schedule reflecting, by job description and location, the
company's compensation structure including employee benefits
o List of all properties and other assets owned by the Company with a
schedule of the debt outstanding on such mortgages
2. In order to give you further assurance on our ability to finance this
transaction, I enclosed the 1999 audited financial statements for J.F.
Seah Co., Inc., as well as an executed letter from Wells Fargo Bank
expressing their desire and our joint ability to execute this transaction
as currently proposed. As you can see from this information, we have a
very strong financial position, affording us the capability to acquire Del
Webb's equity and refinance the company's outstanding debt.
3. By separate letter to Mr. Dion, dated October 6, 2000, I have addressed
his assertions as to my characterization of our prior meetings.
I believe the information above is responsive to your request. If you require
any further materials or have any additional concerns, please do not hesitate to
contact me and I will respond promptly to your requests.
I sincerely appreciate the board's careful consideration of our offer. We
continue to believe our proposal is in the best interests of Del Webb
shareholders and employees and we remain committed to pursuing a mutually
beneficial business combination of our companies.
Sincerely,
/s/ John F. Shea
--------------------
John F. Shea
JFS:slc
Enclosure
<PAGE>
[Letterhead of Wells Fargo]
October 10, 2000
VIA FACSIMILE
(909) 594-0935
Mr. John F. Shea
CEO and President
J.F. Shea Company, Inc.
655 Brea Canyon Road
Walnut, CA 91789
Re: Del Webb Acquisition
Dear John:
As you know, we have had numerous discussions and strategy sessions with
senior officers of J.F. Shea Co. relative to the potential acquisition of Del
Webb, Inc. While this potential transaction has not yet been agreed to by Del
Webb, and with the full understanding that our interest is in all ways subject
to our concurrence with the salient terms of the ultimate transaction a whole
(for example, the purchase price, overall capital structure, organization
structure, etc.), this letter will confirm Wells Fargo's interest and ability to
structure a comprehensive, syndicated debt package to finance this acquisition,
including, as necessary, the refinancing of Del Webb's publicly traded debt.
You understand that this is not a commitment to lend. Such a commitment
could be made only after the terms of the deal are known and analyzed and
satisfac tory due diligence has been accomplished. This would be a syndicated
transaction and would be further subject to normal issues relative to that
process, including the capital markets at the time of commitment and closing.
John, based on our role as sole arranger, and underwriter for J.F. Shea in
the previous two significant acquisitions (Mission Viejo Co. and UDC), we are
confident
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that this is a transaction that could be satisfactorily structured and closed in
a timely manner.
We look forward to working with you on this possible acquisition.
Sincerely,
/s/
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2
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October 4, 2000
VIA FEDERAL EXPRESS
Mr. John F. Shea
J.F. Shea Co., Inc.
P.O. Box 489
655 Brea Canyon Road
Walnut, CA 91788-0489
Dear Mr. Shea:
The Board of Directors of Del Webb Corporation has carefully considered your
requests for a meeting and for access to confidential, non-public information in
order to conduct limited confirmatory due diligence.
The unanimous consensus of the Board is that more specific information is
required before it could decide whether to grant either request or evaluate the
financial terms of any proposal from you. In particular, the Board would like to
understand the specific assumptions you have made that you would like to
"confirm" in order for you to make a non-contingent offer.
In addition, in order for the Board to be assured that any such proposal is
firm, more specificity as to your ability to finance any proposed transaction is
required. In particular, and without limitation, the Board would find it helpful
to review the audited financial statements of J.F. Shea Co., Inc. and any other
entity or person that may be financing the transaction, along with other
documentation evidencing your ability to obtain adequate financing to refinance
Del Webb's outstanding debt. Statements about an unspecified amount of money
available under your existing credit line, your relationship with a commercial
bank and the personal wherewithal of individuals without any specificity will
not suffice.
Once the Board has an understanding of these items, it will be in a better
position to evaluate your requests. As we have stated publicly, the Board is
prepared to give careful consideration to any viable and complete proposal that
it receives. At this point, however, absent further information from you, we do
not believe there is anything that could be seriously evaluated.
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Mr. John F. Shea
October 4, 2000
Page 2
On a personal note, I am extremely disappointed in the mischaracterization of
both the factual content and the tone of our conversation last week as contained
in your letter of September 28, 2000 to the members of our Board. First, as I
indicated to you then and on prior occasions, the views I expressed during our
conversation were my own and not a formal company position. Further, I also
asked you whether you had any additional information regarding your proposal
that you wished to communicate to me or our Board and you indicated that you did
not. I then stated my view, based upon the lack of further specificity, that I
personally would not be prepared to support your access to private company
records or a meeting with our Board. Finally, I also clearly indicated that I
was prepared to (and in fact did) review with the Board all of your requests and
communications, and would have done so whether or not you had written your
misleading letter.
Sincerely,
/s/ Philip J. Dion
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PJD/cjk
cc: Del Webb Board of Directors
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[LETTERHEAD OF CREDIT SUISSE FIRST BOSTON CORPORATION]
October 13, 2000
As requested by Del Webb Corporation ("Del Webb") management, we have reviewed
the above referenced information with respect to the ability of J. F. Shea Co.,
Inc. ("J. F. Shea") to complete the acquisition of Del Webb Corporation
contemplated by them.
Overview
We believe that based on the December 31, 1999 audited financials provided to
you by J.F. Shea a cash purchase of Del Webb at $30 per share by J.F. Shea
should not be financeable given current capital market conditions without a
significant equity contribution.
We also have reviewed the letter provided by Wells Fargo and note that it does
not in any way represent a commitment to provide such financing.
Discussion of Credit Statistics
At $30 per share, a cash purchase of Webb without an equity infusion would
result in the following credit statistics: Net debt/ EBITDA of 4.5x and net
debt/ book capitalization of 70%. EBITDA/ Interest would be approximately 2.1x
assuming the new debt is financed at a blended rate of 10%. We believe that this
entity, based on these credit statistics and the cyclical nature of the
homebuilding industry, would be rated weak single B.
Moreover, in determining the credit statistics, we treated the $341 million of
marketable securities on J.F. Shea's books at December 31, 1999 as cash
equivalents and assumed that the fair market value of these securities remained
unchanged; given recent stock market volatility, this assumption would have to
be confirmed. If the value of these securities has declined, the credit
statistics above would be even weaker.
In addition, these pro forma credit statistics are weaker than almost all of the
homebuilders with public debt outstanding and are particularly troublesome given
the cyclicality of the homebuilding industry. In fact, these credit statistics
would be viewed as weak even in the context of an attempted LBO of a diversified
industrial company, which generally can support higher debt levels than a more
cyclical homebuilder.
Existing High-Yield Debt Market; Bank Market
The high yield new issue market today is very difficult and almost non-existent
for single B credits. This is reflected in the fact that the average yield on a
single B credit for the week ended October 5 has risen to approx 13 percent from
12.3
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percent the week of September 7. Rising treasury rates and the recent problems
in the telecom sector have caused continued deterioration in this market. For
example, last week a major financial institution stated that it may take the
unusual step of exercising a "material adverse change" clause to walk away from
an existing financing commitment.
The bank market also has become more difficult. Volume is down approximately 20%
over last year and non-performing loans and default rates are up significantly.
The bank market is experiencing a flight to quality. As a result, the appetite
for larger size transactions is almost exclusively for double B credits.
Conclusion
In conclusion, we believe that for J.F. Shea to finance the cash purchase of Del
Webb, it would need to make an equity infusion (in addition to the equity on its
books) of $300-$400 million.
Of course, we are available to discuss our perspectives on the situation with
you or representatives of J. F. Shea in more detail.
