June 19, 1998
Dear Fellow Shareholders,
Your Board of Directors has met and considered the offer from Blackacre Capital
Management LLC, an affiliate of Cerberus Partners, to purchase J.C. Nichols
Company for $70 cash per share. For the reasons described below, your Board
continues to believe that the Highwoods merger serves the best interests of J.C.
Nichols shareholders.
Blackacre's initial proposal indicated that it was prepared to proceed with an
offer, subject to several conditions including due diligence. In a subsequent
June 19 letter, however, Blackacre stated that it would not commence the due
diligence it says it requires until the Highwoods merger agreement is terminated
without triggering breakup fees in excess of $2.5 million. This cannot happen
until after the vote on the Highwoods merger. In our review, this "offer" is no
different from the Intell "offer". Should the Highwoods offer be voted down,
Blackacre would be under no obligation to make an offer -- at any price.
We also have very serious legal concerns about the structure of the transaction
intended to provide tax benefits to certain long-term shareholders who have
indicated they do not want cash. We are advised that the structure Blackacre
contemplates should not be attempted without IRS approval. IRS approval is
uncertain. Not obtaining it could result in serious penalties and obtaining IRS
approval could take a long time. You will recall that it took almost two years
to receive IRS approval for the final allocation of ESOP settlement shares.
In addition, one possible result of the structure Blackacre proposes could be
that complete distribution to all ESOP participants would not be made in the
near term -- a result we do not believe would be in the best interests of the
participants as they would be left with an interest in a private company
controlled by a New York based investment fund.
We also note that Blackacre states that it currently intends to exercise
so-called dissenter's rights in the Highwoods transaction, which Blackacre
suggests could reduce the amount of cash available to other shareholders by
approximately 36%. However, it is important to note that holders of
approximately 29% of the outstanding stock have already informed the Company
that they intend to elect stock for their J.C. Nichols shares. This would mean
that anyone making a 100% cash election would receive at least 45% cash, even if
Blackacre exercises dissenters rights. Of course, it is possible that other
shareholders could exercise dissenter's rights, and that shareholders, including
Blackacre, could change their election before 5:00 p.m. on June 26.
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HIGHWOODS OFFER PROVIDES MANY SIGNIFICANT BENEFITS FOR J.C.
NICHOLS SHAREHOLDERS
Your Board continues to believe that the Highwoods merger is in the best
interests of all shareholders, including ESOP participants. We believe that the
Highwoods merger can be completed quickly and J.C. Nichols shareholders will
receive value for their shares immediately upon closing. In its initial letter,
Blackacre selectively recited some of the risk factors your Board considered as
it recommended the Highwoods offer. Blackacre, however, also conveniently
ignored the many benefits of the Highwoods offer that remain in effect:
o a significant premium for your J.C. Nichols shares; 83% over the
closing price of our stock just six months before we entered into the
merger agreement and 30% over the price three months before that date;
o the financial condition and business reputation of Highwoods and the
ability of Highwoods to complete the merger quickly;
o the absence of any conditions in the merger agreement that could impede
consummation of the Merger; the support for the Merger from members of
the Nichols family, who collectively own 26% of the outstanding common
stock; and the satisfaction expressed by INTRUST at the time the
general terms of the Merger were first presented on November 25, 1997
(although INTRUST has not expressed whether it currently supports the
Merger);
o the ability of JCN shareholders to participate in the future growth of
Highwoods. Highwoods is a company whose significant resources and low
cost of capital would provide a competitive advantage and enable rapid
implementation of JCN's long-term growth plans, which the Board
believes will benefit JCN shareholders who receive Highwoods common
stock;
o the fact that JCN is not in a position to pay dividends , while
Highwoods pays a regular quarterly dividend, currently in excess of 6%
annually;
o the Merger is structured to qualify as a tax-free reorganization.
YOUR BOARD OF DIRECTORS URGES YOU TO VOTE IN FAVOR OF THE
HIGHWOODS MERGER
Your Board of Directors has considered these matters carefully. We remain
confident that the Highwoods merger serves the best interests of all J.C.
Nichols shareholders and can be accomplished quickly.
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Remember: Your vote is important; shares not voted are counted against the
merger. We have enclosed an extra proxy card for your convenience. Unless you've
already done so, we urge you to vote this white proxy card in favor of the
Highwoods merger today. For ESOP participants, we have enclosed a blue Voting
Instruction Form. We urge you to instruct the Trustee to vote your shares in
favor of the merger, unless you have already done so.
Thank you for your support,
William Hoskins
Chairman of the Board of Directors
