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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to
SCHEDULE 13E-3
Rule 13e-3 Transaction Statement
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
ST. JOHN KNITS, INC.
(Name of the Issuer)
ST. JOHN KNITS, INC.
ST. JOHN KNITS INTERNATIONAL, INCORPORATED
SJKACQUISITION, INC.
PEARL ACQUISITION CORP.
ROBERT E. GRAY
MARIE GRAY
KELLY A. GRAY
VESTAR/GRAY INVESTORS LLC
VESTAR CAPITAL PARTNERS III, L.P.
VESTAR ASSOCIATES III, L.P.
VESTAR ASSOCIATES CORPORATION III
(Name of Person(s) Filing Statement)
COMMON STOCK, WITHOUT PAR VALUE
(Title of Class of Securities)
790289 102
(CUSIP Number of Class of Securities)
<TABLE>
<S> <C> <C>
Robert E. Gray Roger G. Ruppert James P. Kelley
Chief Executive Officer Senior Vice President-Finance Managing Director
and Chairman of the Board and Chief Financial Officer Pearl Acquisition Corp.
St. John Knits International,
St. John Knits, Inc. Incorporated 245 Park Avenue
17422 Derian Avenue 17422 Derian Avenue 41st Floor
Irvine, California 92614 Irvine, California 92614 New York, New York 10167
(949) 863-1171 (949) 863-1171 (212) 949-6500
</TABLE>
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of Person(s) Filing Statement)
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Copies to:
<TABLE>
<S> <C> <C>
David A. Krinsky, Esq. Brian J. McCarthy, Esq. Philip T. Ruegger III, Esq.
O'Melveny & Myers LLP Skadden, Arps, Slate, Meagher & Flom, LLP Simpson Thacher & Bartlett
610 Newport Center Drive, 17th Floor 300 South Grand Avenue, Suite 3400 425 Lexington Avenue
Newport Beach, California 92660-6429 Los Angeles, California 90071 New York, New York 10017-3954
(949) 760-9600 (213) 687-5000 (212) 455-2000
</TABLE>
This statement is filed in connection with (check the appropriate box):
a.[X] 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 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: [X]
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CALCULATION OF REGISTRATION FEE
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Transaction Valuation* Amount of Filing Fee
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$511,447,460 $102,289
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[_]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.
* For purposes of calculation of the filing fee only. The "Transaction
Valuation" amount referred to above is the sum of (i) the product of
16,581,482, the number of outstanding shares of common stock, without par
value (the "Shares"), of St. John Knits, Inc. as of April 26, 1999 and $30,
the cash price per Share to be paid in the Mergers (as defined herein), and
(ii) cash consideration of $14,003,000 to be paid for options being
surrendered in connection with the Mergers. In accordance with Rule 0-11
under the Securities Exchange Act of 1934, the filing fee is determined by
multiplying the amount calculated pursuant to the preceding sentence by
1/50th of one percent.
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This Rule 13e-3 Transaction Statement (the "Statement") of St. John Knits,
Inc., a California corporation (the "Company"), St. John Knits International,
Incorporated, a Delaware corporation ("SJKI"), Pearl Acquisition Corp., a
Delaware corporation and direct wholly owned subsidiary of Vestar/Gray
Investors LLC ("Pearl"), SJKAcquisition, Inc., a California corporation and
direct wholly owned subsidiary of SJKI ("SJKAcquisition"), Robert E. Gray,
Marie Gray, Kelly A. Gray, Vestar/Gray Investors LLC, Vestar Capital Partners
III, L.P., Vestar Associates III, L.P. and Vestar Associates Corporation III
relates to an Agreement and Plan of Merger, dated as of February 2, 1999 (the
"Merger Agreement"), among the Company, SJKI, Pearl and SJKAcquisition,
pursuant to which (a) SJKAcquisition will merge with and into the Company (the
"Reorganization Merger"), with the result being that the Company will become a
wholly owned subsidiary of SJKI and (b) Pearl will merge with and into SJKI
(the "Acquisition Merger" and, together with the Reorganization Merger, the
"Mergers"), with SJKI as the surviving corporation. As a result of the
Mergers, SJKI will be 7% owned by existing shareholders of the Company, other
than the Grays, and 93% owned by Vestar/Gray Investors LLC. Vestar/Gray
Investors LLC is a Delaware limited liability company and is wholly owned by
Vestar Capital Partners III, L.P., a Delaware limited partnership. Vestar
Associates III, L.P., a Delaware limited partnership, is the sole general
partner of Vestar Capital Partners III, L.P., and Vestar Associates
Corporation III, a Delaware corporation, is the sole general partner of Vestar
Associates III, L.P. Prior to the Reorganization Merger, Robert E. Gray,
Marie Gray and Kelly A. Gray (the "Grays") will contribute their shares of the
Company's common stock to Vestar/Gray Investors LLC, and Vestar/Gray Investors
LLC will become approximately 16% owned by the Grays. The Merger Agreement and
the Mergers have already been approved by the Boards of Directors and the
stockholders of all the parties to the Merger Agreement, other than the
shareholders of the Company. The Statement is intended to satisfy the
reporting requirements of Section 13(e) of the Securities Exchange Act of
1934, as amended (the "Act"). A copy of the Merger Agreement filed by the
Company as Appendix A to the Company's Proxy Statement-Prospectus (the "Proxy
Statement-Prospectus") is filed as Exhibit (c)(1) to the Statement.
The cross-reference sheet below is being supplied pursuant to General
Instruction F to Schedule 13E-3 and shows the location in the Proxy Statement-
Prospectus of the information required to be included in response to the items
of this Statement. The information in the Proxy Statement-Prospectus,
including all appendices thereto, is hereby expressly incorporated herein by
reference and the responses to each item in this Statement are qualified in
their entirety by the information contained in the Proxy Statement-Prospectus.
1
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CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
Item in
Schedule 13E-3 Where Located in Proxy Statement-Prospectus
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<C> <S>
Item 1(a) "Summary--St. John and St. John Knits International" and
"Information About St. John and St. John Knits International"
Item 1(b) "Summary--The Special Meeting" and "The Special Meeting--Record
Date and Voting Rights"
Item 1(c) "Summary--Market Price and Dividend Information"
Item 1(d) "Summary--Market Price and Dividend Information," "Risk
Factors--We Do Not Expect to Pay Dividends" and "The Mergers--
Merger Financing"
Item 1(e) *
Item 1(f) "Purchases of Shares"
Item 2(a)-(d), (g) "Summary--St. John and St. John Knits International,"
"Information About St. John and St. John Knits International--
Management and Additional Information" and "Information
Concerning Pearl, Vestar and the Grays"
Item 2(e)-(f) *
Item 3(a)(1) *
Item 3(a)(2)-(b) "Summary--Reasons for the Mergers; Recommendations to
Shareholders," "Special Factors--Background of the Mergers" and
"--Reasons for the Mergers; Recommendations to Shareholders"
Item 4(a) "Summary--The Mergers," "--What You Will Receive in the
Mergers," "Special Factors--Purpose and Structure for the
Mergers," "The Mergers" and "The Merger Agreement"
Item 4(b) "Summary--Reasons for the Mergers; Recommendations to
Shareholders," "--Interests of the Grays That Are Different
from Yours," "Special Factors--Background of the Mergers," "--
Reasons for the Mergers; Recommendations to Shareholders," "--
Interests of the Grays and Other Officers and Directors of St.
John in the Mergers; Conflicts of Interests," "--Effects of the
Mergers; Operations of St. John After the Mergers; New York
Stock Exchange Delisting," "The Voting Agreement," "The
Stockholders' Agreement" and "The Limited Liability Company
Agreement"
Item 5(a)-(b) *
Item 5(c) "Summary--Reasons for the Mergers; Recommendations to
Shareholders," "--Interests of the Grays That Are Different
from Yours," "Special Factors--Reasons for the Mergers;
Recommendations to Shareholders," "--Interests of the Grays and
Other Officers and Directors of St. John in the Mergers;
Conflicts of Interests" and "The Mergers--Board of Directors
and Officers of St. John Knits International Following the
Mergers"
Item 5(d) "Summary--Merger Financing," "--Market Price and Dividend
Information," "--Selected Historical Condensed Financial Data
and Selected Pro Forma Condensed Consolidated Financial Data
(Unaudited)," "Risk Factors--We Do Not Expect to Pay
Dividends," "Special Factors--Effects of the Mergers;
Operations of St. John After the Mergers; New York Stock
Exchange Delisting," "The Mergers--Merger Financing," "Selected
Historical Condensed Financial Data and Pro Forma Condensed
Consolidated Financial Statements (Unaudited)" and "Comparison
of the Rights of Holders of St. John Common Stock and St. John
Knits International Common Stock--Dividends and Repurchases of
Shares"
</TABLE>
2
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<TABLE>
<C> <S>
Item 5(e) "Special Factors--Purpose and Structure for the Mergers"
Item 5(f)-(g) "Summary--New York Stock Exchange Delisting," "Risk Factors--
Our Common Stock Will Not Be Listed, Which May Make it More
Difficult for You to Sell Shares" and "Special Factors--Effects
of the Mergers; Operations of St. John After the Mergers; New
York Stock Exchange Delisting"
Item 6(a)-(c) "Summary--Merger Financing," "--Selected Historical Condensed
Financial Data and Selected Pro Forma Condensed Consolidated
Financial Data (Unaudited)," "The Mergers--Merger Financing"
Item 6(d) *
Item 7(a)-(c) "Summary--Reasons for the Mergers; Recommendations to
Shareholders," "Special Factors--Background of the Mergers,"
"--Purpose and Structure for the Mergers" and "--Reasons for
the Mergers; Recommendations to Shareholders"
Item 7(d) "Summary--Material Federal Income Tax Consequences," "--New
York Stock Exchange Delisting," "Special Factors--Effects of
the Mergers; Operations of St. John After the Mergers; New York
Stock Exchange Delisting" and "--Material Federal Income Tax
Consequences"
Item 8(a) "Summary--Reasons for the Mergers; Recommendations to
Shareholders," "--Procedural and Substantive Fairness,"
"Special Factors--Background of the Mergers" and "--Reasons for
the Mergers; Recommendations to Shareholders"
Item 8(b) "Summary--Reasons for the Mergers; Recommendations to
Shareholders," "--Opinions of Financial Advisors," "Special
Factors--Reasons for the Mergers; Recommendations to
Shareholders" and "--Fairness Opinions of Financial Advisors"
Item 8(c) "Special Factors--Purpose and Structure for the Mergers"
Item 8(d)-(e) "Summary--Reasons for the Mergers; Recommendations to
Shareholders" and "Special Factors--Reasons for the Mergers;
Recommendations to Shareholders"
Item 8(f) *
Item 9(a)-(c) "Summary--Reasons for the Mergers; Recommendations to
Shareholders," "--Opinions of Financial Advisors," "Special
Factors--Background of the Mergers" and "--Reasons for the
Mergers; Recommendations to Shareholders" and "--Fairness
Opinions of Financial Advisors"
Item 10(a) "Summary--Percentage of Shares Held By Directors and Executive
Officers," "The Special Meeting--Record Date and Voting Rights"
and "Security Ownership of Five Percent Beneficial Owners and
Management"
Item 10(b) *
Item 11 "The Voting Agreement," "The Stockholders' Agreement" and "The
Limited Liability Company Agreement"
Item 12(a)-(b) "Summary--Interests of the Grays That Are Different from
Yours," "--The Special Meeting," "Special Factors--Interests of
the Grays and Other Officers and Directors of St. John in the
Mergers; Conflicts of Interests" and "The Special Meeting--
Record Date and Voting Rights"
Item 13(a) "Summary--Dissenters' Rights" and "The Mergers--Dissenters'
Rights of Appraisal"
Item 13(b)-(c) *
</TABLE>
3
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<TABLE>
<C> <S>
Item 14(a) Company's Annual Report on Form 10-K and Form 10-K/A for
the fiscal year ended November 1, 1998, and "Summary--
Selected Historical Condensed Financial Data and Selected
Pro Forma Condensed Consolidated Financial Data
(Unaudited)"
Item 14(b) "Summary--Selected Historical Condensed Financial Data and
Selected Pro Forma Condensed Consolidated Financial Data
(Unaudited)" and "The Mergers--Pro Forma Condensed
Consolidated Financial Statements (Unaudited)"
Item 15(a)-(b) "The Mergers--Merger Financing," "The Special Meeting--
Proxies" and "--Solicitation of Proxies"
Item 16 *
**Item 17(a)(1) Letter dated February 2, 1999, from The Chase Manhattan
Bank and Chase Securities Inc. to Vestar Capital Partners
III, L.P.
**Item 17(a)(2) Letter dated February 2, 1999, from Chase Securities Inc.
to Vestar Capital Partners III, L.P.
**Item 17(b)(1) Fairness Opinion of Merrill Lynch, Pierce, Fenner & Smith
Incorporated (included as Appendix B to the Proxy
Statement-Prospectus)
**Item 17(b)(2) Fairness Opinion of Wasserstein Perella & Co., Inc.
(included as Appendix C to the Proxy Statement-Prospectus)
Item 17(b)(3) Presentation Materials prepared by Merrill Lynch, Pierce,
Fenner & Smith Incorporated in connection with providing
its opinion to the Special Committee on February 2, 1999
Item 17(b)(4) Presentation Materials prepared by Wasserstein Perella &
Co., Inc. in connection with providing its opinion to the
Special Committee on February 2, 1999
**Item 17(c)(1) Agreement and Plan of Merger, dated as of February 2, 1999,
by and among the Company, SJKI, Pearl and SJKAcquisition
(included as Appendix A to the Proxy Statement-Prospectus)
**Item 17(c)(2) Voting Agreement, dated as of February 2, 1999, among
Vestar Capital Partners III, L.P., Vestar/Gray Investors
LLC and the Grays (included as Appendix E to the Proxy
Statement-Prospectus)
****Item 17(c)(3) Form of Amended and Restated Limited Liability Company
Agreement of Vestar/Gray Investors LLC
****Item 17(c)(4) Form of Stockholders' Agreement among SJKI, Vestar/Gray
Investors LLC, Vestar Capital Partners III, L.P., the Grays
and other management stockholders
***Item 17(d) Proxy Statement-Prospectus filed by St. John Knits
International, Incorporated on April 28, 1999 and
incorporated herein by reference.
**Item 17(e) Summary of Appraisal Rights (included as Appendix D to the
Proxy Statement-Prospectus)
Item 17(f) *
</TABLE>
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* The Item is inapplicable or the answer thereto is in the negative.
** Filed previously.
*** Incorporated herein by reference from the Proxy Statement-Prospectus which
forms a part of Amendment No. 1 to the Registration Statement on Form S-4
of St. John Knits International, Incorporated filed April 28, 1999.
****To be filed by amendment.
4
<PAGE>
RULE 13E-3 TRANSACTION STATEMENT
<TABLE>
<C> <S>
Item 1. Issuer and Class of Security Subject to the Transaction
(a) The information set forth in the Proxy Statement-Prospectus under
the captions "Summary--St. John and St. John Knits International"
and "Information About St. John and St. John Knits International"
is incorporated herein by reference.
(b) The information set forth in the Proxy Statement-Prospectus under
the captions "Summary--The Special Meeting" and "The Special
Meeting--Record Date and Voting Rights" is incorporated herein by
reference.
(c) The information set forth in the Proxy Statement-Prospectus under
the caption "Summary-- Market Price and Dividend Information" is
incorporated herein by reference.
(d) The information set forth in the Proxy Statement-Prospectus under
the captions "Summary-- Market Price and Dividend Information,"
"Risk Factors--We Do Not Expect to Pay Dividends" and "The
Mergers--Merger Financing" is incorporated herein by reference.
(e) Not applicable.
(f) The information set forth in the Proxy Statement-Prospectus under
the caption "Purchases of Shares" is incorporated herein by
reference.
Item 2. Identity and Background
This Statement is filed jointly by the Company, the issuer of the
securities which are the subject of the Rule 13e-3 transaction,
SJKI, SJKAcquisition, Pearl, Robert E. Gray, Marie Gray, Kelly A.
Gray, Vestar/Gray Investors LLC, Vestar Capital Partners III,
L.P., Vestar Associates III, L.P. and Vestar Associates
Corporation III. The Company and SJKAcquisition are each
corporations organized under the laws of the state of California.
SJKI is a corporation organized under the laws of the state of
Delaware. Pearl is a corporation organized under the laws of the
state of Delaware. Vestar/Gray Investors LLC is a limited
liability company organized under the laws of the state of
Delaware. Vestar Capital Partners III, L.P. and Vestar Associates
III, L.P. are each limited partnerships organized under the laws
of the state of Delaware. Vestar Associates Corporation III is a
corporation organized under the laws of the state of Delaware.
SJKI and SJKAcquisition are each affiliates of the Company. The
Grays are executive officers and directors of the Company. The
principal business of the Company is designing, manufacturing and
selling women's apparel. SJKI does not conduct any business other
than holding the capital stock of SJKAcquisition. SJKAcquisition
has been organized for the purpose of consummating the
Reorganization Merger and has no other business activities. Pearl
has been organized for the purpose of consummating the
Acquisition Merger and has no other business activities.
Vestar/Gray Investors LLC has also been organized for the purpose
of consummating the Acquisition Merger and has no other business
activities. The principal business of each of Vestar Capital
Partners III, L.P., Vestar Associates III, L.P. and Vestar
Associates Corporation III is investing in securities. The
address of the Company, SJKI, SJKAcquisition, Robert E. Gray,
Marie Gray and Kelly A. Gray is c/o St. John Knits, Inc., 17422
Derian Avenue, Irvine, California 92614. The address of Pearl,
Vestar/Gray Investors LLC, Vestar Capital Partners III, L.P.,
Vestar Associates III, L.P. and Vestar Associates Corporation III
is c/o Vestar Capital Partners III, L.P., 1225 17th Street,
Suite 1660, Denver, Colorado 80202.
(a)-(d), (g) The information set forth in the Proxy Statement-Prospectus under
the captions "Summary--St. John and St. John Knits
International," "Information About St. John and St. John Knits
International--Management and Additional Information" and
"Information Concerning Pearl, Vestar and the Grays" is
incorporated herein by reference.
(e)-(f) None of the Company, SJKI, Pearl, SJKAcquisition, Robert E. Gray,
Marie Gray, Kelly A. Gray, Vestar/Gray Investors LLC, Vestar
Capital Partners III, L.P., Vestar Associates III, L.P., Vestar
Associates Corporation III, any executive officer, director or
person controlling the Company, SJKI, Pearl, SJKAcquisition,
Vestar/Gray Investors LLC, Vestar Capital Partners III, L.P.,
Vestar Associates III, L.P. or Vestar Associates Corporation III
has during the last five years (i) been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors)
or
</TABLE>
5
<PAGE>
(ii) been 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 future violations of, or prohibiting activities subject to,
federal or state securities laws or finding any violation of such
laws.
<TABLE>
<C> <S>
Item 3. Past Contacts, Transactions or Negotiations
(a)(1) Not applicable.
(a)(2)-(b) The information set forth in the Proxy Statement-Prospectus under
captions "Summary--Reasons for the Mergers; Recommendations to
Shareholders," "Special Factors--Background of the Mergers" and "--
Reasons for the Mergers; Recommendations to Shareholders" is
incorporated herein by reference.
Item 4. Terms of the Transaction
(a) The information set forth in the Proxy Statement-Prospectus under
the captions "Summary--The Mergers," "--What You Will Receive in
the Mergers," "Special Factors--Purpose and Structure for the
Mergers," "The Mergers" and "The Merger Agreement" is incorporated
herein by reference.
(b) The information set forth in the Proxy Statement-Prospectus under
the captions "Summary--Reasons for the Mergers; Recommendations to
Shareholders," "--Interests of the Grays That Are Different from
Yours," "Special Factors--Background of the Mergers," "--Reasons
for the Mergers; Recommendations to Shareholders," "--Interests of
the Grays and Other Officers and Directors of St. John in the
Mergers; Conflicts of Interests," "--Effects of the Mergers;
Operations of St. John After the Mergers; New York Stock Exchange
Delisting," "The Voting Agreement," "The Stockholders' Agreement"
and "The Limited Liability Company Agreement" is incorporated
herein by reference.
Item 5. Plans or Proposals of the Issuer or Affiliate
(a)-(b) Not applicable.
(c) The information set forth in the Proxy Statement-Prospectus under
the captions "Summary--Reasons for the Mergers; Recommendations to
Shareholders," "--Interests of the Grays That Are Different from
Yours," "Special Factors--Reasons for the Mergers; Recommendations
to Shareholders," "--Interests of the Grays and Other Officers and
Directors of St. John in the Merger; Conflicts of Interests" and
"The Mergers--Board of Directors and Officers of St. John Knits
International Following the Mergers" is incorporated herein by
reference.
(d) The information set forth in the Proxy Statement-Prospectus under
the captions "Summary--Merger Financing," --Market Price and
Dividend Information," "--Selected Historical Condensed Financial
Data and Selected Pro Forma Condensed Consolidated Financial Data
(Unaudited)," "Risk Factors--We Do Not Expect to Pay Dividends,"
"Special Factors--Effects of the Mergers; Operations of St. John
After the Mergers; New York Stock Exchange Delisting," "The
Mergers--Merger Financing," "--Pro Forma Condensed Consolidated
Financial Statements (Unaudited)" and "Comparison of the Rights of
Holders of St. John Common Stock and St. John Knits International
Common Stock--Dividends and Repurchases of Shares" is incorporated
herein by reference.
(e) The information set forth in the Proxy Statement-Prospectus under
the caption "Special Factors--Purpose and Structure of the Mergers"
is incorporated herein by reference.
(f)-(g) The information set forth in the Proxy Statement-Prospectus under
the captions "Summary--New York Stock Exchange Delisting," "Risk
Factors--Our Common Stock Will Not Be Listed, Which May Make it
More Difficult for You to Sell Shares" and "Special Factors--
Effects of the Mergers; Operations of St. John after the Mergers;
New York Stock Exchange Delisting" is incorporated herein by
reference.
</TABLE>
6
<PAGE>
<TABLE>
<C> <S>
Item 6. Source and Amounts of Funds or Other Consideration
(a)-(c) The information set forth in the Proxy Statement-Prospectus under the
captions "Summary--Merger Financing," "--Selected Historical
Condensed Financial Data and Selected Pro Forma Condensed
Consolidated Financial Data (Unaudited)," "The Mergers--Merger
Financing" and "--Pro Forma Condensed Consolidated Financial
Statements (Unaudited)" is incorporated herein by reference.
(d) Not applicable.
Item 7. Purpose(s), Alternatives, Reasons and Effects
(a)-(c) The information set forth in the Proxy Statement-Prospectus under the
captions "Summary--Reasons for the Mergers; Recommendations to
Shareholders," "Special Factors--Background of the Mergers," "--
Purpose and Structure for the Mergers" and "--Reasons for the
Mergers; Recommendations to Shareholders" is incorporated herein by
reference.
(d) The information set forth in the Proxy Statement-Prospectus under the
captions "Summary--Material Federal Income Tax Consequences," "--New
York Stock Exchange Delisting," "Special Factors--Effects of the
Mergers; Operations of St. John After the Mergers; New York Stock
Exchange Delisting" and "--Material Federal Income Tax Consequences"
is incorporated herein by reference.
Item 8. Fairness of the Transaction
(a) The information set forth in the Proxy Statement-Prospectus under the
captions "Summary--Reasons for the Mergers; Recommendations to
Shareholders," "--Procedural and Substantive Fairness," "Special
Factors--Background of the Mergers" and "--Reasons for the Mergers;
Recommendations to Shareholders" is incorporated herein by reference.
(b) The information set forth in the Proxy Statement-Prospectus under the
captions "Summary--Reasons for the Mergers; Recommendations to
Shareholders," "--Opinions of Financial Advisors," "Special Factors--
Reasons for the Mergers; Recommendations to Shareholders" and "--
Fairness Opinions of Financial Advisors" is incorporated herein by
reference.
(c) The information set forth in the Proxy Statement-Prospectus under the
caption "Special Factors--Purpose and Structure for the Mergers" is
incorporated herein by reference.
(d)-(e) The information set forth in the Proxy Statement-Prospectus under the
captions "Summary--Reasons for the Mergers; Recommendations to
Shareholders" and "Special Factors--Reasons for the Mergers;
Recommendations to Shareholders" is incorporated herein by reference.
(f) Not applicable.
Item 9. Reports, Opinions, Appraisals and Certain Negotiations
(a)-(c) The information set forth in the Proxy Statement-Prospectus under the
captions "Summary--Reasons for the Mergers; Recommendations to
Shareholders," "--Opinions of Financial Advisors," "Special Factors--
Background of the Mergers," "--Reasons for the Mergers;
Recommendations to Shareholders" and "--Fairness Opinions of
Financial Advisors" is incorporated herein by reference.
Item 10. Interest in Securities of the Issuer
(a) The information set forth in the Proxy Statement-Prospectus under the
captions "Summary--Percentage of Shares Held By Directors and
Executive Officers," "The Voting Agreement," "The Special Meeting--
Record Date and Voting Rights" and "Security Ownership of Five
Percent Beneficial Owners and Management" is incorporated herein by
reference.
(b) None.
</TABLE>
7
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<TABLE>
<C> <S>
Item 11. Contracts, Arrangements or Understandings with Respect to the
Issuer's Securities
The information set forth in the Proxy Statement-Prospectus under the
captions "The Voting Agreement," "The Stockholders' Agreement," and
"The Limited Liability Company Agreement," is incorporated herein by
reference.
Item 12. Present Intention and Recommendation of Certain Persons with Regard
to the Transaction
(a)-(b) The information set forth in the Proxy Statement-Prospectus under the
captions "Summary--Interests of the Grays That Are Different from
Yours," "--The Special Meeting," "Special Factors--Interests of the
Grays and Other Officers and Directors of St. John in the Mergers;
Conflicts of Interests" and "The Special Meeting--Record Date and
Voting Rights" is incorporated herein by reference.
Item 13. Other Provisions of the Transaction
(a) The information set forth in the Proxy Statement-Prospectus under the
captions "Summary-- Dissenters' Rights" and "The Mergers--Dissenters'
Rights of Appraisal" is incorporated herein by reference.
(b)-(c) Not applicable.
Item 14. Financial Information
(a) The information set forth in the Company's Annual Report on Form 10-K
and Form 10-K/A for the fiscal year ended November 1, 1998 and in the
Proxy Statement-Prospectus under the caption "Summary--Selected
Historical Condensed Financial Data and Selected Pro Forma Condensed
Consolidated Financial Data (Unaudited)" is incorporated herein by
reference.
(b) The information set forth in the Proxy Statement-Prospectus under the
captions "Summary--Selected Historical Condensed Financial Data and
Selected Pro Forma Condensed Consolidated Financial Data (Unaudited)"
and "The Mergers--Pro Forma Condensed Consolidated Financial
Statements (Unaudited)" is incorporated herein by reference.
Item 15. Persons and Assets Employed, Retained or Utilized
(a)-(b) The information set forth in the Proxy Statement-Prospectus under the
captions "The Mergers--Merger Financing," "The Special Meeting--
Proxies" and "--Solicitation of Proxies" is incorporated herein by
reference.
Item 16. Additional Information
Not applicable.
Item 17. Material to Be Filed as Exhibits
*(a)(1) Letter dated February 2, 1999, from The Chase Manhattan Bank and
Chase Securities Inc. to Vestar Capital Partners III, L.P.
*(a)(2) Letter dated February 2, 1999, from Chase Securities Inc. to Vestar
Capital Partners III, L.P.
*(b)(1) Fairness Opinion of Merrill Lynch, Pierce, Fenner & Smith
Incorporated (incorporated herein by reference to Appendix B to the
Proxy Statement-Prospectus).
*(b)(2) Fairness Opinion of Wasserstein Perella & Co., Inc. (incorporated
herein by reference to Appendix C to the Proxy Statement-Prospectus).
(b)(3) Presentation Materials prepared by Merrill Lynch, Pierce, Fenner &
Smith Incorporated in connection with providing its opinion to the
Special Committee on February 2, 1999.
(b)(4) Presentation Materials prepared by Wasserstein Perella & Co., Inc. in
connection with providing its opinion to the Special Committee on
February 2, 1999.
</TABLE>
8
<PAGE>
<TABLE>
<C> <S>
*(c)(1) Agreement and Plan of Merger, dated as of February 2, 1999, by and
among the Company, SJKI, Pearl and SJKAcquisition (incorporated
herein by reference to Appendix A to the Proxy Statement-Prospectus).
*(c)(2) Voting Agreement, dated as of February 2, 1999, among Vestar Capital
Partners III, L.P., Vestar/Gray Investors LLC and the Grays
(incorporated herein by reference to Appendix E to the Proxy
Statement-Prospectus).
**(c)(3) Form of Amended and Restated Limited Liability Company Agreement of
Vestar/Gray Investors LLC (to be filed in a subsequent amendment).
**(c)(4) Form of Stockholders' Agreement among SJKI, Vestar/Gray Investors
LLC, Vestar Capital Partners III, L.P., the Grays and other
management stockholders (to be filed in a subsequent amendment).
(d) Proxy Statement-Prospectus (filed by SJKI on April 28, 1999 and
incorporated herein by reference).
*(e) Summary of Appraisal Rights (incorporated by reference to Appendix D
to the Proxy Statement-Prospectus).
(f) Not applicable.
</TABLE>
- --------
* Filed previously.
** To be filed by amendment.
9
<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.
PEARL ACQUISITION CORP.
/s/ James P. Kelley
By:
___________________________________
James P. Kelley
Name:
Title:
ST. JOHN KNITS, INC.
/s/ Bob Gray
By:
___________________________________
Bob Gray
Name:
Title:
ST. JOHN KNITS INTERNATIONAL,
INCORPORATED
/s/ Bob Gray
By:
___________________________________
Bob Gray
Name:
Title:
SJKACQUISITION, INC.
/s/ Bob Gray
By:
___________________________________
Bob Gray
Name:
Title:
BOB GRAY
/s/ Bob Gray
By:
___________________________________
Bob Gray
Name:
MARIE GRAY
/s/ Marie Gray
By:
___________________________________
Marie Gray
Name:
KELLY A. GRAY
/s/ Kelly A. Gray
By:
___________________________________
Kelly A. Gray
Name:
10
<PAGE>
VESTAR/GRAY INVESTORS LLC
By:
/s/ James P. Kelley
_______________________________
Name: James P. Kelley
Title:
VESTAR CAPITAL PARTNERS III, L.P.
By its General Partner:
Vestar Associates III, L.P.
By its General Partner:
Vestar Associates Corporation III
By:
/s/ James P. Kelley
_______________________________
Name: James P.Kelley
Title:
VESTAR ASSOCIATES III, L.P.
By its General Partner:
Vestar Associates Corporation III
By:
/s/ James P. Kelley
_______________________________
Name: James P. Kelley
Title:
VESTAR ASSOCIATES CORPORATION III
By:
/s/ James P. Kelley
_______________________________
Name: James P. Kelley
Title:
April 27, 1999
11
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------- -------
<C> <S>
*(a)(1) Letter dated February 2, 1999, from The Chase Manhattan Bank and
Chase Securities Inc. to Vestar Capital Partners III, L.P.
*(a)(2) Letter dated February 2, 1999, from Chase Securities Inc. to Vestar
Capital Partners III, L.P.
*(b)(1) Fairness Opinion of Merrill Lynch, Pierce, Fenner & Smith
Incorporated (incorporated herein by reference to Appendix B to the
Proxy Statement-Prospectus).
*(b)(2) Fairness Opinion of Wasserstein Perella & Co., Inc. (incorporated
herein by reference to Appendix C to the Proxy Statement-Prospectus).
(b)(3) Presentation Materials prepared by Merrill Lynch, Pierce, Fenner &
Smith Incorporated in connection with providing its opinion to the
Special Committee on February 2, 1999.
(b)(4) Presentation Materials prepared by Wasserstein Perella & Co., Inc. in
connection with providing its opinion to the Special Committee on
February 2, 1999.
*(c)(1) Agreement and Plan of Merger, dated as of February 2, 1999, by and
among the Company, SJKI, Pearl and SJKAcquisition (incorporated
herein by reference to Appendix A to the Proxy Statement-Prospectus).
*(c)(2) Voting Agreement, dated as of February 2, 1999, among Vestar Capital
Partners III, L.P., Vestar/Gray Investors LLC and the Grays
(incorporated herein by reference to Appendix E to the Proxy
Statement-Prospectus).
**(c)(3) Form of Amended and Restated Limited Liability Company Agreement of
Vestar/Gray Investors LLC (to be filed in a subsequent amendment).
**(c)(4) Form of Stockholders' Agreement among SJKI, Vestar/Gray Investors
LLC, Vestar Capital Partners III, L.P., the Grays and other
management stockholders (to be filed in a subsequent amendment).
(d) Proxy Statement-Prospectus (filed by SJKI on April 28, 1999 and
incorporated herein by reference).
*(e) Summary of Appraisal Rights (incorporated by reference to Appendix D
to the Proxy Statement-Prospectus).
(f) Not applicable.
</TABLE>
- --------
* Filed previously.
** To be filed by amendment.
12
<PAGE>
EXHIBIT (b)(3)
Strictly Confidential
Presentation to the
Independent Committee of the
Board of Directors of:
[LOGO OF ST. JOHN KNITS, INC. APPEARS HERE]
February 2, 1999
<PAGE>
Table of Contents
A. Overview of Proposed Transaction
B. Valuation Analysis
<PAGE>
Overview of Proposed Transaction
<PAGE>
Overview of Proposed Transaction
Key Financial Terms
Structure: Reorganization Merger and Acquisition Merger (see page
A-2 for details)
Consideration: Total Consideration = $30.00 per share (premium of
36.8%)/(a)/
Cash/Stock Election:
- Aggregate number of shares to be exchanged for
Parent Common Stock will be 457,000 shares
(approximately 3.0%)
- Aggregate number of shares to be exchanged for cash
will be 97.0%
Based on the number of shares of Parent Common Stock
that the shareholders elect to receive, certain
shareholders may be subject to pro ration amongst the
stock and cash component. As such, assuming full pro
ration, each shareholder will receive $29.10 in cash
and $0.90 in Parent Common Stock
Tax Treatment: Taxable to shareholders
Accounting Treatment: Recapitalization accounting
- -----------------------
(a) Represents an implied premium to the pre-announcement closing SJK stock
price of $21.94 on December 8, 1998.
A-1
<PAGE>
Overview of Proposed Transaction
Summary of Structure
[CHART DEPICTING STRUCTURE OF PROPOSED TRANSACTION APPEARS HERE IN THE PRINTED
MATERIAL]
1. St. John Knits, Inc., a California corporation ("Company"), forms a new
subsidiary, St. John Knits International, Inc., a Delaware and Barbados
corporation ("Parent")
2. Parent forms a new subsidiary, SJK Acquisition, Inc., a California
corporation ("Merger Sub")
3. Merger Sub merges with and into Company, with Company being the surviving
corporation. Each share of Company Common Stock is converted into one share
of Parent Common Stock, resulting in Company becoming a wholly owned
subsidiary of Parent
4. The Gray Family exchanges all of their equity interests in the Company for
cash and equity interests in Vestar/Gray Investors, LLC ("Vestar/Gray")
(approximately 15.9%)
5. Pearl Acquisition Corp., a Delaware corporation ("Acquisition"), a newly
formed corporation owned by Vestar/Gray merges with and into Parent, with
Parent being the surviving corporation. Each holder of Parent Common Stock
(formerly Company Common Stock) has the right to elect to retain Parent
Common Stock or to receive cash, subject to pro ration
A-2
<PAGE>
Overview of Proposed Transaction
Proposed Structure and Financing - Sources and Uses/(a)/
(Dollars in millions, except per share amounts)
<TABLE>
<S> <C>
Total Debt $315.0
1998 EBITDA $65.4
Total Debt/1998 EBITDA 4.8x
LTM 1/99E EBITDA/(b)/ $60.7
Total Debt/LTM 1/99E EBITDA 5.2x
1999E EBITDA/(c)/ $71.6
Total Debt/1999E EBITDA 4.4x
Total Equity $196.7
</TABLE>
<TABLE>
<CAPTION>
Uses:
- ----
<S> <C>
Purchase Equity (17.4 mm diluted shares @ $30.00) $521.9
Transaction Expenses 20.0
------
Total Uses $541.9
======
</TABLE>
<TABLE>
<CAPTION>
Sources:
- -------
<S> <C> <C>
Excess Cash $ 20.0 % of Total
Option Proceeds 10.2 Capitalization/(d)/
-------------------
Senior Bank Debt (2 tranches) 155.0 30.3%
Senior Subordinated Debentures 160.0 31.3%
Public Equity Rollover (0.46 mm shares @ $30.00) 13.7 2.7%
Gray Family Equity Rollover (0.97 mm shares @ $30.00) 29.1 5.7%
Vestar Equity Investment (5.00 mm shares @ $30.00) 150.0 29.3%
New Management Equity Investment (0.13 mm shares
@ $30.00)/(e)/ 3.9 0.8%
------
Total Sources $541.9
======
</TABLE>
- --------------------------------
(a) Based on sources and uses schedule and on equity ownership schedule as
provided by Vestar on 2/1/99.
(b) As per discussions with SJK Management on 1/26/99.
(c) Based on Company budget dated 12/28/98.
(d) Reflects total capitalization of $511.7 mm.
(e) Represents amount which will be funded in part with a Management loan
and/or will be reduced and augmented with an option program to achieve
desired Management ownership level.
A-3
<PAGE>
Overview of Proposed Transaction
Proposed Structure and Financing (cont'd)/(a)/
Equity Investment
- -----------------
- Vestar to invest $150.0 million of equity for a 70.5% stake in the
recapitalized company on a diluted basis, or 76.3% on primary basis
- Purchase 97.0% of the outstanding publicly-held common stock; the 3.0% of
the then outstanding common stock retained by the current public
stockholders will represent approximately 6.4% of the pro forma common
equity on a diluted basis, or 7.0% on a primary basis
- The Gray Family will sell shares and options into the transaction
sufficient to generate pretax cash proceeds of $17.0 million (approximately
1/3 of their ownership)
- Vestar investment and Gray Family rollover will be invested on a "heads
up" or same dollar basis, (i.e., each dollar buys same amount of equity),
therefore the Gray Family, management and directors will own approximately
23.1% of the recapitalized company on a diluted basis, or 16.8% on a
primary basis
Additional Equity Terms
- -----------------------
- - In addition to their rollover, the Gray Family will receive stock options
for an additional 5% (on a diluted basis), to be vested over three years
based on the Vestar equity achieving a 20% IRR
- - Vestar will cause the Company to make available 2% of the primary shares
to the non-Gray Family members of the Company's management team for
purchase at Vestar's buy-in-price, which purchase may be financed with
loans where appropriate
- - In addition, Vestar will cause the Company to grant an additional 2.5% in
options (on a diluted basis) to the management team, which options should
vest over five years and be based, at least in part, on the Company's
performance
- - Vestar will cause the Company to provide a liquidity mechanism for Mr.
Gray's equity ownership (subject to any credit agreement restrictions) such
that upon his ceasing to serve as the Company's CEO he may, at his option,
cause the Company to repurchase up to $5 million per year of his stock
Management/Board
- ----------------
- - Vestar currently has no written agreement with Mr. Gray
- - Vestar will control the board, Mr. Gray will remain CEO for the
foreseeable future
- ---------------------------
(a) Based on sources and uses schedule and on equity ownership schedule as
provided by Vestar on 2/1/99.
A-4
<PAGE>
Overview of Proposed Transaction
Proposed Structure and Financing - Proposed Economic Structure/(a)/
(Shares and dollars in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
Offer Price Per Share: $ 30.00
Current
Shares/ %
Options Owned
------- ------
Gray Family 1,666 9.6%
Mgmt 360 2.1%
Public 15,370 88.4%
Vestar -- --
------- ------
Total 17,396 100.0%
======= ======
</TABLE>
<TABLE>
<CAPTION>
Less: Equals: Plus: Equals: Plus: Equals:
Shares/ Shares/ New Pro Forma New Pro Forma
Options Options Shares Primary % Options Diluted %
Sold Rolled Bought Shares Owned Granted Shares Owned
-------- ------- ------ --------- ------ ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gray Family (697) 969 -- 969 14.8% 354 1,323 18.7%
Mgmt (360) -- 131 131 2.0% 177 308 4.4%
Public (14,914) 456 -- 457 7.0% -- 457 6.4%
Vestar -- -- 5,000 5,000 76.3% -- 5,000 70.5%
-------- ------- ------ --------- ------ ------- --------- -------
Total (15,970) 1,425 5,131 6,557 100.0% 532 7,088 100.0%
======== ======= ====== ========= ====== ======= ========= =======
</TABLE>
<TABLE>
<CAPTION>
Gross Net
Value of Value of
Shares/ Shares/ Value of Value of
Options Options Shares Shares
Sold Sold Rolled Bought
---------- ---------- -------- ---------
<S> <C> <C> <C> <C>
Gray Family ($20,910) ($17,000) $ 29,069 --
Mgmt ( 10,794) (4,519) -- $ 3,934
Public (447,410) (447,410) 13,701 --
Vestar -- -- -- 149,995
--------- --------- -------- --------
Total ($479,114) ($468,929) $ 42,770 $153,929
========= ========= ======== ========
</TABLE>
- ----------------------------------------
(a) Based on equity ownership schedule as provided by Vestar on 2/1/99.
A-5
<PAGE>
Overview of Proposed Transaction
Implied Multiples
(Dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Transaction Value
- --------------------------------------------
<S> <C>
Offer Price $30.00
52-Week High $47.75
52-Week Low $13.25
Diluted Shares Outstanding (mm) 17.4
Offer Value $521.9
Plus: Total Debt/(a)/ 0.0
Plus: Minority Interest 0.7
Less: Cash/(a)/ (20.0)
Less: Option Proceeds/(a)/ (10.2)
------
Transaction Value $492.3
======
</TABLE>
<TABLE>
<CAPTION>
Implied Multiples
---------------------------------------------------------------------------------------------------
Transaction Value as a Multiple of:
------------------------------------------------- Offer Price as a P/E to 5-Year
Year Revenues EBITDA EBIT Multiple of EPS Growth Rate
- -------- ---------------- --------------- ----------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
FY1998A/(b)/ 1.75x 7.5x 9.1x 15.5x 1.61x
LTM 1/1999E/(c)/ 1.73 8.1 10.0 17.1 1.79
FY1999E/(d)/ 1.57 6.9 8.4 14.6 1.52
<CAPTION>
Financial Results and Estimates
------------------------------------------------ 5-Year EPS
Year Revenues EBITDA EBIT Diluted EPS Growth Rate (e)
- -------- ---------------- --------------- ----------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
FY1998A/(b)/ $282.0 $65.4 $54.1 $1.94 9.6%
LTM 1/1999E/(c)/ 285.4 60.7 49.1 1.75/(d)/
FY1999E/(d)/ 314.2 71.6 58.4 2.05
</TABLE>
- ---------------------------------
Note: Fiscal year ends in the beginning of November.
(a) Based on Vestar estimates for LTM 1/99E.
(b) 1998 figures provided in Company's audited Consolidated Financial Statements
as of November 1, 1998.
(c) As per discussions with SJK Management on 1/26/99.
(d) Based on Company budget dated 12/28/98.
(e) 5-year estimated EPS growth rate based on 5-year EBIT CAGR from Company
projections dated 1/8/99.
A-6
<PAGE>
Overview of Proposed Transaction
Implied Premium Analysis and Trading Range
<TABLE>
<CAPTION> Implied Premium/(Discount) to Vestar Offer
SJK --------------------------------------------------
Time Frame/(a)/ Share Price Initial $28.00 Offer Current $30.00 Offer
--------------- ----------- -------------------- --------------------
<S> <C> <C> <C>
December 8, 1998/(b)/ $21.94 27.6% 36.8%
1 Month Average $19.59 43.0% 53.2%
3 Months Average $17.72 58.0% 69.3%
6 Months Average $25.50 9.8% 17.7%
1 Year Average $33.94 (17.5%) (11.6%)
52-Week High $47.75 (41.4%) (37.2%)
52-Week Low $13.25 111.3% 126.4%
</TABLE>
[THE FOLLOWING INFORMATION WAS DEPICTED AS A LINE GRAPH IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION>
Post-Announcement Trading Range: 12/9/98 - 2/1/99
--------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12/9/98 12/16/98 12/23/98 12/31/98 1/8/99 1/15/99 1/25/99 2/1/99
-------- --------- --------- --------- ------- -------- -------- -------
Low: $26.63 $26.00 $25.88 $25.88 $26.25 $26.13 $26.50 $26.38
High: $27.94 $26.31 $26.00 $26.00 $26.50 $26.63 $26.94 $26.55
Close: $26.75 $26.06 $26.00 $26.00 $26.50 $26.56 $26.81 $26.53
Vestar current offer price = $30.00
Vestar initial offer price = $28.00
</TABLE>
- ------------------------------------
(a) Based on daily closing prices for the specified period ending December 8,
1998.
(b) Last closing price before the Vestar initial offer of $28.00/share proposed
on December 8, 1998.
A-7
<PAGE>
Valuation Analysis
<PAGE>
Valuation Analysis
Trading Performance Last Twelve Months
[GRAPH SHOWING THE HISTORICAL TRADING PRICE FOR THE LAST TWELVE-MONTH PERIOD
COMMENCING ON 1/26/98 AND ENDING ON 2/1/99, WITH DESCRIPTION OF SPECIFIC EVENTS
APPEARS HERE]
B-1
<PAGE>
Valuation Analysis
Stock Price Performance: 1/31/97 - 1/29/99
[THE FOLLOWING INFORMATION WAS DEPICTED AS A LINE GRAPH IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION>
Stock Price Performance
-----------------------
St. John Knits S&P 400 Branded Apparel Composite/(a)/
--------------- -------- -------------------------------
<S> <C> <C> <C>
1/31/97 100.00% 100.00% 100.00%
4/14/97 93.41% 94.59% 105.00%
6/25/97 110.99% 113.21% 102.50%
9/5/97 96.84% 118.29% 104.50%
11/18/97 85.44% 118.84% 99.80%
1/30/98 86.26% 124.13% 95.00%
4/13/98 103.02% 138.56% 113.10%
6/24/98 87.64% 143.43% 121.90%
9/4/98 40.52% 126.30% 75.80%
11/17/98 39.15% 147.06% 87.50%
1/29/99 58.24% 168.11% 109.90%
</TABLE>
- ----------------------
(a) Branded Apparel Composite includes Gucci Group, Jones Apparel Group, Liz
Claiborne, Nautica Enterprises, Polo Ralph Lauren and Tommy Hilfiger.
B-2
<PAGE>
Valuation Analysis
Historical Financial Summary/(a)(b)/
(Dollars in millions, except per share data)
[THE FOLLOWING TABLES WERE DEPICTED AS BAR GRAPHS IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION>
Sales (Growth %)
----------------
FY1995 FY1996 FY1997 FY1998 LTM 1/1999E/(c)/
------ ------ ------ ------ ----------------
<S> <C> <C> <C> <C>
$161.8 $203.0 $242.1 $282.0 $285.4
26.4% 25.4% 19.3% 16.5% 12.1%
</TABLE>
<TABLE>
<CAPTION>
Gross Profit (Margin %)
-----------------------
FY1995 FY1996 FY1997 FY1998 LTM 1/1999E/(c)/
- ------ ------ ------ ------ ----------------
<S> <C> <C> <C> <C>
$87.5 $114.1 $142.7 $161.1 $160.4
54.1% 56.2% 58.9% 57.1% 56.2%
</TABLE>
<TABLE>
<CAPTION>
EBITDA (Margin %)
-----------------
FY1995 FY1996 FY1997 FY1998 LTM 1/1999E/(c)/
- --------- ------- ------- ------- -----------------
<S> <C> <C> <C> <C>
$38.4 $52.6 $67.0 $65.4 $60.7
23.7% 25.9% 27.7% 23.2% 21.3%
</TABLE>
<TABLE>
<CAPTION>
EPS (Growth %)
--------------
FY1995 FY1996 FY1997 FY1998 LTM 1/1999E/(d)/
- ------- ------ ------ ------ ----------------
<S> <C> <C> <C> <C>
$1.19 $1.59 $2.01 $1.94 $ 1.75
30.8% 33.6% 26.4% (3.5%) (17.5%)
</TABLE>
- -----------------------------
Note: Fiscal year ends in the beginning of November.
(a) 1995-1997 figures based on SJK Form 10-K dated November 2, 1997.
(b) 1998 figures provided in Company's audited Consolidated Financial
Statements as of November 1, 1998.
(c) As per discussions with SJK Management on 1/26/99.
(d) Based on Company budget dated 12/28/98.
B-3
<PAGE>
Valuation Analysis
Summary of Financial Projections -- Key Assumptions
<TABLE>
<CAPTION>
Fiscal Year Ended November 1,
------------------------------------------------------------------
1998A 1999E 2000E 2001E 2002E 2003E
------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Sales Growth
Management Case 16.5% 11.4% 8.0% 8.0% 8.0% 8.0%
Vestar Case 16.5 8.2 7.4 7.6 6.9 7.1
Gross Margin
Management Case 57.1% 56.6% 57.0% 57.5% 57.5% 57.5%
Vestar Case 57.1 56.7 56.7 56.7 56.6 56.6
SG&A Expenses (% of Sales)
Management Case 38.0% 38.0% 37.5% 37.5% 37.5% 37.5%
Vestar Case 38.0 37.9 37.8 37.6 37.6 37.6
EBITDA Margin
Management Case 23.2% 22.8% 23.7% 24.1% 23.9% 23.7%
Vestar Case 23.2 23.1 23.3 23.4 23.4 23.3
EBIT Margin
Management Case 19.2% 18.6% 19.5% 20.0% 20.0% 20.0%
Vestar Case 19.2 18.8 18.9 19.1 19.0 19.0
Effective Tax Rate/(a)(b)/ 39.7% 40.7% 40.7% 40.7% 40.7% 40.7%
Capital Expenditures/(a)(c)/ $23.6 mm $19.4 mm $17.5 mm $17.5 mm $17.5 mm $17.5 mm
Net Working Capital (% of Sales) /(c)/
Management Case 26.1% 25.6% 25.0% 25.0% 25.0% 25.0%
Vestar Case 26.1 26.1 25.8 25.7 25.7 25.4
</TABLE>
- ------------------------------
Note: Sources include SJK Management projections as of 1/8/99 and Vestar
projections as of 12/31/98. 1998 figures provided in Company's audited
Consolidated Financial Statements as of November 1, 1998.
(a) Assumptions are the same for both Management and Vestar cases.
(b) Based on estimate for 1999 as per Company's budget dated 12/28/98.
(c) As per Vestar's projections and discussions with SJK Management on
1/26/99.
B-4
<PAGE>
Valuation Analysis
Summary of Financial Projections
(Dollars in millions, except per share data)
[THE FOLLOWING TABLES WERE DEPICTED AS BAR GRAPHS IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION>
Sales (Growth %)
----------------
1998A 1999E 2000E 2001E 2002E 2003E
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Actual/(a)/ $282.0
16.5%
Management Case/(b)/ $314.2 $339.4 $366.5 $395.9 $427.5
11.4% 8.0% 8.0% 8.0% 8.0%
Vestar Case/(c)/ $304.9 $327.6 $352.5 $377.0 $403.7
8.2% 7.4% 7.6% 6.9% 7.1%
</TABLE>
<TABLE>
<CAPTION>
Gross Profit (Margin %)
-----------------------
1998A 1999E 2000E 2001E 2002E 2003E
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Actual/(a)/ $161.1
57.1%
Management Case/(b)/ $177.8 $193.4 $210.8 $227.6 $245.8
56.6% 57.0% 57.5% 57.5% 57.5%
Vestar Case/(c)/ $172.7 $185.7 $199.7 $213.5 $228.4
56.7% 56.7% 56.7% 56.6% 56.6%
</TABLE>
<TABLE>
<CAPTION>
EBITDA (Margin %)
-----------------
1998A 1999E 2000E 2001E 2002E 2003E
------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Actual (a) $65.4
23.2%
Management Case/(b)/ $71.6 $80.4 $88.3 $94.7 $101.5
22.8% 23.7% 24.1% 23.9% 23.7%
Vestar Case/(c)/ $70.4 $76.2 $82.4 $88.1 $ 94.2
23.1% 23.3% 23.4% 23.4% 23.3%
</TABLE>
<TABLE>
<CAPTION>
EBIT (Margin %)
---------------
1998A 1999E 2000E 2001E 2002E 2003E
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Actual/(a)/ $54.1
19.2%
Management Case/(b)/ $58.4 $66.2 $73.3 $79.2 $85.5
18.6% 19.5% 20.0% 20.0% 20.0%
Vestar Case/(c)/ $57.2 $67.2 $67.2 $71.8 $76.7
18.8% 18.9% 19.1% 19.0% 19.0%
</TABLE>
- ---------------------------
Note: Fiscal year ends in the beginning of November.
(a) 1998 figures provided in Company's audited Consolidated Financial
Statements as of November 1, 1998.
(b) Source: SJK Management projections, as of 1/8/99.
(c) Source: Vestar projections, as of 12/31/98.
B-5
<PAGE>
Valuation Analysis
Summary Valuation
(Dollars in millions, except per share amounts)
[THE FOLLOWING INFORMATION WAS DEPICTED AS A HORIZONTAL BAR GRAPH IN THE PRINTED
MATERIAL]
<TABLE>
<CAPTION>
Equity Value Per SJK Share
--------------------------
Methodology Management Case/(b)/ Vestar Case
----------- -------------------- -----------
<S> <C> <C> <C>
Public Comparables: FY1999E EPS $26.65 -- $30.75 --
- ------------------- $2.05/(b)/
13.0x -- 15.0x
P/E to Growth Rate: P/E/G $13.78 -- $21.65 --
- ------------------- 9.6%/(c)/
0.70x -- 1.10x
Acquisition Comparables: LTM EBITDA: $24.37 -- $31.35 --
- ------------------------ $60.7
6.5x -- 8.5x/(d)/
DCF Analysis: 2003 Terminal EBITDA:/(e)/ $26.64 -- $34.13 $24.94 -- $31.89
- ------------- 6.0x -- 8.0x
Discount Rates
12.5% -- 13.5%
LBO Analysis: Debt to LTM EBITDA:/(f)/ $28.00 -- $31.00 $27.00 -- $30.00
- ------------- 5.2x
3-5 Year Equity Returns:
20% -- 30%
</TABLE>
Total Offer Price = $30.00
Cash Offer Price = $29.10
Price Prior to Announcement = $21.94 /(a)/
- -----------------------------
(a) Pre-announcement closing price of $21.94 on 12/8/98.
(b) Based on Company budget dated 12/28/98.
(c) 5-year estimated growth rate based on 5-year EBIT CAGR from Company
projections dated 12/28/98.
(d) Based on LTM 1/99E EBITDA estimate per discussions with SJK Management on
1/26/99. Assumes SJK net debt of ($20.0) mm, minority interest of $0.7 mm,
option proceeds of $10.2 mm and 17.4 mm diluted shares outstanding.
(e) Assumes 2003 EBITDA of $101.5 mm in Management Case and $94.2 mm in Vestar
Case, 17.4 mm diluted shares outstanding, net debt of ($20.0) mm, minority
interest of $0.7 mm and option proceeds of $10.2 mm.
(f) Based on LTM 1/99E EBITDA of $60.7 mm per discussions with SJK Management
on 1/26/99. Reflects total debt of $315.0 mm.
B-6
<PAGE>
Valuation Analysis
Selected Comparable Companies Analysis
[THE FOLLOWING TABLES WERE DEPICTED AS BAR GRAPHS IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION>
1999 P/E/(a)/
-------------
Polo Ralph Tommy Liz SJK
Jones Apparel Lauren Gucci Hilfiger Claiborne Nautica SJK/(d)/ Proposal/(e)/
------------- ------ ----- -------- --------- ------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
17.7x 17.6x 16.9x 16.0x 12.8x 9.3x 10.7x 14.6x
</TABLE>
Mean/(c)/ = 14.7x
<TABLE>
<CAPTION>
Market Cap./FY1998E Sales/(b)/
------------------------------
Tommy Jones Polo Ralph Liz SJK
Gucci Hilfiger Apparel Lauren Nautica Claiborne SJK/(d)/ Proposal/(e)/
----- -------- ------- ------ ------- --------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
2.85x 2.37x 2.03x 1.51x 0.99x 0.94x 1.25x 1.75x
</TABLE>
Mean/(c)/ = 1.57x
<TABLE>
<CAPTION>
1999 P/E to 5-Yr. Growth Rate/(a)/
----------------------------------
Liz Polo Ralph Jones Tommy SJK
Claiborne Lauren Gucci Apparel Hilfiger Nautica SJK/(d)/ Proposal/(e)/
--------- ------ ----- ------- -------- ------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1.28x 1.18x 1.13x 0.88x 0.73x 0.58x 1.11x 1.52x
10% 15% 15% 20% 22% 16% 10% 10%
</TABLE>
Mean/(c)/ = 17%/0.93x
<TABLE>
<CAPTION>
Market Cap./FY1998E EBITDA/(b)/
-------------------------------
Jones Tommy Polo Ralph Liz SJK
Apparel Gucci Hilfiger Lauren Claiborne Nautica SJK/(d)/ Proposal/(e)/
------- ----- -------- ------ --------- ------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
12.1x 11.2x 9.9x 9.9x 7.0x 4.8x 5.4x 7.5x
</TABLE>
Mean/(c)/ = 8.7x
- -----------------------------
(a) Earnings estimates and five-year growth rates from First Call as of
1/29/99, except for SJK. Stock prices as of 1/29/99, except for Gucci
which is as of 1/5/99 (day prior to LVMH acquiring a 5.0% stake) and SJK
(see notes (d) and (e)). SJK FY1999E EPS from Company budget dated
12/29/98. SJK 5-year EPS growth rate based on 5-year EBIT CAGR from
Company projections dated 1/8/99. SJK FY1998 sales and EBITDA figures from
Company's audited Consolidated Financial Statements as of November 1, 1998.
(b) Source: Selected Merrill Lynch Equity research reports, except for Gucci
(from DLJ).
(c) Means exclude Gucci and SJK.
(d) Reflects pre-announcement closing price of $21.94/share on December 8,
1998.
(e) Reflects Vestar proposal of $30.00/share.
B-7
<PAGE>
Valuation Analysis
Operating Performance Comparison
[THE FOLLOWING TABLES WERE DEPICTED AS BAR GRAPHS IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION>
FY1996 - FY1999E Sales Growth
-----------------------------
Jones Polo
Apparel Liz Ralph Tommy
Gucci Group Claiborne Nautica Lauren Hilfiger SJK/(a)/
----- ----- --------- ------- ------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 10.8% 34.2% 8.8% 25.4% 16.7% 28.0% 19.3%
1998 5.6% 19.9% 5.1% 11.5% 12.4% 28.3% 16.5%
1999 13.0% 31.8% 4.5% 10.1% 8.4% 16.5% 11.4%
</TABLE>
<TABLE>
<CAPTION>
FY1997 - FY1999E EBIT Margins
-----------------------------
Jones Polo
Apparel Liz Ralph Tommy
Gucci Group Claiborne Nautica Lauren Hilfiger SJK/(a)/
----- ----- --------- ------- ------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 24.2% 14.2% 11.5% 18.3% 13.5% 16.7% 24.0%
1998 22.0% 15.4% 11.2% 18.0% 12.9% 18.6% 19.2%
1999 21.1% 15.5% 11.2% 17.4% 13.9% 18.5% 18.6%
</TABLE>
- -------------------------------------------
Source: Selected Merrill Lynch equity research reports, except for Gucci (from
DLJ).
(a) 1999 figures reflect Company budget dated 12/28/98. 1999 sales growth
and EBIT margin in Vestar case are 8.2% and 18.8%, respectively.
B-8
<PAGE>
Valuation Analysis
Analysis of Recent Acquisition Transactions (1996-present)
[THE FOLLOWING TABLES WERE DEPICTED AS BAR GRAPHS IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION>
LTM EBITDA Multiple
-------------------
(Target/Acquirer)
Designer Lejaby- The Gerber
Pepe Sun Holdings/ Euralis/ William Sun Child- Severin Biderman
Farah Jeans Apparel/ The The Carter Gear For Apparel/ renswear/ Montres/ Industries
Inc./ USA/ Jones Warnaco Warnaco Company/ Sports/ Vestar Citicorp Gucci USA/Vestar
Tropical Tommy Apparel Group, Group, Investcorp. GFSI Capital Venture Group Capital SJK/Vestar
Sportswear Hilfiger USAGroup Inc. Inc. S.A. Holdings Partners Capital NV Partners Proposal/(c)/
- ---------- -------- -------- ---- ---- ---- -------- -------- ------- -- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
16.5x 15.1x 8.5x 6.6x 6.5x 6.5x 6.2x 6.0x 4.0x NA NA 7.5x
</TABLE>
Mean/(a) (b) /= 6.3x
<TABLE>
<CAPTION>
LTM Sales Multiple
------------------
(Target/Acquirer)
Pepe Designer Lejaby- The Gerber
Jeans Sun Holdings/ Severin Euralis/ William Sun Child- Biderman
USA/ Gear For Apparel/ The Montres/ The Carter Apparel/ Farah renswear/ Industries
Tommy Sports/ Jones Warnaco Gucci Warnaco Company/ Vestar Inc./ Citicorp USA/Vestar
Hilfiger GFSI Apparel Group, Group Group, Investcorp. Capital Tropical Venture Capital SJK/Vestar
USA Holdings Group Inc. NV Inc. S.A. Partners Sportswear Capital Partners Proposal/(c)/
- -------- -------- -------- ---- -- ---- ---- -------- ---------- ------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3.00x 1.30x 1.10x 0.82x 0.80x 0.75x 0.64x 0.60x 0.50x 0.40x NA 1.75x
</TABLE>
Mean/(a) /= 0.77x
<TABLE>
<CAPTION>
Gerber Lejaby- The Designer Pepe
Child- Euralis/ William Holdings/ Sun Severin Jeans Biderman Sun
renswear/ The Carter Gear For The Apparel/ Montres/ USA/ Industries Farah Apparel/
Citicorp Warnaco Company/ Sports/ Warnaco Vestar Gucci Tommy USA/Vestar Inc./ Jones
Venture Group, Investcorp. GFSI Group, Capital Group Hilfiger Capital Tropical Apparel
Capital Inc. S.A. Holdings Inc. Partners NV USA Partners Sportswear Group
------- ---- ---- -------- ---- -------- -- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Transaction
Value: $74.0 $79.2 $204.2 $232.9 $400.5 $156.0 $150.0 $1,223.7 $360.0 $144.9 $445.1
Date: 1/24/96 5/6/96 10/31/96 1/24/97 9/25/97 10/16/97 11/25/97 1/30/98 3/31/98 5/4/98 9/10/98
</TABLE>
- ---------------------------
(a) Means exclude Pepe Jeans USA/Tommy Hilfiger USA transaction and SJK/Vestar
Proposal.
(b) Mean excludes Farah Inc./Tropical Sportswear.
(c) Represents offer price of $30.00/share and FY1998 sales and EBITDA figures
from Company's audited Consolidated Financial Statements as of November 1,
1998.
B-9
<PAGE>
Valuation Analysis
Discounted Cash Flow Analysis Summary
<TABLE>
<CAPTION>
Management Case
Equity Value Per Share /(a)/
-----------------------------------------------
Discount Multiple of 2003E EBITDA/(b)/
-------------------------------------------------
Rate 6.0x 7.0x 8.0x
- ---------- ---------------- -------------- --------------
<S> <C> <C> <C>
12.0% $28.18 31.49 34.80
12.5% 27.65 30.89 34.13
13.0% 27.14 30.31 33.47
13.5% 26.64 29.74 32.83
14.0% 26.15 29.18 32.21
</TABLE>
<TABLE>
<CAPTION>
Vestar Case
Equity Value Per Share/(a)/
---------------------------------------------
Discount Multiple of 2003E EBITDA/(c)/
-----------------------------------------------
Rate 6.0x 7.0x 8.0x
- ---------- ---------------- -------------- ------------
<S> <C> <C> <C>
12.0% $26.38 $29.45 $32.52
12.5% 25.88 28.89 31.89
13.0% 25.41 28.35 31.28
13.5% 24.94 27.82 30.69
14.0% 24.49 27.30 30.11
</TABLE>
- ------------------------------
(a) Based on 17.4 mm diluted shares outstanding, net debt of ($20.0) mm,
minority interest of $0.7 mm and option proceeds of $10.2 mm.
(b) Based on 2003 EBITDA of $101.5 mm.
(c) Based on 2003 EBITDA of $94.2 mm.
B-10
<PAGE>
Valuation Analysis
LBO Summary
(Shares and dollars in millions)
LTM 1/99E EBITDA: $60.7/(a)/
-----------------------------
<TABLE>
<CAPTION>
Offer Value Per Share
-----------------------------------------------
<S> <C> <C> <C>
$28.00 $30.00 $32.00
-------------- ---------------- ------------
Transaction Value/ (b)/ $457.6 $492.3 $527.1
Implied LTM 1/99E EBITDA Multiple 7.5x 8.1x 8.7x
Senior Debt @ 8% $155.0 $155.0 $155.0
Subordinated Debt @ 11% $160.0 $160.0 $160.0
New Equity Investment $117.6 $150.0 $182.4
Equity Rollover $ 43.6 $ 46.7 $ 49.8
Total Debt/LTM 1/99E EBITDA 5.2x 5.2x 5.2x
Senior Debt/LTM 1/99E EBITDA 2.6x 2.6x 2.6x
LTM 1/99E EBITDA/Interest 2.0x 2.0x 2.0x
Senior Debt Repaid in 5 years
Management Case 55.7% 55.7% 55.7%
Vestar Case 48.9% 48.9% 48.9%
Implied 3-Year Equity Returns @ Terminal
EBITDA Multiple of:/(c)/
Management Case
---------------
6.5x 22.4% 14.5% 8.3%
7.5x 33.5% 25.0% 18.2%
8.5x 43.1% 33.9% 26.7%
Vestar Case
-----------
6.5x 16.0% 8.5% 2.7%
7.5x 27.5% 19.3% 12.9%
8.5x 37.2% 28.4% 21.5%
</TABLE>
- -----------------------
(a) Based on discussions with SJK Management on 1/26/99.
(b) Excludes financing and advisory fees of $20.0 mm.
(c) Assumes exit in year 2001.
B-11
<PAGE>
EXHIBIT (b)(4)
Confidential
------------
ST. JOHN KNITS
Presentation to the Independent Committee
of the Board of Directors of St. John Knits
February 2, 1999
<PAGE>
Table of Contents
1. Executive Summary
2. Overview of St. John Knits
3. Valuation
<PAGE>
EXECUTIVE SUMMARY
<PAGE>
Overview of Proposal
- - Offer for 97.4% of the outstanding shares not owned by Chairman and Chief
Executive Officer Bob Gray and his family (the "Gray Family") plus part of
the Gray Family's holdings at $30.00 per share
- the Gray Family currently owns approximately 9.6% of the 17.4 million
shares and options outstanding
- the Gray Family is prepared to sell all of its approximately 460,000
options and approximately 20% of its shares
- - The $30.00 per share offer implies the following market capitalization,
trading multiples and premium to market:
<TABLE>
Implied Market Capitalization (MM)
----------------------------------
<S> <C>
Offer Price $30.00
Total Shares Outstanding 16.6
Total Options Outstanding 0.8
Average Strike Price of Options $12.47
------
Equity Market Value $ 512
Plus: Net Debt (19)
------
Adjusted Market Value $ 492
</TABLE>
<TABLE>
<CAPTION>
Implied Multiple
----------------
Adjusted Market Value
as a Multiple of
-------------------------------------------------------
Sales EBITDA P/E
------------------------- -------------------------- --------------------------
<S> <C> <C> <C>
FY 1998 1.7x 7.5x 15.5x
Est. LTM 1/99/(2)/ 1.7x 8.1x 16.8x
FY 1999E/(3)/ 1.6x 6.9x 14.6x
</TABLE>
Share Price Premium Comparison
------------------------------
<TABLE>
<CAPTION>
1 Month 6 Month 1 Year 52 Week 52 Week
1 Day Average Average Average High/(1)/ Low/(1)/
------- -------- -------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Share Price Prior to Original Offer Date $21.94 $19.59 $25.39 $33.91 $47.75 $13.25
Premium (Discount) 37% 53% 18% (12%) (37%) 126%
</TABLE>
_________________________
(1) Based on daily closing prices.
(2) Latest Company estimate based on ten months ended November, December
actual sales and FY1999 Q1 budget.
(3) Based on management's 1999 budget.
1
<PAGE>
Overview of Proposal (Cont'd)
<TABLE>
<CAPTION>
<S> <C>
Rationale: - Bob Gray has stated that the rationale for the transaction is
- to deliver "substantial, certain value to shareholders as we
undertake a strategy to refocus on our core business lines"
- to slow top-line growth to about 10 percent per year
Financing: - The proposal is backed by equity financing from Vestar Capital Partners
- Chase Manhattan Bank will issue a commitment letter for bank
financing and a highly confident letter for high-yield
financing (the "Commitment Letters")
Break-Up Fees: - $14MM, inclusive of expense reimbursements of $1.5MM
Material Conditions: - Shareholder approval; regulatory approval; migration of St. John Knits
International from Barbados to Delaware; financing on terms and
conditions substantially equivalent to the Commitment Letters
Accounting Treatment: - Transaction is structured to allow recap accounting which requires roll
over of portion of public ownership and results in no goodwill
(note: transaction is not conditioned on recap accounting)
Tax Treatment: - Consideration received by shareholders is taxable
Additional Terms: - Vestar will control the Board of Directors, while Bob Gray
will remain CEO for the foreseeable future
- Vestar currently has no written agreement with Mr. Gray
- In addition to rolling over portions of their current ownership
into the new entity, the Gray Family will receive stock
options for an additional 5.0%,/(1)/ subject to Vestar achieving a
20% IRR
- The post-transaction management team will also be eligible
for 2.5%/(1)/ in options based, in part, on the Company's future
performance
- The Company is to make available up to 5.0% of the primary
shares to non-Gray Family members of management for purchase at
Vestar's buy-in price
- Vestar will make financing available where appropriate
- The Company will provide a liquidity mechanism for Bob Gray's ownership
such that upon leaving his CEO position, at his option, he may cause the
Company to repurchase up to $5 million per year in stock
</TABLE>
_________________________________
/(1)/ As a percentage of diluted shares; i.e., including options granted Gray
Family and post-transaction management team.
2
<PAGE>
Transaction Structure - Overview
[CHART SHOWING STRUCTURE OF TRANSACTION APPEARS HERE IN THE PRINTED MATERIAL]
1. St. John Knits International ("SJKI"), a Barbados corporation, forms two
subsidiaries: New FSC, a Barbados corporation, and Mergerco, a California
Corporation
2. SJKI contributes FSC distributorship to the capital of New FSC
3. SJKI files certificate of domestication and certificate of incorporation
with Delaware and files necessary documentation with Barbados so that it no
longer is subject to Barbados laws
4. Vestar forms limited liability company ("LLC") and Newco, a Delaware
corporation
5. Merger of Mergerco with and into SJK, resulting in SJK becoming a wholly-
owned subsidiary of SJKI (the "Reorganization Merger"). Each holder of SJK
shares (subject to any dissenter or approval rights) will receive, in
exchange for each share of SJK common stock, one share of SJKI common stock
6. The Gray Family, and possibly other members of management, pursuant to
agreement with LLC and Newco, among other things, to contribute, following
Reorganization Merger but prior to Acquisition Merger (described in 7), all
their SJKI shares to LLC for LLC shares and cash
7. Merger of Newco with and into SJKI, with SJKI surviving the merger (the
"Acquisition Merger"). Each holder of SJKI Common stock (other than LLC)
will have the right to elect whether to retain its SJKI shares or receive
cash consideration (subject to proration)
3
<PAGE>
Financing Structure - Sources & Uses ($MM)
<TABLE>
<CAPTION>
Uses Sources
---- -------
<S> <C> <C> <C>
Equity Purchase Price/(1)/ $521.9 Cash $ 20.0
Transaction Expenses 20.0 Option Proceeds 10.2
Bank Debt 155.0
Senior Subordinated Notes 160.0
Equity Rollver - Public 13.7
Equity Rollver - Gray Family 29.1
______ Vestar Equity/(2)/ 153.9
------
$541.9 $541.9
====== ======
</TABLE>
_____________________________
(1) $30.00 per share times 17.4MM fully diluted shares (gross of option
proceeds).
(2) Including value of new management options.
4
<PAGE>
Estimated Ownership Structure (Numbers in Thousands)
<TABLE>
<CAPTION>
Current Ownership Rollover Equity Value
-------------------- -------------------- ----------------------
Shares/ Pct. of Shares/ New Total
Options Total Options Value Equity Equity
------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Public 15,370 88.4% 457 $13,701 - $ 13,701
Gray Family 1,666 9.6% 969 29,069 - 29,069
Other Management 300 1.7% - - - -
New Mgmt (Vestar) - 0.0% - - $ 3,934 3,934
Directors 60 0.3% - - - -
Vestar - 0.0% - - 149,995 149,995
------ ----- ----- ------- -------- --------
17,396 100.0% 1,426 $42,770 $153,929 $196,699
====== ===== ===== ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
Post-Transaction
-----------------------------------------------------------------------------
Management Options
----------------------
Primary Pct. of Diluted Pct. of
Shares/(1)/ Total Percent/(2)/ Number Shares Total
----------- -------- ------------- ------ -------- -------
<S> <C> <C> <C> <C> <C> <C>
Public 457 7.0% 457 6.4%
Gray Family 969 14.8% 5.0% 354 1,323 18.7%
Other Management - 0.0% - 0.0%
New Mgmt (Vestar) 131 2.0% 2.5% 177 308 4.4%
Directors - 0.0% - 0.0%
Vestar 5,000 76.3% 5,000 70.5%
----- ----- ----- -----
6,557 100.0% 7,088 100.0%
===== ===== ===== =====
</TABLE>
- ----------------------------
/(1)/ Based on value of total equity.
/(2)/ Percent of diluted shares; i.e., primary shares plus management options.
Subject to Vestar achieving 20% IRR.
5
<PAGE>
Valuation Summary
[THE FOLLOWING INFORMATION IS DEPICTED IN A HORIZONTAL BAR GRAPH IN THE PRINTED
MATERIAL]
Discounted Cash Flow/(1)/ $26.65 - $34.14
Comparable Company
12.5x-14.5x 1999 P/E $25.63 - $29.73
6.0x-8.0x 1999 EBITDA $26.39 - $34.62
7.0x-9.0x Est. Q1 LTM EBITDA $26.13 - $33.11
Comparable Transaction
6.0x-9.0x Est. Q1 LTM EBITDA $22.64 - $33.11
Leveraged Buyout/(2)/ $27.00 - $30.00
Leveraged Recapitalization/(3)/ $22.70 - $30.15
Premiums Paid/(4)/ $26.33 - $28.52
Pre Announcement $21.94
Cash Portion/(5)/ $29.11
Offer $30.00
___________________________
/(1)/ Based on 12.5%-13.5% discount rate and 6.0x to 8.0x LTM EBITDA exit
multiple.
/(2)/ Based on Vestar provided debt levels (approximately 5x debt to EBITDA) and
required return of approximately 20% to 30%.
/(3)/ Based on repurchase of 40.0% to 60.0% of shares at $30.00 (implying
approximate debt to EBITDA levels of 3x to 5x) and a trading range for
remaining shares of 8.0x to 12.0x 1999 earnings.
/(4)/ Based on a 20% to 30% premium.
/(5)/ Assuming all shareholders elect cash, the pro-rata cash amount received
per share held is $29.11 (i.e., $0.89 pro-rata stock).
6
<PAGE>
OVERVIEW OF ST. JOHN KNITS
7
<PAGE>
Company Overview
- - St. John Knits, Inc. designs, manufactures and markets high-end woman's
clothing and accessories
- - The Company was founded in 1962 by Bob and Marie St. John Gray
- - SJK was sold to Escada in 1989 and spun-off as an independent public company
in 1993
- - Bob Gray, 73 years old, is the Chairman of the Board and Chief Executive
Officer
- there is currently no clear successor to Mr. Gray
- the apparent lack of management depth is an important issue for the
Company
- - Marie St. John Gray, as the Company's Chief Designer, and Kelly Gray, the
President and daughter of Bob Gray and Marie St. John Gray, are responsible
for the Company's design teams
- - St. John Knits' products currently fall into one of eight categories:
knitwear, sport, Griffith & Gray, SJK, coat collection, shoes, accessories
and fragrance
- the core knitwear collections account for more than 70% of total sales
- the coat collection and SJK to be eliminated
- - While the Company enjoys an outstanding reputation for fine, high-quality,
classic women's knitwear, it has been unable to stretch its brand name to
other categories with much success
- - St. John Knits is a vertically integrated manufacturer
- the Company has six manufacturing facilities in Southern California
- approximately 94% of St. John Knits products are manufactured in-house
- - The Company's products are distributed through specialty retailers and its
own boutiques
- Saks Fifth Avenue, Neiman Marcus and Nordstrom accounted for 45% of
fiscal 1998 sales
- there may be limited opportunity for growth through new doors within
this customer base
- the Company operates 17 retail boutiques and nine outlet stores,
accounting for approximately 26% of sales
- management has indicated that the Company's optimal number of retail
boutiques is no more than 25, limiting growth through building new
stores
- - foreign sales are around 8% of total
- aside from the Japan joint-venture, the Company's international
business ventures appear limited in scope at this point
- - In addition to international subsidiaries, the Company has a 51% stake in Amen
Wardy Home Stores, a retail home furnishing boutiques operator
- after experiencing continuous losses since late 1997 opening, CEO Amen
Wardy, Jr. was terminated in September 1998
8
<PAGE>
St. John Knits by Category
<TABLE>
<CAPTION>
Product Lines
-------------
Product Line Selected Products Range of Suggested
- ------------------ ----------------------------------------- Retail Prices
------------------
<S> <C> <C>
Knitwear
Collection Dresses, 2-Piece Suits, 3-Piece Suits, 350 - $1,300
Jackets, Pants, Skirts, Coats, Sweaters,
Separates
Dressy Dresses, Theater Suits, Dressy Separates 650 - 2,000
Basics Skirts, Jackets, Pants 160 - 690
Couture Dresses, Gowns, 2-Piece Suits 900 - 3,300
Accessories Jewelry, Scarves, Belts, Handbags 65 - 450
Shoes Pumps, Sling Backs, Loafers, Boots 220 - 495
Sport Jackets, Skirts, Pants, Tops, Jeans 120 - 700
Griffith & Gray Suits, Coats, Dresses, Separates, 300 - 1,200
Eveningwear
Coat Collection Faux Fur Coats 700 - 1,300
SJK Dresses, Skirts, Pants, Jackets, Sweaters 150 - 600
Fragrance Perfume, Bath Products 12 - 250
</TABLE>
[THE FOLLOWING TABLES WERE DEPICTED AS PIE CHARTS IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION>
FY 1998 Sales ($282.0MM)/(1)/
-----------------------------
Jewelry,
Fragrances, Shoes Japan JV & Amen Company-Owned
and Accessories Wardy Core Knitwear Other Apparel /(2)/ Stores
---------------- ----- ------------- ------------- ------
<S> <C> <C> <C> <C>
6.2% 3.8% 70.4% 9.3% 26.4%
</TABLE>
<TABLE>
<CAPTION>
FY 1999E Sales ($314.2MM)/(1)/
------------------------------
Jewelry,
Fragrances, Shoes Japan JV & Amen Company-Owned
and Accessories Wardy Core Knitwear Other Apparel /(2)/ Stores
---------------- ----- ------------- ------------- ------
<S> <C> <C> <C> <C>
6.1% 5.7% 69.5% 5.8% 28.1%
</TABLE>
_______________________
/(1)/ Percentages shown are before eliminations; totals thus exceed 100%.
/(2)/ Other apparel lines (SJK, Sport, Griffith & Gray and the Coat Collection).
9
<PAGE>
Financial Summary ($MM)
<TABLE>
<CAPTION>
Summary Financials Historical Projected
- ------------------ --------------------------------- Estimated ---------------
1995 1996 1997 1998 LTM /(1)/ Mgmt. Street
------ ------ ------ ------ -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales $ 162 $ 203 $ 242 $ 282 $ 285 $ 314 $ 310
COGS 74 89 100 121 125 136 133
----- ----- ----- ----- ----- ----- -----
Gross Profit 88 114 143 161 160 178 177
SG&A 55 68 85 107 111 119 115
----- ----- ----- ----- ----- ----- -----
EBIT 33 46 58 54 49 58 62
Other Income 1 1 1 1 1 0 1
Income Taxes 14 20 24 22 20 24 26
----- ----- ----- ----- ----- ----- -----
Net Income $ 20 $ 27 $ 34 $ 33 $ 31 $ 35 $ 37
Reported Diluted EPS $1.19 $1.59 $2.01 $1.94 $1.79 $2.05 $2.17
Adjusted Diluted EPS $1.19 $1.59 $2.01 $1.94 $1.79 $2.05 $2.17
Avg. Shares Outstanding 16.4 17.0 17.1 17.2 17.1 17.0 17.0
D&A 5 7 9 11 12 13 10
----- ----- ----- ----- ----- ----- -----
EBITDA 38 53 67 65 61 72 72
Capital Expenditure 18 21 23 24 N/A 19 N/A
----- ----- ----- ----- ----- ----- -----
Operating Cash Flow 21 31 44 42 N/A 52 N/A
Sales Growth Rate 26.4% 25.4% 19.3% 16.5% -- 11.4% 9.9%
Effective Tax Rate 42.1% 42.4% 41.4% 39.7% 39.3% 40.7% 41.3%
Gross Margin 54.1% 56.2% 58.9% 57.1% 56.2% 56.6% 57.1%
EBITDA Margin 23.7% 26.0% 27.6% 23.2% 21.3% 22.8% 23.2%
EBIT Margin 20.4% 22.5% 24.0% 19.2% 17.2% 18.6% 20.0%
Net Income Margin 12.1% 13.4% 14.2% 11.9% 10.7% 11.1% 11.9%
</TABLE>
<TABLE>
<CAPTION>
Book Capitalization Amount Percent
- ------------------- ------ -------
<S> <C> <C>
Cash & Investments 20
Debt -- --
Minority Interest 1 0.4%
Stockholders' Equity 161 99.6%
---- -----
Total Capitalization 162 100.0%
</TABLE>
[CAPTION]
10
<PAGE>
<TABLE>
<CAPTION>
Financial Summary (cont'd)
Offer
- -----
<S> <C>
Offer Price $30.00
Shares Outstanding 16.6
Options Outstanding 0.8
Average Exercise Price $12.47
------
Market Value $ 512
Net Debt (19)
------
Adjusted Market Value $ 492
</TABLE>
<TABLE>
<CAPTION>
AMV as a multiple of: LTM/(1)/ 1999E/(2)/
- -------------------- ------- ----------
<S> <C> <C>
Sales 1.7x 1.6x
EBITDA 8.1 6.9
EBIT 10.0 8.4
Other:
- -----
Price/Earnings 16.8 14.6
MV/Book Value 3.1 2.6
</TABLE>
_________________________
/(1)/ Management estimated LTM ended FY 1999 Q1 based on ten months ended
November, December sales and FY 1999 Q1 budget.
/(2)/ Based on Company budget.
11
<PAGE>
Current Situation
- - During the last twelve months prior to the offer, St. John Knits stock
significantly underperformed other premium apparel stocks as well as the
broader market
- SJK stock declined 49% during this time period, compared to a decrease of
16% for comparable apparel index and an increase of 20% for the S&P 500
- the stock declined 49% from 5/28/98, the day that the Company announced
lower-than-expected Q2 earnings
- - SJK stock increased $6.00 or 27% from $21.94 to $27.94 on announcement of the
$28.00 offer and now trades at $26.50 per shares (as of 1/29/99)
- - Prior to the announcement of the offer, St. John Knits was trading at a
discount to comparable apparel companies
- SJK was trading at 4.9x LTM EBITDA and 10.1x LTM earnings/(1)/
- comparable U.S. apparel companies are currently trading at 9.0x LTM EBITDA
and 16.4x LTM earnings
- - At the time of the announcement, research analysts were neutral on the stock
given negative earnings announcements beginning in the second quarter of
fiscal 1998
- fourth quarter earnings declined 35% versus the prior year
- - Historically, St. John Knits has been a strong performer in the apparel
industry with high-quality knitted fashion apparel and related accessories,
vertical integration, tightly controlled distribution and earnings growth
rates in excess of 20%
- - The Company has attempted to meet its high growth objective through
diversification into new apparel lines and retail concepts
- diversification efforts have been largely unsuccessful (SJK bridge line
eliminated and Amen Wardy under review)
- the Company has recently suffered from overproduction and related markdowns
resulting in significant margin contraction
_________________________
/(1)/ Based on publicly available LTM information at the time (Q3).
12
<PAGE>
One-Year Stock Price and Volume History
[GRAPH SHOWING THE WEEKLY STOCK PRICE PERFORMANCE AND TRADING VOLUME FOR THE
PERIOD COMMENCING ON 1/30/98 AND ENDING ON 1/29/99 WITH DESCRIPTION OF SPECIFIC
EVENTS APPEARS HERE]
13
<PAGE>
One-Year Indexed Price History
[GRAPH SHOWING THE HISTORICAL INDEXED PRICE PERFORMANCE FOR THE COMPANY, AN
APPAREL INDEX, A LUXURY GOODS INDEX AND THE S&P 500 FOR THE PERIOD COMMENCING
ON 1/30/98 AND ENDING ON 1/29/99 APPEARS HERE]
Apparel Index includes: Donna Karan, Gucci, Hartmarx, Jones Apparel, Liz
Claiborne, Nautica, Polo Ralph Lauren and Tommy Hilfiger. A broader apparel
index which also includes Fruit of the Loom, Guess ?, Oshkosh B' Gosh, Kellwood,
Oxford Industries, Phillips Van Heusen, Russell, Tultex, V.F. Corp. and Warnaco
declined 6% over the same period.
Luxury Goods Index includes: Christian Dior, LVMH, Tiffany and Richemont.
14
<PAGE>
Post-Announcement Trading Range
[GRAPH SHOWING THE DAILY STOCK PRICE PERFORMANCE AND DAILY TRADING RANGE FOR THE
PERIOD COMMENCING ON 12/9/98 AND ENDING ON 1/29/99 WITH DESCRIPTIONS OF SPECIFIC
EVENTS APPEARS HERE]
15
<PAGE>
Wall Street Perspective before the Offer
[THE FOLLOWING INFORMATION APPEARS AS A CHART IN THE PRINTED MATERIAL, WITH EACH
BROKERAGE HOUSE PLACED IN A MANNER CORRESPONDING TO SHARE PRICE AS OF THE DAY
PRIOR TO PUBLICATION]
<TABLE>
<CAPTION>
Strong Buy Buy Hold Sell
---------- ---- ---- ----
<S> <C> <C> <C>
Black & Co. (10/12) Bear Stearns (11/5) Janney Montgomery Scott (8/26) Tucker Anthony (11/10)
Brean Murray (10/30)
BB Robertson Stephens (11/6)
Salomon SB (8/27)
CIBC Oppenheimer (9/10)
</TABLE>
16
<PAGE>
VALUATION
<PAGE>
Valuation Summary
[THE FOLLOWING INFORMATION IS DEPICTED IN A HORIZONTAL BAR GRAPH IN THE PRINTED
MATERIAL]
<TABLE>
<CAPTION>
<S> <C>
Discounted Cash Flow/(1)/ $26.65 - $34.14
Comparable Company
12.5x-14.5x 1999 P/E $25.63 - $29.73
6.0x-8.0x 1999 EBITDA $26.39 - $34.62
7.0x-9.0x Est. Q1 LTM EBITDA $26.13 - $33.11
</TABLE>
<TABLE>
Comparable Transaction
<S> <C>
6.0x-9.0x Est. Q1 LTM EBITDA $22.64 - $33.11
Leveraged Buyout/(2)/ $27.00 - $30.00
Leveraged Recapitalization/(3)/ $22.70 - $30.15
Premiums Paid/(4)/ $26.33 - $28.52
Pre Announcement $21.94
Cash Portion/(5)/ $29.11
Offer $30.00
</TABLE>
_________________________
/(1)/ Based on 12.5%-13.5% discount rate and 6.0x to 8.0x LTM EBITDA exit
multiple.
/(2)/ Based on Vestar provided debt levels (approximately 5x debt to EBITDA) and
required return of approximately 20% to 30%.
/(3)/ Based on repurchase of 40.0% to 60.0% of shares at $30.00 (implying
approximate debt to EBITDA levels of 3x to 5x) and a trading range for
remaining shares of 8.0x to 12.0x 1999 earnings.
/(4)/ Based on a 20% to 30% premium.
/(5)/ Assuming all shareholders elect cash, the pro-rata cash amount received
per share held is $29.11 (i.e., $0.89 pro-rata stock).
18
<PAGE>
Management Projections ($MM)
<TABLE>
<CAPTION>
Actual Projected
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 1998 1999 2000 2001 2002 2003
------ ------ ------ ------ ------ ------ ------
Operating Results
Net Sales $242.1 $282.0 $314.2 $339.4 $366.5 $395.9 $427.5
Gross Profit $142.6 $161.1 $177.8 $193.4 $210.8 $227.6 $245.8
EBITDA $ 66.9 $ 65.4 $ 71.6 $ 80.4 $ 88.3 $ 94.7 $101.5
EBIT $ 58.0 $ 54.1 $ 58.4 $ 66.2 $ 73.3 $ 79.2 $ 85.5
Sales Growth
Annual 19.3% 16.5% 11.4% 8.0% 8.0% 8.0% 8.0%
2-Year CAGR 22.3% 17.9% 13.9% 9.7% 8.0% 8.0% 8.0%
3-Year CAGR 23.7% 20.3% 15.7% 11.9% 9.1% 8.0% 8.0%
Margins
Gross Margin 58.9% 57.1% 56.6% 57.0% 57.5% 57.5% 57.5%
EBITDA Margin 27.6% 23.2% 22.8% 23.7% 24.1% 23.9% 23.7%
EBIT Margin 24.0% 19.2% 18.6% 19.5% 20.0% 20.0% 20.0%
</TABLE>
19
<PAGE>
Historical and Projected Income Statement Data ($MM, except per share data)/(1)/
<TABLE>
<CAPTION>
Historical Projected
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Financials 1995 1996 1997 1998 1999 2000 2001 2002 2003
------ ------ ------ ------ ------ ------ ------ ------ ------
Net Sales $161.8 $203.0 $242.1 $282.0 $314.2 $339.4 $366.5 $395.9 $427.5
Cost of Sales 74.3 88.9 99.5 120.9 136.4 145.9 155.8 168.2 181.7
------ ------ ------ ------ ------ ------ ------ ------ ------
Gross Profit 87.5 114.1 142.6 161.1 177.8 193.4 210.8 227.6 245.8
SG&A 54.6 68.4 84.5 107.0 119.5 127.3 137.4 148.4 160.3
------ ------ ------ ------ ------ ------ ------ ------ ------
EBIT 33.0 45.7 58.0 54.1 58.4 66.2 73.3 79.2 85.5
Other Income 0.8 1.4 0.7 1.4 0.5 0.5 0.6 0.6 0.6
------ ------ ------ ------ ------ ------ ------ ------ ------
EBT 33.8 47.1 58.7 55.4 58.8 66.7 73.9 79.8 86.1
Income Taxes 14.2 19.9 24.3 22.0 24.0 27.2 30.1 32.5 35.1
------ ------ ------ ------ ------ ------ ------ ------ ------
Net Income 19.6 27.1 34.4 33.4 34.9 39.5 43.8 47.3 51.0
Diluted Shares 16.4 17.0 17.1 17.2 17.0 17.0 17.0 17.0 17.0
EPS $ 1.19 $ 1.59 $ 2.01 $ 1.94 $ 2.05 $ 2.32 $ 2.57 $ 2.78 $ 3.00
EBIT 33.0 45.7 58.0 54.1 58.4 66.2 73.3 79.2 85.5
add: D&A 5.3 7.0 8.9 11.4 13.2 14.2 15.0 15.5 16.0
------ ------ ------ ------ ------ ------ ------ ------ ------
EBITDA 38.3 52.7 66.9 65.4 71.6 80.4 88.3 94.7 101.5
Growth/Margins
Net Sales Growth 26.4% 25.4% 19.3% 16.5% 11.4% 8.0% 8.0% 8.0% 8.0%
COGS %Sales 45.9% 43.8% 41.1% 42.9% 43.4% 43.0% 42.5% 42.5% 42.5%
Gross Margin 54.1% 56.2% 58.9% 57.1% 56.6% 57.0% 57.5% 57.5% 57.5%
SG&A %Sales 33.7% 33.7% 34.9% 38.0% 38.0% 37.5% 37.5% 37.5% 37.5%
EBIT Margin 20.4% 22.5% 24.0% 19.2% 18.6% 19.5% 20.0% 20.0% 20.0%
Other Income %Sales 0.5% 0.7% 0.3% 0.5% 0.2% 0.2% 0.2% 0.2% 0.2%
EBT Margin 20.9% 23.2% 24.3% 19.7% 18.7% 19.7% 20.2% 20.2% 20.2%
Income Taxes %EBT 42.1% 42.4% 41.4% 39.7% 40.7% 40.7% 40.7% 40.7% 40.7%
Net Income Margin 12.1% 13.4% 14.2% 11.9% 11.1% 11.6% 11.9% 11.9% 11.9%
Change in Diluted Shares
0.2% 3.5% 0.7% 0.6% (1.4%) 0.0% 0.0% 0.0% 0.0%
EPS Growth 30.5% 34.0% 26.1% (3.5%) 5.7% 13.4% 10.7% 8.0% 8.0%
EBIT Margin 20.4% 22.5% 24.0% 19.2% 18.6% 19.5% 20.0% 20.0% 20.0%
D&A %Sales 3.3% 3.5% 3.7% 4.0% 4.2% 4.2% 4.1% 3.9% 3.7%
EBITDA Margin 23.7% 26.0% 27.6% 23.2% 22.8% 23.7% 24.1% 23.9% 23.7%
</TABLE>
_________________________
/(1)/ Income tax rate at 40.7%; working capital (excluding cash) at 25.6% in
1999, 25.0% thereafter; capital expenditures at $19.4MM in 1999, $17.5MM
per year thereafter.
20
<PAGE>
Quarterly Performance and Projections
<TABLE>
<CAPTION>
1997 FY 1998 FY 1999 Budget
------------------------------------- ----------------------------------------- -----------------------------------
Financials Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total
-- -- -- -- ----- -- -- -- -- ----- -- -- -- -- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $56.2 $59.6 $54.8 $71.6 $242.1 $68.8 $69.8 $67.7 $75.7 $282.0 $72.8 $78.9 $77.0 $85.5 $314.2
COGS 24.4 23.7 22.6 28.8 99.5 29.0 28.9 28.3 34.7 120.9 33.1 34.1 33.3 35.8 136.4
----- ----- ----- ----- ------ ----- ----- ----- ----- ------ ----- ----- ----- ----- ------
Gross Profit 31.8 35.9 32.2 42.8 142.6 39.8 40.9 39.4 41.0 161.1 39.7 44.8 43.7 49.7 177.8
Operating
Expenses 19.4 21.0 20.1 24.0 84.5 24.2 25.2 27.5 30.2 107.0 30.2 29.7 28.4 31.2 119.5
----- ----- ----- ----- ------ ----- ----- ----- ----- ------ ---- ----- ----- ---- -----
EBIT 12.3 14.8 12.0 18.8 58.0 15.6 15.7 12.0 10.8 54.1 9.5 15.1 15.3 18.5 58.4
Interest/
Other Inc. 0.2 0.2 0.2 0.1 0.7 0.2 0.4 0.5 0.3 1.4 0.1 0.1 0.1 0.1 0.
----- ----- ----- ----- ----- ---- ---- ---- --- ------ ----- ---- ----- ---- ----
EBT 12.6 15.1 12.2 18.8 58.7 15.8 16.1 12.4 11.1 55.4 9.6 15.2 15.4 18.6 58.8
Income
Taxes 5.2 6.2 5.0 7.9 24.3 6.6 6.3 5.1 4.0 22.0 3.9 6.2 6.3 7.6 24.0
----- ----- ----- ----- ------ ---- ----- ----- ----- ------ ----- ----- ----- ---- ----
Net Income 7.4 8.9 7.2 11.0 34.4 9.2 9.8 7.3 7.1 33.4 5.7 9.0 9.1 11.1 34.9
Shares 17.1 17.1 17.1 17.1 17.1 17.0 17.2 17.2 17.0 17.2 17.0 17.0 17.0 17.0 17.0
EPS $0.43 $0.52 $0.42 $0.64 $ 2.01 $ 0.54 $0.57 $0.43 $0.42 $ 1.94 $0.33 $0.53 $0.54 $0.65 $2.05
D&A/(1)/ 2.0 2.3 2.2 2.3 8.9 2.6 2.7 2.9 3.1 11.4 3.3 3.3 3.3 3.3 13.2
EBITDA 14.4 17.2 14.2 21.1 66.9 18.2 18.4 14.9 13.9 65.4 12.8 18.4 18.6 21.8 71.6
Pct. of Net
Sales
COGS 43.5% 39.8% 41.3% 40.2% 41.1% 42.1% 41.4% 41.8% 45.8% 42.9% 45.5% 43.2% 43.3% 41.9% 43.4%
Gross Profit 56.5% 60.2% 58.7% 59.8% 58.9% 57.9% 58.6% 58.2% 54.2% 57.1% 54.5% 56.8% 56.7% 58.1% 56.6%
Operating
Expenses 34.6% 35.3% 36.7% 33.5% 34.9% 35.2% 36.1% 40.5% 39.9% 38.0% 41.4% 37.7% 36.9% 36.5% 38.0%
EBIT 22.0% 24.9% 22.0% 26.3% 24.0% 22.7% 22.5% 17.7% 14.3% 19.2% 13.0% 19.1% 19.9% 21.6% 18.6%
Interest/
Other Inc. 0.4% 0.4% 0.4% 0.1% 0.3% 0.3% 0.6% 0.7% 0.4% 0.5% 0.2% 0.1% 0.2% 0.1% 0.2%
EBT 22.3% 25.3% 22.3% 26.3% 24.3% 23.0% 23.0% 18.3% 14.7% 19.7% 13.2% 19.2% 20.0% 21.8% 18.7%
Income
Taxes 9.2% 10.4% 9.2% 11.0% 10.0% 9.6% 9.1% 7.5% 5.2% 7.8% 5.4% 7.8% 8.2% 8.8% 7.6%
Net Income 13.1% 14.9% 13.1% 15.3% 14.2% 13.4% 14.0% 10.8% 9.4% 11.9% 7.8% 11.4% 11.8% 12.9% 11.1%
D&A/(1)/ 3.6% 3.9% 4.0% 3.3% 3.7% 3.8% 3.9% 4.3% 4.1% 4.0% 4.5% 4.2% 4.3% 3.9% 4.2%
EBITDA 25.6% 28.8% 25.9% 29.5% 27.6% 26.5% 26.4% 22.0% 18.4% 23.2% 17.6% 23.3% 24.2% 25.5% 22.8%
</TABLE>
_________________________
/(1)/ FY 1999 budget does not allocate D&A by quarter; assumed to be equally
distributed over the four quarters.
21
<PAGE>
DCF Valuation Matrix ($MM, except per share data)/(1)/
<TABLE>
<CAPTION>
Discount
Rate EBITDA Exit Multiple
---- --------------------
6.0x 7.0x 8.0x
---- ---- ----
<S> <C> <C> <C> <C>
PV of Cash Flow Stream $ 114 $ 114 $ 114
PV of Perpetuity 338 394 451
------ ------ ------
Enterprise Value $ 452 $ 508 $ 564
12.5% Less: Net Debt (19) (19) (19)
------ ------ ------
Equity Value $ 471 $ 527 $ 584
Implied Price Per Share $27.66 $30.90 $34.14
Implied FCF Growth in Perpetuity 5.4% 6.3% 7.1%
Enterprise Value Multiple to 1998 EBITDA 6.9x 7.8x 8.6x
PV of Cash Flow Stream $ 112 $ 112 $ 112
PV of Perpetuity 331 386 441
------ ------ ------
Enterprise Value $ 443 $ 498 $ 553
13.0% Less: Net Debt (19) (19) (19)
------ ------ ------
Equity Value $ 462 $ 517 $ 572
Implied Price Per Share $27.15 $30.31 $33.48
Implied FCF Growth in Perpetuity 5.8% 6.8% 7.5%
Enterprise Value Multiple to 1998 EBITDA 6.8x 7.6x 8.5x
PV of Cash Flow Stream $ 111 $ 111 $ 111
PV of Perpetuity 323 377 431
------ ------ ------
Enterprise Value $ 434 $ 488 $ 542
13.5% Less: Net Debt (19) (19) (19)
------ ------ ------
Equity Value $ 453 $ 507 $ 561
Implied Price Per Share $26.65 $29.74 $32.84
Implied FCF Growth in Perpetuity 6.3% 7.3% 8.0%
Enterprise Value Multiple to 1998 EBITDA 6.6x 7.5x 8.3x
</TABLE>
_________________________
/(1)/ Based on 16.58MM shares and 0.82MM options with average strike price of
$12.47.
22
<PAGE>
Weighted Average Cost of Capital
<TABLE>
<CAPTION>
Estimated Enterprise Equity Net Debt/
Levered Value Value Total Unlevered
Company Beta/(1)/ ($MM) ($MM) Capital Beta
------- ---- ----- ----- ------- ----
<S> <C> <C> <C> <C> <C>
Tommy Hilfiger 1.1 $3,715 $3,138 16% 1.0
Jones Apparel 1.2 3,529 3,088 13% 1.1
Polo Ralph Lauren 1.0 2,400 2,367 1% 1.0
Liz Claiborne 1.0 2,313 2,363 (2%) 1.0
Nautica 1.2 567 606 (7%) 1.2
Hartmarx 0.8 405 183 55% 0.5
Donna Karan 0.9 139 140 (1%) 0.9
--- ------ ------ --- ---
Mean 1.0 $1,867 $1,698 11% 1.0
=== ====== ====== === ===
</TABLE>
<TABLE>
<CAPTION>
Weighted Average Cost-of-Capital
- -------------------------------------------------------------------------------------
Capital Structure Cost of Equity Cost of Debt Wtd-Avg
- ----------------- -------------- ------------
Debt/ Debt/ Relevered Cost of Before After Cost of
Capital Equity Beta Equity Tax Tax Capital
- ---------- ------- --------- --------------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
0% 0% 0.96 14% 7.0% 4.2% 13.8%
10% 11% 1.03 14% 7.6% 4.6% 13.4%
20% 25% 1.11 15% 8.2% 4.9% 13.0%
30% 43% 1.21 16% 8.8% 5.3% 12.6%
40% 67% 1.35 17% 9.4% 5.6% 12.4%
50% 100% 1.54 18% 10.0% 6.0% 12.2%
</TABLE>
<TABLE>
<CAPTION>
Assumptions
-----------
<S> <C> <C> <C>
Risk Free Rate of Return 4.6% Equity Risk Premium/(2)/ 7.8%
Marginal Tax Rate 40.0% Size Premium/(3)/ 1.7%
</TABLE>
_________________________
/(1)/ Predicted betas. Source: Barra.
/(2)/ Long-horizon expected equity risk premium. Source: Ibbotson Associates.
/(3)/ Expected low-capitalization equity size premium. Source: Ibbotson
Associates.
23
<PAGE>
Selected Apparel Companies - Historical Growth & Margin
[THE FOLLOWING TABLES WERE DEPICTED AS BAR GRAPHS IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION>
Sales Growth/(1)/
------------
Tommy Jones Polo Ralph Liz Donna St. John
Hilfiger /(3)/ Hartmarx Apparel/(3)/ Nautica Lauren Claiborne Karan Knits
-------- ------- ------ ------- ------ -------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
27% 18% 14% 13% 12% 5% (3%) 16%
Mean = 12%
Median = 13%
</TABLE>
<TABLE>
<CAPTION>
EBITDA Margin/(2)/
-------------
Tommy Polo Ralph Jones Liz Donna St. John
Hilfiger Nautica Lauren Apparel Claiborne Hartmarx Karan Knits
-------- ------- ------ ------- --------- -------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
23% 21% 16% 16% 13% 7% NM 23%
Mean = 16%
Median = 16%
</TABLE>
<TABLE>
<CAPTION>
EPS Growth/(1)/
----------
Tommy Jones Liz Polo Ralph Donna St. John
Hilfiger Apparel Nautica Claiborne Lauren Hartmarx Karan Knits
-------- ------- ------- --------- ------ -------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
28% 27% 13% 8% 4% 3% NM (3%)
Mean = 14%
Median = 11%
</TABLE>
<TABLE>
<CAPTION>
EBIT Margin/(2)/
-----------
Tommy Polo Ralph Jones Liz Donna St. John
Nautica Hilfiger Lauren Apparel Claiborne Hartmarx Karan Knits
------- -------- ------ ------- --------- -------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
18% 17% 14% 14% 11% 6% NM 19%
Mean = 13%
Median = 14%
</TABLE>
_________________________
/(1)/ Actual and estimated growth from FY 1997 to FY 1998.
/(2)/ LTM margins.
/(3)/ Pro forma for major acquisitions.
24
<PAGE>
Selected Apparel Companies - Projected Growth & Margin/(1)/
[THE FOLLOWING TABLES WERE DEPICTED AS BAR GRAPHS IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION>
Sales Growth/(1)/
------------
Tommy Jones Polo Ralph Liz Donna St. John
Nautica Hilfiger/(3)/ Apparel/(3)/ Lauren Hartmarx Claiborne Karan Knits
------- -------- ------- ------ -------- --------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
16% 12% 11% 11% 5% 4% 2% 11%
Mean = 9%
Median = 11%
</TABLE>
<TABLE>
<CAPTION>
EBITDA Margin/(2)/
-------------
Tommy Jones Polo Ralph Liz Donna St. John
Hilfiger/(3)/ Nautica Apparel/(3)/ Lauren Claiborne Hartmarx Karan Knits
------- ------- ------- ------ --------- -------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
33% 20% 17% 16% 14% 8% 5% 23%
Mean = 6%
Median = 16%
</TABLE>
<TABLE>
<CAPTION>
EPS Growth/(1)/
----------
Jones Tommy Polo Ralph Liz Donna St. John
Apparel Hilfiger Lauren Nautica Claiborne Hartmarx Karan Knits
------- -------- ------ ------- --------- -------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
24% 20% 15% 12% 6% (27%) NM 6%
Mean = 8%
Median = 14%
</TABLE>
<TABLE>
<CAPTION>
EBIT Margin/(2)/
-----------
Tommy Jones Polo Ralph Liz Donna St. John
Nautica Hilfiger/(3)/ Apparel/(3)/ Lauren Claiborne Hartmarx Karan Knits
------- -------- ------- ------ --------- -------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
18 % 18% 16% 13% 11% 7% 3% 19%
Mean = 12%
Median = 13%
</TABLE>
_________________________
/(1)/ Estimated growth from FY 1998 to FY 1999.
/(2)/ NFY margin.
/(3)/ Pro forma for major acquisitions.
25
<PAGE>
Selected Apparel Companies - LTM Multiples/(1)/
[THE FOLLOWING TABLES WERE DEPICTED AS BAR GRAPHS IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION>
Adjusted Market Value/LTM Sales
-------------------------------
Tommy Jones Polo Ralph Liz Donna SJK SJK
Hilfiger Apparel Lauren Nautica Claiborne Hartmarx Karan Pre-annc./(2)/ Proposal /(2)/
-------- ------- ------ ------- --------- -------- ----- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2.6x 1.9x 1.6x 1.0x 1.0x 0.5x 0.2x 1.3x 1.7x
Mean = 1.3x
Median = 1.0x
</TABLE>
<TABLE>
<CAPTION>
Adjusted Market Value/LTM EBITDA
--------------------------------
Jones Tommy Polo Ralph Liz Donna SJK SJK
Apparel Hilfiger Lauren Hartmarx Claiborne Nautica Karan Pre-annc./(2)/ Proposal /(2)/
------- -------- ------ -------- --------- ------- ----- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12.0x 11.7x 9.9x 8.1x 7.2x 5.1x NM 4.9x 8.1x
Mean = 9.0x
Median = 9.0x
</TABLE>
<TABLE>
<CAPTION>
Price/LTM Earnings
------------------
Jones Tommy Polo Ralph Donna SJK SJK
Apparel Hilfiger Lauren Claiborne Hartmarx Nautica Karan Pre-annc./(2)/ Proposal /(2)/
------- -------- ------ --------- -------- ------- ----- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
22.3x 21.1x 19.0x 13.6x 11.9x 10.3x NM 10.1x 16.8x
Mean = 16.4x
Median = 16.3x
</TABLE>
<TABLE>
<CAPTION>
Adjusted Market Value/LTM EBIT
-------------------------------
Tommy Jones Polo Ralph Liz Donna SJK SJK
Hilfiger Apparel Lauren Hartmarx Claiborne Nautica Karan Pre-annc./(2)/ Proposal /(2)/
-------- ------- ------ -------- --------- ------- ----- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
15.2x 13.4x 11.5x 9.8x 8.6x 5.7x NM 5.8x 10.0x
Mean = 10.7x
Median = 10.7x
</TABLE>
_________________________
/(1)/ Stock prices as of 1/29/99.
/(2)/ SJK pre-announcement multiples based on LTM ended FY 1998 Q3 results
while proposal multiples based on estimated LTM ended FY 1999 Q1 results.
26
<PAGE>
Selected Apparel Companies - NFY Multiples/(1)/
[THE FOLLOWING TABLES WERE DEPICTED AS BAR GRAPHS IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION>
Adjusted Market Value/NFY Sales
-------------------------------
Tommy Jones Polo Ralph Liz Donna SJK SJK
Hilfiger Apparel/(3)/ Lauren Claiborne Nautica Hartmarx Karan Pre-annc./(2)/ Proposal /(2)/
-------- ------- ------ --------- ------- -------- ----- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2.2x 1.7x 1.4x 0.9x 0.9x 0.5x 0.2x 1.2x 1.6x
Mean = 1.1x
Median = 0.9x
</TABLE>
<TABLE>
<CAPTION>
Adjusted Market Value/NFY EBITDA
--------------------------------
Jones Tommy Polo Ralph Liz Donna SJK SJK
Apparel Hilfiger Lauren Claiborne Hartmarx Nautica Karan Pre-annc./(2)/ Proposal /(2)/
------- -------- ------ --------- -------- ------- ----- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
9.9x 9.5x 8.9x 6.8x 6.6x 4.5x 4.0x 4.9x 6.9x
Mean = 7.2x
Median = 6.8x
</TABLE>
<TABLE>
<CAPTION>
Price/NFY Earnings
------------------
Donna Jones Polo Ralph Tommy Liz SJK SJK
Karan Apparel Lauren Hilfiger Claiborne Hartmarx Nautica Pre-annc./(2)/ Proposal /(2)/
----- ------- ------ -------- --------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
20.6X 17.7x 17.3x 15.4x 12.6x 9.3x 9.2x 9.8x 14.6x
Mean = 14.6x
Median = 15.4x
</TABLE>
<TABLE>
<CAPTION>
Adjusted Market Value/NFY EBIT
------------------------------
Tommy Jones Polo Ralph Liz Donna SJK SJK
Hilfiger Apparel Ralph Claiborne Karan Hartmarx Nautica Pre-annc./(2)/ Proposal /(2)/
-------- ------- ----- --------- ----- -------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
11.9x 10.8x 10.4x 8.1x 8.0x 7.8x 5.0x 5.6x 8.4x
Mean = 8.9x
Median = 8.1x
</TABLE>
_________________________
/(1)/ Stock price as of 1/29/99.
/(2)/ SJK pre-announcement multiples based on street projected FY 1999 results
while proposal multiples based on management projected FY 1999 results.
27
<PAGE>
Selected Comparable Transactions - Sales Multiples
[THE FOLLOWING INFORMATION WITH RESPECT TO SALES MULTIPLES WAS DEPICTED AS A
HORIZONTAL BAR GRAPH IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION>
Adjusted
Purchase
Price Annc.
Target/Aquiror ($MM)/(1)/ Date Sales Multiples
- -------------- --------- ---- ---------------
<S> <C> <C> <C>
Pepe Jean USA, TJ Far East & Tomcan 3.4x
Investments/Tommy Hilfiger $1,395 1/98
Valentino/Holding di Partecipazioni 300 9/97 3.0x
Winning Ways/Jordan Co. 233 1/97 1.3x
Sun Apparel/Jones Apparel 449 9/98 1.1x
Helly Hansen/Investcorp 112 4/97 1.1x
Designer Holdings/Warnaco 398 9/97 0.8x
Severin Montres/Gucci 150 11/97 0.8x
The William Carter Co./Investcorp 208 10/96 0.7x
Lejaby-Euralis/Warnaco 79 5/96 0.7x
Jerrell/Haggar 37 12/98 0.6x
Sun Apparel/Vestar 156 10/97 0.6x
Farah/Tropical Sportswear 144 5/98 0.5x
Gerber Childrenswear/Citicorp Venture Capital 74 1/96 0.4x
Joop!/Wuensche AG 83 2/98 0.3x
Bidermann Industries/Vestar 360 3/98 N/A
</TABLE>
Mean = 1.1x
Median = 0.8x
_________________________
/(1)/ Sum of purchase price and estimated net debt.
28
<PAGE>
Selected Comparable Transactions - EBITDA Multiples
[THE FOLLOWING INFORMATION WITH RESPECT TO EBITDA MULTIPLES WAS DEPICTED AS A
HORIZONTAL BAR GRAPH IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION>
Adjusted
Purchase
Price Annc. EBITDA
Target/Aquiror ($MM)/(1)/ Date Multiples
- -------------- ---------- ---- ---------
<S> <C> <C> <C>
Pepe Jean USA, TJ Far East & Tomcan 17.4x
Investments/Tommy Hilfiger $1,395 1/98
Farah/Tropical Sportswear 144 5/98 16.5x
Helly Hansen/Investcorp 112 4/97 8.9x
Sun Apparel/Jones Apparel 449 9/98 8.3x
The William Carter Co./Investcorp 208 10/96 6.8x
Designer Holdings/Warnaco 398 9/97 6.6x
Lejaby-Euralis/Warnaco 79 5/96 6.5x
Winning Ways/Jordan Co. 233 1/97 6.2x
Sun Apparel/Vestar 156 10/97 6.0x
Gerber Childrenswear/Citicorp Venture Capital 74 1/96 4.0x
Bidermann Industries/Vestar 360 3/98 N/A
Valentino/Holding di Partecipazioni 300 9/97 N/A
Severin Montres/Gucci 150 11/97 N/A
Joop!/Wuensche AG 83 2/98 N/A
Jerrell/Haggar 37 12/98 N/A
</TABLE>
Mean = 8.7x
Median = 6.7x
_________________________
/(1)/ Sum of purchase price and estimated net debt.
29
<PAGE>
LBO Summary ($MM, except per share data)
<TABLE>
<CAPTION>
Price per Share
---------------
<S> <C> <C> <C> <C>
$27.00 $28.00 $29.00 $30.00
------ ------ ------ ------
Equity Value $459.5 $476.9 $494.3 $511.7
Enterprise Value 440.2 457.6 475.0 492.3
Bank Debt @ 8.0% 155.0 155.0 155.0 155.0
High Yield @ 11.0% 160.0 160.0 160.0 160.0
Equity Investment 104.5 121.0 137.5 153.9
Net Debt/Est. Q1 LTM EBITDA 5.2x 5.2x 5.2x 5.2x
Net Debt/1998 EBITDA 4.8 4.8 4.8 4.8
Est. Q1 LTM EBITDA/Interest 2.0 2.0 2.0 2.0
1998 EBITDA/Interest 2.1 2.1 2.1 2.1
Implied 5-Year Equity Returns @
6.0x LTM EBITDA 21.4% 18.7% 16.3% 14.1%
7.0x LTM EBITDA 27.3% 24.4% 21.9% 19.7%
8.0x LTM EBITDA 32.2% 29.2% 26.6% 24.3%
</TABLE>
30
<PAGE>
Leveraged Recapitalization Summary (MM, except per share data)
<TABLE>
<CAPTION>
Percent of Primary Shares Repurchased
-------------------------------------
<S> <C> <C> <C>
40.0% 50.0% 60.0%
----- ----- -----
Purchase Price per Share $30.00 $30.00 $30.00
Number of Shares Repurchased 6.6 8.3 9.9
Value of Shares Repurchased $199.0 $248.7 $298.4
Bank Debt @ 8.0% 36.6 87.4 138.2
High Yield @ 11.0% 150.0 150.0 150.0
Net Debt/Est. Q1 LTM EBITDA 3.1x 3.9x 4.8x
Net Debt/1998 EBITDA 2.9 3.6 4.4
Est. Q1 LTM EBITDA/Interest 3.0 2.5 2.1
1998 EBITDA/Interest 3.3 2.7 2.3
Implied Blended Value per Share @
8.0x 1999 P/E $22.70 $24.41 $26.10
10.0x 1999 P/E 25.37 26.76 28.13
12.0x 1999 P/E 28.05 29.11 30.15
</TABLE>
31
<PAGE>
Premiums Paid Summary
Time Horizon: January 1998 - present
Transaction Type: Control Acquisitions
Target Transaction Value Range: $100MM - $1BN
Company Universe: 167 public companies
<TABLE>
<CAPTION>
% Stock Premium Before Announcement Date
----------------------------------------
1 Day 1 Week 4 Weeks
----- ------ -------
<S> <C> <C> <C>
Adjusted Mean/(1)/ 24.1% 28.9% 34.7%
Mean 25.8% 31.9% 37.6%
Median 20.0% 28.4% 33.2%
High 126.4% 172.6% 166.7%
Low (48.5%) (42.1%) (36.8%)
</TABLE>
_________________________
Source: Securities Data Company.
/(1)/ Excludes the highest 10% and the lowest 10% of universe.
32
