Eddie Bauer — Merger or Acquisition (January 2007)
28 slides from Eddie Bauer's merger presentation, Jan 10, 2007
Slide 1: Slide 1
Slide 2: Fair and certain value of $9.25 cash per share: Vote FOR Sale to Golden Gate and Sun Capital
Fair and certain value of $9.25 cash per share Vote FOR Sale to Golden Gate and Sun Capital
Slide 3: Agenda
Agenda Background of Transaction Board Process Designed to Deliver Stockholder Value Transaction Overview Conclusion General Discussion and Q&A Appendices
Slide 4: Background of Transaction
Background of Transaction
Slide 5: Operating Performance
Operating Performance Key developments On June 21, 2005, Eddie Bauer emerged from bankruptcy as a stand-alone publicly owned company for the first time On December 15, 2005, Eddie Bauer filed a Form 10 to register its shares, but due to errors identified in the financial statements, the Form 10 was
Slide 6: Comparable Store Sales
Comparable Store Sales Note: Comparable store sales compare current quarter performance with same quarter of previous year Background of Transaction (26.7)% (21.6)% (13.3)% (14.2)% (10.5)% (13.6)% (3.6)% (2.5)% 2.1% (2.4)% (8.2)% (5.1)% (7.0)% (2.1)% (5.8)% (2.5)% 2 Year Comp Store Sales
Slide 7: Net Sales per Gross Square Foot
Net Sales per Gross Square Foot Background of Transaction
Slide 8: Leverage
Leverage Eddie Bauer emerged from bankruptcy with a $300 million term loan incurred to repay Spiegel Group creditors and a revolving credit facility under which the Company could borrow up to $150 million In April 2006, due to financial results, the Company had to negotiate amendments to certain fin
Slide 9: Board Process Designed to Maximize Stockholder Value
Board Process Designed to Maximize Stockholder Value
Slide 10: Board's Strategic Review of the Company
Board's Strategic Review of the Company Eight of the nine directors are independent (see Appendix A) Board of Directors engaged in a comprehensive strategic review of the Eddie Bauer business in February 2006 Board discussed declining performance, reasons for disappointing Fall/Holiday 2005 results
Slide 11: Board's Strategic Review of the Company
Board's Strategic Review of the Company If successful turnaround, significant improvement in EBITDA expected to take approximately 12 to 18 months due to nature of turnaround effort Loan agreement limits capital expenditures and discretionary marketing activities, impeding ability to implement turna
Slide 12: Thorough and Deliberative Sale Process
Thorough and Deliberative Sale Process Board concluded May 3, 2006 discussions by: Approving a proposal to review strategic options to enhance stockholder value, including the exploration of a sale of the company Appointing a special committee of independent directors to oversee the process, engage
Slide 13: Concerns raised by prospective bidders during preliminary review
Concerns raised by prospective bidders during the preliminary review process: Trend over last several years of significant declines in actual sales and comparable store sales Belief that the current market price of Eddie Bauer common stock was well above levels reflecting the realistic value of the
Slide 14: Board Review of Sale Process
Board Review of Sale Process Evaluation of Preliminary Bids 2 financial bidders with unacceptably low purchase prices were dismissed by the Board from remainder of process 4 remaining bidders invited to conduct additional due diligence, subject to the Board's decision to continue the sale process; 1
Slide 15: Submission of Final Bids
Submission of Final Bids September 21, 2006: Final bid deadline September 15, 2006: Golden Gate and Sun Capital separately contacted Goldman Sachs requesting Eddie Bauer's permission to work together to potentially make a joint bid Unwilling to submit independent bids Board authorized Golden Gate an
Slide 16: Core Rationale
Core Rationale $9.25 cash per share offers certainty and attractive valuation for stockholders 8.6x LTM1 EV/EBITDA, where EBITDA excludes non-cash stock compensation expense 10.4x LTM1 EV/EBITDA, where EBITDA includes non-cash stock compensation expense Certainty of price and financing Speed of exec
Slide 17: Transaction Overview
Transaction Overview
Slide 18: Key Terms
Key Terms Sun Capital Partners, Inc. and Golden Gate Capital (Buyers) acquire Eddie Bauer for $9.25 cash per share Sale of 100% of the stock of Eddie Bauer One-step merger; no financing condition Break-up fee of $8.0 million, plus reimbursement of buyer expenses of up to $5.0 million, payable under
Slide 19: Valuation Metrics
Valuation Metrics 1 For third quarter ended September 30, 2006. To normalize seasonal revolver balances, total debt balance calculated using $19.6 million 365-day average revolver balance as of September 30, 2006. LTM EBITDA includes Other Income Transaction Overview
Slide 20: Conclusion
Conclusion
Slide 21: Conclusion
Conclusion Board process designed to ensure stockholders receive full value for their investment Considered all reasonable alternatives to deliver full value to stockholders Fair value of $9.25 cash per share Fairness of price supported by valuation analysis Two fairness opinions received from Goldm
Slide 22: General Discussion and Q&A
General Discussion and Q&A
Slide 23: Appendix A
Appendix A
Slide 24: Board of Directors
Board of Directors Independent, Knowledgeable and Committed to Stockholder Value 8 out of the 9 directors are independent directors Name Position Description/Biography William T. End Chairman, Independent Director Former Chairman and Chief Executive Officer of Cornerstone Brands and former President
Slide 25: Appendix B
Appendix B
Slide 26: Unanimous Approval of Board to Pursue Transaction
Unanimous Approval of Board to Pursue Transaction Factors considered by Board included: Possible alternatives to a sale, operating on a stand-alone basis and implementing challenging turnaround strategy Likelihood in absence of a transaction that Company would be required to either negotiate additio
Slide 27: Cautionary Statement Regarding Forward Looking Statements
Cautionary Statement Regarding Forward Looking Statements: This document includes statements that do not directly or exclusively relate to historical facts. Such statements are "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934. These forward-lookin
Slide 28: Important Information for Investors and Stockholders
Important Information for Investors and Stockholders In connection with the proposed merger and related transactions, Eddie Bauer has filed a definitive proxy statement with the Securities and Exchange Commission. Eddie Bauer stockholders are urged to read the definitive proxy statement carefully, b
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