FLEET M & A ADVISORS LOGO Mail Stop: PA RP 09912A
Four Penn Center, Suite 1200
Philadelphia, PA 19103
267 675.0329 tel
267 675.0312 fax
June 23, 2002
Special Committee of the Board of Directors
CSS Industries, Inc.
1845 Walnut Street
Philadelphia, PA 19103
Members of the Special Committee of the Board of Directors:
The Special Committee of the Board of Directors (the "Special Committee") of CSS
Industries, Inc. (the "Company") has requested our opinion as investment
bankers, as to the fairness to the Company, from a financial point of view, of
the consideration payable in connection with the proposed repurchase of shares
of the Company's common stock currently owned directly or beneficially by Mr.
Jack Farber, members of his family or trusts created or controlled by Mr. Farber
or members of his family (the "Sellers"). On June 24, 2002, prior to the opening
of trading on the New York Stock Exchange, the Company will purchase, and the
Sellers will sell, 1,100,000 shares of the Company's common stock (the
"Transaction") for a cash purchase price of $33.00 per share, or an aggregate
$36.3 million (the "Repurchase Price").
For purposes of this opinion we have, among other things:
(i) reviewed certain publicly available financial statements and
other business and financial information of the Company;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning the Company prepared
by the Company's management;
(iii) reviewed certain financial forecasts and other forward looking
financial information prepared by the Company's management;
(iv) held discussions with the management of the Company concerning
the business, past and current operations, financial condition
and future prospects of the Company, including discussions
with management of the Company concerning the effect of the
Transaction on the capital structure and financial condition
of the Company and their views regarding the strategic
rationale for the Transaction;
(v) reviewed the proposed Repurchase Price and the size of the
block shares to be repurchased;
(vi) reviewed the stock price and trading history of the Company,
including that the closing price of the Company's common stock
on the New York Stock Exchange on June 21, 2002 was $34.75 and
that the trailing ten-day average closing price on the New
York Stock Exchange is $34.64;
(vii) compared the financial performance of the Company and the
prices and trading activity of Company Common Stock with that
of certain other publicly traded companies comparable with the
Company;
A Division of Fleet Securities
(viii) compared the financial terms of the Transaction to the
financial terms, to the extent publicly available, of other
repurchase transactions that we deemed relevant;
(ix) prepared discounted cash flow analyses of the Company using
management's base case financial forecasts and repurchase
scenarios; and
(x) made such other studies and inquiries, and reviewed such other
data, as we deemed relevant.
In our review and analysis, and in arriving at our opinion, we have assumed and
relied upon the accuracy and completeness of all of the financial and other
information provided to us (including information furnished to us orally or
otherwise discussed with us by management of the Company) or publicly available
and have neither attempted to verify, nor assumed responsibility for verifying,
any of such information. We have relied upon the assurances of management of the
Company that they are not aware of any facts that would make such information
inaccurate or misleading. Furthermore, we did not obtain or make, or assume any
responsibility for assuming or making, any independent evaluation or appraisal
of the properties, assets or liabilities (contingent or otherwise) of the
Company, nor were we furnished with any such evaluation or appraisal. With
respect to the financial forecasts and projections (and the assumptions and
bases therefor) for the Company that we have reviewed, upon the advice of the
Company's management, we have assumed that such forecasts and projections have
been reasonably prepared in good faith on the basis of reasonable assumptions
and reflect the best currently available estimates and judgments as to the
future financial condition and performance of the Company. We express no view as
to such forecasts or projections or the assumptions on which they were based. We
have assumed that the Transaction will be consummated upon the terms provided to
us by the Company without material alteration thereof. In addition, we have
assumed that the historical financial statements of the Company reviewed by us
have been prepared and fairly presented in accordance with U.S. generally
accepted accounting principles consistently applied. We have relied as to all
legal matters relevant to rendering our opinion on the advice of counsel.
The preparation of a fairness opinion is a complex process that is not
necessarily susceptible to partial analysis or summary description. In arriving
at our opinion, we did not attribute any particular weight to any analysis or
factor considered, but rather made qualitative judgments as to the significance
and relevance of each analysis or factor. Accordingly, we believe that our
analysis must be considered as a whole and that considering any portion of such
analysis and of the factors considered, without considering all analyses and
factors, could create an incomplete view of the processes underlying our
opinion.
This opinion is necessarily based upon market, economic and other conditions as
in effect on, and information made available to us as of, the date hereof. We
disclaim any undertaking or obligation to advise any person of any change in any
matter affecting this opinion which may come or be brought to our attention
after the date of this opinion. Our opinion is limited to the fairness, from a
financial point of view and as to the date hereof, to the Company of the
consideration to be paid in the Transaction. We do not express any opinion as to
any tax or other consequences that might result from the Transaction. We were
not asked to and did not participate in the negotiations between the Special
Committee and the Sellers regarding the Repurchase Price, solicit third party
offers to acquire the shares being repurchased in the Transaction or propose or
evaluate any other alternatives available to the Company. Our opinion does not
address the relative merits of the Transaction and the other business strategies
that the Company's Board of Directors or the Special Committee has considered or
may be considering, nor does it address the decision of the Special Committee or
the Company's Board of Directors to proceed with the Transaction.
We were engaged by the Special Committee to render our opinion and will receive
a fee for our services, a significant portion of which is contingent upon the
delivery of this opinion, and the Company has agreed to indemnify us for certain
liabilities that may arise out of our engagement. As you are aware, our
affiliate Fleet National Bank, has in the past provided and participated in, and
is currently providing and participating in, various loan and credit facilities
to CSS Industries, Inc. and its subsidiaries, and Fleet National Bank has
received and will receive compensation, including the repayment of principal and
payment of interest, in connection with its provision of and participation in
such loan and credit facilities. In the ordinary course of business we or our
affiliates may trade in the debt or equity securities of the Company for our own
accounts and for the accounts of our customers and, accordingly, may at any time
hold a long or short position in such securities.
Our opinion expressed herein is provided for the information of the Special
Committee in connection with its evaluation of the Transaction. Our opinion is
not intended to be and does not constitute a recommendation as to any action the
Company should take in connection with the Transaction or any aspect thereof and
is not a recommendation to any person that the Transaction should be
consummated. We express no opinion regarding the price at which shares of the
Company's common stock may trade at any time following the Transaction. This
opinion may not be summarized, described or referred to or furnished to any
party except with our express prior written consent (including any written
consent previously granted).
Based upon and subject to the foregoing considerations, it is our opinion that,
as of the date hereof, the Repurchase Price to be paid in the Transaction is
fair to the Company from a financial point of view.
Very truly yours,
FLEET SECURITIES, Inc.
/s/ Fleet Securities, Inc.
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