Confidential
PROJECT SPITZ
Presentation to the Special Committee
of the Board of Directors of Wonderco
November 12, 1999
[LOGO]
PROJECT SPITZ
- --------------------------------------------------------------------------------
Table of Contents
1. EXECUTIVE SUMMARY
2. VALUATION OF SPITZ
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SPITZ
- --------------------------------------------------------------------------------
EXECUTIVE SUMMARY
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SPITZ EXECUTIVE SUMMARY
- --------------------------------------------------------------------------------
Background
WASSERSTEIN PERELLA & CO. ("WP&CO.") HAS BEEN HIRED BY THE SPECIAL COMMITTEE
OF WONDERCO (THE "SPECIAL COMMITTEE") TO DETERMINE THE FAIRNESS TO WONDERCO
OF AN ACQUISITION OF SPITZ FOR $20.80 PER SHARE IN CASH
a combined Wonderco/Spitz would have approximately $2.6 billion in sales
and $429 million in EBITDA
the transaction is expected to be accretive to Wonderco shareholders
SPITZ IS A PUBLICLY TRADED MANUFACTURER AND MARKETER OF SWIMWEAR AND ACTIVE
FITNESS APPAREL WITH APPROXIMATELY 140 RETAIL STORES
on October 8, 1999, the last trading day prior to the announcement of the
Wonderco proposal, Spitz traded at $17.56, with an equity market value of
$361 million and an enterprise value of $456 million, implying multiples
of 1.1x sales, 6.6x EBITDA, 7.9x EBIT and 13.6x net income on a trailing
basis
prior to the Wonderco offer, Spitz stock had increased 63% over a
three-year period versus 91% for the S&P 500 and a decrease of 4% for its
publicly traded peer group
ALTHOUGH INDEPENDENT, THE TWO COMPANIES HAVE MANY SIGNIFICANT BUSINESS
ARRANGEMENTS INCLUDING:
sharing top management, as well as certain occupancy, design,
manufacturing, purchasing, product sales, laboratory testing, computer
services and transportation services
Wonderco also has a sub-license from Spitz to manufacture and sell
intimate apparel under the Speedo label as well as licenses to make
certain apparel under the Catalina and White Stag labels
in addition, the two companies have jointly negotiated agreements with
vendors and suppliers
on a diluted basis, Linda Wachner, the CEO of both companies, owns
approximately 20% of Spitz common shares and 20% of Wonderco common
shares
ON OCTOBER 10, 1999, WONDERCO PROPOSED ACQUIRING ALL OF THE OUTSTANDING
SHARES OF SPITZ FOR CASH CONSIDERATION OF $20.50 PER SHARE
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SPITZ EXECUTIVE SUMMARY
- --------------------------------------------------------------------------------
Overview of Proposal
WONDERCO HAS PROPOSED ACQUIRING ALL OF THE OUTSTANDING SHARES OF SPITZ FOR
CASH CONSIDERATION OF $20.80 PER SHARE
THE $20.80 PER SHARE OFFER PRICE IMPLIES THE FOLLOWING MARKET
CAPITALIZATION, TRADING MULTIPLES AND PREMIUM TO MARKET
IMPLIED MARKET CAPITALIZATION
Spitz Offer Price $20.80
Total Shares Outstanding 20.3
Total Options Outstanding 3.3
Average Exercise Price of Options $18.47
Equity Market Value $430
Plus: Net Debt 95
------
Adjusted Market Value $525
IMPLIED TRANSACTION MULTIPLES
ADJUSTED MARKET VALUE
AS A MULTIPLE OF
--------------------- PRICE TO
SALES EBITDA EBIT EARNINGS
------- -------- ------ ----------
1999A(1) 1.28x 7.6x 9.1x 16.3x
2000E(2) 1.16x 7.1x 8.3x 14.5x
- ------------
(1) As of June 30, 1999.
(2) Based on analyst projections in line with consensus First Call earnings
estimates.
SHARE PRICE PREMIUM COMPARISON
1 MONTH 6 MONTH 1 YEAR 52-WEEK 52-WEEK
1 DAY AVERAGE AVERAGE AVERAGE HIGH LOW
------- --------- --------- --------- --------- ---------
Share Price Prior to offer $17.56 $17.35 $17.25 $16.74 $18.56 $13.13
Premium 18.4% 19.9% 20.6% 24.3% 12.1% 58.4%
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SPITZ EXECUTIVE SUMMARY
- --------------------------------------------------------------------------------
Transaction Rationale
WONDERCO MANAGEMENT BELIEVES THAT AN ACQUISITION OF SPITZ WILL INCREASE
WONDERCO SHAREHOLDER VALUE
potentially enhanced top line growth (e.g., through sales in Europe
through Rasurel, Wonderco's non-racing swimwear business)
annual synergies related to cost reduction estimated by Wonderco
management at approximately $3 million
- overlapping management and administrative functions (estimated to
generate approximately $1 million in annual savings)
- public company costs (directors, D&O insurance, filings, etc.)
- MIS cost savings
80% of Spitz products already produced by Wonderco in Mexico
- $5 million in estimated cost savings relating to Wonderco
manufacturing remaining 20% of Spitz's products
consolidates management of two companies under one structure and
eliminates potential conflicts
- perception that management can give undivided attention to Wonderco
should simplify street view and help the stock price
opportunity to solidify Catalina brand for mass merchandise channel
Ubertech technology could be utilized to develop a new Sports division for
the combined companies
- represents additional technological advantage for Calvin Klein jeans
and Chaps sportswear businesses where graphic T-shirts are a large
part of the sales
extending Weight Watchers brand into swimwear and body wear for the mass
market
gain additional key licenses, including Polo swimwear
offsetting high seasons for respective businesses will improve Wonderco's
financial risk profile by reducing earnings and cash flow seasonality
- Spitz generates most of its earnings and cash flow between January and
June, the lean period of Wonderco's own business cycle
Spitz' business has demonstrated double-digit growth over the past three
years
- sales and EBITDA annual growth rates of 12.8% and 10.9%, respectively
in a market which rewards larger capitalization companies, the transaction
would increase financial profile of Wonderco
- increase 1999 estimated pro forma sales and EBITDA from $2.1BN and
$358MM to $2.6BN and $429MM, respectively
Wonderco balance sheet will allow expansion and acceleration of retail
store developments
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SPITZ EXECUTIVE SUMMARY
- --------------------------------------------------------------------------------
Overview of WP&Co. Due Diligence-to-Date
WP&CO. HAS MET WITH WONDERCO MANAGEMENT ON SEVERAL OCCASIONS
reviewed with management the transaction rationale and benefits, potential
cost savings and other synergies, financing for the acquisition, change of
control issues and potential market reaction
also reviewed publicly available information on both Wonderco and Spitz
have been provided with forecasts for Spitz prepared by Wonderco
management as well as internal budgets and projections prepared by Spitz
senior management
- we compared both forecasts to Wall Street consensus estimates for
FY2000, which we utilized in our analysis, as well as against each
other with respect to FY2001 and FY2002
WP&CO. HAS PERFORMED A VALUATION OF SPITZ USING THE FOLLOWING METHODOLOGIES:
discounted cash flow ("DCF") analysis
- provides a net present valuation of the projected after-tax unlevered
free cash flows of Spitz
- three year analysis based on analyst projections in line with
consensus First Call earnings estimates through FY2000 and
projections provided by Wonderco management for FY2001 and FY2002
comparable companies analysis
- provides a market valuation benchmark based on the trading multiples
of selected comparable companies
- based on a review of the trading and financial performance of a
selected universe of comparable public apparel companies
comparable transactions analysis
- provides a market benchmark based on the consideration paid in
selected comparable transactions
- based on a review of selected merger and acquisition transactions
involving target companies in the apparel sector
premiums paid analysis
- considers control premia paid in acquisitions ranging in size from
$100 million to $1,000 million from January 1998 to date
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SPITZ EXECUTIVE SUMMARY
- -------------------------------------------------------------------------------
Spitz LTM Price and Volume History
[PERFORMANCE GRAPH]
[1] 1/29/99: Announces that FY 1999 Q2 EPS increased 12% to $0.21
[2] 5/4/99: Announces that FY 1999 Q3 EPS increased 11% to $0.69
[3] 5/28/99: Announces the acquisition of 70% of Ubertech Texas, a Houston
developer of silicone-based graphic designs and applications
[4] 7/8/99: Pentland Group, 22% owners of Spitz, announces that it plans to go
private following a 25% stock market decline in the past three years
[5] 8/17/99: Announces that FY 1999 Q4 EPS increased 30% to $0.69
[6] 8/18/99: The Board institutes a shareholder rights plan
[7] 10/10/99: Wonderco offers to acquire all of the outstanding stock of Spitz
in a cash transaction valued at $20.50 per share
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SPITZ EXECUTIVE SUMMARY
- --------------------------------------------------------------------------------
Valuation Summary ($ in millions, except per share amounts)
DISCOUNTED CASH FLOW(1) $20.53 $27.35
COMPARABLE COMPANIES ANALYSIS
7.5x-8.5x 1999 EBITDA of $68.6MM $20.45 $23.79
With a 30% control premium(3) $26.58 $30.93
5.0x-6.0x 2000E EBITDA of $74.2MM(2) $13.45 $17.06
With a 30% control premium(3) $17.48 $22.18
10.0x-13.0x 2000E Net Income of $29.6MM(2) $14.42 $18.74
With a 30% control premium(3) $18.75 $24.36
COMPARABLE ACQUISITIONS ANALYSIS
1.1x-1.3x 1999 Sales of $410.8MM $17.39 $21.39
8.0x-9.0x 1999 EBITDA of $68.6MM $22.12 $25.46
PREMIUMS PAID(4) $21.95 $23.71
PRE-ANNOUNCEMENT PRICE
$17.56
OFFER PRICE
$20.80
- -------------------
(1) Based on analyst projections in line with consensus First Call earnings
estimates through FY2000 and projections provided by Wonderco management for
FY2001-FY2002, utilizing a range of discount rates from 13.5% to 14.5% and
LTM EBITDA terminal multiples from 7.0x to 9.0x.
(2) Based on analyst projections in line with consensus First Call earnings
estimates.
(3) Based on selected public change-in-control transactions with transaction
values ranging from $100MM to $1,000MM from 1998 to present.
(4) 25% to 35% premium, based on selected public change of control transactions
with transaction values ranging from $100MM to $1,000MM from 1998 to
present, applied to the pre-announcement price of $17.56.
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SPITZ Executive Summary
- --------------------------------------------------------------------------------
Analysis at Various Purchase Prices
($MM, except per share amounts)
- ------------------------------------------------------------------------------------------------------------------------------
SPITZ PRICE PER SHARE ($) $ 17.56 $ 19.00 $ 20.00 $ 20.80 $ 21.00 $ 22.00 $ 23.00 $ 24.00
PREMIUM TO MARKET (1) 0.0% 8.2% 13.9% 18.4% 19.6% 25.3% 31.0% 36.7%
- ------------------------------------------------------------------------------------------------------------------------------
SPITZ EQUITY MARKET VALUE (2) $361 $391 $413 $430 $435 $458 $482 $505
NET DEBT 95 95 95 95 95 95 95 95
--- --- --- --- --- --- --- --
TRANSACTION VALUE $456 $486 $507 $525 $529 $553 $577 $600
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
LTM TRANSACTION MULTIPLES: 1999A
Sales $410.8 1.11x 1.18x 1.24x 1.28x 1.29x 1.35x 1.40x 1.46x
EBITDA 68.6 6.6 7.1 7.4 7.6 7.7 8.1 8.4 8.7
EBIT 57.5 7.9 8.5 8.8 9.1 9.2 9.6 10.0 10.4
Net Income 26.4 13.6 14.8 15.6 16.3 16.4 17.3 18.2 19.1
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
2000E TRANSACTION MULTIPLES: 2000E (3)
Sales $454.3 1.00x 1.07x 1.12x 1.16x 1.17x 1.22x 1.27x 1.32x
EBITDA 74.2 6.1 6.6 6.8 7.1 7.1 7.5 7.8 8.1
EBIT 63.5 7.2 7.7 8.0 8.3 8.3 8.7 9.1 9.5
Net Income 29.6 12.2 13.2 13.9 14.5 14.7 15.5 16.3 17.1
- --------------------------------------------------------------------------------------------------------------------------------
MEDIAN
COMP. MULTIPLES
----------------------
LTM: TRADING DEALS
- ------ ----------------------
Sales 0.89x 0.83x
EBITDA 7.9 8.4
EBIT 10.0 10.3
Net Income 14.3 17.3
2000E:
- ------
Sales 0.73x
EBITDA 4.6
EBIT 6.8
Net Income 10.2
- ------------------------
(1) Based on closing prices of $17.56 on October 8, 1999, the last day trading
day prior to announcement of the Wonderco proposal.
(2) Based on 20.3MM shares outstanding and 3.3MM options exercisable with
an average strike price of $18.47.
(3) Based on analyst projections in line with consensus First Call earnings
estimates.
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SPITZ EXECUTIVE SUMMARY
- --------------------------------------------------------------------------------
Pro Forma Financial Impact on Wonderco(1)
Acquisition Price per Share $20.80
------------
Wonderco FY 2000E Stand Alone EPS (Primary) $2.85
Wonderco FY 2000E Stand Alone EPS (Diluted) $2.75
Spitz Calendarized FY 2000E Net Income(2) $0.59
$3 million of Identified Cost Savings $0.031
$5 million Cost Savings Related to Wonderco Manufacturing Remaining 20% of Spitz Products $0.052
Amortization of Acquisition Goodwill(3) ($0.096)
Incremental Interest Expense(4) ($0.354)
Pro Forma FY 2000E Diluted EPS $2.97
Accretion/(Dilution) $0.222
8.1%
- ---------------------------------
(1) All figures shown after-tax.
(2) Based on analyst projections in line with consensus First Call earnings
estimates.
(3) Assumes tax deductible goodwill per Wonderco management; assuming non-tax
deductible goodwill increases incremental amortization expense to $0.159 at
$20.80 per share, which reduces the accretion from the transaction to 5.8%.
(4) Assumes incremental borrowing of $449.1 mm at 7.50% at $20.80 per share,
respectively, excluding amount required to refinance Spitz existing
indebtedness.
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SPITZ
- --------------------------------------------------------------------------------
VALUATION OF SPITZ
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SPITZ VALUATION OF SPITZ
- --------------------------------------------------------------------------------
Valuation Summary ($ in millions, except per share amounts)
DISCOUNTED CASH FLOW(1) $20.53 $27.35
COMPARABLE COMPANIES ANALYSIS
7.5x-8.5x 1999 EBITDA of $68.6MM $20.45 $23.79
With a 30% control premium(3) $26.58 $30.93
5.0x-6.0x 2000E EBITDA of $74.2MM(2) $13.45 $17.06
With a 30% control premium(3) $17.48 $22.18
10.0x-13.0x 2000E Net Income of $29.6MM(2) $14.42 $18.74
With a 30% control premium(3) $18.75 $24.36
COMPARABLE ACQUISITIONS ANALYSIS
1.1x-1.3x 1999 Sales of $410.8MM $17.39 $21.39
8.0x-9.0x 1999 EBITDA of $68.6MM $22.12 $25.46
PREMIUMS PAID(4) $21.95 $23.71
PRE-ANNOUNCEMENT PRICE
$17.56
OFFER PRICE
$20.80
- -------------------
(1) Based on analyst projections in line with consensus First Call earnings
estimates through FY2000 and projections provided by Wonderco management for
FY2001-FY2002, utilizing a range of discount rates from 13.5% to 14.5% and
LTM EBITDA terminal multiples from 7.0x to 9.0x.
(2) Based on analyst projections in line with consensus First Call earnings
estimates.
(3) Based on selected public change-in-control transactions with transaction
values ranging from $100MM to $1,000MM from 1998 to present.
(4) 25% to 35% premium, based on selected public change of control transactions
with transaction values ranging from $100MM to $1,000MM from 1998 to
present, applied to the pre-announcement price of $17.56.
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SPITZ VALUATION OF SPITZ
- --------------------------------------------------------------------------------
Discounted Cash Flow Analysis(1)
($ in millions, except per share data)
IMPLIED SHARE PRICE(2)
TERMINAL EBITDA MULTIPLE
------------------------------------------------------------------
7.0x 7.5x 8.0x 8.5x 9.0x
---------- ---------- ---------- ----------- ----------
DISCOUNT RATE
-------------
13.5% $21.16 $22.71 $24.26 $25.80 $27.35
14.0% $20.84 $22.37 $23.90 $25.42 $26.95
14.5% $20.53 $22.04 $23.54 $25.05 $26.56
- --------------------------------------
(1) Based on analyst projections in line with consensus First Call earnings
estimates through FY2000 and projections provided by Wonderco management
for FY2001-FY2002.
(2) Based on 20.5 million diluted shares outstanding, including all outstanding
options utilizing the treasury method with "in-the-money" exercise prices,
and $95.0 of Net Debt as of July 3, 1999.
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SPITZ VALUATION OF SPITZ
- --------------------------------------------------------------------------------
Weighted Average Cost of Capital
- ---------------------------------------------
ASSUMPTIONS
- ---------------------------------------------
TAX RATE 40.0%
ESTIMATED MARKET PREMIUM(1) 10.1%
RISK-FREE RATE OF RETURN(2) 6.0%
SIZE PREMIUM(3) 1.7%
- ---------------------------------------------
- ----------------------------------------------------------------------------------------
UNLEVERED BETAS
- ----------------------------------------------------------------------------------------
CURRENT NET EQUITY DEBT/
LEVERED DEBT VALUE TOTAL UNLEVERED
BETA(4) ($MM) ($MM) CAPITAL BETA(5)
------- ----- ----- ------- -------
RUSSELL 0.65 $450 $485 48.1% 0.42
COLUMBIA SPORTSWEAR 0.97 105 495 17.5% 0.86
NAUTICA 0.97 (11) 463 (2.4%) 0.98
QUIKSILVER 1.11 48 359 11.8% 1.03
CUTTER & BUCK 1.00 (7) 144 (5.3%) 1.03
NORTH FACE 1.19 76 62 55.3% 0.68
SPITZ 0.60 96 406 19.2% 0.53
- ----------------------------------------------------------------------------------------
MEAN(6) 0.98 $110 $335 20.8% 0.83
MEDIAN(6) 0.99 $62 $411 14.7% 0.92
- ----------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE COST OF CAPITAL
- --------------------------------------------------------------------------------------------------
CAPITAL STRUCTURE COST OF EQUITY COST OF DEBT
- ------------------------ ---------------------- -----------------------
DEBT/ DEBT/ RELEVERED COST OF BEFORE AFTER WEIGHTED AVERAGE
Capital Equity BETA EQUITY TAX TAX COST OF CAPITAL
------- ------ ---- ------ --- --- ---------------
10.0% 11.1% 0.89 16.7% 7.0% 4.2% 15.5%
20.0% 25.0% 0.96 17.4% 7.5% 4.5% 14.8%
30.0% 42.9% 1.05 18.3% 8.0% 4.8% 14.3%
40.0% 66.7% 1.17 19.5% 8.5% 5.1% 13.8%
50.0% 100.0% 1.33 21.2% 9.0% 5.4% 13.3%
- --------------------------------------------------------------------------------------------------
- ------------------------------
(1) Long-horizon expected equity risk premium (source: Ibbotson Associates).
(2) 10-year U.S. Treasury bond rate as of November 10, 1999.
(3) Expected low-capitalization ($252MM to $416MM) equity size premium (source:
Ibbotson Associates).
(4) Source: Barra.
(5) Unlevered Beta = Levered Beta / {1+(Debt/Equity)*(1-Tax Rate)}.
(6) Excludes SPITZ.
(7) Based on mean of unlevered betas.
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SPITZ VALUATION OF SPITZ
- --------------------------------------------------------------------------------
Selected Apparel Companies - LTM Trading Multiples ($MM)(1)
Adjusted Market Value Equity Market Value
as a Multiple of as a Multiple of I/B/E/S Price
Adjusted Equity ---------------------------------- --------------------- LT EPS Rel. to
Period Market Market Net Net Book Growth 52 Wk.
Ended Value Value Sales EBITDA EBIT Income Value Estimate High
---------- -------- --------- -------- ----------- ---------- --------- ---------- ---------- --------
- ------------------------------------------------------------------------------------------------------------------------------------
SPITZ 07/03/1999 $502 $406 1.22x 7.2x 8.7x 15.3x 3.1x 17.3% 98.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Russell 07/04/1999 $936 $485 0.82x 5.6x 10.0x 12.3x 0.9x 11.3% 58.0%
Columbia Sportswear 09/30/1999 600 495 1.31 8.8 10.3 14.6 2.8 17.1% 87.2%
Nautica 08/28/1999 452 463 0.79 4.9 5.9 9.5 1.9 13.5% 64.7%
Quiksilver 07/31/1999 407 359 0.96 7.7 8.8 14.3 2.6 22.3% 50.5%
Cutter & Buck 07/31/1999 137 144 1.16 8.5 10.4 17.5 1.9 28.4% 55.1%
North Face 06/30/1999 138 62 0.52 8.1 NM NM 0.6 19.0% 28.7%
- ------------------------------------------------------------------------------------------------------------------------------------
MEAN(2) 0.92x 7.3x 9.1x 13.6x 1.8x 18.6% 57.3%
MEDIAN(2) 0.89x 7.9x 10.0x 14.3x 1.9x 18.1% 56.5%
- ------------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------
(1) Stock prices are current as of November 10, 1999; financial results as
reported excluding nonrecurring charges.
(2) Excludes SPITZ.
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SPITZ VALUATION OF SPITZ
- -------------------------------------------------------------------------------
Selected Apparel Companies - NFY Trading Multiples ($MM)(1)
ADJUSTED MARKET VALUE EQUITY MARKET VALUE
AS A MULTIPLE OF AS A MULTIPLE OF
ADJUSTED EQUITY ----------------------------------- ----------------------
PERIOD MARKET MARKET NET NET BOOK
ENDED VALUE VALUE SALES EBITDA EBIT INCOME VALUE
--------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
- ------------------------------------------------------------------------------------------------------------------------------------
SPITZ 07/04/2000 $502 $406 1.00X 6.1X 7.2X 12.2X 2.2X
- ------------------------------------------------------------------------------------------------------------------------------------
Russell 01/02/2001 $936 $485 0.76x 4.4x 6.8x 7.1x 0.8x
Columbia Sportswear 12/31/2000 600 495 1.11 7.3 8.8 13.1 2.3
Nautica 02/27/2000 452 463 0.65 4.4 5.4 8.8 1.7
Quiksilver 10/31/2000 407 359 0.78 5.8 6.8 11.0 2.0
Cutter & Buck 04/30/2001 137 144 0.70 4.8 5.7 9.4 1.4
North Face 12/31/2000 138 62 0.40 4.4 8.2 11.3 0.5
- ------------------------------------------------------------------------------------------------------------------------------------
MEAN(2) 0.73X 5.2X 6.9X 10.1X 1.4X
MEDIAN(2) 0.73x 4.6x 6.8x 10.2x 1.5x
- ------------------------------------------------------------------------------------------------------------------------------------
I/B/E/S PRICE
LT EPS REL. TO
GROWTH 52 WK.
ESTIMATE HIGH
---------- ----------
- -------------------------------------------------------
SPITZ 17.3% 98.1%
- -----------------------------------------------------
Russell 11.3% 58.0%
Columbia Sportswear 17.1% 87.2%
Nautica 13.5% 64.7%
Quiksilver 22.3% 50.5%
Cutter & Buck 28.4% 55.1%
North Face 19.0% 28.7%
- -------------------------------------------------------
MEAN(2) 18.6% 57.3%
MEDIAN(2) 18.1% 56.5%
- -------------------------------------------------------
- ---------------------------------
(1) Stock prices are current as of November 10, 1999; financial
results as reported excluding nonrecurring charges.
(2) Excludes SPITZ.
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SPITZ VALUATION OF SPITZ
- --------------------------------------------------------------------------------
ADJUSTED ADJUSTED PURCHASE PRICE
ANNC. PERCENT PURCHASE PURCHASE AS A MULTIPLE OF: PURCHASE PRICE
--------------------- AS A MULTIPLE OF
DATE TARGET / ACQUIROR ACQUIRED(2) PRICE(2) PRICE(2) SALES EBITDA EBIT NET INCOME
- -------- --------------------------------------------------------------------------- -------- ------ ------- ------ ----------
7/99 Pentland Group PLC/Robert Stephen Holdings plc(1) 38% 594 811 0.7x 8.4x 10.3x 21.6x
5/99 Lucky Brands Dungarees / Liz Claiborne(3) 85% 85 85 1.7 NA NA NA
5/99 Nine West / Jones Apparel 100% 1,455 994 0.8 8.2 11.3 25.2
4/99 Umbro Europe (Holdings) Ltd. / Doughty Hanson & Co.
Ltd. 100% 145 145 0.4 NA NA NA
3/99 Anne Klein & Co. (Takihyo Co.) / Kasper ASL 100% 60 60 NA NA NA NA
2/99 Gant (Phillips-Van Heusen) / Pyramid Partners 100% 71 71 0.9 NM NM NM
1/99 Perry Ellis International Inc. / Supreme International
Corp.(4) 100% 75 75 4.6 9.6 9.9 16.5
1/99 Segrets, Inc. / Liz Claiborne 85% 54 54 1.1 NA NA NA
12/98 Koret / Kellwood Co. 100% 151 130 0.5 6.2 7.2 15.8
12/98 St. John Knits / Vestar and Company Management (5) 93% 492 520 1.7 8.4 10.7 18.2
12/98 Jerell / Haggar 100% 42 37 0.6 6.7 6.9 10.7
9/98 Sun Apparel / Jones Apparel 100% 446 217 1.1 8.2 9.6 13.2
5/98 Farah / Tropical Sportswear 100% 144 93 0.5 16.5 31.8 NM
3/98 Biderman Industries / Vestar 70% 360 125 1.4 12.9 NA NA
2/98 Joop! / Wuensche AG 95% 83 83 0.3 NA NA NA
2/98 Pepe Jeans USA & Tommy Hilfiger Canada / Tommy Hilfiger 100% 1,395 1,320 3.4 17.4 19.1 30.5
11/97 Severin Montres / Gucci 100% 150 150 0.8 NA 3.5 NA
10/97 Sun Apparel / Vestar(5) 40% 357 297 1.3 13.8 18.7 33.4
9/97 Valentino / Holding di Partecipazioni 100% 300 257 3.0 NA 17.3 NA
9/97 Designer Holdings / Warnaco 100% 390 342 0.8 9.0 10.3 18.6
4/97 Helly Hansen / Investcorp 70% 123 88 1.2 9.7 10.9 12.5
1/97 Winning Ways / Jordan Co. 100% 233 204 1.3 6.2 6.8 6.4
10/96 The William Carter Co. / Investcorp 100% 208 208 0.7 6.8 9.9 25.7
5/96 Lejaby-Euralis / Warnaco 100% 79 79 0.7 6.5 NA NA
1/96 Gerber Childrenswear / Citicorp Venture Capital 100% 74 74 0.4 4.0 4.5 7.4
-----------------------------------------------------------------------------------------------------------
MEAN 1.2X 9.3X 11.7X 18.3X
MEDIAN 0.8X 8.4X 10.3X 17.3X
- --------------
(1) Pending transaction; purchase prices for entire company; converted to US$
based on exchange rates as of September 24, 1999.
(2) For transactions for less than 100% of the Company, prices reflect actual
amounts paid for stake acquired, unless otherwise noted.
(3) Purchase price does not include contingent payments of $15 to $45 million to
be paid in 2003 based on performance targets.
(4) Net sales consist of solely licensing revenues. Net income assumes a 40% tax
rate on pretax income (Perry Ellis International was an S corporation).
(5) Acquired by Vestar in a leveraged recapitalization. Percent acquired
reflects Vestar common equity interest following recapitalization. Adjusted
purchase price reflects enterprise valuation placed on target in
transaction. Purchase price reflects value of rolled and new equity as well
as amounts paid to initial stockholders.
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------
PROJECT SPITZ VALUATION OF SPITZ
- --------------------------------------------------------------------------------
Premiums Paid Summary
- --------------------------------------------------------------------------------
Time Horizon: January 1998 - September 1999
Transaction Type: Control Acquisitions
Target Transaction Value Range: $100MM - $1,000MM
Company Universe: 419 public companies
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
% STOCK PREMIUM BEFORE ANNOUNCEMENT DATE
----------------------------------------------------
1 DAY 1 WEEK 4 WEEKS
- --------------------------------------------------------------------------------
MEAN 33% 39% 47%
ADJUSTED MEAN (1) 29% 35% 43%
MEDIAN 26% 32% 41%
- --------------------------------------------------------------------------------
- -------------------------
Source: Securities Data Company.
(1) Excludes the highest 10% and the lowest 10% of universe.
Wasserstein Perella & Co.
- --------------------------------------------------------------------------------