UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE TO
(RULE 14D-100)
TENDER OFFER STATEMENT UNDER SECTION 14(d)(1)
OR SECTION 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)
LITTLE SWITZERLAND, INC.
(NAME OF SUBJECT COMPANY (ISSUER))
TSAC CORP.
TIFFANY & CO.
TIFFANY & CO. INTERNATIONAL
(NAMES OF FILING PERSONS (OFFERORS))
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
537528-10-1
(CUSIP NUMBER OF CLASS OF SECURITIES)
PATRICK B. DORSEY
SENIOR VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
TIFFANY & CO.
600 MADISON AVENUE
NEW YORK, NY 10022
(212) 230-5320
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF THE FILING PERSON)
COPY TO:
STEVEN R. FINLEY
GIBSON, DUNN & CRUTCHER LLP
200 PARK AVENUE
NEW YORK, NY 10166
(212) 351-4000
CALCULATION OF FILING FEE
TRANSACTION VALUATION AMOUNT OF FILING FEE
$26,143,709(1) $2,405.22(2)
(1) The transaction value is estimated for purposes of calculating the filing
fee only. This calculation assumes the purchase of 10,893,212 shares of
common stock, par value $.01 per share (the "Shares"), of Little
Switzerland, Inc., at a purchase price of $2.40 per Share, net to the
seller in cash. Such number of Shares is based on information received
from Little Switzerland, Inc. and assumes (i) 9,311,972 Shares outstanding
(excluding Shares already held by Tiffany International) as of August 14,
2002 and (ii) the exercise of up to 1,524,500 options to purchase Shares
and 56,740 warrants, on or prior to the expected consummation of the
tender offer.
(2) The amount of the filing fee is calculated in accordance with Rule 0-11 of
the Securities Exchange Act of 1934, as amended, and Fee Rate Advisory No.
8 of 2002 issued by the Securities and Exchange Commission on January 16,
2002.
[X] 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.
AMOUNT PREVIOUSLY PAID: $2,405.22 FILING PARTY: TSAC CORP.
TIFFANY & CO.
TIFFANY & CO.
INTERNATIONAL
FORM OR REGISTRATION NO.: SCHEDULE TO-T DATE FILED: AUGUST 15, 2002
[ ] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
Check the appropriate boxes below to designate any transactions to which the
statement relates:
[X] third-party tender offer subject to Rule 14d-1
[ ] issuer tender offer subject to Rule 13e-4
[X] going-private transaction subject to Rule 13e-3
[ ] amendment to Schedule 13D under Rule 13d-2
Check the following box if the filing is a final amendment reporting the results
of the tender offer: [ ]
2
This Amendment No. 1 amends and supplements the Tender Offer Statement and
Schedule 13E-3 Transaction Statement on Schedule TO filed with the Securities
and Exchange Commission on August 15, 2002 (as amended and supplemented, the
"Schedule TO") by Tiffany & Co., a Delaware corporation ("Tiffany"), Tiffany
International, a Delaware corporation and wholly-owned subsidiary of Tiffany
("International"), and TSAC Corp., a Delaware corporation and a wholly-owned
subsidiary of International ("Purchaser"). This Schedule TO relates to the offer
by Purchaser to purchase all the outstanding shares of common stock, par value
$.01 per share (the "Shares"), of Little Switzerland, Inc., a Delaware
corporation, at $2.40 per Share, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase dated August 15,
2002 (as amended and supplemented, the "Offer to Purchase"), and the related
Letter of Transmittal. Copies of the Offer to Purchase and Letter of Transmittal
were attached as Exhibits (a)(1)(i) and (a)(1)(ii), respectively, to the
Schedule TO filed with the Securities and Exchange Commission on August 15,
2002.
Except as otherwise set forth below, the information set forth in the
Offer to Purchase, including all schedules thereto, is hereby expressly
incorporated herein by reference in response to all items of this Schedule TO,
including, without limitation, all of the information required by Schedule 13E-3
that is not included or covered by the items in Schedule TO. Capitalized terms
used but not otherwise defined have the respective meanings ascribed to them in
the Offer to Purchase.
ITEM 4. TERMS OF THE TRANSACTION
Item 4 of Schedule TO is hereby amended and supplemented by including the
following:
We amend the section entitled "Questions and Answers About the Tender
Offer - Is this offer supported by the Little Switzerland board of directors,"
beginning on page 4 of the Offer to Purchase as follows:
The following sentence is added after the third sentence of the first
paragraph of that section:
We understand that the Board of Directors of Little Switzerland has formed
a committee of the one independent director, Mr. Richard Sasso, who is neither
affiliated with Tiffany or the Holtzmans nor an executive officer of Little
Switzerland, to consider the Offer, and that Mr. Sasso has retained independent
legal and financial advisors.
We amend the section entitled "Special factors - Development of the Offer"
beginning on page 9 of the Offer to Purchase as follows:
The second and third paragraphs of that section, appearing on pages 9 and
10 of the Offer to Purchase are deleted and replaced in their entirety with the
following:
On November 15, 2001, Tiffany management discussed with the Board of
Directors of Tiffany Little Switzerland's need for an additional capital
infusion and the difficulty Little Switzerland was facing in raising this
additional capital due in part to Tiffany's significant minority interest in
Little Switzerland, which made third party investments unlikely, and the fact
that a significant portion of Little Switzerland's assets were located outside
the United States, which made it difficult and expensive for U.S. based lenders
to perfect a security interest in those assets and therefore made collateralized
debt financing impracticable. The Board of Directors of Tiffany determined that
it would not be prudent to advance further funds to Little Switzerland, or to
guarantee additional debt financing, while remaining a significant but minority
stockholder. At that time, members of Tiffany senior management asked that
William A. Shutzer, a member of the Tiffany Board of Directors and a managing
director at Lehman Brothers Inc. ("Lehman Brothers"), set up a meeting between
Lehman Brothers and certain members of Tiffany management to discuss Little
Switzerland and Lehman Brothers' views on strategic alternatives available to
Tiffany with respect to its minority position in Little Switzerland. On December
10, 2001, Lehman Brothers presented to selected members of Tiffany management
certain materials prepared to assist Tiffany management in consideration of
strategic alternatives available to Tiffany with respect to its minority
position in Little Switzerland, including the potential acquisition of the
Shares not owned by Tiffany. Tiffany determined at that time that it would be
undesirable to seek to acquire all of the Shares not owned by Tiffany unless
Tiffany could be reasonably assured of being able to acquire the Holtzmans'
Shares. At that time, there was no indication that the Holtzmans' Shares were
available for purchase. As a result, Tiffany management did not engage Lehman
Brothers and declined to take any further action at that time regarding a
potential acquisition of the Shares not owned by Tiffany.
In May 2002, Seymour Holtzman expressed to certain members of Tiffany
management a willingness to sell his interest in Little Switzerland to Tiffany.
At that time, Tiffany management engaged Lehman Brothers to advise Tiffany with
respect to its investment in Little Switzerland and to assist Tiffany in its
negotiations with Seymour Holtzman regarding the potential acquisition of the
Holtzmans' Shares and to provide advice with respect to strategy and tactics,
including advice with respect to the price per Share that Tiffany might offer to
the public, regarding the potential acquisition of the remaining Shares held by
the public. Tiffany did not request Lehman Brothers to advise it with respect to
the fairness of any offered price to the holders of Tiffany shares or to the
holders of Little Switzerland Shares, because Tiffany did not believe that the
Tiffany Board of Directors required the protections offered by obtaining a
fairness opinion as a condition to proceeding with the proposed purchase of the
Holtzmans' Shares or the proposed Offer. On June 5, 2002, Lehman Brothers
presented to selected members of Tiffany management certain materials prepared
to assist Tiffany management in consideration of the potential acquisition of
Little Switzerland. See "Special Factors - a Reasons for and Purpose of the
Offer and the Merger; Tiffany & Co.'s Plans for Little Switzerland" for details
regarding Tiffany's reasons for the Offer and the Merger. Tiffany then directed
Lehman to contact Mr. Holtzman on its behalf regarding the possibility of
Tiffany acquiring the Holtzmans' Shares.
During the month of June 2002, Lehman Brothers and Seymour Holtzman
discussed a possible sale of the Holtzmans' Shares to Tiffany. The Holtzmans
indicated that they would be willing to sell their Shares at $2.50 per share. At
Tiffany's direction, Lehman Brothers indicated that Tiffany would be willing to
pay $2.40 per Share.
The second sentence of the fourth paragraph of that section, appearing on
page 10 of the Offer to Purchase is deleted and replaced in its entirety with
the following:
Upon the advice of its outside legal counsel, Gibson, Dunn & Crutcher LLP
("Gibson Dunn"), Tiffany determined that to ensure that the Offer process would
be fair, Purchaser would not purchase the Holtzmans' Shares unless a substantial
majority of the public were willing to sell their Shares on the same terms, and
would not close the Offer and the subsequent Merger unless a majority of the
Shares not held by International or the Holtzmans were tendered in the Offer.
The first sentence of the fifth paragraph of that section, appearing on
page 10 of the Offer to Purchase is deleted and replaced in its entirety with
the following:
Tiffany determined to make the Offer directly to the stockholders of
Little Switzerland without approaching the management or the Board of Directors
of Little Switzerland in order to avoid the costs to both Tiffany and Little
Switzerland that would arise in connection with responding, on a substantive and
procedural basis, to a proposal from Tiffany to acquire all of the outstanding
Shares. Tiffany recognized that three of the five members of the Little
Switzerland Board of Directors -- two representatives of Tiffany and Seymour
Holtzman -- were interested parties in any such transaction and therefore would
refrain from any participation at the Little Switzerland Board level in
considering a proposal from Tiffany.
The eighth paragraph of that section, appearing on page 10 of the Offer to
Purchase is deleted and replaced in its entirety with the following:
After receipt of the draft stock purchase agreement, the Holtzmans
objected to provisions in the draft agreement that conditioned the purchase of
their Shares on a tender offer to the public that resulted in the acquisition by
Tiffany of at least 90% of the Shares. Following conversations between Lehman
Brothers, Gibson Dunn and the Holtzmans, the Holtzmans' agreed that any purchase
of their Shares would be made concurrently with the closing of the Offer. Over
the following several weeks, stock market conditions deteriorated and the
Holtzmans failed to execute definitive agreements or to respond with substantive
comments to the draft documentation. Tiffany on July 22, 2002, concluded that it
was undesirable to have an outstanding offer to acquire the Holtzmans' Shares at
$2.50 per share that was not documented in a binding agreement and determined to
withdraw its offer. Lehman Brothers communicated the withdrawal of the Offer to
the Holtzmans on that day. Several days thereafter, the Holtzmans indicated to
Lehman Brothers that they still wished to sell their Shares to Tiffany at $2.50
per share. Based on the deterioration of conditions in the market and the
decrease in the price of the Shares since the time when Tiffany indicated a
willingness to pay $2.50 per share, Tiffany instructed Lehman Brothers to inform
the Holtzmans that it was no longer willing to pay $2.50 per share to the
Holtzmans and that it had reduced the price it was willing to pay the Holtzmans
to $2.25 per Share. Following further discussions between Seymour Holtzman and
Lehman Brothers, Tiffany and the Holtzmans agreed to a price of $2.40 per Share,
subject to adjustment so that the Holtzmans would receive the same price as the
public stockholders in the Offer. Tiffany and the Holtzmans executed and
delivered the definitive stock purchase agreement on August 12, 2002.
We amend the section entitled "Special Factors - Reasons for and Purpose
of the Offer and the Merger; Tiffany & Co.'s Plans for Little Switzerland,"
beginning on page 11 of the Offer to Purchase as follows:
The seventh paragraph of that section, appearing on page 11 of the Offer
to Purchase is deleted and replaced in its entirety with the following:
As of May 25, 2002, there were outstanding options to purchase 1,524,500
Shares, of which options to purchase 1,235,167 shares were exercisable. All of
these options were issued to employees and directors of Little Switzerland
pursuant to its incentive option plans (except for certain of the Holtzmans'
options). In the event of the Merger, the option holders will be provided notice
and will have the opportunity to exercise their options prior to the
consummation of the Merger in accordance with the terms of their options. Any
options that are unexercised at the time of the Merger will be cancelled in
accordance with their terms. As a result of such options' terms, option holders
may choose to exercise their options after the Offer is completed and before the
Merger which could result in the aggregate ownership by Tiffany and its
subsidiaries of the outstanding Shares falling below 90%. In that event,
Purchaser may decide to acquire additional Shares in the open market or in
privately negotiated transactions to the extent required for such ownership to
equal or exceed 90%. Any such purchases would be made at market prices or
privately negotiated prices at the time of purchase, which may be higher or
lower than or the same as the Offer price.
3
We amend the section entitled "Special Factors -- Purchaser's and
Tiffany's Position Regarding the Fairness of the Offer and the Merger,"
beginning on page 12 of the Offer to Purchase as follows:
The title and first two paragraphs of that section, appearing on pages 12
and 13 of the Offer to Purchase, are deleted and replaced in their entirety with
the following:
PURCHASER'S, INTERNATIONAL'S AND TIFFANY'S POSITION REGARDING THE FAIRNESS
OF THE OFFER AND THE MERGER
We believe the Offer and the Merger are fair to Little Switzerland's
stockholders who are not affiliated with Little Switzerland, Purchaser, Tiffany
or the Holtzmans. We base our belief on our observations of the following
factors, each of which, in our judgment, supports our view as to the fairness of
the Offer and the Merger. We did not observe any factors which, in our judgment,
weighed against the fairness of the Offer and Merger to Little Switzerland's
stockholders who are not affiliated with Little Switzerland, Purchaser, Tiffany
or the Holtzmans.
o The $2.40 per Share cash consideration payable in the Offer represents an
approximately 73% premium to the closing price on August 12, 2002, the
last trading day prior to public announcement of the Offer, and represents
a 92% premium to the $1.25 per Share paid by Tiffany in May 2001 in
connection with its initial investment in Little Switzerland. We believe
that the size of such premiums indicates that the Offer and Merger are
fair.
o The Offer is conditioned on the tender of at least a majority of the
Shares not owned by Tiffany or the Holtzmans -- the Majority of the
Minority Condition. Satisfaction of this condition will require that at
least approximately 3,800,000 Shares of the approximately 7,600,000
outstanding Shares not owned by Tiffany or the Holtzmans (more than 50% of
such Shares) are tendered. We believe that the Offer is fair because it
includes the Majority of the Minority Condition which grants Little
Switzerland's unaffiliated stockholders meaningful opportunity to
determine how the Offer and Merger should proceed.
o The Offer is conditioned on the tender of a sufficient number of Shares so
that, after the Shares are purchased pursuant to the Offer and the stock
purchase agreement with the Holtzmans, we would own at least 90% of the
outstanding Little Switzerland common stock on a fully-diluted basis --
the Minimum Condition. Satisfaction of this condition will require that at
least approximately 7,100,000 of the Shares not owned by us or the
Holtzmans are tendered. We believe that the Offer is fair because the
Minimum Condition makes the Offer and Merger subject to the condition that
a supermajority of Little Switzerland's unaffiliated stockholders tender
their Shares.
o The Offer and the Merger provides Little Switzerland's stockholders a
substantially greater opportunity to sell their holdings in Little
Switzerland at a premium than has been available in the public market,
where historically low volumes of trading have greatly limited liquidity.
We believe that the Offer and Merger are fair because they provide Little
Switzerland's unaffiliated stockholders liquidity at a more favorable
price than would otherwise have been available.
o Tiffany's ownership of approximately 45% of the currently outstanding
Shares and the location of a significant portion of Little Switzerland's
assets outside the United States may have limited the financing
alternatives available to Little Switzerland and thereby made it less
likely that Little Switzerland would have the ability to raise the capital
necessary to grow its business. We believe that the Offer and Merger are
fair
4
because, without such additional growth, we believe it is unlikely that
Little Switzerland's unaffiliated stockholders would have an opportunity
to sell their Shares on terms and conditions more favorable than those of
the Offer and Merger.
o Little Switzerland stockholders who elect not to tender their Shares in
the Offer will receive the same consideration in the Merger that we pay in
the Offer, subject to their right to dissent from the Merger and demand an
appraisal of the fair value of their Shares under the DGCL. We believe
that the Offer and Merger are fair because Little Switzerland's
unaffiliated stockholders are not forced into tendering into the Offer as
a result of the risk of being treated less favorably if they fail to
tender.
o The fact that, prior to our initial investment in Little Switzerland,
Little Switzerland attempted unsuccessfully to find a merger partner or a
strategic investor indicated to us that the Offer and Merger are fair
because it is unlikely that an alternate proposal on terms and conditions
more favorable than those of the Offer and Merger would be offered by a
potential merger partner or strategic investor.
o The fact that the Holtzmans, who have a representative on the Board of
Directors of Little Switzerland and are therefore in a superior position
with respect to knowledge of the operations and business of Little
Switzerland, have agreed to sell their Shares to us on terms and
conditions identical to those of the Offer lead us to believe that the
Offer is fair to Little Switzerland's unaffiliated stockholders who will
receive the same consideration.
o The materials prepared by Lehman Brothers and discussed with selected
management of Tiffany on June 5, 2002 regarding the potential purchase by
Tiffany of the publicly held Shares, including the relatively low
historical trading prices and volumes of Little Switzerland common stock
over various periods between May 23, 1997 and May 24, 2002 and the fact
that the Offer price represents a significant premium to the book value of
the equity of Little Switzerland. See "Special Factors - Report of Lehman
Brothers to the Board of Directors of Tiffany." Each of the foregoing
observations lead us to believe that the Offer and Merger are fair to
Little Switzerland's unaffiliated stockholders.
We believe that each of the foregoing observations is relevant to all
Little Switzerland stockholders who are not affiliated with Little Switzerland,
the Holtzmans or us.
We amend the section entitled "Special Factors - Report of Lehman Brothers
To Selected Members of Management Of Tiffany," beginning on page 13 of the Offer
to Purchase as follows:
The second sentence of the first paragraph of that section, appearing
on page 13 of the Offer to Purchase is deleted and replaced in its entirety with
the following:
However, Lehman Brothers did prepare materials that were presented to
selected members of management.
The following three sentences are added after the third sentence of the
first paragraph of that section:
An initial version of this presentation was made on December 10, 2001, and
a final version was forwarded to members of Tiffany management on May 29, 2002,
and presented by Lehman Brothers on June 5, 2002. The initial version was
substantially the same as the final version, which updated certain trading and
financial information and included the recent developments on the transaction.
The final version of this presentation, dated May 29, 2002 and presented to
selected members of Tiffany management on June 5, 2002, is described below.
The third sentence of the second paragraph of that section, appearing on
page 13 of the Offer to Purchase is deleted and replaced in its entirety with
the following:
THIS PRESENTATION SHOULD NOT BE DEEMED TO CONSTITUTE AN OPINION THAT THE
$2.40 PRICE PER SHARE CONSIDERATION TO BE OFFERED TO THE LITTLE SWITZERLAND
STOCKHOLDERS (OTHER THAN TIFFANY AND ITS AFFILIATES) IS FAIR, FROM A FINANCIAL
POINT OF VIEW OR OTHERWISE, TO SUCH STOCKHOLDERS, TO TIFFANY, OR TO ANY OTHER
PERSON.
The following paragraph is added after the fourth paragraph of that
section:
Company History and Sapphire Presence. Lehman Brothers noted that Little
Switzerland was spun-off by its parent, Town & Country Corporation, in July
1991. Lehman Brothers reviewed Little Switzerland's retail store locations,
which peaked at 27 in 1996, and currently total 19 stores in six Caribbean
destinations and Alaska. Lehman Brothers noted that since Little Switzerland's
primary competitors are independently-owned merchants, Little Switzerland is
well-positioned to benefit from its relative scale and exclusive distribution
arrangements with certain luxury brands.
The fifth paragraph of that section, appearing on page 14 of the Offer to
Purchase is deleted and replaced in its entirety with the following:
Stock Price Performance Analysis and Trading History. Using publicly
available information, Lehman Brothers compiled data to form four graphs of
stock price performance and historical trading data for Little Switzerland and
its Peer Group. Graph one depicts stock price performance for Little Switzerland
and the Peer Group, also called the Lehman Brothers Small-Cap Luxury Retail
Composite, for the period May 23, 1997 to May 24, 2002. Lehman Brothers noted
that as of May 24, 2002, Little Switzerland was trading at $1.84, a 25% discount
to its 52-week high, and a 1% premium to its 52-week average. During the five
year period depicted in the graph, the stock price for Little Switzerland
decreased 69% and the stock price for the Peer Group increased approximately
80%. Graph two depicts stock price performance for Little Switzerland for the
period May 23, 1997 to May 24, 2002. Little Switzerland's highest trading value
during that five year period was $8.00 on April 30, 1998 and its lowest trading
value was $0.22 on October 21, 1999. Graph three depicts the one year historical
trading volume analysis; the highest quantity of stock (39% of the volume traded
in the past year) was traded when the stock was in the $1.76-$1.93 range, and
the lowest quantity of stock (2% of total volume) was traded when the stock was
in the $2.12-$2.29 range. Graph four depicts the five year historical trading
volume analysis; the highest quantity of stock (37% of total volume traded in
the past 5 years) was traded when the stock was in the $0.22-$1.33 range, and
the lowest quantity of stock (2% of total volume) was traded when the stock was
in the $4.67-$5.77 range.
The last three sentences of the sixth paragraph of that section, appearing
on page 14 of the Offer to Purchase are deleted and replaced in their entirety
with the following:
The results of Lehman Brothers' review of this information were as
follows:
ENTERPRISE VALUE/LTM EQUITY MARKET VALUE/
-------------------- -------------------- TOTAL DEBT/ TOTAL DEBT/
REVENUE EBITDA EBIT LTM NI BOOK VALUE TOTAL CAP LTM EBITDA
------- ------ ---- ------ ---------- --------- ----------
Peer Group Average 0.60x 10.0x 10.9x 15.6x 1.17x 35.4% 2.0x
Peer Group Median 0.54x 8.7x 10.7x 11.6x 0.91x 33.8% 2.1x
Little Switzerland 0.66x NM NM NM 1.63x 28.4% NM
The following sentence and bullet points are added after the first
sentence of the seventh paragraph of that section, appearing on page 14 of the
Offer to Purchase:
The transactions reviewed by Lehman Brothers were as follows (listed by
acquiror/target and announcement date):
- - Finlay Enterprises / Diamond Park Fine Jewelers (9/3/97)
- - Marc Orian / Pop Bijoux (9/24/97)
- - Jan Bell Marketing / Mayor's Jewelers Inc. (2/18/98)
- - Marks Brothers Jewelers / Carlye & Co.-Jewelry Stores (6/22/98)
- - Zale Corp. / Peoples Jewellers Ltd. (3/16/99)
- - Mildghosts Ltd. / Goldsmiths Group PLC (3/18/99)
- - Finlay Enterprises / Jay B Rudolph Inc. (2/11/00)
- - Sunglass Hut International / Watch World International (5/4/00)
- - Zale Corp. / Piercing Pagoda Inc. (8/11/00)
- - Tiffany / Little Switzerland (45% interest) (4/10/01)
The following two sentences are added to the end of the seventh
paragraph of that section, appearing on page 14 of the Offer to Purchase:
At $2.40 per Little Switzerland share, the multiple of transaction value
to Little Switzerland's LTM revenue was 0.83x. The multiples of transaction
value to Little Switzerland's LTM EBITDA and LTM EBIT were not meaningful due to
negative LTM EBITDA and LTM EBIT.
The following paragraph is added after the seventh paragraph of that
section:
Purchase Price Ratio Analysis. Lehman Brothers used the purchase price
ratio analysis to provide enterprise value multiples and equity value multiples
of key operating statistics for a range of transaction values. Lehman Brothers
used the current market price and a range of possible offer price per share of
common equity to calculate the enterprise value for Little Switzerland, Lehman
Brothers then calculated the ratio of enterprise value to revenue, and the ratio
of equity value to book value, each for the last twelve months. The results of
Lehman Brothers' analysis were as follows:
CURRENT
(5/24/02
$1.84 $2.00 $2.15 $2.25 $2.35 $2.45
----- ----- ----- ----- ----- -----
Enterprise Value as a Multiple of LTM Revenue 0.66x 0.70x 0.75x 0.78x 0.81x 0.84x
Equity Value as a Multiple of Book Value 1.63x 1.78x 1.92x 2.01x 2.10x 2.20x
The first two sentences of the eighth paragraph of that section, appearing
on page 15 of the Offer to Purchase are deleted and replaced in their entirety
with the following:
Using publicly available information, Lehman Brothers provided a summary
of recent changes to Little Switzerland's anti-takeover provisions, including
actions to eliminate staggered election periods for members of Little
Switzerland's Board of Directors; to eliminate the requirement for
super-majority voting to engage in certain transactions with an interested
stockholder (defined as a holder of 15% or more of the voting securities of
Little Switzerland); to allow special shareholder meetings to be called by a
majority of shareholders and to eliminate the requirement for super-majority
voting to amend provisions of Little Switzerland's certificate of incorporation
or by-laws. Lehman Brothers also provided a summary of Little Switzerland's
defense profile, which included the following strengths: blank check preferred
stock; the protections of the Delaware takeover statute; and two significant
shareholders owning more than 15% of the common stock. In reviewing Little
Switzerland's defensive profile, Lehman Brothers also noted the following
weaknesses:
- lack of a shareholder rights plan;
- two out of its total board members were representatives of
Tiffany;
- no requirement for super-majority voting to approve
transactions with interested stockholders;
- ability for special shareholder meetings to be called by a
majority of shareholders; and
- no requirement for super-majority voting to amend provisions
of Little Switzerland's certificate of incorporation or
by-laws.
The last two sentences of the ninth paragraph of that section, appearing
on page 15 of the Offer to Purchase are deleted and replaced in their entirety
with the following:
The analysis notes that two of Little Switzerland's stockholders, Seymour
Holtzman and Donald Sturm, control over 15% of the Company's diluted shares,
representing nearly 26% of the Shares not held by Tiffany. Lehman Brothers noted
that the stock ownership analysis indicated that if Tiffany intended to take
Little Switzerland private, Tiffany would need the support of Messrs. Holtzman
and Sturm. Lehman Brothers indicated that they viewed this as a factor that
might make the completion of the Offer potentially more difficult. Lehman
Brothers also noted that Tiffany holds two out of five seats on the Board of
Directors.
The first sentence of the eleventh paragraph of that section, appearing on
page 15 of the Offer to Purchase is deleted and replaced in its entirety with
the following:
The engagement of Lehman Brothers in connection with the proposed merger
was formalized by an engagement letter dated June 13, 2002 between Tiffany and
Lehman Brothers pursuant to which Tiffany has agreed to pay Lehman Brothers a
cash fee of $600,000, $500,000 of which is contingent upon consummation of the
Offer.
We amend the section entitled "Special Factors - Little Switzerland
Financial Projections," beginning on page 15 of the Offer to Purchase as
follows:
The fourth paragraph of that section, appearing on page 16 of the Offer to
Purchase is deleted and replaced in its entirety with the following:
The Little Switzerland Projections were based on assumptions concerning
Little Switzerland's capital expenditures, business prospects and other revenue
and operating assumptions, including increasing consumer confidence levels,
positive attitudes towards flying and cruise taking and fair weather in the
Caribbean. The margins set forth in the table above and the sales growth rate
reflected in the table were based on these assumptions. The specifics as to
these assumptions were not disclosed in writing, but were discussed orally by
Little Switzerland management in their presentation to the Little Switzerland
Board of Directors. Tiffany believes these projections generally are aggressive
and are unlikely to be achieved. Tiffany accordingly has not relied on them in
its consideration of the Offer.
We amend the section entitled "The Offer - Terms of the Offer," beginning
on page 20 of the Offer to Purchase as follows:
The last two sentences of the third paragraph of that section, appearing on
page 20 of the Offer to
5
Purchase are deleted and replaced in their entirety with the following:
If Purchaser accepts any Shares for payment pursuant to the terms of the
Offer, it will accept for payment all Shares validly tendered during the
Offering Period and not withdrawn, and, on the terms and subject to the
conditions of the Offer, including but not limited to the Offer Conditions, it
will promptly pay for all Shares so accepted for payment. If there is a
Subsequent Offering Period (as defined herein), all Shares tendered during the
Offering Period will be immediately accepted for payment and promptly paid for
following the expiration thereof (and may not be withdrawn during the Subsequent
Offering Period) and Shares tendered during a Subsequent Offering Period will be
immediately accepted for payment and paid for on a rolling basis as they are
tendered. Purchaser confirms that its reservation of the right to delay payment
for Shares that it has accepted for payment is limited by Rule 14e-1(c) under
the Exchange Act, which requires that a tender offeror pay the consideration
offered or return the tendered securities promptly after the termination or
withdrawal of a tender offer.
We amend the section entitled "The Offer - Terms of the Offer," beginning
on page 20 of the Offer to Purchase as follows:
The last two sentences of the sixth paragraph of that section, appearing
on page 21 of the Offer to Purchase are deleted and replaced in their entirety
with the following:
If there is a Subsequent Offering Period, all Shares tendered during the
Offering Period will be immediately accepted for payment and promptly paid for
following the expiration thereof (and may not be withdrawn during the Subsequent
Offering Period) and Shares tendered during a Subsequent Offering Period will be
immediately accepted for payment and paid for on a rolling basis as they are
tendered. If Purchaser elects to provide a Subsequent Offering Period, it
expressly reserves the right, in its sole discretion, at any time or from time
to time, to extend the Subsequent Offering Period (not beyond a total of 20
business days) by giving oral or written notice of such extension to the
Depositary and making an announcement to that effect by issuing a press release
no later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date of the Subsequent Offering Period. During a
Subsequent Offering Period, tendering stockholders will not have withdrawal
rights. See Section 4, "The Offer - Rights of Withdrawal."
We amend the section entitled "The Offer - Acceptance for Payment and
Payment for Shares," beginning on page 21 of the Offer to Purchase as follows:
The second sentence of the first paragraph of that section, appearing
on page 21 of the Offer to Purchase is deleted and replaced in its entirety
with the following:
If there is a Subsequent Offering Period, all Shares tendered during the
Offering Period will be immediately accepted for payment and promptly paid for
following the expiration thereof (and may not be withdrawn during the Subsequent
Offering Period) and Shares tendered during a Subsequent Offering Period will be
immediately accepted for payment and paid for on a rolling basis as they are
tendered.
We amend the section entitled "The Offer - Certain Information Concerning
Little Switzerland," beginning on page 28 of the Offer to Purchase as follows:
The first sentence of the seventh paragraph of that section, appearing on
page 30 of the Offer to Purchase is deleted and replaced in its entirety with
the following:
This data and the comparative per share data set forth below are extracted
from, and should be read in conjunction with, the audited consolidated financial
statements and other financial information contained in Little Switzerland's
Annual Report on Form 10-K for the years ended May 25, 2002 and May 26, 2001 and
the unaudited consolidated interim financial information contained in Little
Switzerland's Quarterly Reports on Form 10-Q for the quarterly periods ended
February 23, 2002 and February 24, 2001, including the notes thereto.
We amend the section entitled "The Offer - Certain Effects of the Offer,"
beginning on page 37 of the Offer to Purchase as follows:
The following two paragraphs are added after the fifth paragraph of that
section:
Certain Effects of the Offer and Merger on Purchaser, International and
Tiffany. The purchase of the Shares by the Purchaser pursuant to the Offer and
the subsequent Merger will increase our interest in the net book value and net
earnings of Little Switzerland from 45% to 100%. The purchase of the Shares by
the Purchaser pursuant to the Offer and the subsequent Merger will be
disregarded for federal income tax purposes, and the transactions will be
treated as a purchase of the Shares by International. Such deemed purchase will
not result in any federal income tax liability being incurred by Purchaser,
International or Tiffany.
6
For a discussion of Purchaser's, International's and Tiffany's purposes
and reasons for the Offer and Merger and the anticipated effects of the Offer
and Merger on Purchaser, International and Tiffany see "Special Factors -
Reasons for and Purpose of the Offer and the Merger; Tiffany & Co.'s Plans for
Little Switzerland" and "Special Factors - Tiffany's Ownership and Operating
Relationships with Little Switzerland."
We amend the section entitled "The Offer - Certain Conditions of the
Offer," beginning on page 34 of the Offer to Purchase as follows:
The last word of subsection (c)(iii) of that section, appearing on page 34
of the Offer to Purchase is deleted and replaced in its entirety with the
following:
stockholders
ITEM 6. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS
Item 6 of Schedule TO is hereby amended and supplemented by including the
following:
We amend the section entitled "Special Factors - Reasons for and Purpose
of the Offer and the Merger; Tiffany & Co.'s Plans for Little Switzerland,"
beginning on page 11 of the Offer to Purchase as follows:
The seventh paragraph of that section, appearing on page 11 of the Offer
to Purchase is deleted and replaced in its entirety with the following:
As of May 25, 2002, there were outstanding options to purchase 1,524,500
Shares, of which options to purchase 1,235,167 shares were exercisable. All of
these options were issued to employees and directors of Little Switzerland
pursuant to its incentive option plans (except for certain of the Holtzmans'
options). In the event of the Merger, the option holders will be provided notice
and will have the opportunity to exercise their options prior to the
consummation of the Merger in accordance with the terms of their options. Any
options that are unexercised at the time of the Merger will be cancelled in
accordance with their terms. As a result of such options' terms, option holders
may choose to exercise their options after the Offer is completed and before the
Merger which could result in the aggregate ownership by Tiffany and its
subsidiaries of the outstanding Shares falling below 90%. In that event,
Purchaser may decide to acquire additional Shares in the open market or in
privately negotiated transactions to the extent required for such ownership to
equal or exceed 90%. Any such purchases would be made at market prices or
privately negotiated prices at the time of purchase, which may be higher or
lower than or the same as the Offer price.
We amend the section entitled "The Offer - Certain Effects of the Offer,"
beginning on page 37 of the Offer to Purchase as follows:
The following two paragraphs are added after the fifth paragraph of that
section:
Certain Effects of the Offer and Merger on Purchaser, International and
Tiffany. The purchase of the Shares by the Purchaser pursuant to the Offer and
the subsequent Merger will increase our interest in the net book value and net
earnings of Little Switzerland from 45% to 100%. The purchase of the Shares by
the Purchaser pursuant to the Offer and the subsequent Merger will be
disregarded for federal income tax purposes, and the transactions will be
treated as a purchase of the Shares by International. Such deemed purchase will
not result in any federal income tax liability being incurred by Purchaser,
International or Tiffany.
For a discussion of Purchaser's, International's and Tiffany's purposes
and reasons for the Offer and Merger and the anticipated effects of the Offer
and Merger on Purchaser, International and Tiffany see "Special Factors -
Reasons for and Purpose of the Offer and the Merger; Tiffany & Co.'s Plans for
Little Switzerland" and "Special Factors - Tiffany's Ownership and Operating
Relationships with Little Switzerland."
ITEM 11. ADDITIONAL INFORMATION
Item 11 of Schedule TO is hereby amended and supplemented by including the
following:
We amend the section entitled "Questions and Answers About the Tender
Offer - Is this offer supported by the Little Switzerland board of directors,"
beginning on page 4 of the Offer to Purchase as follows:
The following sentence is added after the third sentence of the first
paragraph of that section:
We understand that the Board of Directors of Little Switzerland has formed
a committee of the one independent director, Mr. Richard Sasso, who is neither
affiliated with Tiffany or the Holtzmans nor an executive officer of Little
Switzerland, to consider the Offer, and that Mr. Sasso has retained independent
legal and financial advisors.
We amend the section entitled "Special Factors - Development of the
Offer," beginning on page 9 of the Offer to Purchase as follows:
The second and third paragraphs of that section, appearing on pages 9 and
10 of the Offer to Purchase are deleted and replaced in their entirety with the
following:
On November 15, 2001, Tiffany management discussed with the Board of
Directors of Tiffany Little Switzerland's need for an additional capital
infusion and the difficulty Little Switzerland was facing in raising this
additional capital due in part to Tiffany's significant minority interest in
Little Switzerland, which made third party investments unlikely, and the fact
that a significant portion of Little Switzerland's assets were located outside
the United States, which made it difficult and expensive for U.S. based lenders
to perfect a security interest in those assets and therefore made collateralized
debt financing impracticable. The Board of Directors of Tiffany determined that
it would not be prudent to advance further funds to Little Switzerland, or to
guarantee additional debt financing, while remaining a significant but minority
stockholder. At that time, members of Tiffany senior management asked that
William A. Shutzer, a member of the Tiffany Board of Directors and a managing
director at Lehman Brothers Inc. ("Lehman Brothers"), set up a meeting between
Lehman Brothers and certain members of Tiffany management to discuss Little
Switzerland and Lehman Brothers' views on strategic alternatives available to
Tiffany with respect to its minority position in Little Switzerland. On December
10, 2001, Lehman Brothers presented to selected members of Tiffany management
certain materials prepared to assist Tiffany management in consideration of
strategic alternatives available to Tiffany with respect to its minority
position in Little Switzerland, including the potential acquisition of the
Shares not owned by Tiffany. Tiffany determined at that time that it would be
undesirable to seek to acquire all of the Shares not owned by Tiffany unless
Tiffany could be reasonably assured of being able to acquire the Holtzmans'
Shares. At that time, there was no indication that the Holtzmans' Shares were
available for purchase. As a result, Tiffany management did not engage Lehman
Brothers and declined to take any further action at that time regarding a
potential acquisition of the Shares not owned by Tiffany.
In May 2002, Seymour Holtzman expressed to certain members of Tiffany
management a willingness to sell his interest in Little Switzerland to Tiffany.
At that time, Tiffany management engaged Lehman Brothers to advise Tiffany with
respect to its investment in Little Switzerland and to assist Tiffany in its
negotiations with Seymour Holtzman regarding the potential acquisition of the
Holtzmans' Shares and to provide advice with respect to strategy and tactics,
including advice with respect to the price per Share that Tiffany might offer to
the public, regarding the potential acquisition of the remaining Shares held by
the public. Tiffany did not request Lehman Brothers to advise it with respect to
the fairness of any offered price to the holders of Tiffany shares or to the
holders of Little Switzerland Shares, because Tiffany did not believe that the
Tiffany Board of Directors required the protections offered by obtaining a
fairness opinion as a condition to proceeding with the proposed purchase of the
Holtzmans' Shares or the proposed Offer. On June 5, 2002, Lehman Brothers
presented to selected members of Tiffany management certain materials prepared
to assist Tiffany management in consideration of the potential acquisition of
Little Switzerland. See "Special Factors - Reasons for and Purpose of the Offer
and the Merger; Tiffany & Co.'s Plans for Little Switzerland" for details
regarding Tiffany's reasons for the Offer and the Merger. Tiffany then directed
Lehman to contact Mr. Holtzman on its behalf regarding the possibility of
Tiffany acquiring the Holtzmans' Shares.
During the month of June 2002, Lehman Brothers and Seymour Holtzman
discussed a possible sale of the Holtzmans' Shares to Tiffany. The Holtzmans
indicated that they would be willing to sell their Shares at $2.50 per share. At
Tiffany's direction, Lehman Brothers indicated that Tiffany would be willing to
pay $2.40 per Share.
The second sentence of the fourth paragraph of that section, appearing
on page 10 of the Offer to Purchase is deleted and replaced in its entirety with
the following:
Upon the advice of its outside legal counsel, Gibson, Dunn & Crutcher
LLP ("Gibson Dunn"), Tiffany determined that to ensure that the Offer process
would be fair, Purchaser would not purchase the Holtzmans' Shares unless a
substantial majority of the public were willing to sell their Shares on the same
terms, and would not close the Offer and the subsequent Merger unless a majority
of the Shares not held by International or the Holtzmans were tendered in the
Offer.
The first sentence of the fifth paragraph of that section, appearing on
page 10 of the Offer to Purchase is deleted and replaced in its entirety with
the following
Tiffany determined to make the Offer directly to the stockholders of
Little Switzerland without approaching the management or the Board of Directors
of Little Switzerland in order to avoid the costs to both Tiffany and Little
Switzerland that would arise in connection with responding, on a substantive and
procedural basis, to a proposal from Tiffany to acquire all of the outstanding
Shares. Tiffany recognized that three of the five members of the Little
Switzerland Board of Directors -- two representatives of Tiffany and Seymour
Holtzman -- were interested parties in any such transaction and therefore would
refrain from any participation at the Little Switzerland Board level in
considering a proposal from Tiffany.
7
The eighth paragraph of that section, appearing on page 10 of the Offer to
Purchase is deleted and replaced in its entirety with the following:
After receipt of the draft stock purchase agreement, the Holtzmans
objected to provisions in the draft agreement that conditioned the purchase of
their Shares on a tender offer to the public that resulted in the acquisition by
Tiffany of at least 90% of the Shares. Following conversations between Lehman
Brothers, Gibson Dunn and the Holtzmans, the Holtzmans' agreed that any purchase
of their Shares would be made concurrently with the closing of the Offer. Over
the following several weeks, stock market conditions deteriorated and the
Holtzmans failed to execute definitive agreements or to respond with substantive
comments to the draft documentation. Tiffany on July 22, 2002, concluded that it
was undesirable to have an outstanding offer to acquire the Holtzmans' Shares at
$2.50 per share that was not documented in a binding agreement and determined to
withdraw its offer. Lehman Brothers communicated the withdrawal of the Offer to
the Holtzmans on that day. Several days thereafter, the Holtzmans indicated to
Lehman Brothers that they still wished to sell their Shares to Tiffany at $2.50
per share. Based on the deterioration of conditions in the market and the
decrease in the price of the Shares since the time when Tiffany indicated a
willingness to pay $2.50 per share, Tiffany instructed Lehman Brothers to inform
the Holtzmans that it was no longer willing to pay $2.50 per share to the
Holtzmans and that it had reduced the price it was willing to pay the Holtzmans
to $2.25 per Share. Following further discussions between Seymour Holtzman and
Lehman Brothers, Tiffany and the Holtzmans agreed to a price of $2.40 per Share,
subject to adjustment so that the Holtzmans would receive the same price as the
public stockholders in the Offer. Tiffany and the Holtzmans executed and
delivered the definitive stock purchase agreement on August 12, 2002.
We amend the section entitled "Special Factors - Reasons for and Purpose
of the Offer and the Merger; Tiffany & Co.'s Plans for Little Switzerland,"
beginning on page 11 of the Offer to Purchase as follows:
The seventh paragraph of that section, appearing on page 11 of the Offer
to Purchase is deleted and replaced in its entirety with the following:
As of May 25, 2002, there were outstanding options to purchase 1,524,500
Shares, of which options to purchase 1,235,167 shares were exercisable. All of
these options were issued to employees and directors of Little Switzerland
pursuant to its incentive option plans (except for certain of the Holtzmans'
options). In the event of the Merger, the option holders will be provided notice
and will have the opportunity to exercise their options prior to the
consummation of the Merger in accordance with the terms of their options. Any
options that are unexercised at the time of the Merger will be cancelled in
accordance with their terms. As a result of such options' terms, option holders
may choose to exercise their options after the Offer is completed and before the
Merger which could result in the aggregate ownership by Tiffany and its
subsidiaries of the outstanding Shares falling below 90%. In that event,
Purchaser may decide to acquire additional Shares in the open market or in
privately negotiated transactions to the extent required for such ownership to
equal or exceed 90%. Any such purchases would be made at market prices or
privately negotiated prices at the time of purchase, which may be higher or
lower than or the same as the Offer price.
We amend the section entitled "Special Factors - Purchaser's and Tiffany's
Position Regarding the Fairness of the Offer and the Merger," beginning on page
12 of the Offer to Purchase as follows:
The title and first two paragraphs of that section, appearing on pages 12
and 13 of the Offer to Purchase, are deleted and replaced in their entirety with
the following:
PURCHASER'S, INTERNATIONAL'S AND TIFFANY'S POSITION REGARDING THE FAIRNESS
OF THE OFFER AND THE MERGER
We believe the Offer and the Merger are fair to Little Switzerland's
stockholders who are not affiliated with Little Switzerland, Purchaser, Tiffany
or the Holtzmans. We base our belief on our observations of the following
factors, each of which, in our judgment, supports our view as to the fairness of
the Offer and the Merger. We did not observe any factors which, in our judgment,
weighed against the fairness of the Offer and Merger to Little Switzerland's
stockholders who are not affiliated with Little Switzerland, Purchaser, Tiffany
or the Holtzmans.
o The $2.40 per Share cash consideration payable in the Offer represents an
approximately 73% premium to the closing price on August 12, 2002, the
last trading day prior to public announcement of the Offer, and represents
a 92% premium to the $1.25 per Share paid by Tiffany in May 2001 in
connection with its initial investment in Little Switzerland. We believe
that the size of such premiums indicates that the Offer and Merger are
fair.
8
o The Offer is conditioned on the tender of at least a majority of the
Shares not owned by Tiffany or the Holtzmans -- the Majority of the
Minority Condition. Satisfaction of this condition will require that at
least approximately 3,800,000 Shares of the approximately 7,600,000
outstanding Shares not owned by Tiffany or the Holtzmans (more than 50% of
such Shares) are tendered. We believe that the Offer is fair because it
includes the Majority of the Minority Condition which grants Little
Switzerland's unaffiliated stockholders meaningful opportunity to
determine how the Offer and Merger should proceed.
o The Offer is conditioned on the tender of a sufficient number of Shares so
that, after the Shares are purchased pursuant to the Offer and the stock
purchase agreement with the Holtzmans, we would own at least 90% of the
outstanding Little Switzerland common stock on a fully-diluted basis --
the Minimum Condition. Satisfaction of this condition will require that at
least approximately 7,100,000 of the Shares not owned by us or the
Holtzmans are tendered. We believe that the Offer is fair because the
Minimum Condition makes the Offer and Merger subject to the condition that
a supermajority of Little Switzerland's unaffiliated stockholders tender
their Shares.
o The Offer and the Merger provides Little Switzerland's stockholders a
substantially greater opportunity to sell their holdings in Little
Switzerland at a premium than has been available in the public market,
where historically low volumes of trading have greatly limited liquidity.
We believe that the Offer and Merger are fair because they provide Little
Switzerland's unaffiliated stockholders liquidity at a more favorable
price than would otherwise have been available.
o Tiffany's ownership of approximately 45% of the currently outstanding
Shares and the location of a significant portion of Little Switzerland's
assets outside the United States may have limited the financing
alternatives available to Little Switzerland and thereby made it less
likely that Little Switzerland would have the ability to raise the capital
necessary to grow its business. We believe that the Offer and Merger are
fair because, without such additional growth, we believe it is unlikely
that Little Switzerland's unaffiliated stockholders would have an
opportunity to sell their Shares on terms and conditions more favorable
than those of the Offer and Merger.
o Little Switzerland stockholders who elect not to tender their Shares in
the Offer will receive the same consideration in the Merger that we pay in
the Offer, subject to their right to dissent from the Merger and demand an
appraisal of the fair value of their Shares under the DGCL. We believe
that the Offer and Merger are fair because Little Switzerland's
unaffiliated stockholders are not forced into tendering into the Offer as
a result of the risk of being treated less favorably if they fail to
tender.
o The fact that, prior to our initial investment in Little Switzerland,
Little Switzerland attempted unsuccessfully to find a merger partner or a
strategic investor indicated to us that the Offer and Merger are fair
because it is unlikely that an alternate proposal on terms and conditions
more favorable than those of the Offer and Merger would be offered by a
potential merger partner or strategic investor.
o The fact that the Holtzmans, who have a representative on the Board of
Directors of Little Switzerland and are therefore in a superior position
with respect to knowledge of the operations and business of Little
Switzerland, have agreed to sell their Shares to us on terms and
conditions identical to those of the Offer lead us to believe that the
Offer is fair to Little Switzerland's unaffiliated stockholders who will
receive the same consideration.
o The materials prepared by Lehman Brothers and discussed with selected
management of Tiffany on June 5, 2002 regarding the potential purchase by
Tiffany of the publicly held Shares, including the relatively low
historical trading prices and volumes of Little Switzerland common stock
over various periods between May 23, 1997 and May 24, 2002 and the fact
that the Offer price represents a significant premium to the book value of
the equity of Little Switzerland. See "Special Factors - Report of Lehman
Brothers to the Board of Directors of Tiffany." Each of the foregoing
observations lead us to believe that the Offer and Merger are fair to
Little Switzerland's unaffiliated stockholders.
We believe that each of the foregoing observations is relevant to all
Little Switzerland stockholders who are not
9
affiliated with Little Switzerland, the Holtzmans or us.
We amend the section entitled "Special Factors - Report of Lehman Brothers
To Selected Members of Management Of Tiffany," beginning on page 13 of the Offer
to Purchase as follows:
The second sentence of the first paragraph of that section, appearing on
page 13 of the Offer to Purchase is deleted and replaced in its entirety with
the following:
However, Lehman Brothers did prepare materials that were presented to
selected members of management.
The following three sentences are added after the third sentence of the
first paragraph of that section:
An initial version of this presentation was made on December 10, 2001, and
a final version was forwarded to members of Tiffany management on May 29, 2002,
and presented by Lehman Brothers on June 5, 2002. The initial version was
substantially the same as the final version, which updated certain trading and
financial information and included the recent developments on the transaction.
The final version of this presentation, dated May 29, 2002 and presented to
selected members of Tiffany management on June 5, 2002, is described below.
The third sentence of the second paragraph of that section, appearing on
page 13 of the Offer to Purchase is deleted and replaced in its entirety with
the following:
THIS PRESENTATION SHOULD NOT BE DEEMED TO CONSTITUTE AN OPINION THAT THE
$2.40 PRICE PER SHARE CONSIDERATION TO BE OFFERED TO THE LITTLE SWITZERLAND
STOCKHOLDERS (OTHER THAN TIFFANY AND ITS AFFILIATES) IS FAIR, FROM A FINANCIAL
POINT OF VIEW OR OTHERWISE, TO SUCH STOCKHOLDERS, TO TIFFANY, OR TO ANY OTHER
PERSON.
The following paragraph is added after the fourth paragraph of that
section:
Company History and Sapphire Presence. Lehman Brothers noted that Little
Switzerland was spun-off by its parent, Town & Country Corporation, in July
1991. Lehman Brothers reviewed Little Switzerland's retail store locations,
which peaked at 27 in 1996, and currently total 19 stores in six Caribbean
destinations and Alaska. Lehman Brothers noted that since Little Switzerland's
primary competitors are independently-owned merchants, Little Switzerland is
well-positioned to benefit from its relative scale and exclusive distribution
arrangements with certain luxury brands.
The fifth paragraph of that section, appearing on page 14 of the Offer to
Purchase is deleted and replaced in its entirety with the following:
Stock Price Performance Analysis and Trading History. Using publicly
available information, Lehman Brothers compiled data to form four graphs of
stock price performance and historical trading data for Little Switzerland and
its Peer Group. Graph one depicts stock price performance for Little Switzerland
and the Peer Group, also called the Lehman Brothers Small-Cap Luxury Retail
Composite, for the period May 23, 1997 to May 24, 2002. Lehman Brothers noted
that as of May 24, 2002, Little Switzerland was trading at $1.84, a 25% discount
to its 52-week high, and a 1% premium to its 52-week average. During the five
year period depicted in the graph, the stock price for Little Switzerland
decreased 69% and the stock price for the Peer Group increased approximately
80%. Graph two depicts stock price performance for Little Switzerland for the
period May 23, 1997 to May 24, 2002. Little Switzerland's highest trading value
during that five year period was $8.00 on April 30, 1998 and its lowest trading
value was $0.22 on October 21, 1999. Graph three depicts the one year historical
trading volume analysis; the highest quantity of stock (39% of the volume traded
in the past year) was traded when the stock was in the $1.76-$1.93 range, and
the lowest quantity of stock (2% of total volume) was traded when the stock was
in the $2.12-$2.29 range. Graph four depicts the five year historical trading
volume analysis; the highest quantity of stock (37% of total volume traded in
the past 5 years) was traded when the stock was in the $0.22-$1.33 range, and
the lowest quantity of stock (2% of total volume) was traded when the stock was
in the $4.67-$5.77 range.
The last three sentences of the sixth paragraph of that section, appearing
on page 14 of the Offer to Purchase are deleted and replaced in their entirety
with the following:
The results of Lehman Brothers' review of this information were as
follows:
ENTERPRISE VALUE/LTM EQUITY MARKET VALUE/
-------------------- -------------------- TOTAL DEBT/ TOTAL DEBT/
REVENUE EBITDA EBIT LTM NI BOOK VALUE TOTAL CAP LTM EBITDA
------- ------ ---- ------ ---------- --------- ----------
Peer Group Average 0.60x 10.0x 10.9x 15.6x 1.17x 35.4% 2.0x
Peer Group Median 0.54x 8.7x 10.7x 11.6x 0.91x 33.8% 2.1x
Little Switzerland 0.66x NM NM NM 1.63x 28.4% NM
The following sentence and bullet points are added after the first
sentence of the seventh paragraph of that section, appearing on page 14 of the
Offer to Purchase:
The transactions reviewed by Lehman Brothers were as follows (listed by
acquiror/target and announcement date):
- - Finlay Enterprises / Diamond Park Fine Jewelers (9/3/97)
- - Marc Orian / Pop Bijoux (9/24/97)
- - Jan Bell Marketing / Mayor's Jewelers Inc. (2/18/98)
- - Marks Brothers Jewelers / Carlye & Co.-Jewelry Stores (6/22/98)
- - Zale Corp. / Peoples Jewellers Ltd. (3/16/99)
- - Mildghosts Ltd. / Goldsmiths Group PLC (3/18/99)
- - Finlay Enterprises / Jay B Rudolph Inc. (2/11/00)
- - Sunglass Hut International / Watch World International (5/4/00)
- - Zale Corp. / Piercing Pagoda Inc. (8/11/00)
- - Tiffany / Little Switzerland (45% interest) (4/10/01)
The following two sentences are added to the end of the seventh paragraph
of that section, appearing on page 14 of the Offer to Purchase:
At $2.40 per Little Switzerland share, the multiple of transaction value
to Little Switzerland's LTM revenue was 0.83x. The multiples of transaction
value to Little Switzerland's LTM EBITDA and LTM EBIT were not meaningful due to
negative LTM EBITDA and LTM EBIT.
The following paragraph is added after the seventh paragraph of that
section:
Purchase Price Ratio Analysis. Lehman Brothers used the purchase price
ratio analysis to provide enterprise value multiples and equity value multiples
of key operating statistics for a range of transaction values. Lehman Brothers
used the current market price and a range of possible offer price per share of
common equity to calculate the enterprise value for Little Switzerland, Lehman
Brothers then calculated the ratio of enterprise value to revenue, and the ratio
of equity value to book value, each for the last twelve months. The results of
Lehman Brothers' analysis were as follows:
CURRENT
(5/24/02
$1.84 $2.00 $2.15 $2.25 $2.35 $2.45
----- ----- ----- ----- ----- -----
Enterprise Value as a Multiple of LTM Revenue 0.66x 0.70x 0.75x 0.78x 0.81x 0.84x
Equity Value as a Multiple of Book Value 1.63x 1.78x 1.92x 2.01x 2.10x 2.20x
The first two sentences of the eighth paragraph of that section, appearing
on page 15 of the Offer to Purchase are deleted and replaced in their entirety
with the following:
Using publicly available information, Lehman Brothers provided a summary
of recent changes to Little Switzerland's anti-takeover provisions, including
actions to eliminate staggered election periods for members of Little
Switzerland's Board of Directors; to eliminate the requirement for
super-majority voting to engage in certain transactions with an interested
stockholder (defined as a holder of 15% or more of the voting securities of
Little Switzerland); to allow special shareholder meetings to be called by a
majority of shareholders and to eliminate the requirement for super-majority
voting to amend provisions of Little Switzerland's certificate of incorporation
or by-laws. Lehman Brothers also provided a summary of Little Switzerland's
defense profile, which included the following strengths: blank check preferred
stock; the protections of the Delaware takeover statute; and two significant
shareholders owning more than 15% of the common stock. In reviewing Little
Switzerland's defensive profile, Lehman Brothers also noted the following
weaknesses:
- lack of a shareholder rights plan;
- two out of its total board members were representatives of
Tiffany;
- no requirement for super-majority voting to approve
transactions with interested stockholders;
- ability for special shareholder meetings to be called by a
majority of shareholders; and
- no requirement for super-majority voting to amend provisions
of Little Switzerland's certificate of incorporation or
by-laws.
The last two sentences of the ninth paragraph of that section, appearing
on page 15 of the Offer to Purchase are deleted and replaced in their entirety
with the following:
The analysis notes that two of Little Switzerland's stockholders, Seymour
Holtzman and Donald Sturm, control over 15% of the Company's diluted shares,
representing nearly 26% of the Shares not held by Tiffany. Lehman Brothers noted
that the stock ownership analysis indicated that if Tiffany intended to take
Little Switzerland private, Tiffany would need the support of Messrs. Holtzman
and Sturm. Lehman Brothers indicated that they viewed this as a factor that
might make the completion of the Offer potentially more difficult. Lehman
Brothers also noted that Tiffany holds two out of five seats on the Board of
Directors.
The first sentence of the eleventh paragraph of that section, appearing on
page 15 of the Offer to Purchase is deleted and replaced in its entirety with
the following:
The engagement of Lehman Brothers in connection with the proposed merger
was formalized by an engagement letter dated June 13, 2002 between Tiffany and
Lehman Brothers pursuant to which Tiffany has agreed to pay Lehman Brothers a
cash fee of $600,000, $500,000 of which is contingent upon consummation of the
Offer.
We amend the section entitled "Special Factors - Little Switzerland
Financial Projections," beginning on page 15 of the Offer to Purchase as
follows:
The fourth paragraph of that section, appearing on page 16 of the Offer to
Purchase is deleted and replaced in its entirety with the following:
The Little Switzerland Projections were based on assumptions concerning
Little Switzerland's capital expenditures, business prospects and other revenue
and operating assumptions, including increasing consumer confidence levels,
positive attitudes towards flying and cruise taking and fair weather in the
Caribbean. The margins set forth in the table above and the sales growth rate
reflected in the table were based on these assumptions. The specifics as to
these assumptions were not disclosed in writing, but were discussed orally by
Little Switzerland management in their presentation to the Little Switzerland
Board of Directors. Tiffany believes these projections generally are aggressive
and are unlikely to be achieved. Tiffany accordingly has not relied on them in
its consideration of the Offer.
We amend the section entitled "The Offer - Terms of the Offer," beginning
on page 20 of the Offer to Purchase as follows:
The last two sentences of the third paragraph of that section, appearing
on page 20 of the Offer to Purchase are deleted and replaced in their entirety
with the following:
If Purchaser accepts any Shares for payment pursuant to the terms of the
Offer, it will accept for payment all Shares validly tendered during the
Offering Period and not withdrawn, and, on the terms and subject to the
conditions of the Offer, including but not limited to the Offer Conditions, it
will promptly pay for all Shares so accepted for payment. If there is a
Subsequent Offering Period (as defined herein), all Shares tendered during the
Offering Period will be immediately accepted for payment and promptly paid for
following the expiration thereof (and may not be withdrawn during the Subsequent
Offering Period) and Shares tendered during a Subsequent Offering Period will be
immediately accepted for payment and paid for on a rolling basis as they are
tendered. Purchaser confirms that its reservation of the right to delay payment
for Shares that it has accepted for payment is limited by Rule 14e-1(c) under
the Exchange Act, which requires that a tender offeror pay the consideration
offered or return the tendered securities promptly after the termination or
withdrawal of a tender offer.
We amend the section entitled "The Offer - Terms of the Offer," beginning
on page 20 of the Offer to Purchase as follows:
The last two sentences of the sixth paragraph of that section, appearing
on page 21 of the Offer to Purchase are deleted and replaced in their entirety
with the following:
If there is a Subsequent Offering Period, all Shares tendered during the
Offering Period will be immediately accepted for payment and promptly paid for
following the expiration thereof (and may not be withdrawn during the Subsequent
Offering Period) and Shares tendered during a Subsequent Offering Period will be
immediately accepted for payment and paid for on a rolling basis as they are
tendered. If Purchaser elects to provide a Subsequent Offering Period, it
expressly reserves the right, in its sole discretion, at any time or from time
to time, to extend the Subsequent Offering Period (not beyond a total of 20
business days) by giving oral or written notice of such extension to the
Depositary and making an announcement to that effect by issuing a press release
no later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date of the Subsequent Offering Period. During a
Subsequent Offering Period, tendering stockholders will not have withdrawal
rights. See Section 4, "The Offer - Rights of Withdrawal."
10
We amend the section entitled "The Offer - Acceptance for Payment and
Payment for Shares," beginning on page 21 of the Offer to Purchase as follows:
The second sentence of the first paragraph of that section, appearing on
page 21 of the Offer to Purchase is deleted and replaced in its entirety with
the following:
If there is a Subsequent Offering Period, all Shares tendered during the
Offering Period will be immediately accepted for payment and promptly paid for
following the expiration thereof (and may not be withdrawn during the Subsequent
Offering Period) and Shares tendered during a Subsequent Offering Period will be
immediately accepted for payment and paid for on a rolling basis as they are
tendered.
We amend the section entitled "The Offer - Certain Information Concerning
Little Switzerland," beginning on page 28 of the Offer to Purchase as follows:
The first sentence of the seventh paragraph of that section, appearing on
page 30 of the Offer to Purchase is deleted and replaced in its entirety with
the following:
This data and the comparative per share data set forth below are extracted
from, and should be read in conjunction with, the audited consolidated financial
statements and other financial information contained in Little Switzerland's
Annual Report on Form 10-K for the years ended May 25, 2002 and May 26, 2001 and
the unaudited consolidated interim financial information contained in Little
Switzerland's Quarterly Reports on Form 10-Q for the quarterly periods ended
February 23, 2002 and February 24, 2001, including the notes thereto.
We amend the section entitled "The Offer - Certain Effects of the Offer,"
beginning on page 37 of the Offer to Purchase as follows:
The following two paragraphs are added after the fifth paragraph of that
section:
Certain Effects of the Offer and Merger on Purchaser, International and
Tiffany. The purchase of the Shares by the Purchaser pursuant to the Offer and
the subsequent Merger will increase our interest in the net book value and net
earnings of Little Switzerland from 45% to 100%. The purchase of the Shares by
the Purchaser pursuant to the Offer and the subsequent Merger will be
disregarded for federal income tax purposes, and the transactions will be
treated as a purchase of the Shares by International. Such deemed purchase will
not result in any federal income tax liability being incurred by Purchaser,
International or Tiffany.
For a discussion of Purchaser's, International's and Tiffany's purposes
and reasons for the Offer and Merger and the anticipated effects of the Offer
and Merger on Purchaser, International and Tiffany see "Special Factors -
Reasons for and Purpose of the Offer and the Merger; Tiffany & Co.'s Plans for
Little Switzerland" and "Special Factors - Tiffany's Ownership and Operating
Relationships with Little Switzerland."
We amend the section entitled "The Offer - Certain Conditions of the
Offer," beginning on page 34 of the Offer to Purchase as follows:
The last word of subsection (c)(iii) of that section, appearing on page 34
of the Offer to Purchase is deleted and replaced in its entirety with the
following:
stockholders
ITEM 13. ADDITIONAL INFORMATION REQUIRED BY SCHEDULE 13E-3
ITEM 6. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS
Item 6 of Schedule TO is hereby amended and supplemented by including the
following:
We amend the section entitled "Special Factors - Reasons for and Purpose
of the Offer and the Merger; Tiffany & Co.'s Plans for Little Switzerland,"
beginning on page 11 of the Offer to Purchase as follows:
The seventh paragraph of that section, appearing on page 11 of the Offer
to Purchase is deleted and replaced in its entirety with the following:
As of May 25, 2002, there were outstanding options to purchase 1,524,500
Shares, of which options to purchase 1,235,167 shares were exercisable. All of
these options were issued to employees and directors of Little Switzerland
pursuant to its incentive option plans (except for certain of the Holtzmans'
options). In the event of the Merger, the option holders will be provided notice
and will have the opportunity to exercise their options prior to the
consummation of the Merger in accordance with the terms of their options. Any
options that are unexercised at the time of the Merger will be cancelled in
accordance with their terms. As a result of such options' terms, option holders
may choose to exercise their options after the Offer is completed and before the
Merger which could result in the aggregate ownership by Tiffany and its
subsidiaries of the outstanding Shares falling below 90%. In that event,
Purchaser may decide to acquire additional Shares in the open market or in
privately negotiated transactions to the extent required for such ownership to
equal or exceed 90%. Any such purchases would be made at market prices or
privately negotiated prices at the time of purchase, which may be higher or
lower than or the same as the Offer price.
11
We amend the section entitled "The Offer - Certain Effects of the Offer,"
beginning on page 37 of the Offer to Purchase as follows:
The following 2 paragraphs are added after the fifth paragraph of that
section:
Certain Effects of the Offer and Merger on Purchaser, International and
Tiffany. The purchase of the Shares by the Purchaser pursuant to the Offer and
the subsequent Merger will increase our interest in the net book value and net
earnings of Little Switzerland from 45% to 100%. The purchase of the Shares by
the Purchaser pursuant to the Offer and the subsequent Merger will be
disregarded for federal income tax purposes, and the transactions will be
treated as a purchase of the Shares by International. Such deemed purchase will
not result in any federal income tax liability being incurred by Purchaser,
International or Tiffany.
For a discussion of Purchaser's, International's and Tiffany's purposes
and reasons for the Offer and Merger and the anticipated effects of the Offer
and Merger on Purchaser, International and Tiffany see "Special Factors -
Reasons for and Purpose of the Offer and the Merger; Tiffany & Co.'s Plans for
Little Switzerland" and "Special Factors - Tiffany's Ownership and Operating
Relationships with Little Switzerland."
ITEM 7. PURPOSES, ALTERNATIVES, REASONS AND EFFECTS IN A GOING-PRIVATE
TRANSACTION
Item 7 of Schedule TO is hereby amended and supplemented by including the
following:
We amend the section entitled "Special Factors - Reasons for and Purpose
of the Offer and the Merger; Tiffany & Co.'s Plans for Little Switzerland,"
beginning on page 11 of the Offer to Purchase as follows:
The seventh paragraph of that section, appearing on page 11 of the Offer
to Purchase is deleted and replaced in its entirety with the following:
As of May 25, 2002, there were outstanding options to purchase 1,524,500
Shares, of which options to purchase 1,235,167 shares were exercisable. All of
these options were issued to employees and directors of Little Switzerland
pursuant to its incentive option plans (except for certain of the Holtzmans'
options). In the event of the Merger, the option holders will be provided notice
and will have the opportunity to exercise their options prior to the
consummation of the Merger in accordance with the terms of their options. Any
options that are unexercised at the time of the Merger will be cancelled in
accordance with their terms. As a result of such options' terms, option holders
may choose to exercise their options after the Offer is completed and before the
Merger which could result in the aggregate ownership by Tiffany and its
subsidiaries of the outstanding Shares falling below 90%. In that event,
Purchaser may decide to acquire additional Shares in the open market or in
privately negotiated transactions to the extent required for such ownership to
equal or exceed 90%. Any such purchases would be made at market prices or
privately negotiated prices at the time of purchase, which may be higher or
lower than or the same as the Offer price.
ITEM 8. FAIRNESS OF THE GOING-PRIVATE TRANSACTION
Item 8 of Schedule TO is hereby amended and supplemented by including the
following:
The title and first two paragraphs of that section, appearing on pages
12 and 13 of the Offer to Purchase, are deleted and replaced in their entirety
with the following:
PURCHASER'S, INTERNATIONAL'S AND TIFFANY'S POSITION REGARDING THE FAIRNESS
OF THE OFFER AND THE MERGER
We believe the Offer and the Merger are fair to Little Switzerland's
stockholders who are not affiliated with Little Switzerland, Purchaser, Tiffany
or the Holtzmans. We base our belief on our observations of the following
factors, each of which, in our judgment, supports our view as to the fairness of
the Offer and the Merger. We did not observe any factors which, in our judgment,
weighed against the fairness of the Offer and Merger to Little Switzerland's
stockholders who are not affiliated with Little Switzerland, Purchaser, Tiffany
or the Holtzmans.
12
o The $2.40 per Share cash consideration payable in the Offer represents an
approximately 73% premium to the closing price on August 12, 2002, the
last trading day prior to public announcement of the Offer, and represents
a 92% premium to the $1.25 per Share paid by Tiffany in May 2001 in
connection with its initial investment in Little Switzerland. We believe
that the size of such premiums indicates that the Offer and Merger are
fair.
o The Offer is conditioned on the tender of at least a majority of the
Shares not owned by Tiffany or the Holtzmans -- the Majority of the
Minority Condition. Satisfaction of this condition will require that at
least approximately 3,800,000 Shares of the approximately 7,600,000
outstanding Shares not owned by Tiffany or the Holtzmans (more than 50% of
such Shares) are tendered. We believe that the Offer is fair because it
includes the Majority of the Minority Condition which grants Little
Switzerland's unaffiliated stockholders meaningful opportunity to
determine how the Offer and Merger should proceed.
o The Offer is conditioned on the tender of a sufficient number of Shares so
that, after the Shares are purchased pursuant to the Offer and the stock
purchase agreement with the Holtzmans, we would own at least 90% of the
outstanding Little Switzerland common stock on a fully-diluted basis --
the Minimum Condition. Satisfaction of this condition will require that at
least approximately 7,100,000 of the Shares not owned by us or the
Holtzmans are tendered. We believe that the Offer is fair because the
Minimum Condition makes the Offer and Merger subject to the condition that
a supermajority of Little Switzerland's unaffiliated stockholders tender
their Shares.
o The Offer and the Merger provides Little Switzerland's stockholders a
substantially greater opportunity to sell their holdings in Little
Switzerland at a premium than has been available in the public market,
where historically low volumes of trading have greatly limited liquidity.
We believe that the Offer and Merger are fair because they provide Little
Switzerland's unaffiliated stockholders liquidity at a more favorable
price than would otherwise have been available.
o Tiffany's ownership of approximately 45% of the currently outstanding
Shares and the location of a significant portion of Little Switzerland's
assets outside the United States may have limited the financing
alternatives available to Little Switzerland and thereby made it less
likely that Little Switzerland would have the ability to raise the capital
necessary to grow its business. We believe that the Offer and Merger are
fair because, without such additional growth, we believe it is unlikely
that Little Switzerland's unaffiliated stockholders would have an
opportunity to sell their Shares on terms and conditions more favorable
than those of the Offer and Merger.
o Little Switzerland stockholders who elect not to tender their Shares in
the Offer will receive the same consideration in the Merger that we pay in
the Offer, subject to their right to dissent from the Merger and demand an
appraisal of the fair value of their Shares under the DGCL. We believe
that the Offer and Merger are fair because Little Switzerland's
unaffiliated stockholders are not forced into tendering into the Offer as
a result of the risk of being treated less favorably if they fail to
tender.
o The fact that, prior to our initial investment in Little Switzerland,
Little Switzerland attempted unsuccessfully to find a merger partner or a
strategic investor indicated to us that the Offer and Merger are fair
because it is unlikely that an alternate proposal on terms and conditions
more favorable than those of the Offer and Merger would be offered by a
potential merger partner or strategic investor.
o The fact that the Holtzmans, who have a representative on the Board of
Directors of Little Switzerland and are therefore in a superior position
with respect to knowledge of the operations and business of Little
Switzerland, have agreed to sell their Shares to us on terms and
conditions identical to those of the Offer lead us to believe that the
Offer is fair to Little Switzerland's unaffiliated stockholders who will
receive the same consideration.
o The materials prepared by Lehman Brothers and discussed with selected
management of Tiffany on June 5, 2002 regarding the potential purchase by
Tiffany of the publicly held Shares, including the relatively low
historical trading prices and volumes of Little Switzerland common stock
over various periods between May 23, 1997 and May 24, 2002 and the fact
that the Offer price represents a significant premium to the book
13
value of the equity of Little Switzerland. See "Special Factors - Report
of Lehman Brothers to the Board of Directors of Tiffany." Each of the
foregoing observations lead us to believe that the Offer and Merger are
fair to Little Switzerland's unaffiliated stockholders.
We believe that each of the foregoing observations is relevant to all Little
Switzerland stockholders who are not affiliated with Little Switzerland, the
Holtzmans or us.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND NEGOTIATIONS
Item 9 of Schedule TO is hereby amended and supplemented by including the
following:
We amend the section entitled "Special Factors - Report of Lehman Brothers
To Selected Members of Management Of Tiffany," beginning on page 13 of the Offer
to Purchase as follows:
The second sentence of the first paragraph of that section, appearing on
page 13 of the Offer to Purchase is deleted and replaced in its entirety with
the following:
However, Lehman Brothers did prepare materials that were presented to
selected members of management.
The following three sentences are added after the third sentence of the
first paragraph of that section:
An initial version of this presentation was made on December 10, 2001, and
a final version was forwarded to members of Tiffany management on May 29, 2002,
and presented by Lehman Brothers on June 5, 2002. The initial version was
substantially the same as the final version, which updated certain trading and
financial information and included the recent developments on the transaction.
The final version of this presentation, dated May 29, 2002 and presented to
selected members of Tiffany management on June 5, 2002, is described below.
The third sentence of the second paragraph of that section, appearing on
page 13 of the Offer to Purchase is deleted and replaced in its entirety with
the following:
THIS PRESENTATION SHOULD NOT BE DEEMED TO CONSTITUTE AN OPINION THAT THE
$2.40 PRICE PER SHARE CONSIDERATION TO BE OFFERED TO THE LITTLE SWITZERLAND
STOCKHOLDERS (OTHER THAN TIFFANY AND ITS AFFILIATES) IS FAIR, FROM A FINANCIAL
POINT OF VIEW OR OTHERWISE, TO SUCH STOCKHOLDERS, TO TIFFANY, OR TO ANY OTHER
PERSON.
The following paragraph is added after the fourth paragraph of that
section:
Company History and Sapphire Presence. Lehman Brothers noted that Little
Switzerland was spun-off by its parent, Town & Country Corporation, in July
1991. Lehman Brothers reviewed Little Switzerland's retail store locations,
which peaked at 27 in 1996, and currently total 19 stores in six Caribbean
destinations and Alaska. Lehman Brothers noted that since Little Switzerland's
primary competitors are independently-owned merchants, Little Switzerland is
well-positioned to benefit from its relative scale and exclusive distribution
arrangements with certain luxury brands.
The fifth paragraph of that section, appearing on page 14 of the Offer to
Purchase is deleted and replaced in its entirety with the following:
Stock Price Performance Analysis and Trading History. Using publicly
available information, Lehman Brothers compiled data to form four graphs of
stock price performance and historical trading data for Little Switzerland and
its Peer Group. Graph one depicts stock price performance for Little Switzerland
and the Peer Group, also called the Lehman Brothers Small-Cap Luxury Retail
Composite, for the period May 23, 1997 to May 24, 2002. Lehman Brothers noted
that as of May 24, 2002, Little Switzerland was trading at $1.84, a 25% discount
to its 52-week high, and a 1% premium to its 52-week average. During the five
year period depicted in the graph, the stock price for Little Switzerland
decreased 69% and the stock price for the Peer Group increased approximately
80%. Graph two depicts stock price performance for Little Switzerland for the
period May 23, 1997 to May 24, 2002. Little Switzerland's highest trading value
during that five year period was $8.00 on April 30, 1998 and its lowest trading
value was $0.22 on October 21, 1999. Graph three depicts the one year historical
trading volume analysis; the highest quantity of stock (39% of the volume traded
in the past year) was traded when the stock was in the $1.76-$1.93 range, and
the lowest quantity of stock (2% of total volume) was traded when the stock was
in the $2.12-$2.29 range. Graph four depicts the five year historical trading
volume analysis; the highest quantity of stock (37% of total volume traded in
the past 5 years) was traded when the stock was in the $0.22-$1.33 range, and
the lowest quantity of stock (2% of total volume) was traded when the stock was
in the $4.67-$5.77 range.
The last three sentences of the sixth paragraph of that section, appearing
on page 14 of the Offer to Purchase are deleted and replaced in their entirety
with the following:
The results of Lehman Brothers' review of this information were as
follows:
ENTERPRISE VALUE/LTM EQUITY MARKET VALUE/
-------------------- -------------------- TOTAL DEBT/ TOTAL DEBT/
REVENUE EBITDA EBIT LTM NI BOOK VALUE TOTAL CAP LTM EBITDA
------- ------ ---- ------ ---------- --------- ----------
Peer Group Average 0.60x 10.0x 10.9x 15.6x 1.17x 35.4% 2.0x
Peer Group Median 0.54x 8.7x 10.7x 11.6x 0.91x 33.8% 2.1x
Little Switzerland 0.66x NM NM NM 1.63x 28.4% NM
The following sentence and bullet points are added after the first
sentence of the seventh paragraph of that section, appearing on page 14 of the
Offer to Purchase:
The transactions reviewed by Lehman Brothers were as follows (listed by
acquiror/target and announcement date):
- - Finlay Enterprises / Diamond Park Fine Jewelers (9/3/97)
- - Marc Orian / Pop Bijoux (9/24/97)
- - Jan Bell Marketing / Mayor's Jewelers Inc. (2/18/98)
- - Marks Brothers Jewelers / Carlye & Co.-Jewelry Stores (6/22/98)
- - Zale Corp. / Peoples Jewellers Ltd. (3/16/99)
- - Mildghosts Ltd. / Goldsmiths Group PLC (3/18/99)
- - Finlay Enterprises / Jay B Rudolph Inc. (2/11/00)
- - Sunglass Hut International / Watch World International (5/4/00)
- - Zale Corp. / Piercing Pagoda Inc. (8/11/00)
- - Tiffany / Little Switzerland (45% interest) (4/10/01)
The following two sentences are added to the end of the seventh paragraph
of that section, appearing on page 14 of the Offer to Purchase:
At $2.40 per Little Switzerland share, the multiple of transaction value
to Little Switzerland's LTM revenue was 0.83x. The multiples of transaction
value to Little Switzerland's LTM EBITDA and LTM EBIT were not meaningful due to
negative LTM EBITDA and LTM EBIT.
The following paragraph is added after the seventh paragraph of that
section:
Purchase Price Ratio Analysis. Lehman Brothers used the purchase price
ratio analysis to provide enterprise value multiples and equity value multiples
of key operating statistics for a range of transaction values. Lehman Brothers
used the current market price and a range of possible offer price per share of
common equity to calculate the enterprise value for Little Switzerland, Lehman
Brothers then calculated the ratio of enterprise value to revenue, and the ratio
of equity value to book value, each for the last twelve months. The results of
Lehman Brothers' analysis were as follows:
CURRENT
(5/24/02
$1.84 $2.00 $2.15 $2.25 $2.35 $2.45
----- ----- ----- ----- ----- -----
Enterprise Value as a Multiple of LTM Revenue 0.66x 0.70x 0.75x 0.78x 0.81x 0.84x
Equity Value as a Multiple of Book Value 1.63x 1.78x 1.92x 2.01x 2.10x 2.20x
The first two sentences of the eighth paragraph of that section, appearing
on page 15 of the Offer to Purchase are deleted and replaced in their entirety
with the following:
Using publicly available information, Lehman Brothers provided a summary
of recent changes to Little Switzerland's anti-takeover provisions, including
actions to eliminate staggered election periods for members of Little
Switzerland's Board of Directors; to eliminate the requirement for
super-majority voting to engage in certain transactions with an interested
stockholder (defined as a holder of 15% or more of the voting securities of
Little Switzerland); to allow special shareholder meetings to be called by a
majority of shareholders and to eliminate the requirement for super-majority
voting to amend provisions of Little Switzerland's certificate of incorporation
or by-laws. Lehman Brothers also provided a summary of Little Switzerland's
defense profile, which included the following strengths: blank check preferred
stock; the protections of the Delaware takeover statute; and two significant
shareholders owning more than 15% of the common stock. In reviewing Little
Switzerland's defensive profile, Lehman Brothers also noted the following
weaknesses:
- lack of a shareholder rights plan;
- two out of its total board members were representatives of
Tiffany;
- no requirement for super-majority voting to approve
transactions with interested stockholders;
- ability for special shareholder meetings to be called by a
majority of shareholders; and
- no requirement for super-majority voting to amend provisions
of Little Switzerland's certificate of incorporation or
by-laws.
The last two sentences of the ninth paragraph of that section, appearing
on page 15 of the Offer to Purchase are deleted and replaced in their entirety
with the following:
The analysis notes that two of Little Switzerland's stockholders, Seymour
Holtzman and Donald Sturm, control over 15% of the Company's diluted shares,
representing nearly 26% of the Shares not held by Tiffany. Lehman Brothers noted
that the stock ownership analysis indicated that if Tiffany intended to take
Little Switzerland private, Tiffany would need the support of Messrs. Holtzman
and Sturm. Lehman Brothers indicated that they viewed this as a factor that
might make the completion of the Offer potentially more difficult. Lehman
Brothers also noted that Tiffany holds two out of five seats on the Board of
Directors.
The first sentence of the eleventh paragraph of that section, appearing on
page 15 of the Offer to Purchase is deleted and replaced in its entirety with
the following:
The engagement of Lehman Brothers in connection with the proposed merger
was formalized by an engagement letter dated June 13, 2002 between Tiffany and
Lehman Brothers pursuant to which Tiffany has agreed to pay Lehman Brothers a
cash fee of $600,000, $500,000 of which is contingent upon consummation of the
Offer.
ITEM 13. FINANCIAL STATEMENTS
Item 13 of Schedule TO is hereby amended and supplemented by including
the following:
(a)(1) The audited consolidated financial statements of Little
Switzerland, Inc. as of and for the fiscal year ended May 25, 2002, are
incorporated herein by reference to the Financial Statements and Supplementary
Data section included as Item 8 to Little Switzerland, Inc.'s Annual Report on
Form 10-K for the fiscal year ended May 25, 2002 filed with the SEC on May 26,
2002.
ITEM 16. EXHIBITS
Item 16 of Schedule TO is hereby amended and supplemented by including the
following:
The following exhibit is added as an exhibit to this Item 16:
(c)(1) Report of Lehman Brothers Inc. to Selected Members of Management of
Tiffany dated December 10, 2001.
14
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.
TIFFANY & CO.
By: /s/ PATRICK B. DORSEY
--------------------------------
Name: Patrick B. Dorsey
Title: Senior Vice President,
Secretary and General Counsel
TIFFANY & CO. INTERNATIONAL
By: /s/ PATRICK B. DORSEY
--------------------------------
Name: Patrick B. Dorsey
Title: Vice President and Secretary
TSAC CORP.
By: /s/ PATRICK B. DORSEY
--------------------------------
Name: Patrick B. Dorsey
Title: Secretary and Treasurer
Dated: August 29, 2002
15