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[SALOMON SMITH BARNEY INC. LETTERHEAD]
September 15, 1998
The Board of Directors
Dravo Corporation
11 Stanwix Street
Pittsburgh, Pennsylvania 15222
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the common stock of Dravo Corporation ("Dravo") of the
consideration to be received by such holders pursuant to the terms and subject
to the conditions set forth in the Agreement and Plan of Merger, dated as of
September 15, 1998 (the "Merger Agreement"), among Carmeuse Lime, Inc.
("Carmeuse"), DLC Acquisition Corp., a wholly owned subsidiary of Carmeuse
("DLC"), and Dravo. As more fully described in the Merger Agreement, (i) DLC
will make a cash tender offer to acquire all outstanding shares of the common
stock, par value $1.00 per share, of Dravo ("Dravo Common Stock"), at a purchase
price of $13.00 per share in cash, without interest (the "Cash Consideration"
and, such tender offer, the "Tender Offer") and (ii) subsequent to the Tender
Offer, DLC will be merged with and into Dravo (the "Merger" and, together with
the Tender Offer, the "Transaction") and each outstanding share of Dravo Common
Stock not previously tendered will be converted into the right to receive the
Cash Consideration.
In arriving at our opinion, we reviewed the Merger Agreement and held
discussions with certain senior officers, directors and other representatives
and advisors of Dravo and certain senior officers and other representatives and
advisors of Carmeuse concerning the business, operations and prospects of Dravo.
We examined certain publicly available business and financial information
relating to Dravo as well as certain financial forecasts and other information
and data for Dravo which were provided to or otherwise discussed with us by the
management of Dravo. We reviewed the financial terms of the Transaction as set
forth in the Merger Agreement in relation to, among other things: current and
historical market prices and trading volumes of Dravo Common Stock; the
historical and projected earnings and other operating data of Dravo; and the
capitalization and financial condition of Dravo. We considered, to the extent
publicly available, the financial terms of certain other similar transactions
recently effected which we considered relevant in evaluating the Merger and
analyzed certain financial, stock market and other publicly available
information relating to the businesses of other companies whose operations we
considered relevant in evaluating those of Dravo. In connection with our
engagement, we were requested to approach, and we held discussions with, third
parties to solicit indications of interest in the possible acquisition of Dravo.
In addition to the forgoing, we conducted such other analyses and examinations
and considered such other information and financial, economic and market
criteria as we deemed appropriate in arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed by
or discussed with us. With respect to financial forecasts and other information
and data provided to or otherwise reviewed by or discussed with us, we have been
advised by the management of Dravo that such forecasts and other information and
data were reasonably prepared on bases reflecting the best currently available
estimates and judgments of the management of Dravo as to the future financial
performance of Dravo. We have not made or been provided with an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of Dravo nor have we made any physical inspection of the properties or assets of
Dravo. We express no view as to, and our opinion does not address, the relative
merits of the Transaction as compared to any alternative business strategies
that might exist for Dravo or the effect of any other transaction in which Dravo
might engage. Our opinion is necessarily based upon information available to us,
and financial, stock market and other conditions and circumstances existing and
disclosed to us, as of the date hereof.
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The Board of Directors
Dravo Corporation
September 15, 1998
Page 2
Salomon Smith Barney has acted as financial advisor to Dravo in connection with
the proposed Transaction and will receive a fee for such services, a significant
portion of which is contingent upon the consummation of the Transaction. We also
will receive a fee upon the delivery of this opinion. In the ordinary course of
our business, we and our affiliates may actively trade or hold the securities of
Dravo for our own account or for the account of our customers and, accordingly,
may at any time hold a long or short position in such securities. In addition,
we and our affiliates (including Travelers Group Inc. and its affiliates) may
maintain relationships with Dravo, Carmeuse and their respective affiliates.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of Dravo in its evaluation of the proposed
Transaction, and our opinion is not intended to be and does not constitute a
recommendation to any stockholder as to whether such stockholder should tender
shares of Dravo Common Stock in the Tender Offer or how such stockholder should
vote on any matters relating to the proposed Transaction. Our opinion may not be
published or otherwise used or referred to, nor shall any public reference to
Salomon Smith Barney be made, without our prior written consent.
Based upon and subject to the foregoing, our experience as investment bankers,
our work as described above and other factors we deemed relevant, we are of the
opinion that, as of the date hereof, the Cash Consideration to be received in
the Transaction by the holders of Dravo Common Stock (other than Carmeuse and
its affiliates) is fair, from a financial point of view, to such holders.
Very truly yours,
/s/ SALOMON SMITH BARNEY
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SALOMON SMITH BARNEY INC.