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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
(RULE 14D-101)
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)
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EGREETINGS NETWORK, INC.
(Name of Subject Company)
EGREETINGS NETWORK, INC.
(Name of Person Filing Statement)
Common Stock, $.001 Par Value
(Title of Class of Securities)
282343102
(CUSIP Number of Class of Securities)
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Egreetings Network, Inc.
Andrew J. Moley
149 New Montgomery Street
San Francisco, CA 94105
(415)-375-4100
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person(s) Filing Statement)
---------------------------------
With a copy to:
Kenneth Guernsey, Esq.,
Jamie Chung, Esq.
Cooley Godward LLP
One Maritime Plaza
San Francisco, CA 94111
(415) 693-2000
[ ] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
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This Amendment No. 1 (the "Amendment") amends and supplements the
Solicitation/Recommendation Statement on Schedule 14D-9 filed with the
Securities and Exchange Commission (the "Commission") on February 12, 2001 (the
"Statement") related to the tender offer by American Pie Acquisition Corp. (the
"Purchaser"), a Delaware corporation and a wholly owned subsidiary of
AmericanGreetings.com, Inc., a Delaware corporation ("AmericanGreetings.com"),
to purchase all of the outstanding shares (the "Shares") of the common stock,
par value $0.001 per share, of Egreetings (the "Common Stock"), at a purchase
price of $0.85 per Share, net to the seller in cash, without interest (the "Per
Share Amount"), on the terms and subject to the conditions set forth in the
Purchaser's Offer To Purchase, dated February 12, 2001 (the "Offer To Purchase")
and in the related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer"). The Offer is
described in a Tender Offer Statement on Schedule TO, initially filed by
AmericanGreetings.com and the Purchaser with the Commission on February 12, 2001
(as amended or supplemented from time to time, the "Schedule TO"). This
Amendment amends Items 2, 4 and 5 of the Statement. Capitalized terms used but
not defined herein have the meanings assigned to such terms in the Statement.
ITEM 2. SUBJECT COMPANY INFORMATION
Item 2 of the Statement is hereby amended and supplemented by adding
the following at the end thereof:
On December 16, 1999, Egreetings sold an aggregate of 6,000,000 shares
of Common Stock in an underwritten public offering at a purchase price of $10.00
per share, with gross proceeds to Egreetings of $60,000,000. On January 20,
2000, upon the exercise of the underwriters' overallotment option, Egreetings
sold an additional 479,000 shares of Common Stock at a purchase price of $10.00
per share, with gross proceeds to Egreetings of $4,790,000.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
Item 4 of the Statement is hereby amended and restated to read in its
entirety as follows:
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors, at a meeting held on February 4, 2001,
determined that the terms of the Offer and the Merger are fair to and in the
best interests of the stockholders of Egreetings. All members of the Board of
Directors (none of whom are affiliated with AmericanGreetings.com or any of its
affiliates) were present at this meeting (including the four non-employee
directors), at which the Board unanimously approved the Offer and the Merger and
the other transactions contemplated by the Merger Agreement and approved the
Merger Agreement. The Board of Directors recommends that stockholders accept the
Offer, tender their Shares in the Offer and, if required under Delaware law or
Egreetings' Certificate of Incorporation or Bylaws, vote to adopt the Merger
Agreement.
A letter to Egreetings' stockholders communicating the Board of
Directors' recommendation is filed as Exhibit (a)(1) hereto, and is incorporated
herein by reference.
BACKGROUND; REASONS FOR THE BOARD OF DIRECTORS' RECOMMENDATION
Background
As a result of discussions by the Board of Directors and management of
Egreetings with respect to the possible courses of action for Egreetings to
achieve growth in revenue and to maximize stockholder value, in October 1999,
Egreetings engaged Credit Suisse First Boston Corporation ("CSFB") as its
financial advisor.
On November 3, 1999, American Greetings Corporation, an Ohio
corporation and an indirect parent corporation of AmericanGreetings.com, and
Gibson publicly announced that they had entered into an agreement for American
Greetings Corporation to acquire Gibson, which then had a beneficial ownership
of approximately 27.8% of Egreetings. On November 5, 1999, Morry Weiss, a
director of AmericanGreetings.com and Chief Executive Officer of American
Greetings Corporation, contacted Gordon Tucker, then Chief Executive Officer of
Egreetings, to commence discussions regarding a possible combination of the two
companies.
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On November 9, 1999, representatives of Egreetings and
AmericanGreetings.com met at the offices of Egreetings to discuss combination
possibilities. James C. Spira, a director of AmericanGreetings.com, John M.
Klipfell, then Chief Executive Officer of AmericanGreetings.com, and Josef A.
Mandelbaum, then Senior Vice President Sales, Business Development and Strategic
Planning of AmericanGreetings.com, represented AmericanGreetings.com and Mr.
Tucker, Andrew J. Moley, then Chief Financial Officer of Egreetings, and three
directors of Egreetings: Stewart Alsop, Charles A. Holloway and Brendon S. Kim,
represented Egreetings. AmericanGreetings.com and Egreetings entered into a
confidentiality agreement on November 16, 1999.
On November 26, 1999, following further discussions among
representatives of Merrill Lynch, as financial advisor to AmericanGreetings.com,
and representatives of CSFB, Merrill Lynch on behalf of AmericanGreetings.com
proposed a transaction whereby Egreetings stockholders would receive shares of a
class of AmericanGreetings.com common stock in exchange for their then
outstanding Egreetings' Common Stock. The stockholders of Egreetings would own
50% of the combined company and Egreetings and AmericanGreetings.com would have
equal representation on the Board of Directors of the combined company.
Egreetings proposed a different structure in which the stockholders of
Egreetings would own 60% of the combined company and Egreetings would have
greater than a majority representation on the Board of Directors of the combined
company. Thereafter Egreetings and AmericanGreetings.com had further discussions
on the two alternative proposals.
On November 29, 1999, at a telephonic meeting of the Board of Directors
of Egreetings at which representatives of CSFB attended, the Board discussed the
transaction as proposed by AmericanGreetings.com and the proposed initial public
offering of Egreetings (the "IPO"). Based upon its belief that the valuation
offered by the IPO was greater than the valuation proposed by
AmericanGreetings.com, the liquidity provided by the IPO and the uncertainty of
the timing of the AmericanGreetings.com transaction, the Board of Directors of
Egreetings decided to proceed with the IPO, which was completed on December 16,
1999.
On January 12, 2000, Mr. Spira contacted Mr. Alsop to resume
discussions with Egreetings for a potential combination of Egreetings and
AmericanGreetings.com. From January 12, 2000 through February 2000, members of
senior management and the financial advisors of Egreetings and
AmericanGreetings.com continued due diligence and discussion of the two
alternative proposals described above.
On February 21, 2000, Mr. Alsop contacted an online media company and
inquired whether it would be interested in receiving a joint proposal from
AmericanGreetings.com and Egreetings for it to participate in a transaction
involving the combined company. An executive of the online media company
responded that it would be interested in participating in a transaction.
In late February 2000, Messrs. Alsop and Kim and Peter Nieh, a director
of Egreetings, met with representatives of CSFB to discuss the terms of the
transaction proposed by AmericanGreetings.com.
On February 25, 2000, Egreetings delivered a term sheet to
AmericanGreetings.com, setting forth its proposal in which stockholders of
Egreetings would own 60% of the combined company and Egreetings would have
greater than a majority representation on the Board of Directors of the combined
company. AmericanGreetings.com rejected such proposal because it believed that
it should have a greater equity holding in and more control of the combined
company.
On March 29, 2000, representatives of AmericanGreetings.com, including
Messrs. Weiss, Spira and Mandelbaum, then Chief Executive Officer of
AmericanGreetings.com, and Maureen M. Spooner, Chief Financial Officer of
AmericanGreetings.com, met with representatives of Egreetings, including Mr.
Alsop, Lee Rosenberg, a director of Egreetings, Messrs. Tucker and Moley and a
representative of the online media company at Egreetings' offices in San
Francisco to discuss a potential transaction involving the three companies. At
the meeting, the representative of the online media company confirmed that,
contingent upon a transaction between Egreetings and AmericanGreetings.com
occurring, they would be interested in making a financial investment in the
combined company and entering into a commercial transaction with the combined
company.
On April 3, 2000, representatives of AmericanGreetings.com, including
Messrs. Weiss and Spira, and representatives of Merrill Lynch, met with
representatives of Egreetings, including Messrs. Alsop and Rosenberg,
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and representatives of CSFB in Chicago to continue the discussion regarding a
potential transaction between AmericanGreetings.com and Egreetings.
On April 4, 2000, at a telephonic meeting of the Board of Directors of
Egreetings, the Board reviewed the terms of the two alternative proposals
described above for a transaction with AmericanGreetings.com and authorized
management to continue negotiations with AmericanGreetings.com.
On April 9, 2000, Egreetings revised its proposal to propose a
transaction in which the stockholders of Egreetings and AmericanGreetings.com
would each hold 50% of the combined entity. The parties thereafter continued
their due diligence investigations and discussions of other terms of the
proposed transaction, including control and management of the combined entity,
access to content provided by American Greetings Corporation, funding by
American Greetings Corporation and commitments regarding cash available at
closing. During such discussions, Egreetings proposed a condition to closing
that the online media company invest in the combined company, a long-term
commitment for content and brand licensing to the combined company by American
Greetings Corporation, a limitation on the online activities of American
Greetings Corporation, equal representation on the Board of Directors of the
combined company and restrictions on the ability of American Greetings
Corporation and its nominees to the Board of Directors of the combined entity to
exercise voting rights with respect to any merger or acquisition transactions
involving the combined company or any issuance of stock by the combined company.
On May 4, 2000, based on the results of its due diligence
investigation, AmericanGreetings.com concluded that a 50% equity ownership
position would not be sufficient in light of the proposed restrictions on
control and determined to suspend discussions with Egreetings on the basis of
the terms then under consideration.
On June 2, 2000, Mr. Mandelbaum contacted Mr. Moley to resume
discussions regarding a potential transaction between Egreetings and
AmericanGreetings.com and to discuss potential changes to the transaction
structure and the previously proposed control restrictions on American Greetings
Corporation.
During June 2000 and early July 2000, senior management of Egreetings
met several times with senior management of a public online loyalty management
company to discuss a potential transaction. Specific terms of a potential
transaction were not discussed and, following a presentation on July 12, 2000 by
senior management of Egreetings to the potential partner and its financial
advisor, the potential partner determined not to continue discussions with
Egreetings.
On July 17, 2000, Mr. Mandelbaum contacted Mr. Alsop while both were
attending an industry conference in the San Francisco area and reiterated
AmericanGreetings.com interest in a potential transaction with Egreetings.
In August 2000, members of senior management of Egreetings met with
representatives of CSFB and requested that they continue the search for
potential strategic partners for Egreetings.
During the period from late August 2000 through early October 2000,
members of senior management of Egreetings met with members of senior management
of a public online gaming company. The potential acquiror initially proposed a
transaction in which Egreetings stockholders would receive stock of such company
valued at the time of the initial proposal at approximately $70 million. While
the two parties were conducting their due diligence and discussing other terms
of the proposed transaction, the value of the proposed consideration dropped to
approximately $25 million and because the proposed acquiror would not increase
the value of the consideration to be paid to Egreetings' stockholders,
Egreetings terminated discussions with such potential acquiror.
In August 2000, members of senior management of Egreetings made a
presentation to a public internet portal company at which no specific terms of a
transaction were discussed. Such company determined not to proceed with
discussions with Egreetings based upon the presentation made.
In addition, during the period from August 2000 through October 2000,
members of senior management of Egreetings held preliminary discussions and
meetings with other potential strategic partners, however, no formal
presentations were made and no specific terms of any proposed transaction were
discussed during such discussions and meetings.
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On October 24, 2000, at a meeting of the Board of Directors of
Egreetings, the Board confirmed its decision to continue to pursue a strategic
transaction.
In early November 2000, Mr. Mandelbaum telephoned Mr. Moley, then Chief
Executive Officer and President of Egreetings, to discuss the possibility of
resuming discussions regarding a proposed transaction. On November 13, 2000, Mr.
Mandelbaum proposed a cash purchase of Egreetings at a total purchase price of
$20 million (approximately $0.56 per Share). Because Egreetings felt that the
proposed purchase price was too low it rejected that proposal.
In late November 2000 and early December 2000, members of senior
management of Egreetings met with members of senior management of a public
digital imaging/storage company to discuss a proposed transaction. The potential
acquiror proposed a transaction in which Egreetings' stockholders would receive
an aggregate of approximately $30-35 million in a combination of cash and stock
of the potential acquiror.
In late November 2000 and early December 2000, members of senior
management of Egreetings also met with members of senior management of a public
online media company (that was not the same company with which Egreetings and
AmericanGreetings.com had previously met with). The potential acquiror proposed
a transaction in which Egreetings stockholders would receive approximately $1.00
per Share in a combination of cash and stock of the potential acquiror to be
determined.
In addition, during the same time period, members of senior management
of Egreetings met with members of senior management of a public online printing
company during which no specific terms of a transaction were discussed.
In early December 2000, Messrs. Mandelbaum and Moley discussed a
transaction structure proposed by AmericanGreetings.com, in which
AmericanGreetings.com's stockholders would receive 70% of the combined company,
which would remain public, potentially preceded by a cash dividend to
Egreetings' stockholders.
On December 12, 2000, Messrs. Spira and Rosenberg met to discuss a
proposed transaction between Egreetings and AmericanGreetings.com based upon the
terms discussed by Messrs. Mandelbaum and Moley. On December 14, 2000, Mr.
Mandelbaum sent an e-mail to Messrs. Alsop, Kim, Nieh and Rosenberg reiterating
the AmericanGreetings.com proposal that was discussed with Mr. Moley.
On December 15, 2000, at a meeting of the Board of Directors of
Egreetings, the Board considered the four potential transactions discussed in
the preceding paragraphs, including the most current proposal from
AmericanGreetings.com. The Board authorized the members of senior management of
Egreetings to proceed with further negotiations with the public online media
company.
On December 22, 2000 the public online media company delivered drafts
of the proposed merger agreement to Egreetings and on January 4, 2001, Cooley
Godward LLP, Egreetings' outside legal counsel ("Cooley Godward"), responded
with comments to the proposed merger agreement. Through early January 2001,
Egreetings and the potential acquiror held numerous meetings to discuss the
transaction and to conduct due diligence. In early January 2001, the potential
acquiror terminated discussions with Egreetings, citing potential difficulties
with the proposed technology integration, changes in the technology market in
general and Egreetings' recent performance. In addition, at that time the
potential acquiror's stock price was declining and Egreetings believes that it
was facing significant internal business issues.
In early January 2001, Mr. Alsop had a phone conversation with Mark
McNay, from William Blair & Company, AmericanGreetings.com's financial advisor,
regarding a potential transaction structure that would be acceptable to
Egreetings. On January 22, 2001, following termination of the discussions with
the public online media company, Mr. Moley had a further conversation with Mr.
McNay during which they agreed to continue further discussions.
On January 24, 2001, representatives of AmericanGreetings.com,
including Mr. Mandelbaum, Michael Waxman-Lenz, Vice President of Business
Development, and Tammy Martin, General Counsel, met with Mr.
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Moley and Scott Neamand, Chief Financial Officer of Egreetings, at the San
Francisco office of William Blair & Company to discuss the potential transaction
between AmericanGreetings.com and Egreetings. Ms. Spooner participated
telephonically. Representatives of William Blair & Company were also present at
the meeting. The representatives of Egreetings provided certain due diligence
materials to representatives of AmericanGreetings.com.
During the next few days, Messrs. Mandelbaum and Moley had telephone
conversations in which they agreed to certain basic terms of a transaction
between Egreetings and AmericanGreetings.com, subject to continuing due
diligence and the negotiation of mutually acceptable definitive agreements.
On January 27, 2001, Jones Day, outside legal counsel to
AmericanGreetings.com, circulated an initial draft of the merger agreement and
tender and voting agreement to Egreetings and Cooley Godward. Between January
27, 2001 and February 5, 2001, AmericanGreetings.com and its legal counsel,
financial advisors and accountants conducted additional due diligence on
Egreetings, and representatives of Egreetings and AmericanGreetings.com
continued to negotiate the terms of the definitive merger agreement.
On January 30, 2001, at a telephonic special meeting of the Board of
Directors of Egreetings, the Board reviewed the status of the proposed
transaction with AmericanGreetings.com and the proposed deal terms and
authorized senior management of Egreetings to continue negotiations.
On February 2, 2001, at a special meeting of the Board of Directors of
Egreetings, the Board reviewed the principal terms of the proposed transaction
with AmericanGreetings.com. At the meeting, representatives of CSFB reviewed
with the Board CSFB's financial analysis of the consideration payable in the
proposed transaction, as well as alternatives to the proposed transaction,
including liquidation. Representatives of Cooley Godward discussed with the
Board of Egreetings the legal aspects of the proposed transaction. The Board
authorized senior management of Egreetings to continue negotiating with
AmericanGreetings.com in order to finalize the proposed merger agreement.
On February 2, 2001, at a meeting of the Board of Directors of
AmericanGreetings.com, the Board unanimously approved the Merger Agreement,
contingent upon final negotiation and execution of definitive documentation.
On February 4, 2001, at a special meeting of the Board of Directors of
Egreetings, the Board reviewed the status of negotiations with
AmericanGreetings.com. At this meeting, Cooley Godward updated the Board on the
changes negotiated to the definitive merger agreement since the previous meeting
of the Board of Egreetings. The Board was also advised that American Greetings
Corporation had agreed to extend a $24 million line of credit to
AmericanGreetings.com and that certain stockholders of Egreetings had agreed to
enter into a Tender and Voting Agreements. Also at this meeting, CSFB rendered
to the Board its oral opinion (subsequently confirmed by delivery of a written
opinion dated February 5, 2001) to the effect that, as of the date of such
opinion and based on and subject to certain matters stated in its opinion, the
$0.85 per Share cash consideration to be received in the Offer and the Merger by
the holders of Shares was fair, from a financial point of view, to such holders
(other than AmericanGreetings.com and its affiliates). After a full discussion
of the matters considered by the Board of Egreetings at the meeting, the Board
unanimously approved the Merger Agreement substantially in the form presented to
the Board and determined to recommend to Egreetings' stockholders that they
accept the Offer, tender their Shares in the Offer and, if required by Delaware
law or Egreetings' Certificate of Incorporation or Bylaws, vote to adopt the
Merger Agreement.
After the close of trading on February 5, 2001, Egreetings,
AmericanGreetings.com and the Purchaser executed the Merger Agreement and
Egreetings and AmericanGreetings.com issued a joint press release announcing the
transaction.
On February 12, 2001 the Purchaser commenced the Offer.
Reasons for the Board of Directors' Recommendation
In reaching its recommendations described above in this Item 4, the
Board of Directors of Egreetings considered a number of factors, including the
following:
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1. The financial condition, results of operations and cash flows
of Egreetings.
2. The fact that Egreetings had undergone a lengthy process of
soliciting potential acquirors or strategic partners.
3. The possible alternatives to the Offer and the Merger and the
risks involved in pursuing such alternatives, including, without limitation,
continuing to operate Egreetings as an independent entity, liquidating
Egreetings and pursuing a business combination with parties other than
AmeircanGreetings.com. The Board of Directors rejected each of the alternatives
in favor of the Offer and the Merger, because the Board of Directors believed
that the Offer and the Merger represented the best and quickest opportunity to
get the most cash to the stockholders of Egreetings.
4. The going concern value, liquidation value and net book value
of Egreetings. Because of the difficulty that Egreetings had experienced in
finding a potential acquiror or strategic partner, the current rate of cash burn
and the stock price of the Shares, the Board of Directors believed that
Egreetings' going concern value was less than the Per Share Amount. In addition,
although Egreetings' net book value per Share as of December 31, 2000 was
greater than the Per Share Amount, the Board believed that any amount received
for the assets of Egreetings in a sale or a liquidation would be less than the
net book value and less than the Per Share Amount.
5. The financial and other terms and conditions of the Offer, the
Merger and the Merger Agreement, which were the result of the arm's-length
negotiations between AmericanGreetings.com and Egreetings.
6. The historical market price, and the recent trading activity
in, the Shares, and particularly the fact that the $0.85 per Share cash price to
be received by the holders of Shares represents a premium of approximately 70%
over the $0.50 closing price of the Shares on the Nasdaq National Market on
February 2, 2001 (the last trading day prior to the Board meeting at which the
Board of Directors approved the Merger Agreement). The Board of Directors also
considered the form of consideration to be paid to holders of Shares in the
Offer and Merger, and the certainty of value of such cash consideration compared
to stock or other forms of consideration. The Board was aware that the
consideration received by holders of Shares in the Offer and Merger would be
taxable to such holders for federal income tax purposes.
7. The opinion to the Board of Directors of CSFB as to the
fairness, from a financial point of view and as of the date of the opinion, of
the consideration to be received in the Offer and the Merger by the holders of
the Shares (other than AmericanGreetings.com and its affiliates). The full text
of the written opinion of CSFB, dated February 5, 2001, which sets forth the
assumptions made, matters considered and limitations on the review undertaken,
is attached hereto as Annex A and is incorporated herein by reference. THE
OPINION OF CSFB IS ADDRESSED TO THE BOARD OF DIRECTORS, RELATES ONLY TO THE
FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE CONSIDERATION TO BE RECEIVED IN
THE OFFER AND THE MERGER BY THE HOLDERS OF SHARES (OTHER THAN
AMERICANGREETINGS.COM AND ITS AFFILIATES), AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER OR NOT SUCH STOCKHOLDER SHOULD
TENDER SHARES IN THE OFFER OR AS TO ANY OTHER MATTERS RELATING TO THE OFFER OR
THE MERGER. HOLDERS OF SHARES ARE URGED TO READ SUCH OPINION CAREFULLY IN ITS
ENTIRETY.
8. The anticipated timing of consummation of the transactions
contemplated by the Merger Agreement including the structure of the transaction
as a cash tender offer for all of the Shares, which should allow stockholders to
receive the transaction consideration earlier than in an alternative form of
transaction, followed by the Merger in which stockholders will receive the same
consideration as received by stockholders who tender their Shares in the Offer.
9. The fact that neither the Offer nor the Merger is subject to
any financing condition, that AmericanGreetings.com has represented that it has
available to it, and will make available to Purchaser, sufficient funds to
consummate the Offer and the Merger and that American Greetings Corporation has
extended a $24 million line of credit to AmericanGreetings.com.
10. The fact that the Merger Agreement, which prohibits
Egreetings from, directly or indirectly, soliciting, initiating or knowingly
encouraging any submission of acquisition proposals from any third party or
participating in any negotiations or discussions regarding, or furnishing
information with respect to, or otherwise
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knowingly cooperating with a third party who makes an acquisition proposal,
under certain circumstances permits Egreetings in response to an unsolicited
acquisition proposal to inform itself with respect to such proposal and, if such
proposal is superior to the terms of the Offer or Merger, to furnish information
to, and negotiate, explore or otherwise engage in substantive discussions with
or, upon the payment of a termination fee, enter into an acquisition agreement
with a third party with respect to such proposal. In this regard, the Board
recognized that the provisions of the Merger Agreement relating to
non-solicitation of acquisition proposals and termination fees were insisted
upon by AmericanGreetings.com as a condition to entering into the Merger
Agreement.
The foregoing includes the material factors considered by the Board of
Directors. In view of its many considerations, the Board did not find it
practical to, and did not, quantify or otherwise assign relative weights to the
specific factors considered. In addition, individual members of the Board may
have given different weights to the various factors considered. After weighing
all of these considerations, the Board unanimously determined to approve the
Merger Agreement and recommend that holders of Shares tender their Shares in the
Offer.
The Board of Directors did not structure the transaction to require the
approval of the holders of a majority of the Shares held by stockholders
unaffiliated with the Purchaser and its affiliates nor retained an unaffiliated
representative to act solely on behalf of such stockholders because such
approval or representative is not required under Delaware law and the Board
believed that the substantive and procedural fairness of the transactions was
established by the factors set forth above.
Opinion of Egreetings' Financial Advisor
CSFB has acted as financial advisor to the Board of Directors of
Egreetings in connection with the Offer and the Merger. The Board of Directors
of Egreetings selected CSFB based on CSFB's experience, expertise and
reputation. CSFB is an internationally recognized investment banking firm and is
regularly engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, leveraged buyouts, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes.
In connection with CSFB's engagement, the Board of Directors of
Egreetings requested that CSFB evaluate the fairness, from a financial point of
view, to the holders of Shares (other than AmercianGreetings.com and its
affiliates) of the consideration to be received by the holders pursuant to the
Offer and the Merger. On February 4, 2001, at a meeting of the Board of
Directors of Egreetings held to evaluate the proposed Offer and the Merger, CSFB
rendered to the Board an oral opinion, which opinion was confirmed by delivery
of a written opinion dated February 5, 2001, to the effect that, as of that date
and based on and subject to the matters described in its opinion, the $0.85 per
Share cash consideration to be received by the holders of Shares pursuant to the
Offer and the Merger was fair, from a financial point of view, to such holders
(other than AmercianGreetings.com and its affiliates).
THE FULL TEXT OF CSFB'S WRITTEN OPINION, DATED FEBRUARY 5, 2001, TO THE
BOARD OF DIRECTORS OF EGREETINGS, WHICH SETS FORTH, AMONG OTHER THINGS, THE
PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN, IS APPENDED TO EGREETINGS' SOLICITATION/ RECOMMENDATION
STATEMENT ON SCHEDULE 14D-9 FILED WITH THE COMMISSION AND IS INCORPORATED HEREIN
BY REFERENCE. HOLDERS OF SHARES ARE URGED TO, AND SHOULD, READ THIS OPINION
CAREFULLY IN ITS ENTIRETY. CSFB'S OPINION IS ADDRESSED TO THE BOARD OF DIRECTORS
OF EGREETINGS, RELATES ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF
THE $0.85 PER SHARE CASH CONSIDERATION TO BE RECEIVED IN THE OFFER AND THE
MERGER BY THE HOLDERS OF SHARES (OTHER THAN AMERCIANGREETINGS.COM AND ITS
AFFILIATES), AND DOES NOT ADDRESS ANY OTHER ASPECT OF THE PROPOSED OFFER OR
MERGER OR ANY RELATED TRANSACTION AND DOES NOT CONSTITUTE A RECOMMENDATION TO
ANY STOCKHOLDER AS TO WHETHER SUCH STOCKHOLDER SHOULD TENDER SHARES IN THE OFFER
OR HOW SUCH STOCKHOLDER SHOULD VOTE WITH RESPECT TO ANY MATTER RELATING TO THE
MERGER. THE SUMMARY OF CSFB'S OPINION IN THIS DOCUMENT IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION.
A copy of CSFB's written presentation to the Board of Directors of
Egreetings has been attached as an exhibit to Egreetings' Schedule 13E-3 filed
with the Commission and will be available for inspection and copying at the
principal executive offices of Egreetings during regular business hours by any
interested Egreetings stockholder or any representative of the stockholder who
has been so designated in writing and may be inspected and copied at the office
of, and obtained by mail from, the Commission.
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In arriving at its opinion, CSFB reviewed the Merger Agreement and
related documents, as well as publicly available business and financial
information relating to Egreetings. CSFB also reviewed other information
relating to Egreetings, including financial forecasts, provided to or discussed
with CSFB by Egreetings, and met with the management of Egreetings to discuss
the business and prospects of Egreetings. CSFB also considered financial and
stock market data of Egreetings and, to the extent publicly available, the
financial terms of other business combinations and other transactions which have
in the past been effected. CSFB also considered other information, financial
studies, analyses and investigations and financial, economic and market criteria
which CSFB deemed relevant.
In connection with its review, CSFB did not assume any responsibility
for independent verification of any of the information provided to or otherwise
reviewed by it and relied on that information being complete and accurate in all
material respects. CSFB was advised, and assumed, that the financial forecasts
for Egreetings were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the management of Egreetings as to the
future financial performance of Egreetings and the other matters covered by the
forecasts. CSFB was not requested to, and did not, make an independent
evaluation or appraisal of the assets or liabilities, contingent or otherwise,
of Egreetings, and was not furnished with any independent evaluations or
appraisals.
CSFB's opinion was necessarily based on information available to it,
and financial, economic, market and other conditions as they existed and could
be evaluated, on the date of its opinion. Although CSFB evaluated, from a
financial point of view, the $0.85 per Share cash consideration to be received
in the Offer and Merger by the holders of Shares (other than
AmericanGreetings.com and its affiliates), CSFB was not requested to, and did
not, recommend the specific consideration to be received in the Offer and the
Merger, which consideration was determined between the Board of Directors of
Egreetings and AmericanGreetings.com. CSFB's opinion did not address the
underlying business decision of Egreetings to proceed with the transaction. In
connection with its engagement, CSFB was requested to solicit indications of
interest from, and held discussions with, third parties regarding the possible
acquisition of all or part of Egreetings. CSFB was advised that if Egreetings
did not consummate the transaction or another similar transaction, Egreetings
would pursue a liquidation of the company. No other limitations were imposed on
CSFB with respect to the investigations made or procedures followed by CSFB in
rendering its opinion.
In preparing its opinion to the Board of Directors of Egreetings, CSFB
performed a variety of financial and comparative analyses, including those
described below. The summary of CSFB's analyses described below is a description
of the material analyses underlying its opinion. The preparation of a fairness
opinion is a complex analytical process involving various determinations as to
the most appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances and, therefore, a
fairness opinion is not readily susceptible to summary description. In arriving
at its opinion, CSFB made qualitative judgments as to the significance and
relevance of each analysis and factor that it considered. Accordingly, CSFB
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and factors or focusing on information presented in
tabular format, without considering all analyses and factors or the narrative
description of the analyses, could create a misleading or incomplete view of the
processes underlying its analyses and opinion.
In its analyses, CSFB considered industry performance, regulatory,
general business, economic, market and financial conditions and other matters,
many of which are beyond the control of Egreetings. No company, transaction or
business used in CSFB's analyses as a comparison is identical to Egreetings or
the proposed Offer and Merger, and an evaluation of the results of those
analyses is not entirely mathematical. Rather, the analyses involve complex
considerations and judgments concerning financial and operating characteristics
and other factors that could affect the acquisition, public trading or other
values of the companies, business segments or transactions analyzed. The
estimates contained in CSFB's analyses and the ranges of valuations resulting
from any particular analysis are not necessarily indicative of actual values or
predictive of future results or values, which may be significantly more or less
favorable than those suggested by the analyses. In addition, analyses relating
to the value of businesses or securities do not purport to be appraisals or to
reflect the prices at which businesses or securities actually may be sold.
Accordingly, CSFB's analyses and estimates are inherently subject to substantial
uncertainty.
CSFB's opinion and financial analyses were only one of many factors
considered by the Board of Directors of Egreetings in its evaluation of the
Offer and the Merger and should not be viewed as determinative of the views of
the Board of Directors of Egreetings or management of Egreetings with respect to
the Offer and the Merger or the consideration to be received in the Offer and
the Merger.
10
The following is a summary of the material analyses underlying CSFB's
opinion dated February 5, 2001 delivered to the Board of Directors of Egreetings
in connection with the Offer and the Merger. THE FINANCIAL ANALYSES SUMMARIZED
BELOW INCLUDE INFORMATION PRESENTED IN TABULAR FORMAT. IN ORDER TO FULLY
UNDERSTAND CSFB'S FINANCIAL ANALYSES, THE TABLES MUST BE READ TOGETHER WITH THE
TEXT OF EACH SUMMARY. THE TABLES ALONE DO NOT CONSTITUTE A COMPLETE DESCRIPTION
OF THE FINANCIAL ANALYSES. CONSIDERING THE DATA IN THE TABLES BELOW WITHOUT
CONSIDERING THE FULL NARRATIVE DESCRIPTION OF THE FINANCIAL ANALYSES, INCLUDING
THE METHODOLOGIES AND ASSUMPTIONS UNDERLYING THE ANALYSES, COULD CREATE A
MISLEADING OR INCOMPLETE VIEW OF CSFB'S FINANCIAL ANALYSES.
SELECTED COMPANIES COMPARISON. CSFB compared financial, operating and
stock market data of Egreetings to corresponding data of the following five
publicly traded companies perceived to be leaders in the internet portals
industry and seven publicly traded companies with business models and means of
generating revenue similar to Egreetings in the advertising-based content
industry:
INTERNET PORTALS ADVERTISING-BASED CONTENT
---------------- -------------------------
o Yahoo! Inc. o Cnet Networks, Inc.
o Terra Networks, S.A. o TicketMaster Online-Citysearch,
Inc.
o At Home, Inc. o SportsLine.com, Inc.
o The Walt Disney Internet Group o TheStreet.com, Inc.
o NBC Internet, Inc. o MarketWatch.com, Inc.
o iVillage, Inc.
o Woman.com Networks, Inc.
CSFB compared fully diluted aggregate values, calculated as fully
diluted equity market value plus net debt, as a multiple of actual calendar year
2000 and estimated calendar year 2001 revenues. All multiples were based on
closing stock prices on January 29, 2001. This analysis indicated the following
median and mean implied multiples for the selected companies as compared to the
implied multiples for Egreetings:
AGGREGATE VALUE /
REVENUE
------------------
ESTIMATED ESTIMATED
2000 2001
---- ----
Egreetings y y
Internet Portals
Median 4.9x 2.0x
Mean 8.9x 6.0x
Advertising-Based Content
Median 2.1x 1.1x
Mean 2.1x 1.5x
"y" indicates a negative multiple value.
PREMIUMS PAID ANALYSIS. CSFB reviewed the percentage premiums paid in
84 publicly announced transactions in the software and internet industries from
January 1, 1999 through January 29, 2001. CSFB calculated the percentages of the
selected transactions within selected ranges of percentage premiums paid and the
percentages of selected transactions in which the premiums paid were in excess
of each range, using 100% for the fifth selected range. CSFB then derived the
implied per Share equity value of Egreetings for each selected range by
multiplying the closing price of Egreetings common stock on January 29, 2001 by
the top of the first four selected ranges and by 100.0% for the fifth selected
range. CSFB also noted that the cash consideration in the Offer and the Merger
is $0.85 per Share. The analysis indicated the following:
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RANGE OF PERCENTAGE PREMIUM PAID
0.0% - 20.0% 20.0% - 40.0% 40.0% - 60.0% 60.0% - 80.0% > 80.0%
------------ ------------- ------------- ------------- -------
Percentage of Precedent 33.0% 26.0% 26.0% 7.0% 7.0%
Transactions Within the Range
Percentage of Premiums Above 67.0% 41.0% 14.0% 7.0% 4.0%
the Range
Implied Per Share Equity Value $0.41 $0.48 $0.54 $0.61 $0.68
CSFB also reviewed the closing price of Egreetings common stock on
January 29, 2001, referred to as current market, and the average closing prices
of Egreetings common stock over various periods ending January 29, 2001. CSFB
then calculated the percentage premium of the cash consideration in the Offer
and the Merger of $0.85 to the closing price of Egreetings common stock on
January 29, 2001 and the average closing prices of Egreetings common stock over
the various periods observed. This analysis indicated the following:
PREMIUM OF MERGER
EGREETINGS CONSIDERATION TO
STOCK PRICES STOCK PRICE
------------ -----------------
Current Market $0.34 147.3%
5 Trading Days Average $0.38 126.7%
10 Trading Days Average $0.38 126.7%
15 Trading Days Average $0.44 94.3%
20 Trading Days Average $0.28 202.2%
30 Trading Days Average $0.28 202.2%
COMPARATIVE STOCK PRICE PERFORMANCE. CSFB also compared the recent
stock price performance of Egreetings with an index comprised of companies in
the internet portals industry, including Yahoo! Inc., At Home Corporation., NBC
Internet, Inc., America Online, Inc., Terra Networks S.A., and the Walt Disney
Interent Group, an index comprised of companies in the internet e-commerce
industry, including Amazon.com Inc., eTOYS Inc., Drugstore.com, Inc. and
priceline.com, Incorporated, an index comprised of companies in the
advertising-based content industry, including TheStreet.com, Inc., Cnet
Networks, Inc., iVillage, Inc., Woman.com Networks, Inc., Sportsline.com, Inc.,
Ticketmaster Online-Citysearch, Inc. and Marketwatch.com, Inc. and the Nasdaq
composite index over the period from December 17, 1999, the date of Egreetings'
initial public offering, through January 29, 2001. The results of this analysis
were as follows:
CHANGE IN MARKET PRICE
PER SHARE FROM
COMPANY OR INDEX 12/17/99 TO 1/29/01
---------------- ----------------------
Egreetings (96.7)%
Internet Portals (46.9)%
Internet E-Commerce (84.6)%
Advertising-Based Content (80.3)%
Nasdaq (24.4)%
HISTORICAL STOCK PRICE ANALYSIS. CSFB analyzed the prices at which
Egreetings common stock has traded since Egreetings' initial public offering on
December 17, 1999 through January 29, 2001. CSFB noted that the all-time high
closing
12
price for Egreetings common stock was $12.38 on January 3, 2000, and the
all-time low closing price for Egreetings common stock was $0.22 on December 8,
2000. CSFB also noted that the price of Egreetings Shares had not closed above
$0.85 per Share since October 3, 2000.
LIQUIDATION ANALYSIS. CSFB performed a liquidation analysis of
Egreetings' portfolio by reviewing the book value of Egreetings' assets and
liabilities estimated by Egreetings's management as of December 31, 2000, which
were then discounted to reflect various liquidation adjustments, based on
internal estimates of Egreetings' management. This analysis resulted in an
implied aggregate equity liquidation reference range for Egreetings of
approximately $25,191,482 to $27,611,352 and an implied per Share equity
liquidation reference range for Egreetings of $0.75 to $0.83, as compared to the
cash consideration in the Offer and the Merger of $0.85 per Share.
OTHER FACTORS. In the course of preparing its opinion, CSFB also
reviewed and considered other information and data, including:
o aggregate values as multiples of actual calendar year 2000 and estimated
calendar year 2001 revenues for the top 25% and bottom 25% internet
software and services companies and the average percentage premium afforded
to the perceived market leaders;
o aggregate values as multiples of estimated calendar year 2001 revenues for
perceived technology leaders within various selected industry
sub-categories and the percentage premium afforded to the perceived market
leaders;
o a list of companies trading at negative aggregate values and the percentage
increases in the prices of the common stock of selected technology
companies required for the companies to trade at illustrative positive
revenue multiples for estimated calendar year 2001;
o Egreetings' actual revenue for the first three fiscal quarters of the
calendar year 2000 compared to various research analysts' estimates for
Egreetings for each of the respective quarters; and
o the estimated cash balance for the continued operation of Egreetings
through the end of calendar year 2002, assuming no additional financing.
INTENT TO TENDER
To the best knowledge of Egreetings, each executive officer and
director of Egreetings (other than Scott Neamand) intends to tender all Shares
held of record or beneficially owned by such person to the Purchaser. Stewart
Alsop, Brendon Kim, Peter Nieh and Lee Rosenberg, all directors of Egreetings,
and their affiliated investment funds, Andrew Moley, a director and Chief
Executive Officer and President of Egreetings, and Frederick Campbell and
Anthony Levitan, entered into a Tender and Voting Agreement with
AmericanGreetings.com and Purchaser on February 5, 2001, pursuant to which they
have contractually committed themselves to tender their Shares and, if required,
vote in favor of adoption of the Merger Agreement. In addition
AmericanGreetings.com and the Purchaser have informed us that Gibson intends to
tender all Shares held of record or beneficially owned by such entity to the
Purchaser. Other than in their capacity as a director of Egreetings, none of
these persons makes a recommendation as to whether stockholders of Egreetings
should tender any Shares held by them into the Offer.
ITEM 5. PERSONS/ASSETS RETAINED, EMPLOYED, COMPENSATED OR USED
Item 5 of the Statement is hereby amended and restated in its entirety
as follows:
Egreetings has retained CSFB to act as its exclusive financial advisor
in connection with the Offer and Merger. Pursuant to the terms of this
engagement, Egreetings has agreed to pay CSFB for its financial advisory
services upon consummation of the Offer and the Merger an aggregate fee of
approximately $1.5 million. Egreetings also has agreed to reimburse CSFB for
reasonable out-of-pocket expenses incurred by CSFB in performing its services,
including reasonable legal fees and expenses, and to indemnify CSFB and related
parties against certain liabilities, including liabilities under the federal
securities laws, relating to or arising out of its engagement.
13
CSFB is an internationally recognized investment banking firm and is
regularly engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, leveraged buyouts, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. CSFB acted
as joint lead manager in connection with Egreetings' IPO in December 1999, for
which it received fees of approximately $2 million and as the sole placement
agent for an Egreetings preferred stock financing in October 1999, for which it
received fees of approximately $600,000. In the ordinary course of business,
CSFB and its successors and affiliates may actively trade or hold the securities
of Egreetings and affiliates of AmericanGreetings.com for their own accounts or
for the accounts of customers and, accordingly, may at any time hold a long or
short position in such securities.
Neither Egreetings nor any person acting on its behalf currently
intends to employ, retain or compensate any person to make solicitations or
recommendations to stockholders on its behalf concerning the Offer.
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SIGNATURE
After due inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
EGREETINGS NETWORK, INC.
By: /s/ Andrew J. Moley
----------------------------
Andrew J. Moley
Chief Executive Officer
and President
Dated: February 26, 2001