[Letterhead of Xxxxxxxx Xxxxxxx & Company]
June 16, 1998
The Board of Directors
Nimbus CD International, Inc.
000 Xxxxx Xxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
Nimbus CD International, Inc., a Delaware corporation (the "Company"),
has entered into an Agreement and Plan of Merger (the "Merger Agreement") with
Carlton Communications Plc, a Public Limited Company organized under the laws of
England and Wales ("Parent"), and Neptune Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Parent ("Sub"), whereby Sub will
commence a tender offer (the "Offer") to purchase all of the issued and
outstanding shares of common stock, par value $.01 per share (the "Common
Stock"), of the Company at a price of $11.50 per share net to the seller in cash
(the "Consideration). The Merger Agreement also provides that, following the
consummation of the Offer, the Company will be merged with and into Sub in a
transaction (the "Merger") pursuant to which each outstanding share of Common
Stock not owned by Parent, Sub or their respective affiliates will be converted
into the right to receive an amount in cash equal to the per share consideration
paid in the Offer and the Company will become a wholly owned subsidiary of
Parent. In addition, we understand that, in connection with the Offer and the
Merger, Parent, Sub and certain stockholders of the Company (the "Stockholders")
who own, in aggregate, approximately 44 percent of the outstanding Common Stock
on a fully-diluted basis, propose to enter into an agreement (the "Stockholders
Agreement") whereby the Stockholders will agree to tender (and not withdraw)
their shares of Common Stock into the Offer and to grant to Parent and/or Sub
the right, subject to certain conditions, to receive the proceeds received by
such Stockholders from the sale of such shares for a consideration in excess of
$11.50 per share. You have asked us to render an opinion to you as to whether or
not the Consideration to be paid to the stockholders of the Company is fair to
the stockholders of the Company from a financial point of view.
In arriving at our opinion, we have, among other things:
(i) reviewed a draft of the Merger Agreement, and a draft of the
Stockholders' Agreement, each dated June 16, 1998;
(ii) reviewed (x) the Company's 1999 budget, and (y) the Company's
2000 and 2001 projected financial results, dated April 15, 1998,
which were received by us on June 4, 1998 (collectively, with the
1999 budget, the "Forecasts"), and discussed such Forecasts with
the Company's management;
(iii)discussed with management of the Company the business,
operations, historical financial results and Forecasts of the
Company;
(iv) reviewed the audited financial statements and Annual Reports on
Form 10-K of the Company for the fiscal years ended March 31,
1995, 1996 and 1997;
(v) reviewed the preliminary unaudited financial statements of the
Company for the fiscal year ended March 31, 1998 and a Company
press release, dated May 21, 1998, relating to the Company's
fiscal year end 1998 financial results;
(vi) reviewed the historical stock prices and trading volumes of the
Company's common stock;
(vii)reviewed certain publicly available information regarding
publicly traded companies we deemed reasonably comparable to the
Company;
(viii) reviewed certain publicly available information regarding a
merger and acquisition transaction involving a company we deemed
reasonably comparable to the Company;
(ix) discussed with other potential acquirers of the Company,
potential merger and acquisition transactions involving the
Company;
(x) reviewed certain information regarding premiums paid in all cash
acquisitions of a size comparable to the Merger for publicly
traded companies;
(xi) performed discounted cash flow analyses based on the Forecasts;
(xii) performed leveraged buyout analyses based on the Forecasts; and
(xiii) reviewed such other information, performed such other analyses
and taken into account such other factors as we deemed relevant.
For purposes of rendering our opinion, we have assumed and relied upon
the accuracy and completeness of all information provided to us by and on behalf
of the Company and have not assumed any responsibility for independent
verification of such information or for any independent valuation or appraisal
of any assets of the Company, nor were we furnished with any such valuations or
appraisals. We have assumed, without independent investigation, the accuracy of
all representations and statements made by officers and management of the
Company. With respect to the Forecasts, we have assumed that they were
reasonably prepared on bases reflecting the best estimates and good faith
judgment of the Company's management as of the date of their preparation and
that management has informed us of all circumstances occurring since such date
that could make the Forecasts incomplete or misleading. Our opinion is
necessarily based on economic, market and other conditions, and information made
available to us as of the date hereof.
This opinion was provided at the request and for the benefit of the
Board of Directors of the Company in connection with its consideration of the
Offer and the Merger and shall not be reproduced, summarized, described, relied
upon, or referred to, or furnished to any other person without Xxxxxxxx
Minella's prior written consent; provided that, subject to our prior review, the
Company may refer to this opinion on any Solicitation/Recommendation Statement
on Schedule 14D-9 filed by the Company with respect to the Offer or any Proxy
Statement filed by the Company with respect to the Merger without such written
consent. The opinion does not and will not constitute a recommendation to
stockholders of the Company to tender their shares in the Offer or to vote in
favor of the Merger. This opinion is delivered subject to the conditions, scope
of engagement, standard of care, limitations, and understandings set forth in
the engagement agreement between Xxxxxxxx Xxxxxxx and the Company, dated June
16, 1998.
This opinion is delivered with the explicit understanding that this
opinion is based on standards of assessment in existence as of the date hereof,
and that standards of assessment may change in the future. Xxxxxxxx Xxxxxxx
disclaims any responsibility for any impact any such changes may have on the
assessment of the Offer and the Merger. Unforeseen future events that could
affect the fairness of the Consideration to be paid to the stockholders in the
Offer and the Merger, from a financial point of view, have not been factored
into this opinion. Xxxxxxxx Xxxxxxx disclaims any obligation to update or revise
this opinion for events occurring subsequent to the date hereof, whether
foreseen or unforeseen.
This opinion is a fairness opinion only from a financial point of
view. Xxxxxxxx Xxxxxxx makes no representations with respect to questions of
legal interpretation or enforceability and expressly disclaims that this opinion
may be construed in any way as a legal opinion. In addition, without limiting
the foregoing, we express no opinion regarding the fairness of the Consideration
to (i) holders of options issued pursuant to any stock option plan of the
Company in which the exercise price of such options exceed the Offer Price (as
defined in the Merger Agreement) and (ii) holders of options of the Company who
exchange such options for securities of Parent. Our opinion is limited to the
matters expressly set forth in this letter, and no opinions may be implied or
may be inferred beyond the matters expressly so stated.
We note that we have acted as financial advisor to the Company in
connection with the Offer and the Merger and will receive a fee for our
services, which is contingent upon the consummation of the Offer.
Based upon and subject to the foregoing, and subject to the various
assumptions, qualifications, and limitations set forth herein, it is our opinion
that, as of the date hereof, the Consideration to be paid to the stockholders of
Company pursuant to the Offer and the Merger is fair to the stockholders of the
Company from a financial point of view.
Very truly yours,
XXXXXXXX XXXXXXX & COMPANY
