EXHIBIT 4
[PAINEWEBBER LETTERHEAD]
June 19, 1997
Board of Directors
Advanced Logic Research, Inc.
0000 Xxxxxxxx
Xxxxxx, XX 00000
Ladies and Gentlemen:
Advanced Logic Research, Inc. (the "Company"), Gateway 2000, Inc. ("Parent")
and a wholly-owned subsidiary of Parent ("Purchaser") propose to enter into an
Agreement and Plan of Merger (the "Agreement") pursuant to which Purchaser will
commence a tender offer (the "Offer") to purchase any and all shares of the
Company's common stock, par value $.01 per share (the "Shares"), at a minimum
price of $15.50 per Share in cash. The Agreement also provides that, following
consummation of the Offer, Purchaser will merge with the Company in a
transaction (the "Merger") in which each share of the Company's common stock
will be converted into the right to receive cash equal to the higher of $15.50
or the amount per Share paid in the Offer. As a condition to Parent and
Purchaser entering into the Agreement, Parent and Purchaser have requested that
certain stockholders of the Company, who own an aggregate of 41.8% of the
Company's outstanding Shares, enter into stockholders agreements ("Stockholders
Agreements"), pursuant to which each such stockholder would agree to vote in
favor of the Merger, to grant Parent an irrevocable proxy to vote such Shares in
favor of the Merger, to tender all Shares owned by such stockholder to Purchaser
in the Offer, and to grant to Parent an option to purchase such Shares for a
purchase price of $15.50 per share in certain circumstances. For purposes of
this letter, the Offer and the Merger are sometimes collectively referred to as
the "Proposed Transaction."
You have asked us whether or not, in our opinion, the proposed cash
consideration to be received by the stockholders of the Company (other than
Parent and Purchaser) pursuant to the Offer and the Merger is fair to such
stockholders from a financial point of view.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed the Company's Annual Reports, Forms 10-K and related financial
information for the five fiscal years ended September 30, 1996 and the
Company's Forms 10-Q and the related unaudited financial information
for the quarters ended December 31, 1996 and March 31, 1997;
(2) Reviewed Parent's Annual Reports, Forms 10-K and related financial
information for the five fiscal years ended December 31, 1996 and
Parent's Form 10-Q and the related unaudited financial information for
the quarter ended March 31, 1997;
(3) Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets and prospects of the
Company furnished to us by the Company;
(4) Conducted discussions with members of senior management of the Company
concerning its business and prospects;
(5) Reviewed the historical market prices and trading activity for the
Shares and compared them with those of certain publicly traded
companies which we deemed to be relevant;
(6) Compared the financial position and results of operations of the
Company with those of certain publicly traded companies which we deemed
to be relevant;
(7) Compared the proposed financial terms of the Proposed Transaction with
the financial terms of certain other business combinations which we
deemed to be relevant;
(8) Reviewed a draft of the Agreement dated June 17, 1997;
(9) Reviewed a draft of the Stockholders Agreement dated June 17, 1997; and
(10) Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we
deemed necessary, including our assessment of general economic, market
and monetary conditions.
In preparing our opinion, we have relied on the accuracy and completeness of
all information that was publicly available, supplied or otherwise made
available to us by the Company, and we have not assumed any responsibility to
independently verify such information. We have assumed that the financial
forecasts examined by us were reasonably prepared and reflect the best
currently available estimates and good faith judgments of the management of
the Company as to the future performance of the Company. We have also relied
upon assurances of the management of the Company that they are unaware of any
facts that would make the information or financial forecasts provided to us
incomplete or misleading. We have not made any independent evaluation or
appraisal of the assets, liabilities (contingent or otherwise) or technologies
of the Company nor have we been furnished with any such evaluations or
appraisals. Our opinion is based upon economic, monetary and market conditions
existing on the date hereof. We have further assumed with your consent that
the transactions contemplated by the draft Agreement and draft Stockholders
Agreement reviewed by us will be consummated in accordance with the terms of
such agreements, without any further amendment thereto, and without waiver by
the Company of any of the conditions to its obligations thereunder.
Our opinion is directed to the Board of Directors of the Company and does
not constitute a recommendation to any stockholder of the Company as to
whether any such stockholder should accept the Offer or how any such
stockholder should vote on the Merger. This opinion does not address the
relative merits of the Proposed Transaction and any other transactions or
business strategies discussed by the Board of Directors of the Company as
alternatives to the Proposed Transaction or the decision of the Board of
Directors of the Company to proceed with the Proposed Transaction. In
connection with its engagement, PaineWebber Incorporated was not requested or
authorized by the Board of Directors to solicit, and did not solicit,
potential proposals from any third parties with respect to the acquisition of
the Company.
This opinion has been prepared for the use of the Board of Directors of the
Company and shall not be reproduced, summarized, described or referred to or
given to any other person or otherwise made public without the prior written
consent of PaineWebber Incorporated; provided, however, that this letter may
be reproduced in full in any Schedule 14D-1 filed by Parent or any Schedule
14D-9 filed by the Company with the Securities and Exchange Commission in
connection with the Proposed Transaction.
PaineWebber Incorporated is currently acting as financial advisor to the
Company in connection with the Proposed Transaction and will receive a fee
upon consummation of the Merger. In the past, PaineWebber Incorporated and its
affiliates have provided investment banking services to the Company and have
received fees for rendering these services.
In the ordinary course of its business, PaineWebber Incorporated may trade
the securities of the Company and Parent for its own account and for the
accounts of its customers and, accordingly, may at any time hold long and
short positions in such securities.
On the basis of, and subject to the foregoing, we are of the opinion that,
as of the date hereof, the proposed cash consideration to be received by the
stockholders of the Company (other than Parent and Purchaser) pursuant to the
Offer and the Merger is fair to such stockholders from a financial point of
view.
Very truly yours,
PAINEWEBBER INCORPORATED
By: /s/ PaineWebber Incorporated
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