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ANNEX II
[XXXXXXX XXXXX LETTERHEAD]
October 23, 1996
Board of Directors
Syratech Corporation
000 XxXxxxxxx Xxxxxxx
Xxxx Xxxxxx, XX 00000
Gentlemen:
Syratech Corporation (the "Company"), and THL Transaction I Corporation
(the "Acquiror"), a Delaware corporation formed by The Xxxxxx X. Xxx Company,
propose to enter into an agreement (the "Agreement") pursuant to which the
Company will be merged with the Acquiror in a transaction (the "Merger") in
which each outstanding share of the Company's common stock, par value $0.01 per
share (the "Shares"), will be converted into the right to receive $32.00 in cash
(the "Consideration"). In addition, the public shareholders of the Company will
be entitled to elect to receive, subject to certain limitations, up to 25% of
their Consideration in the form of common stock of the surviving entity. Because
this structure is optional, we have not been asked to value the stock of the
surviving entity, and have not done so. The Merger is expected to be considered
by the shareholders of the Company at a special shareholders' meeting and
consummated on or shortly after the date of such meeting (assuming the
shareholders of the Company approve the transaction).
You have asked us whether, in our opinion, the proposed Consideration to be
received by the holders of the Shares (other than Shares held by Xx. Xxxxxxx
Xxxxxxxx, Shares to be canceled pursuant to the Agreement and dissenting Shares)
pursuant to the Merger is fair to such shareholders 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 December 31, 1995 and
the Company's Forms 10-Q and the related unaudited financial information
for the quarterly periods ending March 31, 1996, and June 30, 1996;
(2) Reviewed a draft of the Company's Form S-3 dated September 12,
1996;
(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 businesses and prospects;
(5) Reviewed the historical market prices and trading activity for the
Shares and compared them with that of certain publicly traded companies
which we deemed to be reasonably similar to the Company;
(6) Compared the results of operations of the Company with that of
certain publicly traded companies which we deemed to be reasonably similar
to the Company;
(7) Compared the proposed financial terms of the transactions
contemplated by the Agreement with the financial terms of certain other
mergers and acquisitions which we deemed to be relevant;
(8) Reviewed the Agreement dated October 23, 1996, including the
financing commitment letters attached thereto;
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(9) 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 supplied or otherwise made available to us by the Company,
and we have not independently verified such information or undertaken an
independent appraisal of the assets of the Company. With respect to the
financial forecasts furnished by the Company, we have assumed that they have
been prepared on a reasonable basis and reflect the best currently available
estimates and judgment of the Company's management as to the expected future
financial performance of the Company.
In connection with our engagement, we were authorized by the Company to,
and did, solicit indications of interest for the acquisition of the Company from
a limited number of third parties who were specified by the Company.
Our opinion is necessarily based upon market, economic and other conditions
as they exist on, and can be evaluated as of, the date of this letter. Our
opinion does not address the merits of the underlying decision by the Company to
engage in the Merger and does not constitute a recommendation to any shareholder
as to how such shareholder should vote with respect to the Merger or any
transaction related thereto.
Xxxxxxx Xxxxx has acted as exclusive financial advisor to the Special
Committee of the Board of Directors in connection with the Merger, for which we
will receive a fee. An affiliate of Xxxxxxx Xxxxx acts as the general partner
for the publicly registered investment funds in which Xxxxxx X. Xxx is an
individual general partner and an affiliate of Xxxxxx X. Xxx acts as the
investment advisor to the funds. Xxxxxxx Xxxxx has also provided in the past
financial advisory and financing services to Xxxxxx X. Xxx and to certain
companies affiliated with Xxxxxx X. Xxx and such funds. In the ordinary course
of business, we have traded the equity securities of the Company for our own
account and the accounts of our customers and, accordingly, may at any time hold
a long or short position in such securities.
On the basis of, and subject to the foregoing, we are of the opinion that
the proposed cash Consideration to be received by the holders of the Shares
(other than Shares held by Xx. Xxxxxxx Xxxxxxxx, Shares to be canceled pursuant
to the Agreement and dissenting Shares) pursuant to the Merger is fair to such
shareholders from a financial point of view.
Very truly yours,
XXXXXXX LYNCH, XXXXXX, XXXXXX & XXXXX
INCORPORATED
By /s/ Xxxxxxx X. Xxxxx
Director
Investment Banking Group
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