EXHIBIT 6
[LOGO] [LETTERHEAD OF XXXXXXX XXXXX]
November 2, 1996
Board of Directors
Eckerd Corporation
0000 Xxxxx Xxxxx Xxxx
Xxxxx, XX 00000
Members of the Board of Directors:
Eckerd Corporation (the "Company"), X.X. Xxxxxx Company, Inc. (the
"Acquiror"), and Omega Acquisition Corporation, a wholly owned subsidiary of the
Acquiror (the "Acquisition Sub"), have entered into an agreement and plan of
merger (the "Agreement") pursuant to which the Acquisition Sub will make a
tender offer (the "Offer") for 50.1% of the shares of the Company's common
stock, par value $0.01 per share (the "Shares"), at $35.00 per Share, net to the
seller in cash. The Agreement also provides that, following consummation of the
Offer, (i) if the Stock Condition (as defined in the Agreement) has been
satisfied, the Company will be merged with and into the Acquisition Sub (the
"Forward Merger") or (ii) if the Stock Condition has not been satisfied, the
Acquisition Sub will be merged with and into the Company (the "Reverse Merger,"
and together with the Forward Merger, the "Merger"). Pursuant to the Agreement,
each remaining Share outstanding after consummation of the Offer not held by the
Acquiror or its affiliates will be converted into the right to receive either
(i) if the Forward Merger is consummated 0.6604 shares of the common stock of
the Acquiror (the "Acquiror Shares") or (ii) if the Reverse Merger is
consummated, $35.00 per Share in cash, as such amounts may be adjusted pursuant
to the Agreement. In connection with the Offer and the Merger, the parties have
also entered into an agreement (the "Option Agreement") pursuant to which the
Company has granted the Acquiror an option under certain circumstances described
in the Option Agreement to acquire up to 10,554,786 Shares, or such other number
of Shares as would equal 15% of the total Shares outstanding at the time of
exercise of the option.
You have asked us whether, in our opinion, the proposed consideration to be
received by the holders of the Shares in the Offer and the Merger, taken as a
whole, 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 three fiscal years ended January 29, 1994, January
28, 1995, and February 3, 1996, and the Company's Forms 10-Q and the
related unaudited financial information for the quarterly periods
ending May 4, 1996, and August 3, 1996;
(2) Reviewed the Acquiror's Annual Reports, Forms 10-K and related
financial information for the three fiscal years ended January 29,
1994, January 28, 1995, and January 27, 1996, and the Acquiror's Forms
10-Q and the related unaudited financial information for the quarterly
periods ending April 27, 1996, and July 27, 1996;
(3) Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets and prospects of the
Company and the Acquiror as well as the cost savings and related
synergies expected to result from the Merger, furnished to us by the
Company and the Acquiror, respectively;
(4) Conducted discussions with members of senior management of the Company
and the Acquiror concerning their respective businesses and prospects,
including the cost savings and synergies expected to result from the
Merger;
(5) Reviewed the historical market prices and trading activity for the
Shares and the Acquiror Shares and compared them with that of certain
publicly traded companies which we deemed to be reasonably similar to
the Company and the Acquiror, respectively;
(6) Compared the historical and projected results of operations of the
Company and the Acquiror with that of certain companies which we deemed
to be reasonably similar to the Company and the Acquiror, respectively;
(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) Considered the pro forma effect of the Merger on the Acquiror's
earnings, consolidated capitalization and certain financial ratios;
(9) Reviewed the Agreement dated November 2, 1996;
(10) Reviewed the Option Agreement dated November 2, 1996; and
(11) 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 or on behalf of
the Company or the Acquiror, or made publicly available by the Company or
Acquiror, and we have not independently verified such information or undertaken
an independent evaluation or appraisal of the assets or liabilities of the
Company or the Acquiror or been furnished with any such evaluation or appraisal.
With respect to the financial forecasts and information related to cost savings
and synergies expected to result from the Merger furnished by the Company and
the Acquiror, we have assumed with your consent that they have been reasonably
prepared and reflect the best currently available estimates and judgment of the
Company's or the Acquiror's management as to the expected future financial
performance of the Company or the Acquiror, as the case may be, as well as the
cost savings and synergies expected to result from the Merger. We have further
assumed that the Forward Merger will qualify as a reorganization within the
meaning of Section 368 (a) of the Internal Revenue Code of 1986, as amended.
Our opinion is necessarily based upon market, monetary, general economic and
other conditions as they exist and can be evaluated on the date hereof.
We have acted as financial advisor to the Company in connection with the
Merger and will receive a fee from the Company for our services, a significant
portion of which is contingent upon the consummation of the Merger. We have
also, in the past, provided financial advisory and financing services to the
Company and the Acquiror and have received fees for the rendering of such
services. In addition, in the ordinary course of business, we may actively
trade the Shares, as well as the Acquiror Shares, for our own account and for
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities. Affiliates of Xxxxxxx Xxxxx own approximately
1.27% of the outstanding Shares, and Messrs. Xxxxxxxxxxx and Xxxxx, directors of
Xxxxxxx Xxxxx Capital Partners, Inc., are also members of the Board of Directors
of the Company.
This opinion is addressed to the Board of Directors of the Company and does
not constitute a recommendation to any stockholder as to whether such
stockholder should tender any Shares pursuant to the Offer or vote in favor of
the Merger.
We are not expressing any opinion herein as to the prices at which the
Acquiror Shares will trade following the announcement or consummation of the
Merger.
On the basis of, and subject to the foregoing, we are of the opinion that
the proposed consideration to be received by the holders of the Shares pursuant
to the Offer and the Merger, taken as a whole, is fair to such stockholders from
a financial point of view.
Very truly yours,
XXXXXXX LYNCH, XXXXXX, XXXXXX & XXXXX
INCORPORATED
