Exhibit 7
Lazard Freres & Co. LLC
000 Xxxx Xxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
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Telephone (000) 000-0000 Chicago
Facsimile (000) 000-0000
May 5, 1999
Board of Directors
Xxxxxx Xxxxxxxx Industries, Inc.
000 Xxxxxx Xxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxx 00000
Dear Members of the Board:
We understand that Falcon Products, Inc. ("Falcon") and Xxxxxx Xxxxxxxx
Industries, Inc. ("Shelby") have entered into an Agreement dated as of May 5,
1999 (the "Agreement"), pursuant to which Falcon will make a cash tender offer
(the "Tender Offer") to acquire all of the outstanding shares of common stock of
Shelby at a price of $16.50 per share to be followed by a merger (the "Merger")
of a wholly-owned subsidiary of Falcon into Shelby in which each remaining share
of Shelby not acquired in the tender offer would be converted into the right to
receive $16.50 per share (the "Acquisition").
You have requested our opinion as to the fairness, from a financial point
of view, to the shareholders of Shelby of the consideration to be paid in the
Acquisition. In connection with this opinion, we have:
(i) Reviewed the financial terms and conditions of the Agreement;
(ii) Analyzed certain historical business and financial information
relating to Shelby;
(iii) Reviewed certain financial forecasts and other data provided to us
by Shelby relating to its business;
(iv) Held discussions with members of the senior management of Shelby
with respect to the business, prospects and strategic objectives of
Shelby;
(v) Reviewed public information with respect to certain other companies
in lines of businesses we believe to be generally comparable to the
businesses of Falcon and Shelby;
(vi) Reviewed the financial terms of certain business combinations
involving companies in lines of businesses we believe to be
generally comparable to those of Falcon and Shelby;
(vii) Reviewed the historical stock prices and trading volumes of Shelby's
common stock; and
(viii) Conducted such other financial studies, analyses and investigations
as we deemed appropriate.
We have relied upon the accuracy and completeness of the foregoing
information, and have not assumed any responsibility for any independent
verification of such information
Lazard Freres & Co. LLC
or any independent valuation or appraisal of any of the assets or liabilities of
Falcon or Shelby, or concerning the solvency or fair value of either of the
foregoing entities. With respect to financial forecasts, we have assumed that
they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of management of Shelby as to the future
financial performance of Shelby. We assume no responsibility for and express no
view as to such forecasts or the assumptions on which they are based.
Further, our opinion is necessarily based on economic, monetary, market and
other conditions as in effect on, and the information made available to us as
of, the date hereof.
In rendering our opinion, we have assumed that (i) the Acquisition will be
consummated on the terms described in the Agreement, without any waiver of any
material terms or conditions by Shelby and that obtaining the necessary
regulatory approvals for the Acquisition will not have an adverse effect on
Shelby and (ii) we have been fully informed about other contracts relating to
the Acquisition entered into at the same time as the Agreement by Falcon and the
Company or certain of its shareholders and that those contracts will not be
modified or waived in any material respect. We were not requested to, and did
not, solicit third party indications of interest in acquiring Shelby. This
opinion does not address the Company's underlying business decision to effect
the Acquisition.
We are aware that Shelby has received a conditional offer from a third
party. With your consent, we did not address the relative merits of the
Acquisition and any alternative potential transaction.
Lazard Freres & Co. LLC is acting as investment banker to Shelby in
connection with the Acquisition and will receive a fee for our services, a
substantial portion of which is contingent upon the consummation of the
Acquisition. We acted as the lead underwriter for Shelby's offer of shares of
common stock in March 1997, for which we received a customary fee.
Our engagement and the opinion expressed herein are for the benefit of
Shelby's Board of Directors, and the opinion is rendered to Shelby's Board of
Directors in connection with its consideration of the Acquisition. The opinion
expressed herein does not constitute a recommendation to any stockholder of
Shelby with respect to whether such holder should tender shares pursuant to the
Tender Offer or as to how such stockholder should vote or otherwise act with
respect to the Merger. It is understood that this letter may not be disclosed or
otherwise referred to without our prior consent, except as may otherwise be
required by law or by a court of competent jurisdiction.
Based on and subject to the foregoing, we are of the opinion that the
consideration to be paid in the Acquisition is fair to the shareholders of
Shelby from a financial point of view.
Very truly yours,
LAZARD FRERES & CO. LLC
By /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Managing Director
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