NEW YORK, Nov. 17, 2014 /PRNewswire/ -- Clinton Group, Inc., which together with its affiliates and funds ("Clinton Group") owns a significant stake in EveryWare Global, Inc. (NASDAQ: EVRY) ("EveryWare"), today announced that it has sent a letter to the Board of Directors of CSS Industries, Inc. (NYSE: CSS) ("CSS" or the "Company")
"A merger of the two companies makes a lot of sense for all stakeholders while at the same time delivering a premium valuation and enhanced liquidity to CSS Industries," said Joseph A. De Perio, Senior Portfolio Manager of the Clinton Group.
A complete copy of the Clinton Group's letter is below:
About Clinton Group, Inc.
Clinton Group, Inc. is a diversified asset management firm that is a Registered Investment Advisor. The firm has been investing in global markets since its inception in 1991 with expertise that spans a wide range of investment styles and asset classes.
[Clinton Group Letterhead]
November 17, 2014
CSS Industries, Inc.
1845 Walnut Street
Philadelphia, PA 19103
Attn: Board of Directors
Gentlemen and Madam:
I write on behalf of Clinton Group, Inc., the investment manager to various funds and partnerships ("Clinton Group") that invest in public equity securities of companies such as CSS Industries, Inc. ("CSS" or the "Company").
We have monitored the Company from afar for the last few years and have owned its common stock in the past. We are ambivalent to owning stock of the Company if it continues to operate as an independent entity in a declining industry niche. On the one hand, there is an attractive amount of annual cash flow generation which should provide a yield to the equity, on the other hand, we would highlight concerns regarding (i) the Company's operating expense efficiencies given its disparate asset base and (ii) capital allocation decisions with softening working capital metrics and a large net cash balance. In fact, in similar companies with comparable balance sheets, we would often advocate a repurchase of the Company's common stock, but in this case, we are diametrically opposed to a buyback due to the dwindling industry niche and the Company's already anemic trading volume. The liquidity in the stock is what keeps us on the sidelines today, and I imagine current shareholders wonder how they will eventually monetize their positions.
I believe Clinton Group can set forth an alternative path to equity value creation. Clinton Group is also the owner of a significant stake in EveryWare Global, Inc. ("EveryWare") (NASDAQ: EVRY), and I sit on both the Board of Directors and the Acquisition Committee of the Board. Assuming both parties can come to an agreement on a contribution analysis and an exchange ratio and based on our detailed review of the Company's publicly available information and our substantial knowledge of the industry, I believe EveryWare Global can offer as much as $34.00 per share in an exchange offer to CSS shareholders.
Operating benefits of the merger include the opportunity to rationalize manufacturing and distribution assets, the ability to combine product procurement and sales force teams, a melding of key executives from each organization and potential revenue synergies between both companies' varied customer bases. Financial benefits of the merger to both sets of shareholders would be earnings accretion and higher stock prices, working capital efficiency, increased trading liquidity and enhanced shareholder returns from a more efficiently structured balance sheet. Preliminarily, based on the information available to us, we estimate between $20 million and $30 million in annual synergies from manufacturing, distribution and fixed asset utilization, which at an 8.0x multiple would yield $160 million to $180 million in equity value creation to be shared by shareholders of both entities, which at the midpoint, is over 65% of CSS' current market capitalization.
The Acquisition Committee of the board of directors of EveryWare has met and discussed the opportunity, and this letter along with my call to Christopher J. Munyan last week confirms our interest. I believe our management team would look forward to understand how it can work cohesively with their counterparts at CSS to build a pro forma executive team. Of course, nothing in this letter is intended to create a legally binding obligation of any kind and no such obligation will exist unless and until a definitive transaction agreement is executed by both CSS and EveryWare. I would also welcome the opportunity to speak with the shareholders of CSS to discuss the merits of the combination. I believe we can be successful in putting together a deal that benefits all stakeholders and would welcome a discussion with the Company's executive team. I can be reached at (212) 825-0400.
Joseph A. De Perio
Senior Portfolio Manager
SOURCE Clinton Group, Inc.