Form DEFA14A

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

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¨   Preliminary Proxy Statement
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¨   Definitive Proxy Statement
x   Definitive Additional Materials
¨   Soliciting Material Pursuant to §240.14a-12

American Greetings Corporation

(Exact name of Registrant as specified in its charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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  (1)  

Title of each class of securities to which transaction applies:

 

     

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  (4)  

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The following presentation was delivered to Institutional Shareholder Services today.

American Greetings
Investor Presentation
July 18, 2013

1.
Transaction Summary
2.
Strategic Rationale
3.
Process
4.
Valuation
Topics
1

1.
Transaction Summary
2.
Strategic Rationale
3.
Process
4.
Valuation
2
X
X
X
X
X
X

Transaction Summary
Merger Price:
3
Offer Premium:
Shareholder Meeting:
Required Vote:
On April 1, 2013, American Greetings Corporation announced that it had signed a definitive
agreement
under
which
the
Weiss
Family
would
acquire
the
Company
for
$18.20
in
cash.
On
July
3,
2013,
AG
announced
that
it
had
signed
an
amendment
to
the
merger
agreement
providing
for
an
increased per share price of $19.00 in cash
Funding:
•
$19.00 per share in cash for all shares not owned by the Family and related
entities
•
In addition, a regular quarterly dividend of $0.15 paid in July 2013
•
32.5%
to
the
9/25/12
stock
price
(unaffected
closing
price
prior
to
the
Family’s
initial offer); 33.1% to the average stock price for 45-days prior to initial offer
•
18.0%
to
the
3/28/13
stock
price
(last
trading
day
prior
to
the
public
announcement
of a definitive merger agreement)
•
26.5%
to
the
LTM
EBITDA
multiple
over
average
LTM
EBITDA
at
9/25/12
•
4.4%
to the $18.20 price per share under the original merger agreement
•
Transaction financed through:
–
Contributions of American Greetings shares owned by the Family
–
~$240 million non-voting preferred stock investment from Koch AG Investment
–
$600 million in committed debt financing ($350 million funded term loan and
$250 million partially funded revolving credit facility)
•
August 7, 2013
•
Affirmative vote of holders of a majority of the common stock not held by the
Family
and
related
entities
or
any
director
or
executive
officer
(“Majority
of
the
Minority”)

1.
Transaction Summary
2.
Strategic Rationale
3.
Process
4.
Valuation
4
*
*
*
*
*

Strategic Rationale
Executive Summary
•
American Greetings is at an inflection point
–
Paper greeting cards and gift packaging constitute ~88% of our business, and the
market is shrinking—we are experiencing persistent year-over-year declines in sales
of the core greeting card business, due to combination of a number of factors,
including:
•
A shrinking base of card and gift shops
•
Increasing distribution through the value channel
•
The effects of the explosion of social media
–
Opportunities in the electronic social expressions channel of distribution exist, but
require substantial investment and entail significant execution risk
–
Substantial
required
deferred
maintenance
spending
on
IT
systems
and
new
or
substantially rehabilitated headquarters
–
Company requires capital investment at roughly 3x normal levels over next three
years
–
Transaction transfers all business risk to the Family; gives public shareholders
certainty of cash at a significant premium
5

Strategic Rationale
Executive Summary (cont’d)
•
The Company’s stock has consistently underperformed in trading markets
–
Strategy of returning cash to shareholders (over $1 billion to Class A public
shareholders
through
dividends
and
repurchases
since
FY2005)
has
not
been
successful in driving share price performance
–
The
following
are
likely
contributing
to
weak
stock
performance:
core
market
shrinking, revenue growth challenges, margin pressures, complex changes in
portfolio
of
businesses,
lack
of
comparable
companies,
virtually
no
analyst
coverage
and necessary investments
–
Many investors are under pressure to produce short-term and intermediate returns,
especially in today’s low-yield environment, making it difficult to hold shares through
business
transformations,
and
creating
further
downward
pressure
on
share
price
–
During this period, share prices will likely be put under pressure
–
Transformational expenses will detract from AG’s results of operations
•
The
Family
has
controlled
AG
for
over
100
years,
and
wants
to
do
what
is
best
for
AG
while being fair to public shareholders—the Family does not think the required
transformation can realistically be achieved as a public company
6
•
If  the transaction is voted down, the capital that must be redeployed into the business for
the foreseeable future will not be available to shareholders

•
American Greetings engages in the design, manufacture and sale of greeting cards and
other social expression products in the United States and internationally
•
Segments include:
–
North American Social Expression Products (includes Cardstore.com)
–
International Social Expression Products
–
Interactive or internet brands (e.g., AmericanGreetings.com, BlueMountain.com,
egreetings.com)
–
UK Retail (Clintons)
–
Other, including in-store display fixture business and licensing of intellectual
properties (e.g., Care Bears and Strawberry Shortcake)
•
The Company distributes its greeting card products through mass merchandisers, dollar
stores, chain drug stores, supermarkets, card and gift shops
Business Overview
7
FY2013 Revenue Breakout by Segment / Product Category
74% of FY2013
Revenue came from
Core Paper Greeting
Card sales

2.6
2.5
2.5
2.4
2.3
2.3
2.0
2.2
2.4
2.6
2.8
3.0
CY07
CY08
CY09
CY10
CY11
CY12
6.2
6.1
6.0
6.0
5.9
5.9
5.7
5.8
5.9
6.0
6.1
6.2
6.3
CY07
CY08
CY09
CY10
CY11
CY12
Greeting Cards Industry Faces Persistent,
Accelerating Decline
•
Mature greeting cards industry experiencing long-term and accelerating unit decline (2%-4%
decline / year since CY 2007)
–
Pace of decline meaningfully accelerated in 2011 and 2012, despite improved economy
–
Most lucrative “heavy user”
customer base saw declining volume in 2012 (-1.5%)
•
Social media, including Facebook and other e-greeting technologies, have exerted competitive
pressure on American Greetings and the industry overall
•
While price increases have softened the revenue impact, sustainability is uncertain given
absolute prices, emergence of mass retailers/dollar stores and increasing electronic pressures
8
Source:
IRI
scan
data,
AG
proprietary
consumer
surveys,
management
estimates.
Units
Dollars
U.S. Greeting Card Industry Units and Dollar Sales Trends
Billions
CY07-CY12 CAGR: (2.6%)
Billions
CY07-CY12 CAGR: (0.8%)

Declining Industry Trends
•
Consumer
purchases
driven
more
by
selection
and
convenience
than
by
brand
–
Adult participation in social networking and media has grown to ~52% in 2012 from
~11% in 2006
•
Retailer consolidation increases retailer purchasing power
•
Channel shift
Mass retailers and dollar stores growing share as card and gift shops
(specialty retail) decline
–
More volume sold at lower price points and lower margins
•
Electronic channels of social expression have emerged as potentially major disruptors to our
core industry
9
Source: IRI scan data, AG proprietary consumer surveys, management estimates.
(a) Does not include e-cards
Card Category History and Projections by Channel
Units
Dollars

Stock Price Performance
10
Source: Capital IQ as of 7/2/13. 
(a) Represents closing price as of 9/25/12, unaffected for announcement of Initial Offer, which was made after the market close.
•
In the two years prior to the initial Family offer, AG’s stock price was down 30% despite having returned
over $180 million of capital to shareholders in that period
–
In
the
same
period,
the
S&P
400
Consumer
Discretionary
Index
was
up
40%
–
Correlation
between
AG’s
stock
price
and
the
broader
market
has
been
very
low
over
both
short-
and long-term periods

Trading Ranges Nearly Always Below Final Offer
11
30-Days
Between 9/25 Initial Proposal and 7/2 (191 Days)
180-Days
1-Year
Source: Capital IQ as of 7/2/13.
•
99% of shares traded over the one-year period prior to the Family’s initial proposal traded below $19.00
•
100% of shares traded below $16.50 in the six months prior to the initial proposal
(Period ending September 25, 2012, except where noted)

American Greetings 15-Year Stock Price Chart
Marked Decline in Equity Value
American Greetings 15-Year Total Shareholders' Equity Value History
Source: Capital IQ.
12

Lackluster Stock Price Performance Despite
Major Return of Capital to Shareholders
•
Since FY2005, AG has returned over $1 billion of capital to Class A public shareholders    
through share repurchases and dividends
–
Despite major share repurchases and dividends, AG’s unaffected stock price has declined
38% since 2005 and 82% since 1997; the Company’s strategy of returning significant
capital to shareholders has not been successful
Deployment of Capital to Class A Shareholders ($ in millions)
13
Source: Company’s public filings.  Class A dividends calculated by applying ratio of average Class A shares outstanding to average Class B shares outstanding in each fiscal year to total dividends paid in such year.

Limited Benefit to Being Public
Source: Bloomberg, Capital IQ, ThomsonOne
(a) ADTV calculated as averaged trading volume over 30 consecutive trading days
–
Lack
of
comparable
public
companies
discourages investment in equity research and
investor education
–
Largest competitor (Hallmark Cards) is privately
owned
–
Social expressions is an adjacent market to
consumer goods, limiting interest from institutions
focused on the consumer goods markets
•
Many of the standard benefits enjoyed by public
companies do not exist for American Greetings
–
Limited institutional support –
only one equity coverage
analyst
–
Industry fundamentals do not support future equity
research coverage or institutional investment
–
Average daily trading volume and declining public share
float further hinder liquidity and appetite for public
investment
–
On average over the six months prior to the Family’s
initial offer, short interest accounted for 40% of AG’s
share float –
investors have recognized that our core
market is shrinking
14
Shares Outstanding and Average Daily Trading Volume ("ADTV")
(a)
Industry Fundamentals
Limited
Institutional
Support
–
AG
Equity
Coverage
Analysts

American Greetings is at a Significant Competitive
Disadvantage as Long as it is Publicly Traded
•
American Greetings’
largest competitor is privately held and able to invest and re-
invest in its business without the pressure to produce period-over-period revenue,
earnings and cash flow growth
–
Expanding business with retail customers can require significant upfront expenses
before revenue and profit are generated, thereby putting substantial pressure on
short-term results and causing earnings volatility
–
American
Greetings
recently
developed
a
significant
new
customer
relationship
with a national retailer; however, assuming a contract is signed, the relationship
would require substantial investment in the early years and has a negative NPV
over the first five years
–
After American Greetings publicly reports strong operating results, commercial
negotiations become more difficult as retail customers push contract terms
–
As
a
private
company,
American
Greetings
will
be
subject
to
less
commercial
negotiating stress, and be better able to optimize its retail partner negotiations
much like its largest competitor
15

Industry Challenges and Necessary Redirection of
Capital Increase Downside Risks for Public Holders
•
Persistent decline in the core paper greeting cards industry of 2%-4% unit volume
annually (including 3.7% decline in most recent year)
–
Intensifying risks to the core paper greeting cards industry posed by transition to the
use of social media, decrease in number of specialty retailers and growing
proportion of value channel sales
–
Material costs associated with investments in online/digital social expression
products with uncertain return
–
Increasing concentration of retailers exacerbates pressure on commercial terms
–
The Company will continue to support investment in the value channel as a source
of potential unit growth, despite negative implications on margins
•
Alternatives evaluated, such as a substantial special dividend or leveraged
recapitalization transaction, would reduce the Company’s flexibility and jeopardize the
equity value of the Company
•
Substantial investments required over the next several years (restructuring Clinton
Cards,
modernization
of
IT
systems,
new
or
significant
rehabilitation
of
headquarters)
will adversely affect earnings and cash flow
•
These factors, taken collectively, evidence significant challenges facing the Company
were it to remain public, and support the recommendation to deliver certain value to
shareholders
16

1.
Transaction Summary
2.
Strategic Rationale
3.
Process
4.
Valuation
17
*
*
*
*
*

Process
Executive Summary
•
Fully independent Special Committee advised by nationally recognized independent
advisors
•
Financial advisor’s fees not conditioned on rendering a favorable opinion as to the
transaction
•
Special Committee empowered to consider/pursue alternatives and to reject any
proposed transaction
•
The Family did not participate in any board deliberations concerning the proposal
•
Transaction
conditioned
on
“majority
of
the
minority”
vote
•
Standstill after public announcement of Family proposal to ensure negotiating leverage
and
adequate
time
for
a
third
party
to
express
interest
(no
such
interest
was
expressed)
•
Special Committee negotiated a substantial increase in Family’s offer price
•
Special Committee continued to evaluate the Company after the March 28, 2013
agreement was reached, and extracted additional value for shareholders
18

Experienced / Independent Special Committee
and Independent Advisors
19
The Special Committee:
•
Dr.
Scott
S.
Cowen:
President
of
Tulane
University,
former
Dean
of
Case
Western
Reserve
University,
former
Chairman
of
Special
Committee
for
Jo-Ann
Stores’
going-private
LBO
•
Jeffrey D. Dunn:              
Former President and Chief Executive Officer and director of
HIT Entertainment Limited
•
William
E.
MacDonald,
III:
Former
Vice
Chairman
of
National
City
Corporation
•
Michael
J.
Merriman,
Jr.:
Former
CEO
of
Lamson
&
Sessions
Corporation
Advisors to the Special Committee:
•
Peter J. Solomon Company, financial advisor
•
Sullivan & Cromwell, legal advisor

Key Process and Proposal Highlights
•
American Greetings was founded by Jacob Sapirstein in 1906, and has remained
controlled by descendants of Jacob Sapirstein (now the Weiss Family) throughout the
Company’s existence
•
A/B voting structure in existence since 1955; public shareholders invested knowingly into
Family-controlled company with an A/B voting structure
•
During the six-month public process, prospective parties interested in contacting the
Special Committee or PJSC were able to do so
–
On
10/19/12,
the
Company
issued
a
press
release
stating
that
the
Special
Committee was authorized to review and evaluate other options, signaling openness
to third-party approaches
–
No third party expressed interest in acquiring or entering into any other transaction
with the Company during that six-month period (or to date)
–
A
standstill
provision
prohibited
the
Family
from
pursuing
a
bid
(or
taking
certain
other related actions) without the consent of the Special Committee
•
Record reflects extensive negotiation by the Special Committee
•
The
Family
did
not
participate
in
any
deliberations
of
American
Greetings’
Board
of
Directors regarding the proposal
•
Special Committee actively controlled Family access to company management
20

Robust Special Committee Process
•
Board of Directors delegated to the Special Committee the exclusive power and authority to
recommend what action, if any, should be taken with respect to the Family’s proposal
–
The Committee could have just said no, or approved a financial alternative
•
Counsel for Special Committee and Family negotiated confidentiality agreement with standstill
–
Contained 22-week standstill provision that limited the ability of the Family
to make a
proposal directly to the Company’s shareholders or to purchase shares
–
Special Committee also obtained a 12-month standstill from the Family’s potential
financing sources, effectively limiting the ability of the Family to acquire the Company
without Special Committee approval
•
Special Committee of four independent directors also empowered to consider and
recommend that the Board take action with respect to strategic alternatives, including the
ability to reject the Family’s proposal and remain a public company or pursue a financial
alternative
•
The Special Committee met 27 times between its formation and original announcement of the
transaction and evaluated alternatives, including:
–
Continuing as a stand-alone public company
–
Undertaking a recapitalization (including share repurchases and/or dividends)
–
Sale of Company to the Family
•
The Special Committee met an additional seven times between the original announcement of
the transaction and the announcement of the amendment to the merger agreement
21

Robust Special Committee Process (cont’d)
•
The Board fully considered and adopted the Special Committee’s recommendation in
making its decision to unanimously recommend the transaction to the shareholders
•
The
Special
Committee
demanded
and
secured
“Majority
of
the
Minority”
shareholder
approval requirement; shares beneficially owned by directors, officers and the Family not
counted in Majority of Minority vote
–
Negates voting interest of Family and other officers and directors
–
Remaining Class B shares receive only one vote
–
Enables public shareholders to determine whether transaction will occur
•
The Special Committee continued to evaluate the Company after the original merger
agreement
was
signed,
and
demanded
and
secured
an
enhancement
in
the
per
share
merger consideration
–
The Family Shareholders believe that the financial developments during the
Company’s first fiscal quarter of 2014 were neither material nor reflective of any
fundamental
improvement
in
the
trajectory
of
American
Greetings’
business;
nevertheless, the Special Committee was able to extract an additional 4.4% premium
($0.80 per share) for the public shareholders
22

Arm’s-Length Legal Negotiations
•
On behalf of the Family, Jones Day delivered the first draft of the Merger Agreement on
January 19, 2013, and the agreement was negotiated by Jones Day and Sullivan &
Cromwell until March 29, 2013.  As compared to Jones Day’s initial draft of the
agreement, the final version reflects several key concessions secured by the Special
Committee, including:
–
The Majority of the Minority shareholder vote
–
A $7.3 million joint and several guaranty from the Family with respect to the obligations of the
purchasing entities
–
The
Special
Committee's
ability
to
change
its
recommendation
due
to
an
intervening
event
affecting AG’s prospects as a publicly traded company
–
The obligation of the Family Shareholders to deliver a fully executed preferred stock purchase
agreement for the preferred equity concurrently with the execution of the Merger Agreement, as
opposed to simply providing a commitment letter
–
More favorable language on customarily negotiated items such as representations, warranties,
covenants and other provisions affecting closing certainty
–
The cancellation, without consideration, of the various equity awards held by the Family
Shareholders with an aggregate value of over $9.3 million
23

1.
Transaction Summary
2.
Strategic Rationale
3.
Process
4.
Valuation
24
*
*
*
*
*

Valuation
Valuation Overview
•
Special Committee believes that the $19.00 per share consideration (reached after
prolonged negotiations) represents the highest per share consideration it could obtain
from the Family
•
$19.00 proposal represents a 32.5% premium to the 9/25/12 unaffected closing price
prior to the Family’s initial proposal
•
Company’s financial results in recent years have been significantly affected by non-
recurring, one-time and other special items
–
~40% of FY2013E Adjusted EBIT was related to one-time adjustments
–
Makes it difficult to identify clear trends in the Company’s business and the
Company’s likely future financial performance
–
Results in inconsistent cash flows
–
Company’s EBIT has consistently underperformed relative to strategic plans, raising
concerns about certainty of future EBIT forecasts
25

$12.50
$15.25
$13.00
$16.00
$16.75
$17.00
$19.50
$25.00
$22.50
$23.25
$25.50
$23.00
$10.00
$12.50
$15.00
$17.50
$20.00
$22.50
$25.00
$27.50
52-Week Trading Range Prior
to 9/25/13 Offer
Comparable Companies
Precedent Transactions
Present Value of Future Share
Price (a)
Sum of the Parts
DCF
26
(a)
Includes
present
value
of
future
quarterly
dividend
payments
of
$0.15
per
share.
Valuation Analysis Summary
1/17/13
Offer
Unaffected Share
9/25/12
$14.34
$17.18
9/25/12
Initial Offer
3/28/13
Offer
$18.20
7/1/13
Offer
$19.00

Compelling Offer to Shareholders
•
Attractive Premium
–
32.5% premium to unaffected share price prior to Family’s initial proposal (9/25/12)
–
33.1% premium to 45 trading day average prior to Family’s initial proposal
–
18.0% premium to closing stock price prior to announcement of original definitive merger
agreement (3/28/13)
–
4.4% premium to the price per share contained in the original March 29, 2013 merger agreement
•
Premium Multiple
–
4.0x FY13E EBITDA based on Management Treasury Model dated 11/30/12 with certain
adjustments based on Management guidance
•
Represents a 29.3% premium  to the average LTM EBITDA multiple over American Greetings’
prior year average LTM EBITDA multiple
•
More favorable to the Company’s shareholders than the status quo or other strategic and financial
alternatives given the operational and/or financial risks associated with the status quo or other
alternatives
•
$19.00 per share compared to valuation methodologies
–
Discounted cash flow:  $17.00 to $23.00
–
Selected public company analysis:  $15.25 to $25.00
–
Precedent transactions:  $13.00 to $22.50
–
Present value of future share price:  $16.00 to $23.25
–
Sum of the parts:  $16.75 to $25.50
•
Company shares have not historically correlated with broader equity markets and it cannot be assumed
that  recent positive trends in overall market conditions would similarly affect the Company’s shares in
absence of an offer
27
Note:
American
Greetings
has
no
substantially
similar
publicly
traded
comparable
companies

Premium Valuation Achieved
28
$14.34
$17.18
$17.50
$18.20
$19.00
10.00
12.00
14.00
16.00
18.00
$20.00
$14.34
$17.18
$17.50
$18.20
$19.00
10.00
12.00
14.00
16.00
18.00
$20.00
8.6% premium to
Revised
Proposal on 1/17
(a)
Revised Proposal  on 1/17/13 would eliminate regular quarterly dividends of $0.15  per share.
(b)
Revised Proposal on 3/28/13 also includes one regular quarterly dividend of $0.15 per share payable July 2013 (not included above).
Unaffected
Share Price
Initial
Proposal
On 9/25/12
Revised
Proposal on
1/17/13 (a)
Revised
Proposal on
3/28/13 (b)
10.6%
premium to
Initial Proposal
32.5%
premium to
unaffected
share price
Premium
to
Unaffected
Trading
Price
and
Earlier
Proposals
by
the
Family
Final Offer
4.4% premium to
Revised Proposal
on 3/28

Premium Valuation Achieved
29
$12.50
$14.25
$14.34
$16.10
$18.20
$19.00
10.00
12.00
14.00
16.00
18.00
$20.00
Unaffected
Share Price
18%
premium to
prior day
closing
stock price
(a) Revised Proposal on 3/28/13 also includes one regular quarterly dividend of $0.15 per share payable July 2013 (not included above).
52-Week
Low Prior to
Initial
Proposal
Closing
Stock Price
on 3/28/13
32.5%
premium to
unaffected
share price
33.3%
premium to 30
calendar days
prior to Initial
Proposal
30 Calendar
Days Prior
to Initial
Proposal
52.0%
premium to
52-week low
prior to Initial
Proposal
Revised
Proposal on
3/28/13 (a)
Premium to Various Historical Stock Prices
Final Offer
4.4% premium to
Revised Proposal
on 3/28

Offer Represents Significant Premium
Source:
Capital
IQ.
Capital
IQ
calculation
of
enterprise
value
does
not
include
restricted
stock
units
or
performance
shares
and
may
have
different
adjustments
for
EBITDA
than
those
used
in
other
analyses
in this
presentation. Data as of 7/2/13.
(a) CapIQ calculates LTM EV/EBITDA multiple using EBITDA of $150.1mm for period ended 2/28/13 compared to adjusted EBITDA of $212.3mm for same period with adjustments per Management guidance.
(b)Current multiple assumes LTM EBITDA of $212.3mm and net debt of $200.3mm for the period ended 2/28/13 based on Company’s Form 10-K dated 5/9/13, with certain adjustments to EBITDA based on Management
guidance. Current multiple calculated using diluted share count including restricted stock units and performance shares and treasury stock method of options exercisable as of 5/31/13 per Management guidance.
30
EV / LTM EBITDA –
2 years prior to Initial Proposal

50%
75%
100%
125%
150%
175%
200%
Sep-09
Mar-10
Sep-10
Mar-11
Sep-11
Mar-12
Sep-12
American Greetings
S&P 400 Consumer Discretionary
0%
25%
50%
75%
100%
125%
150%
Sep-07
Sep-08
Sep-09
Sep-10
Sep-11
Sep-12
American Greetings
S&P 400 Consumer Discretionary
0%
50%
100%
150%
200%
250%
300%
Sep-97
Sep-00
Sep-03
Sep-06
Sep-09
Sep-12
American Greetings
S&P 400 Consumer Discretionary
0%
50%
100%
150%
200%
250%
Sep-02
Sep-04
Sep-06
Sep-08
Sep-10
Sep-12
American Greetings
S&P 400 Consumer Discretionary
10-Year Relative Stock Chart
15-Year Relative Stock Chart
5-Year Relative Stock Chart
Comparative Stock Price Performance
3-Year Relative Stock Chart
Source: Capital IQ.
31
•
While the broader market has provided significant returns on equity investments over time, American
Greetings
has
significantly
underperformed
and,
in
most
periods,
has
not
provided
positive
return
•
Furthermore, in all observed time periods, American Greetings has demonstrated a lack of correlation
with the broader consumer discretionary market
41.9%
253.9%
87.4%
223.6%
55.0%
134.0%
75.6%
168.1%
(Period ending September 25, 2012)
R
: 0.213
R
: 0.292
R
: 0.322
R
: 0.068
2
2
2
2

0.172
0.026
0.029
0.021
0.106
0.016
0.126
0.012
0.022
0.051
0.033
0.084
0.097
0.076
0.288
0.304
0.155
0.178
0.202
0.217
0.144
0.098
0.212
0.088
0.138
0.076
0.176
0.070
--
0.100
0.200
0.300
0.400
0.500
0.600
0.700
0.800
0.900
1.000
BTH
CSS
SCHL
MDP
ICON
CHKE
FLWS
SFLY
RRD
QUAD
HGG
GME
BBY
BKS
Low Trading Price Correlation to Comparables
Source: Bloomberg. R-squared is calculated as the weekly correlation between week over week change of the stock and American Greetings.
32
•
In addition to the lack of correlation between AG’s stock price and the S&P 400 Consumer
Discretionary Index, movement in AG’s stock price has a very low correlation with the selected
comparable public companies
–
While we believe the selected group of comparable companies is as similar as possible to AG,
there simply are not substantially similar comparable companies in the public market
1-Year (9/26/11 - 9/25/12)
5-Year (9/25/07 - 9/25/12)

Short Interest
•
Prior to the announcement of the Family’s initial proposal, approximately 44% of AG’s
float was short
•
Similarly high short interest likely to return if transaction not consummated
AG Short Interest as Percent of Float –
May 2012 to June 2013
33
Source: Short interest data from NYSE; float number from FactSet

A Leveraged Recap is Not a Viable Alternative
•
The Special Committee, after careful consideration, concluded that a leveraged recapitalization
was not likely to lead to superior value.
–
Substantially greater debt levels would significantly increase AG’s business risks by
reducing (1) the Company’s flexibility, (2) its ability to respond to adverse business
developments, and (3) its ability to fund necessary deferred capital expenditures—all of
which is likely to jeopardize the equity value of the Company
–
The common equity of a recapitalized, more indebted Company might trade at lower
multiples of EBITDA than it has traded in the recent past
–
The Company’s resulting small equity capitalization could impair the liquidity and trading
value of the Company’s publicly held Class
A common shares
–
The potential economic benefits of such a dividend/recapitalization transaction are not likely
to provide a value superior to the $19.00 per share merger consideration and the risks to
realizing any superior value are considerable
–
AG’s track record of substantial capital return to shareholders has
not been correlated with
creation of value in the stock price (over $1bn returned since FY2005; stock price down
35%); there is no reason to believe that markets would react differently to further capital
return
–
It is likely that the very high level of short interest in AG (44% of share float prior to the
Family’s offer) would return
•
A leveraged recapitalization would not address the basic challenges of reshaping our business
for the future as a public company
34

35
Future Stock Price Analysis Based on Illustrative
Levered Recap
Source:
Share
count
for
LTM
based
on
diluted
shares
outstanding
as
of
5/31/13
per
Management;
FY14-FY18
based
on
diluted
shares
outstanding
from
Updated
Management
Treasury
Model
dated
6/23/13.
(Amounts in Millions, Except Per Share Data)
Fiscal Year
LTM
2014E
2015E
2016E
2017E
2018E
Adjusted EBITDA (c)
$216.9
$218.8
$230.9
$238.7
$245.5
% Growth
4.4%
(1.2%)
5.5%
3.4%
2.8%
Net Debt
461.6
475.5
423.6
391.1
268.4
116.0
Total Debt / EBITDA
2.4 x
2.1 x
1.9 x
1.7 x
1.1 x
0.5 x
Adj. EBITDA
Stock Price at End of Fiscal Year
Multiple
LTM
2014E
2015E
2016E
2017E
2018E
Projected Stock Price at Illustrative EV/Adjusted EBITDA Multiples:
3.4
x
$8.32
$8.42
$9.58
$11.60
$15.76
$20.56
3.6
9.63
9.77
10.88
12.96
17.15
21.96
3.8
10.94
11.11
12.19
14.32
18.53
23.37
4.0
12.24
12.46
13.50
15.68
19.92
24.77
4.2
13.55
13.80
14.81
17.04
21.30
26.18
4.4
14.86
15.14
16.12
18.40
22.69
27.58
4.6
16.17
16.49
17.42
19.76
24.07
28.98
4.8
17.48
17.83
18.73
21.11
25.46
30.39
Present Value at May 31, 2013
Present Value of Stock Price Assuming 13.5% Cost of Equity:
3.4
x
$8.32
$7.66
$7.67
$8.19
$9.81
$11.27
3.6
9.63
8.88
8.72
9.15
10.67
12.04
3.8
10.94
10.11
9.77
10.11
11.53
12.81
4.0
12.24
11.33
10.82
11.07
12.39
13.58
4.2
13.55
12.55
11.87
12.03
13.25
14.35
4.4
14.86
13.77
12.92
12.99
14.12
15.12
4.6
16.17
15.00
13.96
13.95
14.98
15.89
4.8
17.48
16.22
15.01
14.91
15.84
16.66
Present Value at May 31, 2013
Total Shareholder Value Including Present Value of Stock Price and
3.4
x
$16.32
$15.66
$15.68
$16.19
$17.81
$19.27
$8.00 Dividend, Assuming 13.5% Cost of Equity:
3.6
17.63
16.89
16.72
17.15
18.67
20.04
Assuming 100.0% Cost of Equity:
3.8
18.94
18.11
17.77
18.11
19.53
20.81
4.0
20.25
19.33
18.82
19.07
20.39
21.58
$221.5(d)
4.2
21.55
20.55
19.87
20.03
21.25
22.35
4.4
22.86
21.78
20.92
20.99
22.12
23.12
4.6
24.17
23.00
21.96
21.95
22.98
23.89
4.8
25.48
24.22
23.01
22.91
23.84
24.66
•
Assumes
an
$8.00
dividend
is
paid
on
5/31/13,
(a)
using
incremental
borrowing
of
$265
million,
resulting
in
2.4x
Debt / LTM EBITDA
•
Assumes
no
make-whole
payment
on
existing
7.375%
Senior
Notes
(b)
•
Assumes suspension of regular $0.15 / quarter dividend
(a) Assumes $265mm of incremental leverage using Term Loan B at L + 450bps with 125bps floor (2.4x Total Debt / LTM EBITDA).
(b) Does not factor in potential consent fees or changes to interest rate.
(c) Source: LTM EBITDA as of 5/31/13 per Management on 6/25/13, with certain adjustments, including normalizing for 365-day period, based on Management guidance. FY2014-FY2018 per Updated Management Treasury
Model dated 6/26/13, with certain adjustments to FY2014E EBITDA based on Management guidance.
(d) FY2014E Adjusted EBITDA includes $8.0 million of additional adjustments made in connection with the analyses performed by the Special Committee and its advisors

36
Pro Forma Effect of Special Dividend
Mkt Cap Post Dividend
Stock Price Post Dividend
Proforma 5/31/13 Stock
Price Plus Dividend
(Amounts in Millions, Except Per Share Data)
Special
Dividend
Total $
Pro Forma
EV / Adj. LTM EBITDA Multiple (a)
Per Share
Distributed
Debt / EBITDA
3.4 x
3.6 x
3.8 x
4.0 x
4.2 x
4.4 x
4.6 x
4.8 x
$16.32
$17.63
$18.94
$20.25
$21.55
$22.86
$24.17
$25.48
$2.00
$66.3
1.5 x
$474.9
$518.2
$561.6
$605.0
$648.4
$691.7
$735.1
$778.5
$14.32
$15.63
$16.94
$18.25
$19.55
$20.86
$22.17
$23.48
$4.00
132.6
1.8 x
$408.5
$451.9
$495.3
$538.7
$582.1
$625.4
$668.8
$712.2
$12.32
$13.63
$14.94
$16.25
$17.55
$18.86
$20.17
$21.48
$6.00
199.0
2.1 x
$342.2
$385.6
$429.0
$472.4
$515.7
$559.1
$602.5
$645.9
$10.32
$11.63
$12.94
$14.25
$15.55
$16.86
$18.17
$19.48
$8.00
265.3
2.4 x
$275.9
$319.3
$362.6
$406.0
$449.4
$492.8
$536.2
$579.5
$8.32
$9.63
$10.94
$12.24
$13.55
$14.86
$16.17
$17.48
$10.00
331.6
2.7 x
$209.6
$253.0
$296.3
$339.7
$383.1
$426.5
$469.9
$513.2
$6.32
$7.63
$8.94
$10.25
$11.55
$12.86
$14.17
$15.48
Source: Share count based on diluted shares outstanding as of 5/31/13 per Management guidance.
Calendar Days
Prior to Initial Offer
Mean
Median
30 Days
3.2 x
3.2 x
60 Days
3.1 x
3.1 x
90 Days
3.1 x
3.1 x
6 Months
3.0 x
3.0 x
12 Months
3.1 x
3.1 x
18 Months
3.4 x
3.3 x
24 Months
3.5 x
3.5 x
•
In the 24 months preceding the Family’s initial offer, the average EV/Adjusted LTM
EBITDA multiple was 3.5x
EV / LTM EBITDA –
2 years prior to Initial Proposal
Note: Market capitalization calculated using the enterprise value based on LTM EBITDA of $216.9mm multiplied by the adjusted LTM EBITDA multiple, less net debt of $196.3mm as of 5/31/13,
per Management on 6/25/13, less cash used to issue dividends.
(a)    Source: LTM EBITDA as of 5/31/13 from Management, with certain adjustments, including normalizing for 365-day period, based on Management guidance.

Conclusion
•
Growth in the paper greeting card space has been negative and this trend is likely to
continue
–
Growth in electronic channels may increase rapidly
•
American Greetings is at an inflection point; capital will be dramatically redirected
–
Capital must be redirected from a focus on returning capital to shareholders to
investments in the core business including information technology and the electronic
channel of distribution
–
AG’s normal capital expenditures are approximately $50 million per year.  In light of
the conditions faced by the Company, up to $446 million (over 1.75x historical
patterns) is estimated to be required over the next five years for:
•
Deferred expenditures in information systems technology;
•
Substantial rehabilitation of the current headquarters or investment in a new
headquarters (current facility ~60 years old);
•
Investment in emerging channels of distribution for social expressions products
(through Cardstore or other emerging channels of distribution)
–
A substantial portion of this required capex is not growth-focused, but rather is
deferred maintenance necessary to support the Company’s core business in the
declining paper greeting card industry
–
The proposed transaction transfers all business risk to the Family, giving public
shareholders certainty of cash at a significant premium
37

Conclusion (cont’d)
•
A premium cash offer at a time when industry trends show declining sales
–
Significant premium above stock’s trading levels over the months leading up to
announcement and premium multiple
•
More favorable to the Company’s shareholders than the status quo or other strategic and
financial alternatives available
•
No third party has provided any indication of interest in pursuing a transaction involving
the Company
•
The proposal is the culmination of a process that ultimately leaves shareholders with the
decision:
–
The
merger
agreement
must
be
approved
by
a
“Majority
of
the
Minority”
vote
38
$19.00
per
share
in
cash
is
fair
to
and
in
the
best
interests
of
the
Company
and
its
unaffiliated shareholders based on:

Appendix
•
Chronology of Negotiation Process
•
Special Committee Qualifications
•
Forward-Looking Statements
•
Additional Information and Where to Find It
•
Participants in the Solicitation
39

12/7/12
•
Special Committee told the Family that it would only negotiate if and when
the Family presented a firmer and more detailed financing structure
•
Special Committee communicated to the Family the possibility of pursuing
alternative transactions (e.g., recapitalization) to enhance value
•
Special
Committee
also
communicated
to
the
Family
that
it
sought
a
bid in
the $20’s
Chronology of Special Committee’s Efforts to
Maximize Shareholder Value
•
Family submitted Initial Proposal of $17.18 to acquire all Class
A and Class
B common shares not owned by the Family
40
9/25/12
9/30/12
•
Special Committee formed by the Company’s Board of Directors
10/7/12 -
10/14/12
•
Special Committee appointed Sullivan & Cromwell as its legal advisor and
Peter J. Solomon Company as its financial advisor

Chronology of Special Committee’s Efforts to
Maximize Shareholder Value (cont’d)
•
Special Committee, upon review of 1/17/13 Revised Proposal, informed the
Family that the updated proposal remained insufficient
–
Special Committee also emphasized that any proposal must include
quarterly dividends, reverse break-fees and majority of minority
shareholder approval condition
41
1/30/13
1/17/13
•
Family sent a letter to the Special Committee increasing its merger price to
$17.50
–
Draft merger agreement included suspension of $0.15 quarterly
dividends
•
Dr. Cowen and Zev Weiss met to discuss price; Mr. Weiss indicated that the
Family may be willing to consider $18.00 per share plus regular quarterly
dividend, but no such proposal was made
–
Dr. Cowen stated that he did not believe that price would be acceptable
to the Special Committee
2/27/13
12/19/12
•
Zev Weiss stated that the Family had significant concerns about obtaining
financing on terms acceptable to them that would support the proposed
$17.18 per share price

Chronology of Special Committee’s Efforts to
Maximize Shareholder Value (cont’d)
•
Special
Committee
and
representatives
of
Sullivan
&
Cromwell
and
PJSC
negotiated
price
and
transaction
agreements
with
the
Family
and its
advisors
•
Zev Weiss indicated that the Family had no ability and no intention to pay
more than $18.00 per share, plus regular quarterly dividends
•
Dr. Cowen, on behalf of the Special Committee, indicated that the Special
Committee’s desired that shareholders receive $18.75 per share plus
ordinary course dividends
•
Zev Weiss indicated the Family could pay $18.25 per share with no
dividend
•
Dr. Cowen communicated a proposal of $18.20 plus one quarterly
dividend, which was accepted by the Family
42
3/2/13 -
3/28/13
•
Parties executed the merger agreement and related agreements
3/29/13

Chronology of Special Committee’s Efforts to
Maximize Shareholder Value (cont’d)
•
Zev Weiss indicated that the Family would be willing to consider
raising the price to $19.00 per share, with an increase in the cap on
expenses payable to the Family if the merger were not approved by
shareholders
43
6/23/13
•
Dr. Cowen, on behalf of the Special Committee, communicated to Zev
Weiss that the Special Committee had received new financial information
pertaining to AG’s operating results, and was therefore revisiting its
recommendation of the deal at $18.20 per share
–
The Special Committee did not make any decision to modify or
withdraw its recommendation
–
Mr. Weiss communicates to Dr. Cowen that the financial
improvements cited by the Special Committee were neither material
nor reflective of any fundamental improvement in the trajectory of
AG’s business
6/26/13

Chronology of Special Committee’s Efforts to
Maximize Shareholder Value (cont’d)
•
The
Family
obtained
all
required
consents
from
financing
sources
to
raise
offer
price
•
The Family delivered a letter to the Special Committee offer to $19.00 per
share, with an increase in the cap on payable expenses
44
6/27/13
•
Dr. Cowen, on behalf of the Special Committee, reiterated the Special
Committee’s position of $19.50 per share
•
Zev Weiss reiterated that the Family would not pay additional consideration
above $19.00 per share, but indicated that it would be willing to keep the payable
expenses cap unchanged from the original maximum amount, if the Special
Committee agreed to consider in its sole discretion expense reimbursements in
excess of that amount for documented expenses
7/1/13
•
Dr.
Cowen,
on
behalf
of
the
Special
Committee,
communicated
to
Zev
Weiss
that
the
Special
Committee
would
be
willing
to
recommend
a
price
increase
to
$19.50
per
share
and
a
reciprocal,
proportionate
increase
in
the
amount
of
the
expense reimbursement cap
–
Zev Weiss indicated that the Family would not be supportive of an increase
to $19.50
7/2/13

Chronology of Special Committee’s Efforts to
Maximize Shareholder Value (cont’d)
45
7/3/13
•
PJSC gave the Special Committee an oral fairness opinion
(subsequently confirmed in writing) as to the price of $19.00 per
share, and the Special Committee accepted the Family’s proposal
(including the unchanged expense reimbursement cap with excess
amounts reimbursed at the Special Committee’s sole discretion)
•
Parties executed the amendment to the merger agreement

Special Committee Qualifications
•
Dr. Scott S. Cowen –
Dr. Cowen has been a director since 1989. Dr. Cowen is President
and Seymour S Goodman Professor of Management and Professor of Economics,
Tulane University, a position he has held since 1998. Prior to that, Dr. Cowen served as
Dean and Albert J. Weatherhead, III Professor of Management, Weatherhead School of
Management at Case Western Reserve University. Dr. Cowen has served as a director
of Forest City Enterprises, Inc. since 1989 and Newell Rubbermaid Inc. (a publicly-held
consumer
home
products
company)
since
1999.
He
was
a
director
of
Jo-Ann
Stores,
Inc.
(a
publicly-held
specialty
store
retailer)
from
1987
until
its
sale
in
2011.
Dr.
Cowen
has
been a member of the Board of Overseers of TIAA-CREF (a private financial services
company) since 2010. Dr. Cowen participates as a board member of
a number of civic
organizations, including as Chair of the Southeast Louisiana Regional Airport Authority,
and
as
a
member
of
the
New
Orleans
Business
Council,
New
Orleans
Public
Belt
Railroad and Greater New Orleans Inc.
46

Special Committee Qualifications (cont’d)
•
William E. MacDonald, III –
Mr. MacDonald has been a director since 2007. Mr.
MacDonald was Vice Chairman and member of the Office of the Chairman of National
City Corporation from 2001 until his retirement in 2006. Prior to that, Mr. MacDonald held
various
management
positions
within
National
City
over
more
than
30
years
including
Senior
Executive
Vice
President
of
National
City
Corporation
and
President
and
Chief
Executive Officer of National City’s Ohio Bank. Mr. MacDonald has served as a director
of Lincoln Electric Holdings, Inc. (a publicly-held manufacturer and reseller of welding
and cutting products) since 2007. He was a director of The Lamson & Sessions Co. (a
publicly-held manufacturer of thermoplastic conduit, fittings and electrical switch and
outlet boxes) from 2006 to 2007 and MTC Technologies, Inc. (a publicly-held provider of
technical and professional services and equipment integration for the U.S. military and
intelligence agencies) from 2002 to 2007, when in each case the boards were dismantled
as a result of divestiture. Mr. MacDonald has served as a director of Segmint Inc. (a
privately held technology-based company helping financial institutions and their
marketing partners build digital customer relationships) since 2008. Mr. MacDonald
participates
as
a
board
member
of
a
number
of
civic,
health
care
and
other
non-profit
organizations including The Cleveland Clinic Foundation and is Trustee Emeritus of The
Diversity Center and WVIZ/PBS and 90.3 Ideastream.
47

Special Committee Qualifications (cont’d)
•
Jeffrey D. Dunn –
Mr. Dunn has been a director since 2007. Mr. Dunn served as
president and chief executive officer and was a director of HIT Entertainment Limited (a
children’s entertainment company), from 2008 until the company was sold in February
2012. Before that, Mr. Dunn was a private investor, and was employed by MTV Networks
(an entertainment company and a division of Viacom, Inc., a publicly-held company) as
Chief Operating Officer of the Nickelodeon Networks Group and the President of
Nickelodeon Film Enterprises from 1993 to 2006. Prior to that time, Mr. Dunn was
employed as Director of Marketing, Arthur D. Little (a publicly-held management
consulting
firm),
from
1991
to
1993,
Director
of
Marketing,
Bank
of
Boston
(a
Boston,
Massachusetts banking institution) from 1986 to 1991, and Associate International
Director, Time Magazine (a weekly news magazine) and General Manager, Discover
Magazine (monthly general science magazine) from 1977 to 1986.
48

Special Committee Qualifications (cont’d)
•
Michael J. Merriman, Jr. –
Mr. Merriman has been a director since 2006. Mr. Merriman
has been an operating advisor with Resilience Capital Partners, LLC (a private equity
firm)
since
2008.
From
2006
until
its
sale
in
2007,
Mr.
Merriman
served
as
Chief
Executive Officer of The Lamson & Sessions Co. Prior to joining Lamson & Sessions, Mr.
Merriman
served
as
the
Senior
Vice
President
and
Chief
Financial
Officer
of
American
Greetings from 2005 until 2006. He served as the President and Chief Executive Officer
of Royal Appliance Mfg. Co. (a publicly-held manufacturer and marketer of Dirt Devil
vacuum cleaners) from 1995 until 2004, was its Chief Financial Officer from 1992 to
1995, and served on the board of directors from 1993 to 2004. Mr. Merriman served as a
director of RC2 Corporation (a publicly-held manufacturer of pre-school toys and infant
products) from 2004 until its sale in 2011. Mr. Merriman has served as a director of
Nordson Corporation (a publicly-held manufacturer of equipment used for precision
dispensing, testing and inspection, surface preparation and curing) since 2008;
OMNOVA Solutions Inc. (a publicly-held innovator of emulsion polymers, specialty
chemicals, and decorative and functional surfaces) since 2008; and Regis Corporation (a
publicly-held operator of beauty salons in North America and Europe, including
Supercuts, Smart Style Salons in Wal-Mart stores and Regis Salons in malls) since 2011.
Mr. Merriman is also a director of Boys Hope Girls Hope of Northeast Ohio, True Hero,
Inc. and John Carroll University.
49

Forward-Looking Statements
•
Statements about the expected timing, completion and effects of the proposed
transaction and all other statements in this communication, other than historical facts,
constitute forward-looking statements within the meaning of the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place
undue reliance on these forward-looking statements and any such forward-looking
statements are qualified in their entirety by reference to the following cautionary
statements. All forward-looking statements speak only as of the date hereof and are
based on current expectations and involve a number of assumptions, risks and
uncertainties that could cause the actual results to differ materially from such forward-
looking statements. The Company may not be able to complete the proposed transaction
on the terms described above or other acceptable terms or at all
because of a number of
factors, including the failure to obtain shareholder approval or
the failure to satisfy other
closing conditions. Factors that may affect the business or financial results of the
Company are described in the risk factors included in the Company’s filings with the
SEC, including the Company’s 2013 Annual Report on Form 10-K. The Company
expressly disclaims a duty to provide updates to forward-looking statements, whether as
a result of new information, future events or other occurrences.
50

Additional Information and Where to Find It
•
In connection with the proposed merger transaction, the Company filed with the SEC a
definitive proxy statement and other relevant documents, including a form of proxy card,
on July 10, 2013.  The definitive proxy statement and a form of proxy card have been
mailed to the Company's shareholders.  This investor presentation does not constitute a
solicitation of any vote or approval. Shareholders are urged to read the proxy statement
and any other documents filed with the SEC in connection with the proposed merger or
incorporated by reference in the proxy statement because they contain important
information about the proposed merger.
•
Investors will be able to obtain a free copy of documents filed with the SEC at the SEC’s
website
at
http://www.sec.gov.
In
addition,
investors
may
obtain
a
free
copy
of
the
Company’s filings with the SEC from the Company’s website at
http://investors.americangreetings.com
or
by
directing
a
request
to
the
Company’s
Corporate Secretary at our World Headquarters at One American Road, Cleveland, Ohio
44144-2398, or via email to investor.relations@amgreetings.com.
51

Participants in the Solicitation
•
The Company and its directors, executive officers and certain other members of
management
and
employees
of
the
Company
may
be
deemed
“participants”
in
the
solicitation of proxies from shareholders of the Company in favor of the proposed
merger. Information regarding the persons who may, under the rules of the SEC, be
considered participants in the solicitation of the shareholders of the Company in
connection with the proposed merger is set forth in the definitive proxy statement and the
other relevant documents filed with the SEC. You can find information about certain of
the Company’s executive officers and its directors in its Annual Report on Form 10-K for
the fiscal year ended February
28, 2013.
52