DEFA14A 1 ddefa14a.

htm DEFINITIVE ADDITIONAL MATERIALS

UNITEDSTATES
SECURITIESANDEXCHANGECOMMISSION
WASHINGTON,D.C.20549

SCHEDULE14A
PROXYSTATEMENTPURSUANTTOSECTION14(a)
OFTHESECURITIESEXCHANGEACTOF1934
FiledbytheRegistrantxFiledbyaPartyotherthantheRegistrant
Checktheappropriatebox:

PreliminaryProxyStatement

Confidential,foruseoftheCommissionOnly(aspermittedbyRule14a6(e)(2))

DefinitiveProxyStatement

DefinitiveAdditionalMaterials

SolicitingMaterialUnderRule14a12

J.CREWGROUP,INC.
(NameofRegistrantasSpecifiedinitsCharter)
PaymentofFilingFee(Checktheappropriatebox):

Nofeerequired

FeecomputedontablebelowperExchangeActRules14a6(i)(1)and011

(1)

Titleofeachclassofsecuritiestowhichtransactionapplies:

(2)

Aggregatenumberofsecuritiestowhichtransactionapplies:

(3)

PerunitpriceorotherunderlyingvalueoftransactioncomputedpursuanttoExchangeActRule011(setforththeamountonwhichthefilingfeeiscalculatedandstate
howitwasdetermined):

(4)

Proposedmaximumaggregatevalueoftransaction:

(5)

Totalfeepaid:

Feepaidpreviouslywithpreliminarymaterials.

CheckboxifanypartofthefeeisoffsetasprovidedbyExchangeActRule011(a)(2)andidentifythefilingforwhichtheoffsettingfeewaspaidpreviously.Identifytheprevious
filingbyregistrationstatementnumber,ortheformorscheduleandthedateofitsfiling.

(1)

AmountPreviouslyPaid:

(2)

Form,ScheduleorRegistrationStatementNo.:

(3)

Filingparty:

(4)

DateFiled:

ForwardLookingStatements:
Certainstatementshereinareforwardlookingstatements.SuchforwardlookingstatementsreflecttheCompanyscurrentexpectationsorbeliefsconcerningfutureeventsand
actualresultsofoperationsmaydiffermateriallyfromhistoricalresultsorcurrentexpectations.Anysuchforwardlookingstatementsaresubjecttovariousrisksanduncertainties,
includingthestrengthoftheeconomy,changesintheoveralllevelofconsumerspendingorpreferencesinapparel,ourabilitytocompetewithotherretailers,thepartiesabilityto
consummatetheproposedtransactiononthecontemplatedtimeline,theperformanceoftheCompanysproductswithintheprevailingretailenvironment,ourstrategyandexpansion
plans,systemsupgrades,relianceonkeypersonnel,traderestrictions,politicalorfinancialinstabilityincountrieswheretheCompanysgoodsaremanufactured,postalrateincreases,
paperandprintingcosts,availabilityofsuitablestorelocationsatappropriatetermsandotherfactorswhicharesetforthintheCompanysForm10KandinallfilingswiththeSecurities
andExchangeCommissionmadebytheCompanysubsequenttothefilingoftheForm10K.TheCompanydoesnotundertaketopubliclyupdateorreviseitsforwardlooking
statements,whetherasaresultofnewinformation,futureeventsorotherwise.
AdditionalInformationandWheretoFindIt:
Inconnectionwiththeproposedtransaction,theCompanyhasfiledwiththeSecuritiesandExchangeCommissionandmailedtoitssecurityholdersadefinitiveproxystatement.
INVESTORSANDSECURITYHOLDERSOFTHECOMPANYAREURGEDTOREADCAREFULLYANDINTHEIRENTIRETYALLRELEVANTMATERIALSFILEDOR
FURNISHEDWITHTHESECURITIESANDEXCHANGECOMMISSION,INCLUDINGTHEDEFINITIVEPROXYSTATEMENT,BECAUSETHESEMATERIALSCONTAIN
IMPORTANTINFORMATIONABOUTTHEPROPOSEDTRANSACTION.Investorsandsecurityholdersmayobtainafreecopyofthedefinitiveproxystatementandother
documentsfiledorfurnishedtotheSecuritiesandExchangeCommissionbytheCompanyattheSecuritiesandExchangeCommissionswebsiteathttp://www.sec.govoratthe
Companyswebsiteathttp://www.jcrew.comandthenclickingontheInvestorRelationslinkandthentheSECFilingslink.Thedefinitiveproxystatementandotherrelevant
materialsmayalsobeobtainedforfreefromJ.CrewGroup,Inc.bydirectingsuchrequesttoJ.CrewGroup,Inc.,770Broadway,NewYork,NewYork10003or(212)2092500.The
contentsofthewebsitesreferencedabovearenotdeemedtobeincorporatedbyreferenceintothedefinitiveproxystatement.
ParticipantsinSolicitation:
TheCompanyanditsdirectors,executiveofficersandothermembersofitsmanagementandemployeesmaybedeemedtobeparticipantsinthesolicitationofproxiesfromits
stockholdersinconnectionwiththeproposedtransaction.InformationconcerningtheinterestsoftheCompanysparticipantsinthesolicitationissetforthinJ.CrewGroup,Inc.sproxy

statementsandAnnualReportsonForm10K,previouslyfiledwiththeSecuritiesandExchangeCommission,andinthedefinitiveproxystatementrelatingtotheproposedtransaction.
EachofthesedocumentsisavailablefreeofchargeattheSecuritiesandExchangeCommissionswebsiteatwww.sec.govandfromtheCompanyathttp://www.jcrew.com,andthen
clickingontheInvestorRelationslinkandthentheSECFilingslinkorbydirectingsuchrequesttoJ.CrewGroup,Inc.,770Broadway,NewYork,NewYork10003or(212)209
2500.

INVESTORPRESENTATION
February2011

ForwardLookingStatements:
Certainstatementshereinareforwardlookingstatements.SuchforwardlookingstatementsreflecttheCompanyscurrentexpectationsorbeliefs
concerningfutureeventsandactualresultsofoperationsmaydiffermateriallyfromhistoricalresultsorcurrentexpectations.Anysuchforwardlooking
statementsaresubjecttovariousrisksanduncertainties,includingthestrengthoftheeconomy,changesintheoveralllevelofconsumerspendingor
preferencesinapparel,ourabilitytocompetewithotherretailers,thepartiesabilitytoconsummatetheproposedtransactiononthecontemplated
timeline,theperformanceoftheCompanysproductswithintheprevailingretailenvironment,ourstrategyandexpansionplans,systemsupgrades,
relianceonkeypersonnel,traderestrictions,politicalorfinancialinstabilityincountrieswheretheCompanysgoodsaremanufactured,postalrate
increases,paperandprintingcosts,availabilityofsuitablestorelocationsatappropriatetermsandotherfactorswhicharesetforthintheCompanysFor
10KandinallfilingswiththeSecuritiesandExchangeCommissionmadebytheCompanysubsequenttothefilingoftheForm10K.TheCompanydoes
notundertaketopubliclyupdateorreviseitsforwardlookingstatements,whetherasaresultofnewinformation,futureeventsorotherwise.
AdditionalInformationandWheretoFindIt:
Inconnectionwiththeproposedtransaction,theCompanyhasfiledwiththeSecuritiesandExchangeCommissionandmailedtoitssecurityholdersa
definitiveproxystatement.INVESTORSANDSECURITYHOLDERSOFTHECOMPANYAREURGEDTOREADCAREFULLYANDINTHEIR
ENTIRETYALLRELEVANTMATERIALSFILEDORFURNISHEDWITHTHESECURITIESANDEXCHANGECOMMISSION,INCLUDINGTHE
DEFINITIVEPROXYSTATEMENT,BECAUSETHESEMATERIALSCONTAINIMPORTANTINFORMATIONABOUTTHEPROPOSED
TRANSACTION.Investorsandsecurityholdersmayobtainafreecopyofthedefinitiveproxystatementandotherdocumentsfiledorfurnishedtothe
SecuritiesandExchangeCommissionbytheCompanyattheSecuritiesandExchangeCommissionswebsiteathttp://www.sec.govorattheCompanys
websiteathttp://www.jcrew.comandthenclickingontheInvestorRelationslinkandthentheSECFilingslink.Thedefinitiveproxystatementandother
relevantmaterialsmayalsobeobtainedforfreefromJ.CrewGroup,Inc.bydirectingsuchrequesttoJ.CrewGroup,Inc.,770Broadway,NewYork,New
York10003or(212)2092500.Thecontentsofthewebsitesreferencedabovearenotdeemedtobeincorporatedbyreferenceintothedefinitiveproxy
statement.
ParticipantsinSolicitation:
TheCompanyanditsdirectors,executiveofficersandothermembersofitsmanagementandemployeesmaybedeemedtobeparticipantsinthe
solicitationofproxiesfromitsstockholdersinconnectionwiththeproposedtransaction.InformationconcerningtheinterestsoftheCompanysparticipants
inthesolicitationissetforthinJ.CrewGroup,Inc.sproxystatementsandAnnualReportsonForm10K,previouslyfiledwiththeSecuritiesandExchange
Commission,andinthedefinitiveproxystatementrelatingtotheproposedtransaction.Eachofthesedocumentsisavailablefreeofchargeatthe
SecuritiesandExchangeCommissionswebsiteatwww.sec.govandfromtheCompanyathttp://www.jcrew.com,andthenclickingontheInvestor
RelationslinkandthentheSECFilingslinkorbydirectingsuchrequesttoJ.CrewGroup,Inc.,770Broadway,NewYork,NewYork10003or
(212)2092500.

AGENDA
BusinessOverview
TransactionSummary
CompellingOffer
SpecialCommitteeProcess
KeySpecialCommitteeActions
SaleandOtherAlternatives
RecommendationoftheSpecialCommittee
Meaningful PostSigning GoShop Process
CalendarofCertainEvents
MarketReaction
BusinessResults,OutlookandValuationAnalysis
Conclusion

BUSINESSOVERVIEW

J.CREWGROUP,INC.
2010ERevenue:$1.7billion
J.CREWSTORES

220J.Crew stores
9crewcuts stores
Collection
Wedding
Mens

FACTORYSTORES

85factoryoutlet
stores,including
crewcuts factorystores

Retailstores:
70%ofrevenue
Note:

MADEWELLSTORES

20Madewell stores

DIRECT

www.jcrew.com
J.Crew catalogs
www.jcrew.com/kids
clothing.jsp
crewcuts catalogs
www.madewell.com
www.jcrew.com/
factory

Direct:
28%ofrevenue

Other 2% of revenue consists primarily of shipping and handling store count as of 1/18/2011

TRANSACTIONSUMMARY
On November 23, 2010, J.Crew Group, Inc. (J.Crew or the Company) entered into a merger agreement
withaffiliatesofTPGCapital(TPG)andLeonardGreenPartners(LGP)
J.Crew isbeingpurchasedbyTPGandLGPforapriceof$43.50pershareorapproximately$3.0billion
Transactionwillbefundedusing(i)equitycontributionsfromTPG/LGPtotalingapproximately$1.2billion,(ii)
rolloverfinancingtotalingapproximately$100million,(iii)debtfinancingofapproximately$1.6billionand(iv)
cashofthecompanytotalingapproximately$312million

$43.50PERSHAREINCASH:ACOMPELLINGOFFER
Attractivepremium

29.6%topriormonthsaveragestockprice

19.2%tostockpricepriortoannouncement

DealannouncedsimultaneouslywithrevisionofQ4guidanceto$0.30$0.35versusconsensusestimateof
$0.50CompanyreaffirmedguidanceonJanuary20,2011

Attractivemultiple

9.6x2010EEBITDAbasedontheNovember5yearprojections

8.6x LTM EBITDA (11/1/2009 to 10/30/2010) higher than the median of relevant transactions andhigher
thantherecentspecialtyappareltransactions

21.0x2010EP/EmultiplebasedontheNovember5yearprojections

Withinrangeoffairnessbasedonvariousvaluationmethodologies

Tradingcomparables

Precedenttransactions

Discountedcashflow

Source:
Notes:

J.Crew Definitive Proxy statement, filed with the SEC on 1/25/2011 Opinion of Perella Weinberg, Financial Advisor to the Special Committee
Premiumof19.2%basedonclosingpriceon11/19referencedateof$36.49closingpriceon11/22was$37.65

SPECIALCOMMITTEEPROCESS
BoardofDirectorsresolvedthatitwouldnotapproveasaleoftheCompanywithoutSpecialCommittee
recommendation
SpecialCommitteeoffourindependentdirectorsempoweredtoconsiderandrecommendthattheBoardtake
actionwithrespecttostrategicalternatives,includingasaleoftheCompany
Assistedbyexperiencedindependentadvisors

Legal advisor to Special Committee Cravath, Swaine & Moore LLP

Financial advisor to Special Committee Perella Weinberg Partners

ProvidedopiniontotheSpecialCommitteeuponwhichtheBoardwasentitledtorelythatthetransaction
considerationwasfairfromafinancialpointofviewtotheCompanysunaffiliatedstockholders

TheSpecialCommitteemet18timesbetweenitsformationandannouncementofthetransactionand
evaluatedarangeofalternativesincluding:

Statusquo continuingasastandalonepubliccompany

Conductingastockrepurchase,implementingadividendorundertakingarecapitalization

SaleoftheCompany,eithertoTPG/LGPorpursuanttoanalternativesaleprocess

TheBoardofDirectors,assistedbyoutsidecounselClearyGottliebSteen&HamiltonLLP,actedonthe
recommendationoftheSpecialCommittee

KEYSPECIALCOMMITTEEACTIONS
WhiletherewerepreliminarydiscussionsbetweenmanagementandTPG,theSpecialCommitteetookcomplete
control of the process when it was formed and never relinquished complete control

At the direction of the Special Committee, Cravath sent a communication to TPG on October 21 freezing the process
andprohibitingcommunicationswithmanagementwithoutSpecialCommitteepermission

SamecommunicationsenttoMr.Drexlerandothermembersofmanagement

Mr.DrexlerdidnotattendanySpecialCommitteemeetings

SpecialCommitteecomfortableJustSayingNotoTPG/LGPinfurtheranceoftheirfiduciaryduties

OnOctober29,SpecialCommitteesoughtandreceivedassurancefromMr.Drexlerthathewouldremainwiththe
CompanyiftheSpecialCommitteedeterminedthattheCompanyshouldremainstandalone
OnNovember1,TPG/LGPputinanofferof$41.00pershareinresponse,theSpecialCommitteecalledoffthe
entireprocesstheSpecialCommitteewascomfortablewiththisoutcome,whichresultedinTPGcomingbackwitha
significantlyhigher$45.00offer

Priceandtermsrenegotiation

Originalpricewasagreedat$45.50pershareafterrigorousnegotiation
TPG made revised $43.00 per share proposal at the end of process (TPG reduced the price due to weaker updated
financials)
SpecialCommitteeconsidered:postChristmasauctionprocesssharerepurchase/dividend/recapitalizationand
immediatetransactionwithameaningfulgoshop
SpecialCommitteeconsidereddecliningrecentandanticipatedfinancialperformanceandeffectonsharepriceand
onthevariousalternatives
SpecialCommitteenegotiatedhigherpriceandlowerbreakupfee,longergoshopandhigherreversetermination
fee
8

SALEANDOTHERALTERNATIVES
Followingitsreviewofstrategicalternatives,theSpecialCommitteedeterminedthatasaleoftheCompany,
asopposedtoremainingstandaloneorundertakingadifferentstrategicalternative,representsthebest
valuefortheCompany'sstockholders

Sale delivers significant premium to J.Crew shareholders at an attractive multiple

Decliningrecentandanticipatedfuturefinancialperformance

Executionriskassociatedwithimplementationofstrategicplan

Conductingastockrepurchase,implementingadividendoreffectingarecapitalizationwouldresultina
lower implied stock price and value to stockholders than a sale, as well as deferred realization of value and
greaterexecutionrisk

PursuingasalepriortotheCompany'sthirdquarterearningsreleaseandupdatedguidancewasinthebest
interestsofstockholders

Fourthquarteroutlookandfullyearperformanceexpectedtobemateriallylowerthan"Street"consensus

ShiftedtheriskoftheCompanyunderperformingduringtheholidayseasontotheacquiror

Pursuing a transaction with TPG and LGP, with a meaningful postsigning goshop process, was the best
waytoaccomplishasaleonthistimetable

RECOMMENDATIONOFTHESPECIALCOMMITTEE

TheSpecialCommitteeunanimouslydeterminedthattheTPG/LGPofferwasadvisableand
fairtoandinthebestinterestsoftheCompanyanditsunaffiliatedstockholders
Significantpremiumabovestockstradinglevelsoverthemonthsleadinguptoannouncementandattractive
multiples
More favorable to the Compnays stockholders than the status quo or other strategic alternatives available

SpecialCommittee'sunderstandingofthebusiness,operationsandmanagementoftheCompany,
includingtheCompany'sprospectsasastandalonebusiness

TheCompany'srecentfinancialperformanceandmanagement'sreducedexpectationsfortheCompany's
shortandlongtermfutureperformance

Timingandexecutionriskassociatedwithachieving$43.50pershareunderalternativestothesaleto
TPG/LGP

Limitedexecutionrisk

Committedfinancingwithnofinancingcondition

Standardregulatoryapprovalsprocess

Highreverseterminationfeeandrighttospecificperformance

54daygoshop (subsequentlyextendedto85days),lowbreakupfeesandfullcooperationofmanagement

10

MEANINGFUL POSTSIGNING GOSHOP PROCESS

54dayinitialgoshop periodthroughJanuary15,2011,withlowterminationfee(approximately0.9%ofthe
transactionequityvalueduringgoshop)

AtthedirectionofandunderthesupervisionoftheSpecialCommittee,PerellaWeinbergcontactedatotalof58
partiesthroughJanuary15

39strategicpartiesand19financialparties

58partiescontactedincludedthetwopartiesthathadpreviouslyexpressedinterestintheCompany

Threepartiessignedconfidentialityagreementsandwereprovidedaccesstoduediligenceand,attherequestofone
party,amanagementmeeting

Themergeragreementwassubsequentlyamendedtoprovideevenmorefavorabletermsforinterestedthirdparties

Extension of the goshop period for an additional 31 days through February 15, 2011 (85 day total goshop period)
Reducedterminationfeeto$20millionthroughtheshareholdervote(approximately0.66%ofthetransactionequity
value)

Termination fee previously was $27 million during goshop period and $54 million during noshop period

EliminationincertaincircumstancesofthematchrightsofaffiliatesofTPGandLGP

Reimbursementofexpensesupto$3millionforathirdpartybidderincertaincircumstances

AgreementbyMr.Drexlertoa2yearnoncompeteintheeventathirdpartyacquirestheCompanyandoffersMr.
Drexlercomparableemploymenttermsbuthedeclinestocontinuehisemployment

SpecialCommitteemet9timessinceNovember23

11

CALENDAROFCERTAINEVENTS
October5

FollowingpreliminarydiscussionsbetweenTPGandmanagementin
September,TPGexpressedabonafideinterestinpursuingatransaction

October7 11

Millard Drexler apprised the Board members of TPGs potential interest

October15 21

BoardappointedandmandatedtheSpecialCommitteeSpecialCommittee
appointed Cravath, Swaine & Moore as its legal counsel and Perella Weinberg
Partnersasitsfinancialadvisor(October20/21)

November1

TPG/LGP submitted initial proposal of $41.00 per share which the Special
Committeerejected

November14

TPG/LGPandtheSpecialCommitteeagreedonanofferpriceof$45.50

November16

TPG/LGPreceivedupdatedfinancialswithlowerfourthquarterguidanceand
longtermprojections

12

CALENDAROFCERTAINEVENTS(CONTD)
November22

TPG/LGPinformedSpecialCommitteethattheynolongerwishedtopursuea
transaction
RepresentativeofSpecialCommitteecalledTPGtobetterunderstand
reasonsfortheirunwillingnesstopursueatransaction
TPG/LGPcommunicateda$43.00/shareoffer
SpecialCommitteedeliberatedandcounteredwith$44.00/share,conditioned
oncertainotherkeytransactionterms,includingtermsofgoshop
After further negotiations, TPG/LGP and Special Committee agreed on $43.50
andotherkeytransactionterms

November23

MergeragreementexecutedandannouncedCompanyannouncedthird
quarter earnings and revised guidance that is lower than current "Street"
consensus

February15

End of extended goshop period

13

SELLSIDEANALYSTREACTIONSHAVEBEENPOSITIVE
WebelievethisisagreatdealforJ.Crewshareholders,sincetheestimatedtakeovervaluerepresentsa
28% premium to our previous $34 fair value estimate. Morningstar Equity Research, 11/23/2010
Whilewewouldviewthecurrentpotentialofferasfair,webelievethereisthepotentialforotherbiddersto
enterthefray. Brean MurrayCarret &Co.,11/23/2010
Wecommendmanagementoneffectingthisdealandalthoughweexpectpressureonthefundamentals,
we expect shares to trade rangebound around the deal price. Janny Capital Markets, 11/23/2010
WebelievethattheTPGCapital/LeonardGreenproposaltoacquireJCGat$43.50persharefairlyvalues
the shareholders of JCG, and we are using a February 28, 2011, closing estimate. MKM Partners,
11/23/2010
If this deal had not been announced, we believe JCG shares would have been under pressure given its
F4Q10 forecast being well below consensus expectations Raymond James, 11/24/2010
We believe it is unlikely that the company will receive a higher offer during this time since (1) $43.50 per
shareisalreadyapremiumtootherrecentdealssuchasGYMB(9xourFY10EV/EBITDAestimateforJCG
versus 8x consensus estimate for GYMB), (2) its comp trends have weakened further, and (3) it did not
receive any other bids during the initial goshop period Raymond James, 1/20/2011

14

OTHERNOTABLECOMMENTARY
At$43.50ashare,theJ.Crewbuyoutcarrieda16percentpremiumtoitsstockpricethedaybeforethe
dealSomehavebalkedthattheofferisstillwellbelowJ.Crews52weekhighof$50.96inApril.Butthe
price looks pretty good, considering that the retailer whose earnings have taken a hit of late was
trading in the $30s before DealBook broke news of the talks on Nov. 22 NY Times (DealBook),
11/30/2010
The price represents a premium of 16% to J.Crews Tuesday closing price before the announcement and
29%premiumtolastmonthsaverageprice.Thisisnearly3%higherthanourpriceestimateforJ.Crews
stock of $42.35. [A] deal at $1 higher is a good fit. Forbes, 12/2/2010
Thedealmayultimatelyberightforshareholders.Afterall,thebuyersarepayinga23percentpremium,
and the company's earnings have been lousy of late. NY Times, 1/4/2011
Orrico,whosefundownsJ.Crewstock,saidtheboardhastakenstepstoprotectinvestors.Theseinclude
negotiatingtherighttoseekotheroffersandalowerthanaveragebreakupfeethatwouldmakeendingthe
deal less expensive. He views the $43.50ashare bid by the TPG group as fairly priced. Bloomberg,
1/13/2011
Idont expect competing bids, given that the offer is full and the valuation is more than fair, said Randal
Konik,managingdirectorofNewYorkbasedJefferies&Co.Herecommendsholdingthestock.Its
interestingthattherearealltheselawsuits,buttomethestockwouldbeinthe20srightnowiftherewasno
deal. Bloomberg,1/18/2011

15

BUSINESSRESULTS,OUTLOOKANDVALUATIONANALYSIS

Q4GUIDANCE
Q4FY2010GUIDANCE

Q4guidanceof$0.30$0.35pershare(vs.$0.50
Consensusand$0.61inQ42009)
Comparablestoresalesinthenegativemidsingle
digits
Directsalesgrowthinthepositivelowdoubledigits

Q4CONSENSUSEPSEVOLUTION

$0.70

Consensus

Q42009:
$0.61

$0.60

Grossmargindecreaseofapproximately600to700
basispoints
Inventoryincreasemidteens(~10%excludinga
partialpullforwardofSpringdeliveries)

$0.50
$0.50

$0.40

Guidance:
$0.30 $0.35
$0.30
Jan

Mar

May

Jul

Sep

Nov

17

SELECTRETAILERSNEXTQUARTERGUIDANCEANDSTOCKPRICEREACTION
COMPANY

Median

TotalMedian

Note:

NEXTQUARTERGUIDANCE
VSLY (1)

NEXTQUARTERGUIDANCE
VSCONSENSUS (1)

(4)%
($0.94 $0.96vs.$0.99)

(8)%
($0.94 $0.96vs.$1.03)

(14)%

(24)%
($0.90 $1.20vs.$1.38)

(18)%
($0.90 $1.20vs.$1.28)

(6)%

(1)%
($1.71 $1.91vs.$1.82)

(12)%
($1.71 $1.91vs.$2.05)

(15)%

(1)%
($0.48 $0.53vs.$0.51)

(6)%
($0.48 $0.53vs.$0.54)

(1)%

(2.6)%

(10.0)%

(9.9)%

11%
($0.41 $0.43vs.$0.38)

(7)%
($0.41 $0.43vs.$0.45)

(4)%

44%
($0.32 $0.40vs.$0.25)

(12)%
($0.32 $0.40vs.$0.41)

(9)%

5.2%
($0.88 $0.93vs.$0.86)

(2)%
($0.88 $0.93vs.$0.92)

(10)%

6%
($1.36 $1.42vs.$1.31)

(1)%
($1.36 $1.42vs.$1.40)

(5)%

2.1%

(7.2)%

(7.2)%

(46)%
($0.30 $0.35vs.$0.61)

(35)%
($0.30 $0.35vs.$0.50)

N/A

1DAYSTOCKPRICEREACTION

(1)Variancebasedonmidpointofguidancerange

18

J.CREWSTANDALONESHAREPRICECONSIDERATIONS
SHAREPRICEPERFORMANCESINCE8/1/2010

ILLUSTRATIVE SHARE PRICE NO TRANSACTION

$50.00

ReferencePrice (2)
ReferenceDate:11/19/2010

Returnsince11/19
J.Crew
19%

$45.00

(1)

$40.00

$36.49

Divideby:IBESConsensusFY2010EEPS
(11/19/2010)

$2.25

ReferenceMultiple

16.2x

EPSbasedonrevisedguidance(MGMT's
FY2010EEPS)

XRT
5%

Low

High

$2.08

$2.13

Reference

Low

Peers
3%

$35.00

MultipleApplied

ImpliedSharePrice

5%8%
Decline

AverageSince8/26

High

(3)

Low

High

16.2x

16.2x

14.4x

14.4x

$33.73

$34.54

$29.89

$30.61

$30.00
ImpliedDealPremiumAssuming$43.50Offer

29.0%

25.9%

45.5%

42.1%

$25.00
Aug10
Source:
Notes:

Sep10

Nov10

Dec10

Feb11

FactSet asof2/7/2011,11/17/2010CompanyManagementprojections,I/B/E/S
SelectedPeersrepresentedbyequalweightedindexofAbercrombie&Fitch,Aeropostale,AmericanEagle,AnnTaylor,Bebe,Carters,Chicos,ChildrensPlace,Coach,ColdwaterCreek,TheDressBarn,The
Gap,Guess?,LimitedBrands,NewYork&Company,PoloRalphLauren,Talbots,UnderArmour,andUrbanOutfitters.PeersindexedtoCompanysharepriceof$36.49,theclosingpriceon11/19/2010
(1)XRTrepresentstheS&PRetailIndex
(2)ReferencePriceasof11/19/2010
(3)RepresentsaverageCompanyP/EmultiplesinceQ2earningsannouncementandguidanceonAugust26,2010

19

PERELLAWEINBERGANALYSISTRANSACTIONOVERVIEW
US$INMM,EXCEPTMULTIPLESANDPERSHAREAMOUNTS

11/19/10Close
SharePrice
PremiumTo:
11/19/10Close
1MonthAverage
3MonthAverage

$43.50

0.0%
8.7%
8.4%

19.2%
29.6%
29.2%

FullyDilutedSharesOutstanding
EquityValue

68.4
$2,495

69.1
$3,005

Add:Debt (1)
Less:Cash (1)
EnterpriseValue

0
(312)
$2,184

0
(312)
$2,693

Metric
$36.49
33.57
33.66

EV/LTMEBITDA(Q32010)(2)

$314

7.0x

8.6x

IBESCONSENSUS
EV/EBITDA
FY2010E
FY2011E

$303
317

7.2x
6.9

8.9x
8.5

$2.25
2.45

16.2x
14.9

19.3x
17.8

$281
326

7.8x
6.7

9.6x
8.3

$2.07
2.43

17.6x
15.0

21.0x
17.9

Price/Earnings
FY2010E
FY2011E
NOVEMBER5YEARPROJECTIONS
EV/EBITDA
FY2010E
FY2011E
Price/Earnings
FY2010E
FY2011E
Source:
Notes:

TransactionPrice

$36.49

Schedule13E3,Exhibit(c)(2)filedwithSECon12/6/2010
(1) RepresentQ3FY2010endingdebtandcashbalances
(2) BasedonactualreportedEBITDAof$315.9MM,adjustedforonetimeitems(benefitrelatedtoforfeitedsharebasedawards,leasetermination,andseverancecosts)

20

PERELLAWEINBERGANALYSISVALUATIONSUMMARY:EQUITYVALUEPERSHARE
11/19/2010Price:$36.49 TransactionPrice:$43.50

52WeekRange
52WeekRange

EquityResearchPriceTargets
EquityResearchPriceTargets

$30.06

$50.96

$30.00

PublicCompanies
6.5x 8.0x 2010E EBITDA, 16.0x 20.0x 2010E Comps
EPS
6.0x 7.5x 2011E EBITDA, 15.0x 17.0x 2011E EPS

$50.00

$32.00

$41.00

PremiumsPaid
1Day Premium: 11% 36%
PremiaPaid
1Week Premium:18%
39%
1Month Premium: 22% 34%

$38.00

RelevantTransactions
Precedents
7.5x 9.5xLTMEBITDA

$39.00

7.5x 9.5x2010EEBITDA

Source:

$47.00

$35.00

DiscountedCashFlowAnalysis
DCF
11% 15%WACC,6.0x7.5xExitMultiple

$20.00

$50.00

$43.00
$40.00

$25.00

$30.00

$35.00

$40.00

$52.00

$45.00

$50.00

$55.00

$60.00

$65.00

Schedule13E3,Exhibit(c)(2)filedwithSECon12/6/2010

21

PERELLA WEINBERG ANALYSIS RELEVANT TRANSACTIONS

EV/LTMEBITDA
SpecialtyApparel

Branded

16.0x
PrivateEquityBuyer

StrategicBuyer
14.1x

14.0x
IMPLIED TRANSACTION MULTIPLE: 9.6x 2010E EBITDA (November 5 year projections)
8.6xLTMEBITDA

12.2x

12.0x
SpecialtyApparelMedian:7.9x

8.9x
7.9x

7.9x

7.8x

10.2x

OverallMedian:8.2x

10.0x
7.9x

8.2x

9.4x

BrandedMedian:8.9x
8.8x

8.7x

8.1x

8.0x

7.2x
6.6x

6.0x

4.0x

2.0x

0.0x
Tommy
Hilfiger

Claire's
Stores

DebShops

Charlotte
Russe

Tommy
Hilfiger

Acquiror

Apax

Apollo

LeeEquity

Advent

V.Heusen

DateAnnounced

12/05

3/07

7/07

8/09

3/10

$1,547

$2,581

$259

$312

$3,136

$1,761

TransactionValue

(2)

Gymboree

Barney's

May

Bain

Jones

Federated

10/10

11/04

2/05

$400

$17,260

ToysRUs

Neiman
Marcus

Consortium Consortium

Linensn
Things

Burlington
Coat
Factory

Michaels
Stores

Petco

Barney's

Apollo

Bain

Consortium

3/05

5/05

11/05

1/06

6/06

7/06

6/07

$6,213

$4,981

$1,305

$1,958

$5,604

$1,819

$942

Source:

Schedule13E3,Exhibit(c)(2)filedwithSECon12/6/2010

Note:

(1)BasedonactualreportedEBITDAof$315.9MM,adjustedforonetimeitems(benefitrelatedtoforfeitedsharebasedawards,leaseterminationbenefit,andseverancecosts)
(2)DefinedasTransactionEnterpriseValue.FiguresshowninmillionsofUSdollars

Consortium Istithmar

22

PERELLA WEINBERG ANALYSIS PUBLIC COMPANIES EV / FY2010E EBITDA

Company

SelectedPeers

OtherPeers

20.0x

ImpliedTransactionMultiple:9.6xNovember5yearprojections
8.9xIBESConsensus

16.8x

15.0x

SelectedPeersMedian:6.9x
10.6x

10.4x

10.0x Offer:9.6x
7.8x

OtherPeersMedian:6.6x

8.3x

Offer:8.9x

7.2x
5.5x

5.5x
4.8x

4.6x

5.0x

5.8x

6.0x

6.1x

6.6x

7.6x

7.8x

Coach

Limited
Brands

8.2x

6.9x

4.9x

0.0x
CurrentPlan

Source:

IBES

Aeropostale

Chico's

A&F

Urban
Outfitters

TheGap DressBarn American

Eagle

Talbots

Children's AnnTaylor Coldwater

Place
Creek

Carter's

Guess?

Polo

Bebe

Schedule13E3,Exhibit(c)(2)filedwithSECon12/6/2010

23

PERELLA WEINBERG ANALYSIS PREMIUMS PAID

PremiumsPaid(2ndQuartileHighand3rdQuartileLow)
50.0%

40.0%

38.8%

37.3%

36.2%

34.2%

28.3%

30.0%

25.9%
21.3%

21.0%

20.0%

21.5%

19.2%

10.0%

18.2%

11.1%

MedianofPrecedents

CurrentOfferPremia

0.0%
1DayPrior

1WeekPrior

1MonthPrior

ImpliedSharePrice
2ndQuartileHigh

Source:
Note:

$49.72

$47.08

$42.52

Median

44.25

41.05

39.89

3rdQuartileLow

40.55

40.07

38.48

Schedule13E3,Exhibit(c)(2)filedwithSECon12/6/10
Analysisincludes100%cashtransactionswithU.S.targetsfrom2005topresentbetween$2.0Bnand$4.0Bn

24

PERELLA WEINBERG ANALYSIS EQUITY RESEARCH PRICE TARGETS

PriceTargetSummary
High

Low

OverallEstimates

$50.00

$30.00

$35.00

Oct.andNov.Estimates

$44.00

$30.00

$34.00

$55.00

$50.00

Median

$49.00

RecommendationSummary
$45.00

$44.00

Buy
$42.00
$40.00

$40.00

Sell

Hold

OverallAnalysts

33%

5%

62%

Oct.andNov.Analysts

13%

13%

75%

$37.00

ReferencePrice:$36.49
$35.00

$35.00

$35.00

$35.00

$35.00

$34.00

$34.00
$33.00
$31.00

$31.00
$30.00

$25.00
Oppenheimer Baird

UpsidetoCurrent

Source:

Atlantic B.Murray Wedbush Weeden JPMorgan

Equities

UBS

Jefferies

MKM

BOA

Nomura P.Jaffray Goldman

BMO

Janney

Morgan
Stanley
11/18

8/27

8/27

11/15

8/27

8/27

8/26

7/15

8/26

8/27

10/25

10/5

11/9

10/21

11/11

8/26

10/21

Buy

Buy

Buy

Buy

Buy

Buy

Hold

Hold

Hold

Hold

Hold

Hold

Hold

Hold

Hold

Hold

Sell

10%

1%

(4%)

(4%)

(4%)

(4%)

(7%)

(7%)

(10%)

(15%)

(15%)

(18%)

37%

34%

21%

15%

10%

Schedule13E3,Exhibit(c)(2)filedwithSECon12/6/2010

25

CONCLUSION

$43.50pershareincashisacompellingofferandinthebestinterestsoftheCompanyandits
unaffiliatedstockholdersbasedon
Significantpremiumabovestockstradinglevelsoverthemonthsleadinguptoannouncementandattractivemultiple
MorefavorabletotheCompanysstockholdersthanthestatusquoorotherstrategicalternativesavailable
TheCompanysrecentfinancialperformanceandmanagementsreducedexpectationsfortheCompanysshortand
longtermfutureperformance
Limitedexecutionrisk
MeaningfulpostsigningGoShop periodwithlowbreakupfeesandfullcooperationofmanagement

26

APPENDIX

MEMBERSOFTHESPECIALCOMMITTEE
MaryAnnCasati Ms.Casatihasbeenadirectorsince2006.Ms.CasatiisafoundingpartnerofCircleFinancialGroup
LLC,aprivatewealthmanagementmembershippractice,andhasservedassuchsince2003.Priortothat,Ms.Casatiwas
a partner and managing director of The Goldman Sachs Group, Inc. where she was employed for twenty years and
developedandrantheirGlobalRetailingIndustryInvestmentBankingbusiness.
David House Mr. House has been a director since 2007. Mr. House is Chairman of Serenoa LLC, a familyowned
investmentbusiness.Priortothat,Mr.HousewasGroupPresidentoftheGlobalNetworkandEstablishmentServicesand
TravelersCheques andPrepaidServicesbusinessesatAmericanExpressCompany,adiversifiedglobaltraveland
financialservicescompany,from2000until2006andservedonitsGloballeadershipTeamduringthisperiod.Hejoined
American Express in 1993 and held various senior positions there prior to assuming his global role as a GroupPresident.
Mr.HousealsoservesontheBoardofDirectorsofModernBank.
Stephen Squeri Mr. Squeri has been a director since September 2010. Mr. Squeri has been Group Presidentof
Global Services and Chief Information Officer at American Express Company since 2009. Mr. Squeri joined American
Expressin1985andhasheldvariousseniorpositionssincethen,includingexecutivevicepresidentandchiefinformation
officerfrom2005to2009,presidentoftheGlobalCommercialCarddivisionfrom2002to2005andpresident
of Establishment Services Canada and the United States from 2000 to 2001. Prior to joining American Express, Mr.Squeri
wasamanagementconsultantatArthurAndersenandCompanyfrom1981to1985.
JoshWeston Mr.Westonhasbeenadirectorsince1998.Mr.WestonalsoservedasHonoraryChairmanoftheBoard
ofDirectorsofAutomaticDataProcessing,acomputingservicesbusiness,from1998to2004.Mr.WestonwasChairman
oftheBoardofDirectorsofAutomaticDataProcessingfrom1996 until1998,andChairmanandChiefExecutiveOfficerfor
morethanfiveyearspriorthereto.Mr.WestonservedontheBoardofDirectorsandCompensationCommitteeofGentiva
HealthServices,Inc.anditspredecessorcompany,theOlstenCorp.,forovertenyearsuntilMay2009.Healsopreviously
served on the Board of Directors of Russ Berrie and Company, Inc. from 1999 until 2007.
28