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Going private transaction by certain issuers

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13E-3

(Amendment No. 2)

RULE 13E-3 TRANSACTION STATEMENT UNDER SECTION 13(E)

OF THE SECURITIES EXCHANGE ACT OF 1934

Crown Media Holdings, Inc.

(Name of the Issuer)

Hallmark Cards, Incorporated

H.A., LLC

HMK Holdings, Inc.

H C Crown, LLC

CM Merger Co.

(Name of Person(s) Filing Statement)

Class A Common Stock, Par Value $0.01 Per Share

(Title of Class of Securities)

228411 10 4

(CUSIP Number of Class of Securities)

Brian Gardner, Esq.

Executive Vice President and General Counsel

Hallmark Cards, Incorporated

Department 339

2501 McGee

Kansas City, Missouri 64108

(816) 274-5583

(Name, Address and Telephone Number of Persons Authorized to Receive Notices and Communications on Behalf of Persons Filing Statement)

Copies to:

Maurice M. Lefkort

Willkie Farr & Gallagher LLP

787 Seventh Avenue

New York, NY 10019

(212) 728-8239

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THIS TRANSACTION, PASSED ON THE MERITS OR THE FAIRNESS OF THE TRANSACTION OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

This statement is filed in connection with (check the appropriate box):

a.

¨ The filing of solicitation materials or an information statement subject to Regulation 14A, Regulation 14-C or Rule 13e-3(c) under the Securities Exchange Act of 1934.

b.

¨ The filing of a registration statement under the Securities Act of 1933.

c.

¨ A tender offer.

d.

x None of the above.

Check the following box if the soliciting materials or information statement referred to in checking box (a) are preliminary copies: ¨

Check the following box if the filing is a final amendment reporting the results of the transaction: ¨

Calculation of Filing Fee

Transaction Valuation* Amount of Filing Fee**
$175,691,621.00 $17,692.15
* Calculated solely for the purpose of determining the filing fee in accordance with Rule 0-11(b)(1) under the Securities Exchange Act of 1934, as amended. The transaction value was calculated by multiplying the per share merger consideration of $5.05 by the 34,790,420 shares of Class A Common Stock held by persons other than those filing this Schedule 13E-3 (such 34,790,420 shares represent 359,675,936 shares, the total number of shares of Crown Media Holdings, Inc. Class A Common Stock outstanding as of March 10, 2016, less the 324,885,516 shares of Class A Common Stock beneficially owned by Hallmark Cards, Incorporated).
** The amount of the filing fee, calculated in accordance with Rule 0-11 under the Securities Exchange Act of 1934, as amended, and Fee Rate Advisory #1 for fiscal year 2016, issued August 27, 2015, was calculated by multiplying $175,691,621.00 by 0.0001007.
x Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) under the Act and identify the filing with which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
Amount Previously Paid: $17,692.15 Filing Party: Hallmark Cards, Incorporated

TABLE OF CONTENTS

SUMMARY TERM SHEET

3

INTRODUCTION

7

BACKGROUND OF THE MERGER

8

SPECIAL FACTORSPURPOSES, ALTERNATIVES, REASONS AND EFFECTS OF THE MERGER

9

CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS

12

FAIRNESS OF THE MERGER

13

TRANSACTION STATEMENT

21

Item 1.

Summary Term Sheet.

21

Item 2.

Subject Company Information.

21

Item 3.

Identity and Background of Filing Persons.

22

Item 4.

Terms of the Transaction.

23

Item 5.

Past Contacts, Transactions, Negotiations, and Agreements.

27

Item 6.

Purpose of the Transaction and Plans or Proposals.

30

Item 7.

Purposes, Alternatives, Reasons, and Effects.

30

Item 8.

Fairness of the Transaction.

30

Item 9.

Reports, Opinions, Appraisals, and Certain Negotiations.

30

Item 10.

Source and Amounts of Funds or Other Consideration.

30

Item 11.

Interest in Securities of the Subject Company.

31

Item 12.

The Solicitation or Recommendation.

32

Item 13.

Financial Information.

32

Item 14.

Persons/Assets, Retained, Employed, Compensated or Used.

33

Item 15.

Additional Information.

33

Item 16.

Exhibits.

34

SCHEDULE I

37

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SUMMARY TERM SHEET

This summary and the remainder of this Transaction Statement on Schedule 13E-3 include information describing the going private merger involving Crown Media Holdings, Inc. (Crown) and Hallmark Cards, Incorporated (Hallmark), how it affects you, what your rights are with respect to the merger as a stockholder of Crown, and the position of the persons listed on the cover of the Schedule 13E-3 above the caption Name of Person(s) Filing Statement, who are referred to herein as the Filing Persons on the fairness of the merger to you.

Introduction

This Transaction Statement on Schedule 13E-3 (this Schedule 13E-3) is being filed in connection with a potential short-form merger (the Merger) under Section 253 of the General Corporation Law of the State of Delaware (the DGCL), pursuant to which a newly-formed Delaware corporate subsidiary of Hallmark would merge with and into Crown, with Crown as the surviving corporation. As a result of the Merger, all of the shares of Crown Class A common stock, par value $0.01 per share (the Shares), not owned directly or indirectly by any of the Filing Persons, will be converted into the right to receive $5.05 per Share in cash, without interest (the Merger Consideration).

Special FactorsPurposes, Alternatives, Reasons, and Effects of the Merger

The purpose of the Merger is to enable the Filing Persons to acquire the entire outstanding minority public interest in Crown. Following the Merger, the Filing Persons will own all of the outstanding Shares. The Merger will also provide the stockholders of Crown, other than the Filing Persons (the Public Stockholders), including the stockholders of Crown not affiliated with the Filing Persons (the Unaffiliated Stockholders), with an opportunity to realize the value of their investment in Crown by receiving the Merger Consideration of $5.05 per Share in cash, without interest. See Special FactorsPurposes, Alternatives, Reasons, and Effects of the MergerPurposes.

Principal Terms of the Merger

The Merger. On the effective date of the Merger, Merger Sub (Merger Sub) will merge with and into Crown in a short-form merger under Section 253 of the DGCL. Hallmark intends to effect the Merger no sooner than 20 days after the date the Filing Persons have mailed this Schedule 13E-3 to the holders of Shares. Pursuant to Section 253 of the DGCL, Merger Sub, as the holder of in excess of 90% of the outstanding Shares, may effect the Merger without the approval of or action by the board of directors of Crown or the Public Stockholders (including the Unaffiliated Stockholders). CONSEQUENTLY, THE BOARD OF DIRECTORS OF CROWN HAS NOT ACTED TO APPROVE OR DISAPPROVE THE MERGER, AND THE PUBLIC STOCKHOLDERS (INCLUDING THE UNAFFILIATED STOCKHOLDERS) ARE NOT BEING ASKED TO APPROVE OR DISAPPROVE, OR FURNISH A PROXY IN CONNECTION WITH, THE MERGER. See Special FactorsPurposes, Alternatives, Reasons, and Effects of the MergerEffects.

Merger Consideration. As a result of the Merger, each Share not owned by the Filing Persons as of the effective date of the Merger will automatically be converted into the right to receive $5.05 in cash, without interest.

Crown Shares Outstanding; Ownership by the Filing Persons. As of February 16, 2016, as reported in Crowns Form 10-K filed on February 19, 2016, there were 359,675,936 Shares outstanding, with all shares classified as Class A common stock. Hallmark beneficially owns 324,885,516 Shares. On April 6, 2016, the Filing Persons transferred 324,885,516 Shares, representing 90.3% of the issued and outstanding shares of Crown, to Merger Sub.

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Hallmark directly owns no Shares, but shares dispositive and voting power over all Shares owned by Merger Sub. H C Crown, LLC, a Delaware limited liability company (HCC), wholly owns Merger Sub. HMK Holdings, Inc., a Delaware corporation (HMK), wholly owns HCC and is a wholly-owned subsidiary of H.A., LLC, a Delaware limited liability company. H.A., LLC is a direct wholly-owned subsidiary of Hallmark. HCC, HMK, H.A., LLC, and Hallmark, consequently, share dispositive and voting power over all the Shares owned by Merger Sub.

Payment for Shares. You will be paid for the Shares you hold as of the effective date of the Merger promptly after the effective date of the Merger and your compliance with the instructions set forth in the Notice of Merger and Appraisal Rights and Letter of Transmittal, which will be mailed within 10 calendar days following the effective date of the Merger to stockholders of record of Crown as of the effective date of the Merger.

Source and Amount of Funds. The total amount of funds expected to be required to pay the Merger Consideration, and to pay related fees and expenses, is estimated to be approximately $176,349,000 including $656,000 of fees and expenses. Hallmark will contribute the total amount of required funds to Merger Sub immediately prior to the effective date of the Merger. Hallmark will utilize cash on hand to meet these requirements, and the Merger will not be subject to any financing conditions. The Filing Persons have no present plans for alternative funding.

Conditions to Completing the Merger. There are no conditions to completing the Merger, including any conditions related to financing. Nevertheless, the Filing Persons will continue to evaluate the principal reasons for taking Crown private as set forth in Special FactorsPurposes, Alternatives, Reasons, and Effects of the MergerReasons. Accordingly, the Filing Persons may ultimately decide not to proceed with the Merger.

Fairness of the Merger

The Filing Persons believe that the Merger is fair to the Unaffiliated Stockholders. In formulating their belief as to the fairness of the Merger to the Unaffiliated Stockholders, the Filing Persons relied principally on the fact that the Merger Consideration reflects a 65.0% premium to the midpoint of a discounted cash flow analysis conducted by the Filing Persons (the DCF Analysis) as of February 26, 2016 (the Calculation Date). This conclusion as to fairness is supported by the fact that the Merger Consideration also reflects a premium to the other indicators of value considered by the Filing Persons (the Other Value Indicators).

The Filing Persons believe that the DCF Analysis is the most accurate reflection of fair value. See Fairness of the MergerDCF Analysis beginning on page 13 of this Schedule 13E-3.

The Filing Persons conducted the DCF Analysis using methodologies that are frequently used by the Delaware Court of Chancery in determining the value of the Shares that stockholders would be entitled to receive in an appraisal action under Delaware law. The DCF Analysis resulted in a potential value for the Shares ranging from $2.29 to $4.43 per Share.
The Merger Consideration reflects a premium of 65.0% to the DCF Analysis value of $3.06 per Share, which was obtained by utilizing the midpoint of the inputs to the DCF Analysis.

In addition to the DCF Analysis, the Filing Persons also considered the Other Value Indicators, which Other Value Indicators the Filing Persons do not consider to be as accurate a measure of value as the DCF Analysis, as described in Fairness of the MergerPosition of the Filing Persons. The Merger Consideration exceeds the valuation of Crown derived from each of these Other Value Indicators:

Market Price . The Merger Consideration reflects a premium to the measures of market price of the Shares described in the two sub-bullet points below, and the Filing Persons believe these market prices already reflect a premium to the value of Crown due to the market expectation of a going private

transaction (the Built-In Premium). In addition, the Filing Persons believe that the market price of the Shares may not be an accurate reflection of the value of Crown, due to the effect on the market price of the recent inclusion of the Shares in published market indices (the Index Effect). See Fairness of the MergerMarket Price, Built-In Premium and Index Effect beginning on page 16 of this Schedule 13E-3.

a premium of 12.5% to the 30-trading day volume-weighted average price of the Shares as of the Announcement Date of $4.49 per Share. The Filing Persons believe that longer period averages are distorted by the Index Effect; and
a premium of 2.4% to the closing price per Share on March 8, 2016 (the day before the amendment to Schedule 13D publicly announcing the Filing Persons decision to engage in the Merger, the Announcement Date) of $4.93 per Share.
Comparable Company Analysis . The Merger Consideration represents a 14.0% premium to the $4.43 midpoint of the $4.19 to $4.76 per Share range of values based on a financial analysis prepared by the Filing Persons of multiples of earnings before interest, taxes, depreciation, and amortization (EBITDA) of certain companies in Crowns industry. See Fairness of the MergerComparable Company Analysis beginning on page 17 of this Schedule 13E-3.
Valuation Obtained for Other Purposes. On an annual basis, Hallmark obtains from an investment bank a letter regarding the reasonableness of its valuation of Hallmarks non-core investments, including its investment in Crown. Based upon and subject to the qualifications set forth in the letter, the investment bank stated its belief that, as of December 31, 2015, a per Share valuation of Crown of $4.75 is a reasonable valuation for Hallmarks interest in Crown. The Merger Consideration reflects a premium of 6.32% to the $4.75 per Share valuation. See Fairness of the MergerValuation Obtained for Other Purposes beginning on page 18 of this Schedule 13E-3.

In addition, the Filing Persons also considered other factors, including the following, as described in Fairness of the MergerPosition of the Filing Persons:

The Filing Persons determined that the Merger would shift the risks of Crowns business and industry, including distribution risks, increased programming costs, reliance on third parties for content, move of advertising to digital platforms, lack of leverage in negotiations with distributors and advertisers, and increased competition from digital and other platforms, from the Public Stockholders (including the Unaffiliated Stockholders) entirely to the Filing Persons.
The Public Stockholders (including the Unaffiliated Stockholders) will be entitled to exercise appraisal rights in accordance with the DGCL.

The Filing persons believe that no events have occurred since the Calculation Date that would cause the Filing Persons to alter their conclusion as to the fairness of the Merger Consideration. See Fairness of the MergerPosition of the Filing PersonsSubsequent Events.

Consequences of the Merger

Completion of the Merger will have the following consequences:

Crown will become a wholly-owned subsidiary of Hallmark.
Crown will no longer be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the Exchange Act), and the Shares will no longer be traded on any securities exchange or automated quotation system.
Only the Filing Persons will have the opportunity to participate in the future earnings and growth, if any, of Crown. Similarly, only the Filing Persons will face the risk of losses generated by Crowns operations or the decline in value of Crown.
Each Share held by Public Stockholders (including the Unaffiliated Stockholders) as of the effective date of the Merger will be converted into the right to receive $5.05 in cash, without interest, except for those Shares for which statutory appraisal rights are properly exercised.
The Public Stockholders (including the Unaffiliated Stockholders) will no longer be subject to the risks of continued ownership of Crown, as described in Fairness of the MergerRisks to Crown.

See Special FactorsPurposes, Alternatives, Reasons and Effects of the MergerEffects.

Appraisal Rights

Subject to compliance with the applicable provisions of the DGCL, you have a statutory right to demand payment of the fair value of your Shares, as determined in a judicial appraisal proceeding in accordance with Section 262 of the DGCL, plus interest from the date of the Merger. This value may be equal to, more than, or less than the Merger Consideration offered in the Merger. In order to properly exercise these rights, you (or, if you hold your Shares through a broker or other nominee, your broker or nominee) must demand in writing an appraisal of your Shares within 20 days after the date of mailing of the Notice of Merger and Appraisal Rights, which will be mailed to the registered holders of Shares as of the effective date of the Merger within 10 days following the effective date of the Merger, and otherwise comply with the procedures for exercising appraisal rights set forth in the DGCL. The procedures regarding properly perfecting appraisal rights are complicated. A copy of Section 262 of the DGCL is attached to this Schedule 13E-3 as Exhibit F. Any failure to properly comply with its terms will result in an irrevocable loss of such rights. Stockholders seeking to properly exercise their statutory appraisal rights are encouraged to seek advice from legal counsel.

See Item 4 Terms of the TransactionAppraisal Rights.

Where You Can Find More Information

More information regarding Crown is available from its public filings with the Securities and Exchange Commission, including its most recent Form 10-K, filed on February 19, 2016. See Item 2 Subject Company Information and Item 3 Identity and Background of Filing Persons.

INTRODUCTION

This Rule 13E-3 transaction statement on Schedule 13E-3 (this Schedule 13E-3) is being filed with the Securities and Exchange Commission (the Commission) jointly by Hallmark Cards, Incorporated, a Missouri corporation (Hallmark), H.A., LLC, a Delaware limited liability company and wholly-owned subsidiary of Hallmark, HMK Holdings, Inc., a Delaware corporation and wholly-owned subsidiary of H.A., LLC (HMK), H C Crown, LLC, a Delaware limited liability company and wholly-owned subsidiary of HMK (HCC), and CM Merger Co., a Delaware corporation and wholly-owned subsidiary of HCC (Merger Sub). Hallmark, H.A., LLC, HMK, HCC, and Merger Sub are referred to herein as the Filing Persons.

This Schedule 13E-3 is being filed by the Filing Persons in connection with the proposed merger (the Merger) of Merger Sub with and into Crown Media Holdings, Inc. (Crown), pursuant to Section 253 of the General Corporation Law of the State of Delaware (DGCL). The Filing Persons intend to effect the Merger no sooner than 20 days after the date the Filing Persons have mailed this Schedule 13E-3 to the holders of Crown Class A common stock (the Effective Date).

As of February 16, 2016, as reported in Crowns Form 10-K filed on February 19, 2016, there were outstanding 359,675,936 shares of Crown Class A common stock, par value $0.01 per share (the Shares), of which, as of April 6, 2016, 324,885,516 or 90.3%, were held by Hallmark, through Merger Sub, its indirect wholly-owned subsidiary. Hallmark does not directly own any Shares, but exercises dispositive and voting power over all Shares owned by Merger Sub. HCC wholly owns Merger Sub. HMK wholly owns HCC and is a wholly-owned subsidiary of H.A., LLC. H.A., LLC is a direct wholly-owned subsidiary of Hallmark. HCC, HMK, H.A., LLC, and Hallmark, consequently, share dispositive and voting power over all the Shares owned by Merger Sub.

Upon consummation of the Merger, each outstanding Share not held by the Filing Persons will be cancelled and converted into the right to receive $5.05 per Share in cash (the Merger Consideration), without interest, upon surrender of the certificate for such Share to Computer Trust Company, N.A. (the Paying Agent). Instructions regarding the surrender of certificates to the Paying Agent will be set forth in a Notice of Merger and Appraisal Rights and a Letter of Transmittal, which will be mailed to the registered holders of Shares as of the Effective Date within 10 calendar days following the Effective Date.

Under the DGCL, no approval or action is required by the stockholders of Crown, other than the Filing Persons (the Public Stockholders) (including the Unaffiliated Stockholders (as defined below)), or the board of directors of Crown for the Merger to become effective. CONSEQUENTLY, THE BOARD OF DIRECTORS OF CROWN HAS NOT ACTED TO APPROVE OR DISAPPROVE THE MERGER, AND THE PUBLIC STOCKHOLDERS (INCLUDING THE UNAFFILIATED STOCKHOLDERS) ARE NOT BEING ASKED TO APPROVE OR DISAPPROVE, OR FURNISH A PROXY IN CONNECTION WITH, THE MERGER. Crown will be the surviving corporation in the Merger. Upon effectiveness of the Merger, each share of common stock of Merger Sub will be converted into one share of the surviving corporation and the Shares held by Merger Sub will be cancelled. As a result of the Merger, Hallmark will be the only stockholder of Crown. The Filing Persons currently intend to proceed with the Merger, but will continue to evaluate the principal reasons for taking Crown private as set forth in Special FactorsPurposes, Alternatives, Reasons and Effects of the MergerReasons. Accordingly, the Filing Persons may ultimately decide not to proceed with the Merger.

Subject to compliance with the applicable provisions of the DGCL, the Public Stockholders (including the Unaffiliated Stockholders) as of the effective date of the Merger have a statutory right to demand payment of the fair value of their Shares, as determined in a judicial appraisal proceeding in accordance with Section 262 of the DGCL, plus interest from the date of the Merger. This value may be equal to, more than, or less than the Merger Consideration offered in the Merger. Crown stockholders wishing to seek such appraisal rights must demand in writing an appraisal of their Shares within 20 days after the date of mailing of the Notice of Merger and Appraisal Rights and otherwise comply with the procedures for exercising appraisal rights set forth in the

DGCL. The procedures regarding properly perfecting appraisal rights are complicated. A copy of Section 262 of the DGCL is attached to this Schedule 13E-3 as Exhibit F. Any failure to properly comply with its terms will result in an irrevocable loss of such rights. Stockholders seeking to properly exercise their statutory appraisal rights are encouraged to seek advice from legal counsel. If you hold Shares through a broker or other nominee, you should consult with your broker or other nominee to determine the appropriate procedures to exercise appraisal rights and to obtain the Notice of Merger and Appraisal Rights.

This Schedule 13E-3 and the documents incorporated herein by reference include certain forward-looking statements. These statements include statements regarding the intent, belief, or current expectations of the Filing Persons, including statements regarding the Filing Persons strategies following completion of the Merger. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those described in such forward-looking statements as a result of various factors, including general economic conditions, positions and strategies of competitors, and the capital markets.

BACKGROUND OF THE MERGER

On June 24, 2013, Hallmark filed an amendment to its Schedule 13D, in which Hallmark disclosed that, in connection with the expiration on December 31, 2013 of the standstill restrictions binding on Hallmark and certain of its controlled affiliates pursuant to the terms of the stockholders agreement, dated June 29, 2010 (the Stockholders Agreement), by and among Crown, Hallmark, and HCC, Hallmark and its affiliates were evaluating their investment in Crown and may consider all alternatives available to them, including: (a) maintaining their investment in Crown, (b) purchasing additional Shares, either on the market or in privately negotiated transactions, (c) engaging in a short-form merger to eliminate the minority stockholders in Crown, or proposing another form of going private transaction, (d) proposing that Crowns board of directors consider implementing a stock repurchase program, (e) proposing that Crowns board of directors consider delisting the Shares from the Nasdaq Global Market and terminating Crowns registration under the Exchange Act, (f) disposing, subject to the continuing limitations in the Stockholders Agreement, all or a portion of their investment in Crown in a privately negotiated transaction or series of transactions, and (g) exercising their rights under the Stockholders Agreement. That disclosure superseded prior disclosure that the Filing Persons do not currently intend to engage in or propose a going private transaction. Shortly after the filing of the June amendment to the Schedule 13D of the Filing Persons, Crowns stock price increased approximately $0.65 per Share, which the Filing Persons believe was directly attributable to the Filing Persons disclosure and in anticipation of the Filing Persons pursuing a going private transaction.

On December 31, 2013, the provisions in the Stockholders Agreement that restricted Hallmark and its controlled affiliates from acquiring additional Shares (including in a short-form merger), except in certain limited circumstances, expired. A description of certain terms of the Stockholders Agreement is set forth in Item 5 Past Contacts, Transactions, Negotiations, and AgreementsAgreements Involving the Subject Companys Securities beginning on page 29 of this Schedule 13E-3.

On March 8, 2016 (the Announcement Date), Hallmark delivered to the board of directors of Crown a letter indicating their intention to acquire, in a short-form merger, all of the Shares not then owned by the Filing Persons at a price of $5.05 per Share, and filed an amendment to its Schedule 13D publicly disclosing such letter.

From time to time, the Filing Persons considered investments in the Shares, as well as the business of Crown and its status as a public company. As part of these considerations, the Filing Persons reviewed Crowns business and the ability to conduct Crowns business in a way that advantaged the non-Crown businesses of the Filing Persons and the impediments to such business strategy posed by Crowns status as a public company. In addition, the Filing Persons have recognized that Crown has incurred significant costs, but has derived only minimal benefits, from being a public company. The Shares have a small public float based on the 34,790,420 Shares held by the Public Stockholders (including the Unaffiliated Stockholders) as of February 16, 2016 (the

most recent date for which such information is publicly available). The Shares also have a low trading volume (the average daily trading volume for Shares for the 30-day period ended on the Announcement Date was only approximately 163,330 Shares, excluding one day of abnormal trading from the Index Effect). The costs and burdens associated with being a public company, including the focus on periodic performance emphasized by Unaffiliated Stockholders, the distraction to management in attending to public company tasks, and the resources expended to comply with certain reporting obligations under the Exchange Act, all support Crown becoming a private company.

SPECIAL FACTORS

PURPOSES, ALTERNATIVES, REASONS AND EFFECTS OF THE MERGER

Purposes

The purpose of the Merger is to enable the Filing Persons to acquire the Shares held by the Public Stockholders (including the Unaffiliated Stockholders). Following the Merger, the Filing Persons will own all of the outstanding Shares. The Merger will also provide the Public Stockholders (including the Unaffiliated Stockholders) with an opportunity to realize the value of their investment in Crown by receiving the Merger Consideration of $5.05 per Share in cash, without interest.

Alternatives

The Filing Persons believe that effecting the transaction by way of a short-form merger with Merger Sub under Section 253 of the DGCL is the most efficient way for Hallmark to acquire the Shares held by the Public Stockholders (including the Unaffiliated Stockholders) and to provide the Public Stockholders (including the Unaffiliated Stockholders) with cash Merger Consideration for their Shares.

Reasons

In determining whether to acquire the outstanding public minority equity interest in Crown and to effect the Merger, the Filing Persons consider the following to be the principal benefits to the Filing Persons of taking Crown private:

realizing the benefits from the Filing Persons ownership of Crown that are unavailable to them while Crown remains a public company with minority stockholders;
the use of the highly recognized Hallmark brand in the entertainment industry to strengthen the Hallmark brand across all of the Filing Persons businesses;
strengthening the link between Crowns channels and Hallmarks businesses;
with Crown as a wholly-owned subsidiary, the Filing Persons will be able to control Crowns content decisions and potential monetization paths, and will have greater flexibility to respond to the many risks and challenges of the rapidly changing cable and entertainment landscape and protect their substantial investment in Crown;
the ability to direct Crowns business and make all of those decisions in light of what is best for the Filing Persons as a whole, without being constrained by public, minority stockholders at Crown;
the decrease in costs over time associated with being a public company; and
the elimination of burdens on Crowns management associated with public reporting and other tasks resulting from Crowns public company status, including, for example, the dedication of time and resources of Crowns management to stockholder inquiries and investor relations.

The Filing Persons also considered a number of risks and other potentially negative factors for the stockholders of Crown not affiliated with the Filing Persons (the Unaffiliated Stockholders) and the Filing Persons concerning the Merger, including:

Approval of security holders. Because the Merger is being effected as a short-form merger under Section 253 of the DGCL, it does not require either approval by the Unaffiliated Stockholders or approval by at least a majority of the Unaffiliated Stockholders.
Approval of the board of directors of Crown. Because the Merger is being effected as a short-form merger under Section 253 of the DGCL, it does not require approval or action by the board of directors of Crown, and, therefore, neither the board of directors of Crown nor a majority of the directors of Crown who are not employees of Crown or the Filing Persons (the Independent Directors), have approved or disapproved the Merger.
Unaffiliated representative. Because neither the approval or action of the Crown board of directors nor the Unaffiliated Stockholders is required to complete the Merger, neither the board of directors of Crown, nor a majority of the Independent Directors, nor the Filing Persons have retained a representative to act on behalf of the Unaffiliated Stockholders, nor has any report been issued by a third party as to the fairness of the Merger Consideration to the Unaffiliated Stockholders.
No participation in the future prospects of Crown. Following the consummation of the Merger, the Unaffiliated Stockholders will cease to participate in the future earnings or growth, if any, of Crown, or benefit from an increase, if any, in the value of the equity interests of Crown.
Potential conflicts of interest. Because the Filing Persons own 90.3% of Crown immediately prior to the Merger and will own 100% of Crown as a result of the Merger, the interests of the Filing Persons in determining the Merger Consideration could be considered to be in conflict to the interests of the Unaffiliated Stockholders.
No interest in a sale of Crown. The Filing Persons have no interest in selling Crown at this time and have no obligation to determine if there is a buyer for all of Crown that would be willing to pay a price per Share in excess of the Merger Consideration.

The Filing Persons have determined to effect the Merger at this time, because they wish to immediately realize the benefits of taking Crown private, as discussed above. The Merger transaction is structured as a short-form merger under Section 253 of the DGCL. This form of merger offers the Public Stockholders (including the Unaffiliated Stockholders) the right to receive the cash Merger Consideration for their Shares quickly (or to seek an appraisal of the fair value of such Shares) and allows Crown to become a wholly-owned subsidiary of Hallmark without any action by the board of directors of Crown or the Public Stockholders (including the Unaffiliated Stockholders).

Effects

Upon completion of the Merger, Crown will become an indirect, wholly-owned subsidiary of Hallmark, and Merger Sub will cease to exist as a separate corporate entity. Consequently, only Hallmark and the holders of the stock of Hallmark will have the opportunity to participate in the future earnings and growth, if any, of Crown. Similarly, only Hallmark and the holders of the stock of Hallmark will face the risk of losses generated by Crowns operations or the decline in value of Crown after the Merger. The Filing Persons beneficial ownership of Shares immediately prior to the Merger in the aggregate will amount to approximately 90.3%. Thus, completion of the Merger will have the effect of increasing Hallmarks ownership of Crown by the 9.7% of Crown that Hallmark currently does not own, or an increase in such ownership from 90.3% to 100%. At December 31, 2015, Crowns net book value (or total stockholders equity) aggregated approximately $579.6 million. Completion of the Merger would have the effect of increasing the amount of such net book value of Crown attributable to Hallmarks ownership of Crown by approximately $56.2 million (or 9.7% of $579.6 million), from approximately $523.4 million (or 90.3% of $579.6 million) to approximately $579.6 million.

Crowns net income for the year ended December 31, 2015 was approximately $86.1 million. Completion of the Merger would have the effect of increasing the amount of such net income attributable to Hallmarks ownership of Crown by approximately $8.4 million (or 9.7% of $86.1 million), from approximately $77.7 million (or 90.3% of $86.1 million) to approximately $86.1 million.

Upon completion of the Merger, the Filing Persons will indirectly realize all of the benefit of the recurring cost savings resulting from Crown no longer being a public company. Such cost savings will arise when Crown is relieved of the burdens imposed on companies with publicly traded equity, including, but not limited to, the ongoing costs associated with the public reporting requirements imposed by Section 13 of the Exchange Act, maintaining investor relations, maintaining public company directors and officers liability insurance, and furnishing proxy statements in connection with annual shareholders meetings. The Filing Persons estimate that such cost savings will be between $1,400,000 and $1,800,000 annually.

Upon completion of the Merger, the Public Stockholders (including the Unaffiliated Stockholders) will no longer have any interest in, and will not be stockholders of, Crown and, therefore, will not participate in Crowns future earnings and potential growth and will no longer bear the risk of any decreases in the value of Crown. In addition, the Public Stockholders (including the Unaffiliated Stockholders) will not share in any future dividend distributions of Crown, whether contemplated at the time of the Merger or after the Merger. See Item 6(c) Purpose of the Transaction and Plans or ProposalsPlans of this Schedule 13E-3. All other incidents of stock ownership with respect to such Public Stockholders (including the Unaffiliated Stockholders), such as the rights to vote on certain corporate decisions, to elect directors, and to receive distributions upon the liquidation of Crown, will be extinguished upon completion of the Merger. In summary, if the Merger is completed, the Public Stockholders (including the Unaffiliated Stockholders) will have no ongoing rights as stockholders of Crown, but instead will be entitled to receive the cash Merger Consideration (or alternatively, such stockholders will be entitled to seek an appraisal of the fair value of their Shares from the Delaware Court of Chancery pursuant to and in accordance with Section 262 of the DGCL).

Once the Merger is consummated, public trading of the Shares will cease. The Filing Persons intend to deregister the Shares under the Exchange Act. Consequently, Crown will no longer be required to file annual, quarterly, and other reports with the Commission under Section 13(a) of the Exchange Act (Periodic Reports) and will no longer be subject to the proxy rules under Section 14 of the Exchange Act. In connection with the Shares deregistration, the principal stockholder of Crown also will no longer be subject to reporting its ownership of Shares under Section 13 of the Exchange Act or to the requirement under Section 16 of the Exchange Act to disgorge to Crown certain profits from the purchase and sale of Shares.

The transfer of Shares owned by Hallmark to Merger Sub and Merger Subs temporary holding of such shares prior to the Merger will be treated as a transitory step for tax purposes and both the Merger and Merger Sub will be disregarded. Consequently, the transaction will be treated as an acquisition of Shares by Hallmark and accorded the same tax treatment as a direct purchase of the Shares by Hallmark from the stockholders of Crown. Accordingly, neither Hallmark, nor Merger Sub, nor Crown will recognize any gain or loss for U.S. federal income tax purposes as a direct result of completing the Merger. However, Hallmark will incur a nominal German tax liability as a result of the transaction. Merger Sub will cease to exist immediately upon the Merger.

On March 11, 2003, Crown became a member of Hallmarks consolidated federal tax group and entered into a federal tax sharing agreement with Hallmark, later amended on January 1, 2010. On October 31, 2012, pursuant to an agreement...


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