News:
2007 ANNUAL LETTER

We completed our 18th year as an independent investment bank providing objective, strategic and financial advice to senior executives of public and private companies.

Events in 2007 demonstrated the value of independence and wisdom.  It was a year during which major securities firms and commercial banks felt the adverse effects of some of their conflicting business practices.  For example, they sold securities to their customers at the same time they shorted similar securities on their proprietary desks,  provided "stapled" financing to acquirers of companies they were also being paid to sell and participated in groups buying companies that their firms were selling or financing. 

By the end of the year, we saw the CEOs of these investment banking firms at odds with their "valued" clients, walking away from legal commitments to finance transactions.  Reputations for integrity, which took years to establish, were cast aside with the cynical but no less accurate view that if all the big banks and firms act in unison, clients will have no alternative but to return to them once the capital markets recover. 

Companies do have alternatives, however, and it is the presence of independent investment banking firms such as PJSC that provide such alternatives.  In a tumultuous financial world, our practice continues to expand and prosper across geographies, industries and transaction sizes and structures.

Reflecting the globalization of commerce, we concluded a number of cross-border transactions.  In an acquisition hailed as “the retail deal of the year” by a leading financial periodical, we represented Istithmar., an investment company of the Emirate of Dubai, in the acquisition of Barneys. We also represented Redcats U.S.A., a subsidiary of PPR SA in the acquisition of United Retail Group; concluded the acquisition of the Philippines power generating assets of Mirant Corporation by Tokyo Electric Power Company and Marubeni Corporation; and represented François-Charles Oberthur Fiduciaire S.A. in the sale of Oberthur Gaming Technologies to Scientific Games Corporation.

Peter J. Solomon Company continues to be a recognized leader in advising retailers, wholesalers, catalog companies and Internet distributors.  For example, we advised Dick’s Sporting Goods on its acquisition of Golf Galaxy and Regis, Monro Muffler/Brake, Handleman, Office Depot and Phillips-Van Heusen on a number of strategic issues and initiatives.

We also strengthened our retail capacities, adding Michael Sherman, an authority on catalog and Internet businesses, and Richard Marcus, the former Chairman of Neiman Marcus, as Senior Advisors.  Mitch Hara, a highly regarded and experienced banker in the retail sector, also returned to the Firm.
 
Our restructuring business grew this past year, assisting companies such as Friedman's and Tweeter and working with creditor groups in Calpine and Portrait Corporation of America.  M&A related activity included advising a hedge fund investor in its acquisition of Bally Total Fitness.  Restructuring promises to be more active this year and we are working on engagements in housing and building materials as you might expect.  Brad Dietz, Barry Korn and Anders Maxwell continue to lead our business.

We had a record year in our Special Committee and Fairness Opinion practice.  The breadth of our assignments reflects heightened scrutiny of transactions and the potential for conflicts.  We provided independent fairness opinions to the Boards of Finish Line in connection with the signing of a merger agreement with Genesco, and Claire’s Stores in its sale to Apollo.  We represented the independent directors of A&P in the purchase of Pathmark Stores and S&C Electric in a stock repurchase from the founding family.  We served as advisors to the Special Committee of Guitar Center which asked us to analyze the benefits and risks of a leveraged recapitalization versus its ultimate sale to Bain Capital.  Interestingly, we delivered our first opinion to a SPAC (special purpose acquisition corporation) when Grubb & Ellis Realty Advisors purchased assets from its majority shareholder.  

Our healthcare team remains active in the evolving care management sector.  In 2007, we represented Walgreen Co. in its largest acquisition to date, the purchase of OptionCare, a provider of specialty pharmacy and infusion services.  We continue to work on a number of projects and anticipate a robust healthcare transaction market.

Our business is a rewarding and enjoyable enterprise.  We take great pride and satisfaction in knowing that we are helping our clients achieve personal and professional goals and that we have created an unambiguous culture where our only client is you.

I thank my talented colleagues.  Led by our President Ken Berliner, our Managing Directors Ken Baronoff, Diane Coffey, Marc Cooper, Andy Cowherd, Brad Dietz, Mitch Hara, Jeff Hornstein, Barry Korn, Cathy Leonhardt, Anders Maxwell, Drew Quigley and Joe Stein are experienced advisors to chief executives and owners.  Our three additional Senior Advisors – Irwin Cohen, Robert Glauber and Bob Phillips – continue to assist us and our clients with their wealth of operating and regulatory experience.

We thank you for your support and confidence in us. To learn more about us and how we can help you, please visit our web site, www.pjsolomon.com.

With best wishes,