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GIBSON OUTLINES 'OVERWHELMING ANTITRUST PROBLEMS' THAT WOULD EMERGE FROM MERGER DISCUSSIONS WITH RIVAL

CINCINNATI, March 7 /PRNewswire/ -- Gibson Greetings, Inc. (Nasdaq-NNM: GIBG) today announced that its legal advisors have prepared a detailed "white paper" outlining the overwhelming antitrust problems associated with the unsolicited merger proposal from its rival in the greeting cards industry, American Greetings Corporation. As previously announced, Gibson has rejected merger negotiations with American Greetings on the basis of these overwhelming antitrust problems.

The "white paper", which was prepared by leading antitrust experts at Skadden, Arps, Slate, Meagher & Flom and Taft, Stettinius & Hollister, notes that a combination of Gibson and American Greetings would likely be the world's largest greeting card company, controlling nearly 50 percent of the almost $6 billion U.S. market for greeting cards. Such a firm, in addition to Hallmark, would control almost 90 percent of this market, dwarfing the next largest firm -- which would be 20 times smaller.

The document concludes, "Gibson Greetings believes that American Greetings is fully aware that its proposed acquisition of Gibson Greetings could never pass federal or state antitrust scrutiny. Instead, Gibson Greetings believes that American Greetings is engaged in a cynical marketplace maneuver designed to weaken Gibson Greetings' ability to secure additional American Greetings accounts and to hold those it currently supplies."

Gibson Greetings, Inc. is the world's second largest publicly owned manufacturer and distributor of everyday and seasonal greeting cards, gift wrap and related social expression products.

The complete text of the "white paper" follows:
 March 7, 1996
 AMERICAN GREETINGS' PROPOSAL TO ACQUIRE GIBSON GREETINGS
 WOULD VIOLATE THE ANTITRUST LAWS


American Greetings' proposal to acquire Gibson Greetings would likely create the world's largest greeting card company, which would possess nearly 50% of the almost $6 billion U.S. market for greeting cards. That firm, plus Hallmark, would control almost 90% of this market, dwarfing the next largest firm -- which would be 20 times smaller. It is not surprising, therefore, that American Greetings cannot present a sensible proposal for obtaining antitrust agency approval for its proposed acquisition of Gibson.

* The combined market shares of American Greetings and Gibson

Greetings are at levels that the Government presumes are likely to

result in anticompetitive effects.

The U.S. greeting cards market is a highly concentrated tri-opoly of three firms: American Greetings, Gibson Greetings and Hallmark. These three firms have dominated the U.S. greeting cards industry for decades. The proposed transaction would further concentrate the industry by creating a duopoly market structure.

On the basis of published industry data on the total sales of greeting cards at retail in 1994 (the latest year for which such information is available), the change in the Herfindahl-Hirschman Index (HHI), the index used by the antitrust enforcement agencies to measure market concentration, is dramatic and results in extremely concentrated markets. The HHI levels are far higher than the levels at which the Merger Guidelines of the Federal Trade Commission and the Department of Justice state that these agencies are likely to challenge a transaction.

The HHI resulting from an acquisition of Gibson Greetings by American Greetings would be at least 3790, an increase of 785 from its pre-acquisition level. The Merger Guidelines state that mergers producing an increase in the HHI of more than 50 points and that result in an HHI level of more than 1800 "raise significant competitive concerns," and that an increase of more than 100 points creates a presumption that the merger will create or enhance market power.

In specific greeting card market segments that might be scrutinized by the antitrust enforcement agencies, the HHI figures produce an even stronger presumption of a violation, as follows:
 Resulting HHI
 Market HHI Increase
 Drug Store Channel 4575 640
 Supermarket Channel less than 5000 1800


Mass Merchandiser/
 Discounter Channel less than 3700 less than 800
 Deep Discounter Channel 5800 less than 2800
 "Other Retail" Channel less than 4000 385
 * The government is likely to focus on greeting cards or
 narrower product markets.


The antitrust enforcement agencies are most likely to consider greeting card sales in the United States to be the relevant market for purposes of analyzing the effect of an American Greetings acquisition of Gibson Greetings. Greeting cards are a mature market, recognized by the industry, and there do not appear to be any reasonable substitutes for greeting cards to which current consumers would likely turn in response to small but significant price increases or reduced quality. Furthermore, the three major greeting card firms are all full service suppliers for all occasions and sentiments and, accordingly, the appropriate market in which to measure antitrust effects is the full- line greeting card market.

In fact, American Greetings and Gibson Greetings are even closer competitors than their overall market shares would indicate. These two companies compete much more strongly in the mass merchandiser, supermarket and chain store distribution channels and are the two closest competitors outside of the specialty store channel that is dominated by Hallmark.

The channels in which American Greetings and Gibson Greetings are closest competitors are precisely the channels of distribution that are of increasing competitive significance. In 1980, most greeting cards sold in the United States were sold through card and gift shops, which are Hallmark's historical strength. In contrast, that channel shrank to less than one-third of the market by 1995, with the substantial majority of sales now being made through mass merchandisers, supermarkets and chain store channels.

In these channels, competition between American Greetings and Gibson Greetings is particularly intense. For example, within the last year, American Greetings and Gibson Greetings competed for the business of all five retail divisions of Ahold -- Gibson Greetings took away from American Greetings the business from Ahold's Tops division and Gibson was only able to retain the business of Ahold's other four retail divisions by offering substantial discounts and upfront payments. Similarly, Gibson Greetings recently lost the campaign for a contract with Hannaford Brothers, a food distribution and supermarket operator, to American Greetings, with American Greetings making a substantial upfront discount and payment to the retailer. Within the last few years, Gibson Greetings has either taken business from or lost business to American Greetings in a wide variety of retail settings, including such retail giants as Winn-Dixie, K-Mart, Wal-Mart and Michael's Craft Stores.

The harm to consumers, which the loss of the significant competition that currently exists between American Greetings and Gibson Greetings will cause, has already begun. Gibson has been told by some of its customers that American has warned it will reduce its discount offers to these customers if it succeeds in acquiring Gibson. American could only successfully reduce its discounts by eliminating Gibson Greetings' competition.
 * There are substantial barriers that prevent
 competitively meaningful new entry into the greeting
 card market.


The substantial competition lost by the proposed acquisition of Gibson Greetings by American Greetings will not be mitigated by the entry or expansion of other firms. While there are many small manufacturers of greeting cards, these small players have had virtually no effect on the competitive practices of the three large firms. Smaller firms simply lack the scale and scope necessary to take significant market share away from the largest three firms. Smaller greeting card companies, not part of the strong three-firm oligopoly that dominates the industry, are not capable of supplying the prime mass merchandising channels of distribution in which American Greetings and Gibson Greetings compete, because they lack the size and resources necessary to provide the upfront payments these retailers require, lack the resources to manage the category on behalf of retailers who may have hundreds or thousands of outlets, and do not offer a full range of social expression products. Even Hallmark, which is a participant in these channels of distribution, focuses mainly on its card shop source of distribution and must carefully manage its supply to these other retail channels to avoid cannibalization of its card shop business.

In the competition for accounts with major retailers, greeting card companies pay substantial up-front allowances to obtain the contracts. As of December 31, 1995, for example, Gibson Greetings had $77.3 million in prepaid and deferred sales agreement costs and $26.2 million in liabilities for future sales agreement payments. Smaller firms on the "competitive fringe" of the greeting cards industry do not have the size necessary to make sufficient advances of this magnitude.

Major retailers also demand that their greeting card suppliers provide merchandising services that cannot be supplied by smaller fringe firms. Major greeting cards companies design and provide all retailer fixtures. They plan and manage the layout of the greeting cards sections for their larger retailer customers, and provide efficient computer response systems for major retailers. The gross value before the reserve for depreciation of fixtures installed at Gibson Greetings' customers was $80.2 million at December 31, 1995. Moreover, the three large greeting card firms maintain a staff of merchandisers to maintain, restock, control the inventory, and organize the greeting cards sections of major retailers -- sometimes providing one full-time employee for each retail store. At December 31, 1995, Gibson Greetings had approximately 5,200 merchandisers. Smaller fringe greeting card firms lack the ability to support major retailers, who may require these services to be provided simultaneously for hundreds of stores nationwide.

Entry or expansion is made substantially more difficult by the prevalence of minimum three-year long supply agreements. Most large retailers have long-term exclusive or primary supply contracts with one of the three dominant greeting cards firms that preclude significant new entry in competition with existing suppliers. Contracts that do not have exclusivity or primary supply provisions frequently have volume requirements that similarly deter new competition.
 * Divesture would not likely resolve the antitrust issues.


In some transactions, a divestiture of assets can ameliorate the antitrust problems raised by a proposed transaction. No such antitrust "fix" is possible here.

In the first place, most of Gibson Greetings' cards are manufactured at a single facility outside of Cincinnati, Ohio. An acquisition of Gibson Greetings with a resulting divestiture of that facility by American Greetings would make little business or economic sense. More importantly, however, divestiture is not a practical alternative because of the need to create new marketing and distribution capabilities in order for the divested properties to be viable competitors. With the high level of up-front payments, fixture investments and merchandiser infrastructure required to compete in this market, a divestiture of assets does nothing to enable a competitor to replace the competition lost by the acquisition of Gibson. Divestiture is also not a practical solution where it will not remedy the lessening of future competition in a given market.
 * Why then is American Greetings pursuing Gibson Greetings
 so aggressively?


Gibson Greetings believes that American Greetings is fully aware that its proposed acquisition of Gibson Greetings could never pass federal or state antitrust scrutiny. Instead, Gibson Greetings believes that American Greetings is engaged in a cynical marketplace maneuver designed to weaken Gibson Greetings' ability to secure additional American Greetings accounts and to hold those it currently supplies. If American Greetings can create sufficient uncertainty about Gibson Greetings' survival as an independent market force, it hopes to be able to convince major mass merchants that they should do business with American Greetings, instead. Accordingly, Gibson Greetings intends to move swiftly to take all appropriate steps to cause American Greetings to terminate its campaign to undermine Gibson Greetings.
 -0- 3/7/96


/CONTACT: W. L. Flaherty, Senior Vice President - Finance, 513-841-6675, or Karen Durand, Director - Investor Relations, 513-841-6986, both of Gibson Greetings/

(GIBG)

CO: Gibson Greetings; American Greetings ST: Ohio IN: HOU REA SU:

CS-TC -- CLTH036 -- 1389 03/07/96 18:33 EST
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