Blue Nile, Inc. (NASDAQ:NILE) Files An 8-K Other Events

The defendants to the Delaware Action deny all allegations of
wrongful or actionable conduct asserted in the action, and the
Board of Directors vigorously maintains that it diligently
complied with its fiduciary duties, that the Definitive Proxy
Statement is complete and accurate in all material respects and
that no further disclosure is required under applicable law.
Nonetheless, the Company has determined to supplement the
Definitive Proxy Statement with the disclosures set forth below
solely to alleviate the costs, risks, distraction and
uncertainties inherent in litigation and any potential delay of
the proposed Merger. In making these supplemental disclosures,
the defendants to the Delaware Action do not in any way admit to
the factual or legal allegations therein and further reserve all
of their rights and defenses with respect thereto.

Supplemental Disclosures

Solely in connection with the Delaware Action, the Company has
determined to make these supplemental disclosures to the
Definitive Proxy Statement. This supplemental information should
be read in conjunction with the Definitive Proxy Statement, which
should be read in its entirety. Nothing herein shall be deemed an
admission of the legal necessity or materiality of any of the
disclosures set forth herein. All page references in the
information below are to pages in the Definitive Proxy Statement,
and all capitalized terms used below shall have the meanings set
forth in the Definitive Proxy Statement.

Selected Publicly Traded Companies and Selected Precedent
Transactions Analyses

The disclosure under the heading The MergerOpinion of Merrill
Lynch, Pierce, Fenner Smith Incorporated Blue Nile Financial
Analyses Selected Publicly Traded Companies Analysis on page 51
of the Definitive Proxy Statement is hereby supplemented by
amending and restating the section to read as follows:

Selected Publicly Traded Companies Analysis

BofA Merrill Lynch reviewed publicly available financial and
stock market information for Blue Nile and the following 10
publicly traded companies in the eCommerce and jewelry retail
industries:

BofA Merrill Lynch reviewed, among other things, enterprise
values of the selected publicly traded companies, calculated as
equity

values based on closing stock prices on November 4, 2016, plus
debt and preferred stock and minority interests, less cash and
cash equivalents, as a multiple of calendar year 2017 estimated
earnings adjusted to exclude the effects of stock-based
compensation expense before interest, taxes, depreciation and
amortization, commonly referred to as adjusted EBITDA. BofA
Merrill Lynch also reviewed the per share equity values of the
selected publicly traded companies, based on closing stock prices
on November 4, 2016, as a multiple of calendar year 2017
estimated cash earnings per share, and the market capitalization
of the selected publicly traded companies, based on closing stock
prices on November 4, 2016, as a multiple of calendar year 2017
estimated free cash flow. This analysis indicated the following
multiples for the selected publicly traded companies:

BofA Merrill Lynch then applied (i) a range of enterprise value
to adjusted EBITDA multiples of 7.5x to 13.5x, based on the
selected publicly traded companies, to Blue Niles calendar year
2017 estimated adjusted EBITDA; (ii) a range of price to cash
earnings per share multiples of 14.0x to 27.0x, based on the
selected publicly traded companies, to Blue Niles calendar year
2017 estimated cash earnings per share; and (iii) a range of
price to free cash flow multiples of 10.0x to 20.0x, based on the
selected publicly traded companies, to Blue Niles calendar year
2017 estimated free cash flow. Estimated financial data of the
selected publicly traded companies were based on publicly
available research analysts estimates, and estimated financial
data of Blue Nile were based on the Management Projections. This
analysis indicated the following approximate implied per share
equity value reference ranges for Blue Nile, rounded to the
nearest $0.05, as compared to the Per Share Price:

No company used in this analysis is identical or directly
comparable to Blue Nile. Accordingly, an evaluation of the
results of this analysis is not entirely mathematical. Rather,
this analysis involves complex considerations and judgments
concerning differences in financial and operating characteristics
and other factors that could affect public trading or other
values of the companies to which Blue Nile was compared.

The disclosure under the heading The MergerOpinion of Merrill
Lynch, Pierce, Fenner Smith Incorporated Blue Nile Financial
AnalysesSelected Precedent Transactions Analysis on page 52 of
the Definitive Proxy Statement is hereby supplemented by amending
and restating the section to read as follows:

Selected Precedent Transactions Analysis

BofA Merrill Lynch reviewed, to the extent publicly available,
financial information relating to the following 15 selected

transactions involving companies in the eCommerce and jewelry
retail industries:

BofA Merrill Lynch reviewed enterprise values as a multiple of
the target companys last twelve month and next twelve month
estimated revenue and adjusted EBITDA. This analysis indicated
the following multiples for the selected precedent transactions:

BofA Merrill Lynch then applied last twelve month adjusted EBITDA
multiples of 10.0x to 18.0x, derived from the selected
transactions, to Blue Niles last twelve month adjusted EBITDA as
of October 2, 2016. Estimated financial data of the selected
transactions were based on publicly available information at the
time of announcement of the relevant transaction. Estimated
financial data of Blue Nile were based on the Management
Projections. This analysis indicated the following approximate
implied per share equity value reference range for Blue Nile,
rounded to the nearest $0.05, as compared to the Per Share Price:

Implied Per Share Equity Value Reference Range for Blue Nile
>>>>>>>>>>>Per Share Price

(Based on Management Projections)

LTM Adj. EBITDA

$22.70 – $37.95 $40.75

No company, business or transaction used in this analysis is
identical or directly comparable to Blue Nile or the Merger.
Accordingly, an evaluation of the results of this analysis is not
entirely mathematical. Rather, this analysis involves complex
considerations and judgments concerning differences in financial
and operating characteristics and other factors that could affect
the acquisition or other values of the companies, business
segments or transactions to which Blue Nile and the Merger were
compared.

Management Projections

The disclosure under the heading The Merger Management
ProjectionsManagement Projections on page 56 of the Definitive
Proxy Statement is hereby supplemented by amending and restating
the section to read as follows:

Management Projections

Note: Revenue, Gross Profit, GAAP Net Income, GAAP EPS and
Adjusted EBITDA were provided by management. Cash Net Income and
Cash EPS were calculated with the Board of Directors
authorization from management models. See the reconciliation of
the differences between Cash Net Income, Adjusted EBITDA and Cash
EPS from the comparable GAAP measures in the section
Reconciliation of Non-GAAP Metrics below.

Unlevered Free Cash Flows

In addition to the Management Projections, certain projections of
Blue Niles unlevered free cash flows related to the Management
Projections were provided to Blue Niles financial advisor for the
purpose of performing its financial analyses. The unlevered free
cash flows related to the Management Projections were derived at
the direction of and approved by Blue Nile from the Management
Projections, taking into account certain cash flow items related
to changes in working capital, capital expenditures and
stock-based compensation expense provided by Blue Nile
management. The Board of Directors instructed Blue Niles
financial advisor to use the unlevered free cash flows related to
the Management Projections for purposes of its financial analysis
and opinion.

The following table presents in summary form the projected
unlevered free cash flows related to the Management Projections.

The disclosure under the headings The Merger Management
ProjectionsSensitivity CasesDownside Case and The Merger
Management ProjectionsSensitivity CasesUpside Caseon page 57 of
the Definitive Proxy Statement is hereby supplemented by amending
and restating the section to read as follows:

Downside Case

Note: Revenue, Gross Profit, GAAP Net Income, GAAP EPS and
Adjusted EBITDA were provided by management. Cash Net Income and
Cash EPS were calculated with the Board of Directors
authorization, from management models. See the reconciliation of
the differences between Cash Net Income, Adjusted EBITDA and Cash
EPS from the comparable GAAP measures in the section
Reconciliation of Non-GAAP Metrics below.

Upside Case

Note: Revenue, Gross Profit, GAAP Net Income, GAAP EPS and
Adjusted EBITDA were provided by management. Cash Net Income and
Cash EPS were calculated with the Board of Directors
authorization, from management models. See the reconciliation of
the differences between Cash Net Income, Adjusted EBITDA and Cash
EPS from the comparable GAAP measures in the section
Reconciliation of Non-GAAP Metrics below.

Unlevered Free Cash Flows

In addition to the Sensitivity Cases, certain projections of Blue
Niles unlevered free cash flows related to the Sensitivity Cases
were provided to Blue Niles financial advisor, and were derived
at the direction of and approved by Blue Nile from the
Sensitivity Cases, taking into account certain cash flow items in
the Sensitivity Cases related to changes in working capital,
capital expenditures and stock-based compensation expense
provided by Blue Nile management. The unlevered free cash flows
related to the Sensitivity Cases were provided for illustrative
purposes only, and, at the direction of Blue Nile, Blue Niles
financial advisor did not use or rely on the unlevered free cash
flows related to the Sensitivity Cases for purposes of its
financial analysis or opinion.

The following table presents in summary form the projected
unlevered free cash flows related to the Sensitivity Cases.

Additional Information and Where to Find It

Blue Nile filed the Definitive Proxy Statement with the SEC on
December 28, 2016. This Definitive Proxy Statement contains
important information about the proposed Merger and related
matters. INVESTORS AND STOCKHOLDERS ARE URGED TO READ THE
DEFINITIVE PROXY STATEMENT CAREFULLY. Investors and stockholders
may obtain free copies of these documents and other documents
filed with the SEC by Blue Nile through the website maintained by
the SEC at www.sec.gov. In addition, investors and stockholders
may obtain free copies of these documents from Blue Nile by
contacting Blue Niles Investor Relations by e-mail at
investor@bluenile.com, or by going to Blue Niles Investor
Relations page on its corporate web site at
http://investor.bluenile.com and clicking on the link titled SEC
Filings under the Financials Filings heading.

Participants in the Solicitation>

Blue Nile and certain of its directors, executive officers, and
certain other members of management and employees of Blue Nile
may be deemed to be participants in the solicitation of proxies
from the stockholders of Blue Nile in connection with the
proposed Merger. Information regarding these individuals and
other persons who may be deemed to be participants in the
solicitation of proxies, as well as any interests they may have
in the transaction described herein, are included in the
Definitive Proxy Statement described above. Additional
information regarding Blue Niles directors and executive officers
is also included in Blue Niles proxy statement for its 2016
Annual Meeting of Stockholders, which was filed with the SEC on
April 15, 2016. These documents are available free of charge as
described in the preceding paragraph.

Legal Notice Regarding Forward-Looking Statements

This information contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934 with respect to the
proposed transaction between Blue Nile and BC Cyan Parent Inc.,
including statements regarding the benefits of the transaction,
the anticipated timing of the transaction, the expected closing
of the proposed Merger and future performance and plans of Blue
Nile. In some cases, you can identify forward-looking statements
by terms such as would, could, may, will, should, expect, intend,
plan, anticipate, believe, estimate, might, predict, potential,
targets, seek, or continue, the negative of these terms or other
variations of such terms. These forward-looking statements
involve certain risks and uncertainties that could cause actual
results to differ materially from those indicated in such
forward-looking statements, including, but not limited to, the
ability to obtain approval of Blue Niles stockholders, the
ability to obtain required regulatory approvals, the ability of
the parties to satisfy other conditions to the consummation of
the proposed Merger, the occurrence of any event, change or other
circumstance that could give rise to the termination of the
merger agreement, the risk that the transaction may involve
unexpected costs, liabilities or delays and such other risks as
identified in Blue Niles Annual Report on Form 10-K for the
fiscal year ended January 3, 2016, Quarterly Report on Form 10-Q
for the fiscal quarter ended October 2, 2016, Quarterly Report on
Form 10-Q for the fiscal quarter ended April 3, 2016 and
Quarterly Report on Form 10-Q for the fiscal quarter ended July
3, 2016, each as filed with the SEC, which contain and identify
important factors that could cause the actual results to differ
materially from those contained in the forward-looking
statements. While Blue Nile may elect to update forward-looking
statements at some point in the future, Blue Nile specifically
disclaims any obligation to update the forward-looking statements
provided to reflect any change in its expectations or any change
in events, conditions or circumstances on which any such

statement is based, and, therefore, you should not rely on these
forward-looking statements as representing Blue Niles views as of
any date subsequent to today.