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Alco Stores Inc – ‘PREM14A’ for 9/30/13

On:  Thursday, 8/15/13, at 5:29pm ET   ·   For:  9/30/13   ·   Accession #:  1047469-13-8488   ·   File #:  1-35911

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 8/15/13  Alco Stores Inc                   PREM14A     9/30/13    1:1.5M                                   Merrill Corp/New/FA

Document/Exhibit                   Description                      Pages   Size 

 1: PREM14A     Preliminary Proxy Solicitation Material -- Merger   HTML   1.39M 
                          or Acquisition                                         

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.          )

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PRELIMINARY PROXY STATEMENT—SUBJECT TO COMPLETION

DATED [    •    ], 2013

[    •    ], 2013

Dear Stockholder:

        You are cordially invited to attend a special meeting of stockholders of ALCO Stores, Inc. to be held on [    •    ], 2013 at the Royal Oaks Country Club, 7915 Greenville Avenue, Dallas, Texas 75231, at [    •    ], Central time.

        At the special meeting, you will be asked to consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated July 25, 2013, as amended, by and among ALCO Stores, Inc., Mallard Parent, LLC, or Parent, and M Acquisition Corporation, or Merger Sub, a wholly owned subsidiary of Parent. Parent and Merger Sub are entities that are affiliated with Argonne Capital Group LLC. Pursuant to the terms of the merger agreement, Merger Sub will merge with and into ALCO Stores, and ALCO Stores will become a wholly owned subsidiary of Parent. You will also be asked to consider and vote on a non-binding, advisory proposal to approve compensation that will or may become payable by ALCO Stores to its named executive officers in connection with the merger.

        If the merger contemplated by the merger agreement is completed, you will be entitled to receive $14.00 in cash, without interest, for each share of our common stock owned by you (unless you have properly exercised your appraisal rights with respect to such shares), which represents a premium of approximately 63% to ALCO Stores' closing stock price on July 24, 2013, the last trading day prior to ALCO Stores' announcement of the transactions contemplated by the merger agreement.

        ALCO Stores' Board of Directors, by the affirmative vote of all of its independent members (our sole director that is also a member of management, Richard E. Wilson, ALCO Stores' President and Chief Executive Officer, abstained), after considering factors more fully described in this proxy statement has determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger, are advisable and in the best interests of ALCO Stores and our stockholders, has declared advisable the merger agreement and has adopted and approved the merger agreement and the transactions contemplated by the merger agreement, including the merger. The Board of Directors recommends that you vote

•

"FOR" the adoption of the merger agreement, as amended;



•

"FOR" the non-binding, advisory proposal to approve compensation that will or may become payable by ALCO Stores to its named executive officers in connection with the merger; and



•

"FOR" the adjournment of the special meeting, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.

        The enclosed proxy statement provides detailed information about the special meeting, the merger agreement and the merger. A copy of the merger agreement, and amendment thereto, is attached as Annex A to the proxy statement. The proxy statement also describes the actions and determinations of our Board of Directors in connection with its evaluation of the merger agreement and the merger. We encourage you to read the proxy statement and its annexes, including the merger agreement, carefully and in their entirety. You may also obtain more information about ALCO Stores from documents we file with the Securities and Exchange Commission from time to time. On or about [    •    ], 2013, we will begin mailing our proxy materials.

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        Whether or not you plan to attend the special meeting in person, please complete, sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the Internet or by telephone. If you attend the special meeting and vote in person by ballot, your vote will revoke any proxy that you have previously submitted. If you hold your shares in "street name," you should instruct your broker how to vote in accordance with the voting instruction form you will receive from your bank, broker or other nominee.

        Your vote is very important, regardless of the number of shares that you own. We cannot complete the merger unless the holders of at least a majority of the outstanding shares of our common stock vote to approve the proposal to adopt the merger agreement. The failure of any stockholder to vote in person by ballot at the special meeting, to submit a signed proxy card or to grant a proxy electronically over the Internet or by telephone will have the same effect as a vote "AGAINST" the proposal to adopt the merger agreement. If you hold your shares in "street name," the failure to instruct your bank, broker or other nominee how to vote your shares will have the same effect as a vote "AGAINST" the proposal to adopt the merger agreement.

        If you have any questions or need assistance voting your shares of our common stock, please contact Georgeson Inc., our proxy solicitor, by calling (800) 314-4549 (toll-free).

        On behalf of our Board of Directors, I thank you for your support and appreciate your consideration of this matter.

        Neither the U.S. Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved of the transactions described in this document, including the merger, or determined if the information contained in this document is accurate or adequate. Any representation to the contrary is a criminal offense.

        The accompanying proxy statement is dated [    •    ], 2013 and, together with the enclosed form of proxy card, is first being mailed to stockholders of ALCO Stores on or about [    •    ], 2013.

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PRELIMINARY PROXY STATEMENT—SUBJECT TO COMPLETION

DATED [    •    ], 2013

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

YOUR VOTE IS VERY IMPORTANT. PLEASE VOTE YOUR SHARES PROMPTLY.

        Notice is hereby given that a special meeting of stockholders of ALCO Stores, Inc., a Kansas corporation, will be held on [    •    ], 2013 at Royal Oaks Country Club, 7915 Greenville Avenue, Dallas, Texas 75231, at [    •    ], Central time, for the following purposes:

1.

To consider and vote on the proposal to adopt the Agreement and Plan of Merger, dated July 25, 2013, as amended (referred to as the merger agreement) by and among ALCO Stores, Inc., Mallard Parent, LLC, or Parent, and M Acquisition Corporation, or Merger Sub, a wholly owned subsidiary of Parent, as it may be amended from time to time (a copy of the merger agreement, as amended, is attached as Annex A to the proxy statement accompanying this notice);



2.

To consider and vote on a non-binding, advisory proposal to approve compensation that will or may become payable by ALCO Stores to its named executive officers in connection with the merger;



3.

To consider and vote on any proposal to adjourn the special meeting to a later date or dates, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting; and



4.

To transact any other business that may properly come before the special meeting or any adjournment or postponement of the special meeting.

        The affirmative vote of the holders of a majority of the outstanding shares of our common stock is required to adopt the merger agreement. Approval, by non-binding, advisory vote, of compensation that will or may become payable by ALCO Stores to its named executive officers in connection with the merger requires the affirmative vote of a majority of those shares of common stock represented in person or by proxy and voting on the proposal. Approval of the proposal to adjourn the special meeting, whether or not a quorum is present, requires the affirmative vote of the majority of the voting power of the shares of common stock represented either in person or by proxy at the special meeting. The failure of any stockholder of record to submit a signed proxy card, grant a proxy electronically over the Internet or by telephone or to vote in person by ballot at the special meeting will have the same effect as a vote "AGAINST" the proposal to adopt the merger agreement but will not have any effect on the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by ALCO Stores to its named executive officers in connection with the merger and the adjournment proposal. If you hold your shares in "street name," the failure to instruct your bank, broker or other nominee how to vote your shares will have the same effect as a vote "AGAINST" the proposal to adopt the merger agreement but will not have any effect on the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by ALCO Stores to its named executive officers in connection with the merger and the adjournment proposal. Abstentions will have the same effect as a vote "AGAINST" the proposal to adopt the merger agreement, the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by ALCO Stores to its named executive officers in connection with the merger and the adjournment proposal.

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        All shares represented by properly executed proxies received in time for the special meeting will be voted at the special meeting in accordance with the instructions of the stockholder. Properly executed proxies that do not contain voting instructions will be voted "FOR" adoption of the merger agreement, "FOR" the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by ALCO Stores to its named executive officers in connection with the merger and "FOR" the adjournment of the special meeting, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting. No proxy that is specifically marked against adoption of the merger agreement will be voted in favor of the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by ALCO Stores to its named executive officers in connection with the merger, unless it is specifically marked "FOR" the approval of the proposal.

        Only stockholders of record as of the close of business on [    •    ], 2013 are entitled to notice of the special meeting and to vote at the special meeting or at any adjournment or postponement thereof. A list of stockholders entitled to vote at the special meeting will be available in our principal executive offices located at 751 Freeport Parkway, Coppell, Texas 75019, during regular business hours for a period of no less than ten days before the special meeting and at the place of the special meeting during the meeting.

        Stockholders who do not vote in favor of the proposal to adopt the merger agreement will have the right to seek appraisal of the fair value of their shares of ALCO Stores common stock if they deliver a demand for appraisal before the vote is taken on the merger agreement and comply with all the requirements of Kansas law, which are summarized herein and reproduced in their entirety in Annex C to the accompanying proxy statement.

        The Board of Directors recommends that you vote "FOR" the adoption of the merger agreement, "FOR" the non-binding, advisory proposal regarding compensation that will or may become payable by ALCO Stores to its named executive officers in connection with the merger and "FOR" the adjournment of the special meeting (if necessary or appropriate). In considering the recommendation of the Board of Directors, stockholders of ALCO Stores should be aware that members of the Board of Directors and its executive officers have agreements and arrangements that provide them with interests in the merger that may be different from, or in addition to, those of ALCO Stores stockholders. See "The Merger—Interests of the Directors and Executive Officers of ALCO Stores in the Merger."

Dated: [    •    ], 2013

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YOUR VOTE IS IMPORTANT

        WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING IN PERSON, WE ENCOURAGE YOU TO SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE (1) BY TELEPHONE (2) THROUGH THE INTERNET OR (3) BY MARKING, SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE POSTAGE-PAID ENVELOPE PROVIDED. You may revoke your proxy or change your vote at any time before the special meeting. If your shares are held in the name of a bank, broker or other nominee, please follow the instructions on the voting instruction card furnished to you by such bank, broker or other nominee, which is considered the stockholder of record, in order to vote. As a beneficial owner, you have the right to direct your broker or other agent on how to vote the shares in your account. Your broker or other agent cannot vote on any of the proposals, including the proposal to adopt the merger agreement, without your instructions.

        If you fail to return your proxy card, grant your proxy electronically over the Internet or by telephone or vote by ballot in person at the special meeting, your shares will not be counted for purposes of determining whether a quorum is present at the special meeting. If you are a stockholder of record, voting in person by ballot at the special meeting will revoke any proxy that you previously submitted. If you hold your shares through a bank, broker or other nominee, you must obtain from the record holder a valid proxy issued in your name in order to vote in person at the special meeting.

        We encourage you to read the accompanying proxy statement, including all documents incorporated by reference into the accompanying proxy statement, and its annexes carefully and in their entirety. If you have any questions concerning the merger, the special meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of common stock, please contact our proxy solicitor:

Georgeson Inc.
480 Washington Blvd., 26^th Floor
Jersey City, NJ 07310
Stockholders, call toll-free: (800) 314-4549

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Annexes

Annex A    Agreement and Plan of Merger, as Amended

Annex B    Opinion of ALCO Stores' Financial Advisor

Annex C    Section 17-6712 of the Kansas Statutes Annotated

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QUESTIONS AND ANSWERS

        The following questions and answers are intended to address some commonly asked questions regarding the merger, the merger agreement and the special meeting. These questions and answers may not address all questions that may be important to you as an ALCO Stores stockholder. We encourage you to read carefully the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents we refer to in this proxy statement. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under "Where You Can Find More Information" beginning on page 98.

Q:

Why am I receiving these materials?

A:

The Board of Directors is furnishing this proxy statement and form of proxy card to the holders of ALCO Stores common stock in connection with the solicitation of proxies to be voted at a special meeting of stockholders or at any adjournments or postponements of the special meeting.

Q:

When and where is the special meeting?

A:

The special meeting will take place on [    •    ], 2013 at Royal Oaks Country Club, 7915 Greenville Avenue, Dallas, Texas 75231, at [    •    ], Central time.

Q:

Who is entitled to vote at the special meeting?

A:

Only stockholders of record as of the close of business on [    •    ], 2013 are entitled to notice of the special meeting and to vote at the special meeting or at any adjournment or postponement thereof. Each holder of ALCO Stores common stock is entitled to cast one vote on each matter properly brought before the special meeting for each share of ALCO Stores common stock that such holder owned as of the record date.

Q:

May I attend the special meeting and vote in person?

A:

Yes. All stockholders as of the record date may attend the special meeting and vote in person. Stockholders will need to present proof of ownership of ALCO Stores common stock, such as a bank or brokerage account statement, and a form of personal identification to be admitted to the special meeting. No cameras, recording equipment, electronic devices, large bags, briefcases or packages will be permitted in the special meeting. Even if you plan to attend the special meeting in person, we encourage you to complete, sign, date and return the enclosed proxy or vote electronically over the Internet or via telephone to ensure that your shares will be represented at the special meeting. If you attend the special meeting and vote in person, your vote by ballot will revoke any proxy previously submitted. If you hold your shares in "street name," because you are not the stockholder of record, you may not vote your shares in person at the special meeting unless you request and obtain a valid proxy from your bank, broker or other nominee.

Q:

What am I being asked to vote on at the special meeting?

A:

You are being asked to vote on the following proposals:

•

To adopt the merger agreement, pursuant to which Merger Sub will merge with and into ALCO Stores, and ALCO Stores will become a wholly owned subsidiary of Parent;

•

To approve, by non-binding, advisory vote, compensation that will or may become payable by ALCO Stores to its named executive officers in connection with the merger; and

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•

To approve the adjournment of the special meeting to a later date or dates, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.

Q:

What is the proposed merger and what effects will it have on ALCO Stores?

A:

In the proposed merger, Merger Sub will be merged with and into ALCO Stores, and ALCO Stores will continue as the surviving corporation and become a wholly owned subsidiary of Parent, pursuant to the merger agreement. If the proposal to adopt the merger agreement is approved by the holders of ALCO Stores common stock and the other closing conditions under the merger agreement have been satisfied or waived, Merger Sub will merge with and into ALCO Stores, with ALCO Stores continuing as the surviving corporation. As a result of the merger, ALCO Stores will become a wholly owned subsidiary of Parent, and ALCO Stores common stock will no longer be publicly traded. In addition, ALCO Stores common stock will be delisted from the NASDAQ and deregistered under the Securities Exchange Act of 1934, as amended, and we will no longer file periodic reports with the SEC on account of ALCO Stores common stock.

Q:

What will I receive if the merger is completed?

A:

Upon completion of the merger, you will be entitled to receive the per share merger consideration of $14.00 in cash, without interest, for each share of common stock that you own, unless you have properly exercised and not withdrawn your appraisal rights under the K.S.A. with respect to such shares. For example, if you own 100 shares of common stock, you will receive $1,400.00 in cash in exchange for your shares of common stock, less any applicable withholding taxes. In either case, your shares will be canceled and you will not own shares in the surviving corporation.

Q:

How does the per share merger consideration compare to the market price of ALCO Stores common stock prior to ALCO Stores' announcement of the merger?

A:

The $14.00 per share merger consideration represents a premium of approximately 63% to ALCO Stores' closing stock price on July 24, 2013, the last trading day prior to ALCO Stores' announcement of the merger, which was $8.58.

Q:

What do I need to do now?

A:

We encourage you to read this proxy statement, the annexes to this proxy statement and the documents we refer to in this proxy statement carefully and consider how the merger affects you. Then complete, sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying reply envelope or grant your proxy electronically over the Internet or by telephone, so that your shares can be voted at the special meeting. If you hold your shares in "street name," please refer to the voting instruction forms provided by your bank, broker or other nominee to vote your shares. Please do not send your stock certificates with your proxy card.

Q:

Should I send in my stock certificates now?

A:

No. Once the merger is completed, under the terms of the merger agreement, you will receive shortly thereafter a letter of transmittal instructing you to send your stock certificates to the paying agent in order to receive the cash payment of the merger consideration for each share of ALCO Stores common stock represented by the stock certificates. You should use the letter of transmittal to exchange your stock certificates for the cash payment to which you are entitled upon completion of the merger. Please do not send in your stock certificates now.

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Q:

What happens if I sell or otherwise transfer my shares of ALCO Stores common stock after the record date but before the special meeting?

A:

The record date for the special meeting is earlier than the date of the special meeting and the date the merger is expected to be completed. If you sell or transfer your shares of ALCO Stores common stock after the record date but before the special meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you sell or otherwise transfer your shares and each of you notifies ALCO Stores in writing of such special arrangements, you will transfer the right to receive the merger consideration, if the merger is completed, to the person to whom you sell or transfer your shares of ALCO Stores common stock, but you will retain your right to vote these shares at the special meeting. Even if you sell or otherwise transfer your shares of common stock after the record date, we encourage you to complete, date, sign and return the enclosed proxy card or vote via the Internet or telephone.

Q:

How does ALCO Stores' Board of Directors recommend that I vote?

A:

The Board of Directors, by the affirmative vote of all of its independent members (our sole director that is also a member of management, Richard E. Wilson, ALCO Stores' President and Chief Executive Officer, abstained), after considering the various factors described under "The Merger—Recommendation of Our Board of Directors and Reasons for the Merger," the comprehensive sale process conducted by the Board of Directors and the alternatives to the merger (including remaining as an independent public company), has determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger, are advisable and in the best interests of, ALCO Stores and our stockholders, has declared advisable the merger agreement and has adopted and approved the merger agreement and the transactions contemplated by the merger agreement, including the merger.

The Board of Directors recommends that you vote "FOR" the adoption of the merger agreement, "FOR" the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by ALCO Stores to its named executive officers in connection with the merger and "FOR" the adjournment of the special meeting, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.

Q:

What happens if the merger is not completed?

A:

If the merger agreement is not adopted by ALCO Stores stockholders or if the merger is not completed for any other reason, ALCO Stores stockholders will not receive any payment for their shares of common stock. Instead, ALCO Stores will remain an independent public company, the common stock will continue to be listed and traded on the NASDAQ and registered under the Exchange Act and we will continue to file periodic reports with the SEC on account of ALCO Stores common stock.

Under specified circumstances, ALCO Stores may be required to reimburse Parent's expenses or pay Parent a termination fee, or may be entitled to receive a reverse termination fee from Parent, upon the termination of the merger agreement, as described under "The Merger Agreement—Termination Fees" beginning on page 89 and "The Merger Agreement—Expense Reimbursement" beginning on page 90.

Q:

Do any of ALCO Stores' directors or officers have interests in the merger that may differ from those of ALCO Stores stockholders generally?

A:

Yes. In considering the recommendation of the Board of Directors with respect to the proposal to adopt the merger agreement, you should be aware that our directors and executive officers may

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have interests in the merger that are different from, or in addition to, the interests of our stockholders generally. The Board was aware of and considered these interests, to the extent such interests existed at the time, among other matters, in evaluating and negotiating the merger agreement and the merger, in approving the merger agreement and the merger, and in recommending that the merger agreement be adopted by the stockholders of ALCO Stores. For a description of the interests of our directors and executive officers in the merger, see "The Merger—Interests of the Directors and Executive Officers of ALCO Stores in the Merger" beginning on page 59.

Q:

What vote is required to adopt the merger agreement?

A:

The affirmative vote of the holders of a majority of the outstanding shares of ALCO Stores common stock is required to adopt the merger agreement.

The failure of any stockholder of record to submit a signed proxy card, grant a proxy electronically over the Internet or by telephone or to vote in person by ballot at the special meeting will have the same effect as a vote "AGAINST" the proposal to adopt the merger agreement. If you hold your shares in "street name," the failure to instruct your bank, broker or other nominee how to vote your shares will have the same effect as a vote "AGAINST" the proposal to adopt the merger agreement. Abstentions will have the same effect as a vote "AGAINST" the proposal to adopt the merger agreement.

As of [    •    ], 2013, the record date for determining who is entitled to vote at the special meeting, there were approximately [    •    ] shares of ALCO Stores common stock issued and outstanding. Each holder of ALCO Stores common stock is entitled to one vote per share of stock owned by such holder as of the record date.

Q:

What vote is required to approve, by non-binding, advisory vote, compensation that will or may become payable by ALCO Stores to its named executive officers in connection with the merger and to approve any proposal to adjourn the special meeting to a later date, if necessary or appropriate, including to solicit additional proxies?

A:

Approval, by non-binding, advisory vote, of compensation that will or may become payable by ALCO Stores to its named executive officers in connection with the merger requires the affirmative vote of a majority of those shares of common stock represented in person or by proxy and voting upon on the proposal. Approval of the proposal to adjourn the special meeting, whether or not a quorum is present, requires the affirmative vote of the majority of the voting power of the shares of common stock represented either in person or by proxy at the special meeting.

The failure of any stockholder of record to submit a signed proxy card, grant a proxy electronically over the Internet or by telephone or to vote in person by ballot at the special meeting will not have any effect on the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by ALCO Stores to its named executive officers in connection with the merger or the adjournment proposal. If you hold your shares in "street name," the failure to instruct your bank, broker or other nominee how to vote your shares will not have any effect on the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by ALCO Stores to its named executive officers in connection with the merger and the adjournment proposal. Abstentions will have the same effect as a vote "AGAINST" the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by ALCO Stores to its named executive officers in connection with the merger and the adjournment proposal.

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All shares represented by properly executed proxies received in time for the special meeting will be voted at the special meeting in accordance with the instructions of the stockholder. Properly executed proxies that do not contain voting instructions will be voted "FOR" adoption of the merger agreement, "FOR" the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by ALCO Stores to its named executive officers in connection with the merger and "FOR" the adjournment of the special meeting, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting. No proxy that is specifically marked against adoption of the merger agreement will be voted in favor of the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by ALCO Stores to its named executive officers in connection with the merger, unless it is specifically marked "FOR" the approval of the proposal.

Q:

What is the difference between holding shares as a stockholder of record and as a beneficial owner?

A:

If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., which we refer to as Computershare, you are considered, with respect to those shares, to be the "stockholder of record." In this case, this proxy statement and your proxy card have been sent directly to you by ALCO Stores.

If your shares are held through a bank, broker or other nominee, you are considered the "beneficial owner" of the shares of ALCO Stores common stock held in "street name." In that case, this proxy statement has been forwarded to you by your bank, broker or other nominee who is considered, with respect to those shares, to be the stockholder of record. As the beneficial owner, you have the right to direct your bank, broker or other nominee how to vote your shares by following their instructions for voting. You are also invited to attend the special meeting. However, because you are not the stockholder of record, you may not vote your shares in person at the special meeting unless you request and obtain a valid proxy from your bank, broker or other nominee.

Q:

How may I vote?

A:

If you are a stockholder of record (that is, if your shares of common stock are registered in your name with Computershare, our transfer agent), there are four ways to vote:

•

By attending the special meeting and voting in person by ballot;

•

By visiting the Internet at the address on your proxy card;

•

By calling toll-free (within the U.S. or Canada) at the phone number on your proxy card; or

•

By completing, dating, signing and returning the enclosed proxy card in the accompanying prepaid reply envelope.

A control number, located on your proxy card, is designed to verify your identity and allow you to vote your shares of ALCO Stores common stock, and to confirm that your voting instructions have been properly recorded when voting electronically over the Internet or by telephone. Please be aware that, although there is no charge for voting your shares, if you vote electronically over the Internet or by telephone, you may incur costs such as telephone and Internet access charges for which you will be responsible.

Even if you plan to attend the special meeting in person, you are strongly encouraged to vote your shares of ALCO Stores common stock by proxy. If you are a record holder or if you obtain a valid proxy to vote shares which you beneficially own, you may still vote your shares of ALCO Stores common stock in person at the special meeting even if you have previously voted by proxy. If you

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are present at the special meeting and vote in person, your previous vote by proxy will not be counted.

If your shares are held in "street name" through a broker, bank or other nominee, you may vote through your broker, bank or other nominee by completing and returning the voting form provided by your broker, bank or other nominee, or electronically over the Internet or by telephone through your broker, bank or other nominee if such a service is provided. To vote via the Internet or via telephone through your broker, bank or other nominee, you should follow the instructions on the voting form provided by your broker, bank or nominee.

Q:

If my broker holds my shares in "street name," will my broker vote my shares for me?

A:

No. Your bank, broker or other nominee will only be permitted to vote your shares on any proposal only if you instruct your bank, broker or other nominee how to vote. You should follow the procedures provided by your bank, broker or other nominee regarding the voting of your shares of ALCO Stores common stock. Without instructions, your shares will not be voted, which will have the same effect as if you voted against adoption of the merger agreement and approval of the transactions contemplated thereby, but will have no effect on the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by ALCO Stores to its named executive officers in connection with the merger or the adjournment proposal.

Q:

May I change my vote after I have mailed my signed proxy card?

A:

Yes. If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the special meeting by:

•

Submitting a new proxy electronically over the Internet or by telephone after the date of the earlier submitted proxy;

•

Signing another proxy card with a later date and returning it to us prior to the special meeting; or

•

Attending the special meeting and voting in person.

If you hold your shares of ALCO Stores common stock in "street name," you should contact your bank, broker or other nominee for instructions regarding how to change your vote. You may also vote in person at the special meeting if you obtain a valid proxy from your bank, broker or other nominee.

Q:

What is a proxy?

A:

A proxy is your legal designation of another person, referred to as a "proxy," to vote your shares of ALCO Stores common stock. The written document describing the matters to be considered and voted on at the special meeting is called a "proxy statement." The document used to designate a proxy to vote your shares of ALCO Stores common stock is called a "proxy card." Our Board of Directors has designated [    •    ] and [    •    ], and each of them, with full power of substitution, as proxies for the special meeting.

Q:

If a stockholder gives a proxy, how are the shares voted?

A:

Regardless of the method you choose to vote, the individuals named on the enclosed proxy card, or your proxies, will vote your shares in the way that you indicate. When completing the Internet or telephone process or the proxy card, you may specify whether your shares should be voted for or against or to abstain from voting on all, some or none of the specific items of business to come before the special meeting.

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If you properly sign your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the shares represented by your properly signed proxy will be voted "FOR" the adoption of the merger agreement, "FOR" the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by ALCO Stores to its named executive officers in connection with the merger and "FOR" the adjournment of the special meeting, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.

Q:

What should I do if I receive more than one set of voting materials?

A:

You may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, date, sign and return (or vote via the Internet or telephone with respect to) each proxy card and voting instruction card that you receive.

Q:

Who will count the votes?

A:

The votes will be counted by the independent inspector of election appointed for the special meeting.

Q:

Where can I find the voting results of the special meeting?

A:

ALCO Stores intends to announce preliminary voting results at the special meeting and publish final results in a Current Report on Form 8-K that will be filed with the SEC following the special meeting. All reports ALCO Stores files with the SEC are publicly available when filed. See "Where You Can Find More Information" beginning on page 98 of this proxy statement.

Q:

Will I be subject to U.S. federal income tax upon the exchange of ALCO Stores common stock for cash pursuant to the merger?

A:

If you are a U.S. Holder (as defined under "The Merger—Material U.S. Federal Income Tax Consequences of the Merger"), the exchange of ALCO Stores common stock for cash pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes, which generally will require a U.S. Holder to recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between the amount of cash received by such U.S. Holder in the merger and such U.S. Holder's adjusted tax basis in the shares of ALCO Stores common stock surrendered in the merger. A Non-U.S. Holder (as defined under "The Merger—Material U.S. Federal Income Tax Consequences of the Merger") generally will not be subject to U.S. federal income tax with respect to the exchange of ALCO Stores common stock for cash in the merger unless such Non-U.S. Holder has certain connections to the United States. Because particular circumstances may differ, we recommend that you consult your own tax advisor to determine the U.S. federal income tax consequences relating to the merger in light of your own particular circumstances and any consequences arising under the laws of any state, local or foreign taxing jurisdiction. A more complete description of the material U.S. federal income tax consequences of the merger is provided under "The Merger—Material U.S. Federal Income Tax Consequences of the Merger" beginning on page 69 of this proxy statement.

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Q:

What will the holders of ALCO Stores stock options and shares of restricted stock receive in the merger?

A:

At the effective time of the merger, each outstanding option to purchase shares of ALCO Stores common stock, whether or not vested, will be canceled and converted into the right to receive an amount in cash (subject to any applicable withholding or other taxes, or other amounts as required by law) equal to the product of (i) the total number of shares of ALCO Stores common stock subject to the option as of the effective time of the merger and (ii) the amount, if any, by which $14.00 exceeds the exercise price per share of ALCO Stores common stock underlying the stock option.

At the effective time of the merger, each share of restricted stock outstanding under ALCO Stores' stock incentive plans will immediately vest in full and all restrictions thereupon will lapse, and each such share of restricted stock will be cancelled. The holder of each such cancelled share of restricted stock will be paid an amount equal to $14.00 per share of ALCO Stores common stock underlying such cancelled share of restricted stock.

Q:

When do you expect the merger to be completed?

A:

We are working toward completing the merger as quickly as possible and currently expect to consummate the merger in the fourth calendar quarter of 2013. However, the exact timing of completion of the merger cannot be predicted because the merger is subject to specified conditions, including adoption of the merger agreement by our stockholders, the completion of the merger not being restrained, enjoined, rendered illegal or otherwise prohibited by any law or order of any governmental authority and the completion of the go-shop period (including any extension of the go-shop period), during which ALCO Stores may negotiate, subject to some restrictions specified in the merger agreement, an alternative acquisition proposal with a third party.

Q:

Am I entitled to appraisal rights under the K.S.A.?

A:

If the merger is adopted by ALCO Stores stockholders, stockholders who do not vote in favor of the adoption of the merger agreement and who properly demand appraisal of their shares will be entitled to appraisal rights in connection with the merger under Section 17-6712 of the K.S.A. This means that stockholders of ALCO Stores common stock who do not wish to accept the per share merger consideration may dissent from the merger and elect to have the fair value of their respective shares of ALCO Stores common stock (exclusive of any element of value arising from the accomplishment or expectation of the merger) judicially determined by a Kansas district court and paid to such stockholder in cash, together with a fair rate of interest, if any, provided that such stockholder complies with the provisions of Section 17-6712. Stockholders who wish to seek appraisal of their shares are encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights due to the complexity of the appraisal process. The K.S.A. requirements for exercising appraisal rights are described in further detail in this proxy statement, and the relevant section of the K.S.A. regarding appraisal rights is reproduced and attached as Annex C to this proxy statement.

Q:

Who can help answer my questions?

A:

If you have any questions concerning the merger, the special meeting or this proxy statement, would like additional copies of this proxy statement or need help voting your shares of ALCO Stores common stock, please contact our proxy solicitor:

        Georgeson Inc.
480 Washington Blvd., 26^th Floor
Jersey City, NJ 07310
Stockholders, call toll-free: (800) 314-4549

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FORWARD-LOOKING STATEMENTS

        This proxy statement, and the documents to which we refer you in this proxy statement, as well as information included in oral statements or other written statements made or to be made by us or on our behalf, contain "forward-looking statements" that do not directly or exclusively relate to historical facts. You can typically identify forward-looking statements by the use of forward-looking words, such as "may," "should," "could," "project," "believe," "anticipate," "expect," "estimate," "continue," "potential," "plan," "forecast" and other words of similar import. Stockholders are cautioned that any such forward-looking statements are not guarantees of future performance and may involve significant risks and uncertainties, and that actual results may vary materially from those in the forward-looking statements. These risks and uncertainties include, but are not limited to, the risks detailed in our filings with the SEC, including in our most recent filings on Forms 10-K and 10-Q, factors and matters described or incorporated by reference in this proxy statement, and the following factors:

•

The inability to complete the merger due to the failure to obtain stockholder approval;



•

The failure to satisfy the conditions to the completion of the merger, including the completion of the merger not being restrained, enjoined, rendered illegal or otherwise prohibited by any law or order of any governmental authority;



•

The outcome of any legal proceedings that may be instituted against us and others related to the merger agreement;



•

The completion of the go-shop period (including any extension of the go-shop period);



•

The failure by Parent to obtain the necessary equity and debt financing set forth in the financing commitments entered into in connection with the merger, or alternative financing, or the failure of any such financing to be sufficient to complete the merger and the other transactions contemplated by the merger agreement;



•

The risk that the definitive merger agreement may be terminated in circumstances that require us to pay Parent a termination fee of $2.25 million (or of $1.75 million, if terminated during the go-shop period, including any extension of the go-shop period on account of a superior proposal made by an excluded party) and/or reimbursement of Parent's expenses of up to $1 million;



•

Risks that the proposed merger disrupts our operations or affects our ability to retain or recruit key employees;



•

The fact that receipt of the all-cash merger consideration would be taxable to ALCO Stores stockholders that are treated as United States persons for U.S. federal income tax purposes;



•

The fact that ALCO Stores stockholders would forego the opportunity to realize the potential long-term value of the successful execution of ALCO Stores current strategy as an independent company;



•

The possibility that Parent could, at a later date, engage in unspecified transactions including restructuring efforts, special dividends or the sale of some or all of ALCO Stores assets to one or more as yet unknown purchasers that could conceivably produce a higher aggregate value than that available to the stockholders in the merger;



•

The effect of the announcement or pendency of the merger on our business relationships, operating results and business generally;



•

The amount of the costs, fees, expenses and charges related to the merger agreement and the merger;



•

Risks related to diverting management's or employees' attention from ongoing business operations; and

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•

Risks that our stock price may decline significantly if the merger is not completed.

        Consequently, all of the forward-looking statements we make in this proxy statement are qualified by the information contained or incorporated by reference herein, including, but not limited to (a) the information contained under this heading and (b) the information contained under the headings "Risk Factors" and information in our consolidated financial statements and notes thereto included in our most recent filings on Forms 10-K and 10-Q (see "Where You Can Find More Information" beginning on page 98). No assurance can be given that these are all of the factors that could cause actual results to vary materially from the forward-looking statements.

        Except as required by applicable law, we undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. ALCO Stores stockholders are advised, however, to consult any future disclosures we make on related subjects as may be detailed in our other filings made from time to time with the SEC.

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THE SPECIAL MEETING

        The enclosed proxy is solicited on behalf of our Board of Directors for use at the special meeting of stockholders or at any adjournment or postponement thereof.

Date, Time and Place

        We will hold the special meeting on [    •    ], 2013 at the Royal Oaks Country Club, 7915 Greenville Avenue, Dallas, Texas 75231, at [    •    ], Central time.

Purpose of the Special Meeting

        At the special meeting, we will ask our stockholders to vote on proposals to adopt the merger agreement, to approve, by non-binding, advisory vote, compensation that will or may become payable by ALCO Stores to its named executive officers in connection with the merger and to adjourn the special meeting to a later date, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.

Record Date; Shares Entitled to Vote; Quorum

        Only stockholders of record as of the close of business on [    •    ], 2013 are entitled to notice of the special meeting and to vote at the special meeting or at any adjournment or postponement thereof. A list of stockholders entitled to vote at the special meeting will be available in our principal executive offices located at 751 Freeport Parkway, Coppell, Texas 75019, during regular business hours for a period of no less than ten days before the special meeting and at the place of the special meeting during the meeting.

        As of the record date, there were approximately [    •    ] shares of ALCO Stores common stock outstanding and entitled to be voted at the special meeting.

        The holders of a majority in voting power of the outstanding shares of ALCO Stores common stock entitled to vote thereat, present either in person or represented by proxy, will constitute a quorum at the special meeting. As a result, [    •    ] shares must be represented by proxy or by stockholders present and entitled to vote at the special meeting to have a quorum. In the event that a quorum is not present at the special meeting, it is expected that the meeting will be adjourned to solicit additional proxies.

Vote Required; Abstentions and Broker Non-Votes

        The affirmative vote of the holders of a majority of the outstanding shares of ALCO Stores common stock is required to adopt the merger agreement. Adoption of the merger agreement by our stockholders is a condition to the closing of the merger.

        Approval, by non-binding, advisory vote, of compensation that will or may be paid by ALCO Stores to its named executive officers in connection with the merger requires the affirmative vote of a majority of those shares of common stock represented in person or by proxy and voting upon on the proposal. Approval of the proposal to adjourn the special meeting, whether or not a quorum is present, requires the affirmative vote of the majority of the voting power of the shares of ALCO Stores common stock represented either in person or by proxy at the special meeting.

        If an ALCO Stores stockholder abstains from voting, the abstention will have the same effect as if the stockholder voted "AGAINST" the proposal to adopt the merger agreement. For stockholders who attend the meeting or are represented by proxy and abstain from voting, the abstention will have the same effect as if the stockholder voted "AGAINST" the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by ALCO Stores to its named executive officers in

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connection with the merger and "AGAINST" any proposal to adjourn the special meeting to a later date, including to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.

        Each "broker non-vote" will also count as a vote "AGAINST" the proposal to adopt the merger agreement, but will have no effect on the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by ALCO Stores to its named executive officers in connection with the merger and any proposal to adjourn the special meeting to a later date, including to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.

Shares Held by ALCO Stores' Directors and Executive Officers

        At the close of business on [    •    ], 2013, our directors and executive officers beneficially owned [    •    ] shares of ALCO Stores common stock, which represented approximately [    •    ]% of the shares of our outstanding common stock on that date. The directors and executive officers have informed ALCO Stores that they currently intend to vote all of their shares of ALCO Stores common stock "FOR" the adoption of the merger agreement, "FOR" the non-binding, advisory proposal regarding compensation that will or may become payable by ALCO Stores to its named executive officers in connection with the merger and "FOR" the adjournment of the special meeting (if necessary or appropriate).

Voting of Proxies

        If your shares are registered in your name with our transfer agent, Computershare, you may cause your shares to be voted by returning a signed proxy card, or you may vote in person at the special meeting. Additionally, you may submit electronically over the Internet or by phone a proxy authorizing the voting of your shares by following the instructions on your proxy card. You must have the enclosed proxy card available, and follow the instructions on the proxy card, in order to submit a proxy electronically over the Internet or by telephone. Based on your proxy cards or Internet and telephone proxies, the proxy holders will vote your shares according to your directions.

        If you plan to attend the special meeting and wish to vote in person, you will be given a ballot at the meeting. If your shares are registered in your name, you are encouraged to vote by proxy even if you plan to attend the special meeting in person. If you attend the special meeting and vote in person, your vote by ballot will revoke any proxy previously submitted.

        Voting instructions are included on your proxy card. All shares represented by properly executed proxies received in time for the special meeting will be voted at the special meeting in accordance with the instructions of the stockholder. Properly executed proxies that do not contain voting instructions will be voted "FOR" adoption of the merger agreement, "FOR" the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by ALCO Stores to its named executive officers in connection with the merger and "FOR" the adjournment of the special meeting, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting. No proxy that is specifically marked against adoption of the merger agreement will be voted in favor of the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by ALCO Stores to its named executive officers in connection with the merger, unless it is specifically marked "FOR" the approval of the proposal.

        If your shares are held in "street name" through a broker, bank or other nominee, you may vote through your broker, bank or other nominee by completing and returning the voting form provided by your broker, bank or other nominee, or by the Internet or telephone through your broker, bank or other nominee if such a service is provided. To vote via the Internet or telephone through your broker,

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bank or other nominee, you should follow the instructions on the voting form provided by your broker, bank or other nominee. If you do not return your bank's, broker's or other nominee's voting form, do not vote via the Internet or telephone through your broker, bank or other nominee, if possible, or do not attend the special meeting and vote in person with a proxy from your broker, bank or other nominee, it will have the same effect as if you voted "AGAINST" the proposal to adopt the merger agreement but will not have any effect on the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by ALCO Stores to its named executive officers in connection with the merger or the adjournment proposal.

Revocability of Proxies

        If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the special meeting by:

•

Submitting a new proxy electronically over the Internet or by telephone after the date of the earlier submitted proxy;



•

Signing another proxy card with a later date and returning it to us prior to the special meeting; or



•

Attending the special meeting and voting in person.

        Please note that to be effective, your new proxy card, Internet or telephonic voting instructions or written notice of revocation must be received by our Corporate Secretary prior to the special meeting and, in the case of Internet or telephonic voting instructions, must be received before 11:59 p.m. Eastern time on [    •    ], 2013. If you have submitted a proxy, your appearance at the special meeting, in the absence of voting in person or submitting an additional proxy or revocation, will not have the effect of revoking your prior proxy.

        If you hold your shares of ALCO Stores common stock in "street name," you should contact your bank, broker or other nominee for instructions regarding how to change your vote. You may also vote in person at the special meeting if you obtain a valid proxy from your bank, broker or other nominee. Any adjournment, recess or postponement of the special meeting for the purpose of soliciting additional proxies will allow ALCO Stores stockholders who have already sent in their proxies to revoke them at any time prior to their use at the special meeting as adjourned, recessed or postponed.

Board of Directors' Recommendation

        The Board of Directors, by the affirmative vote of all of its independent members (our sole director that is also a member of management, Richard E. Wilson, ALCO Stores' President and Chief Executive Officer, abstained), after considering various factors described in the section entitled "The Merger—Recommendation of Our Board of Directors and Reasons for the Merger," has determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger, are advisable and in the best interests of, ALCO Stores and our stockholders and has adopted and approved the merger agreement and the transactions contemplated by the merger agreement, including the merger. The Board of Directors recommends that you vote "FOR" the adoption of the merger agreement, "FOR" the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by ALCO Stores to its named executive officers in connection with the merger and "FOR" the adjournment of the special meeting, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.

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Solicitation of Proxies

        The expense of soliciting proxies in the enclosed form will be borne by ALCO Stores. We have retained Georgeson Inc., which we refer to as Georgeson, a proxy solicitation firm, to solicit proxies in connection with the special meeting at a cost of approximately $[    •    ] plus expenses. We will also indemnify Georgeson against losses arising out of its provisions of such services on our behalf. In addition, we may reimburse brokers, banks and other custodians, nominees and fiduciaries representing beneficial owners of shares for their expenses in forwarding soliciting materials to such beneficial owners. Proxies may also be solicited by some of our directors, officers and employees, personally or by telephone, facsimile or other means of communication. No additional compensation will be paid for such services.

Anticipated Date of Completion of the Merger

        Assuming timely satisfaction of necessary closing conditions, including the approval by our stockholders of the proposal to adopt the merger agreement, we anticipate that the merger will be completed in the fourth calendar quarter of 2013.

Rights of Stockholders Who Seek Appraisal

        If the merger is adopted by ALCO Stores stockholders, stockholders who do not vote in favor of the adoption of the merger agreement and who properly demand appraisal of their shares will be entitled to appraisal rights in connection with the merger under the K.S.A. This means that stockholders of ALCO Stores common stock who do not wish to accept the per share merger consideration may dissent from the merger and elect to have the fair value of their respective shares of ALCO Stores common stock (exclusive of any element of value arising from the accomplishment or expectation of the merger) judicially determined by a Kansas district court and paid to such stockholder in cash, together with a fair rate of interest, if any, provided that such stockholder complies with the provisions of Section 17-6712. Stockholders who wish to seek appraisal of their shares are in any case encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights due to the complexity of the appraisal process.

        All references in Section 17-6712 of the K.S.A. and this section to a "stockholder" are to a record holder of the shares of ALCO Stores common stock as to which appraisal rights are asserted. If you hold a beneficial interest in "street name" in shares of ALCO Stores common stock held of record in the name of another person, such as a bank, brokerage firm or other nominee, you should consult with your bank, brokerage firm or other nominee to determine the appropriate procedures for the making of a demand for appraisal by such bank, brokerage firm or nominee.

        Stockholders considering seeking appraisal should be aware that the fair value of their shares as determined pursuant to Section 17-6712 of the K.S.A. could be more than, the same as or less than the value of the consideration they would receive pursuant to the merger if they did not seek appraisal of their shares.

        To exercise your appraisal rights, you must submit a written demand for appraisal to ALCO Stores before the vote is taken on the adoption of the merger agreement and you must not submit a proxy or otherwise vote in favor of the proposal to adopt the merger agreement. Merely not voting in favor of the merger proposal will not preserve the right of ALCO Stores stockholders to appraisal of their shares of ALCO Stores common stock under the K.S.A. Your failure to follow exactly the procedures specified under the K.S.A. will result in the loss of your appraisal rights. Due to the complexity of the appraisal process, we advise any ALCO Stores stockholder considering demanding appraisal to consult legal counsel. The K.S.A. requirements for exercising appraisal rights are described in further detail in this proxy statement under "The Merger—Appraisal Rights" beginning on page 66, and the relevant

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section of the K.S.A. regarding appraisal rights is reproduced and attached as Annex C to this proxy statement.

Other Matters

        At this time, we know of no other matters to be submitted at the special meeting.

Householding of Special Meeting Materials

        Unless we have received contrary instructions, we may send a single copy of this proxy statement and notice to any household at which two or more stockholders reside if we believe the stockholders are members of the same family. Each stockholder in the household will continue to receive a separate proxy card. This process, known as "householding," reduces the volume of duplicate information received at your household and helps to reduce our expenses.

        If you would like to receive your own set of our disclosure documents, follow the instructions described below. Similarly, if you share an address with another stockholder and together both of you would like to receive only a single set of our disclosure documents, follow these instructions.

        If your shares are registered in your own name, please contact us at our executive offices at ALCO Stores, Inc., Corporate Secretary, 751 Freeport Parkway, Coppell, Texas 75019 or Telephone: (469) 322-2900 to inform us of your request. If a bank, broker or other nominee holds your shares, please contact your bank, broker or other nominee directly.

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THE MERGER

        This discussion of the merger is qualified in its entirety by reference to the merger agreement, as amended, which is attached to this proxy statement as Annex A and incorporated into this proxy statement by reference. You should read the entire merger agreement carefully as it is the legal document that governs the merger.

Parties Involved in the Merger

ALCO Stores, Inc.

751 Freeport Parkway
Coppell, Texas 75019

        ALCO Stores is a Kansas corporation and a regional retailer operating 214 stores in 23 states. The company's stores offer a broad line of merchandise consisting of approximately 35,000 items, including automotive, consumables and commodities, crafts, domestics, electronics, furniture, hardware, health and beauty aids, housewares, jewelry, ladies', men's and children's apparel and shoes, pre-recorded music and video, sporting goods, seasonal items, stationery and toys.

        ALCO Stores will be the surviving corporation after the merger.

        ALCO Stores common stock is currently listed on the NASDAQ under the symbol "ALCS."

Mallard Parent, LLC

Mallard Parent, LLC
c/o Argonne Capital Group, LLC
3060 Peachtree Road NW, Suite 400
Atlanta, GA 30305

        Parent is a Delaware limited liability company that is currently controlled by Argonne. Parent was formed solely for the purpose of entering into the merger agreement and completing the transactions contemplated by the merger agreement and the related financing transactions. Parent has not conducted any business operations except in furtherance of this purpose and activities incident to its formation. Upon completion of the merger, ALCO Stores will be a direct wholly owned subsidiary of Parent.

M Acquisition Corporation

M Acquisition Corporation
c/o Argonne Capital Group, LLC
3060 Peachtree Road NW, Suite 400
Atlanta, GA 30305

        Merger Sub is a Kansas corporation and a wholly owned subsidiary of Parent, formed solely for the purpose of entering into the merger agreement and completing the transactions contemplated by the merger agreement and the related financing transactions. Merger Sub has not conducted any business operations except in furtherance of this purpose and activities incident to its formation. Upon completion of the merger, Merger Sub will cease to exist.

Effect of the Merger

        Upon the terms and subject to the conditions of the merger agreement, Merger Sub will merge with and into ALCO Stores, with ALCO Stores continuing as the surviving corporation and a wholly owned subsidiary of Parent. Throughout this proxy statement we use the term surviving corporation to

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refer to ALCO Stores as the surviving corporation following the merger. As a result of the merger, the common stock of ALCO Stores will cease to be publicly traded. If the merger is completed, you will not own any shares of the capital stock of the surviving corporation.

        The time at which the merger will become effective, which we refer to as the effective time of the merger, will occur upon the filing of a certificate of merger (or other appropriate documents) with the Secretary of State of the State of Kansas (or at such later time as we, Parent and Merger Sub may agree and specify in the certificate of merger).

Effect on ALCO Stores if the Merger is Not Completed

        If the merger agreement is not adopted by ALCO Stores stockholders or if the merger is not completed for any other reason, ALCO Stores stockholders will not receive any payment for their shares of common stock. Instead, ALCO Stores will remain an independent public company, the common stock will continue to be listed and traded on the NASDAQ and registered under the Exchange Act and we will continue to file periodic reports with the SEC on account of ALCO Stores common stock. In addition, if the merger is not completed, ALCO Stores expects that management will operate the business in a manner similar to that in which it is being operated today and that ALCO Stores stockholders will continue to be subject to the same risks and opportunities to which they are currently subject, including, without limitation, risks related to the highly competitive industry in which ALCO Stores operates and adverse economic conditions.

        Furthermore, if the merger is not completed, and depending on the circumstances that would have caused the merger not to be completed, it is likely that the price of ALCO Stores common stock will decline significantly. If that were to occur, it is uncertain when, if ever, the price of ALCO Stores common stock would return to the price at which it trades as of the date of this proxy statement.

        Accordingly, if the merger is not completed, there can be no assurance as to the effect of these risks and opportunities on the future value of your shares of ALCO Stores common stock. If the merger is not completed, the Board of Directors will continue to evaluate and review ALCO Stores' business operations, properties and capitalization, among other things, make such changes as are deemed appropriate and continue to seek to enhance stockholder value. If the merger agreement is not adopted by ALCO Stores stockholders or if the merger is not completed for any other reason, there can be no assurance that any other transaction acceptable to ALCO Stores will be offered or that ALCO Stores' business, prospects or results of operation will not be adversely impacted.

        In addition, under specified circumstances, ALCO Stores may be required to reimburse Parent's expenses or pay Parent a termination fee, or may be entitled to receive a reverse termination fee from Parent, upon the termination of the merger agreement, as described under "The Merger Agreement—Termination Fees" beginning on page 89.

Merger Consideration

        In the merger, each outstanding share of ALCO Stores common stock (other than (i) shares owned by ALCO Stores in treasury or otherwise, (ii) any shares owned, directly or indirectly, by Parent or Merger Sub, (iii) shares of restricted stock outstanding under ALCO Stores' stock incentive plans and (iv) shares owned by stockholders who are entitled to and who properly exercise appraisal rights under Kansas law) will be converted into the right to receive $14.00 in cash, without interest, which amount we refer to as the per share merger consideration, and, without any action by the holders of such shares, will cease to be outstanding, be canceled and retired and cease to exist, and each certificate formerly representing any of the shares of ALCO Stores common stock will thereafter represent only the right to receive the per share merger consideration. At or immediately prior to the effective time of the merger, Parent will deposit sufficient funds to pay the aggregate per share merger consideration with a designated paying agent. Once a stockholder has provided the paying agent with

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his or her stock certificates and the other items specified by the paying agent, the paying agent will promptly pay the stockholder the per share merger consideration.

        After the merger is completed, under the terms of the merger agreement, you will have the right to receive the per share merger consideration, but you will no longer have any rights as an ALCO Stores stockholder as a result of the merger (except that stockholders who properly exercise their right of appraisal will have the right to receive a payment for the "fair value" of their shares as determined pursuant to an appraisal proceeding as contemplated by Kansas law), as described below under "—Appraisal Rights" beginning on page 66.

Background of the Merger

        As part of its ongoing evaluation of ALCO Stores' business, the Board of Directors, together with senior management, regularly reviews and assesses opportunities to increase stockholder value. From time to time, ALCO Stores has also received preliminary contacts from financial sponsors or other industry participants regarding possible interest in various types of transactions. On November 30, 2009, pursuant to a letter agreement between the parties, ALCO Stores retained William Blair to investigate opportunities with third parties. The letter agreement was subsequently amended on May 24, 2011. Since 2009, William Blair has remained engaged by ALCO Stores to assist in evaluating proposed transactions, both solicited and unsolicited.

        In October 2012, representatives of Everbright Development Overseas, Ltd., an entity that, according to a Schedule 13D filed with the SEC by Everbright on May 10, 2013, is controlled by Luis Chang and his affiliates, which we refer to as Everbright, contacted ALCO Stores to discuss strategic opportunities with ALCO Stores.

        Argonne approached ALCO Stores in early November 2012 seeking to learn more about its business and operations. On November 20, 2012, representatives of Argonne and ALCO Stores held a conference call to discuss ALCO Stores' business and operations.

        On January 22, 2013, Everbright submitted to Royce Winsten, ALCO Stores' Chairman of the Board, a proposal that ALCO Stores enter into discussions concerning either a strategic partnership or an acquisition of ALCO Stores' outstanding common stock, at a valuation of $8.00 per share. After considering the sufficiency of the offered per share consideration, the Board of Directors of ALCO Stores determined the offer was insufficient and dismissed the offer as inadequate.

        On January 23, 2013, members of ALCO Stores' management and representatives of Argonne met in Abilene, Kansas to have a more detailed discussion on ALCO Stores' business and its operations and to tour ALCO Stores' distribution center and one of its stores located in Abilene. During this meeting, Argonne expressed an interest in being granted access to non-public information in order to evaluate a potential acquisition of ALCO Stores. Members of ALCO Stores' management indicated that Argonne should submit a written proposal to the Board of Directors.

        On January 29, 2013, Argonne sent a letter to Mr. Winsten describing its interest in potentially acquiring ALCO Stores. The letter also included specific requests for additional information regarding ALCO Stores' business and operations and indicated Argonne's willingness to sign a non-disclosure agreement so that it could receive information responsive to its requests. Upon receipt of the letter from Argonne, Mr. Winsten contacted William Blair and requested William Blair's help in facilitating the process of providing information to and potentially negotiating with Argonne.

        On January 31, 2013, representatives of Argonne and William Blair held a conference call to discuss Argonne's interest in ALCO Stores and the written due diligence request for information Argonne provided to the Board of Directors.

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        On January 31, 2013, Tim Carroll from William Blair and Mr. Winsten held a conference call to discuss Argonne's interest in ALCO Stores and the written request for information Argonne provided to the Board of Directors.

        On February 7, 2013, Argonne entered into a non-disclosure agreement with ALCO Stores pursuant to which Argonne agreed to maintain the confidentiality of certain non-public information it would receive from William Blair and ALCO Stores regarding ALCO Stores' business and operations.

        According to the Schedule 13D filed with the SEC by Everbright on May 10, 2013, on February 8, 2013, Everbright acquired 380 shares of ALCO Stores common stock at $8.25 per share through trading on the NASDAQ.

        On February 14, 2013, representatives of William Blair and Argonne held a conference call to discuss the status of the due diligence requests for information Argonne submitted to the Board of Directors. On February 15, 2013, representatives of William Blair and Scott Moses of Sagent Advisors, LLC, Argonne's financial advisor in connection with the potential acquisition of ALCO Stores, held a follow-up call regarding the status of such due diligence requests.

        On February 28, 2013, ALCO Stores' President and Chief Executive Officer, Richard E. Wilson, and Argonne's President and Founder, Michael Klump, attended an introductory dinner meeting held in Manhattan, Kansas to discuss ALCO Stores' business and operations.

        On March 1, 2013, members of ALCO Stores' management and representatives of Argonne took part in a walk-through of ALCO Stores' distribution center and its store located in Abilene, Kansas.

        On March 6, 2013, representatives of William Blair and Sagent held a conference call to discuss the status of Argonne's potential offer and due diligence on ALCO Stores' business.

        On March 11, 2013, Argonne submitted a non-binding letter of intent to the Board of Directors to acquire all of ALCO Stores' outstanding common stock for $10.50 per share.

        On March 14, 2013, the Board of Directors held a special meeting via telephone to review Argonne's proposed offer and discuss potential responses. Representatives of William Blair, Norton Rose Fulbright and Lathrop & Gage LLP, outside legal counsel to ALCO Stores, attended the special meeting via telephone. Norton Rose Fulbright reviewed the fiduciary duties of the Board of Directors and the legal standards applicable to their consideration of Argonne's proposed offer.

        In light of the unsolicited indications of interest by Everbright and Argonne, on March 14, 2013, the Board of Directors requested that William Blair solicit indications of interest from other third parties regarding a potential transaction. On that same day, Mr. Carroll contacted Mr. Moses to inform Sagent that additional time was necessary to evaluate Argonne's offer.

        Between March 18 and March 20, 2013, William Blair contacted 12 potential buyers, consisting of both strategic and financial buyers, on a confidential basis regarding potential alternative offers for the acquisition of all of ALCO Stores' outstanding common stock. As a result of such solicitation efforts, three parties (including Party A, as described below) entered into non-disclosure agreements with ALCO Stores to consider a potential transaction, two of which declined to pursue a transaction.

        On March 21, 2013, the Board of Directors held a special meeting via telephone to discuss the current status of alternative offers by potential buyers for the acquisition of all of ALCO Stores' outstanding common stock. Representatives of William Blair, Norton Rose Fulbright and Lathrop & Gage LLP attended the special meeting via telephone.

        On March 22, 2013, a financial buyer which we refer to as Party A entered into a non-disclosure agreement with ALCO Stores to consider a potential transaction. William Blair subsequently began to provide Party A with diligence information and material regarding ALCO Stores that had been previously shared with Argonne. Party A then began to perform an initial review of ALCO Stores and

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its business and operations, based upon the diligence information and material provided to Party A by William Blair.

        On March 25, 2013, representatives of William Blair contacted Mr. Moses to inform him that the Board of Directors determined that Argonne's proposed offer of $10.50 per share of ALCO Stores' outstanding common stock was insufficient and had been rejected by the Board of Directors. Representatives of William Blair also provided the Forecasts, ALCO Stores' five-year plan, which Argonne had not previously reviewed, and other diligence information to Mr. Moses.

        On March 28, 2013, Mr. Carroll and Mr. Moses held a conference call to discuss the Board of Directors' rejection of Argonne's offer. Mr. Moses informed Mr. Carroll that Argonne was in the process of evaluating its response. Mr. Moses also informed Mr. Carroll that representatives of Argonne would appreciate the opportunity to review ALCO Stores' five-year plan with members of ALCO Stores' management.

        On April 2, 2013, members of ALCO Stores' management and representatives of William Blair and Argonne held a conference call to review ALCO Stores' five-year plan, during which Argonne requested information pertaining to ALCO Stores' historical actual operating results relative to its budget and asked a number of related questions. Later on that day, members of ALCO Stores' management, representatives of William Blair and Party A held a conference call regarding Party A's due diligence review of ALCO Stores and its business and operations.

        On April 3, 2013, Argonne submitted a revised offer to acquire all of ALCO Stores' outstanding common stock for $11.25 per share.

        On April 4, 2013, Party A submitted an indication of interest in acquiring all of ALCO Stores' outstanding common stock for between $9.00 and $11.00 per share, subject to further due diligence.

        On April 4, 2013, the Board of Directors held a quarterly meeting via telephone to discuss the proposals received from Argonne and Party A. Representatives of William Blair, Norton Rose Fulbright and Lathrop & Gage LLP attended the special meeting via telephone. Norton Rose Fulbright reviewed the fiduciary duties of the Board of Directors and the legal standards applicable to their consideration of Argonne's proposed offer. The Board of Directors authorized William Blair to communicate to Party A that its offer was not competitive.

        On April 5, Mr. Carroll held a conference call with Party A to inform Party A that its offer was insufficient and not competitive with alternative offers for the outstanding common stock of ALCO Stores. In response, Party A verbally revised its expression of interest to acquire all of ALCO Stores' outstanding common stock to a range between $9.50 and $11.00 per share.

        On April 11, 2013, the Board of Directors held a special meeting via telephone to discuss the revised proposals received from Argonne and Party A. Representatives of William Blair, Norton Rose Fulbright and Lathrop & Gage LLP attended the special meeting via telephone. Norton Rose Fulbright reviewed the fiduciary duties of the Board of Directors and the legal standards applicable to their consideration of Argonne's proposed offer. The Board of Directors discussed with Mr. Carroll the financial merits of Argonne's proposed offer. The Board determined that the terms of Argonne's proposed offer were inadequate and not in the best interest of ALCO Stores stockholders. The Board of Directors authorized William Blair to inform Argonne and Party A that their offers were insufficient. The Board of Directors instructed William Blair to notify Argonne that the Board of Directors was open to continuing discussions with Argonne regarding a potential strategic transaction under terms more favorable to ALCO Stores. Later in the day, Mr. Carroll informed Mr. Moses that Argonne's offer was insufficient and held a conference call with Party A to inform Party A that its revised offer was insufficient and not competitive with alternative offers for the outstanding common stock of ALCO Stores. Thereafter, Party A indicated that it did not intend to increase its proposal above $11.00 per share and declined to pursue a transaction.

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        On April 23, 2013, Mr. Carroll called Layton Grisette of Argonne to provide additional context to Mr. Grisette relating to the determination of the Board of Directors that Argonne's revised offer to acquire ALCO Stores' outstanding common stock was insufficient.

        On April 24, 2013, Mr. Winsten and Mr. Grisette held a conference call in which Mr. Grisette suggested that direct discussions between the principals might be productive. Mr. Winsten and Mr. Grisette agreed to schedule a meeting at Teterboro Airport on May 2, 2013.

        According to the Schedule 13D filed with the SEC by Everbright on May 10, 2013, on April 30, 2013, Everbright acquired 564,311 shares of ALCO Stores' outstanding common stock for $7.00 per share through trading on the NASDAQ and on May 2, Everbright acquired an additional 2,000 shares of ALCO Stores' outstanding common stock for $7.86 per share through trading on the NASDAQ.

        On May 1, 2013, the Board of Directors held a special meeting to discuss the potential adoption of a stockholder rights plan. Representatives of William Blair and Norton Rose Fulbright attended the special meeting to provide an overview of a potential stockholder rights plan. Norton Rose Fulbright reviewed the fiduciary duties of the Board of Directors and the legal standards applicable to their consideration of the potential adoption of a stockholder rights plan.

        On May 2, 2013, Mr. Winsten, Mr. Klump, Mr. Grisette and Bill Weimar of Argonne held a meeting at the Teterboro Airport in Teterboro, NJ to discuss Argonne's offered per-share consideration. Mr. Winsten recommended that Argonne increase the offered per-share consideration to an amount in excess of $11.25 per share.

        On May 3, 2013, Argonne contacted Mr. Winsten and stated that it would need additional time with management and additional information to determine its willingness to increase its offered per-share consideration. From May 3, 2013 through May 24, 2013, representatives of Argonne and ALCO Stores' management held several meetings and conference calls as a part of Argonne's financial due diligence with respect to ALCO Stores.

        Also on May 3, 2013, a representative of Everbright informed ALCO Stores via telephone that Everbright had acquired 566,311 shares of ALCO Stores common stock, and requested a meeting with ALCO Stores' management and the Board of Directors to express Everbright's views regarding ALCO Stores' performance, prospects and operating strategy. In response, ALCO Stores asked Everbright to enter into a confidentiality and standstill agreement and to provide information regarding its financial wherewithal. Everbright declined.

        On May 3, 2013, after considering Everbright's ownership of 566,311 shares of ALCO Stores common stock, Everbright's stated intentions and its refusal to enter into a confidentiality and standstill agreement, the Board of Directors held a special meeting via telephone to adopt a stockholder rights plan. Representatives of William Blair, Norton Rose Fulbright and Lathrop & Gage LLP attended the special meeting via telephone. ALCO Stores publicly announced the adoption of the stockholder rights plan on the same day.

        Subsequently, on May 10, 2013, Everbright filed a Schedule 13D with the SEC disclosing its beneficial ownership of approximately 17.4% of ALCO Stores' then-outstanding common stock. Everbright disclosed, in its Schedule 13D, that it intended to review its investment in the shares of ALCO Stores common stock it had acquired on a regular basis and, as a result, determine, either alone or as part of a group, (i) to acquire additional securities of ALCO Stores, through open market purchases, privately negotiated transactions or otherwise, (ii) to dispose of all or a portion of the securities of ALCO Stores owned by it in the open market, in privately negotiated transactions or otherwise, (iii) to communicate with other ALCO Stores stockholders regarding ALCO Stores, its operations, management and other matters or (iv) to take any other available course of action.

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        On May 23, 2013, members of ALCO Stores' management and Mr. Winsten held a due diligence conference call with representatives of Argonne and William Blair to address several concerns raised by Argonne as the result of its due diligence.

        On May 24, 2013, Argonne submitted a revised offer to acquire all of ALCO Stores' outstanding common stock for $14.00 per share. Argonne's revised offer included a request that Argonne be afforded the right to deal exclusively with ALCO Stores for a period of 30 days with respect to a potential transaction and a "go-shop" provision to be included in any subsequent definitive merger agreement agreed to between Argonne and ALCO Stores.

        On May 28, 2013, the Board of Directors held a special meeting via telephone to discuss Argonne's revised offer, including the "go-shop" provision and the potential entry into a 30-day exclusivity agreement with Argonne.

        On May 30, 2013, outside legal counsel for Argonne, King & Spalding LLP, which we refer to as King & Spalding, provided to representatives of ALCO Stores a list of major issues which set out its positions on several transaction points. The issues list proposed: (i) a termination fee of $2.25 million (payable by ALCO Stores upon termination of a definitive agreement after the "go shop" period for ALCO Stores to enter into an alternative acquisition agreement with a third party); (ii) a lower termination fee of $1.75 million (payable by ALCO Stores upon termination of a definitive agreement during the "go shop" period for ALCO Stores to enter into an alternative acquisition agreement with a third party); (iii) a reverse termination fee of $2.25 million (payable by Argonne upon termination of a definitive agreement if the conditions to the transaction were otherwise satisfied and Argonne failed to close); (iv) reimbursement of Argonne's transaction expenses up to $1.25 million (payable by ALCO Stores upon termination of a definitive agreement due to failure to obtain stockholder approval of the transaction or material breach of the merger agreement by ALCO Stores); and (v) Argonne's obligation to close being conditioned upon ALCO Stores maintaining, between the signing of a definitive agreement and closing, a to-be-determined minimum amount of excess availability under the revolving credit facility.

        On May 31, 2013, ALCO Stores and Argonne agreed to a 30-day exclusivity agreement, which we refer to as the exclusivity agreement, in connection with ongoing discussions regarding Argonne's potential acquisition of all of ALCO Stores' outstanding common stock.

        From May 31, 2013, the date on which ALCO Stores and Argonne entered into the exclusivity agreement, until July 25, 2013, the date on which ALCO Stores and affiliates of Argonne entered into the merger agreement, Argonne engaged several third-party advisers to conduct due diligence on ALCO Stores. Specifically, Argonne engaged (i) Clear Thinking Group to conduct general business and financial due diligence, (ii) Ernst & Young to conduct accounting due diligence, (iii) EBI Consulting to conduct environmental due diligence and (iv) King & Spalding to conduct legal due diligence.

        On June 4, 2013, the Board of Directors held a special meeting and adopted a resolution to create a special committee of the Board of Directors, which we refer to as the special committee, in order to evaluate the merits of Argonne's proposed offer. The resolution appointed Mr. Winsten and Terry Babilla as members of the special committee and defined the special committee's powers to, on behalf of ALCO Stores, (i) engage a financial advisor, legal counsel and other professionals, if necessary, to advise the special committee with respect to Argonne's proposed offer, (ii) negotiate, or authorize others to negotiate, with Argonne with respect to Argonne's proposed offer, (iii) take such steps as necessary or appropriate to ascertain the fairness of the transaction to ALCO Stores' stockholders, (iv) evaluate available alternatives to Argonne's proposed offer, (v) take any defensive action it deemed appropriate, including the power to amend, modify or terminate ALCO Stores' stockholder rights plan and (vi) to negotiate a definitive merger agreement with Argonne.

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        On June 17, 2013, King & Spalding provided an initial draft of the merger agreement to representatives of ALCO Stores. The draft reflected the terms outlined in the material transaction points list; however, the reverse termination fee concept was revised to provide for a to-be-determined, higher reverse termination fee in the event all conditions to closing were satisfied and the debt financing was otherwise available to Argonne. The draft did not include the ability for ALCO Stores to seek specific performance against Argonne.

        On June 18 and June 19, 2013, representatives of ALCO Stores' management, Argonne and William Blair held diligence meetings in the offices of Lathrop & Gage LLP in Kansas City, Missouri.

        On June 21, 2013, the special committee held a special meeting via telephone to discuss the terms of the potential transaction with Argonne. Representatives of William Blair and Norton Rose Fulbright attended the special meeting via telephone to discuss legal and financial issues related to the potential transaction. The participants discussed the terms of the merger agreement. The special committee directed Mr. Winsten to communicate to Argonne the special committee's conclusions.

        On June 24, 2013, the special committee held a special meeting via telephone to discuss the terms of the potential transaction with Argonne. Representatives of William Blair attended the special meeting via telephone. The special committee received a report on the status of the proposed transaction.

        On June 26, 2013, the special committee held a special meeting via telephone to discuss the terms of the potential transaction with Argonne. Representatives of William Blair, Norton Rose Fulbright and Lathrop & Gage LLP attended the special meeting via telephone to discuss legal and financial issues related to the potential transaction. The participants discussed the proposed terms of the merger agreement and other outstanding issues. The special committee also agreed on strategic objectives for future discussions with Argonne.

        Also on June 26, 2013, Mr. Winsten and Mr. Grisette engaged in general negotiations regarding certain material provisions of the draft merger agreement, including the concepts of the reverse termination fee and limited specific performance against Parent. Mr. Winsten expressed the need for ALCO Stores to receive a higher reverse termination fee in the event Argonne failed to close the transaction at a time when all conditions to closing were otherwise satisfied, as well as a need for ALCO Stores to have limited specific performance against Parent available as a remedy if all conditions to closing were satisfied and the debt financing was otherwise available to Parent and for ALCO Stores' obligation to reimburse Argonne's transaction expenses to be limited to $1 million. Mr. Grisette agreed to these concepts.

        On June 27, 2013, the special committee held a special meeting via telephone to discuss the terms of the potential transaction with Argonne. Representatives of William Blair, Norton Rose Fulbright and Lathrop & Gage LLP attended the special meeting via telephone to discuss legal and financial issues related to the potential transaction. The participants discussed the terms of the proposed merger agreement and other outstanding issues. The special committee directed Mr. Winsten to respond to Argonne with alternative terms discussed during the meeting.

        On June 28, 2013, ALCO Stores and Argonne agreed to an extension of the exclusivity agreement, until July 15, 2013. Also on June 28, the special committee held a special meeting to discuss the terms of the potential transaction with Argonne. Mr. Wilson and Wayne Peterson, Senior Vice President and Chief Financial Officer of ALCO Stores, also participated in the meeting. The participants discussed the terms of the proposed transaction with Argonne and financial information of ALCO Stores.

        On July 1, 2013, the special committee held a special meeting via telephone to discuss the terms of the potential transaction with Argonne. Representatives of William Blair attended the special meeting via telephone to discuss financial issues related to the potential transaction, including financial

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information provided by ALCO Stores management. The participants discussed appropriate actions to take regarding the potential transaction in light of such information.

        On July 2, 2013, the special committee held a special meeting via telephone to discuss the terms of the potential transaction with Argonne. Representatives of William Blair and Norton Rose Fulbright attended the special meeting via telephone to discuss legal and financial issues related to the potential transaction. The participants discussed the terms of the proposed merger agreement and how to proceed with respect to the terms of the potential transaction.

        On July 5, 2013, the special committee held a special meeting via telephone to discuss the terms of the potential transaction with Argonne. Representatives of Norton Rose Fulbright attended the special meeting via telephone to discuss outstanding legal issues related to the potential transaction. The participants discussed the proposed terms of the merger agreement and how to respond to Argonne's most recent proposal.

        On July 10, 2013, the special committee held a special meeting via telephone to discuss the merger agreement. Representatives of Norton Rose Fulbright attended the special meeting via telephone. Norton Rose Fulbright advised the special committee on the status of the transaction and the fiduciary duties of the Board of Directors with respect to exclusivity.

        On July 11, 2013, ALCO Stores and Argonne agreed to an extension of the exclusivity agreement, until July 19, 2013.

        On July 12, 2013, Norton Rose Fulbright provided King & Spalding with a revised draft of the merger agreement. The draft of the merger agreement provided by Norton Rose Fulbright reflected the termination fee and remedies concepts discussed by Mr. Winsten and Mr. Grisette during their June 26^th discussion.

        On July 16, 2013, King & Spalding provided Norton Rose Fulbright with a revised draft of the merger agreement.

        On July 17, 2013, the special committee held a special meeting via telephone to discuss the compensation for members of the special committee. Peggy Houser, Corporate Secretary of ALCO Stores, and representatives of Norton Rose Fulbright attended the special meeting via telephone. The special committee directed Mr. Winsten to discuss such compensation with representatives of Argonne. The special committee also determined that it would meet with the full Board of Directors to discuss such compensation.

        On July 18, 2013, Norton Rose Fulbright provided King & Spalding with a revised draft of the merger agreement. Also on July 18, the special committee held a special meeting via telephone to discuss the terms of the potential transaction with Argonne. Also participating were Mr. Wilson, Mr. Peterson and representatives of William Blair and Norton Rose Fulbright. The participants discussed how to respond to Argonne regarding certain financial calculations prepared by ALCO Stores management. The special committee determined that Mr. Carroll would respond to Argonne to deliver the special committee's response and that Mr. Peterson would subsequently contact Argonne. On that same day, the Board of Directors held a special meeting to discuss compensation for members of the special committee. Also participating were Ms. Houser and representatives of Norton Rose Fulbright. The participants discussed the legal aspects of such compensation. Mr. Winsten informed the Board of Directors that Argonne had approved such compensation after their discussion on the matter. After discussion, the Board of Directors approved compensation to be provided to members of the special committee in the form of $125,000 in compensation plus $1,000 per meeting of the special committee and a reasonable per diem fee in an amount to be determined related to any litigation that could arise regarding any such transaction.

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        On July 19, 2013, ALCO Stores and Argonne agreed to an extension of the exclusivity agreement, until July 24, 2013. Also on July 19, King & Spalding provided Norton Rose Fulbright with a revised draft of the merger agreement.

        On July 20, 2013, the special committee held a special meeting via telephone to discuss the terms of the potential transaction with Argonne. Representatives of Norton Rose Fulbright attended the special meeting via telephone to discuss outstanding legal issues related to the potential transaction. The participants discussed the terms of the merger agreement and how to respond to Argonne's most recent revisions to the merger agreement. Later that same day, Norton Rose Fulbright provided King & Spalding with a revised draft of the merger agreement.

        On July 22, 2013, King & Spalding provided Norton Rose Fulbright with a revised draft of the merger agreement.

        On July 23, 2013, the Board of Directors held a full meeting to discuss the definitive merger agreement, William Blair's review of the fairness of the proposed transaction with Argonne to holders of ALCO Stores' common stock and the fiduciary duties of the directors of ALCO Stores. Representatives of William Blair were present and provided a presentation regarding their review of the fairness of the proposed transaction. Representatives of Norton Rose Fulbright were present and provided a presentation regarding the fiduciary duties of the directors of ALCO Stores. Also on July 23, Norton Rose Fulbright provided King & Spalding with a revised draft of the merger agreement. Later on that same day, King & Spalding provided Norton Rose Fulbright with a revised draft of the merger agreement.

        On July 24, 2013, King & Spalding provided Norton Rose Fulbright with a revised draft of the merger agreement. Later in the evening, the parties finalized the terms of the merger agreement.

        On July 25, 2013, the Board of Directors held a special meeting to discuss and adopt the merger agreement. Representatives of William Blair were present and presented their fairness opinion to the Board of Directors. Representatives of Norton Rose Fulbright were present and provided their advice. The Board of Directors adopted the merger agreement and recommended it to the stockholders of ALCO Stores for their adoption. The Board of Directors further authorized William Blair to solicit indications of interest from third parties, including the twelve potential buyers contacted between March 18 and March 20, regarding a potential transaction on terms potentially superior to the proposed transaction with Argonne. ALCO Stores subsequently publicly announced the merger.

        On July 31, 2013, a potential financial acquirer, which we refer to as Party B, entered into a non-disclosure agreement with ALCO Stores meeting the requirements for such agreements specified in the merger agreement, which we refer to as acceptable confidentiality agreements, pursuant to which Party B would maintain the confidentiality of the non-public information it would receive from William Blair and ALCO Stores regarding ALCO Stores' business and operations. That same day, ALCO Stores provided Party B with a financial model that ALCO Stores had previously provided to Argonne, which we refer to as the financial model.

        On July 31, 2013, an additional potential financial acquirer, which we refer to as Party C, contacted William Blair and requested non-public information regarding ALCO Stores. On August 1, 2013 Party C entered into an acceptable confidentiality agreement pursuant to which Party C would maintain the confidentiality of the non-public information it would receive from William Blair and ALCO Stores regarding ALCO Stores' business and operations. That same day, ALCO Stores provided Party C with the financial model.

        Also on July 31, 2013, a representative of Everbright left a message for Mr. Winsten indicating Everbright's interest to submit a bid to acquire all of ALCO Stores' outstanding common stock.

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        On August 1, 2013, representatives of William Blair held a conference call with representatives of Party B. Party B indicated that it would like to review additional information regarding ALCO Stores in order to determine whether it would submit an offer to acquire all of ALCO Stores' outstanding common stock. William Blair agreed to provide Party B with diligence information and material regarding ALCO Stores that had been previously shared with Argonne. Party B subsequently began to perform an initial review of ALCO Stores and its business and operations.

        Also on August 1, 2013, representatives of William Blair held a conference call with representatives and advisors of Everbright, including representatives of Financo, Inc., which we refer to as Financo. Everbright had retained Financo to as a financial advisor to provide its advice regarding a potential acquisition of ALCO Stores. William Blair requested that Everbright provide information regarding Everbright, including regarding its management and financial wherewithal. William Blair provided Everbright with a draft acceptable confidentiality agreement substantially in the same form as the non-disclosure agreement entered into by Argonne and provided copies of ALCO Stores' public filings to Everbright and Financo for their review.

        On August 2, 2013, representatives of William Blair held a conference call with representatives of Party C. Party C indicated that it would like to review additional information regarding ALCO Stores in order to determine whether it would submit an offer to acquire all of ALCO Stores' outstanding common stock. William Blair agreed to provide Party C with diligence information and material regarding ALCO Stores that had been previously shared with Argonne. Party C subsequently began to perform an initial review of ALCO Stores and its business and operations.

        On August 2, 2013, Everbright provided additional information regarding its structure, management and financial wherewithal to William Blair. Everbright also provided contact information for its outside legal counsel, Greenberg Traurig, LLP, which we refer to as Greenberg Traurig.

        Also on August 2, 2013, Norton Rose Fulbright provided written notice to Argonne, pursuant to the requirements of the merger agreement, informing Argonne that Party B and Party C had entered into acceptable confidentiality agreements with ALCO Stores, that ALCO Stores had provided the financial model to Party B and Party C and that William Blair had engaged in discussions with Everbright regarding a potential acquisition of ALCO Stores.

        On August 2, 2013, Everbright entered into an acceptable confidentiality agreement pursuant to which Everbright would maintain the confidentiality of certain non-public information it would receive from William Blair and ALCO Stores regarding ALCO Stores' business and operations. William Blair subsequently began to provide Everbright and Financo with diligence information and material regarding ALCO Stores that had been previously shared with Argonne. Everbright subsequently began to perform an initial review of ALCO Stores and its business and operations, based upon diligence material provided to Everbright by William Blair.

        On August 7, 2013, Party C notified William Blair that, after further evaluation of a potential acquisition of ALCO Stores, it had decided to withdraw from the process.

        On August 8, 2013, representatives of Financo and William Blair held a conference call to discuss diligence conducted by Everbright and Financo on ALCO Stores as well as the bidding process and the estimated timing for submission of an offer by Everbright. Financo indicated that additional diligence and analysis was required. After the call, William Blair provided Financo with a store level financial summary and a schedule of stock options granted to ALCO Stores' directors and executive officers, both of which had been previously provided to Argonne.

        On August 10, 2013, representatives of Financo and William Blair held a conference call to discuss the schedule of stock options granted to ALCO Stores' directors and executive officers William Blair had provided to Financo.

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        On August 12, 2013, Party B notified William Blair that, after further evaluation of a potential acquisition of ALCO Stores, it had decided to withdraw from the process.

        On August 14, 2013, Everbright submitted a non-binding acquisition proposal to acquire all of ALCO Stores' outstanding common stock for at least $14.30 per share net of any termination fee payable by ALCO Stores to Parent, subject to further due diligence. The proposal also stated that, subject to further due diligence, a definitive agreement between ALCO Stores and Everbright would include representations and warranties and covenants more favorable to ALCO Stores, a 20% reduction in the excess availability threshold dollar amounts related to the minimum excess availability calculation and a decreased termination fee potential payable by ALCO Stores.

Recommendation of Our Board of Directors and Reasons for the Merger

Recommendation of Our Board of Directors

        The Board of Directors recommends that you vote "FOR" the proposal to adopt the merger agreement, "FOR" the non-binding, advisory proposal regarding compensation that will or may become payable by ALCO Stores to its named executive officers in connection with the merger and "FOR" the proposal to adjourn the special meeting.

Reasons for the Merger

        In evaluating the merger agreement, the merger and the other transactions contemplated by the merger agreement, the Board of Directors consulted with ALCO Stores' senior management, outside legal counsel and an independent financial advisor. In recommending that ALCO Stores stockholders vote their shares of common stock in favor of adoption of the merger agreement, the Board of Directors also considered a number of factors, including the following (not necessarily in order of relative importance):

•

ALCO Stores' business and operations, and its current and historical financial condition and results of operations.



•

ALCO Stores' business plan and related financial projections, the economic environment facing ALCO Stores and the risks and uncertainties in executing its business plan and achieving previously-stated financial projections.



•

The historic trading ranges of ALCO Stores common stock, the potential trading range of ALCO Stores common stock and the possibility that it could take a considerable period of time before the trading price of ALCO Stores common stock would trade at a level in excess of the per share merger consideration of $14.00 on a present value basis.



•

The relationship of the $14.00 merger consideration to the trading price of the common stock, including that the merger consideration constituted a premium of approximately 63% to the closing share price for ALCO Stores common stock on July 24, the day before ALCO Stores' announcement of the transactions contemplated by the merger agreement.



•

The financial analysis presentation of ALCO Stores' financial advisor in connection with the merger, and the opinion of William Blair, dated as of July 25, 2013, delivered to the Board of Directors that, as of July 25, 2013, and based upon and subject to the assumptions, qualifications and limitations set forth therein, the $14.00 per share in cash consideration to be received by the holders of shares of ALCO Stores common stock (other than Parent or its affiliates) pursuant to the merger agreement was fair from a financial point of view to such holders, as more fully described below under the heading "—Opinion of William Blair & Company, L.L.C."



•

The risks and opportunities associated with the potential alternative to the merger of remaining an independent public company and pursuing ALCO Stores' business plan.

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•

The fact that the all-cash merger consideration will provide certainty of value and liquidity to ALCO Stores stockholders, while eliminating long-term business and execution risk.



•

The perceived risks of pursuing other alternatives; the range of potential benefits to ALCO Stores stockholders of these alternatives; and the assessment that no other alternatives were reasonably likely to create greater value for ALCO Stores stockholders than the merger, taking into account risk of execution as well as business, competitive, industry and market risk.



•

The Board of Directors' belief that it engaged in a thorough review of a potential sale, including that:



•

Since November 2009, ALCO Stores has retained William Blair to consider and review strategic alternatives, including the sale of ALCO Stores, from time to time;



•

The Board of Directors requested that William Blair solicit indications of interest from twelve potential buyers, consisting of both strategic and financial buyers, following the submission of unsolicited offers by Everbright and Argonne in January and March, respectively;



•

The Board of Directors negotiated an increase in Argonne's proposed offer from $10.50 to $14.00 per share of ALCO Stores common stock, and the Board of Directors believed that Argonne was unwilling to increase its proposal further; and



•

Based upon its review and the process conducted, the Board of Directors believed that $14.00 per share in cash consideration was the best price reasonably attainable for ALCO Stores stockholders.



•

The Board of Directors' view that the merger agreement permits ALCO Stores to, directly and indirectly, initiate, solicit, facilitate and encourage any inquiries regarding, or the making of, superior proposals by third parties, including the right to furnish information or enter into discussions with a third party in connection with an alternative acquisition proposal after the end of the go-shop period (including any extension of the go-shop period) if the Board of Directors determines in good faith, after consultation with its independent financial advisor and outside legal counsel, that such acquisition proposal would reasonably be expected to result in a superior proposal. In this regard, the Board of Directors considered that:



•

The Board of Directors could change its recommendation to ALCO Stores stockholders with respect to adoption of the merger agreement prior to the adoption of the merger agreement by the stockholders if (i) an event, fact, development or occurrence affecting ALCO Stores' business, assets or operations (but not related to an acquisition proposal) that was not known nor reasonably foreseeable to the Board of Directors as of the date of the merger agreement becomes known to the Board of Directors or (ii) if ALCO Stores received a written acquisition proposal that the Board of Directors determined in good faith, after consultation with its independent financial advisor and outside legal counsel, that such offer constitutes a superior proposal, provided that the Board of Directors has concluded that failure to do so would be inconsistent with its fiduciary obligations under applicable law;



•

Prior to the adoption of the merger agreement by the stockholders, the Board of Directors may terminate the merger agreement in order to enter into a definitive agreement with respect to an alternative acquisition proposal that the Board of Directors determines, in good faith, after consultation with its legal and financial advisors, is a superior proposal, if it provides Parent prior notice and a good faith opportunity to negotiate;



•

The structure of the transaction as a merger would allow sufficient time for a third party to make a superior proposal if it desired to do so; and

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•

While the merger agreement contained a termination fee of $2.25 million, or approximately [    •    ]% of the aggregate equity value of the transaction, or a lesser fee of $1.75 million if terminated during the go-shop period (including any extension of the go-shop period) on account of a superior proposal made by an excluded party, or approximately [    •    ]% of the aggregate equity value of the transaction, that ALCO Stores would be required to pay to Parent under certain circumstances, the Board of Directors believed that this fee is reasonable in light of the circumstances and the overall terms of the merger agreement, consistent with fees in comparable transactions, and not preclusive of other offers.



•

The Board of Directors' view that the merger agreement was the product of arms-length negotiations and contained customary terms and conditions.



•

The other terms of the merger agreement, including:



•

The conditions to the closing of the merger, including the fact that there is no third-party consent condition, no stockholder litigation condition and that holders not more than 22% of the outstanding shares of ALCO Stores common stock must not have effected a demand for appraisal under section 17-6712 of the K.S.A;



•

The termination provisions in the merger agreement, including:



•

The fact that Parent has a right to terminate the merger agreement if, immediately prior to the time ALCO Stores is required to mail this proxy statement, ALCO Stores does not have specified levels of available borrowing capacity under the revolving credit facility;



•

The fact that the termination date under the merger agreement on which either party, subject to specified exceptions, can terminate the merger agreement allows for sufficient time to consummate the transactions contemplated by the merger agreement;



•

The fact that the Board of Directors may terminate the merger agreement in order to enter into a definitive agreement with respect to an alternative acquisition proposal that the Board of Directors determines, in good faith, after consultation with its legal and financial advisors, is a superior proposal, if it provides Parent prior notice and a good faith opportunity to negotiate;



•

The fact that the Board of Directors believed that the termination fee of $2.25 million, or approximately [    •    ]% of the aggregate equity value of the transaction, or a lesser fee of $1.75 million if terminated during the go-shop period (including any extension of the go-shop period) on account of a superior proposal made by an excluded party, or approximately [    •    ]% of the aggregate equity value of the transaction, is reasonable and not preclusive of other offers; and



•

The obligation of Parent to pay ALCO Stores a reverse termination fee of $3.50 million, or approximately [    •    ]% of the aggregate equity value of the transaction, if Parent fails to consummate the merger if the conditions to closing are satisfied or ALCO Stores has terminated the merger agreement as a result of Parent's material breach of the merger agreement; and



•

The fact that Parent has received commitments for the necessary financing, including that Parent delivered executed debt financing commitment letters to provide the debt financing, which increases the likelihood of such financing being completed.



•

The fact that the Limited Guarantor provided a limited guaranty in favor of ALCO Stores that guarantees the payment of the reverse termination fee and other expenses and that the Limited

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Guarantor provided an executed equity commitment letter to provide the equity portion of the financing.

•

The fact that the Limited Guarantor has also deposited $3.5 million into the escrow fund, which, at the Limited Guarantor's option, may be replaced by the Limited Guarantor with a letter of credit, from which ALCO Stores may be paid any unpaid portion of the reverse termination fee, if such payment becomes required pursuant to the merger agreement, and to be drawn upon for the purpose of reimbursing ALCO Stores with respect to expenses and liabilities specified in the merger agreement.



•

The number and nature of the conditions to funding set forth in the debt and equity financing commitment letters and the Board of Directors' expectation that such conditions will be timely met and that the financing will be provided in a timely manner.



•

The fact that the merger agreement was approved by the independent members of the Board of Directors who are not affiliated with Argonne and are not employees of ALCO Stores or any of its subsidiaries, and which retained and received advice from ALCO Stores' outside financial and legal advisors in evaluating, negotiating and recommending the terms of the merger agreement.



•

The availability of dissenters' rights to ALCO Stores stockholders who comply with specified procedures under Kansas law.

        The Board of Directors also considered a number of uncertainties and risks in its deliberations concerning the merger and the other transactions contemplated by the merger agreement, including the following (not necessarily in order of relative importance):

•

The fact that ALCO Stores may not have a sufficient amount of available borrowing capacity under the revolving credit facility, which, if resulting from a breach of the merger agreement by ALCO Stores entitling Parent to exercise its right to terminate the merger agreement on account of such breach, may result in ALCO Stores being required to pay Parent a termination fee of $2.25 million.



•

The fact that receipt of the all-cash merger consideration would be taxable to ALCO Stores stockholders that are treated as United States persons for U.S. federal income tax purposes.



•

The fact that ALCO Stores stockholders would forego the opportunity to realize the potential long-term value of the successful execution of ALCO Stores' current strategy as an independent company.



•

The possibility that Parent could, at a later date, engage in unspecified transactions including restructuring efforts, special dividends or the sale of some or all of ALCO Stores' assets to one or more as yet unknown purchasers that could conceivably produce a higher aggregate value than that available to the stockholders in the merger.



•

The fact that, under specified circumstances, ALCO Stores may be required to pay fees and expenses in the event the merger agreement is terminated and the effect this could have on ALCO Stores, including:



•

The fact that the termination fee could discourage other potential acquirers from making a competing offer to acquire ALCO Stores; although the Board of Directors believed that the termination fee was customary in amount and would not unduly deter any other party that might be interested in acquiring ALCO Stores;



•

The fact that, if the merger is not completed, ALCO Stores will be required to pay its own expenses associated with the merger agreement and the transactions contemplated thereby; and

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•

The requirement that ALCO Stores reimburse Parent for up to $1 million of its and its affiliates' reasonable documented out-of-pocket expenses in connection with the merger if the merger agreement is terminated under circumstances specified in the merger agreement; although the Board of Directors concluded that this amount was customary and reasonable.



•

The significant costs involved in connection with entering into and completing the merger and the substantial time and effort of management required to complete the merger, which may disrupt ALCO Stores' business operations.



•

The restrictions on ALCO Stores' conduct of business prior to completion of the merger, which could delay or prevent ALCO Stores from undertaking business opportunities that may arise or taking other actions with respect to its operations.



•

The fact that the reverse termination fee is not available in all instances where the merger agreement is terminated and may be ALCO Stores' only recourse where it is available.



•

The fact that Parent's and the Limited Guarantor's monetary damages under the merger agreement cannot exceed the amount of the reverse termination fee plus specified expenses payable by Parent and Merger Sub as well as specified reimbursement and indemnification obligations under the merger agreement.



•

The fact that, while ALCO Stores expects the merger to be completed if approved by ALCO Stores stockholders, there can be no assurance that all conditions to the parties' obligations to complete the merger will be satisfied.



•

The risk that the proposed merger might not be completed and the effect of the resulting public announcement of termination of the merger agreement on the trading price of ALCO Stores common stock.



•

The fact that the market price of ALCO Stores common stock could be affected by many factors, including: (i) the reason or reasons for which the merger agreement was terminated and whether such termination resulted from factors adversely affecting ALCO Stores; (ii) the possibility that, as a result of the termination of the merger agreement, the marketplace would consider ALCO Stores to be an unattractive acquisition candidate; and (iii) the possible sale of ALCO Stores common stock by short-term investors following an announcement that the merger agreement was terminated.



•

The fact that ALCO Stores' business, sales operations and financial results could suffer in the event that the merger is not completed and that ALCO Stores' stock price would likely be adversely affected.



•

The fact that the announcement and pendency of the merger, or failure to complete the merger, may cause substantial harm to ALCO Stores' relationships with its employees (including making it more difficult to attract and retain key personnel and the possible loss of key management, technical, sales or other personnel), vendors and customers and may divert employees' attention away from ALCO Stores' day-to-day business operations.



•

The fact that ALCO Stores' directors and executive officers may have interests in the merger that may be different from, or in addition to, those of ALCO Stores stockholders. For more information about such interests, see below under the heading "—Interests of the Directors and Executive Officers of ALCO Stores in the Merger."



•

The Board of Directors believed that, overall, the potential benefits of the merger to ALCO Stores stockholders outweighed the risks and uncertainties of the merger.

        The Board of Directors also considered that while Mr. Wilson, ALCO Stores' President and Chief Executive Officer, advised the Board of Directors that he had no arrangements or understandings with

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Argonne regarding his continued employment following the merger or his participation in any equity program Parent or Argonne might establish following the merger, Argonne had indicated to the Chairman of ALCO Stores its interest in such continued association and it was possible Mr. Wilson could agree to such continued association.

        The foregoing discussion of factors considered by the Board of Directors is not intended to be exhaustive, but includes the material factors considered by the Board of Directors in considering whether to recommend that ALCO Stores' stockholders vote their shares of common stock in favor of adoption of the merger agreement. In light of the variety of factors considered in connection with its evaluation of the merger, the Board of Directors did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determinations and recommendations. Moreover, each member of the Board of Directors applied his or her own personal business judgment to the process and may have given different weight to different factors. The Board of Directors did not undertake to make any specific determination as to whether any factor, or any particular aspect of any factor, supported or did not support its ultimate determination. The Board of Directors based its recommendation on the totality of the information presented.

Opinion of William Blair & Company, L.L.C.

        William Blair was retained to act as the financial advisor to ALCO Stores to render certain investment banking services including soliciting offers for the possible sale of ALCO Stores, which ultimately included the proposed transaction with Parent, as set forth in the merger agreement. As part of its engagement, ALCO Stores requested the opinion of William Blair as to the fairness, from a financial point of view, to the holders of the outstanding shares of common stock (other than Parent or its affiliates) of ALCO Stores, Inc. of the $14.00 per share cash consideration to be received by such stockholders (other than Parent or its affiliates) pursuant to the merger agreement. On July 25, 2013, William Blair delivered its oral opinion to the Board of Directors and subsequently confirmed in writing, that, as of that date and based upon and subject to the assumptions, qualifications and limitations stated in its opinion, the $14.00 per share cash consideration to be received by the stockholders (other than Parent or its affiliates) pursuant to the merger was fair, from a financial point of view, to such stockholders.

        William Blair provided the opinion described above for the information and assistance of the Board of Directors (in their capacity as directors and not in any other capacity) in connection with its consideration of the merger. The terms of the merger agreement, including the amount and form of the consideration payable in the merger, were determined through negotiations between ALCO Stores and Parent, and were approved by the Board of Directors. William Blair did not determine nor recommend any specific consideration to the Board of Directors or that any specific consideration constituted the only appropriate consideration for the merger. The opinion described above delivered to the Board of Directors was reviewed and approved by William Blair's Fairness Opinion Committee. William Blair has consented to the inclusion in this proxy statement of its opinion and the description of its opinion appearing under this subheading "Opinion of William Blair & Company, L.L.C."

        THE FULL TEXT OF WILLIAM BLAIR'S WRITTEN OPINION, DATED JULY 25, 2013, IS ATTACHED AS ANNEX B TO THIS PROXY STATEMENT AND INCORPORATED INTO THIS SCHEDULE BY REFERENCE. YOU ARE URGED TO READ THE ENTIRE OPINION CAREFULLY AND IN ITS ENTIRETY TO LEARN ABOUT THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITS ON THE SCOPE OF THE REVIEW UNDERTAKEN BY WILLIAM BLAIR IN RENDERING ITS OPINION. WILLIAM BLAIR'S OPINION WAS DIRECTED SOLELY TO ALCO STORES BOARD OF DIRECTORS FOR ITS BENEFIT AND USE IN EVALUATING THE FAIRNESS OF THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT. WILLIAM BLAIR'S OPINION RELATES ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE CONSIDERATION TO BE RECEIVED BY ALCO

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STORES STOCKHOLDERS (OTHER THAN PARENT OR ITS AFFILIATES) IN THE MERGER PURSUANT TO THE MERGER AGREEMENT, DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER OR ANY RELATED TRANSACTIONS, AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY ALCO STORES STOCKHOLDER AS TO HOW SUCH ALCO STORES STOCKHOLDER SHOULD VOTE OR ACT WITH RESPECT TO THE MERGER. WILLIAM BLAIR DID NOT ADDRESS THE MERITS OF THE UNDERLYING DECISION BY ALCO STORES TO ENGAGE IN THE MERGER . THE FOLLOWING SUMMARY OF WILLIAM BLAIR'S OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION ATTACHED TO THIS PROXY STATEMENT AS ANNEX B.

        In connection with William Blair's review of the merger and the preparation of its opinion, William Blair examined or discussed, among other things:

•

a draft of the merger agreement dated July 24, 2013;



•

the audited historical financial statements of ALCO Stores for the fiscal years ended January 30, 2011, January 29, 2012 and February 3, 2013;



•

the unaudited financial statements of ALCO Stores for the fiscal quarter ended May 5, 2013;



•

certain internal business, operating and financial information and forecasts of ALCO Stores prepared by the senior management of ALCO Stores, which we refer to as the Forecasts and which are defined below under "—Projections Prepared by ALCO Stores' Management";



•

certain information regarding publicly available financial terms of certain other business combinations William Blair deemed relevant;



•

the financial position and operating results of ALCO Stores compared with those of certain other publicly traded companies William Blair deemed relevant;



•

current and historical market prices and trading volumes of the common stock of ALCO Stores; and



•

certain other publicly available information on ALCO Stores.

        In addition, in recognition of ALCO Stores' historical underperformance of actual results relative to budget, the Board of Directors directed William Blair to conduct and examine sensitivity analyses, including discounts of 20%, 40% and 60% to the results of earnings before interest, taxes, depreciation and amortization, which we refer to as EBITDA, in such Forecasts. From fiscal year 2011 to 2013, actual EBITDA ranged from a 34.1% to 64.5% discount to budgeted EBITDA per senior management of ALCO Stores. William Blair also held discussions with members of the senior management of ALCO Stores to discuss the foregoing, considered other matters which it deemed relevant to its inquiry, and took into account the accepted financial and investment banking procedures and considerations that it deemed relevant. In connection with William Blair's engagement, it was requested to approach, and held discussions with, third parties to solicit indications of interest in a possible acquisition of ALCO Stores. As described under the subsection titled "The Merger—Background of the Merger", subsequent to rendering its opinion and following the public announcement of the merger, at the direction of the Board of Directors, William Blair solicited the interest of third parties to engage in a possible business combination transaction with ALCO Stores pursuant to the terms of the merger agreement.

        In rendering its opinion, William Blair assumed and relied, without any independent verification and with the Board of Directors' consent, upon the accuracy and completeness of all the information examined by or otherwise reviewed or discussed with William Blair for purposes of this opinion including, without limitation, the Forecasts prepared and provided by the senior management of ALCO Stores, and William Blair has not assumed any responsibility or liability therefor. William Blair has not

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made or obtained an independent valuation or appraisal of the assets, liabilities or solvency of ALCO Stores. William Blair has been advised by the senior management of ALCO Stores that the Forecasts examined by William Blair have been reasonably prepared on bases reflecting the best currently available estimates and judgments of the senior management of ALCO Stores. In that regard, William Blair assumed, with the Board of Directors' consent, that (i) the Forecasts will be achieved and (ii) all material assets and liabilities (contingent or otherwise) of ALCO Stores are as set forth in ALCO Stores' financial statements or other information made available to William Blair. In addition, as directed by the Board of Directors, William Blair examined certain sensitivity analyses of the Forecasts due to ALCO Stores' historical underperformance of actual results relative to budget. William Blair expressed no opinion with respect to the Forecasts, the estimates and judgments on which they are based, or the assumptions in or results of the sensitivity analyses. William Blair did not consider and expressed no opinion as to the amount or nature of the compensation to any of ALCO Stores' officers, directors or employees (or any class of such persons) relative to the merger consideration payable to public stockholders. William Blair expressed no opinion as to any terms or other aspects of the merger (other than the merger consideration to the extent specified in such opinion), including, without limitation, the form or structure of the merger, or accounting or tax consequences thereof. William Blair was not asked to consider, and its opinion did not address, the financing terms of the merger, the relative merits of the merger as compared to any alternative business strategies that might exist for ALCO Stores or the effect of any other transaction in which ALCO Stores might engage. William Blair's opinion was based upon economic, market, financial and other conditions existing on, and other information disclosed to William Blair as of, the date of its opinion. It should be understood that, although subsequent developments may affect William Blair's opinion, William Blair does not have any obligation to update, revise or reaffirm its opinion. William Blair relied as to all legal and regulatory matters on advice of counsel to ALCO Stores. William Blair assumed that the final executed form of the merger agreement did not materially differ from the last draft thereof reviewed by William Blair and has assumed that the merger will be completed on the terms described in such draft merger agreement, without any amendment or waiver of any material terms or conditions by ALCO Stores.

        William Blair's investment banking services and its opinion were provided for the use and benefit of the Board of Directors in connection with its consideration of the transactions contemplated by the merger agreement. William Blair's opinion was limited to the fairness, from a financial point of view, of the consideration to be received by ALCO Stores stockholders (other than Parent or its affiliates) in the merger pursuant to the merger agreement, and William Blair did not address the merits of the underlying decision by ALCO Stores to engage in the merger and its opinion does not constitute a recommendation to any company stockholder as to how such stockholder should vote with respect to the merger.

        The following is a summary of the material analyses performed and material factors considered by William Blair in connection with its opinion. William Blair performed certain procedures, including each of the analyses described below, and reviewed with the Board of Directors the assumptions upon which such analyses were based, as well as other factors. Although the summary does not purport to describe all of the analyses performed or factors considered by William Blair in this regard, it does set forth those considered by William Blair to be material in arriving at its opinion. The order of the summaries of analyses described below does not represent the relative importance or weight given to those analyses by William Blair. The analyses summarized below include information presented in a tabular format. In order to fully understand the analyses performed by William Blair, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the analyses performed by William Blair. Considering the data set forth in the tables below without considering the full narrative description of the analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the analyses performed by William Blair.

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        Historical Trading Analysis.    William Blair observed the historical trading prices of ALCO Stores for the last twelve months and for the last three years ending July 19, 2013. William Blair noted that over the last twelve months, ALCO Stores' closing stock price ranged from a low of $6.31 per share to a high of $11.21 per share, with a volume weighted average price of $7.83 per share. William Blair also noted that over the past three years, ALCO Stores' closing stock price ranged from a low of $6.31 per share to a high of $15.00 per share, with a volume weighted average price of $9.85 per share. William Blair's analysis of historical trading concluded that 100% of those shares that traded in the last twelve months and 98% of those shares that traded over the past three years traded below the merger consideration of $14.00 per share.

        Selected Publicly Traded Company Analysis.    William Blair reviewed and compared certain financial information relating to ALCO Stores to corresponding financial information, ratios and public market multiples for a selected group of publicly-traded retailers. Although none of the selected companies was directly comparable to ALCO Stores, the companies listed were selected because they are publicly traded companies with similar merchandising assortments, customer base and operating geographies that, for purposes of this analysis, may be deemed reasonably comparable to ALCO Stores. William Blair identified three categories of selected publicly-traded retailers, including regional retailers, dollar stores, and broad assortment retailers. William Blair noted that the regional retailers group most closely matched ALCO Stores' operating and financial statistics. The companies selected by William Blair were:

Regional Retailers

•

Fred's, Inc.



•

Gordmans Stores, Inc.



•

Stage Stores Inc.

Dollar Stores

•

Dollar General Corporation



•

Dollar Tree, Inc.



•

Family Dollar Stores Inc.

Broad Assortment Retailers

•

Kohl's Corporation



•

Target Corporation



•

Tractor Supply Company



•

Wal-Mart Stores Inc.

        Among the information William Blair considered were revenue, EBITDA and earnings before interest and taxes, which we refer to as EBIT. William Blair considered the enterprise value for each company (including ALCO Stores), which William Blair calculated as the equity value of ALCO Stores, plus total debt, minority interest and preferred stock, less cash and cash equivalents. The equity value of each company was calculated using the closing stock price as of July 19, 2013 (the last trading day prior to William Blair's distribution of its analysis to the Board of Directors), multiplied by the diluted shares outstanding (the common stock outstanding and in-the-money common stock equivalents calculated using the treasury method). Enterprise values were then divided by the revenue, EBITDA and EBIT for each company for the last twelve months for which results were publicly available, which we refer to as LTM, to arrive at certain multiples. The operating results and the corresponding derived

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multiples for ALCO Stores and each of the selected public companies were based on each company's most recent available publicly disclosed financial information and closing share prices as of July 19, 2013. For ALCO Stores and each of the selected public companies, William Blair considered EBITDA and EBIT on an adjusted basis, to eliminate the impact of non-recurring, non-operating or non-cash items. ALCO Stores' LTM results were adjusted to reflect a 52-week period. The implied enterprise value of ALCO Stores is based on the equity value implied by the merger consideration plus the total debt, less cash and cash equivalents held by ALCO Stores as of its most recent fiscal quarter ended May 5, 2013.

        William Blair then compared the multiples implied for ALCO Stores based on the merger, to the range of trading multiples for the aggregate group of selected public companies. Information regarding the multiples from William Blair's analysis of selected publicly traded companies is set forth in the following table.