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Acquisition Scenario Facts . . . Company A announced an offer to buy Company B for $22/sh; $17/sh in cash, $5/sh in stock (explain) Cash
Acquisition Scenario Facts . . . Company A announced an offer to buy Company B for $22/sh; $17/sh in cash, $5/sh in stock (explain) Cash component is about $22 Bn Revenue of target is 6.5x the acquiror Combined EBITDA is $6.5 Bn Free cash flow is $5.4 Bn Acquiror announced the sale of a sub/division for $2.3 Bn Acquiror is projecting $2 Bn in synergies Both companies paid dividends Pro Forma leverage is 5x Companies moving in different directions in terms of revenue growth External ratings (Moodys/S&P) differ with the target much better rated . . Acquisition Scenario Company A Company B Adjustments Pro-forma consolidate Revenue $ 9,088 $ 58,601 $ 67,688 EBITDA $ 1,558 $ 4,958 $ 6,516 EBITDA W/ synergies $ 2,000 $ 8,516 Cash & Equivalents $ 922 $ 4,919 $ 5,841 Proceeds from sale of Division $ 2,300 $ 8,141 Total Debt $ 4,832 $ 5,058 $ 9,890 Proposed Acquisition Debt $ 23,000 $ 32,890 Free Cash Flow $ 1,269 $ 4,103 $ 5,372 1.0x Leverage: Gross leverage Net Leverage Net Leverage after synergies Net Leverage after synergies and asset sale 3.1x 2.5x 5.Ox 4.2x 3.8x 2.9x 1. Ox Synergies 2,000 Dividends paid last 12 months $250 $970 Avg revenue growth last 3 years -5.20% 9.80% Market Capitalization $8 Bn $27Bn External credit rating Ba 1/BB+/BB Baa 2/BBB Questions 1. At 5x leverage are you comfortable with the terms of the merger? 2. The target has 5X the revenue of the acquiror. Is this normal? 3. The acquiror is stating there are $2 Bn in synergies associated with the merger. Are they likely to attain these synergies? 4. Is the cash portion of the offer financeable? 5. If you were CEO or CFO of the target would you entertain this offer? 6. Would the fact there is limited overlap between their two businesses effect your decision? Acquisition Scenario Facts . . . Company A announced an offer to buy Company B for $22/sh; $17/sh in cash, $5/sh in stock (explain) Cash component is about $22 Bn Revenue of target is 6.5x the acquiror Combined EBITDA is $6.5 Bn Free cash flow is $5.4 Bn Acquiror announced the sale of a sub/division for $2.3 Bn Acquiror is projecting $2 Bn in synergies Both companies paid dividends Pro Forma leverage is 5x Companies moving in different directions in terms of revenue growth External ratings (Moodys/S&P) differ with the target much better rated . . Acquisition Scenario Company A Company B Adjustments Pro-forma consolidate Revenue $ 9,088 $ 58,601 $ 67,688 EBITDA $ 1,558 $ 4,958 $ 6,516 EBITDA W/ synergies $ 2,000 $ 8,516 Cash & Equivalents $ 922 $ 4,919 $ 5,841 Proceeds from sale of Division $ 2,300 $ 8,141 Total Debt $ 4,832 $ 5,058 $ 9,890 Proposed Acquisition Debt $ 23,000 $ 32,890 Free Cash Flow $ 1,269 $ 4,103 $ 5,372 1.0x Leverage: Gross leverage Net Leverage Net Leverage after synergies Net Leverage after synergies and asset sale 3.1x 2.5x 5.Ox 4.2x 3.8x 2.9x 1. Ox Synergies 2,000 Dividends paid last 12 months $250 $970 Avg revenue growth last 3 years -5.20% 9.80% Market Capitalization $8 Bn $27Bn External credit rating Ba 1/BB+/BB Baa 2/BBB Questions 1. At 5x leverage are you comfortable with the terms of the merger? 2. The target has 5X the revenue of the acquiror. Is this normal? 3. The acquiror is stating there are $2 Bn in synergies associated with the merger. Are they likely to attain these synergies? 4. Is the cash portion of the offer financeable? 5. If you were CEO or CFO of the target would you entertain this offer? 6. Would the fact there is limited overlap between their two businesses effect your decision
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