I am working on the Dupont Buyout Case study, I see documents uploaded by by Jameszs- I am wondering how he arrived at the answers in the tables he provided. Is there an excel spread sheet that I can view so as to assist me in figuring out where the numbers came from? Most numbers came from exhibit 9? Unfortunately the documents uploaded here aren't helpful in actually solving the case questions..Can someone please HELP table exhibit 9

UV6790 Rev. May 19, 2014 DUPONT CORPORATION: SALE OF PERFORMANCE COATINGS In January 2012, Ellen Kullman, CEO and chairman of DuPont, was reviewing an internal report on the company's Performance Coatings division. A month earlier, she had dismissed rumors that the business was up for sale after reports had surfaced that the company had hired Credit Suisse to seek potential buyers for it. Kullman stated that the business would be given a \"chance\" to see if it could meet certain performance targets, saying: \"From a performance standpoint we will give them a chance to see if they can get there. If any of our businesses can't obtain their targets, obviously we will look at alternatives.\"1 For several years, the business, which produced paint for the auto and trucking industries, had struggled with low demand and high raw-material costs that had hurt profits. During her tenure as CEO, Kullman had attempted to move DuPont away from commodity chemicals to a specialty chemical and science-focused products business. It was no longer clear whether DuPont Performance Coatings (DPC) fit her strategic vision for the firm. Still, the issue was what course would produce the greatest value for shareholders. She had called for an internal review of the business that fall to assess its value to DuPont compared to what outside parties might pay for it. Those reports were now complete, and she would have to decide whether to retain the business or sell it and, if so, at what price. History of DuPont E. I. du Pont de Nemours and Company was one of the longest continually operating companies in the United States. It traced its origin to a French migr, Eleuthre Irne (E. I.) du Pont, who had studied chemistry and who, at age 14, had written a paper on gunpowder. In 1799, his family fled revolutionary France, and in 1802, he founded a company in Delaware, at the 1 Stefan Baumgarten, \"DuPont CEO Slams News Media Over Reports of Coatings Business Sale,\" ICIS News, December 13, 2011. This case was prepared by Susan Chaplinsky, Tipton P. Snavely Professor of Business Administration, and Felicia Marston, Professor of Commerce, McIntire School of Commerce, with the assistance of Brett Merker, Research Assistant. It was written as a basis for class discussion rather than to illustrate an effective or ineffective handling of an administrative situation. Copyright 2014 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an e-mail to sales@dardenbusinesspublishing.com. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any meanselectronic, mechanical, photocopying, recording, or otherwisewithout the permission of the Darden School Foundation. This document is authorized for use only by Sherry Sheppard (smsheppard@hotmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. -2- UV6790 urging of Thomas Jefferson, to manufacturer gunpowder.2 From its origins in gunpowder, in the 1880s, the company pioneered the manufacture of dynamite. At the turn of the 20th century, the chemistry of nitrocellulose, critical to explosives, began to spawn early innovations in plastics, lacquers, films, and fibers. In 1911, the U.S. government, citing antitrust reasons, forced DuPont to break up its monopoly gunpowder business. Notwithstanding this, the company made enormous profits during World War I, which it used to diversify into other businesses. By 2011, DuPont was among the world's largest chemical companies; it had $38 billion in sales and operations in 90 countries. Among its most well-known products were nylon (introduced in 1935), Tyvek (used in construction), Kevlar (a protection product), and Teflon (a protective surface). Exhibit 1 shows the evolving nature of DuPont's businesses since its founding. Kullman's Watch Kullman joined DuPont in 1988 as a marketing manager after starting her career at GE. Within DuPont, she had a reputation for making businesses grow, a legacy she attributed to her father, who was a landscaper. In 1998, she launched a safety consulting business, which later became the Safety & Protection business, which boasted sales approaching $4 billion in 2011. She was named DuPont's CEO in January 2009 and, later that same year, chairman. That year was a difficult one for the company because its performance was closely tied to the broader economy, which had fallen into a recession. Shortly after her appointment as CEO, in February 2009, DuPont's stock price fell below $19, a multiyear low (Exhibit 2). In response to the downturn, Kullman cut costs, laid off 4,500 employees, and continued to transition the company from a commodity chemical business to a specialty chemical and science-driven business. Commodity chemicals typically were cyclical, and intense priced-based competition kept margins low. By moving toward specialty chemicals and more customized products based on DuPont's research and development (R&D), Kullman hoped to focus the company on highergrowth and -margin businesses. As part of this plan, the company acquired Danisco, a leading food ingredient and enzyme company, for $7.1 billion in January 2011. It was the second-largest acquisition in company history, smaller only than the 1999 acquisition of Pioneer Hi-Bred International, a maker of genetically modified seeds. With the shift taking place away from the \"Old DuPont\" to a more specialty-focused company, the drivers of growth over the next few years were likely to be Agriculture, Nutrition & Health, Performance Chemicals, and the nascent Industrial Biosciences businesses. Kullman saw the firm's future increasingly at the core of industrial 2 Du Pont's gunpowder company was capitalized at $36,000, with 18 shares worth $2,000 each, a portion of which was used to purchase a site on Brandywine Creek for $6,740. Jefferson advised du Pont of the new nation's need for gunpowder and gave him his first order, calling the agreement between the two a \"handshake that built a country,\" from E. I. du Pont de Nemours and Company, \"DuPont200 Years of Service to the U.S. Government in Times of Need.\" This document is authorized for use only by Sherry Sheppard (smsheppard@hotmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. -3- UV6790 biotechnology; the company was positioned to compete in agriculture, nutrition, and advanced materials. She articulated her direction for the firm in the 2010 annual report: We have attractive growth opportunities supported by market-driven science and fueled by global megatrends associated with population growth. We are allocating resources to drive the highest growth opportunities...Global population will pass the 7 billion mark in 2011 and exceed 9 billion people by 2050or about 150,000 more people on the planet every day. This will translate into critical needs in the areas of feeding the world, reducing our dependence on fossil fuels and keeping people and the environment safethe megatrends that are driving our science and innovation....3 With her push to match the company's focus to these megatrends, DuPont's business units were evaluated to determine whether they fit this vision and could meet the company's performance goals. The company had publicly stated that its longer-term performance goals were to achieve 7% sales growth annually and 12% earning margins. The firm had eight separate business units: Agriculture (24% of 2011 sales), Performance Chemicals (21%), Performance Materials (18%), Performance Coatings (11%), Safety & Protection (10%), Electronics & Communications (8%), Nutrition & Health (6%), and Industrial Biosciences (2%). Based on 2011 revenue, Agriculture had grown to be DuPont's largest business (Exhibit 3). Although there was some unevenness in growth over the past two years, most of DuPont's divisions had been able to grow sales in line with the 7% goal. This was also true of DPC, which, in rebounding from the lows of 2009, had grown sales by 12.5% in 2011, but the growth rate in sales over the next two years was expected to be only 3% to 5% (Exhibit 4). More concerning was that its profit margins were the lowest among the eight businesses. All of this suggested that DPC would have to significantly improve its growth and profitability to meet DuPont's performance goals. Performance Coatings DPC was formed in March 1999 when Herberts GmbH and DuPont Automotive Finishes merged.4 Its products included high-performance liquid and powder coatings for motor vehicle original equipment manufacturers (OEMs), the motor vehicle aftermarket (refinishing), and general industrial applications, such as coatings for heavy equipment, pipes and appliances, and electrical insulation.5 DPC employees liked to say that the products they made didn't make cars go faster, they just made them look good going faster. From 2007 to 2011, sales had grown at a 3 DuPont, \"Letter to Shareholders,\" 2010 Annual Review, 2011, 2. DuPont had been a supplier of paint to the U.S. auto industry since its infancy, providing paint to General Motors in the 1920s. Herberts, a subsidiary of Hoechst, was acquired for $1.9 billion, making the combined firms the largest supplier of automotive finishes in the world. At the time, 80% of Herberts's operations were in Europe, while 75% of DuPont's business was in North America. 5 Sales to OEMs included all vehicles (e.g., cars, trucks, buses, and motorcycles). 4 This document is authorized for use only by Sherry Sheppard (smsheppard@hotmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. -4- UV6790 -0.3% cumulative average growth rate (CAGR) and profits had declined at a -6.0% CAGR (Exhibit 5). Due to the company's exposure to the auto sector, sales and earnings had been adversely affected by the 2008 and 2009 downturn. In 2011, the company posted stronger revenue growth of 12.5%, but most of this was attributed to price increases, which were unlikely to continue. Notwithstanding the pickup in sales, operating margins remained muted because of rising input costs. Nearly 50% of the key raw-material inputs (e.g., hydrocarbon solvents and organic pigments) were tied to crude oil prices, which had risen since the middle of 2010 due to tight supply and improving economic conditions. Key competitive factors in its business included technology and technical expertise, product innovation and quality, breadth of product line, service, and price. In most industrial applications, the coating itself was only a small part of total production costs (e.g., 10% to 15%), and most customers were willing to pay more for technologically advanced coatings if it reduced application costs (e.g., labor). The industry in general was also not highly capital-intensive capital expenditures and R&D were relatively small in comparison to the variable costs of production. DPC held the number-four position in the global industrial coatings market, where it faced strong competition in all the business verticals that made up the industry (Exhibit 6). The market was highly fragmented: two companiesPPG Industries and Akzo Nobel N.V., each with sales greater than $10 billiontogether accounted for 25% of industry sales. Seventeen firms had sales between $1 billion and $10 billion, the range of DPC's sales, which accounted for 45% of sales. The remainder of sales came from over 60 additional firms. Given the increased pressures for cutting costs and finding higher-growth opportunities, over the last six years, the industry had been consolidating; the market share of the six top companies increased from 28% in 2005 to 35% in 2011.6 The top-10 global competitors controlled 60% to 75% of the sales in U.S. and European markets. To varying degrees, all the top competitors saw opportunities for growth in the less saturated Asia-Pacific and Latin American markets. Relative to peers, DPC's strengths were in refinishing and the vehicle OEM market. In 2011, the vehicle aftermarket accounted for 43% of the division's sales, down from 53% of sales in 2009. The decline in refinishing was of concern because its profit margins tended to be higher than those in the vehicle OEM market. Of the $7 billion global refinishing market, PPG and DuPont were the market leaderseach had approximately a 28% market sharefollowed by Akzo Nobel (17% market share). Sales to motor vehicle OEMs accounted for 37% of DPC's 2011 sales, and DPC held the number-three market position in the OEM paint market behind PPG and BASF SE. The two key drivers of revenue for these businesses were miles driven and vehicle sales. Miles driven was correlated with the incidence of collisions, which affected the demand for paint from refinishing, and sales of vehicles generated demand for paint from OEMs (Exhibit 7). 6 Buckingham Research Group, PPG Industries: \"Other\" Industrial Coatings Review, May 21, 2012. This document is authorized for use only by Sherry Sheppard (smsheppard@hotmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. -5- UV6790 Trends in the refinishing market were generally steady to negative. In the past several years, the number of miles driven in the United States had tapered off, resulting in fewer collisions. Potentially offsetting this trend was an expected increase in miles drivenand relatedly, collisionsoutside the United States. Also reducing the demand for paint was a significant dropoff in the number of damaged cars that were refinished. This was due to more damaged cars being written off (\"totaled\") and insurance companies imposing higher deductibles such that damaged cars more frequently went without repair. In the United Kingdom, for example, an estimated 7% of damaged cars were written off in 2010 compared to 5% in 2000; that translated to 80,000 fewer cars requiring repair (and paint) every year.7 Further, advances in the quality of paint used by OEMs made it more durable and resistant to scratches and weathering. The OEM market had experienced a sharp decline in global motor vehicle production in 2009 that had since begun to recover (Exhibit 8). In 2011, North American vehicle production (13.5 million units) still fell short of its 2007 level (15.5 million units). Over the past decade, most of the growth in vehicle production had taken place in countries outside the United States, particularly in emerging markets. For example, between 2000 and 2010, China and India had experienced an astonishing 763% and 344% increase, respectively, in vehicle manufacturing. DPC's existing customer base was heavily concentrated in Detroit, but North America accounted for only 27% of its revenues. As vehicle manufacturing continued to grow outside North America, DPC's revenues would likely expand in those markets. DPC's overall revenues were closely tied to GDP growth, which was expected to be 1% to 2% in 2012-13 in the United States, largely flat in Europe, and more positive but erratic in emerging markets. Most analysts expected that emerging-market growth coupled with unprecedented fleet aging would spur a recovery in vehicle sales on the order of 3% to 5% per year.8 Increases in sales, however, did not necessarily translate into higher profits for several reasons. First, the OEM profit margins were set by multiyear contracts with vehicle manufacturers, which made it difficult for paint suppliers to quickly pass on raw-material price increases. By comparison, the margins in refinishing were primarily based on claims paid by insurance companies, which left consumers less price sensitive to repair costs. Second, growing concerns about lead, the high cost of treating airborne emissions and solid hazardous waste generated by paint operations, and new regulations covering the global chemical industry in Europe were all expected to increase environmental compliance costs gradually over time. Although a bullish scenario could be concocted for DPC, industry trends suggested that stable to modest improvement was the more likely course for the business over the next several years. As part of the internal review, DuPont attempted to assess DPC's value if it remained a division of the company. DuPont's internal targets for DPC were annual revenue growth of 3% 7 8 Morgan Stanley, \"E. I. du Pont de Nemours & Co.,\" analyst report, February 13, 2012. Morgan Stanley, 5. This document is authorized for use only by Sherry Sheppard (smsheppard@hotmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. -6- UV6790 to 5% and operating margins of 10% to 12%. Given DPC's mixed track record of performance, the internal review set targets at 4% for growth and 10% for margins, the low end of the targeted range. Other assumptions underlying the stand-alone valuation were incorporated into the analysis itself (Exhibit 9) and together yielded a value of approximately $4 billion for the division. Potential Buyers When news surfaced in late October 2011 that DuPont was seeking a potential buyer for DPC, companies including PPG, BASF, Akzo Nobel, and Valspar Corporation were mentioned as prospective strategic buyers. For all but BASF, a potential purchase price of $4 billion would be a sizable transaction to complete (Exhibit 10). In response to a question about his company's potential interest, Valspar CEO Gary E. Hendrickson said that DPC was \"a little too big a bite for us.\"9 Although the $4 billion price tag would also be large in the current environment for private equity (PE) firms, Blackstone, Advent International, KKR & Co., Onex Corporation, and Clayton, Dubilier & Rice were all reportedly considering bids or had already made inquiries about the division.10 The interest from PE firms was not surprising, given that buyout firms were sitting on record levels of \"dry powder\" cumulatively totaling over $400 billion at the end of 2011. A large portion of that was concentrated in buyout funds with 2006 and 2007 vintage years. In those years, buyout funds had raised record amounts of capital but had found it difficult to invest in the ensuing crisis years. As these funds neared the end of their investment periods, their general partners were under increasing pressure to find investments. A leveraged buyout (LBO) was the purchase of a firm facilitated by large amounts of debt financing. In an LBO, the PE firm or sponsor would arrange debt financing for the deal and contribute the balance of financing with equity from one or more of its funds. Because of the anticipated higher debt load, PE firms generally looked for firms that could readily service the debt. Target characteristics might include steady and predictable cash flows, assets that provided good collateral for debt, or non-core assets that could be sold to pay down debt. Debt support (and returns) could also be bolstered if the targets had opportunities to grow EBITDA by increasing sales or cutting costs. For similar reasons, sponsors looked for mature firms that did not seemingly require large amounts of additional capital expenditures or R&D. Most sponsors also looked for a strong management team because they typically were not hands-on operators and had to rely on the target's management to run day-to-day operations. 9 Doug Cameron, \"Valspar: DuPont Coatings Business Too Big a Bite for Us to Buy,\" Wall Street Journal, May 14, 2012. 10 At the same time, DuPont hired Greenhill & Co. to handle the sale of a smaller part of the business that handled coatings for tractors and playground equipment. Zachary R. Mider and Jeffrey McCracken, \"DuPont Is Said to Weigh $4 Billion Sale of Auto-Paint Unit,\" Bloomberg, October 28, 2011. This document is authorized for use only by Sherry Sheppard (smsheppard@hotmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. -7- UV6790 Of course, to make a good return, the sponsor had to increase the target's value above its purchase price over a typically four- to five-year period, after which it would seek to exit the investment. Sponsors in PE deals generally looked to three factors to drive returns in their investee companies: benefits from the use of leverage, growth in EBITDA, and multiple arbitrage (i.e., buy at a low multiple and sell at a high multiple). Benefits of leverage One benefit of leverage was that interest on debt was tax deductible and therefore the cost of debt was lower than the cost of equity. As a result, increasing leverage could produce interest tax shields that enhanced the company's value. The use of leverage could also help augment a sponsor's returns, because for a given price paid for the business, more debt financing directly translated to a smaller equity contribution. All else equal, the smaller the equity base, the higher the return. Additionally, as equity holders, the sponsors received their share of the difference between the selling price (i.e., enterprise value of the firm at exit) and the equity value remaining after the debt and other senior claims were paid off. In a highly leveraged company, a relatively small increase in the firm's enterprise value could lead to a substantial increase in the sponsor's equity value. But high leverage also increased the sponsor's risk, since, analogously, a relatively small decline in enterprise value could materially reduce the value of its equity. High leverage could also be instrumental in driving returns for another reasonhigh interest and principal payments helped focus management's attention on improving performance and operating efficiency to generate cash for debt service. DPC as a stand-alone company was expected to be all equity financed, and therefore the use of leverage was a potential source of value for PE sponsors. Sponsors typically spoke to bankers ahead of a deal to gauge how much debt might be available to finance the transaction. The total financing that would have to be raised depended on how much the sponsors paid for the target. Given its size, DPC would be considered a large buyout, which was generally defined as a deal above $1 billion in size. The number of large buyouts had declined precipitously from 98 deals in 2007 to just 10 in 2009, before clawing back to 36 deals in 2011 (Exhibit 11). The pressure to put money to work and the resulting pickup in number of deals had increased median purchase price multiples (PPMs) to 9.0 in 2011, almost as high as their peak of 9.5 in 2008. Not unrelatedly, the increase in PPMs coincided with easing in the credit markets as the markets moved further away from the financial crisis. Total debt-to-EBITDA multiples contracted sharply, from 7.6 in 2007 to 3.3 in 2009, necessitating a large increase in equity contributions from the sponsors. Thereafter, there had been a significant increase in debt availability: the median debt multiple expanded to 6.2 in 2011. Over 2010-11, large buyouts had been approximately 60% debt financed on average. If current trends held, it appeared that PE firms would have generous amounts of debt financing available, on the order of 5.5 to 6.0 EBITDA for a potential purchase of DPC. This document is authorized for use only by Sherry Sheppard (smsheppard@hotmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. -8- UV6790 Growth in EBITDA Growth in EBITDA created value by improving the target's operations by undertaking measures such as product expansions, cost reductions, and add-on acquisitions. In assessing the opportunity for growth in EBITDA, PE firms routinely conducted extensive due diligence to develop improvement plans after they gained control of a company. A first step in this process was often to compare the target's performance to that of close competitors. Because PPG's industrial and performance coatings business segments directly competed with DPC, it was DPC's closest peer. Compared with DPC, PPG had projected slightly stronger sales growth and had achieved higher margins. PPG's mix of products accounted for some of the difference, but DPC's lower margins were mostly the result of higher costs and overhead. Based on this assessment and other due diligence, sponsors might reasonably expect to increase DPC's sales growth by 1% to 2% and improve its operating margins by 200 to 250 basis points. DPC was led by DuPont veteran John McCool, 58, who was well regarded in the industry. McCool had held a variety of leadership positions since joining DuPont's Textile Fibers department in 1976. Kullman named McCool president in 2010 after he had served as vice president for DPC's Europe, Middle East, and Africa (EMEA) operations. She had given him the specific charge to turn the division's performance around. All the PE firms that were contemplating a bid for DPC would have to evaluate McCool and his team to see if they had the requisite skills to head the new company. If the current team was found wanting, the sponsors would have to be prepared to replace management as part of their plans. Multiple arbitrage Multiple arbitrage arose when a sponsor received a higher PPM at exit for a target than it paid for it. All else equal, the higher the entry PPM, the lower the chances of a sponsor achieving multiple arbitrage. At a stand-alone value of approximately $4 billion, it looked as if DPC's potential buyers would have to pay on the order of 7 projected EBITDA for the company. Exit opportunities could arise from an IPO, sale to a strategic buyer, or sale to another PE fund (secondary buyout). Over the period 2006 to 2011, sales to strategic buyers had been the most frequent mode of exit by PE firms (Exhibit 12). Due to the growth in the size of the PE sector, however, secondary buyouts were a strong second to them. IPOs had fallen off as exit vehicles, in part due to uncertain market conditions accompanying the financial crisis and its aftermath. Because strategic buyers likely had greater opportunity for operating synergies with a target company, they were commonly thought to pay more for a target than financial buyers. Based on the PPMs of recent exits, however, the average PPM for exits to secondary buyouts was somewhat higher than the average PPM of exits to strategic buyers (Exhibit 12). Based on the current valuation of PPG and potential market expansion, sponsors might look to achieve 7.5 to 8.0 EBITDA at exit for DPC, given improvements in margins and growth as a private firm. This document is authorized for use only by Sherry Sheppard (smsheppard@hotmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. -9- UV6790 Decision If Ellen Kullman decided to divest DPC, she would put in motion an auction for the division. At that point, DuPont would provide detailed information about the target and invite interested parties to bid. As part of that process, she would likely set a minimum price for bidders. Her stand-alone valuation suggested that the division was worth nearly $4 billion to DuPont. She would then need to assess how much potential additional value could be obtained, both separately and jointly, from EBITDA growth, multiple arbitrage, and the use of leverage to give her some idea of the potential range of values that bidders might offer. Relative to that, she knew that sponsors would likely seek higher returns to justify the greater financial risk from the use of leverage. Although financial buyers naturally sought the highest possible internal rate of return (IRR), in the current environment of tough competition, they often had to settle for IRRs of 20%. With that in mind, she would formulate her minimum required bid to ensure that shareholders' interests were served no matter what decision she reached about DPC. This document is authorized for use only by Sherry Sheppard (smsheppard@hotmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Data source: Macquarie Research, \"E. I. du Pont de Nemours & Co.,\" analyst report, January 26, 2012, adapted by case writers. History and Outlook of Business DUPONT CORPORATION: SALE OF PERFORMANCE COATINGS Exhibit 1 UV6790 -10- This document is authorized for use only by Sherry Sheppard (smsheppard@hotmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. -11- UV6790 Exhibit 2 DUPONT CORPORATION: SALE OF PERFORMANCE COATINGS Stock Price Performance $60 $50 Stock Price $40 $30 $20 $10 $0 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-11 Jan-12 Performance Relative to S&P 500 Cumulative Return on $1 Invested 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 Jan-06 Jan-07 Jan-08 Jan-09 Dupont Jan-10 S&P500 Data source: Yahoo! Finance. This document is authorized for use only by Sherry Sheppard (smsheppard@hotmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. -12- UV6790 Exhibit 3 DUPONT CORPORATION: SALE OF PERFORMANCE COATINGS Business Segment Performance (dollars in millions) Segment Sales Agriculture Electronics & Communications Nutrition & Health Performance Chemicals Performance Coatings Performance Materials Safety & Protection Industrial Biosciences Other 2009 $7,069 1,918 1,218 4,964 3,429 4,768 2,811 158 2010 $7,845 2,764 1,240 6,322 3,806 6,287 3,364 194 2011 $9,166 3,173 2,460 7,794 4,281 6,815 3,934 705 40 Total segment sales Elimination of transfers 26,335 (226) 31,822 (317) 38,368 (407) Net sales $26,109 $31,505 $37,961 Pretax Operating Income* Agriculture Electronics & Communications Nutrition & Health Performance Chemicals Performance Coatings Performance Materials Safety & Protection Industrial Biosciences Pharmaceuticals (discontinued) Other Total pretax operating income * After significant items. 2009 $1,160 87 64 547 69 287 260 2010 $1,293 445 62 1,081 249 994 454 1,037 (169) 489 (206) 2011 $1,527 355 44 1,923 271 973 500 (1) 289 (235) $3,342 $4,861 $5,646 Year-over-Year Growth 2009 2010 2011 7.9% 11.0% 16.8% -10.7% 44.1% 14.8% -13.2% 1.8% 98.4% -14.5% 27.4% 23.3% -21.4% 11.0% 12.5% -25.3% 31.9% 8.4% -24.4% 19.7% 16.9% -14.5% 20.7% 20.5% Segment Margins 2009 2010 2011 16.4% 16.5% 16.7% 4.5% 16.1% 11.2% 5.3% 5.0% 1.8% 11.0% 17.1% 24.7% 2.0% 6.5% 6.3% 6.0% 15.8% 14.3% 9.2% 13.5% 12.7% -0.1% 12.8% 15.4% 14.9% Data source: Company reports. This document is authorized for use only by Sherry Sheppard (smsheppard@hotmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. This document is authorized for use only by Sherry Sheppard (smsheppard@hotmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. 15% 29% Corn seeds Soybean seeds Herbicides White pigments (TiO2) Fluoroproducts ChemSolutions Engineering resins Ethylene co-polymers Elastomers Refinish coatings OEM coatings Ind. liquid and powder coatings Aramids products Tyvek/Typar Safety consulting and training Photovoltaic materials Electronic materials Printing, packaging materials Food ingredients Biomaterialsenzymes Major Products Sales as % of Product 47% 15% 13% 47% 34% 19% 46% 23% 9% 43% 31% 26% 39% 26% 16% 39% 25% 18% 100% Industrials and chemicals Construction Specialties Transportation Industrial Packaging Vehicle aftermarket Vehicle OEM General industrial Industrial Consumer Construction materials Photovoltaics Consumer electronics Advanced printing Food ingredients Bioprocessing Seeds Chemicals Major Industry UV6790 36% 31% 18% 37% 18% 14% 43% 37% 15% 54% 20% 12% 39% 18% 18% 100% 100% Sales as % of Industry 68% 32% Data source: Company data, Macquarie Research, \"E. I. du Pont de Nemours & Co.,\" analyst report, January 26, 2012, and case writer estimates. Nutrition & Health Industrial Biosciences 6% Electronics & Communications 3%-5% Performance Coatings 7% 4% Performance Materials Safety & Protection 12% Performance Chemicals Agriculture Est. Sales Growth (2012-14) 10% Sales Growth Forecasts for Business Units DUPONT CORPORATION: SALE OF PERFORMANCE COATINGS Exhibit 4 -13- This document is authorized for use only by Sherry Sheppard (smsheppard@hotmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Data source: Company Databooks, various years. 26% 12% 46% 16% 123 56 55 2,018 Sales by Region North America Asia-Pacific Europe, Middle East, and Africa Latin America 111 69 91 2,226 2009 $3,428 -21.4% 69 2.0% 53% 28% 14% 5% 107 71 126 2,607 Depreciation and Amortization Research and Development Capital Expenditures Segment Net Assets 2008 $4,360 0.3% -8 -0.2% Sales by Industry Aftermarket (refinishing) Vehicle OEM General Industrial Other 366 8.4% Net Sales Year-over-Year Growth Pretax Operating Income Margin 2007 $4,347 27% 13% 44% 18% 44% 36% 14% 6% 105 48 74 2,047 2010 $3,806 11.0% 255 6.7% Performance Coatings Historical Performance (dollars in millions) 27% 13% 43% 17% 43% 37% 15% 5% 104 46 80 2,107 5-year 2011 CAGR $4,281 -0.3% 12.5% 268 -6.0% 6.3% DUPONT CORPORATION: SALE OF PERFORMANCE COATINGS Exhibit 5 -14- UV6790 This document is authorized for use only by Sherry Sheppard (smsheppard@hotmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. 1 2 3 4 5 6 4+ 4+ 1 3 2 Architectural $40.9 43% 1 2 4+ 4+ 3 4+ Industrial $24.7 26% 1 2 4+ Protective & Marine $12.4 13% 3 1 4+ 2 4+ 4+ Refinishing $6.7 7% Percent of Sales of Top-10 Competitors 75% 60% 30% 30% 2 3 1 Auto OEM $5.7 6% UV6790 1 3 2 2 1 4+ Packaging Aerospace $2.9 $1.9 3% 2% Data source: Buckingham Research Group, PPG Industries: \"Other\" Industrial Coatings Review, May 21, 2012. U.S. and Canada EMEA Asia-Pacific Latin America Penetration Rates of Top Global Competitors by Region A blank cell indicates \"no participation\" in business vertical. Peer Ranking: Akzo Nobel PPG Sherwin-Williams DuPont Valspar BASF End Market Sales (billions) % of End Market Sales Global Position $95.0 100% Global Competitive Position in Industrial Coatings Market DUPONT CORPORATION: SALE OF PERFORMANCE COATINGS Exhibit 6 -15- -16- UV6790 Exhibit 7 DUPONT CORPORATION: SALE OF PERFORMANCE COATINGS Trends Affecting Paint Demand in Vehicle Aftermarket U.S. Vehicle Miles Traveled (billions) 3,100 Miles of Travel (billions) 3,000 2,900 2,800 2,700 2,600 2,500 2,400 2,300 1997 1999 2001 2003 2005 2007 2009 2011 Data source: U.S. Federal Highway Administration, Highway Statistics. U.S. Motor Vehicle Accidents per Million Motor Vehicle Accidents (per million) 20 18 16 14 12 10 8 6 4 2 0 1997 1999 2001 2003 2005 2007 2009 Data source: National Safety Council. This document is authorized for use only by Sherry Sheppard (smsheppard@hotmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. -17- UV6790 Exhibit 8 DUPONT CORPORATION: SALE OF PERFORMANCE COATINGS Trends Affecting Paint Demand from Vehicle Manufacturers World Motor Vehicle Production World Motor Vehicle Production (units in millions) 90 80 70 60 50 40 30 20 10 0 1997 1999 2001 2003 NA 2005 2007 2009 2011 ROW Notes: NA = North America (United States, Canada, and Mexico); ROW = Rest of World. World Production of Vehicles, 2000 and 2010. North America United States Canada Mexico Asia-Oceania Japan China India South Korea Europe France Germany Italy Spain United Kingdom South America 2000 17,699 12,800 2,964 1,935 17,928 10,144 2,069 796 3,115 20,275 3,348 5,527 1,738 3,032 1,814 2,076 2010 12,177 7,761 2,071 2,345 40,900 9,625 18,263 3,537 4,272 19,822 2,229 5,906 838 2,388 1,393 4,464 % Change -31% -39% -30% 21% 128% -5% 783% 344% 37% -2% -33% 7% -52% -21% -23% 115% Data source: Organisation Internationale des Constructeurs d'Automobiles (OICA) production statistics. This document is authorized for use only by Sherry Sheppard (smsheppard@hotmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. This document is authorized for use only by Sherry Sheppard (smsheppard@hotmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Terminal EBITDA Multiple () Debt/EBITDA 2012 () Debt Blended Interest Rate on Debt 3 Unlevered Cost of Equity Sales Growth (%) Depreciation and Amortization EBIT Margin (Pretax) 1 Tax Rate Capital Expenditures Net Working Capital (%) Metric Sales Growth (%) EBIT Margin (Pretax) EV/EBITDA 2012 () Metric 2 Projected 2012E 2013E 4.1% 4.3% 11.0% 12.0% 6.75% 11.2% N/A 2011A 12.5% $104 6.3% 25% $80 Closing Projected 2012E 2013E 2014E 2015E 4.0% 4.0% 4.0% 4.0% $115 $118 $122 $125 10.0% 10.0% 10.0% 10.0% 25% 25% 25% 25% $115 $122 $132 $144 15.0% 15.0% 15.0% 15.0% DuPont Performance Coatings PPG Industries Actual 2011 10.9% 11.2% 7.3 Stand-Alone Valuation (dollars in millions) DUPONT CORPORATION: SALE OF PERFORMANCE COATINGS Exhibit 9 -18- 7.0 2016E 4.0% $130 10.0% 25% $150 15.0% UV6790 This document is authorized for use only by Sherry Sheppard (smsheppard@hotmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. $308 Unlevered FCF, including TV Enterprise Value (EV) Interest Tax Shield PV Tax Shield EV with Tax Shield $317 $317 $317 $463 ($116) $347 ($27) ($122) $463 $0 2013E $4,630 $581 $118 $323 $323 $323 $482 ($120) $361 ($28) ($132) $482 $0 2014E $4,816 $604 $122 $327 $327 $327 $501 ($125) $376 ($29) ($144) $501 $0 2015E $5,008 $626 $125 $5,079 $341 $4,738 $341 $521 ($130) $391 ($30) ($150) $521 $0 2016E $5,208 $651 $130 Notes to stand-alone model: 1 DPC's estimated average tax rate of 25% is lower than the U.S. marginal corporate tax rate as a result of international operations taxed at lower rates. 2 Assumed forward exit multiple for Terminal Value is based on projected EBITDA growth in 2017 and is below PPG's multiple because of lower margins and slightly lower growth. 3 Unlevered Cost of Equity (k ) is based on PPG's estimated unlevered beta of 1.2, a normalized 4% long-term U.S. Treasury u rate, and a 6% market risk premium. Data sources: Historical information for DPC is from DuPont company Databooks. Projections are case writer estimates. PPG's enterprise value is based on prices at the end of January 2012. PPG's projections are based on Buckingham Research Group analyst report, PPG Industries: \"Other\" Industrial Coatings Review, May 21, 2012. $3,970 $308 Unlevered Free Cash Flow (FCF) Terminal Value $3,970 $308 Residual (Levered) Cash Flow $445 $0 $445 ($111) $334 ($26) ($115) $268 APV Analysis Closing 2012E $4,452 $560 $115 Earnings before Taxes Taxes Net Income Increase in Net Working Capital Capital Expenditures Pretax Operating Income (EBIT) Interest Expense Net Sales EBITDA Depreciation and Amortization 2011A $4,281 $372 $104 Stand-Alone Valuation (continued) Exhibit 9 (continued) -19- UV6790 This document is authorized for use only by Sherry Sheppard (smsheppard@hotmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. $3,637 $3,953 Revenues $18,972 $95,482 $14,885 $8,766 $513 EBITDA $2,311 $15,205 $2,141 $956 1,057 Total Debt 4,585 16,972 3,682 993 Data source: Financial data are from Capital IQ; stock price performance is based on CRSP data. Valspar Akzo Nobel N.V. BASF SE PPG Industries Sherwin-Williams Market Capitalization 12/31/2011 $11,837 $66,702 $12,893 $9,263 UV6790 2.1 41.0% 13.0% Total Debt/ 5-Year Stock 1-Year Stock EBITDA Performance Performance 2.0 NA -21.0% 1.1 -5.4% -12.8% 1.7 30.0% -0.7% 1.0 40.4% 6.6% Financial Characteristics of Potential Strategic Buyers (fiscal-year-end values in millions, except multiples and percentages) DUPONT CORPORATION: SALE OF PERFORMANCE COATINGS Exhibit 10 -20- -21- UV6790 Exhibit 11 DUPONT CORPORATION: SALE OF PERFORMANCE COATINGS Buyout Deals Volume and Number of Buyout Deals above $1 Billion 120 $500 100 98 80 $400 61 $300 $200 $100 28 60 41 33 31 36 40 No. Deals > $1 B Deal Volume ($ billions) $600 20 10 0 $0 2004 2005 2006 2007 2008 Above $1B Under $1B 2009 2010 2011 No. Deals > $1B Debt, Equity, and Purchase Price Multiples for Buyout Deals Medians Total Debt/EBITDA Equity/EBITDA Purchase Price/EBITDA 2004 5.3 2.3 7.6 2005 5.0 3.2 8.2 2006 5.9 3.1 9.0 2007 7.6 1.2 8.8 2008 4.4 5.0 9.4 2009 3.3 3.2 6.5 2010 4.6 2.7 7.3 2011 6.2 2.8 9.0 Data source: PitchBook, Annual Private Equity Breakdown 2012. This document is authorized for use only by Sherry Sheppard (smsheppard@hotmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. -22- UV6790 Exhibit 12 DUPONT CORPORATION: SALE OF PERFORMANCE COATINGS Private Equity Exits Number of Exits by Exit Type 300 Number of Exits 250 200 266 252 240 229 219 193 164 150 150 142 150 107 100 66 51 50 14 24 33 40 30 0 2006 2007 Strategic buyer Medians Strategic buyer PE-backed IPOs Secondary buyouts 2006 9.5 5.8 11.0 2008 PE-backed IPO 2009 2010 2011 Secondary buyouts Exit Multiple by Exit Type 2007 2008 2009 10.9 9.5 8.0 11.7 10.8 7.4 6.9 9.8 12.4 2010 8.5 7.2 9.4 2011 Average 8.7 9.2 5.1 8.0 9.6 9.9 Data source: PitchBook and Grant Thornton, Private Equity Exits Report, 2012 Annual Edition. This document is authorized for use only by Sherry Sheppard (smsheppard@hotmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies