EXHIBIT (c)(2)
Project Aurora
Presentation to the Special Committee
November 9, 2000
MORGAN STANLEY DEAN WITTER
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TABLE OF CONTENTS
Section 1 Executive Summary
Section 2 Corporate Overview
Section 3 Valuation Analysis
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Section 1
Executive Summary
<PAGE>
Executive Summary
Overview of Transaction Process
Camaro Initial Proposal
- On August 15, 2000, Camaro made a written, non-binding proposal to Aurora's
Board of Directors to acquire all of the outstanding Aurora shares not
owned by Carnaro at a price of $29 per share in cash. On the same day,
Camaro made a public announcement of this proposal
Engagement
- On September 1, 2000, the Special Committee of the Board of Directors of
Aurora agreed to retain Morgan Stanley Dean Witter ("Morgan Stanley") to
assist the Special Committee in considering the proposal as well as other
strategic alternatives available to the Company
Transaction Process
- On September 21, 2000, the Special Committee and Morgan Stanley met to
discuss an indicative valuation of the Company. Ford announced a proposal
to buy the publicly-held shares of Hertz on that same day
- The Special Committee instructed Morgan Stanley to inform Camaro and its
advisors that the $29 bid was not compelling and to determine their
willingness to increase their bid
- Negotiations continued between the parties during September and October. On
October 27, 2000, Camaro proposed a price of $33.00 in cash, subject to the
completion of due diligence and negotiation of a merger agreement
Transaction Terms
- Purchase Price: $33.00 per share
- Consideration: Cash
- Legal Structure: Merger of Aurora into Camaro
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<CAPTION>
Executive Summary
SUMMARY OF OFFER TERMS
Offer Summary
11/8/00 8/15/00 Final
Market Price Camaro Offer Camaro Offer
$ $ $
<S> <C> <C> <C>
Price Per Share 30.63 29.00 33.00
Implied Market Premium/(Discount)
One Day Prior To Announcement - 8/14/00 ($25.50) 20.1 13.7 29.4
One Week Prior To Announcement - 8/7/00 ($23.44) 30.7 23.7 40.8
One Month Prior To Announcement - 7114100 ($23.56) 30.0 23.1 40.1
Pre-Announcem ent 52 Week High - 12/31/99 ($25.56) 19.8 13.5 29.1
Pre-Announcement 52 Week Low - 3/7/00 ($13.38) 128.9 116.7 146.6
Aurora Indexed Price (1) ($24.09) 27.1 20.4 37.0
Price/2000 EPS (x)(2) 9.6 9.1 10.3
Price/2001 EPS (x) (2) 7.6 7.2 8.2
Price/Book (x) 1.4 1.3 1.5
Adj. Agg. Value/Adj. 2000E EBITDA (x)(3) 4.7 4.5 4.9
Adj. Agg. Value/Adj. 2001 E EBITDA (x)(3) 4.6 4.4 4.8
Notes
(1) Aurora Indexed Price based on price 1 day prior to announcement indexed to reflect market changes using the S&P 500
(2) Based on mean IBES EPS estimates as of 11/08/00
(3) EBITDA estimate from management projections for years 2000 and 2001. Adjusted EBITDA defined as EBITDA less vehicle
depreciation and vehicle interest expense. Adjusted Aggregate Value excludes vehicle debt
</TABLE>
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Section 2
Corporate Overview
<PAGE>
Corporate Overview
Aurora Summary Profile
- Aurora is a premier player in the car rental and vehicle management
services sectors given its:
- Leading market positions in its key product lines:
- second largest general use car rental business in the U.S.
- second largest fleet management company in the U.S.
- market leader in fuel card sector
- Strong brand name recognition
- Sophisticated technology systems
- Highly regarded management team
- Aurora has also demonstrated strong financial performance relative to its
rental car peers:
- GAAP revenue growth(1) of 11.4% versus 9.6% for peer median
- LTM direct operating costs to vehicle revenue of 37% vs. 44% for peer
median.
- In spite of these strong fundamentals, Aurora's equity market valuation has
been negatively impacted by several market and company-related factors
during the past 18 months including:
- Investor concern over pricing volatility in the car rental sector
- The announced purchase of PHH and Wright Express
- The Company's stock valuation had improved in the months prior to the
Camaro announcement as Aurora continued to demonstrate good financial
performance and the PHH Europe sale allowed for a $1 billion reduction of
debt
- Aurora management believes the Company can continue to achieve strong
financial performance
- Improved debt position and broad base of revenues
- History of consistently beating quarterly consensus EPS estimates
- Projected 2001 EPS growth of 25%(2)
- Projected long-term annual EPS growth of 17%(2)
Notes
(1) Revenue growth per share based on originally reported financial information
from 12/31/96 to 12/31/99
(2) Based on mean IBES estimated EPS as of 11/08/00
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Corporate Overview
Aurora Considerations
Operating Issues
- Aurora faces well-positioned competition in its two largest business lines
- In the car rental market Hertz is a larger and better-capitalized
competitor who has consistently sought to maintain its leading share
of the general use rental market
- In fleet management services GE Capital is the market leader and has
larger scale and lower-cost funding
- The Company's relatively high leverage can make it more susceptible to
interest rate risk than some of its peers
- Aurora debt/total capital ratio of 92% versus 85% for its peers
- Aurora's payment of 4% royalty fees to Camaro effectively lowers operating
margins
- Aurora's LTM pretax margin of 6.3% versus 12.0% for Hertz and 12.4%
for Dollar/Thrifty
- Royalty fee percentage escalates over time
- The Company may have difficulty in diversifying its current customer bases
- Goal to increase leisure penetration in car rental
- Goal to capture greater share of small and mid-tier fleet market
Transaction Issues
- A sale of the Company to a third party is made more difficult based on
Aurora's relationship with Camaro
- Camaro owns the rights to the "Aurora" name and maintains certain
franchiser rights in regard to Aurora
- Camaro owns the "Wizard" car rental system and provides reservation
and computer services to Aurora under long-term services agreements
- Camaro ownership of approximately 18% of Aurora's common shares
- Camaro ownership of convertible preferred stock (creating
approximately 33% economic ownership upon full conversion)
- Issues as to Camaro's rights with regard to change of control under
licensing agreement
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Corporate Overview
Aurora Operating Performance vs. Peers
Operating Statistics
Direct Operating Costs/Vehicle Revenue(1) (%)
ANC Rental 78.5%
Hertz(3) 46.3%
Budget 42.3%
Dollar/Thrifty 39.3%
Aurora 37.3%
Net Interest Expense/Revenues %
Aurora 11.0%
Budget 9.8%
Dollar/Thrifty 9.1%
Hertz 7.6%
ANC Rental 1.6%
Pre-tax Margin(1)
Dollar/Thrifty 12.4%
Hertz 12.0%
Aurora 6.3%
Budget 4.7%
ANC Rental N/M
ROE(1) %
Hertz 21.8%
Dollar/Thrifty 19.4%
Aurora 14.2%
Budget 11.6%
ANC Rental N/M
Revenue Growth/Per Share(2) %
Aurora 11.4%
Budget 10.1%
Dollar/Thrifty 9.8%
ANC Rental 9.5%
Hertz 8.8%
Debt/Total Capital(4) %
Aurora 92%
Budget 90%
ANC Rental 85%
Dollar/Thrifty 83%
Hertz 81%
Notes
(1) Income statement information on an LTM basis as of 6/30/00 (adjusted for
extraordinary items). Aurora statistics based on pro forma information for
divestiture of PHH Europe as given in the company's 8-K dated 8/24/00.
Aurora's ROE based on 6-month pro forma information (annualized) from the
8-K
(2) Revenue growth per share based on originally reported financial
information. Period from 12/31/96 to 12/31/99
(3) Hertz includes car and equipment rental revenues
(4) Financial data as of 6/30/00. Total Capital defined as Total Debt
(including minority interest and preferred)/Total Debt + Equity
<PAGE>
Corporate Overview
Major Events Affecting Aurora Share Price
Aurora's stock declined significantly after the announcement of the PHH/WEX
acquisition in May 1999 and during much of early 2000
The stock showed some improvement after the announcement of the sale of 80%
of PHH Europe
Major Events Affecting Aurora Share Price
12/31/98 - Present
[Line graph showing performance of Avis Class A common stock since
12/31/98 with the following events noted: ]
5/24/99 Announces acquisition of PHH and Wright Express from Camaro for
$1.8Bn. Aurora's stock declines 21%
6/30/99 PHH and Wright Express acquisition closes
12/31/99 Industry(1) declines by 32% from 12/31/99 to 3/1/00 due to market
concerns over price and interest rate pressure
4/18/00 Announces sale of 80% of PHH Europe to BNP Paribas for $800MM.
S&P outlook revised to stable
8/10/00 Aurora announces approval to repurchase $100MM of stock
8/15/00 Camaro announces interest in acquiring Aurora at $29/share. Stock
rises 20%
9/21/00 Ford announces offer to purchase the remaining 18.5% of Hertz
10/20/00 Aurora announces record Q3 diluted EPS of $1.36
Note
(1) Measured using a market weighted industry composite comprised of HRZ, DTG,
BD
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Aurora Relative Trading Analysis
12/31/97-Present
Market prices for car rental stocks have generally shown declines since
mid-1999 and have underperformed the broader market
Aurora Relative Trading (1998-YTD 2000)
%
[Line Graph regarding market performance from 12/31/97 - 11/8/00 showing
the S&P 500 Index increasing by 45.2% over the period, Avis decreasing by 4.1%,
Hertz decreasing by 15.7% and the car rental index decreasing by 71.5%]
During 2000, Aurora showed improved relative trading prior to the Camaro
offer
Aurora Relative Trading (YTD 2000)
%
[Line Graph regarding market performance during 2000 showing Avis
increasing by 19.8% during the period, the S&P 500 Index decreasing by 4.1%,
Hertz decreasing by 32.3% and the car rental index decreasing by 45.5%]
Note
(1) Car rental index includes ANCX, DTG, BD
<PAGE>
Hertz/Ford Analysis
On September 21, 2000, Hertz received an acquisition proposal from Ford to
acquire Hertz' 18.5% public float at $30 cash per share
Hertz Offer Analysis(1)
Hertz Information
Base Premium/
$ Multiple
Offer Price 30.00
One Day Prior to Announcement 24.25 23.7%
One Week Prior to Announcement 24.94 20.3%
Price/2001 EPS-IBES 3.42 8.8x
Aurora has historically traded at a discount(2) to Hertz on a P/E basis
NTM P/E Discount
X %
8/14/00 6.9 20
1 mo. avg. 6.5 25
3 mo. avg. 6.0 29
6 mo. avg. 5.8 34
5/21/99 14.6 19
1 mo. avg. 14.5 26
3 mo. avg. 12.5 30
Aurora/Hertz Relative NTM P/E (1998-YTD)
[Line graph showing the multiple of share price to next twelve months
estimated earnings per share for each of Avis and Hertz from 12/31/97 to
11/8/00]
Notes
(1) Based on public data regarding Ford proposal and IBES mean EPS estimates as
of 9/20/00
(2) Discount periods for averages measured prior to Camaro announcement on
8/15/00 and PHH acquisition announcement on 5/24/99
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Section 3
Valuation Analysis
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Valuation Methodology
MSDW has valued Aurora using a variety of different valuation
methodologies
Comparable Companies Valuation
- Appropriate trading multiples established from peer analysis
- Multiples applied to target company
Component Valuation
- Appropriate trading multiples established from peer analysis for each key
Aurora business sector
- Multiples applied to management projections for each business sector
- Corporate expenses and preferred dividends allocated on a weighted-average
basis between the sectors
- Equity value determined from sum of component valuations
Precedent Transaction Premiums Paid
- Review of market premiums paid in comparable U.S. affiliated party
transactions announced between January 1, 1995 and November 8, 2000
- Acquiring company owned more than 50% of target prior to transaction
- Valuation premiums applied to subject comparable companies valuations and
Aurora price 1 day prior to announcement
DCF
- Estimation of future free cash flows based on management projections
- 5 year projection period
- Estimated future free cash flows and terminal value discounted to present
value assuming a range of discount rates based on Aurora's theoretical
weighted-average cost of capital
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xxx
Indicative Valuation Analysis
Valuation Summary(1)
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<CAPTION>
Methodology Valuation Comments
$ Per Share
<S> <C> <C>
Comparable Company Valuation
-IBES Estimates [bar chart extending from $20 to $26] *Based on 5.0-6.5x2001 IBES EPS
estimate of $4.01
-Management Projections(2) [bar chart extending from $21 to $27] *Based on 5.0-6.5x 2001 Management
EPS estimate of $4.15
Component Valuation [bar chart extending from $25 to $33] *Based on valuation estimates for each
Aurora business line based on public
peer 2001 P/E multiples and Management
Projections
- Vehicle Rental: 4.5-6.0x
- PHH N.A.: 6.0-8.0x
- WEX: 14.0-16.0x
Premiums Paid Analysis
-IBES Estimate [bar chart extending from $24 to $34] *Assumes 20-30% premium to market
based on comparable affiliated party
transactions
- applied to comparable company
analysis results
- applied to price 1-day prior to
Camaro announcement
-Management Projections(2) [bar chart extending from $25 to $35]
-Aurora Price (8/14/00) [bar chart extending from $31 to $33]
Discounted Cash Flow
-DCF Value(2) [bar chart extending from $29 to $38] *Based on management projections,
forward year Adjusted EBITDA multiples
of 2.75-3.25x and discount rate range
of 9-11%
Notes
(1) Financial information as of 6/30/00. Market information at 11/08/00
(2) Based on Aurora management estimates as presented in Forecast Model data
7/28/00
(3) 52 week high and low prior to Camaro announcement on 8/15/00
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Summary of Valuation
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<CAPTION>
Comparable Trading Analysis 2001 P/E Multiple Range
2001 EPS Low High Low High
<S> <C> <C> <C> <C> <C>
IBES Estimate $4.01 5.0 x 6.5 x $20.05 $26.07
Management Projections(1) 4.15 5.0 6.5 20.75 26.98
<CAPTION>
Component Trading Analysis 2001 Pre-Tax 2001 Net
Income(1)(2) Income 2001 P/E Multiple Range Implied Equity Value
($MM) ($MM)
Low High Low High
<S> <C> <C> <C> <C> <C> <C>
Vehicle Rental $ 156 $ 87 4.5 x 6.0 x $ 393 $ 524
PHH-NA 64 36 6.0 8.0 217 289
Wright Express 22 12 14.0 16.0 173 198
242 136 783 1,012
Equity Value Per Share 25.16 32.49
<CAPTION>
Precedent Premiums Paid
Implied Price Per Share Premium Range Implied Value Per Share
Low High Low High Low High
<S> <C> <C> <C> <C> <C> <C>
IBES Estimate $ 20.05 $ 26.07 20% 30% $ 24.06 $ 33.88
Management Projections(1) 20.75 26.98 20 30 24.90 35.07
Aurora Price (1 Day Prior to Announce) 25.50 25.50 20 30 30.60 33.15
<CAPTION>
Discounted Cash Flow Analysis
WACC Adjusted EBITDA Multiple Implied Value Per Share
Low High Low High Low High
<S> <C> <C> <C> <C> <C> <C>
Management Projections(1) 9% 11% 2.75 x 3.25 x $ 29.29 $ 37.61
Notes
(1) Based on Aurora management estimates as presented in Forecast Model dated 7/28/00
(2) Assumes allocation of $60MM in pre-tax corporate expenses and $19MM of preferred dividends on a pro-rata basis based on
pre-tax income contribution
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Car Rental Trading Valuation(1)
2000E P/E
Hertz Indexed(2) 7.2x
ANC Rental 5.7x
Dollar/Thrifty 5.0x
Budget N/M
Mean 6.0x
2001E P/E
Hertz Indexed(2) 6.9x
ANC Rental 4.9x
Dollar/Thrifty 4.6x
Budget 4.0x
Mean 5.1x
I/B/E/S Long-Term Growth
Hertz 15.3%
Budget 13.3%
Dollar/Thrifty 12.5%
ANC Rental N/A
Mean 13.7%
Adj. Agg Val(3)/Adj. 2000E EBITDA
Budget 4.0x
Hertz Indexed(2) 3.3x
ANC Rental 3.0x
Dollar/Thrifty 1.7x
Mean 3.0x
Adj. Agg Val(3)/Adj. 2001E EBITDA
Budget 3.4x
Hertz Indexed(2) 3.0x
ANC Rental 2.8x
Dollar/Thrifty 1.5x
Mean 2.7x
P/E To Growth Ratio
Hertz Indexed(2) 0.47x
Dollar/Thrifty 0.40x
Budget N/M
ANC Rental N/A
Mean 0.44x
Notes
1. I/B/E/S mean estimates as of 11/08/00. Future EBITDA estimates for peers
based on public research reports
2. Hertz price as of 9/20/00 indexed to change in S&P 500
3. Adjusted EBITDA defined as EBITDA less vehicle depreciation and vehicle
interest expense. Adjusted Aggregate Value excludes vehicle debt
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<CAPTION>
Valuation Matrix
Adj. Agg.
Val(2)/
Equity Adj. Agg. Market Price/ Price/ Price/ 2000E Adj.
Price Value(1) Value(2) Prem.(3) 00 EPS(4) 01 EPS(4) Book EBITDA
<S> <C> <C> <C> <C> <C> <C> <C>
$28.00 $ 919 $1,819 9.8% 8.8 x 7.0 x 1.2 x 4.4 x
29.00 956 1,857 13.7 9.1 7.2 1.3 4.5
30.00 995 1,895 17.6 9.4 7.5 1.3 4.6
31.00 1,033 1,933 21.6 9.7 7.7 1.4 4.7
32.00 1,071 1,971 25.5 10.0 8.0 1.4 4.8
33.00 1,109 2,009 29.4 10.3 8.2 1.5 4.9
34.00 1,147 2,047 33.3 10.6 8.5 1.5 5.0
35.00 1,185 2,085 37.3 10.9 8.7 1.6 5.1
36.00 1,224 2,124 41.2 11.3 9.0 1.6 5.2
37.00 1,262 2,162 45.1 11.6 9.2 1.7 5.3
38.00 1,300 2,200 49.0 11.9 9.5 1.7 5.3
Notes
(1) Based on fully diluted shares
(2) Net Debt based on information provided in 8K, and Company 3Q earnings release. Adjusted EBITDA defined as EBITDA less vehicle
depreciation and vehicle interest expense. Adjusted Aggregate Value excludes vehicle debt
(3) Based on price one day prior to Camaro announcement on 8/15/00
(4) IBES mean estimates as of 11/08/00
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