EXHIBIT (c)(3)
Presentation regarding
Avis Group
Avis Group Holdings, Inc.
CONFIDENTIAL
[Draft--Incomplete Work Product]
September 18, 2000
<PAGE>
Table of Contents
Section
1 Situation Analysis
2 Valuation Summary
3 Avis Hypothetical Stock Price Analysis
4 Wall Street Commentary
Appendices
A Precedent M&A Transactions Detail
B Public Trading Comparable Companies Detail
<PAGE>
Section 1
Situation Analysis
<PAGE>
Historical and Forecasted Financial Performance
[Line Graph regarding (1) historical financial performance from 1997 to
1999 showing a cumulative average growth rate (CAGR) for earnings per share of
68% over the period, a CAGR for pre-tax earnings of 74%, a CAGR for earnings
before interest, tax, depreciation and amortization of 102% and a CAGR for
revenue of 28%; and (2) forecasted financial performance from 2000 to 2004
showing a CAGR for earnings per share of 19% over the period, a CAGR for pre-tax
earnings of 18%, a CAGR for earnings before interest, tax, depreciation and
amortization of 9% and a CAGR for revenue of 5%.]
<PAGE>
History of Beating Forecasts
The Company has under-promised and over-delivered, consistently beating
internally forecasted financial results.
Forecasted vs. Actual Earnings per Share Performance
<TABLE>
<CAPTION>
Actual Performance Forecast as of 6/23/1998 Forecast as of 3/17/1999 Forecast as of 7/28/2000
<S> <C> <C> <C> <C>
1997A 1.26 1.26
1998A 1.82 1.62 1.82
1999A 2.61 2.04 2.18 2.61
2000E 2.45 2.62 3.23
2001E 2.94 3.15 4.15
2002E 3.53 3.79 4.83
</TABLE>
<PAGE>
Avis Stock Price/Volume Performance - Since IPO (09/24/97 - 09/12/00)
[Annotated Line Graph showing Avis' daily share price since its IPO at
$17 per share, with a high of $37 7/16 on 2/5/98 and a low of $11 7/8 on
10/8/98.]
<PAGE>
Transaction Proposal and Implied Valuation Multiples
<TABLE>
<CAPTION>
($ in millions, except per share amounts)
Valuation Summary At Current Market(1) At Transaction
<S> <C> <C>
Price per Share $30.94 $29.00
Premium to Market (6.3 %)
Common Shares Outstanding(2) 31.132 31.132
Total In-the-Money Options Outstanding(3) 6.945 6.945
Gross Diluted Shares 38.076 38.076
Gross Equity Value $1,178.0 $1,104.2
Less: Options Proceeds (148.1) (148.1)
Net Equity Value $1,029.9 $956.1
Plus: Non-Fleet Debt(2)(5) $601.2 $601.2
Plus: Preferred Stock(2) 380.2 380.2
Less: Unrestricted Cash(4) (84.2) (84.2)
Enterprise Value $1,927.2 $1,853.4
</TABLE>
<TABLE>
<CAPTION>
Enterprise Value/EBITDA Operating Data(5)
<S> <C> <C> <C>
LTM $374.0 5.2x 5.0x
2000E 384.7(6) 5.0 4.8
2001E 419.0 4.6 4.4
Price/EPS
LTM $3.63 8.5x 8.0x
2000E 3.77 8.2 7.7
2001E 4.15 7.4 7.0
</TABLE>
(1) As of September 12, 2000.
(2) Source: Avis Group Form 10-Q for the quarter ending June 30, 2000.
(3) Source: Company detailed option schedule as of September 13, 2000.
(4) Source: Avis Group Form 8-K dated August 24, 2000.
(5) Source: Avis Group Forecast Model dated July 28, 2000. Pro forma for the
acquisition of VMS and the sale of PHH Europe.
(6) 2000E EBITDA, excluding pro forma adjustments for the acquisition of VMS
and the sale of PHH Europe, would be approximately $412 million.
<PAGE>
Price/Earnings Performance - Since Initial Public Offering
[Line Graph showing that the estimated 2001 price earnings ratio of
7.3X implied by the Cendant proposal of $29 per share was lower than the
multiple of Avis' share price to next twelve months estimated earnings per share
for a majority of Avis' trading history since its IPO.]
<PAGE>
Section 2
Valuation Summary
<PAGE>
Precedent M&A Transactions(1)
<TABLE>
<CAPTION>
($ in millions)
Harmonic Mean Harmonic Mean
Valuation Multiples Valuation Multiples
Number of Avis 2000E EBITDA(2) Enterprise Value/EBITDA Equity/Net Income
Comparable
Segment Transactions $ % of Total LTM LTM
<S> <C> <C> <C> <C> <C>
Vehicle Rental 8(3) $242.5 63.1% 9.4x 18.8x
PHH-NA 5(4) 103.2 26.8 10.2 19.5
WEX 8(5) 38.9 10.1 14.1 35.3
Weighted Multiple 10.1x 20.7x
Cendant Proposal--Implied 5.0 8.0
Multiple
</TABLE>
(1) See Appendix A for additional detail.
(2) Source: Avis Group Forecast Model dated July 28, 2000. Pro forma for the
acquisition of VMS and the sale of PHH Europe. Other income generated
through the participation in Arval PHH and technology fee receipts are
allocated to PHH-NA.
(3) Vehicle Rental precedent transactions include (Target/Acquiror): Hayes/Avis
Rent A Car (5/1/98); EuroDollar (Holdings) PLC/Republic Industries
(3/22/97); First Gray Line/Avis Rent A Car (8/20/97); TLS PLC/GE Capital
(9/24/97); Budget Rent-A-Car/Team Rental (4/29/97); National/Republic
Industries (2/26/97); Alamo/Republic Industries (11/25/96); Avis Rent A
Car/HFS Inc. (10/16/96).
(4) PHH NA precedent transactions include (Target/Acquiror): PHH Europe/BNP
Paribas Group (8/10/00); PHH Holdings Corp. (VMS)/Avis Rent A Car
(6/30/99); BCH Group PLC/DB Vehicle Solutions (3/18/99); Oxford
Resources/Barnett Banks Inc. (4/1/97); PHH Corp./HFS Inc. (4/30/97).
(5) WEX precedent transactions include (Target/Acquiror): ABR Information
Services Inc./Ceridian Corp. (7/22/99); Electronic Payment Systems/Concord
EFS (3/1/99); USCS International, Inc./DST Systems Inc. (12/21/98); Payment
Services Inc./Nova Corp. (9/24/98); Moneygram Payment Systems, Inc./Viad
Corp. (7/10/98); MasterCard Automated Point-of-Sale Program/National Data
Corp. (4/16/96); Comdata Holding Corp./Ceridian Corp. (12/12/95); First
Financial Management Corp./First Data Corp. (10/27/95).
<PAGE>
Public Trading Comparable Companies(1)
<TABLE>
<CAPTION>
($ in millions)
Avis Harmonic Mean Valuation Multiples
Number of 2000E EBITDA(2) Enterprise Value/EBITDA Price/EPS
Comparable % of
Segment Companies $ Total LTM 2000E 2001E LTM 2000E 2001E
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Vehicle Rental 4(3) $242.5 63.1% 4.1x 3.8x 3.3x 8.3x 8.3x 7.1x
PHH-NA 4(4) 103.2 26.8 3.9 3.8 3.3 8.5 7.7 6.7
WEX 7(5) 38.9 10.1 9.4 8.6 7.5 21.1 19.8 16.7
Weighted Multiple 4.6x 4.3x 3.7x 9.6x 9.3x 8.0x
Cendant Proposal-- 5.0 4.8 4.4 8.0 7.7 7.0
Implied Multiples
</TABLE>
(1) See Appendix B for additional detail.
(2) Source: Avis Group Forecast Model dated July 28, 2000. Pro forma for the
acquisition of VMS and the sale of PHH Europe. Other income generated
through the participation in Arval PHH and technology fee receipts are
allocated to PHH-NA.
(3) Includes Hertz, Budget, Dollar Thrifty Group and Avis Europe.
(4) Includes Rollins Truck Leasing, Ryder Systems, LEX Service and Athlon Group
NV.
(5) Includes National Data Corporation, National Processing, First Data
Corporation, Concord EFS, NOVA Corporation, Ceridian Corporation and Total
Systems Services.
<PAGE>
Discounted Cash Flow Analysis
Implied Enterprise Value(1) ($ in millions)
2005E EBITDA Exit Multiple
WACC 4.0x 4.5x 5.0x
11.0% $2,269.2 $2,459.7 $2,650.2
12.0 2,185.0 2,367.2 2,549.3
13.0 2,104.9 2,279.2 2,453.4
Implied Value Per Share(2)
2005E EBITDA Exit Multiple
WACC 4.0x 4.5x 5.0x
11.0% $38.05 $43.05 $48.06
Implied Perpetual Growth Rate 0.7% 1.8% 2.6%
12.0 35.84 40.62 45.41
Implied Perpetual Growth Rate 1.6% 2.7% 3.6%
13.0 33.74 38.31 42.89
Implied Perpetual Growth Rate 2.6% 3.6% 4.5%
(1) Based on Avis Group Forecast Model dated July 28, 2000. Does not reflect
the potential value from deferred taxes or the utilization of net operating
losses. Amounts discounted to December 31, 2000.
(2) Assumes projected debt of $601.2 million, preferred stock of $389.7
million, and unrestricted cash of $22.4 million as of December 31, 2000.
<PAGE>
Hypothetical Valuation Matrix
<TABLE>
<CAPTION>
($ in millions, except per share amounts)
Cendant
Proposal Hypothetical Transaction Values
<S> <C> <C> <C> <C> <C>
Stock Price $29.00 $35.00 $40.00 $45.00 $50.00
Common Shares Outstanding(1) 31.132 31.132 31.132 31.132 31.132
Total In-the-Money Options Outstanding(2) 6.945 6.945 6.945 6.945 6.945
Gross Diluted Shares 38.076 38.076 38.076 38.076 38.076
Gross Equity Value $1,104.2 $1,332.7 $1,523.1 $1,713.4 $1,903.8
Less: Options Proceeds (148.1) (148.1) (148.1) (148.1) (148.1)
Net Equity Value $956.1 $1,184.6 $1,375.0 $1,565.3 $1,755.7
Plus: Non-Fleet Debt(1) $601.2 $601.2 $601.2 $601.2 $601.2
Plus: Preferred Stock(1) 380.2 380.2 380.2 380.2 380.2
Less: Unrestricted Cash(3) (84.2) (84.2) (84.2) (84.2) (84.2)
Enterprise Value $1,853.4 $2,081.9 $2,272.2 $2,462.6 $2,653.0
Valuation Ratios:
Operating
Data(4)
Enterprise Value/EBITDA
LTM $374.0 5.0x 5.6x 6.1x 6.6x 7.1x
2000E 384.7 4.8 5.4 5.9 6.4 6.9
2001E 419.0 4.4 5.0 5.4 5.9 6.3
Price/EPS
LTM $3.63 8.0x 9.6x 11.0x 12.4x 13.8x
2000E 3.77 7.7 9.3 10.6 11.9 13.3
2001E 4.15 7.0 8.4 9.6 10.8 12.0
</TABLE>
(1) Source: Avis Group Form 10-Q for the quarter ending June 30, 2000.
(2) Source: Company detailed option schedule as of September 13, 2000.
(3) Source: Avis Group Form 8-K dated August 24, 2000.
(4) Source: Avis Group Forecast Model dated July 28, 2000. Pro forma for the
acquisition of VMS and the sale of PHH Europe.
<PAGE>
Section 3
Avis Hypothetical Stock Price
Analysis
<PAGE>
Status Quo with Stock Repurchase Program(1)
<TABLE>
<CAPTION>
($ in millions, except per share amounts)
Fiscal Year Ending December 31,
2001E 2002E 2003E 2004E 2005E
<S> <C> <C> <C> <C> <C>
Free Cash Flow (FCF)(2) $173.3 $213.5 $260.1 $310.7 $347.4
FCF Available for Share Repurchase(3) 51.2 67.6 78.2 90.4 104.7
Status Quo EPS(4) $4.15 $4.82 $5.58 $6.48 $7.39
Pro Forma EPS, assumes Repurchase @ Forward(5)
7.0x $4.36 $5.32 $6.46 $7.89 $9.48
8.0x 4.33 5.24 6.31 7.65 9.11
Hypothetical Future Stock Prices Present Value of Hypothetical Future Stock Prices(6)
Forward P/E 12/31/01 12/31/02 12/31/03 12/31/04 Forward P/E
Multiple Multiple 12/31/01 12/31/02 12/31/03 12/31/04
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7.0x $37.21 $45.22 $55.20 $66.34 7.0x $31.37 $33.44 $35.81 $37.75
8.0x 41.89 50.50 61.17 72.89 8.0x 35.32 37.35 39.68 41.48
</TABLE>
(1) This analysis is for illustrative purposes only and should not be construed
as an indication of an appropriate valuation for the Company in the context
of a change of control transaction.
(2) Defined as cash flow from operating activities less cash flow from
investing activities plus changes in vehicle debt.
(3) Assumes repurchases occur at the beginning of each period. Repurchases are
limited to 50% of net income.
(4) Source: Avis Group Forecast Model dated July 28, 2000.
(5) Assumes shares are repurchased at a forward multiple of projected EPS that
does not reflect stock repurchases in such period.
(6) Assumes a cost of equity discount rate of 14% to a base date of September
12, 2000.
<PAGE>
Divestiture of Avis Fleet Leasing & Management (Including PHH-NA and Wright
Express)
o Management's estimate of PHH-NA and WEX valuation
o PHH-NA: Enterprise Value range $750-$1,050 million (8.7x-12.1x 2000E
EBITDA)
o WEX: Enterprise Value range $300-$500 million (7.7x-12.8x 2000E
EBITDA)
o Purchaser of Vehicle Mgt. Services acquires entity through stock purchase
o Change of control at Vehicle Mgt. Services may trigger:
o Call by BNP Paribas of Avis' 20% interest in Arval PHH Holdings;
o Acceleration of Technology Fee (PV of 80% of Cash Flows at 6.00%); and
o Tax on gain on sale of PHH Europe which becomes currently payable
o Proceeds used to:
o Redeem senior sub. notes
o Redeem preferred stock
<PAGE>
Divestiture of Avis Fleet Leasing & Management (Including PHH-NA and Wright
Express) (cont.)
<TABLE>
<CAPTION>
Purchase Price Metrics ($ in millions) Sources & Uses ($ in millions)
<S> <C> <C> <C>
PHH-NA Implied Enterprise Value $900.0 Sources
Less: Intercompany Debt(1) (29.0) Total Proceeds/Equity Purchase Price $844.5
Plus: Cash(1) 16.7 Settlement of Intercompany Debt 218.9
PHH-NA Purchase Price $887.8 Total Sources $1,063.3
WEX Implied Enterprise Value $400.0 Uses
Less: WEX Debt (1) (101.2) Repayment of Senior Subordinated Notes $500.0
Less: Intercompany Debt (1) (14.9) Tender Premium on Senior Subordinated 51.9
Notes(2)
Plus: Cash (1) 30.2 Deferred Taxes Payable 263.0
WEX Purchase Price $314.2 Subtotal $814.9
Call of Interest in Arval PHH(1) 167.0 Excess Cash 248.5
Acceleration of Technology Fee(1) 30.7 Total Uses $1,063.3
Subtotal $1,399.7
Less: AFL&M Intercompany Debt(1) (175.0)
Less: Preferred Stock(1) (380.2)
Total Proceeds/Equity Purchase Price $844.5
</TABLE>
(1) Source: Company schedules.
(2) Assumes tender premium is calculated at a discount rate equal to the
applicable UST plus 75 basis points and is tax affected at a rate of 39.0%.
<PAGE>
Divestiture Case--Hypothetical Stock Price Analysis(1)
<TABLE>
<CAPTION>
($ in millions, except per share amounts)
Status Quo (Pre -Announcement Stock Pro Forma (Sale of PHH-NA and Wright
Price)(2) Express)(3)
<S> <C> <C>
Enterprise Value $1,724.3 $1,157.3
Less: Debt (601.2) 0.0
Less Preferred Stock (380.2) 0.0
Plus: Unrestricted Cash 84.2 332.6
Equity Value $827.0 $1,490.0
2001E EBITDA 419.0(4) 281.2
Enterprise Value/2001E EBITDA 4.1x 4.1x
Price per Share $25.50 $43.02(5)
</TABLE>
(1) This analysis is for illustrative purposes only and should not be construed
as an indication of an appropriate valuation for the Company in the context
of a change of control transaction.
(2) Enterprise value based on current balance sheet data and share price of
$25.50 as of August 14, 2000, one day prior to the announcement of Cendant
proposal.
(3) Enterprise value based on Avis pre-announcement EBITDA multiple of 4.1x and
2001E EBITDA of $281.2, pro forma for divestitures of PHH-NA and WEX.
(4) Source: Avis Group Forecast Model dated July 28, 2000.
(5) Amount excludes potential tax benefit accruing to Avis from the divestiture
as a result of the $1.37 billion equity tax basis of the divested
operations.
<PAGE>
Avis Alternatives(1)
<TABLE>
<CAPTION>
Pro Forma EPS Hypothetical Stock Prices @ 7.5x Forward P/E
2001E 2002E 12/31/00 12/31/01
<S> <C> <C> <C> <C>
Status Quo(2) $4.15 $4.82 $31.13 $36.15
Status Quo--Stock Repurchase(3) 4.34 5.27 32.56 39.55
Divest AFL & M--Stock Repurchase(3)(4) 5.36 5.77 40.22 43.24
</TABLE>
(1) This analysis is for illustrative purposes only and should not be construed
as an indication of an appropriate valuation for the Company in the context
of a change of control transaction.
(2) Source: Avis Group Forecast Model dated July 28, 2000.
(3) Assumes shares are repurchased at a forward multiple of projected EPS that
does not reflect stock repurchases in such period.
(4) Assumes net proceeds generated from the sale of AFL & M are used to
repurchase stock as of January 1, 2001.
<PAGE>
Summary
o Avis' core businesses continue to exhibit strong earnings performance
o Recent announcements by Hertz relate primarily to their equipment rental
and international businesses, and do not reflect a weakening of conditions
in the domestic auto rental industry or Avis' current earnings outlook
o Cendant's proposal of $29 does not appropriately or adequately reflect
Avis' fair value under any traditional valuation methodology
o Avis' strong earnings momentum and high level of free cash flow generation
provide the Company with ample opportunity to achieve higher shareholder
values independently
o Opportunity to dispose of non-core businesses at attractive values and
further deleverage Avis' balance sheet further support Avis' ability to
generate higher shareholder values on its own.
<PAGE>
Section 4
Wall Street Commentary
<PAGE>
Wall Street Research Summary--Prior to Cendant Proposal
<TABLE>
<CAPTION>
Company Analyst Opinion/Rating Price Target Report Date Selected Commentary
<S> <C> <C> <C> <C> <C>
ABN Amro Robert Napoli Buy $52.00 8/10/00 "We remain comfortable with our estimates and the
current quarter materially tracking with our
expectations. We reiterate our Buy rating and $52
target price. AVI remains extremely undervalued,
in our opinion, at only 6x and 5x our GAAP and
cash EPS estimates for 2001 compared to expected
long term EPS growth of 15%."
Credit Suisse Henry Diamond Strong Buy $43.00 8/10/00 "Transaction [PHH Europe] should: (1) Be First
First Boston Boston immediately accretive to EPS and free cash
flow; (2) Strengthen Avis' balance sheet by
eliminating approximately $1 billion in debt; (3)
Increase Avis' margins and returns on capital. We
are raising our 2000 EPS estimate to $3.11, 2001
EPS estimate to $4.00 and 2002 EPS estimate to
$4.53. We continue to believe that Avis is a
compelling growth and value story, and reiterate
our Strong Buy rating on the stock and 12-month
price target of $43 per share."
Goldman Sachs Meg Saegebarth Market NA 7/26/00 "We maintain our Market Outperformer rating on
Outperformer these shares. While these earnings may not be
robust enough to get investors excited, we think
that there are two catalysts which should improve
results in the second half: (1) Hertz's $3/day
price increase should result in stronger Y/Y
pricing and (2) the likelihood that Avis will pay
down a significant amount of its non-fleet debt
after it closes the PHH Europe transaction in
mid-August should reduce both debt and
amortization expenses starting in 3Q00."
J.P. Morgan Dean Gianoukos Buy NA 8/10/00 "We had raised our 2000 and 2001 EPS estimates by
$0.02 and $0.24 to $3.22 and $4.08, respectively.
Additionally the company's Board authorized a
share buyback program of up to $100 million. We
continue to view the stock as cheap, trading at
7.4x our 2000 EPS estimate. We reiterate our Buy
rating."
Lehman Brothers Jeff Kessler Buy $38.00 7/31/00 "We are raising our estimates for the remainder of
2000 and 2001... We believe that these estimates
are conservative and would not be surprised to see
management guide estimates higher when the [PHH
Europe] transaction actually closes... We continue
to recommend purchase of Avis, trading at an
absurd 7.2x our 2000 estimate and 5.8x our 2001
estimate, despite having beaten estimates every
quarter since going public! With its newfound
financial flexibility, public investors will only
have themselves to blame if someday smarter
private investors emerge to take this well
performing, but undervalued auto rental stock off
their hands."
Robertson Jordan Hymowitz Long Term NA 8/14/00 "We believe that the share repurchase program,
Stephens Attractive which will be funded with ongoing cash flow from
operations, is a positive initiative towards
increasing shareholders' value... Avis' sale of
its least strategic asset [PHH Europe]
significantly reduces the company's balance sheet
leverage."
Salomon Smith David Reidel Buy $29.00 8/10/00 "Domestic car rental is growing strongly with
Barney double digit volume increases and stable pricing.
We expect the entire industry will have a strong
3Q. We believe AVI is considerably undervalued at
just 7.4x our new current year EPS estimate and
5.9x 2001E EPS ... We raise our 2000 full-year EPS
estimate to $3.19 from $3.15 and 2001 from $3.70
to $4.00."
</TABLE>
<PAGE>
Summary of Market Commentary--After Cendant Proposal
<TABLE>
<CAPTION>
Company Analyst Opinion/Rating Price Target Report Date Selected Commentary
<S> <C> <C> <C> <C> <C>
ABN AMRO Robert P. Napoli Buy $52.00 8/15/00 "We believe this offer is materially inadequate
and should be rejected by AVI's Board of
Directors. The market has misunderstood how
economically attractive the car rental industry
is. This offer is also confusing, given that
Cendant spun off AVI's car rental operations in
1997 and sold PHH to AVI last year. We believe the
most logical reason that Cendant believes Avis is
worth more that what they are offering, possibly a
lot more."
Credit Suisse Henry A. Diamond Strong Buy $43.00 8/16/00 "We do not believe that the $29 offer is adequate.
First Boston We are surprised to see this offer. The proposed
purchase of Avis today seems inconsistent with
Cendant's prior decision to sell the Avis assets
and retain the brand name. In our opinion, Cendant
is attracted to Avis primarily as an opportunity
to make an accretive acquisition of a strong
generator of free cash flow at a bargain basement
price. We believe the parties will agree on a
price somewhere in the mid to high $30's."
Donaldson, Gary Balter NA NA 8/18/00 "Of course, there is the possibility of the price
going up, considering that the valuation on Avis
seems cheap. Still, the purchase would be a good
deal. A purchase as high as $40 per share would
still be close to $0.05 accretive to EPS. The
financial advantages convince us that the deal is
an excellent one for Cendant should it go
through."
Goldman Sachs Meg Saegebarth Market $35.00 8/16/00 "We think this is the beginning of a negotiation
Outperform and that the ultimate price is likely to be higher
that the initial $29. We would advise Avis holders
to hold a little longer, because likely the
ultimate price is likely to be somewhere between
the $29 offer and our estimate of fair value of
$35. We think that Avis' management may want to go
back under the Cendant umbrella and receive a
higher value that as a standalone company."
J.P. Morgan Dean Gianoukos Buy $33.00-35.00 8/15/00 "We view the offer price as low. We would expect
an offer to be somewhere between $33 and $35 in
order to close the transaction. Cendant's offer to
buy Avis seems unusual given Cendant's avoidance
of asset intensive businesses. Cendant may need to
purchase Avis to get the accretion from the deal,
or Cendant may wish to purchase Avis and then
subsequently sell it to another party."
Morgan Stanley Michael A. Happel NA NA 8/16/00 "In our opinion, Cendant's control of the Avis
Dean Witter name makes it a logical buyer for AVI. It's not
clear to us that it is strategically important for
Cendant to own the portion of Avis that it does
not already own. At this point, we assume that
Cendant is interested in AVI primarily because it
views the proposed acquisition as financially
attractive rather than strategically imperative."
Salomon Smith Michael Millman NA NA 8/16/00 "We note that AVI closed above the $29 offering
Barney price, at $30.50--indicating that there is belief
either Cendant or another company would pay more
for Avis. We believe this purchase does not add
sizzle, but earnings and cash flow accretion."
Salomon Smith David Riedel Buy $31.19 8/21/00 "We have long believed that the car rental sector,
Barney including Avis, has been considerably undervalued.
Since Cendant could increase its offer price
substantially before the deal would stop being
accretive, and since this P/E multiple still
values the company at only 0.4x its long-term
projected growth rate, we believe the deal will
likely get done at a higher price. We believe the
market's response of bidding AVI shares above the
$29 price reflects investor sentiment that the
price clearly undervalues Avis's strong business."
</TABLE>
<PAGE>
Appendices
<PAGE>
Appendix A
Precedent M&A Transactions Detail
<PAGE>
Recent M&A Transactions--Vehicle Rental(1)
<TABLE>
<CAPTION>
($ in millions)
------------------------------------------------------------------------------------------------------------------------------
Enterprise Value/ Equity
------------------------- Value/
Enterprise Equity LTM LTM LTM LTM Net
Closed Target Company/Acquiring Company Value Value Sales EBITDA EBIT Income
<S> <C> <C> <C> <C> <C> <C> <C>
05/01/98 Hayes/Avis Rent A Car(2) $85.0 $85.0 1.09x 8.8x 9.1x 22.1x
09/22/97 EuroDollar (Holdings) PLC/Republic Industries(3) 93.8 95.2 0.87 9.0 11.3 17.2
08/20/97 First Gray Line/Avis Rent A Car(4) 195.0 195.0 0.99 11.8 11.8 17.5
09/24/97 TLS PLC/GE Capital (General Electric)(5) 64.2 66.4 1.13 5.7 6.1 14.4
04/29/97 Budget Rent-A-Car/Team Rental(6) 696.9 350.0 0.61 6.9 12.1 21.4
02/26/97 National/Republic Industries(7) 600.0 600.0 0.59 11.4 14.3 23.0
11/25/96 Alamo/Republic Industries(8) 880.3 625.0 0.59 29.6 103.5 NM
10/16/96 Avis Rent A Car/HFS(9) 805.0 805.0 0.43 9.9 10.5 20.2
High 1.1x 29.6x 103.5x 23.0x
Low 0.4 5.7 6.1 14.4
Harmonic Mean 0.7 9.4 11.3 18.8
Median 0.7 9.5 11.6 20.2
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For all target latest twelve months financials, fleet-related debt is not
included in the calculation of enterprise value, interest on that debt is
not added back in the calculation of EBIT and EBITDA, and fleet-related
depreciation and amortization is not added back in the calculation of
EBITDA. All LTM financials are for the latest twelve months prior to
announcement of the transaction, and are pro forma to exclude all
non-recurring items and reflect the operating results of acquired
businesses.
(2) Assumes that $127.0 million of debt was related to assets under management
and is therefore, not included in the calculation of Enterprises Value.
(3) Enterprise Value calculation excludes 117.1 million of Vehicle Backed
Finance and includes $1.0 million of Bank Overdrafts.
(4) Assumes that $231.0 million of Revenue Equipment Obligations and Other
Debt, was related to assets under management. Therefore, the aforementioned
liabilities are not included in the calculation of Enterprise Value.
(5) Assumes that (pound)52.6 million of Hire Purchase Finance is related to
assets under management and is therefore, excluded from the calculation of
Enterprise Value.
(6) Calculated Enterprise Value includes $346.9 million of non-fleet debt and
excludes $1,987.3 million of fleet-related debt. Net income assumes tax
rate of 38%.
(7) Assumes that $1,819.0 million of Revenue Earning Asset obligations and
Subordinated Debt is related to assets under management and is therefore,
excluded from the calculation of Enterprise Value. Net income assumes tax
rate of 38%.
(8) Calculated Enterprise Value excludes $2,448.3 million of Notes Payable,
Lines of Credit and Other Debt, all deemed to be related to assets under
management, and includes $255.3 million of non-fleet debt.
(9) Assumes that $2,295.5 million of debt is related to assets under
management, and is therefore, not included in the calculation of Enterprise
Value.
<PAGE>
PHH M&A Target Descriptions
Company Description
Oxford Resources Corp. Oxford Resources is the nation's largest
independent automobile leasing company. The
company, based in Melville, N.Y., provides leases
and loans for new and used automobiles through
more than 2,000 auto dealers in 21 states.
BCH Group Plc BCH is a UK vehicle management company which
provides contract hire to corporate customers
together with related vehicle management products,
in particular fleet management and accident
management services. The company's core business
is in the corporate sector.
<PAGE>
Recent M&A Transactions--PHH-NA(1)
<TABLE>
<CAPTION>
($ in millions)
----------------------------------------------------------------------------------------------------------------------------------
Enterprise Value as a
Multiple of
---------------------------
Date Equity Enterprise LTM LTM LTM Equity Value/
Effective Target/Acquiror Value Value Revenue EBITDA EBIT LTM Net Income
<S> <C> <C> <C> <C> <C> <C> <C>
Pending PHH Europe/BNP Paribas Group(2) $1,000.0 $1,000.0 3.67x 11.1x 11.1x 17.3x
06/30/99 PHH Holdings Corp. (VMS)/Avis Rent a Car(3) 1,800.0 1,746.6 1.08 10.5 12.9 20.6
03/18/99 BCH Group PLC/DB Vehicle Solutions(4) 39.5 39.7 0.63 10.2 10.6 16.3
04/01/97 Oxford Resources/Barnett Banks Inc.(4) 565.7 499.4 1.51 12.9 13.9 25.8
04/30/97 PHH Corp./HFS Inc.(5) 1,809.5 1,798.1 0.74 7.7 11.9 20.0
High 3.67x 12.9x 13.9x 25.8x
Low 0.63 7.7 10.6 16.3
Harmonic Mean 1.04 10.2 12.0 19.5
Median 1.08 10.5 11.9 20.0
</TABLE>
(1) For all target latest twelve months financials, fleet-related debt is not
included in the calculation of enterprise value, interest on that debt is
not added back in the calculation of EBIT and EBITDA, and fleet-related
depreciation and amortization is not added back in the calculation of
EBITDA. All LTM financials are for the latest twelve months prior to
announcement of the transaction, and are pro forma to exclude all
non-recurring items and reflect the operating results of acquired
businesses.
(2) Source: Confidential Information Memorandum dated June, 2000 regarding Avis
Group Holdings' $1.35 billion Amendment to the Senior Secured Credit
Facilities. Assumes no non-fleet interest or depreciation and amortization,
and a tax rate of 36%. $234 million intercompany loan is assumed to be
fleet-related and is excluded from Enterprise Value.
(3) Enterprise Value includes net debt of negative $53.4 million ($20.8 million
of Borrowed Funds and $74.32 million of Cash and Equivalents) and excludes
$228 million of Intercompany Loan related to assets under management, as
per 3/31/99 VMS balance sheet in Avis Rent-A-Car Form 8-K dated 7/15/99.
LTM financials are pro forma to exclude a non-recurring net gain of $1.3
million recorded during the fiscal year ended 12/31/98.
(4) Assumes that $103 million of Hire Purchase Contracts and Finance Lease debt
(as per Company balance sheet dated 6/30/98 from Company Form 8-K dated
11/23/98) is related to assets under management, and is therefore, excluded
from the calculation of Enterprise Value; the $0.2 million of bank
overdrafts is included in the calculation of Enterprise Value.
(5) Assumes that $1.6 billion of Notes Payable and Obligations Under Capital
Leases--Non Recourse (as per Company balance sheet dated 12/31/96 from
Company Form 10-Q dated 12/31/96) is related to assets under management, as
per disclosure in Company Form 10-K dated 6/30/96, and is therefore not
included in the calculation of Enterprise Value.
(6) All debt, including Medium Term Notes, Commercial Paper, Limited Recourse
Debt, Secured Notes Payable and Other Unsecured Debt is deemed to be
related to assets under management, and is therefore, excluded from the
calculation of Enterprise Value.
<PAGE>
WEX M&A Target Descriptions
Company Description
ABR Information Services Inc. ABR is a leading provider of comprehensive
benefits administration, payroll, and human
resources services to employers seeking to
outsource these functions. ABR has operations
in three areas: Benefits Services, Qualified
Plan Services and Payroll and Human Resource
Services.
Electronic Payment Systems Electronic Payment Services is a leading
electronic funds transfer processor in the US.
EPS is a holding company with two subsidiaries:
BuyPass Corporation, a third-party POS
processor and debit transaction acquiror; and
Money Access Service Inc., the nation's leading
ATM terminal driver with over 32,000 ATM's
across the US.
USCS International, Inc. USCS is a leading global provider of customer
management software and statement processing to
the communications, utilities and other service
industries, which serve more than 80 million
end-users worldwide. USCS clients include cable
television, wireless and land-line telephony,
direct broadcast satellite, electricity, water,
gas, waste management, utility and multiple
services in more than 30 countries.
PMT Services Inc. PMT provides electronic credit card
authorization and payment equipment and
services to small to midsized businesses and
banks throughout the US. PMT is one of the
largest independent service organizations in
the country.
Moneygram Payment Systems, Inc. Moneygram is one of the nation's largest money
wire transfer companies. As a provider of
wire-transfer services to consumers, MoneyGram
operates in over 100 nations and has revenues
of $141 mil. Its biggest business is in the
US-Mexican market.
Mastercard Automated MAPP is a business unit established and
Point-of-Sale Program operated by MasterCard International Inc. that
provides transaction processing services to
acquiring members, including the authorization
and capture of credit and debit card
transactions through telecommunications and
computer networks.
Comdata Holding Corp. Comdata provides transaction processing and
decision support services to the trucking
industry. For trucking companies and drivers,
Comdata provides funds transfer, fuel purchase,
cash advance, regulatory permit and
telecommunications services, as well as fleet
optimization and routing software. For truck
stops, Comdata provides point-of-sale and data
collection services.
First Financial Management Corp. First Financial is a worldwide leader in
information services. The Company's Western
Union Financial Services Inc. unit has a 90%
market share in the lucrative money wiring
business.
<PAGE>
Recent M&A Transactions--WEX(1)
<TABLE>
<CAPTION>
($ in millions)
-----------------------------------------------------------------------------------------------------------------------------------
Equity
Enterprise Value/ Value/
----------------------- ----------
Enterprise Equity LTM LTM LTM LTM
Closed Target Company/Acquiring Company Value Value Revenue EBITDA EBIT Net Income
<S> <C> <C> <C> <C> <C> <C> <C>
07/22/99 ABR Information Services Inc./Ceridian Corp $701.1 $743.4 7.24x 21.3x 28.7x 37.2x
03/01/99 Electronic Payment Services/Concord EFS 1,045.0 901.4 4.62 13.0 20.4 40.1
12/21/98 USCS International, Inc./DST Systems Inc. 869.4 873.5 2.72 12.7 20.9 35.1
09/24/98 PMT Services/Nova Corp.(2) 1,370.0 1,373.1 2.97 20.5 27.9 41.0
07/10/98 Moneygram Payment Systems, Inc./Viad Corp.(3) 257.8 286.6 1.76 11.3 18.1 32.6
04/01/96 Mastercard Automated Point-of-Sale Program/National 128.8 128.8 2.65 11.8 18.6 31.9
Data Corp.
12/12/95 Comdata Holding Corp./Ceridian Corp. 1,144.2 929.9 4.45 14.5 17.0 31.6
10/27/95 First Financial Management Corp./First Data Corp.(4) 6,383.8 6,497.0 2.32 13.4 18.5 35.6
High 7.24x 21.3x 28.7x 41.0x
Low 1.76 11.3 17.0 31.6
Harmonic Mean 3.01 14.1 20.5 35.3
Median 2.85 13.2 19.5 35.4
</TABLE>
(1) All latest twelve months financials are for the latest twelve month period
prior to the announcement of the transaction, and are pro forma to exclude
non-recurring items and to reflect the operating results of acquired
businesses.
(2) PMT Services' latest twelve months results are pro forma to exclude a
non-recurring pre-tax change of $3.8 million related to litigation and
merger costs.
(3) Pro forma for the acquisition of Mid-America Money Order Company.
(4) Pro forma for the acquisition of Western Union.
<PAGE>
Appendix B
Public Trading Comparable
Companies Detail
<PAGE>
Relative Trading Multiples--Vehicle Rental(1)
<TABLE>
<CAPTION>
($ in millions)
-----------------------------------------------------------------------------------------------------------------------------------
Enterprise Value/ Price/
------------------------------------------- -----------------------------
Stock Enterprise Equity LTM LTM LTM 2000E 2001E LTM FY 2000E FY 2001E
Price(2) Value Value Revenue EBIT EBITDA EBITDA EBITDA EPS EPS EPS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ANC Rental(3) $6.28 NA NA NA NA NA NA NA NA 5.4x 4.0%
Budget(4) 4.06 $865.4 $151.3 0.35x 17.8x 6.9x 5.0x 3.5x NM 8.5 5.9
Dollar Thrifty 19.00 422.6 462.8 0.40 3.0 2.4 2.2 2.1 6.4x 6.1 5.6
Hertz 25.19 2,579.4 2,706.7 0.52 4.5 3.5 3.5 3.3 7.7 7.8 7.4
Avis Europe 3.06 1,736.3 1,785.5 1.61 8.0 7.5 7.9 7.2 13.3 13.9 12.6
Harmonic Mean(5) 0.51x 5.4x 4.1x 3.8x 3.3x 8.3x 8.3x 7.1x
</TABLE>
(1) For all target latest twelve months financials, fleet-related debt is not
included in the calculation of enterprise value, interest on that debt is
not added back in the calculation of EBIT and EBITDA, and fleet-related
depreciation and amortization is not added back in the calculation of
EBITDA. All LTM financials are for the latest twelve months prior to
announcement of the transaction, and are pro forma to exclude all
non-recurring items and reflect the operating results of acquired
businesses.
(2) Closing stock price as of September 12, 2000.
(3) ANC Rental is the parent company of Alamo/National and was recently spun
off from Republic Industries. Trailing 12 month financial data is
unavailable, and there is insufficient equity research coverage to derive
projected results.
(4) Latest twelve months results are pro forma to exclude pre-tax charges of
$105.4 million related to restructuring. 2001E EBITDA unavailable in
research; amount is extrapolated from First Call earnings estimates.
(5) Harmonic Mean excludes ANC Rental.
<PAGE>
Selected Comparable Companies for PHH-NA
<TABLE>
<CAPTION>
Company Ticker Description
<S> <C> <C>
Rollins Truck Leasing RLC Rollins Truck Leasing is primarily engaged in full-service truck leasing and rentals, providing
complete transportation and distributions systems for companies in a wide range of industries.
Other services include guaranteed maintenance leasing, dedicated carriage services and integrated
logistics and asset management programs.
Ryder System, Inc. RLC Ryder System, Inc. is primarily engaged in the business of leasing, renting and maintaining
commercial trucks for private fleet operators. It is also the world's largest provider of
transportation logistics services, which includes dedicated contract carriage, management of
carriers, and inventory deployment.
LEX Service LEX Lex is a business and motoring services group offering a range of services to business and private
customers including vehicle management, mechanical handling, inventory management, driver and
motoring services, financial products, and vehicle importing and retailing.
Athlon Group NV ATHL Athlon is engaged in three core activities: car leasing, dealer activities and car body repairs.
Car leasing activities include operational lease, fleet management and car rental and have
recently been expanding through recent acquisitions.
</TABLE>
<PAGE>
Relative Trading Multiples--PHH-NA
<TABLE>
<CAPTION>
($ in millions)
-----------------------------------------------------------------------------------------------------------------------------------
Enterprise Value/ Price/
-------------------------------------------- -------------------------
Stock Enterprise Equity LTM LTM LTM 2000E 2001E LTM FY 2000E FY 2001E
Price(1) Value Value Revenue EBIT EBITDA EBITDA EBITDA EPS EPS EPS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Rollins Truck Leasing $6.75 $384.9 $392.2 0.49x 3.8x 2.8x 2.9x 2.4x 6.8x 6.8x 5.7x
Corp.(2)
Ryder System Inc.(3) 19.94 1,123.3 1,189.4 0.22 5.7 3.6 3.5 3.2 10.4 9.4 8.1
Lex Service PLC(4) 5.81 949.6 672.5 0.60 13.2 9.2 9.1 8.1 12.6 10.9 9.8
Athlon Groep NV(5) 11.62 180.7 181.1 0.20 4.6 3.6 3.1 2.9 6.7 5.8 5.1
Harmonic Mean 0.30x 5.5x 3.9x 3.8x 3.3x 8.5x 7.7x 6.7x
</TABLE>
(1) Closing stock price as of September 12, 2000.
(2) Pro forma to exclude $56.7 million net gain on sale of business operations.
All debt is assumed to be fleet related, and 16.3% of depreciation and
amortization is assumed to be non-fleet related.
(3) Pro forma to exclude net pre-tax charge of $76.1 million related to
restructuring and Y2K expenses. All debt is assumed to be fleet-related,
and 20% of depreciation and amortization is assumed to be non-fleet
related, with the balance assumed to be fleet-related.
(4) Pro forma to exclude non-recurring charges related to restructuring and
disposal of discontinued businesses. All historical results are pro forma
to exclude the operations of divested businesses and have been converted to
$US.
(5) All debt is assumed to be fleet-related. Amounts denominated in Euros.
<PAGE>
Selected Comparable Companies for WEX
Company Ticker Description
National Data Corporation NDC National Data Corporation is a leading
provider of high volume information services
and systems to the health care and
electronic commerce markets. Primary
products and services include electronic
eligibility, claims processing, adjudication
and remittance services, billing services,
and other information-based services.
National Processing, Inc. NAP National Processing, Inc. operates three
business segments which provide merchant,
corporate and travel services. As one of the
largest domestic merchant processors, it
grants retailers and other merchants credit
and debit card authorization, capture,
settlement, exception processing and other
related services.
First Data Corporation FDC First Data is a provider of
transaction-processing. It provides
transaction reporting and billing services,
which includes payment instruments, card
issuer and merchant processing services, to
financial institutions, oil companies, and
retailers. The company also provides
mutual-fund processing, cost-management,
toll-free telephone services and
information-based products for enhanced
decision-making and marketing.
Concord EFS, Inc. CEFT Concord EFS, Inc. is a leading nationwide
provider of electronic transaction
authorization, processing, settlement and
funds transfer services. It provides
complete outsourcing solutions for
integrated electronic transactions services
for credit cards, debit cards, electronic
benefits transfer cards and ATM's.
NOVA Corporation NIS NOVA Corporation is a provider of integrated
transaction processing services, related
software application products and
value-added services. It provides
transaction processing support for all major
credit, charge and debit cards, plus check
verification services. Its market focus on
small and midsize merchants remains under
penetrated.
Ceridian Corporation CEN Ceridian Corporation operates exclusively in
the information services industry, providing
products and services to customers in the
human resources, transportation and media
information markets. In particular, its
Comdata business unit provides transaction
processing and information services to the
transportation industry.
Total Systems Services TSS TSS is one of the largest information
technology processors of credit, debit,
commercial and retail cards. Synovus
Financial Corp., a multi-financial services
company, owns 80.8% of TSS.
<PAGE>
Relative Trading Multiples--WEX (1)
<TABLE>
<CAPTION>
Enterprise Value/ Price/
------------------------------------------------ ------------------
Stock Enterprise Equity LTM LTM LTM 2000E 2001E LTM FY 2000E FY 2001E
Price(2) Value Value Revenue EBIT EBITDA EBITDA EBITDA EPS EPS EPS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
National Data Corp.(3) $29.88 $1,264.1 $1,014.3 1.84x 11.5x 7.8x 7.1x 6.1x 17.1x 15.0x 13.0x
National Processing Inc.(4) 11.94 481.8 606.8 1.21 8.3 6.1 5.4 4.8 14.7 13.6 11.5
First Data Corp.(5) 42.63 18,376.8 17,712.3 3.30 14.3 9.8 9.5 8.7 21.9 20.6 17.8
Concord EFS Inc.(6) 33.44 6,560.6 7,111.9 6.58 30.1 23.0 16.0 12.5 44.6 38.0 28.3
Ceridian Corp.(7) 25.81 4,322.4 3,818.3 3.08 16.3 12.1 11.3 10.5 27.2 25.6 21.0
Nova Corp. GA(8) 16.69 1,407.1 1,230.0 0.91 8.1 5.9 5.8 5.0 13.2 13.7 11.6
Total System Services Inc. 16.94 3,205.5 3,299.2 5.55 26.6 18.7 17.4 15.1 40.3 38.5 32.6
Harmonic Mean 2.04x 13.1x 9.4x 8.6x 7.5x 21.1x 19.8x 16.7x
</TABLE>
(1) LTM financials are pro forma to exclude non-recurring charges and reflect
the operations of acquired businesses. All reported estimates are based on
Wall Street research and EPS estimates are from First Call.
(2) Closing stock price as of September 12, 2000.
(3) There are no FY 2000E EBITDA and EBIT multiples for National Data Corp.,
due to the fact that their fiscal year ended 5/31/2000. Expenses are pro
forma to exclude $22.4 million restructuring charge, a $72.0 million charge
related to discontinued operations and a $6.0 million charge related to an
adjustment to Medscape valuation. Forward P/E multiples shown are for FY
2001E and FY 2002E because company has a fiscal year that ends on May 31.
(4) Pro forma to exclude the operating results of business segments divested in
1999 as well as $73.2 million of non-recurring charges.
(5) Pro forma to exclude a $703.5 million pretax net gain attributable to
divestitures, restructuring, litigation and impairment.
(6) Pro forma to exclude net pretax charge of $37.0 million related to
acquisition expenses and restructuring.
(7) Pro forma to exclude pre-tax charge of $30.5 million related to asset
write-downs and accrued exit costs.
(8) Pro forma to exclude net pre-tax charge of $142.5 related to asset
impairment and other non-recurring items.
