SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________________________
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(Pursuant to Section 13(e) of the
Securities Exchange Act of 1934)
_________________________________________________________
LIN BROADCASTING CORPORATION
(Name of Issuer)
AT&T CORP.
MCCAW CELLULAR COMMUNICATIONS, INC.
MMM HOLDINGS, INC.
MMM ACQUISITION CORP.
LIN BROADCASTING CORPORATION
(Name of Persons Filing Statement)
Common Stock, $.01 par value 532763-10-9
(Title of Class of Securities) (CUSIP Number of Class of
Securities)
_________________________________________________________
Marilyn J. Wasser Andrew A. Quartner Tom A. Alberg
AT&T Corp. McCaw Cellular LIN Broadcasting
131 Morristown Road Communications, Inc. Corporation
Basking Ridge, NJ 07920 1150 Connecticut 5295 Carillon Point
(212) 387-5400 Avenue, NW Kirkland, WA 98033
Washington, D.C. 20036 (206) 828-1902
(202) 223-9222
(Name, Address and Telephone Number of Persons Authorized
to Receive Notices and Communications on Behalf of the
Persons Filing Statement)
_________________________________________________________
Copies to:
Steven A. Rosenblum David B. Chapnick
Wachtell, Lipton, Rosen & Katz Simpson Thacher & Bartlett
51 West 52nd Street 425 Lexington Avenue
New York, NY 10019 New York, NY 10017
(212) 403-1000 (212) 455-2000
<PAGE>
<PAGE>
This statement is filed in connection with the filing of
solicitation materials subject to Regulation 14A under the
Securities Exchange Act of 1934.
Check the following box if the soliciting materials referred
to above are preliminary copies. [X]<PAGE>
<PAGE>
Calculation of Filing Fee
Transaction Valuation Amount of Filing Fee
--------------------- --------------------
$3,323,370,309 * $664,674.06
* For purposes of calculation of fee only. This amount
assumes the purchase of 25,613,644 shares of Common Stock,
par value $.01 per share, of LIN Broadcasting Corporation at
$129.75 net in cash per share. The amount of the filing fee
calculated in accordance with Regulation 240.0-11 of the
Securities Exchange Act of 1934 equals 1/50 of 1% of the
value of the shares to be purchased.
[X] Check box if any part of the fee is offset as provided by
Rule 0-11(a)(2).
Amount Previously Paid: $664,674.06
Form or Registration No.: Schedule 14A
Filing Parties: LIN Broadcasting Corporation
Date Filed: July 10, 1995
Page 1 of __ Pages
Exhibit Index on Page ___<PAGE>
<PAGE>
This Rule 13E-3 Transaction Statement (the "Statement")
relates to a proposal to approve and adopt an Agreement and Plan
of Merger, dated April 28, 1995, as amended and restated June 30,
1995 (the "Merger Agreement"), among LIN Broadcasting
Corporation, a Delaware corporation ("LIN"), McCaw Cellular
Communications, Inc., a Delaware corporation ("McCaw") and a
wholly owned subsidiary of AT&T Corp., a New York corporation
("AT&T"), MMM Holdings, Inc., a Delaware corporation ("Holdings")
and a wholly owned subsidiary of McCaw, and MMM Acquisition
Corp., a Delaware corporation ("Merger Sub") and a wholly owned
subsidiary of Holdings, and the merger of Merger Sub into LIN
upon the terms and subject to the conditions set forth in the
Merger Agreement (the "Merger"). This Statement is intended to
satisfy the reporting requirements of Section 13(e) of the
Securities Exchange Act of 1934, as amended (the "Act"). A copy
of the Merger Agreement is filed by LIN as Appendix A to the
proxy statement (the "Proxy Statement") filed as Exhibit (d) to
this Statement.
The cross reference sheet below is being supplied pursuant
to General Instruction F to Schedule 13E-3 and shows the location
in the Proxy Statement of the information required to be included
in response to the items of this Statement. The information in
the Proxy Statement, including all appendices thereto, is hereby
expressly incorporated herein by reference and the responses to
each item in this Statement are qualified in their entirety by
the information contained in the Proxy Statement.
<PAGE>
<PAGE>
CROSS REFERENCE SHEET
Item in
Schedule 13E-3 Where located in Proxy Statement
Item 1(a) "SUMMARY -- AT&T, McCaw, Holdings, Merger Sub
and LIN" and "CERTAIN INFORMATION REGARDING
AT&T, McCAW, HOLDINGS, MERGER SUB AND LIN --
LIN"
Item 1(b) Cover Page of Proxy Statement, "SUMMARY --
Annual Meeting of LIN Stockholders," and "THE
ANNUAL MEETING -- Record Date; Shares
Entitled to Vote; Vote Required"
Item 1(c),(d) "MARKET PRICES OF LIN COMMON SHARES; DIVIDEND
HISTORY"
Item 1(e) **
Item 1(f) "MARKET PRICES OF LIN COMMON SHARES; DIVIDEND
HISTORY"
Item 2(a)-(d),(g) Cover Page of Proxy Statement, "SUMMARY --
AT&T, McCaw, Holdings, Merger Sub and LIN,"
"CERTAIN INFORMATION REGARDING AT&T, McCAW,
HOLDINGS, MERGER SUB AND LIN," "ELECTION OF
DIRECTORS -- Nominees for Director,"
"EXECUTIVE OFFICERS" and Appendix E
Item 2(e) **
Item 2(f) **
______________________
* The information requested by this Item is not required to be
included in the Proxy Statement.
** The Item is inapplicable or the answer thereto is in the
negative.
<PAGE>
<PAGE>
Item 3(a)(1) "CERTAIN INFORMATION REGARDING AT&T, McCAW,
HOLDINGS, MERGER SUB AND LIN -- Certain
Transactions Among LIN, AT&T and McCaw" and
"-- Relationship with LIN Television."
Item 3(a)(2) "SPECIAL FACTORS -- Background of the Merger"
Item 3(b) "SPECIAL FACTORS -- Background of the Merger"
Item 4(a),(b) "SUMMARY -- The Merger," "THE MERGER" and
"SPECIAL FACTORS -- Interests of Certain
Persons in the Merger; Conflicts of Interest"
Item 5(a) **
Item 5(b) **
Item 5(c),(e) "SPECIAL FACTORS -- Certain Effects of the
Merger; Operations of LIN After the Merger"
Item 5(d) **
Item 5(f),(g) "SPECIAL FACTORS -- Certain Effects of the
Merger; Operations of LIN After the Merger"
and "CURRENT INFORMATION: DELISTING AND
DEREGISTRATION"
Item 6(a),(b),(c) "SUMMARY -- The Merger," "FINANCING OF THE
MERGER" and "THE MERGER -- Expenses and Fees"
Item 6(d) **
Item 7(a)-(c) "SPECIAL FACTORS -- Purpose, Structure and
Reasons for the Merger"
______________________
* The information requested by this Item is not required to be
included in the Proxy Statement.
** The Item is inapplicable or the answer thereto is in the
negative.<PAGE>
<PAGE>
Item 7(d) "SUMMARY -- The Merger," "SPECIAL FACTORS --
Certain Effects of the Merger; Operations of
LIN After the Merger" and "-- Certain Federal
Income Tax Consequences"
Item 8(a),(b) "SUMMARY -- The Merger" and "SPECIAL FACTORS
-- Fairness of the Transaction;
Recommendations"
Item 8(c) "SUMMARY -- Annual Meeting of LIN
Stockholders" and "THE ANNUAL MEETING --
Record Date; Shares Entitled to Vote; Vote
Required"
Item 8(d) "SUMMARY -- The Merger," "SPECIAL FACTORS --
Background of the Merger," "-- Fairness
Opinion of Wasserstein Perella," and "--
Terms of the PMVG"
Item 8(e) "SPECIAL FACTORS -- Background of the Merger"
and "-- Fairness of the Transaction;
Recommendations"
Item 8(f) **
Item 9(a),(b),(c) "SUMMARY -- The Merger," "SPECIAL FACTORS --
Background of the Merger," "-- Fairness
Opinion of Wasserstein Perella," "-- Private
Market Value View of Morgan Stanley," "--
Private Market Value View of Bear Stearns and
Lehman Brothers" and "-- Private Market Value
Determination of Wasserstein Perella"
_______________________________
* The information requested by this Item is not required to be
included in the Proxy Statement.
** The Item is inapplicable or the answer thereto is in the
negative.<PAGE>
<PAGE>
Item 10(a) "SPECIAL FACTORS -- Background of the
Merger," "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT -- Principal
Stockholders," "-- Security Ownership of
Management" and Appendix E
Item 10(b) **
Item 11 "SUMMARY -- Annual Meeting of LIN
Stockholders," "-- The Merger," "THE ANNUAL
MEETING -- Record Date; Shares Entitled to
Vote; Vote Required," "SPECIAL FACTORS --
Background of the Merger," "-- Terms of the
PMVG" and "THE MERGER"
Item 12(a) "SUMMARY -- Annual Meeting of LIN
Stockholders," "THE ANNUAL MEETING -- Annual
Meeting" and "-- Record Date; Shares Entitled
to Vote; Vote Required"
Item 12(b) "SUMMARY -- The Merger," "THE ANNUAL MEETING
-- Annual Meeting" and "SPECIAL FACTORS --
Fairness of the Transaction; Recommendations"
Item 13(a) "SUMMARY -- The Merger," "RIGHTS OF
DISSENTING STOCKHOLDERS" and Appendix C
Item 13(b) **
Item 13(c) **
Item 14(a) "SUMMARY -- LIN Broadcasting Corporation
Summary Consolidated Financial Data"
Item 14(b) **
_________________________
* The information requested by this Item is not required to be
included in the Proxy Statement.
** The Item is inapplicable or the answer thereto is in the
negative.<PAGE>
<PAGE>
Item 15(a),(b) "THE ANNUAL MEETING -- Proxies; Proxy
Solicitation"
Item 16 Proxy Statement
Item 17(a) **
Item 17(b) *
Item 17(c)(1) Appendix A
Item 17(c)(2) Appendix D
Item 17(d) Proxy Statement
Item 17(e) Appendix C
Item 17(f) **
_________________________
* The information requested by this Item is not required to be
included in the Proxy Statement.
** The Item is inapplicable or the answer thereto is in the
negative.<PAGE>
<PAGE>
Item 1. Issuer and Class of Security Subject to the
Transaction.
(a) The information set forth in "SUMMARY -- AT&T,
McCaw, Holdings, Merger Sub and LIN" and "CERTAIN
INFORMATION REGARDING AT&T, McCAW, HOLDINGS,
MERGER SUB AND LIN -- LIN" in the Proxy Statement
is incorporated herein by reference.
(b) The information set forth on the Cover Page of the
Proxy Statement, in "SUMMARY -- Annual Meeting of
LIN Stockholders" and in "THE ANNUAL MEETING --
Record Date; Shares Entitled to Vote; Vote
Required" in the Proxy Statement is incorporated
herein by reference.
(c), (d) The information set forth in "MARKET PRICES OF LIN
COMMON SHARES; DIVIDEND HISTORY" in the Proxy
Statement is incorporated herein by reference.
(e) Not applicable.
(f) The information set forth in "MARKET PRICES OF LIN
COMMON SHARES; DIVIDEND HISTORY" in the Proxy
Statement is incorporated herein by reference.
Item 2. Identity and Background.
(a)-(d), The information set forth on the Cover Page of
(g) Proxy Statement and in "SUMMARY -- AT&T, McCaw,
Holdings, Merger Sub and LIN," "CERTAIN
INFORMATION REGARDING AT&T, McCAW, HOLDINGS,
MERGER SUB AND LIN," "ELECTION OF DIRECTORS --
Nominees for Director," "EXECUTIVE OFFICERS" and
Appendix E in the Proxy Statement is incorporated
herein by reference.
(e) Negative.
(f) Negative.
<PAGE>
<PAGE>
Item 3. Past Contacts, Transactions or Negotiations.
(a)(1) The information set forth in "CERTAIN INFORMATION
REGARDING AT&T, McCAW, HOLDINGS, MERGER SUB AND
LIN -- Certain Transactions Among LIN, AT&T and
McCaw" and "-- Relationship With LIN Television"
in the Proxy Statement is incorporated herein by
reference.
(a)(2) The information set forth in "SPECIAL FACTORS --
Background of the Merger" in the Proxy Statement
is incorporated herein by reference.
(b) The information set forth in "SPECIAL FACTORS --
Background of the Merger" in the Proxy Statement
is incorporated herein by reference.
Item 4. Terms of the Transaction.
(a),(b) The information set forth in "SUMMARY -- The
Merger," "THE MERGER" and "SPECIAL FACTORS --
Interests of Certain Persons in the Merger;
Conflicts of Interest" in the Proxy Statement is
incorporated herein by reference
Item 5. Plans or Proposals of the Issuer or Affiliate.
(a) Not applicable.
(b) Not applicable.
(c),(e) The information set forth in "SPECIAL FACTORS --
Certain Effects of the Merger; Operations of LIN
After the Merger" in the Proxy Statement is
incorporated herein by reference.
(d) Not applicable.
<PAGE>
<PAGE>
(f),(g) The information set forth in "SPECIAL FACTORS --
Certain Effects of the Merger; Operations of LIN
After the Merger" and "CURRENT INFORMATION:
DELISTING AND DEREGISTRATION" in the Proxy
Statement is incorporated herein by reference.
Item 6. Source and Amount of Funds or Other Consideration.
(a),(b), The information set forth in "SUMMARY -- The
(c) Merger," "FINANCING OF THE MERGER" and "THE MERGER
-- Expenses and Fees" in the Proxy Statement is
incorporated herein by reference.
(d) Not applicable.
Item 7. Purpose(s), Alternatives, Reasons and Effects.
(a)-(c) The information set forth in "SPECIAL FACTORS --
Purpose, Structure and Reasons for the Merger" in
the Proxy Statement is incorporated herein by
reference.
(d) The information set forth in "SUMMARY -- The
Merger," "SPECIAL FACTORS -- Certain Effects of
the Merger; Operations of LIN After the Merger"
and "-- Certain Federal Income Tax Consequences"
in the Proxy Statement is incorporated herein by
reference.
Item 8. Fairness of the Transaction.
(a),(b) The information set forth in "SUMMARY -- The
Merger" and "SPECIAL FACTORS -- Fairness of the
Transactions; Recommendations" in the Proxy
Statement is incorporated herein by reference.
(c) The information set forth in "THE ANNUAL MEETING --
Record Date; Shares Entitled to Vote; Vote
Required" in the Proxy Statement is incorporated
herein by reference.
<PAGE>
<PAGE>
(d) The information set forth in "SPECIAL FACTORS --
Background of the Merger," "-- Fairness Opinion of
Wasserstein Perella," and "-- Terms of the PMVG"
in the Proxy Statement is incorporated herein by
reference.
(e) The information set forth in "SPECIAL FACTORS --
Background of the Merger" and "-- Fairness of the
Transaction; Recommendations" in the Proxy
Statement is incorporated herein by reference.
(f) Not Applicable.
Item 9. Reports, Opinions, Appraisals and Certain
Negotiations.
(a),(b), The information set forth in "SUMMARY -- The
(c) Merger," "SPECIAL FACTORS -- Background of the
Merger," "-- Fairness Opinion of Wasserstein
Perella", "-- Private Market Value View of Morgan
Stanley," "-- Private Market Value View of Bear
Stearns and Lehman Brothers" and "-- Private
Market Value Determination of Wasserstein Perella"
in the Proxy Statement is incorporated herein by
reference.
Item 10. Interest in Securities of the Issuer.
(a) The information set forth in "SPECIAL FACTORS --
Background of the Merger," "SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -- Principal
Stockholders," "-- Security Ownership of Management"
and Appendix E in the Proxy Statement is incorporated
herein by reference.
(b) Not applicable.
<PAGE>
<PAGE>
Item 11. Contracts, Arrangements or Understandings With Respect
to the Issuer's Securities.
The information set forth in "SUMMARY - Annual Meeting
of LIN Stockholders," "-- The Merger," "THE ANNUAL
MEETING -- Record Date; Shares Entitled to Vote; Vote
required," "SPECIAL FACTORS -- Background of the
Merger," "-- Terms of the PMVG" and "THE MERGER" in the
Proxy Statement is incorporated herein by reference.
Item 12. Present Intention and Recommendations of Certain
Persons With Regard to the Transaction.
(a) The information set forth in "SUMMARY - Annual Meeting
of LIN Stockholders," "THE ANNUAL MEETING -- Annual
Meeting" and " -- Record Date; Shares Entitled to
Vote; Vote Required" in the Proxy Statement is
incorporated herein by reference.
(b) The information set forth in "SUMMARY -- The Merger,"
"THE ANNUAL MEETING -- Annual Meeting" and "SPECIAL
FACTORS -- Fairness of the Transaction;
Recommendations" in the Proxy Statement is incorporated
herein by reference.
Item 13. Other Provisions of the Transaction.
(a) The information set forth in "SUMMARY -- The Merger,"
"RIGHTS OF DISSENTING STOCKHOLDERS" and Appendix C in
the Proxy Statement is incorporated herein by
reference.
(b) Not applicable.
(c) Not applicable.
<PAGE>
<PAGE>
Item 14. Financial Information.
(a) The information set forth in (i) "SUMMARY -- LIN
Broadcasting Corporation Summary Consolidated Financial
Data" in the Proxy Statement, (ii) LIN's Annual Report
on Form 10-K for the year ended December 31, 1994, as
amended by Amendment No. 1 thereto on Form 10-K/A, and
(iii) LIN's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995 is incorporated herein by
reference.
(b) Not applicable.
Item 15. Persons and Assets Employed, Retained or Utilized.
(a),(b) The information set forth in "THE ANNUAL MEETING --
Proxies; Proxy Solicitation" in the Proxy
Statement is incorporated herein by reference.
Item 16. Additional Information.
The information set forth in the Proxy Statement is
incorporated herein by reference.
Item 17. Material to be Filed as Exhibits.
(a) Not applicable.
(b)(1) Fairness opinion of Wasserstein Perella & Co.
(incorporated by reference to Appendix B to the
Proxy Statement)
(b)(2) Fairness opinion materials prepared by Wasserstein
Perella & Co.
(b)(3) Materials prepared by Morgan Stanley & Co.
Incorporated.
<PAGE>
<PAGE>
(b)(4) Materials prepared by Bear Stearns & Co., Inc. and
Lehman Brothers Inc.
(b)(5) Materials prepared by Wasserstein Perella & Co.
(b)(6) Letter delivered by Bear Stearns & Co., Inc. to
the LIN Independent Directors, dated April 28,
1995.
(b)(7) Letter delivered by Lehman Brothers Inc. to the
LIN Independent Directors, dated April 28, 1995.
(c)(1) Agreement and Plan of Merger, dated April 28,
1995, as amended and restated June 30, 1995, among
McCaw, Holdings, Merger Sub and LIN (incorporated
by reference to Appendix A to the Proxy
Statement).
(c)(2) The Private Market Value Guarantee, dated December
11, 1989, as amended, between McCaw and LIN
(incorporated by reference to Appendix D to the
Proxy Statement).
(c)(3) Memorandum of Understanding, dated June 22, 1995,
with respect to the proposed settlement of
litigation.
(d) Proxy Statement and related Notice of Annual
Meeting, Letter to Stockholders and Proxy
(incorporated by reference to the Proxy Statement
and related materials filed under a Schedule 14A
by LIN on the date hereof).
(e) Incorporated by reference to Appendix C to the
Proxy Statement.
(f) Not applicable.<PAGE>
<PAGE>
SIGNATURE
After due inquiry and to the best of its knowledge and
belief, each of the undersigned certifies that the information
set forth in this statement is true, complete and correct.
Date: July 10, 1995 AT&T CORP.
By: DENNIS J. CAREY
-----------------------------
Dennis J. Carey
Vice President
Date: July 10, 1995 McCAW CELLULAR COMMUNICATIONS,
INC.
By: STEVEN W. HOOPER
-----------------------------
Steven W. Hooper
President
Date: July 10, 1995 MMM HOLDINGS, INC.
By: STEVEN W. HOOPER
-----------------------------
Steven W. Hooper
President
Date: July 10, 1995 MMM ACQUISITION CORP.
By: H. JOHN HOKENSON
-----------------------------
H. John Hokenson
Vice President
Date: July 10, 1995 LIN BROADCASTING CORPORATION
By: LEWIS M. CHAKRIN
-----------------------------
Lewis M. Chakrin
Chairman<PAGE>
<PAGE>
EXHIBIT INDEX
Exhibit No. Page. No.
- ---------- --------
(a) Not applicable.
(b)(1) Fairness opinion of Wasserstein Perella & Co.
(incorporated by reference to
Appendix B to the Proxy Statement)
(b)(2) Fairness opinion materials prepared by
Wasserstein Perella & Co.
(b)(3) Materials prepared by Morgan Stanley & Co.
Incorporated.
(b)(4) Materials prepared by Bear Stearns & Co.,
Inc. and Lehman Brothers Inc.
(b)(5) Materials prepared by Wasserstein Perella & Co.
(b)(6) Letter delivered by Bear Stearns & Co., Inc.
to the LIN Independent Directors,
dated April 28, 1995.
(b)(7) Letter delivered by Lehman Brothers Inc.
to the LIN Independent Directors,
dated April 28, 1995.
(c)(1) Agreement and Plan of Merger, dated
April 28, 1995, as amended and
restated June 30, 1995, among
McCaw, Holdings, Merger Sub and
LIN (incorporated by reference to
Appendix A to the Proxy Statement).
(c)(2) The Private Market Value Guarantee,
dated December 11, 1989, as
amended, between McCaw and LIN
(incorporated by reference to
Appendix D to the Proxy Statement).
(c)(3) Memorandum of Understanding, dated
June 22, 1995, with respect to
the proposed settlement of litigation.
(d) Proxy Statement and related Notice of
Annual Meeting, Letter to Stockholders
and Proxy (incorporated by reference to
the Proxy Statement and related materials
filed under a Schedule 14A by LIN on the
date hereof).
(e) Incorporated by reference to Appendix C
to the Proxy Statement.
(f) Not applicable.
<PAGE>
<PAGE>
EXHIBIT (b)(2) Fairness opinion materials prepared by Wasserstein
Perella & Co.
<PAGE>
<PAGE>
Page 1
CONFIDENTIAL
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LIN BROADCASTING CORPORATION
Presentation to the Board of Directors
June 30, 1995
WASSERSTEIN PERELLA & CO.
<PAGE>
Page 2
LIN BROADCASTING
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
1. Summary of Background and Selected Considerations
2. Overview of Revised McCaw Offer
3. Public Company Trading Analysis
4. Precedent M&A Transactions Analysis
5. Discounted Cash Flow Analysis
WASSERSTEIN PERELLA & CO.
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<PAGE>
Page 3
LIN BROADCASTING
- -------------------------------------------------------------------------------
SUMMARY OF
BACKGROUND AND SELECTED CONSIDERATIONS
WASSERSTEIN PERELLA & CO.
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<PAGE>
Page 4
LIN BROADCASTING SUMMARY OF BACKGROUND AND SELECTED CONSIDERATIONS
- -------------------------------------------------------------------------------
OVERVIEW OF WASSERSTEIN PERELLA'S RECENT INVOLVEMENT REGARDING LIN
February 17, 1995 WP&Co. retained by LIN and McCaw as
Mutually Designated Appraiser under the
Private Market Value Guarantee
MARCH 7, 1995 WP&Co. rendered its determination of the
Mutually Appraised Amount in its role
of Mutually Designated Appraiser pursuant
to the Private Market Value Guarantee
between McCaw and LIN
APRIL 28, 1995 WP&Co. met with the LIN Board of Directors
in its capacity as the Mutually
Designated Appraiser and reviewed its
determination of the Mutually Appraised
Amount
JUNE 23, 1995 WP&Co. retained by the Board of Directors
of LIN to opine on the fairness,
from a financial point of view, to the
minority shareholders of LIN of the
revised McCaw merger proposal
JUNE 30, 1995 WP&Co. presentation and opinion regarding
the revised McCaw Proposal
WASSERSTEIN PERELLA & CO.
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<PAGE>
Page 5
LIN BROADCASTING SUMMARY OF BACKGROUND AND SELECTED CONSIDERATIONS
- -------------------------------------------------------------------------------
OVERVIEW OF VALUATION METHODOLOGIES
WP&Co. utilized three valuation methods as part of its analysis:
. Public company trading analysis
. Precedent M&A transactions analysis
. Discounted cash flow analysis
WASSERSTEIN PERELLA & CO.
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<PAGE>
Page 6
LIN BROADCASTING SUMMARY OF BACKGROUND AND SELECTED CONSIDERATIONS
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GENERAL VALUATION CONSIDERATIONS
. Qualitative factors examined in the context of our analysis include
(but are in no way limited to) the following:
- Wireless communication and demographic trends on the whole and in LIN's
markets
- LIN's historical financial and operating performance and future
prospects in the context of its business strategy, market position and
current and prospective competition
- LIN's technological, marketing and product strategy (including new
services and its entry into the wireless data business)
- LIN management projections and McCaw management projections
- LIN's size and asset mix
- LIN's shared control (with BellSouth) of the LA and Houston markets
- Evaluation of the breadth and depth of potential acquisition universe
for LIN
- Potential public market trading value of LIN as a standalone entity
- Wall Street analyst commentary, research and valuation estimates
WASSERSTEIN PERELLA & CO.
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<PAGE>
Page 7
LIN BROADCASTING SUMMARY OF BACKGROUND AND SELECTED CONSIDERATIONS
- -------------------------------------------------------------------------------
STRUCTURAL VALUATION CONSIDERATIONS
. Among the structural factors we took into consideration in our
evaluation of LIN were:
- McCaw's ownership of a majority voting and economic interest in LIN
- McCaw's ability to act as a buyer of the publicly held shares of LIN
yet not necessarily as a willing seller of its LIN stake
- Regulatory restrictions imposed on AT&T with respect to its ability to
receive equity consideration from potential buyers of all or part of
LIN
- The feasibility of various potential value maximizing transaction
structures, including regulatory, legal and tax considerations such as
FCC foreign ownership restrictions, "A" side/"B" side antitrust
overlaps and corporate level treatment of potential multiple party
transactions
WASSERSTEIN PERELLA & CO.
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<PAGE>
Page 8
LIN BROADCASTING
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OVERVIEW OF REVISED MCCAW OFFER
WASSERSTEIN PERELLA & CO.
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<PAGE>
Page 9
LIN BROADCASTING OVERVIEW OF REVISED MCCAW OFFER
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SUMMARY OF KEY TERMS
Anticipated Closing: September 15, 1995
CONSIDERATION:
Form Cash
Amount Per Share $129.50
Additional Amount Per Share $0.00 to $0.25(1)
Accretion Amount Per Share (2)
- ------------------------------
(1) The Additional Amount Per Share is to be $0.25 less the excess per
share, if any, over an aggregate $4 million in fees potentially awarded
to plaintiff's attorneys in connection with the settlement of certain
stockholder lawsuits.
(2) The amount, if any, equal to 5.5% per annum on the sum of the Amount Per
Share plus the Additional Amount Per Share accruing from but not including
September 15, 1995 through, and including the Closing Date.
WASSERSTEIN PERELLA & CO.
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<PAGE>
Page 10
LIN BROADCASTING OVERVIEW OF REVISED MCCAW OFFER
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RATIO ANALYSIS OF OFFER PRICE FOR LIN
(IN MILLIONS, EXCEPT PER SHARE AND PER POP VALUES)
OFFER PRICE $129.50
No. of Shares Outstanding (1) 53.250
EQUITY VALUE $6,896
Plus: Net Debt (2) $1,586
Less: Option Proceeds (1) ($108)
ENTERPRISE VALUE $8,373
Less:
Non-Cellular Assets (3) ($131)
CELLULAR ENTERPRISE VALUE $8,242
CELLULAR ENTERPRISE VALUE AS A
MULTIPLE OF:
LTM Cellular EBITDA $396 20.8x
LIN MANAGEMENT BASE CASE
1995E Cellular EBITDA $535 15.4x
1996E Cellular EBITDA $674 12.2
1997E Cellular EBITDA $795 10.4
MCCAW PROJECTIONS W/O AT&T
SYNERGIES
1995E Cellular EBITDA $518 15.9x
1996E Cellular EBITDA $638 12.9
1997E Cellular EBITDA $722 11.4
VALUE PER POP (12/31/94) 25.72 $320
(1) Based on 51.715 million primary shares
outstanding as of 4/30/95 per the 3/31/95 10-Q,
1.535 million estimated in-the-money outstanding
options at an estimated average exercise price of
$70.64 as of 1/31/95 per SEC filings. Excludes
85,000 options granted to executive officers in
1994 at an exercise price of $133.50 and estimated
63,736 options exercised since 12/31/94.
(2) As of 3/31/95 per the 10-Q.
(3) $88.379 million based on 9.5x 1995E WOOD-TV and
WOTV-TV EBITDA of $9.303 million, and $42.63 million
for 1.656 million shares of American Mobile Satellite,
based on $25.75 a share as of 6/28/95.
WASSERSTEIN PERELLA & CO.
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<PAGE>
Page 11
LIN BROADCASTING OVERVIEW OF REVISED MCCAW OFFER
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IMPLIED MULTIPLES OF REFERENCE RANGE
----------------------------------------------------------------
Summary Reference Range Per LTM 1995E 1996E
LIN Share PER POP EBITDA EBITDA(1) EBITDA(1)
--------------------------- ------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Public Companies Trading Analysis $95 - $110 $249 - $280 16.2x - 18.2x 12.0x - 13.5x 9.5x - 10.7x
Comparable Transactions Analysis $120 - $145 $301 - $353 19.5x - 22.9x 14.5x - 17.0x 11.5x - 13.5x
Discounted Cash Flow Analysis $110 - $150 $280 - $363 18.2x - 23.6x 13.5x - 17.5x 10.7x - 14.6x
Revised McCaw Offer $129.50(2) $320 20.8x 15.4x 12.2x
</TABLE>
- ------------------------------------
(1) Implied multiples based on LIN management base case projections.
(2) Subject to adjustment.
WASSERSTEIN PERELLA & CO.
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<PAGE>
Page 12
LIN BROADCASTING PUBLIC COMPANY TRADING ANALYSIS
- -------------------------------------------------------------------------------
PUBLIC COMPANY
TRADING ANALYSIS
- --------------------------------------------------------------------
WASSERSTEIN PERELLA & CO.
<PAGE>
Page 13
LIN BROADCASTING PUBLIC COMPANY TRADING ANALYSIS
- -------------------------------------------------------------------------------
PUBLIC COMPANY TRADING ANALYSIS
. Determining relevance in the
context of public trading multiples
requires qualitative judgments
. LIN lacks a precise analogue among
publicly traded cellular companies given
its predominant major-market presence and
its lack of international assets
. LIN's trading pattern has been affected
by existence of the Private Market Value
Guarantee
. While the "per-POP" approach to
analyzing the cellular industry has
become less influential than cash-flow
multiples as the business matures, many
companies continue to disclose valuations
on a per POP basis
. The public trading environment has a
degree of volatility over time because of
such macroeconomic factors as interest
rate and equity market fluctuations as
well as such microeconomic factors as
industry results and growth expectations
. The wireless industry in particular has
undergone dramatic changes in recent
years and faces continued dynamic
evolution
WASSERSTEIN PERELLA & CO.
- ------------------------------------------------------------------------------
<PAGE>
Page 14
LIN BROADCASTING PUBLIC COMPANY TRADING ANALYSIS
- -------------------------------------------------------------------------------
SUMMARY ANALYSIS(1)
<TABLE>
<CAPTION>
Adjusted Market Value as a Multiple of Implied LIN Share Price based on the Multiple of:
----------------------------------------------- ------------------------------------------------
Total LTM LTM 1995E Total LTM LTM 1995E
POPS Revenues(2) EBITDA(2) EBITDA POPS Revenues(2) EBITDA(2) EBITDA
------------ ----------- ---------- ------ ------------ ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED MAJOR MARKET
COMPANIES(3)
Low $185 6.4x 16.4x 12.7x $64.09 $89.77 $96.63 $102.20
Mean $222 6.9 22.9 15.1 $81.69 $100.01 $144.95 $126.29
High $243 7.5 35.0 17.6 $92.07 $110.42 $234.91 $151.39
SELECTED U.S. BASED CELLULAR
COMPANIES(4)
Low $109 6.4x 16.4x 12.7x $27.57 $89.77 $96.63 $102.20
Mean $178 7.6 28.4 20.5 $60.64 $111.48 $185.84 $180.50
High $243 9.5 44.8 32.7 $92.07 $147.25 $307.76 $302.97
</TABLE>
- ----------------------------
(1) Based on the closing stock price of 6/28/95.
(2) Latest twelve months as of 3/31/95.
(3) Includes AirTouch, Cellular Communications and Vanguard Cellular.
(4) Includes AirTouch, Cellular Communications, Vanguard, Centennial,
CommNet Cellular, PriCellular, U.S. Cellular and Palmer Wireless.
WASSERSTEIN PERELLA & CO.
- ------------------------------------------------------------------------------
<PAGE>
Page 15
LIN BROADCASTING PUBLIC COMPANY TRADING ANALYSIS
- -------------------------------------------------------------------------------
TRADING ANALYSIS OF SELECTED CELLULAR COMPANIES ($MM, EXCEPT PER POP VALUES)
<TABLE>
<CAPTION>
Estimated Estimated
Adjusted Adjusted Estimated Estimated Adjusted Market Value
Market Market Implied of Cellular Operations/
Value of Value of Enterprise ---------------------------------- LTM 1995E
Adjusted Non-U.S.and Domestic Domestic Value per LTM LTM 1995E Cellular Cellular
Market Market Non-Cellular Cellular Pops Domestic Cellular Cellular Cellular EBITDA EBITDA
Value(1) Value(2) Operations Operations (MM) Pop Revenues EBITDA EBITDA per Pop per Pop
-------- -------- ---------- ---------- ------- -------- ---------- --------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LIN Broadcasting $6,628 $8,214 $131 $8,083 25.7 $314 8.4x 20.4x 15.1 $15.40 $20.79
(3)
AirTouch Comm.(4) 13,620 13,369 5,000 8,369 35.4 236 6.9 16.4 12.7 14.40 18.56
Cellular Comm.(5) 1,825 1,955 0 1,955 8.0 243 6.4 17.1 15.1 14.18 16.09
Vanguard Cellular 980 1,405 20 1,385 7.5 185 7.5 35.0 17.6 5.29 10.53
(6)
Low $185 6.4 16.4 12.7 5.29 10.53
Mean $222 6.9 22.9 15.1 11.29 15.06
High $243 7.5 35.0 17.6 14.40 18.56
</TABLE>
Note: Figures are for publicly available LTM data available for each company.
Estimates from analyst reports.
- --------------------------------------------------------
(1) Market values based on 6/28/1995 closing stock price: AirTouch - $27.50;
CCI 'A' - $45.50; LIN - $126.50; Vanguard - $23.38; U.S. Cellular- $29.63;
CommNet - $28.00; Centennial - $15.88; Pricellular - $8.94; Palmer
Wireless - $16.38.
(2) Defined as market value plus debt, preferred stock and minority interests
less cash and equivalents.
(3) Non-cellular assets consist of 1.656 million shares of American Mobile
Satellite (equity value of $42.6 million as of 6/28/1995), and television
stations at 9.5x 1995E EBITDA of $9.30 million. Equity value includes
option spread on 1.535 million stock options outstanding at an average
exercise price of $70.64 as of 1/31/95. Operating data based on
proportionate ownership.
(4) Non-Cellular and Non-U.S. assets consist of international cellular assets
and domestic paging operations valued at $5,000 million
(5) Operating data based on CCI's proportional ownership interest in cellular
operations, not consolidated financials.
(6) Vanguard's non-cellular operations are based on 2.5 million share holdings
of Geotek Communications, and a $8.13 share price of Geotek as of
6/28/1995.
WASSERSTEIN PERELLA & CO.
- ------------------------------------------------------------------------------
<PAGE>
Page 16
LIN BROADCASTING PUBLIC COMPANY TRADING ANALYSIS
- -------------------------------------------------------------------------------
TRADING ANALYSIS OF SELECTED CELLULAR COMPANIES ($MM, EXCEPT PER POP VALUES)
<TABLE>
<CAPTION>
Estimated Estimated
Adjusted Adjusted Estimated Estimated Adjusted Market Value
Market Market Implied of Cellular Operations/
Value of Value of Enterprise ---------------------------------- LTM 1995E
Adjusted Non-U.S.and Domestic Domestic Value per LTM LTM 1995E Cellular Cellular
Market Market Non-Cellular Cellular Pops Domestic Cellular Cellular Cellular EBITDA EBITDA
Value(1) Value(2) Operations Operations (MM) Pop Revenues EBITDA EBITDA per Pop per Pop
-------- ------- ---------- ---------- ---- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LIN Broadcasting $6,628 $8,214 $131 $8,083 25.7 $314 8.4x 20.4x 15.1x $15.40 $20.79
(3)
AirTouch Comm. 13,620 13,369 5,000 8,369 35.4 236 6.9 16.4 12.7 14.40 18.56
(4)
Cellular Comm. 1,825 1,955 0 1,955 8.0 243 6.4 17.1 15.1 14.18 16.09
(5)
Centennial 365 722 3 719 6.5 111 9.5 22.7 16.5 4.90 6.75
Cellular (6)
CommNet Cellular 317 558 0 558 3.2 177 7.6 44.8 29.4 3.94 6.01
Pricellular (7) 145 229 0 229 1.8 125 8.3 43.0 32.7 2.91 3.84
U.S. Cellular (8) 2,413 2,759 0 2,759 25.2 109 7.5 28.2 19.4 3.88 5.65
Vanguard Cellular 980 1,405 20 1,385 7.5 185 7.5 35.0 17.6 5.29 10.53
(9)
Palmer Wireless 383 568 0 568 2.4 236 6.7 19.9 NA 11.87 NA
Low $109 6.4 16.4 12.7 2.91 3.84
Mean $178 7.6 28.4 20.5 7.67 9.63
High $243 9.5 44.8 32.7 14.40 18.56
</TABLE>
Note: Figures are for publicly available LTM data available for each company.
Estimates from analyst reports.
- ----------------------------------------------------------
(1) Market values based on 6/28/1995 closing stock price: AirTouch - $27.50;
CCI 'A' - $45.50; LIN - $126.50; Vanguard - $23.38
U.S. Cellular- $29.13; CommNet - $26.50; Centennial - $16.50;
Pricellular - $9.00; Palmer Wireless - $16.38.
(2) Defined as market value plus debt, preferred stock and minority interests
less cash and equivalents.
(3) Non-cellular assets consist of 1.656 million shares of American Mobile
Satellite (equity value of $42.6 million as of
6/28/1995), and television stations at 9.5x 1995E EBITDA of $9.30 million.
Equity value includes option spread on 1.535 million stock options
outstanding at an average exercise price of $70.64 as of
1/31/95. Operating data based on proportionate ownership.
(4) Non-Cellular assets and Non-U.S. assets consist of international
cellular assets and domestic paging operations valued at
$5,000 million
(5) Operating data based on CCI's proportional ownership interest in cellular
operations, not consolidated financials.
(6) Operating data based on pro forma adjustments for recent acquisitions.
(6) Non-cellular assets consist of a domestic paging business valued at $500
per subscriber, and a domestic SMR radio business also
valued at $500 per subscriber.
(7) Pricellular financials are pro-forma, giving effect to recent acquisitions
from CIS and other pending acquisitions as if the transactions had
occurred on January 1, 1994.
(8) Operating data based on consolidated information after adding back
investment income.
(9) Vanguard's non-cellular operations are based on 2.5 million share
holdings of Geotek Communications, and a $8.13 share price
of Geotek as of 6/28/1995.
WASSERSTEIN PERELLA & CO.
- ------------------------------------------------------------------------------
<PAGE>
Page 17
LIN BROADCASTING PUBLIC COMPANY TRADING ANALYSIS
- -------------------------------------------------------------------------------
INDEXED PRICE HISTORY OF SELECTED COMPANIES (MONTHLY FROM JANUARY 1, 1990 -
MAY 31, 1995)
<TABLE>
<CAPTION>
DATE II IV 90 II
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LIN 100.0 106.0 77.3 60.2 69.1 70.1 62.6 51.2 42.9 41.0 54.7 58.3 61.8 63.0 59.7 64.7 64.2 55.5
BROADCASTING
S&P 100.0 100.9 104.1 101.8 111.4 111.0 111.1 100.9 95.2 94.2 99.8 102.3 107.4 114.9 117.3 117.5 122.8 116.7
INDUSTRIALS
CELLULAR 100.0 111.3 107.0 90.3 106.2 102.5 87.7 68.5 57.8 56.0 76.2 83.5 75.4 88.0 97.1 104.0 98.0 86.6
COMPOSITE
DATE IV 94 II IV 92
LIN 64.2 69.2 69.9 67.8 59.2 67.8 70.6 74.4 70.6 69.2 63.5 60.7 65.9 63.5 69.9 64.0 74.2 72.5
BROADCASTING
S&P 122.1 124.3 121.1 122.3 116.8 130.1 128.2 129.7 126.8 130.0 130.0 126.8 131.5 128.7 129.5 129.6 133.6 134.0
INDUSTRIALS
CELLULAR 90.8 95.8 100.6 114.4 105.0 106.7 113.0 121.2 116.1 105.3 99.3 90.3 96.4 91.1 93.1 88.5 108.8 109.6
COMPOSITE
DATE II IV 93 II
LIN 74.2 78.2 79.4 84.4 92.4 94.1 95.0 111.8 109.7 107.6 104.3 104.7 110.0 105.9 101.9 100.2 111.2 113.5
BROADCASTING
S&P 134.3 134.5 136.7 133.3 137.5 135.8 133.9 138.5 136.4 141.4 140.9 142.6 147.4 144.4 137.6 138.6 140.5 136.4
INDUSTRIALS
CELLULAR 100.1 105.8 111.8 111.1 116.8 117.0 126.3 155.7 151.1 165.2 146.8 157.4 156.1 151.7 139.1 146.8 149.7 145.3
COMPOSITE
DATE IV 94
LIN 118.5 127.0 131.9 130.8 136.0 126.5 131.8 122.6 115.4 118.2 117.4
BROADCASTING
S&P 141.0 147.4 144.8 148.2 142.5 144.6 146.4 152.1 157.6 161.8 167.1
INDUSTRIALS
CELLULAR 158.5 176.2 171.8 186.0 176.4 182.3 169.0 172.1 164.1 161.4 164.5
COMPOSITE
</TABLE>
WASSERSTEIN PERELLA & CO.
- ------------------------------------------------------------------------------
<PAGE>
Page 18
LIN BROADCASTING PUBLIC COMPANY TRADING ANALYSIS
- -------------------------------------------------------------------------------
INDEXED PRICE HISTORY OF SELECTED COMPANIES (WEEKLY FROM JANUARY 1, 1994 -
JUNE 23, 1995)
<TABLE>
<CAPTION>
DATE 1/7/94 3/31
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LIN 100.0 98.0 101.0 105.0 105.0 103.5 104.8 101.6 103.0 101.7 100.9 102.3 98.2 96.1 96.1 95.9 96.6 102.3
BROADCASTING
S&P 100.0 101.1 101.2 101.5 100.1 100.4 100.3 99.7 99.6 100.1 101.1 98.6 95.3 95.5 94.7 94.9 96.0 95.6
INDUSTRIALS
CELLULAR 100.0 100.9 101.1 100.4 98.5 97.1 97.8 97.4 95.7 97.2 93.7 93.8 89.9 91.7 94.8 93.4 94.9 95.0
COMPOSITE
DATE 6/24/94
LIN 102.1 105.3 107.8 108.7 109.1 109.1 105.3 110.0 109.6 114.4 114.4 114.2 115.4 116.0 117.8 120.8 122.5 124.4
BROADCASTING
S&P 95.0 97.0 97.5 97.9 97.3 97.4 94.2 94.8 95.7 96.7 96.6 97.6 97.3 98.4 99.2 101.7 101.1 100.9
INDUSTRIALS
CELLULAR 93.9 96.9 97.1 99.6 99.4 99.6 97.8 95.0 97.0 97.4 99.3 102.4 101.2 104.7 106.0 110.7 112.5 111.7
COMPOSITE
DATE 9/16/94 12/9/94
LIN 126.9 127.4 127.1 123.5 124.2 123.5 124.7 126.3 127.9 128.0 127.1 130.1 128.2 129.7 132.6 121.9 120.8 123.1
BROADCASTING
S&P 101.8 99.4 100.2 98.6 101.8 101.1 102.9 100.4 100.7 100.9 98.2 98.5 96.9 99.6 100.1 100.1 100.1 101.2
INDUSTRIALS
CELLULAR 111.6 111.1 111.1 111.7 115.6 117.5 117.9 115.9 116.8 118.6 112.2 113.2 110.0 111.6 113.9 117.8 115.5 113.1
COMPOSITE
DATE 3/3/95
LIN 125.7 126.0 127.1 126.7 118.0 118.3 117.8 111.2 110.7 111.2 111.2 111.6 113.2 112.7 113.9 112.3 112.8 112.7
BROADCASTING
S&P 101.0 101.4 103.1 104.0 104.2 105.4 105.1 106.3 107.7 109.1 109.1 109.8 110.6 110.6 112.0 113.0 114.2 113.0
INDUSTRIALS
CELLULAR 114.1 111.2 112.1 113.0 112.1 112.1 110.3 109.8 111.6 110.5 106.0 105.5 106.4 104.0 104.3 104.1 105.7 106.5
COMPOSITE
DATE 5/26
LIN 113.2 113.0 112.7 113.7 115.5
BROADCASTING
S&P 113.8 115.2 114.9 117.6 119.6
INDUSTRIALS
CELLULAR 106.1 105.0 106.9 108.8 111.8
COMPOSITE
</TABLE>
WASSERSTEIN PERELLA & CO.
- ------------------------------------------------------------------------------
<PAGE>
Page 19
LIN BROADCASTING
- ------------------------------------------------------------------------------
PRECEDENT M&A TRANSACTIONS
WASSERSTEIN PERELLA & CO.
- ------------------------------------------------------------------------------
<PAGE>
Page 20
LIN BROADCASTING Precedent M&A Transactions
- -------------------------------------------------------------------------------
PRECEDENT M&A TRANSACTIONS
. Determining relevance in the context of precedent M&A transactions
requires qualitative judgments
. Although there have been a number of recent cellular transactions,
with the exception of the AirTouch/US WEST and Bell Atlantic/NYNEX
joint venture transactions, only the AT&T acquisition of McCaw
has been of comparable scale
. Values paid in going private transactions have historically been
affected by the existence of a controlling shareholder
. While the "per-POP" approach to analyzing the cellular industry
has become less influential than cash-flow multiples as the
business matures, many companies continue to disclose valuations
on a per POP basis
. The M&A transaction environment has a degree of volatility over
time because of such macroeconomic factors as interest rate
and equity market fluctuations as well as such microeconomic
factors as industry results and growth expectations
. The wireless industry in particular has undergone dramatic changes
in recent years and faces continued dynamic evolution
WASSERSTEIN PERELLA & CO.
- ------------------------------------------------------------------------------
<PAGE>
Page 21
LIN BROADCASTING Precedent M&A Transactions
- -------------------------------------------------------------------------------
SUMMARY ANALYSIS ($MM - EXCEPT PER SHARE PRICE)
<TABLE>
<CAPTION>
Adjusted Market Values as Multiple of: Implied LIN Price Per Share
---------------------------------------------- ---------------------------------------------
PRICE PRICE/LTM 1ST YEAR 2ND YEAR PRICE PRICE/LTM PRICE/1 YR. PRICE/2 YR.
BUYER SELLER DATE PER POP EBITDA EBITDA EBITDA PER POP EBITDA EBITDA EBITDA
- -------- ---------- ------- -------- --------- -------- -------- ------- --------- ----------- -----------
AT&T/MCCAW
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AT&T McCaw 8/93 $283 25.3x 20.9x 15.1x $111.32 $162.79 $198.21 $174.43
</TABLE>
<TABLE>
<CAPTION>
IMPLIED VALUE OF LIN AS PART OF AT&T'S ACQUISITION OF MCCAW
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Based 8/93 $125.03(1) $105.77(1)(2)
on EBITDA
Based on
Relative
POPs $103.26(1)
Based on
Relative
Subs $120.87(1)
</TABLE>
<TABLE>
<CAPTION>
SELECTED GOING PRIVATE TRANSACTIONS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GTE Contel 1/95 $191 25.4x 14.1x 9.9x $67.08 $163.54 $125.59 $105.65
Cellular
US WEST US WEST 11/90 $148.2 49.7 23.8 14.1 $46.31 $344.19 $229.22 $167.20
New Vector
</TABLE>
<TABLE>
<CAPTION>
SELECTED RECENT TRANSACTIONS(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Low $79 $12.87
Mean $202 $75.52
High $321 $129.77
</TABLE>
- --------------------------------------
(1) Excludes TV assets subsequently spun-off at an assumed estimated per
share price of $12.00.
(2) Based on estimated EBITDA for the year starting approximately 5 months
post announcement.
(3) Excludes the AT&T/McCaw transaction and selected going private
transactions.
WASSERSTEIN PERELLA & CO.
- ------------------------------------------------------------------------------
<PAGE>
Page 22
LIN BROADCASTING PRECEDENT M&A TRANSACTIONS
- -------------------------------------------------------------------------------
ANALYSIS OF AT&T'S ACQUISITION OF MCCAW
. WP&Co. analyzed AT&T's acquisition of McCaw as follows:
- Transaction announcement date of August 13, 1993
- The shares outstanding were obtained from McCaw 10-Q dated 6/30/93
. The options outstanding and estimated strike price were obtained
from McCaw 10-K dated 12/31/92
- McCaw net debt was obtained from McCaw 10-Q dated 6/30/93, and
excluded the 48% of LIN debt that it did not own
- The value of International and non-cellular assets was estimated
as follows:
. 472,500 estimated pagers at $500 a pager
. Approximately 52% of LIN media estimated as follows:
- 9.5x LTM as of 6/30/93 EBITDA of LIN's media properties of $69.5
million from McCaw and LIN's public documents
. $44.3 million for McCaw and LIN's pro rata ownership interests in American
Mobile Satellite based on trading value at 12/13/93 (first day of public
trading)
. 1.7 million Hong Kong POPs at $10 per POP and 0.92 Mexican cellular POPs
at $10 per POP (as of announcement date)
- Proportionate cellular cash flow values for McCaw for LTM as of 6/30/93,
year-ending 1993 and LTM as of 6/30/94 were obtained from McCaw public
documents
- Proportionate cellular cash flow estimate for McCaw for 1994 was a mean
from selected research reports (Salomon Brothers - 9/94; CS First Boston
- 7/94; Wheat First - 8/94)
- Proportionate cellular cash flow estimate for McCaw for 1995 was a mean
from selected research reports (Salomon Brothers - 9/94; Wheat First
- 8/94)
WASSERSTEIN PERELLA & CO.
- ------------------------------------------------------------------------------
<PAGE>
Page 23
LIN BROADCASTING PRECEDENT M&A TRANSACTIONS
- ------------------------------------------------------------------------------
AT&T'S ACQUISITION OF MCCAW - SUMMARY TRANSACTION ANALYSIS (IN THOUSANDS,
EXCEPT FOR PER SHARE AND PER POP VALUES)
Transaction Announcement
(8/13/93)
AT&T Share Price (8/13/93) $62.375
McCaw Share Price (8/13/93) $51.250
Premium 21.7%
No. of McCaw Shares Outstanding 206,185
(6/30/93)
Equity Value $12,860,802
Options Outstanding -(12/31/92) 11,189
Option Spread - Average $474,123
Exercise Price $20.00
Total Equity Value $13,334,925
Net Debt (6/30/93) $4,809,922
Less: 48% of LIN Net ($764,314)
Debt(1)
Total Net Debt $4,045,608
Total Enterprise Value $17,380,533
Less: Value of Non-Cellular ($649,814)
Assets (2)
Cellular Enterprise Value $16,730,720
Total Net POPs (3) 59,161
Value per POP $283
Cellular Enterprise Value as
a Multiple of (4):
LTM OCF (6/30/93) $660,130 25.3x
1993 OCF $730,901 22.9
LTM 6/30/94 OCF $798,605 20.9
1994E OCF $925,800 18.1
1995E OCF $1,283,350 13.0
(1) Excludes $1,238 million of preferred stock exchangeable for LIN's 49.99%
interest in Philadelphia, which is assumed to be redeemed.
(2) Includes McCaw's estimated 472,500 pagers at $500 a pager, 52% of 9.5x
LTM LIN's media properties cash flow of $69.5 million as of 6/30/93,
McCaw's direct and indirect interest in American Mobile Satellite (AMSAT)
of 8.85% and AMSAT's equity value of $500.2 million as of 12/13/93,
license for 1.7 million Hong Kong POPs at $10 a POP, and cellular license
in Mexico for $10 a POP and 0.92 million POPs
(3) Includes all proportionate POPs, and excludes LIN's Philadelphia POPs.
Source: DLJ - Spring 1993.
(4) Proportionate cellular OCF values from McCaw 10-K and 10-Q. Excludes
Philadelphia (in millions): LTM as of 6/30/93 - $13.9; 1993 - $18.0;
LTM as of 6/30/94 - $29.8. Philadelphia estimates from LIN appraisal
information, except for OCF of LTM as of 6/30/94, which is based on
pro rata CAGR from 1992 to 1993. 1994 and 1995 OCF estimates from
research analyst reports.
WASSERSTEIN PERELLA & CO.
- ------------------------------------------------------------------------------
<PAGE>
Page 24
LIN BROADCASTING PRECEDENT M&A TRANSACTIONS
- ----------------------------------------------------------------------------
Implied Value of LIN as Part of AT&T's Acquisition of McCaw (Assuming No
Difference in Relative Value between McCaw and LIN) (in thousands, except
per share and per POP values)
<TABLE>
<CAPTION>
Transaction Announcement (8/13/93)
Based on Cellular EBITDA Multiples:
LIN Implied
Multiples based on Cellular LIN Cellular
AT&T-McCaw EBITDA (1) Enterprise Value
<S> <C> <C> <C> <C>
LTM (6/30/93) 25.3x $317,961 $8,058,600
1993 22.9 $338,749 $7,754,143
1994 18.1 $389,760 $7,043,600
Implied LIN Cellular Enterprise Value $7,043,600 - $8,058,600
Plus: Value of LIN Non-Cellular Assets (2) $694,062
Total LIN Implied Enterprise Value $7,737,663 - $8,752,662
Less: LIN Net Debt (6/30/93) (3) (4) ($1,529,779)
Implied LIN Equity Value $6,207,884 - $7,222,883
No. of LIN Shares Outstanding (6/30/93) 51,447
No. of LIN Options Outstanding (12/31/92) 1,263
Fully Diluted LIN Shares 52,710
Implied LIN Value per Share (5) $117.77 - $137.03
LIN Share Price (8/13/93) $102.25
Implied Value as a Premium to Market 15.2% - 34.0%
Implied Value per LIN POP (24.4 million $288.22 - $329.76
POPs)
LIN Trading Value per POP $254.74
Implied per POP Value Premium to Market 13.1% - 29.4%
</TABLE>
(1) Cellular EBITDA values do not include Philadelphia (in millions): LTM as
of 6/30/93 - $13.9; 1993 - $18.0; LTM as of 6/30/94 - $29.8.
1995 estimates from appraisal information.
(2) Includes media properties at 9.5x LTM cash flow of $69.5 million as of
6/30/93, and equity value in American Mobile Satellite of $33.5 million
as of 12/13/93.
(3) Excludes $1,238 million of preferred stock exchangeable for LIN's 49.99%
interest in Philadelphia, which is assumed to be redeemed.
(4) Includes option proceeds from options outstanding at an average exercise
price of $49.51.
(5) Includes TV assets subsequently spun-off. Estimated range after backing
out approximately $12 per share of TV equates to $105.77 - $125.03 per
share.
WASSERSTEIN PERELLA & CO.
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LIN BROADCASTING PRECEDENT M&A TRANSACTIONS
- -------------------------------------------------------------------------
IMPLIED VALUE OF LIN AS PART OF AT&T'S ACQUISITION OF MCCAW (ASSUMING
NO DIFFERENCE IN RELATIVE VALUE BETWEEN MCCAW AND LIN)(CONT'D)
(IN THOUSANDS, EXCEPT PER SHARE AND PER POP VALUES)
<TABLE>
<CAPTION>
Transaction Announcement (8/13/93)
Based on Contributed POPs:
<S> <C>
McCaw Proportionate POPs (1) 59,161
LIN Proportionate POPs in McCaw (1) 12,708
McCaw Cellular Enterprise Value $16,730,720
LIN Proportionate Enterprise Value in McCaw $3,593,735
LIN Implied Cellular Enterprise Value $6,911,030
Implied Value per LIN POP $282.80
Plus: Value of LIN Non-Cellular Assets (2) $694,062
LIN Total Implied Enterprise Value $7,605,092
Less: LIN Net Debt (6/30/93) (3) (4) ($1,529,779)
Implied LIN Equity Value $6,075,313
LIN Fully Diluted Shares 52,710
Implied LIN Value per Share (5) $115.26
Premium to Market (8/13/93) 12.7%
</TABLE>
<TABLE>
<CAPTION>
Based on Contributed Subscribers:
<S> <C>
McCaw Proportionate Subscribers (6) 1,558,000
LIN Proportionate Subs. in McCaw (6) 379,600
McCaw Cellular Enterprise Value $16,730,720
LIN Proportionate Enterprise Value in McCaw $4,076,368
LIN Implied Cellular Enterprise Value $7,839,169
Implied Value per LIN POP $320.78
Plus: Value of LIN Non-Cellular Assets (2) $694,062
LIN Total Implied Enterprise Value $8,533,231
Less: LIN Net Debt (6/30/93) (3) (4) ($1,529,779)
Implied LIN Equity Value $7,003,452
LIN Fully Diluted Shares 52,710
Implied LIN Value per Share (7) $132.87
Premium to Market (8/13/93) 29.9%
</TABLE>
(1) Includes all proportionate POPs including McCaw's 52% POPs of LIN, and
excludes LIN's Philadelphia POPs.
Source: DLJ - Spring 1993 for transaction announcement.
(2) Includes media properties at 9.5x LTM cash flow of $69.5 million
as of 6/30/93, and equity value in American Mobile Satellite of
$33.5 million as of 12/13/93.
(3) Excludes $1,238 million of preferred stock exchangeable for LIN's 49.99%
interest in Philadelphia, which is assumed to be redeemed.
(4) Includes media properties at 9.5x LTM cash flow of $71.5 million
as of 6/30/94, and equity value in American Mobile Satellite of
$27.1 million as of 9/19/94.
(4) Includes option proceeds from options outstanding at an average exercise
price of $49.51.
(5) Includes TV assets subsequently spun-off. Estimated range after backing
out approximately $12 per share of TV equates to $103.26 per share.
(6) Subscriber figures from analyst reports.
(7) Includes TV assets subsequently spun-off. Estimated range after backing
out approximately $12 per share of TV equates to $120.87 per share.
WASSERSTEIN PERELLA & CO.
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LIN BROADCASTING PRECEDENT M&A TRANSACTIONS
- ----------------------------------------------------------------------------
Selected Recent Cellular Transactions
<TABLE>
<CAPTION>
Implied LIN Equity
Value per Share
Price/1st Price/2nd Price/ Price/
Purchase Price/ Year Year Price/ 1st 2nd
Date Price Price/ LTM EBITDA EBITDA Price/ LTM Year Year
Announced Market(s) Buyer/Bidder Seller/Target ($MM) POP EBITDA Since LTM Since LTM POP EBITDA EBITDA EBITDA
- ---------- ---------- ------------- ------------- ----- ---- -------- -------- -------- ------ --------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sep. 1994 Includes 19.5MM GTE acquired Contel Cellular $457 $191.2 25.4x 14.1x(2)9.9x(2) $67.08 $163.54 $125.49 $105.65
adjusted remaining (1) (2)
MSA POPs and 10% stake)
4.4MM adjusted
RSA POPs.
Feb. 1994 Buffalo, NY SBC Associated $680 $188.9 28.8x 19.9x 15.9x $65.95 $188.81 $187.52 $185.01
(75.0%) Communications Communications (3) (4) (4) (4)
Rochester, NY
(85.7%)
Albany, NY
Pittsburgh, PA
(35.7%)
San Francisco
(3.0%)
Nov. 1990 35 cities in the US West US West $476 $148.2 49.7x 23.8x 14.1x $46.31 $344.19 $229.22 $161.20
Midwest and (acquired New Vector (5) (6) (6) (6)
the Western U.S. remaining
including 19% stake)
Low $148.2 25.4x 14.1x 9.9x $46.31 $163.54 $125.49 $105.65
Mean $176.1 34.7x 19.3x 13.3x $59.78 $232.67 $181.10 $150.62
High $191.2 49.7x 23.8x 15.9x $67.08 $344.19 $229.22 $185.01
</TABLE>
(*) Notes on the following page.
WASSERSTEIN PERELLA & CO.
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LIN BROADCASTING PRECEDENT M&A TRANSACTIONS
- -------------------------------------------------------------------------
SELECTED RECENT CELLULAR TRANSACTIONS (CONT'D)
NOTES
(1) Purchase offer consisted of a cash offer of $25.50 per share for all
9.97MM outstanding Class B shares (10% of outstanding stock). The
implied enterprise purchase price (for 100% of the stock) includes
2.02 billion of net debt, as per the 9/30/94 Contel 10-Q. The purchase
price shown is 10% of this adjusted total price.
(2) LTM EBITDA is as of 9/30/94. 1994 EBITDA is the 12/31/94 actual fiscal
EBITDA. 1995E and 1996E EBITDA is based on management projections, as
listed in the 1/31/95 Contel Merger Proxy. All EBITDA numbers are
multiplied by the proportionate ratio of total to consolidated POPs of
1.43 (source: 1/30/95 Merger Proxy) to derive total cellular EBITDA.
EBITDA was also adjusted for minority interest to reflect average 94.1%
ownership in consolidated EBITDA. The EBITDA numbers presented represent
10% of total EBITDA. LTM EBITDA calculations are on a proportionate
basis.
(3) Purchase price includes the assumption of $128MM in liabilities. In
connection with the transaction, Associated shareholders received
pro-rated shares of a new company to be formed with the non-cellular
assets that were not sold to SBC (these include holdings in TCI, Liberty
Media, General Communications, Republic Pictures, as well as Mexican
cellular (2.1MM POPs) operations.)
(4) LTM 12/31/93 historical EBITDA of merged cellular assets ($19.7MM)
taken from the 7/29/94 Associated Merger Proxy. Proportional EBITDA
based on ratio of total POPs to consolidated POPs of 1.33, and 90.2%
average proportionate interest in consolidated cellular EBITDA. 1994
EBITDA assumes a 45% growth rate over 1993. 1995 EBITDA assumes a 25%
growth rate over 1994 EBITDA.
(5) Reflects U.S. West's acquisition of the remaining 19% of New Vector that
it did not own.
(6) EBITDA projections are based on the January 3, 1990 Merrill Lynch analyst
research report. Represent 19% of total EBITDA.
WASSERSTEIN PERELLA & CO.
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LIN BROADCASTING PRECEDENT M&A TRANSACTIONS
- ----------------------------------------------------------------------------
SELECTED ADDITIONAL CELLULAR TRANSACTIONS - PER POP IMPLIED VALUATION
<TABLE>
<CAPTION>
Estimated
Date Purchase POPS Price Per
Announced Market(s) Buyer/Bidder Seller/Target Price ($MM) (MM) Pop
- ------------ ------------------- ----------------- ------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Nov. 94(1) Providence, RI SNET Bell Atlantic/NYNEX $450(2) 2.300(2) $196
New Bedford, MA
(Bell Atlantic)
Pittsfield, MA
(80.0%)
8 other markets in
CT, MA (16.1%)
(NYNEX)
Oct. 1994 Washington Cie Generale(3) SBC Communications(3) $215(4) 0.730 $295
D.C./Baltimore des Eaux (CGE)
markets (10%
ownership)
Jul. 94 Covers 9 to the top U.S. WEST AirTouch $13,250(5) 53.000(5) $250
20 U.S. markets (Joint Venture (Joint Venture -
including - owns 30%) owns 70%)
Los Angeles,
San Francisco
Detroit,
Atlanta,
Seattle,
and Denver
Jun. 94 Covers 7 of the top Bell Atlantic NYNEX $13,000(5) 55.000(5) $236
20 U.S. markets (Joint Venture (Joint Venture
including - owns 62.35%) - owns 37.65%)
New York,
Boston,
Philadelphia,
Baltimore and
Washington D.C.
</TABLE>
**FOOTNOTES**
(1) The closing of this transaction is subject to the consummation of the
Bell Atlantic/NYNEX cellular joint venture.
(2) Purchase price and per POP calculation based on the 11/22/94 SNET 8-K.
(3) In a concurrent transaction, SBC communications invested $626MM to gain
a 10% stake in CGE's cellular subsidiary in France, SFR, as well as
minority ownership positions in other communications businesses controlled
by CGE, including mobile data and paging services.
(4) Purchase price excludes $32MM of net other investments with CGE made in
SBC, as per the 10/11/94 SBC Investor Briefing report.
(5) Estimated, based on news articles.
- --------------------------------------------------------------------
WASSERSTEIN PERELLA & CO.
<PAGE>
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LIN BROADCASTING PRECEDENT M&A TRANSACTIONS
- ---------------------------------------------------------------------------
SELECTED ADDITIONAL CELLULAR TRANSACTIONS - PER POP IMPLIED VALUATION
<TABLE>
<CAPTION>
Estimated
Date Purchase POPS Price Per
Announced Market(s) Buyer/Bidder Seller/Target Price ($MM) (MM) Pop
- ------------- ------------------- ----------------- -------------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Nov. 1993 Dallas, TX SBC Communications GTE $120 0.420 $286
(acquired an
additional 10% (Dallas Cellular)
stake)
Aug. 1992 Albany, NY Associated McCaw Cellular $90(1) 0.689(2) $131
Rochester, NY Communications
Glens Falls, NY
May 1992 Nationwide; Markets Sprint Centel $4,412(3) 16.570 $115-$135
include: New York,
NY, Chicago, IL,
Houston, TX
Oct. 1991 Omaha Lincoln Centel $36(4) 16.570 $214
(50% ownership in JV) Telecommunications
Sept. 1991 Wisconsin BellSouth McCaw Cellular $410(5) 2.220(6) $184
Illinois
Indiana
Sept. 1991 Milwaukee, WI BellSouth Graphic Scanning $310(7) 1.153 $178(8)
Indianapolis, IN
Terre Haute, IN
Bloomington, IN
</TABLE>
- --------------------------------------------
(1) Includes assumption of $7.5 million in debt.
(2) The parties also formed a joint venture, with McCaw donating its 50%
interest in Buffalo and Associated its 6% interest in San Francisco/San
Jose.
(3) Includes $1,363 billion in net debt. Assuming a value of $1,300 to $1,500
per access line for Centel's 1.599 million access lines and the market
value ($102.8 million) of its holdings in Rochester Telephone, Centel's
cellular assets have an implied value of $115 to $135 per POP.
(4) Purchase price represents $11.9 million in cash and the assumption of
a $23.8 million note.
(5) Includes an agreement to let McCaw out of a $50 million obligation
originally incurred by Graphics Scanning and due to BellSouth.
(6) BellSouth acquired 2.5 million POPs from McCaw and gave McCaw its
interest in Rochester (280,000 POPs), resulting in a net gain of 2.22
million POPs.
(7) Comprised of $168 million in cash and $142 million in Graphic Scanning
liabilities assumed by BellSouth.
(8) Assumes a value of $18.9 million for Graphic Scanning's 315,000 paging
subscribers and $86 million for its UK cellular and paging assets
(analyst estimates).
WASSERSTEIN PERELLA & CO.
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LIN BROADCASTING PRECEDENT M&A TRANSACTIONS
- ----------------------------------------------------------------------------
SELECTED ADDITIONAL CELLULAR TRANSACTIONS - PER POP IMPLIED VALUATION
<TABLE>
<CAPTION>
Estimated
Date Purchase POPS Price Per
Announced Market(s) Buyer/Bidder Seller/Target Price ($MM) (MM) Pop
- -------------- ------------------- ----------------- ----------------- ---------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sept. 1991 18 MSAs nationwide, Bell Atlantic Metro Mobile $2,448(1) 11.530 $206
including:
Phoenix, AZ
Hartford, CT
Providence, RI
Bridgeport, CT
New Haven, CT
Charlotte, NC
Tucson, AZ
Aug. 1991 Wichita, KN Pacific Telesis McCaw Cellular $100 0.619 $162
Topeka, KN
Aug. 1991 Ohio, Michigan MSAs Pacific Telesis Cellular $90(2) 0.476 $189
(5% interest) Communications
July 1991 Waco, TX McCaw Cellular Crowley Cellular $107 0.609 $176
Daytona Beach, FL
June 1991 Philadelphia, PA Comcast Cellular Metromedia $1,110 5.155 $198(3)
Long Branch, NJ
New Brunswick, NJ
May 1991 St. Louis MSA Ameritech CyberTel $512 2.815 $159(4)
surrounding RSAs
</TABLE>
- --------------------------
(1) Includes liquid petroleum business valued at approximately $70 MM.
Purchase price represents equity valued at $1,623 million and the
assumption of $825 million in debt.
(2) Part of larger transaction, including the formation of a joint venture
with 8.86 million POPs.
(3) Purchased based on $310 MM in cash, $250MM in cash or Comcast Class A
stock and Comcast Cellular participating preferred stock (valued by
analysts at $550 MM). Assuming a range of 6.0x- 8.0x EBITDA (estimated
by analysts at $12.8 MM) for Guest Informant division and 15% interest
in WOTV purchased, the value of Metromedia's cellular assets is $196-
$200 per POP.
(4) Assumes a value of $37.5 million for 750,000 pagers and $26 million for
non-compete agreement and net operating loss (NOL) carry forward.
WASSERSTEIN PERELLA & CO.
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LIN BROADCASTING PRECEDENT M&A TRANSACTIONS
- ----------------------------------------------------------------------------
SELECTED ADDITIONAL CELLULAR TRANSACTIONS - PER POP IMPLIED VALUATION
<TABLE>
<CAPTION>
Estimated
Date Purchase POPS Price Per
Announced Market(s) Buyer/Bidder Seller/Target Price ($MM) (MM) Pop
- ------------- ------------------- ---------------- -------------------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Mar. 1991 Athens, GA BellSouth GTE Mobilnet $102 0.903 $111
Lexington, KY
3 RSAs around
Atlanta
Jan. 1991 Minority interests Centel Rochester $35 0.435 $79
in 20 Telephone(1)
markets in seven
states
Jan. 1990 Dallas McCaw Cellular $60(2) 0.22 $276
Communications
Dec. 1989 New York McCaw LIN Broadcasting $3,375(3) 25.6 $321
Los Angeles
Houston
Dallas
Philadelphia
Oct. 1989 New York LIN Broadcasting Metromedia $1,881 6.8 $275
</TABLE>
- ----------------------------
(1) Assuming a range of 8.75x-9.75x EBITD, or $1,800- $2,000 per access line
(as estimated by analysts) for the 85,000 Centel access lines transferred
to Rochester, less the cash and equity (based on RTC's closing stock price
on 4/3/91) given up by Rochester, the value of Rochester's cellular assets
being transferred is $60-$99 per POP.
(2) McCaw acquired CCI's 5.56% interest in Dallas.
(3) McCaw purchased 21.9 million shares (42% of the outstanding stock) of
LIN Broadcasting, which increased its interest to 51.9%.
WASSERSTEIN PERELLA & CO.
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<PAGE>
Page 32
LIN BROADCASTING
- ------------------------------------------------------------------------------
DISCOUNTED CASH FLOW ANALYSIS
WASSERSTEIN PERELLA & CO.
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<PAGE>
Page 33
LIN BROADCASTING
- ------------------------------------------------------------------------------
DCF Discussion
. DCF valuation ranges are extremely sensitive to changes in both operating
assumptions and valuation parameters given nature of cellular and wireless
data industries
. In performing DCF analysis, WP&Co. looked at different assumptions
regarding weighted average cost of capital and terminal value
- High variability regarding appropriate valuation of wireless data segment
is not unusual in industries that are in a relatively early stage of
development
. Valuation parameters were applied to the LIN Management Case and the McCaw
Management Case
. Solely for comparative purposes, WP&Co. prepared a sensitivity case. The
WP&Co. sensitivity case does not purport to be WP&Co.'s projections, but
represents a sensitivity analysis using different assumptions for
comparative purposes
WASSERSTEIN PERELLA & CO.
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LIN BROADCASTING LIN CELLULAR PROPORTIONATE-MCCAW CASE WITHOUTH AT&T SYNERGIES
- -------------------------------------------------------------------------------
ASSUMPTIONS COMMON TO LIN MANAGEMENT AND MCCAW MANAGEMENT PROJECTIONS
. Continued growth in penetration and revenue over 10-year forecast period
. As penetration increases, revenue/subscriber/month declines in both real and
nominal terms
. Margins continue to hold at high levels
. No major replacement capital modeled for out years
. Marketing expense per gross addition will rise in 1997 and 1998 when
competition is projected to increase (e.g. PCS entry)
. Cash flow margin before marketing and direct expense per subscriber per month
are very similar throughout period
. Churn is expected to decline over the period despite expected increased
competition
. LIN management has revised its 1995 financial forecasts as per actual
quarterly financial results through June 1995
WASSERSTEIN PERELLA & CO.
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LIN BROADCASTING LIN CELLULAR PROPORTIONATE-MCCAW CASE WITHOUT AT&T SYNERGIES
- -------------------------------------------------------------------------------
MAJOR AREAS OF DIFFERENCE BETWEEN LIN MANAGEMENT AND MCCAW CASES
. McCaw's management attempted to strip out AT&T synergies from LIN Management
Base Case in arriving at McCaw Management numbers
- LIN Management stated that it did not incorporate meaningful AT&T synergies
in its base case
. McCaw assumes lower penetration by LIN (14.5% vs. 16.9% in year 2004)
. McCaw revenue/subscriber/month is lower in later years of model
approximately (approximately $49 vs. approximately $54 in LIN Management
Case in year 2004)
. McCaw marketing costs per gross addition are higher throughout period
but especially so in last five years of period
. Wireless data expectations as reflected in the McCaw Case are more modest
than in the LIN Management Case (approximately one-half the cash flow in
year 2004)
- --------------------------------------------------------------------
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<PAGE>
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LIN BROADCASTING LIN CELLULAR PROPORTIONATE-MCCAW CASE WITHOUT AT&T SYNERGIES
- -------------------------------------------------------------------------------
SUMMARY ANALYSIS OF LIN MANAGEMENT CASE
<TABLE>
<CAPTION>
Discount Implied Price Per LIN Share Based Implied Multiple of EBITDA
Rate on an Exit Perpetuity Multiple of: Based on Exit Perpetuity Multiple of:
---------- ------------------------------------------- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
5.0% 5.5% 6.0% 5.0% 5.5% 6.0%
-------- ------- ------- -------- ------- -------
Cellular 11% $143.75 $155.05 $168.60 10.6x 11.7x 12.9x
12% $116.24 $123.84 $132.71 9.1x 9.9x 10.7x
13% $95.73 $101.89 $107.21 8.6x 9.2x 10.0x
6.0% 8.0% 10.0% 6.0% 8.0% 10.0%
-------- -------- -------- -------- ------ ------
Wireless Data 19% $7.78 $8.82 $10.32 4.6x 5.5x 6.9x
20% $6.89 $7.72 $8.88 4.3x 5.1x 6.2x
21% $6.14 $6.81 $7.71 4.0x 4.7x 5.6x
4.0% 5.0% 6.0% 4.0% 5.0% 6.0%
------- ------- ------- ------- ------ ------
LIN-TV 11% $1.44 $1.58 $1.77 8.1x 9.5x 11.6x
12% $1.26 $1.36 $1.44 7.1x 8.2x 9.6x
13% $1.12 $1.19 $1.28 6.3x 7.2x 8.3x
Aggregate Price
Per Share
$152.97 $165.45 $180.69
$124.39 $132.92 $143.03
$102.99 $109.89 $116.20
</TABLE>
WASSERSTEIN PERELLA & CO.
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LIN BROADCASTING LIN CELLULAR PROPORTIONATE-MCCAW CASE WITHOUT AT&T SYNERGIES
- -------------------------------------------------------------------------------
SUMMARY ANALYSIS MCCAW CASE (WITHOUT AT&T SYNERGIES)
<TABLE>
<CAPTION>
Discount Implied Price Per LIN Share Based Implied Multiple of EBITDA
Rate on an Exit Perpetuity Multiple of: Based on Exit Perpetuity Multiple of:
--------- ---------------------------------------- --------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
5.0% 5.5% 6.0% 5.0% 5.5% 6.0%
------- ------ ------- ----- ----- -----
Cellular 11% $95.16 $102.85 $112.08 10.4x 11.4x 12.6x
12% $76.25 $81.42 $87.46 8.9x 9.7x 10.5x
13% $62.11 $65.76 $69.93 7.8x 8.4x 9.0x
6.0% 8.0% 10.0% 6.0% 8.0% 10.0%
------- ------ ------- ----- ----- ------
Wireless Data 19% $3.65 $4.15 $4.88 4.5x 5.4x 6.7x
20% $3.11 $3.62 $4.18 4.2x 5.0x 6.1x
21% $2.86 $3.18 $3.62 3.9x 4.6x 5.5x
4.0% 5.0% 6.0% 4.0% 5.0% 6.0%
------ ----- ------ ----- ----- ------
LIN-TV 11% $1.44 $1.58 $1.77 8.1x 9.5x 11.6x
12% $1.26 $1.36 $1.44 7.1x 8.2x 9.6x
13% $1.12 $1.19 $1.28 6.3x 7.2x 8.3x
Aggregate Price
Per Share
$100.25 $108.58 $118.73
$80.62 $86.40 $93.08
$66.09 $70.13 $74.83
</TABLE>
WASSERSTEIN PERELLA & CO.
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LIN BROADCASTING LIN CELLULAR PROPORTIONATE-MCCAW CASE WITHOUT AT&T SYNERGIES
- -------------------------------------------------------------------------------
SUMMARY ANALYSIS OF SENSITIVITY CASE
<TABLE>
<CAPTION>
Discount Implied Price Per LIN Share Based Implied Multiple of EBITDA
Rate on an Exit Perpetuity Multiple of: Based on Exit Perpetuity Multiple of:
--------- ------------------------------------------------- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
5.0% 5.5% 6.0% 5.0% 5.5% 6.0%
------- ------- ------- ---- ----- -----
Cellular 11% $133.32 $143.91 $156.62 10.4x 11.4x 12.6x
12% $107.51 $114.64 $122.96 8.9x 9.6x 10.5x
13% $88.26 $93.29 $99.03 7.8x 8.4x 9.0x
6.0% 8.0% 10.0% 6.0% 8.0% 10.0%
------- ------- -------- ------ ----- -----
Wireless Data 19% $7.78 $8.82 $10.32 4.6x 5.5x 6.9x
20% $6.89 $7.72 $8.88 4.3x 5.1x 6.2x
21% $6.14 $6.81 $7.71 4.0x 4.7x 5.6x
4.0% 5.0% 6.0% 4.0% 5.0% 6.0%
----- ----- ----- ---- ---- ------
LIN-TV 11% $1.44 $1.58 $1.77 8.1x 9.5x 11.6x
12% $1.26 $1.36 $1.44 7.1x 8.2x 9.6x
13% $1.12 $1.19 $1.28 6.3x 7.2x 8.3x
Aggregate Price
Per Share
$142.54 $154.31 $168.71
$115.66 $123.72 $133.28
$95.52 $101.29 $108.02
</TABLE>
WASSERSTEIN PERELLA & CO.
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LIN BROADCASTING WIRELESS DATA - LIN MANAGEMENT CASE
- -------------------------------------------------------------------------------
LIN: not including Wireless Data, including Long Distance, including Additional
Products (cont'd)
(in thousands, except per POP values)
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total No. of 25,722 25,980 26,240 26,502 26,767 27,034 27,304 27,578 27,854 28,133 28,414
POPs
% Growth Rate NA 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Beginning 771.302 1,092.076 1,587.399 2,070.865 2,481.767 2,886.521 3,284.306 3,666.878 4,024.885 4,352.573 4,610.246
Subscribers
Gross 557.510 744.662 822.650 805.766 855.424 899.623 934.151 947.786 944.519 968.685 881.533
Subscribers
Added
Deactivations (236.737) (249.339) (339.184) (394.864) (450.669) (501.838) (551.579) (589.779) (616.831) (711.013) (689.666)
Annual % Churn (25.41%) (18.61%) (18.54%) (17.35%) (16.79%) (16.26%) (15.87%) (15.34%) (14.73%) (15.87%) (14.65%)
Monthly % (2.12%) (1.55%) (1.55%) (1.45%) (1.40%) (1.36%) (1.32%) (1.28%) (1.23%) (1.32%) (1.22%)
Churn
Net Sub-
scribers 320.774 495.322 483.466 410.902 404.754 397.785 382.573 358.007 327.688 257.673 191.867
Added
Ending 1,092.076 1,587.399 2,070.865 2,481.767 2,886.521 3,284.306 3,666.878 4,024.885 4,352.573 4,610.246 4,802.113
Subscribers
Average 931.689 1,339.737 1,829.132 2,276.316 2,684.144 3,085.413 3,475.592 3,845.882 4,188.729 4,481.410 4,706.180
Subscribers
Total 4.25% 6.11% 7.89% 9.36% 10.78% 12.15% 13.43% 14.59% 15.63% 16.39% 16.90%
Penetration
% Penetration NA 43.9% 29.2% 18.7% 15.2% 12.7% 10.5% 8.7% 7.1% 4.9% 3.1%
Growth
Annual 1.25% 1.91% 1.84% 1.55% 1.51% 1.47% 1.40% 1.30% 1.18% 0.92% 0.68%
Penetration (1)
% Growth NA 52.9% (3.4%) (15.9%) (2.5%) (2.7%) (4.8%) (7.3%) (9.4%) (22.1%) (26.3%)
</TABLE>
(1) Defined as net subscribers added in a period divided by the population at
the end of the period.
WASSERSTEIN PERELLA & CO.
- ------------------------------------------------------------------------------
<PAGE>
Page 40
LIN BROADCASTING LIN CELLULAR PROPORTIONATE - LIN MANAGEMENT CASE
- ------------------------------------------------------------------------
LIN: NOT INCLUDING WIRELESS DATA, INCLUDING LONG DISTANCE, INCLUDING
ADDITIONAL PRODUCTS (CONT'D)
(IN THOUSANDS, EXCEPT PER POP VALUES)
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999 2000 2001
Income Statement
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue / Subscriber $82.60 $73.09 $66.84 $62.53 $60.13 $57.29 $55.83 $55.17
/ Month
% Growth NA (11.5%) (8.6%) (6.4%) (3.8%) (4.7%) (2.6%) (1.2%)
Total Revenues $923,546 $1,175,108 $1,467,136 $1,708,154 $1,936,835 $2,121,322 $2,328,346 $2,546,174
% Growth NA 27.2% 24.9% 16.4% 13.4% 9.5% 9.8% 9.4%
Direct Operating $279,817 $339,134 $461,244 $559,882 $665,940 $750,474 $858,201 $975,525
Expenses
% of Revenues 30.3% 28.9% 31.4% 32.8% 34.4% 35.4% 36.9% 38.3%
Cash Flow Before $643,729 $835,974 $1,005,891 $1,148,272 $1,270,895 $1,370,848 $1,470,145 $1,570,650
Marketing
Margin 69.7% 71.1% 68.6% 67.2% 65.6% 64.6% 63.1% 61.7%
Sales & Marketing $249,855 $291,999 $325,330 $353,397 $366,809 $371,665 $358,705 $333,537
% of Revenues 27.1% 24.8% 22.2% 20.7% 18.9% 17.5% 15.4% 13.1%
Sales & Marketing / $448 $392 $395 $439 $429 $413 $384 $352
Gross Addition
Corporate Expenses $0 $0 $0 $0 $0 $0 $0 $0
% of Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total Operating $529,672 $631,133 $786,574 $913,279 $1,032,748 $1,122,138 $1,216,906 $1,309,061
Expenses
Operating Cash Flow $393,873 $543,976 $680,561 $794,875 $904,086 $999,183 $1,111,440 $1,237,113
(OCF)
Margin 42.6% 46.3% 46.4% 46.5% 46.7% 47.1% 47.7% 48.6%
Depreciation & $128,184 $188,818 $238,986 $260,674 $261,625 $248,446 $227,060 $202,078
Amortization
% of Revenues 13.9% 16.1% 16.3% 15.3% 13.5% 11.7% 9.8% 7.9%
EBIT $265,689 $355,157 $441,575 $534,201 $642,461 $750,737 $884,380 $1,035,035
Margin 28.8% 30.2% 30.1% 31.3% 33.2% 35.4% 38.0% 40.7%
Taxes $97,012 $129,116 $160,463 $194,295 $233,716 $273,434 $322,519 $377,675
Effective Tax Rate 36.5% 36.4% 36.3% 36.4% 36.4% 36.4% 36.5% 36.5%
Unlevered Net Income $168,677 $226,042 $281,112 $339,906 $408,745 $477,303 $561,861 $657,360
Net Margin 18.3% 19.2% 19.2% 19.9% 21.1% 22.5% 24.1% 25.8%
Free Cash Flow
Unlevered Net Income $168,677 $226,042 $281,112 $339,906 $408,745 $477,303 $561,861 $657,360
Depreciation & $128,184 $188,818 $238,986 $260,674 $261,625 $248,446 $227,060 $202,078
Amortization
Capital Expenditures ($190,343) ($301,124) ($294,122) ($279,903) ($202,317) ($186,996) ($169,646) ($142,256)
Change in Working $0 ($25,156) ($29,203) ($24,102) ($22,868) ($18,449) ($20,702) ($21,783)
Capital
As a % of Change in NA 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Revenues
Free Cash Flow (FCF) $106,518 $88,580 $196,773 $296,575 $445,186 $520,305 $598,573 $695,400
</TABLE>
<TABLE>
<CAPTION>
CONT'D
2002 2003 2004
<C> <C> <C>
$54.94 $54.75 $54.15
(0.4%) (0.3%) (1.1%)
$2,761,366 $2,944,454 $3,057,837
8.5% 6.6% 3.9%
$1,096,295 $1,193,546 $1,261,177
39.7% 40.5% 41.2%
$1,665,070 $1,750,908 $1,796,660
60.3% 59.5% 58.8%
$295,195 $266,198 $246,266
10.7% 9.0% 8.1%
$313 $275 $279
$0 $0 $0
0.0% 0.0% 0.0%
$1,391,491 $1,459,744 $1,507,443
$1,369,875 $1,484,710 $1,550,394
49.6% 50.4% 50.7%
$175,851 $152,833 $130,473
6.4% 5.2% 4.3%
$1,194,024 $1,331,877 $1,419,920
43.2% 45.2% 46.4%
$435,945 $486,770 $519,785
36.5% 36.5% 36.6%
$758,079 $845,107 $900,136
27.5% 28.7% 29.4%
$758,079 $845,107 $900,136
$175,851 $152,833 $130,473
($130,292) ($102,451) ($76,298)
($21,519) ($18,309) ($11,338)
10.0% 10.0% 10.0%
$782,119 $877,181 $942,973
</TABLE>
WASSERSTEIN PERELLA & CO.
- ------------------------------------------------------------------------------
<PAGE>
Page 41
LIN BROADCASTING LIN CELLULAR PROPORTIONATE - LIN MANAGEMENT CASE
- ----------------------------------------------------------------------------
LIN: NOT INCLUDING WIRELESS DATA, INCLUDING LONG DISTANCE, INCLUDING
ADDITIONAL PRODUCTS (CONT'D) (IN THOUSANDS, EXCEPT PER POP VALUES)
<TABLE>
<CAPTION>
Discount Rate Perpetuity Growth Rates of Free Cash Flow
<S> <C> <C> <C> <C> <C> <C> <C>
4.0% 5.0% 5.5% 6.0% 6.5% 7.0%
11.0% Present Value of Cash Flows $2,875,853 $2,875,853 $2,875,853 $2,875,853 $2,875,853 $2,875,853
Terminal Value $5,311,796 $6,256,683 $6,857,974 $7,579,524 $8,461,419 $9,563,787
Enterprise Value $8,187,649 $9,132,536 $9,733,828 $10,455,378 $11,337,272 $12,439,640
Less: Net Debt (2) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612)
Equity Value $6,710,038 $7,654,925 $8,256,216 $8,977,766 $9,859,660 $10,962,028
Value per Share (3) $126.01 $143.75 $155.05 $168.60 $185.16 $205.86
Enterprise Value / POP $316.72 $353.27 $376.53 $404.44 $438.56 $481.20
Implied Exit Multiple of EBITDA 9.0x 10.6x 11.7x 12.9x 14.4x 16.3x
12.0% Present Value of Cash Flows $2,733,361 $2,733,361 $2,733,361 $2,733,361 $2,733,361 $2,733,361
Terminal Value $4,276,143 $4,934,011 $5,338,853 $5,811,169 $6,369,360 $7,073,697
Enterprise Value $7,009,504 $7,667,372 $8,072,214 $8,544,530 $9,102,721 $9,807,058
Less: Net Debt (2) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612)
Equity Value $5,531,892 $6,189,761 $6,594,602 $7,066,918 $7,625,109 $8,329,446
Value per Share (3) $103.89 $116.24 $123.84 $132.71 $143.19 $156.42
Enterprise Value / POP $271.15 $296.60 $312.26 $330.53 $352.12 $379.37
Implied Exit Multiple of EBITDA 7.9x 9.1x 9.9x 10.7x 11.8x 13.0x
13.0% Present Value of Cash Flows $2,600,362 $2,600,362 $2,600,362 $2,600,362 $2,600,362 $2,600,362
Terminal Value $3,499,647 $3,974,959 $4,260,147 $4,586,076 $4,962,147 $5,429,456
Enterprise Value $6,100,009 $6,575,322 $6,860,509 $7,186,438 $7,562,509 $8,029,818
Less: Net Debt (2) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612)
Equity Value $4,622,397 $5,097,710 $5,382,897 $5,708,826 $6,084,898 $6,552,206
Value per Share (3) $86.81 $95.73 $101.09 $107.21 $114.27 $123.05
Enterprise Value / POP $235.97 $254.35 $265.38 $277.99 $292.54 $310.62
Implied Exit Multiple of EBITDA 7.0x 8.0x 8.6x 9.2x 10.0x 10.8x
14.0% Present Value of Cash Flows $2,476,104 $2,476,104 $2,476,104 $2,476,104 $2,476,104 $2,476,104
Terminal Value $2,902,066 $3,255,523 $3,463,439 $3,697,344 $3,962,437 $4,289,584
Enterprise Value $5,378,170 $5,731,627 $5,939,543 $6,173,448 $6,438,541 $6,765,689
Less: Net Debt (2) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612)
Equity Value $3,900,559 $4,254,016 $4,461,931 $4,695,837 $4,960,929 $5,288,077
Value per Share (3) $73.25 $79.89 $83.79 $88.18 $93.16 $99.31
Enterprise Value / POP $208.04 $221.72 $229.76 $238.81 $249.06 $261.72
Implied Exit Multiple of EBITDA 6.3x 7.1x 7.5x 8.1x 8.6x 9.3x
</TABLE>
(1) Present values as of 9/15/95. Enterprise value per POP based on 6/30/95
estimated POPs, which is the average of 12/31/94 and 12/31/95E POPs.
(2) Based on 3/31/95 net debt of $1,586 million, less option proceeds of
$108 million, based on 1,535,338 options outstanding as of 1/1/95 at
an average exercise price of $70.64 per LIN mgmt.
(3) Based on fully diluted shares including 51,714,736 shares outstanding as
of 3/31/95, plus 1,535,338 options outstanding as of 1/1/95 per LIN
management.
WASSERSTEIN PERELLA & CO.
- -----------------------------------------------------------------------------
<PAGE>
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LIN BROADCASTING LIN CELLULAR PROPORTIONATE - LIN MANAGEMENT CASE
- -----------------------------------------------------------------------------
LIN: NOT INCLUDING WIRELESS DATA, INCLUDING LONG DISTANCE, INCLUDING ADDITIONAL
PRODUCTS (CONT'D)
(IN THOUSANDS, EXCEPT PER POP VALUES)
<TABLE>
<CAPTION>
Discount Rate Terminal Exit Multiples of OCF
9.5x 10.0x 10.5x 11.0x 11.5x
<S> <C> <C> <C> <C> <C> <C>
11.0% Present Value of Cash Flows $2,875,853 $2,875,853 $2,875,853 $2,875,853 $2,875,853
Terminal Value $5,584,346 $5,878,259 $6,172,172 $6,466,085 $6,759,998
Enterprise Value $8,460,200 $8,754,113 $9,048,026 $9,341,939 $9,635,852
Less: Net Debt (2) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612)
Equity Value $6,982,588 $7,276,501 $7,570,414 $7,864,327 $8,158,240
Value per Share (3) $131.13 $136.65 $142.17 $147.69 $153.21
Enterprise Value / POP $325.64 $336.95 $348.27 $359.58 $370.89
Implied Perpetuity Growth 4.3% 4.6% 4.9% 5.2% 5.4%
Rate
12.0% Present Value of Cash Flows $2,733,361 $2,733,361 $2,733,361 $2,733,361 $2,733,361
Terminal Value $5,137,776 $5,408,185 $5,678,594 $5,949,003 $6,219,412
Enterprise Value $7,871,137 $8,141,546 $8,411,955 $8,682,364 $8,952,774
Less: Net Debt (2) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612)
Equity Value $6,393,525 $6,663,934 $6,934,343 $7,204,753 $7,475,162
Value per Share (3) $120.07 $125.14 $130.22 $135.30 $140.38
Enterprise Value / POP $302.97 $313.38 $323.78 $334.19 $344.60
Implied Perpetuity Growth 5.3% 5.6% 5.9% 6.1% 6.4%
Rate
13.0% Present Value of Cash Flows $2,600,362 $2,600,362 $2,600,362 $2,600,362 $2,600,362
Terminal Value $4,730,419 $4,979,389 $5,228,358 $5,477,328 $5,726,297
Enterprise Value $7,330,782 $7,579,751 $7,828,721 $8,077,690 $8,326,659
Less: Net Debt (2) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612)
Equity Value $5,853,170 $6,102,139 $6,351,109 $6,600,078 $6,849,048
Value per Share (3) $109.92 $114.59 $119.27 $123.94 $128.62
Enterprise Value / POP $282.17 $291.75 $301.33 $310.92 $320.50
Implied Perpetuity Growth 6.2% 6.5% 6.8% 7.1% 7.3%
Rate
14.0% Present Value of Cash Flows $2,476,104 $2,476,104 $2,476,104 $2,476,104 $2,476,104
Terminal Value $4,358,532 $4,587,929 $4,817,325 $5,046,722 $5,276,118
Enterprise Value $6,834,636 $7,064,033 $7,293,429 $7,522,826 $7,752,222
Less: Net Debt (2) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612)
Equity Value $5,357,025 $5,586,421 $5,815,817 $6,045,214 $6,274,610
Value per Share (3) $100.60 $104.91 $109.22 $113.52 $117.83
Enterprise Value / POP $263.07 $271.90 $280.73 $289.56 $298.39
Implied Perpetuity Growth 7.1% 7.5% 7.8% 8.0% 8.3%
Rate
15.0% Present Value of Cash Flows $2,359,902 $2,359,902 $2,359,902 $2,359,902 $2,359,902
Terminal Value $4,018,754 $4,230,268 $4,441,781 $4,653,294 $4,864,808
Enterprise Value $6,378,657 $6,590,170 $6,801,683 $7,013,197 $7,224,710
Less: Net Debt (2) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612)
Equity Value $4,901,045 $5,112,558 $5,324,072 $5,535,585 $5,747,098
Value per Share (3) $92.04 $96.01 $99.98 $103.95 $107.93
Enterprise Value / POP $245.52 $253.66 $261.80 $269.94 $278.09
Implied Perpetuity Growth 8.1% 8.4% 8.7% 9.0% 9.2%
Rate
</TABLE>
(1) Present values as of 9/15/95. Enterprise value per POP based on 1995
POPs.
(2) Based on 3/31/95 net debt of $1,586 million, less option proceeds of
$108 million, based on 1,535,338 options outstanding as of 1/1/95 at
an average exercise price of $70.64 per public SEC filings.
(3) Based on fully diluted shares including 51,714,736 shares outstanding
as of 3/31/95, plus 1,535,338 options outstanding as of 1/1/95 per
the 10-K.
- -----------------------------------------------------------------------
WASSERSTEIN PERELLA & CO.
<PAGE>
Page 43
LIN BROADCASTING WIRELESS DATA - LIN MANAGEMENT CASE
- ------------------------------------------------------------------------------
LIN WIRELESS DATA OPERATING MODEL (IN THOUSANDS)
<TABLE>
<CAPTION>
INCOME
STATMENT 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
- ------------- ------- ------- ------- ------- ------- ------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TOTAL $0 $4,500 $18,000 $47,500 $89,000 $147,000 $213,000 $276,900 $359,970 $467,961 $608,349
REVENUES
% Growth NA NM 300.0% 163.9% 87.4% 65.2% 44.9% 30.0% 30.0% 30.0% 30.0%
Direct $0 $8,450 $19,230 $31,350 $49,470 $61,790 $76,630 $99,619 $129,505 $168,356 $218,863
Operating
Revenues
% of Revenues NA 187.8% 106.8% 66.0% 55.6% 42.0% 36.0% 36.0% 36.0% 36.0% 36.0%
Cash Flow $0 ($3,950) ($1,230) $16,150 f$39,530 $85,210 $136,370 $177,281 $230,465 $299,605 $389,486
Before
Marketing
Margin NA (87.8%) (6.8%) 34.0% 44.4% 58.0% 64.0% 64.0% 64.0% 64.0% 64.0%
Sales & $0 $5,500 $5,250 $9,500 $15,500 $22,000 $32,000 $41,600 $54,080 $70,304 $91,395
Marketing
% of Revenues NA 122.2% 29.2% 20.0% 17.4% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0%
Corporate $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Expenses
% of Revenues NA 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
TOTAL $0 $13,950 $24,480 $40,850 $64,970 $83,790 $108,630 $141,219 $183,585 $238,660 $310,258
OPERATING
EXPENSES
OPERATING $0 ($9,450) $6,480) $6,650 $24,030 $63,210 $104,370 $135,681 $176,385 $229,301 $298,091
CASH FLOW
("OCF")
Margin NA (210.0% (36.0%) 14.0% 27.0% 43.0% 49.0% 49.0% 49.0% 49.0% 49.0%
Depreciation $0 $10,600 $11,160 $8,696 $9,197 $10,149 $8,416 $6,666 $6,330 $6,071 $5,524
&
Amortization
% of Revenues NA 235.6% 62.0% 18.3% 10.3% 6.9% 4.0% 2.4% 1.8% 1.3% 0.9%
EBIT $0 ($20,050)($17,640) ($2,046) $14,833 $53,061 $95,954 $129,015 $170,055 $223,230 $292,567
Margin NA (445.6%) (98.0%) (4.3%) 16.7% 36.1% 45.0% 46.6% 47.2% 47.7% 48.1%
Taxes $0 ($7,619) ($6,703) ($777) $5,637 $20,163 $36,463 $49,026 $64,621 $84,827 $111,175
Effective Tax 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0%
Rate
UNLEVERED NET $0 ($12,431)($10,937) ($1,269) $9,196 $32,898 $59,491 $79,989 $105,434 $138,403 $181,392
INCOME
Net Margin NA (276.2%) (60.8%) (2.7%) 10.3% 22.4% 27.9% 28.9% 29.3% 29.6% 29.8%
FREE CASH FLOW
- --------------
Unlevered Net $0 ($12,431)($10,937) ($1,269) $9,196 $32,898 $59,491 $79,989 $105,434 $138,403 $181,392
Income
Depreciation $0 $10,600 $11,160 $8,696 $9,197 $10,149 $8,416 $6,666 $6,330 $6,071 $5,524
&
Amortization
Capital $0 ($19,000) ($5,000) ($5,000)($10,000)($10,000) ($5,250) ($5,250) ($5,250) ($5,250) ($5,250)
Expenditures
Change in $0 ($450) ($1,350) ($2,950) ($4,150) ($5,800) ($6,600) ($6,390) ($8,307)($10,799) ($14,039)
Working
Capital
As a % of NA 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Change in
Revenues
FREE CASH $0 ($21,281) ($6,127) ($523) $4,243 $27,247 $56,057 $75,015 $98,207 $128,425 $167,627
FLOW ("FCF")
</TABLE>
WASSERSTEIN PERELLA & CO.
- -------------------------------------------------------------------------------
<PAGE>
Page 44
LIN BROADCASTING WIRELESS DATA - LIN MANAGEMENT CASE
- ------------------------------------------------------------------------------
LIN WIRELESS DATA OPERATING MODEL(1)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Discount Rate Perpetuity Growth Rates of Free Cash Flow
6.0% 8.0% 10.0% 12.0% 14.0%
<S> <C> <C> <C> <C> <C> <C>
18.0% Present Value of Cash Flows $152,336 $152,336 $152,336 $152,336 $152,336
Terminal Value $318,022 $388,827 $495,035 $672,047 $1,026,072
Enterprise Value $470,358 $541,163 $647,371 $824,383 $1,178,408
Net Debt $0 $0 $0 $0 $0
Equity Value $470,358 $541,163 $647,371 $824,383 $1,178,408
Value per Share $8.83 $10.16 $12.16 $15.48 $22.13
Implied Exit Multiple of EBITDA 5.0x 6.1x 7.7x 10.5x 16.0x
19.0% Present Value of Cash Flows $142,810 $142,810 $142,810 $142,810 $142,810
Terminal Value $271,417 $326,817 $406,840 $532,591 $758,942
Enterprise Value $414,226 $469,627 $549,650 $675,401 $901,752
Net Debt $0 $0 $0 $0 $0
Equity Value $414,226 $469,627 $549,650 $675,401 $901,752
Value per Share $7.78 $8.82 $10.32 $12.68 $16.93
Implied Exit Multiple of EBITDA 4.6x 5.5x 6.9x 9.0x 12.8x
20.0% Present Value of Cash Flows $133,948 $133,948 $133,948 $133,948 $133,948
Terminal Value $233,173 $277,168 $338,760 $431,150 $585,132
Enterprise Value $367,120 $411,115 $472,708 $565,097 $719,079
Net Debt $0 $0 $0 $0 $0
Equity Value $367,120 $411,115 $472,708 $565,097 $719,079
Value per Share $6.89 $7.72 $8.88 $10.61 $13.50
Implied Exit Multiple of EBITDA 4.3x 5.1x 6.2x 7.9x 10.7x
21.0% Present Value of Cash Flows $125,697 $125,697 $125,697 $125,697 $125,697
Terminal Value $201,475 $236,857 $285,106 $354,799 $464,316
Enterprise Value $327,172 $362,554 $410,803 $480,496 $590,013
Net Debt $0 $0 $0 $0 $0
Equity Value $327,172 $362,554 $410,803 $480,496 $590,013
Value per Share $6.14 $6.81 $7.71 $9.02 $11.08
Implied Exit Multiple of EBITDA 4.0x 4.7x 5.6x 7.0x 9.2x
</TABLE>
(1) Present values as of 9/15/95.
WASSERSTEIN PERELLA & CO.
- ------------------------------------------------------------------------------
<PAGE>
Page 45
LIN BROADCASTING LIN TELEVISION STATIONS - LIN MANAGEMENT CASE
- ------------------------------------------------------------------------------
LIN TELEVISION STATIONS: WOOD-TV AND WOTV-TV
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Income Statement
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Revenues $21,795 $22,909 $24,100 $25,022 $26,320 $26,957 $28,112 $28,794 $30,031 $30,761 $32,068
% Growth NA 5.1% 5.2% 3.8% 5.2% 2.4% 4.3% 2.4% 4.3% 2.4% 4.2%
Direct Operating $7,296 $7,128 $7,471 $7,739 $8,113 $8,298 $8,628 $8,825 $9,181 $9,387 $9,720
Expenses
% of Revenues 33.5% 31.1% 31.0% 30.9% 30.8% 30.8% 30.7% 30.6% 30.6% 30.5% 30.3%
SG&A and Promotion $6,197 $6,478 $6,772 $7,003 $7,324 $7,487 $7,773 $7,945 $8,249 $8,432 $8,807
Expenses
% of Revenues 28.4% 28.3% 28.1% 28.0% 27.8% 27.8% 27.7% 27.6% 27.5% 27.4% 27.5%
Corporate Expenses $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
% of Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total Operating $13,493 $13,606 $14,243 $14,742 $15,437 $15,785 $16,401 $16,770 $17,430 $17,819 $18,527
Expenses
Operating Cash Flow $8,302 $9,303 $9,857 $10,280 $10,883 $11,172 $11,711 $12,024 $12,601 $12,942 $13,541
(OCF)
Margin 38.1% 40.6% 40.9% 41.1% 41.3% 41.4% 41.7% 41.8% 42.0% 42.1% 42.2%
Depreciation & $1,265 $1,599 $1,802 $2,010 $2,221 $2,437 $1,391 $1,282 $1,307 $1,334 $1,356
Amortization
% of Revenues 5.8% 7.0% 7.5% 8.0% 8.4% 9.0% 4.9% 4.5% 4.4% 4.3% 4.2%
EBIT $7,037 $7,704 $8,055 $8,271 $8,662 $8,736 $10,320 $10,742 $11,294 $11,609 $12,185
Margin 32.3% 33.6% 33.4% 33.1% 32.9% 32.4% 36.7% 37.3% 37.6% 37.7% 38.0%
Taxes $2,674 $2,928 $3,061 $3,143 $3,292 $3,319 $3,922 $4,082 $4,292 $4,411 $4,630
Effective Tax Rate 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0%
Unlevered Net Income $4,363 $4,776 $4,994 $5,128 $5,371 $5,416 $6,398 $6,660 $7,002 $7,197 $7,555
Net Margin 20.0% 20.8% 20.7% 20.5% 20.4% 20.1% 22.8% 23.1% 23.3% 23.4% 23.6%
Free Cash Flow
Unlevered Net Income $4,363 $4,776 $4,994 $5,128 $5,371 $5,416 $6,398 $6,660 $7,002 $7,197 $7,555
Depreciation & $1,265 $1,599 $1,802 $2,010 $2,221 $2,437 $1,391 $1,282 $1,307 $1,334 $1,356
Amortization
Capital Expenditures ($843) ($2,003) ($1,219) ($1,244) ($1,268) ($1,294) ($1,319) ($1,346) ($1,373) ($1,401) ($1,401)
Change in Working $0 ($111) ($119) ($92) ($130) ($64) ($116) ($68) ($124) ($73) ($131)
Capital
As a % of Change in NA 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Revenues
Free Cash Flow (FCF) $4,785 $4,261 $5,458 $5,801 $6,194 $6,495 $6,355 $6,528 $6,813 $7,057 $7,379
</TABLE>
- ---------------------------------------------------------------------
WASSERSTEIN PERELLA & CO.
<PAGE>
Page 46
LIN BROADCASTING LIN TELEVISION STATIONS - LIN MANAGEMENT CASE
- ------------------------------------------------------------------------------
LIN TELEVISION STATIONS: WOOD-TV AND WOTV-TV (CONT'D)
(IN THOUSANDS, EXCEPT PER SHARE VALUES)
<TABLE>
<CAPTION>
Discount Rate Perpetuity Growth Rates of Free Cash Flow
4.0% 5.0% 5.5% 6.0% 6.5% 7.0%
<S> <C> <C> <C> <C> <C> <C> <C>
11.0% Present Value of Cash Flows $35,081 $35,081 $35,081 $35,081 $35,081 $35,081
Terminal Value $41,565 $48,959 $53,664 $59,311 $66,212 $74,838
Enterprise Value $76,647 $84,040 $88,746 $94,392 $101,293 $109,919
Less: Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $76,647 $84,040 $88,746 $94,392 $101,293 $109,919
Value per Share (3) $1.44 $1.58 $1.67 $1.77 $1.90 $2.06
Implied Exit Multiple of 8.1x 9.5x 10.5x 11.6x 12.9x 14.6x
EBITDA
12.0% Present Value of Cash Flows $33,652 $33,652 $33,652 $33,652 $33,652 $33,652
Terminal Value $33,461 $38,609 $41,777 $45,473 $49,841 $55,082
Enterprise Value $67,113 $72,261 $75,429 $79,125 $83,493 $88,735
Less: Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $67,113 $72,261 $75,429 $79,125 $83,493 $88,735
Value per Share (3) $1.26 $1.36 $1.42 $1.49 $1.57 $1.67
Implied Exit Multiple of 7.1x 8.2x 8.8x 9.6x 10.6x 11.7x
EBITDA
13.0% Present Value of Cash Flows $32,311 $32,311 $32,311 $32,311 $32,311 $32,311
Terminal Value $27,385 $31,105 $33,336 $35,887 $38,829 $42,263
Enterprise Value $59,696 $63,415 $65,647 $68,197 $71,140 $74,573
Less: Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $59,696 $63,415 $65,647 $68,197 $71,140 $74,573
Value per Share (3) $1.12 $1.19 $1.23 $1.28 $1.34 $1.40
Implied Exit Multiple of 6.3x 7.2x 7.7x 8.3x 8.9x 9.7x
EBITDA
14.0% Present Value of Cash Flows $31,051 $31,051 $31,051 $31,051 $31,051 $31,051
Terminal Value $22,709 $25,475 $27,102 $28,932 $31,007 $33,377
Enterprise Value $53,760 $56,525 $58,152 $59,983 $62,057 $64,428
Less: Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $53,760 $56,525 $58,152 $59,983 $62,057 $64,428
Value per Share (3) $1.01 $1.06 $1.09 $1.13 $1.17 $1.21
Implied Exit Multiple of 5.7x 6.4x 6.8x 7.2x 7.7x 8.3x
EBITDA
</TABLE>
(1) Present values as of 9/15/95.
(2) Segment net debt is assumed to be $0, and is consolidated with the parent
debt.
(3) Based on fully diluted shares including 51,714,736 shares outstanding as
of 3/31/95, plus 1,535,338 options outstanding as of 1/1/95 per LIN
management.
WASSERSTEIN PERELLA & CO.
- -------------------------------------------------------------------------------
<PAGE>
Page 47
LIN BROADCASTING LIN TELEVISION STATIONS - LIN MANAGEMENT CASE
- ------------------------------------------------------------------------------
LIN TELEVISION STATIONS: WOOD-TV AND WOTV-TV (CONT'D)
(IN THOUSANDS, EXCEPT PER SHARE VALUES)
<TABLE>
<CAPTION>
Discount Rate Perpetuity Growth Rates of Free Cash Flow
4.0% 5.0% 5.5% 6.0% 6.5% 7.0%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
11.0% Television Enterprise $76,647 $84,040 $88,746 $94,392 $101,293 $109,919
Value
As a Multiple of (1):
1994 Segment EBITDA $8,302 9.2x 10.1x 10.7x 11.4x 12.2x 13.2x
1995E Segment EBITDA $9,303 8.2 9.0 9.5 10.1 10.9 11.8
1996E Segment EBITDA $9,857 7.8 8.5 9.0 9.6 10.3 11.2
Value per Share (2) $1.44 $1.58 $1.67 $1.77 $1.90 $2.06
12.0% Television Enterprise $67,113 $72,261 $75,429 $79,125 $83,493 $88,735
Value
As a Multiple of (1):
1994 Segment EBITDA $8,302 8.1x 8.7x 9.1x 9.5x 10.1x 10.7x
1995E Segment EBITDA $9,303 7.2 7.8 8.1 8.5 9.0 9.5
1996E Segment EBITDA $9,857 6.8 7.3 7.7 8.0 8.5 9.0
Value per Share (2) $1.26 $1.36 $1.42 $1.49 $1.57 $1.67
13.0% Television Enterprise $59,696 $63,415 $65,647 $68,197 $71,140 $74,573
Value
As a Multiple of (1):
1994 Segment EBITDA $8,302 7.2x 7.6x 7.9x 8.2x 8.6x 9.0x
1995E Segment EBITDA $9,303 6.4 6.8 7.1 7.3 7.6 8.0
1996E Segment EBITDA $9,857 6.1 6.4 6.7 6.9 7.2 7.6
Value per Share (2) $1.12 $1.19 $1.23 $1.28 $1.34 $1.40
14.0% Television Enterprise $53,760 $56,525 $58,152 $59,983 $62,057 $64,428
Value
As a Multiple of (1):
1994 Segment EBITDA $8,302 6.5x 6.8x 7.0x 7.2x 7.5x 7.8x
1995E Segment EBITDA $9,303 5.8 6.1 6.3 6.4 6.7 6.9
1996E Segment EBITDA $9,857 5.5 5.7 5.9 6.1 6.3 6.5
Value per Share (2) $1.01 $1.06 $1.09 $1.13 $1.17 $1.21
</TABLE>
(1) EBITDA figures based on discounted cash flow analysis.
(2) Values per share based on discounted cash flow analysis.
- ---------------------------------------------------------------------
WASSERSTEIN PERELLA & CO.
<PAGE>
Page 48
LIN BROADCASTING LIN CELLULAR PROPORTIONATE-MCCAW CASE WITHOUT AT&T SYNERGIES
- -------------------------------------------------------------------------------
LIN: not including Wireless Data, including Long Distance, including Additional
Products
(in thousands, except per POP values)
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total No. of 25,722 25,980 26,240 26,502 26,767 27,034 27,304 27,578 27,854 28,133 28,414
POPs
% Growth Rate NA 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Beginning 767.205 1,084.603 1,542.510 1,968.679 2,292.740 2,612.018 2,925.895 3,227.817 3,510.390 3,769.132 3,972.509
Subscribers
Gross 543.305 719.061 768.441 707.998 738.034 768.469 790.638 799.337 794.478 770.801 744.273
Subscribers
Added
Deactivations(221.777) (274.801) (343.355) (384.671) (419.506) (454.870) (487.558) (518.039) (535.439) (568.246) (593.681)
Annual % (23.95%) (20.92%) (19.56%) (18.05%) (17.11%) (16.43%) (15.85%) (15.38%) (14.71%) (14.68%) (14.67%)
Churn
Monthly % (2.00%) (1.74%) (1.63%) (1.50%) (1.43%) (1.37%) (1.32%) (1.28%) (1.23%) (1.22%) (1.22%)
Churn
Net 321.528 444.260 425.086 323.327 318.528 313.599 303.080 281.298 259.039 202.555 150.592
Subscribers
Added
Ending
Subscribers 1,084.603 1,542.510 1,968.679 2,292.740 2,612.018 2,925.895 3,227.817 3,510.390 3,769.132 3,972.509 4,123.789
Average 925.904 1,313.557 1,755.595 2,130.710 2,452.379 2,768.957 3,076.856 3,369.104 3,639.761 3,870.821 4,048.149
Subscribers
Total 4.22% 5.94% 7.50% 8.65% 9.76% 10.82% 11.82% 12.73% 13.53% 14.12% 14.51%
Penetration
% Penetration NA 40.8% 26.4% 15.3% 12.8% 10.9% 9.2% 7.7% 6.3% 4.4% 2.8%
Growth
Annual 1.25% 1.71% 1.62% 1.22% 1.19% 1.16% 1.11% 1.02% 0.93% 0.72% 0.53%
Penetration
(1)
% Growth NA 36.8% (5.3%) (24.7%) (2.5%) (2.5%) (4.3%) (8.1%) (8.8%) (22.6%) (26.4%)
</TABLE>
(1) Defined as net subscribers added in a period divided by the population
at the end of the period.
WASSERSTEIN PERELLA & CO.
- ------------------------------------------------------------------------------
<PAGE>
Page 49
LIN BROADCASTING LIN CELLULAR PROPORTIONATE-MCCAW CASE WITHOUT AT&T SYNERGIES
- -------------------------------------------------------------------------------
LIN: NOT INCLUDING WIRELESS DATA, INCLUDING LONG DISTANCE, INCLUDING ADDITIONAL
PRODUCTS (CONT'D)
(IN THOUSANDS, EXCEPT PER POP VALUES)
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999 2000
Income Statement
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue/ Subscriber/ $83.46 $73.56 $65.70 $60.81 $57.42 $54.60 $52.44
Month
% Growth NA (11.9%) (10.7%) (7.4%) (5.6%) (4.9%) (3.9%)
Total Revenues $927,344 $1,159,472 $1,384,214 $1,554,849 $1,689,892 $1,814,133 $1,936,371
% Growth NA 25.0% 19.4% 12.3% 8.7% 7.4% 6.7%
Direct Operating $292,577 $346,573 $431,471 $512,801 $590,145 $659,929 $732,158
Expenses
% of Revenues 31.5% 29.9% 31.2% 33.0% 34.9% 36.4% 37.8%
Cash Flow Before $634,767 $812,899 $952,743 $1,042,048 $1,099,747 $1,154,204 $1,204,213
Marketing
Margin 68.5% 70.1% 68.8% 67.0% 65.1% 63.6% 62.2%
Sales & Marketing $235,251 $294,815 $314,292 $320,015 $328,425 $328,136 $320,999
% of Revenues 25.4% 25.4% 22.7% 20.6% 19.4% 18.1% 16.6%
Sales & Marketing/ $433 $410 $409 $452 $445 $427 $406
Gross Addition
Corporate Expenses $0 $0 $0 $0 $0 $0 $0
% of Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total Operating $527,828 $641,388 $745,763 $832,816 $918,570 $988,065 $1,053,157
Expenses
Operating Cash Flow $399,516 $518,084 $638,451 $722,033 $771,322 $826,068 $883,214
(OCF)
Margin 43.1% 44.7% 46.1% 46.4% 45.6% 45.5% 45.6%
Depreciation & $118,070 $147,554 $206,333 $200,825 $193,549 $182,849 $172,149
Amortization
% of Revenues 12.7% 12.7% 14.9% 12.9% 11.5% 10.1% 8.9%
EBIT $281,445 $370,530 $432,118 $521,208 $577,773 $643,219 $711,065
Margin 30.3% 32.0% 31.2% 33.5% 34.2% 35.5% 36.7%
Taxes $106,949 $140,801 $164,205 $198,059 $219,554 $244,423 $270,205
Effective Tax Rate 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0%
Unlevered Net Income $174,496 $229,729 $267,913 $323,149 $358,219 $398,796 $440,861
Net Margin 18.8% 19.8% 19.4% 20.8% 21.2% 22.0% 22.8%
Free Cash Flow
Unlevered Net Income $174,496 $229,729 $267,913 $323,149 $358,219 $398,796 $440,861
Depreciation & $118,070 $147,554 $206,333 $200,825 $193,549 $182,849 $172,149
Amortization
Capital Expenditures ($175,325) ($235,316) ($253,936) ($215,639) ($149,673) ($137,623) ($128,619)
Change in Working $0 ($23,213) ($22,474) ($17,064) ($13,504) ($12,424) ($12,224)
Capital
As a % of Change in NA 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Revenues
Free Cash Flow (FCF) $117,242 $118,754 $197,836 $291,271 $388,591 $431,597 $472,166
</TABLE>
<TABLE>
<CAPTION>
CONT'D
2001 2002 2003 2004
<C> <C> <C> <C>
$51.11 $50.03 $49.46 $48.90
(2.5%) (2.1%) (1.1%) (1.1%)
$2,066,517 $2,185,024 $2,297,456 $2,375,415
6.7% 5.7% 5.1% 3.4%
$812,259 $894,278 $979,774 $1,035,697
39.3% 40.9% 42.6% 43.6%
$1,254,258 $1,290,746 $1,317,682 $1,339,718
60.7% 59.1% 57.4% 56.4%
$312,541 $297,929 $281,342 $260,496
15.1% 13.6% 12.2% 11.0%
$391 $375 $365 $350
$0 $0 $0 $0
0.0% 0.0% 0.0% 0.0%
$1,124,800 $1,192,207 $1,261,116 $1,296,193
$941,717 $992,817 $1,036,340 $1,079,222
45.6% 45.4% 45.1% 45.4%
$151,996 $131,711 $112,727 $93,804
7.4% 6.0% 4.9% 3.9%
$789,721 $861,105 $923,613 $985,419
38.2% 39.4% 40.2% 41.5%
$300,094 $327,220 $350,973 $374,459
38.0% 38.0% 38.0% 38.0%
$489,627 $533,885 $572,640 $610,960
23.7% 24.4% 24.9% 25.7%
$489,627 $533,885 $572,640 $610,960
$151,996 $131,711 $112,727 $93,804
($107,000) ($97,588) ($75,566) ($54,854)
($13,015) ($11,851) ($11,243) ($7,796)
10.0% 10.0% 10.0% 10.0%
$521,609 $556,158 $598,558 $642,113
</TABLE>
WASSERSTEIN PERELLA & CO.
- ---------------------------------------------------------------------------
<PAGE>
Page 50
LIN BROADCASTING LIN CELLULAR PROPORTIONATE-MCCAW CASE WITHOUT AT&T SYNERGIES
- ------------------------------------------------------------------------------
LIN: NOT INCLUDING WIRELESS DATA, INCLUDING LONG DISTANCE, INCLUDING ADDITIONAL
PRODUCTS (CONT'D)
(IN THOUSANDS, EXCEPT PER POP VALUES)
<TABLE>
<CAPTION>
Discount Perpetuity Growth Rates of Free Cash Flow
Rate
4.0% 5.0% 5.5% 6.0% 6.5% 7.0%
<S> <C> <C> <C> <C> <C> <C> <C>
11.0% Present Value of Cash $2,284,620 $2,284,620 $2,284,620 $2,284,620 $2,284,620 $2,284,620
Flows
Terminal Value $3,617,044 $4,260,460 $4,669,907 $5,161,243 $5,761,765 $6,512,418
Enterprise Value $5,901,663 $6,545,080 $6,954,527 $7,445,863 $8,046,385 $8,797,037
Less: Net Debt (2) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612)
Equity Value $4,424,052 $5,067,468 $5,476,915 $5,968,251 $6,568,773 $7,319,426
Value per Share (3) $83.08 $95.16 $102.85 $112.08 $123.36 $137.45
Enterprise Value/POP $228.29 $253.18 $269.02 $288.03 $311.26 $340.30
Implied Exit Multiple of 8.8x 10.4x 11.4x 12.6x 14.1x 15.9x
EBITDA
12.0% Present Value of Cash $2,178,017 $2,178,017 $2,178,017 $2,178,017 $2,178,017 $2,178,017
Flows
Terminal Value $2,911,820 $3,359,793 $3,635,468 $3,957,089 $4,337,187 $4,793,304
Enterprise Value $5,089,837 $5,537,810 $5,813,485 $6,135,106 $6,515,204 $6,971,321
Less: Net Debt (2) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612)
Equity Value $3,612,226 $4,060,198 $4,335,873 $4,657,495 $5,037,592 $5,493,710
Value per Share (3) $67.84 $76.25 $81.42 $87.46 $94.60 $103.17
Enterprise Value/POP $196.89 $214.22 $224.88 $237.32 $252.03 $269.67
Implied Exit Multiple of 7.7x 8.9x 9.7x 10.5x 11.5x 12.7x
EBITDA
13.0% Present Value of Cash $2,078,320 $2,078,320 $2,078,320 $2,078,320 $2,078,320 $2,078,320
Flows
Terminal Value $2,383,069 $2,706,731 $2,900,928 $3,122,868 $3,378,952 $3,677,717
Enterprise Value $4,461,388 $4,785,050 $4,979,248 $5,201,187 $5,457,271 $5,756,036
Less: Net Debt (2) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612)
Equity Value $2,983,777 $3,307,439 $3,501,636 $3,723,575 $3,979,660 $4,278,425
Value per Share (3) $56.03 $62.11 $65.76 $69.93 $74.74 $80.35
Enterprise Value/POP $172.58 $185.10 $192.61 $201.20 $211.10 $222.66
Implied Exit Multiple of 6.9x 7.8x 8.4x 9.0x 9.7x 10.6x
EBITDA
14.0% Present Value of Cash $1,984,989 $1,984,989 $1,984,989 $1,984,989 $1,984,989 $1,984,989
Flows
Terminal Value $1,976,149 $2,216,834 $2,358,413 $2,517,690 $2,698,204 $2,904,505
Enterprise Value $3,961,138 $4,201,823 $4,343,402 $4,502,679 $4,683,192 $4,889,494
Less: Net Debt (2) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612)
Equity Value $2,483,526 $2,724,211 $2,865,790 $3,025,067 $3,205,581 $3,411,882
Value per Share (3) $46.64 $51.16 $53.82 $56.81 $60.20 $64.07
Enterprise Value/POP $153.23 $162.54 $168.02 $174.18 $181.16 $189.14
Implied Exit Multiple of 6.2x 6.9x 7.4x 7.9x 8.4x 9.1x
EBITDA
</TABLE>
(1) Present values as of 9/15/95. Enterprise value per POP based on 6/30/95
estimated POPs, which is the average of 12/31/94 and 12/31/95E POPs
(2) Based on 3/31/95 net debt of $1,586 million, less option proceeds of $108
million, based on 1,535,338 options outstanding as of 1/1/95 at an average
exercise price of $70.64 per public SEC filings.
(3) Based on fully diluted shares including 51,714,736 shares outstanding as
of 3/31/95, plus 1,535,338 options outstanding as of 1/1/95 per 10-K.
- ---------------------------------------------------------------------
WASSERSTEIN PERELLA & CO.
<PAGE>
Page 51
LIN BROADCASTING LIN CELLULAR PROPORTIONATE - MCCAW CASE WITHOUT AT&T SYNERGIES
- -------------------------------------------------------------------------------
LIN: NOT INCLUDING WIRELESS DATA, INCLUDING LONG DISTANCE, INCLUDING ADDITIONAL
PRODUCTS (CONT'D)
(IN THOUSANDS, EXCEPT PER POP VALUES)
<TABLE>
<CAPTION>
Discount Terminal Exit Multiples of OCF
Rate
9.5x 10.0x 10.5x 11.0x 11.5x
<S> <C> <C> <C> <C> <C> <C>
11.0% Present Value of Cash $2,284,620 $2,284,620 $2,284,620 $2,284,620 $2,284,620
Flows
Terminal Value $3,887,240 $4,091,831 $4,296,423 $4,501,014 $4,705,606
Enterprise Value $6,171,859 $6,376,451 $6,581,042 $6,785,634 $6,990,225
Less: Net Debt (2) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612)
Equity Value $4,694,248 $4,898,839 $5,103,431 $5,308,022 $5,512,614
Value per Share (3) $88.15 $92.00 $95.84 $99.68 $103.52
Enterprise Value / POP $237.56 $245.44 $253.31 $261.19 $269.06
Implied Perpetuity 4.5% 4.8% 5.0% 5.3% 5.5%
Growth Rate
12.0% Present Value of Cash $2,178,017 $2,178,017 $2,178,017 $2,178,017 $2,178,017
Flows
Terminal Value $3,576,383 $3,764,614 $3,952,845 $4,141,076 $4,329,306
Enterprise Value $5,754,401 $5,942,631 $6,130,862 $6,319,093 $6,507,323
Less: Net Debt (2) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612)
Equity Value $4,276,789 $4,465,020 $4,653,250 $4,841,481 $5,029,712
Value per Share (3) $80.32 $83.85 $87.38 $90.92 $94.45
Enterprise Value / POP $221.49 $228.74 $235.98 $243.23 $250.47
Implied Perpetuity 5.4% 5.7% 6.0% 6.3% 6.5%
Growth Rate
13.0% Present Value of Cash $2,078,320 $2,078,320 $2,078,320 $2,078,320 $2,078,320
Flows
Terminal Value $3,292,825 $3,466,131 $3,639,438 $3,812,744 $3,986,051
Enterprise Value $5,371,144 $5,544,451 $5,717,757 $5,891,064 $6,064,370
Less: Net Debt (2) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612)
Equity Value $3,893,532 $4,066,839 $4,240,146 $4,413,452 $4,586,759
Value per Share (3) $73.12 $76.37 $79.63 $82.88 $86.14
Enterprise Value / POP $206.74 $213.41 $220.08 $226.75 $233.42
Implied Perpetuity 6.3% 6.7% 6.9% 7.2% 7.4%
Growth Rate
14.0% Present Value of Cash $1,984,989 $1,984,989 $1,984,989 $1,984,989 $1,984,989
Flows
Terminal Value $3,033,956 $3,193,637 $3,353,319 $3,513,001 $3,672,683
Enterprise Value $5,018,944 $5,178,626 $5,338,308 $5,497,990 $5,657,672
Less: Net Debt (2) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612)
Equity Value $3,541,333 $3,701,014 $3,860,696 $4,020,378 $4,180,060
Value per Share (3) $66.50 $69.50 $72.50 $75.50 $78.50
Enterprise Value / POP $193.18 $199.33 $205.48 $211.62 $217.77
Implied Perpetuity 7.3% 7.6% 7.9% 8.2% 8.4%
Growth Rate
15.0% Present Value of Cash $1,897,534 $1,897,534 $1,897,534 $1,897,534 $1,897,534
Flows
Terminal Value $2,797,438 $2,944,671 $3,091,905 $3,239,138 $3,386,372
Enterprise Value $4,694,972 $4,842,205 $4,989,439 $5,136,673 $5,283,906
Less: Net Debt (2) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612)
Equity Value $3,217,360 $3,364,594 $3,511,827 $3,659,061 $3,806,294
Value per Share (3) $60.42 $63.18 $65.95 $68.71 $71.48
Enterprise Value / POP $180.71 $186.38 $192.05 $197.72 $203.38
Implied Perpetuity 8.2% 8.5% 8.8% 9.1% 9.3%
Growth Rate
</TABLE>
(1) Present values as of 9/15/95. Enterprise value per POP based on 1995 POPs.
(2) Based on 3/31/95 net debt of $1,586 million, less option proceeds of $108
million, based on 1,535,338 options outstanding as of 1/1/95 at an average
exercise price of $70.64 per public SEC filings.
(3) Based on fully diluted shares including 51,714,736 shares outstanding as
of 3/31/95, plus 1,535,338 options outstanding as of 1/1/95 per 10-K.
WASSERSTEIN PERELLA & CO.
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LIN WIRELESS DATA OPERATING MODEL (IN THOUSANDS)
<TABLE>
<CAPTION>
INCOME 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
STATEMENT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TOTAL REVENUES $0 $2,250 $9,000 $23,750 $44,500 $73,500 $106,500 $138,450 $179,985 $233,981 $304,175
% Growth NA NM 300.0% 163.9% 87.4% 65.2% 44.9% 30.0% 30.0% 30.0% 30.0%
DIRECT $0 $4,225 $7,000 $11,000 $17,000 $20,000 $22,750 $29,575 $38,448 $49,982 $64,976
OPERATING
REVENUES
% of Revenues NA 187.8% 77.8% 46.3% 38.2% 27.2% 21.4% 21.4% 21.4% 21.4% 21.4%
CASH FLOW $0 ($1,975) $2,000 $12,750 $27,500 $53,500 $83,750 $108,875 $141,537 $183,999 $239,199
BEFORE
MARKETING
Margin NA (87.8%) 22.2% 53.7% 61.8% 72.8% 78.6% 78.6% 78.6% 78.6% 78.6%
SALES & $0 $2,750 $5,250 $9,500 $15,500 $22,000 $32,000 $41,600 $54,080 $70,304 $91,395
MARKETING
% of Revenues NA 122.2% 58.3% 40.0% 34.8% 29.9% 30.0% 30.0% 30.0% 30.0% 30.0%
CORPORATE $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
EXPENSES
% of Revenues NA 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
TOTAL $0 $6,975 $12,250 $20,500 $32,500 $42,000 $54,750 $71,175 $92,528 $120,286 $156,371
OPERATING
EXPENSES
OPERATING CASH $0 ($4,725) ($3,250) $3,250 $12,000 $31,500 $51,750 $67,275 $87,457 $113,695 $147,804
CASH ("OCF")
Margin NA (210.0%) (36.1%) 13.7% 27.0% 42.9% 48.6% 48.6% 48.6% 48.6% 48.6%
DEPRECIATION $0 $10,600 $11,160 $8,696 $9,197 $10,149 $8,416 $6,666 $6,330 $6,071 $5,524
&
AMORTIZATION
% of Revenues NA 471.1% 124.0% 36.6% 20.7% 13.8% 7.9% 4.8% 3.5% 2.6% 1.8%
EBIT $0 ($15,325)($14,410) ($5,446) $2,803 $21,351 $43,334 $60,609 $81,127 $107,624 $142,280
Margin NA (681.1%) (160.1%) (22.9%) 6.3% 29.0% 40.7% 43.8% 45.1% 46.0% 46.8%
TAXES $0 ($5,824) ($5,476) ($2,069) $1,065 $8,113 $16,467 $23,031 $30,828 $40,897 $54,066
Effective Tax 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0%
Rate
UNLEVERED NET $0 ($9,502) ($8,934) ($3,377) $1,738 $13,238 $26,867 $37,578 $50,299 $66,727 $88,214
INCOME
Net Margin NA (422.3%) (99.3%) (14.2%) 3.9% 18.0% 25.2% 27.1% 27.9% 28.5% 29.0%
Free Cash Flow
UNLEVERED NET $0 ($9,502) ($8,934) ($3,377) $1,738 $13,238 $26,867 $37,578 $50,299 $66,727 $88,214
INCOME
DEPRECIATION $0 $10,600 $11,160 $8,696 $9,197 $10,149 $8,416 $6,666 $6,330 $6,071 $5,524
&
AMORTIZATION
CAPITAL $0 ($19,000) ($5,000) ($5,000)($10,000)($10,000) ($5,250) ($5,250) ($5,250) ($5,250) ($5,250)
EXPENDITURES
CHANGE IN $0 ($225) ($675) ($1,475) ($2,075) ($2,900) ($3,300) ($3,195) ($4,154) ($5,400) ($7,019)
WORKING
CAPITAL
As a % of NA 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Change in
Revenues
FREE CASH $0 ($18,127) ($3,449) ($1,156) ($1,140) $10,487 $26,733 $35,799 $47,225 $62,148 $81,468
FLOW ("FCF")
</TABLE>
WASSERSTEIN PERELLA & CO.
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LIN: WIRELESS DATA(1)
(IN THOUSANDS, EXCEPT PER SHARE VALUES)
<TABLE>
<CAPTION>
Discount Rate PERPETUITY GROWTH RATES OF FREE CASH FLOW
6.0% 8.0% 10.0% 12.0% 14.0%
<S> <C> <C> <C> <C> <C> <C>
18.0%
Present Value of Cash Flows $66,995 $66,995 $66,995 $66,995 $66,995
Terminal Value $154,566 $188,978 $240,598 $326,629 $498,693
-------- -------- -------- -------- --------
ENTERPRISE VALUE $221,560 $255,973 $307,592 $393,624 $565,688
Net Debt $0 $0 $0 $0 $0
EQUITY VALUE $221,560 $255,973 $307,592 $393,624 $565,688
VALUE PER SHARE $4.16 $4.80 $5.77 $7.39 $10.61
Implied Exit Multiple of 4.9x 6.0x 7.6x 10.3x 15.7x
EBITDA
19.0%
Present Value of Cash Flows $62,520 $62,520 $62,520 $62,520 $62,520
Terminal Value $131,915 $158,841 $197,734 $258,851 $368,863
-------- -------- -------- -------- --------
ENTERPRISE VALUE $194,435 $221,361 $260,254 $321,371 $431,383
Net Debt $0 $0 $0 $0 $0
EQUITY VALUE $194,435 $221,361 $260,254 $321,371 $431,383
VALUE PER SHARE $3.65 $4.15 $4.88 $6.03 $8.09
Implied Exit Multiple of 4.5x 5.4x 6.7x 8.8x 12.6x
EBITDA
20.0%
Present Value of Cash Flows $58,362 $58,362 $58,362 $58,362 $58,362
Terminal Value $113,327 $134,710 $164,645 $209,549 $284,387
-------- -------- -------- -------- --------
ENTERPRISE VALUE $171,689 $193,072 $223,007 $267,910 $342,749
Net Debt $0 $0 $0 $0 $0
EQUITY VALUE $171,689 $193,072 $223,007 $267,910 $342,749
VALUE PER SHARE $3.22 $3.62 $4.18 $5.03 $6.43
Implied Exit Multiple of 4.2x 5.0x 6.1x 7.7x 10.5x
EBITDA
21.0%
Present Value of Cash Flows $54,495 $54,495 $54,495 $54,495 $54,495
Terminal Value $97,922 $115,118 $138,568 $172,440 $225,668
-------- -------- -------- -------- --------
ENTERPRISE VALUE $152,416 $169,613 $193,063 $226,935 $280,163
Net Debt $0 $0 $0 $0 $0
EQUITY VALUE $152,416 $169,613 $193,063 $226,935 $280,163
VALUE PER SHARE $2.86 $3.18 $3.62 $4.26 $5.26
Implied Exit Multiple of 3.9x 4.6x 5.5x 6.9x 9.0x
EBITDA
</TABLE>
(1) Present Values as of 9/15/95.
WASSERSTEIN PERELLA & CO.
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LIN: NOT INCLUDING WIRELESS DATA, INCLUDING LONG DISTANCE, INCLUDING
ADDITIONAL PRODUCTS
(IN THOUSANDS, EXCEPT PER POP VALUES)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Total No. of POPs 25,722 25,980 26,240 26,502 26,767 27,034 27,304 27,578 27,854 28,133 28,414
% Growth Rate NA 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Beginning 771.302 1,092.076 1,587.399 2,070.865 2,481.767 2,886.521 3,284.306 3,666.878 4,024.885 4,352.573 4,610.246
Subscribers
Gross Subscribers 557.510 744.662 822.650 805.766 855.424 899.623 934.151 947.786 944.519 968.685 881.533
Added
Deactivations (236.737) (249.339) (339.184) (394.864) (450.669) (501.838) (551.579) (589.779) (616.831) (711.013) (689.666)
Annual % Churn (25.41%) (18.61%) (18.54%) (17.35%) (16.79%) (16.26%) (15.87%) (15.34%) (14.73%) (15.87%) (14.65%)
Monthly % Churn (2.12%) (1.55%) (1.55%) (1.45%) (1.40%) (1.36%) (1.32%) (1.28%) (1.23%) (1.32%) (1.22%)
Net Subscribers 320.774 495.322 483.466 410.902 404.754 397.785 382.573 358.007 327.688 257.673 191.867
Added
Ending Subscribers 1,092.076 1,587.399 2,070.865 2,481.767 2,886.521 3,284.306 3,666.878 4,024.885 4,352.573 4,610.246 4,802.113
Average Subscribers 931.689 1,339.737 1,829.132 2,276.316 2,684.144 3,085.413 3,475.592 3,845.882 4,188.729 4,481.410 4,706.180
Total Penetration 4.25% 6.11% 7.89% 9.36% 10.78% 12.15% 13.43% 14.59% 15.63% 16.39% 16.90%
% Penetration Growth NA 43.9% 29.2% 18.7% 15.2% 12.7% 10.5% 8.7% 7.1% 4.9% 3.1%
Annual Penetration 1.25% 1.91% 1.84% 1.55% 1.51% 1.47% 1.40% 1.30% 1.18% 0.92% 0.68%
(1)
% Growth NA 52.9% (3.4%) (15.9%) (2.5%) (2.7%) (4.8%) (7.3%) (9.4%) (22.1%) (26.3%)
</TABLE>
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PRODUCTS (CONT'D)
(IN THOUSANDS, EXCEPT PER POP VALUES)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998 1999
Income Statement
Revenue/Subscriber/ $82.60 $73.09 $66.84 $62.53 $60.13 $57.29
Month
% Growth NA (11.5%) (8.6%) (6.4%) (3.8%) (4.7%)
Total Revenues $923,546 $1,175,108 $1,467,136 $1,708,154 $1,936,835 $2,121,322
% Growth NA 27.2% 24.9% 16.4% 13.4% 9.5%
Direct Operating - $279,817 $339,134 $461,244 $559,882 $665,940 $750,474
Expenses
% of Revenues 30.3% 28.9% 31.4% 32.8% 34.4% 35.4%
Cash Flow Before - $643,729 $835,974 $1,005,891 $1,148,272 $1,270,895 $1,370,848
Marketing
Margin 69.7% 71.1% 68.6% 67.2% 65.6% 64.6%
Sales & Marketing $241,402 $305,311 $336,464 $364,206 $380,663 $384,139
% of Revenues 26.1% 26.0% 22.9% 21.3% 19.7% 18.1%
Sales & Marketing / $433 $410 $409 $452 $445 $427
Gross Addition
Corporate Expenses $0 $0 $0 $0 $0 $0
% of Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total Operating - $521,219 $644,446 $797,708 $924,088 $1,046,603 $1,134,613
Expenses
Operating Cash Flow $402,327 $530,663 $669,428 $784,066 $890,232 $986,709
(OCF)
Margin 43.6% 45.2% 45.6% 45.9% 46.0% 46.5%
Depreciation & $128,184 $188,818 $238,986 $260,674 $261,625 $248,446
Amortization
% of Revenues 13.9% 16.1% 16.3% 15.3% 13.5% 11.7%
EBIT $274,143 $341,845 $430,442 $523,392 $628,606 $738,263
Margin 29.7% 29.1% 29.3% 30.6% 32.5% 34.8%
Taxes $104,174 $129,901 $163,568 $198,889 $238,870 $280,540
Effective Tax Rate 38.0% 38.0% 38.0% 38.0% 38.0% 38.0%
Unlevered Net Income $169,968 $211,944 $266,874 $324,503 $389,736 $457,723
Net Margin 18.4% 18.0% 18.2% 19.0% 20.1% 21.6%
Free Cash Flow
Unlevered Net Income $169,968 $211,944 $266,874 $324,503 $389,736 $457,723
Depreciation & $128,184 $188,818 $238,986 $260,674 $261,625 $248,446
Amortization
Capital Expenditures ($190,343) ($301,124) ($294,122) ($279,903) ($202,317) ($186,996)
Change in Working - $0 ($25,156) ($29,203) ($24,102) ($22,868) ($18,449)
Capital
As a % of Change in - NA 10.0% 10.0% 10.0% 10.0% 10.0%
Revenues
Free Cash Flow (FCF) $107,810 $74,482 $182,535 $281,172 $426,176 $500,725
</TABLE>
<TABLE>
<CAPTION>
<CONT'D>
<C> <C> <C> <C> <C>
2000 2001 2002 2003 2004
$55.83 $55.17 $54.94 $54.75 $54.15
(2.6%) (1.2%) (0.4%) (0.3%) (1.1%)
$2,328,346 $2,546,174 $2,761,366 $2,944,454 $3,057,837
9.8% 9.4% 8.5% 6.6% 3.9%
$858,201 $975,525 $1,096,295 $1,193,546 $1,261,177
36.9% 38.3% 39.7% 40.5% 41.2%
$1,470,145 $1,570,650 $1,665,070 $1,750,908 $1,796,660
63.1% 61.7% 60.3% 59.5% 58.8%
$379,265 $370,584 $354,195 $353,570 $308,537
16.3% 14.6% 12.8% 12.0% 10.1%
$406 $391 $375 $365 $350
$0 $0 $0 $0 $0
0.0% 0.0% 0.0% 0.0% 0.0%
$1,237,467 $1,346,109 $1,450,490 $1,547,117 $1,569,714
$1,090,879 $1,200,065 $1,310,876 $1,397,338 $1,488,123
46.9% 47.1% 47.5% 47.5% 48.7%
$227,060 $202,078 $175,851 $152,833 $130,473
9.8% 7.9% 6.4% 5.2% 4.3%
$863,819 $997,988 $1,135,025 $1,244,505 $1,357,650
37.1% 39.2% 41.1% 42.3% 44.4%
$328,251 $379,235 $431,309 $472,912 $515,907
38.0% 38.0% 38.0% 38.0% 38.0%
$535,568 $618,752 $703,715 $771,593 $841,743
23.0% 24.3% 25.5% 26.2% 27.5%
$535,568 $618,752 $703,715 $771,593 $841,743
$227,060 $202,078 $175,851 $152,833 $130,473
($169,646) ($142,256) ($130,292) ($102,451) ($76,298)
($20,702) ($21,783) ($21,519) ($18,309) ($11,338)
10.0% 10.0% 10.0% 10.0% 10.0%
$572,280 $656,792 $727,755 $803,666 $884,580
</TABLE>
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PRODUCTS (CONT'D)
(IN THOUSANDS, EXCEPT PER POP VALUES)
<TABLE>
<CAPTION>
Discount Perpetuity Growth Rates of Free Cash Flow
Rate
<S> <C> <C> <C> <C> <C> <C> <C>
4.0% 5.0% 5.5% 6.0% 6.5% 7.0%
11.0% Present Value of Cash $2,707,663 $2,707,663 $2,707,663 $2,707,663 $2,707,663 $2,707,663
Flows
Terminal Value $4,982,868 $5,869,244 $6,433,301 $7,110,169 $7,937,453 $8,971,558
Enterprise Value $7,690,531 $8,576,906 $9,140,964 $9,817,832 $10,645,116 $11,679,221
Less: Net Debt (2) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612)
Equity Value $6,212,919 $7,099,295 $7,663,352 $8,340,220 $9,167,504 $10,201,609
Value per Share (3) $116.67 $133.32 $143.91 $156.62 $172.16 $191.58
Enterprise Value / POP $297.49 $331.78 $353.60 $379.78 $411.78 $451.79
Implied Exit Multiple of 8.8x 10.4x 11.4x 12.6x 14.1x 15.9x
EBITDA
12.0% Present Value of Cash $2,573,833 $2,573,833 $2,573,833 $2,573,833 $2,573,833 $2,573,833
Flows
Terminal Value $4,011,347 $4,628,477 $5,008,250 $5,451,317 $5,974,943 $6,603,294
Enterprise Value $6,585,179 $7,202,310 $7,582,082 $8,025,150 $8,548,776 $9,177,126
Less: Net Debt (2) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612)
Equity Value $5,107,568 $5,724,698 $6,104,470 $6,547,538 $7,071,164 $7,699,515
Value per Share (3) $95.92 $107.51 $114.64 $122.96 $132.79 $144.59
Enterprise Value / POP $254.73 $278.61 $293.30 $310.44 $330.69 $355.00
Implied Exit Multiple of 7.7x 8.9x 9.6x 10.5x 11.5x 12.7x
EBITDA
13.0% Present Value of Cash $2,448,894 $2,448,894 $2,448,894 $2,448,894 $2,448,894 $2,448,894
Flows
Terminal Value $3,282,934 $3,728,814 $3,996,341 $4,302,087 $4,654,871 $5,066,452
Enterprise Value $5,731,829 $6,177,708 $6,445,236 $6,750,982 $7,103,765 $7,515,346
Less: Net Debt (2) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612)
Equity Value $4,254,217 $4,700,096 $4,967,624 $5,273,370 $5,626,153 $6,037,734
Value per Share (3) $79.89 $88.26 $93.29 $99.03 $105.66 $113.38
Enterprise Value / POP $221.72 $238.97 $249.32 $261.15 $274.79 $290.72
Implied Exit Multiple of 6.9x 7.8x 8.4x 9.0x 9.7x 10.6x
EBITDA
14.0% Present Value of Cash $2,332,145 $2,332,145 $2,332,145 $2,332,145 $2,332,145 $2,332,145
Flows
Terminal Value $2,722,359 $3,053,928 $3,248,969 $3,468,390 $3,717,067 $4,001,269
Enterprise Value $5,054,503 $5,386,073 $5,581,113 $5,800,534 $6,049,211 $6,333,414
Less: Net Debt (2) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612)
Equity Value $3,576,892 $3,908,461 $4,103,502 $4,322,923 $4,571,600 $4,855,802
Value per Share (3) $67.17 $73.40 $77.06 $81.18 $85.85 $91.19
Enterprise Value / POP $195.52 $208.35 $215.89 $224.38 $234.00 $244.99
Implied Exit Multiple of 6.2x 6.9x 7.4x 7.9x 8.4x 9.1x
EBITDA
Implied Exit Multiple of 5.6x 6.2x 6.6x 7.0x 7.4x 8.0x
EBITDA
</TABLE>
(1) Present values as of 9/15/95. Enterprise value per POP based on 6/30/95
estimated POPs, which is the average of 12/31/94 and 12/31/95E POPs.
(2) Based on 3/31/95 net debt of $1,586 million, less option proceeds of $108
million, based on 1,535,338 options outstanding as of 1/1/95 at an average
exercise price of $70.64 per public SEC filings.
(3) Based on fully diluted shares including 51,714,736 shares outstanding as of
3/31/95, plus 1,535,338 options outstanding as of 1/1/95 per the 10-K.
WASSERSTEIN PERELLA & CO.
- ------------------------------------------------------------------------------
<PAGE>
Page 57
LIN BROADCASTING LIN CELLULAR PROPORTIONATE - SENSITIVITY CASE
- -----------------------------------------------------------------------------
LIN: NOT INCLUDING WIRELESS DATA, INCLUDING LONG DISTANCE, INCLUDING
ADDITIONAL PRODUCTS (CONT'D)
(IN THOUSANDS, EXCEPT PER POP VALUES)
<TABLE>
<CAPTION>
Discount Rate Terminal Exit Multiples of OCF
9.5x 10.0x 10.5x 11.0x 11.5x
<S> <C> <C> <C> <C> <C> <C>
11.0% Present Value of Cash Flows $2,707,663 $2,707,663 $2,707,663 $2,707,663 $2,707,663
Terminal Value $5,360,055 $5,642,163 $5,924,272 $6,206,380 $6,488,488
Enterprise Value $8,067,718 $8,349,826 $8,631,934 $8,914,043 $9,196,151
Less: Net Debt (2) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612)
Equity Value $6,590,106 $6,872,214 $7,154,323 $7,436,431 $7,718,539
Value per Share (3) $123.76 $129.06 $134.35 $139.65 $144.95
Enterprise Value / POP $310.53 $321.39 $332.25 $343.11 $353.97
Implied Perpetuity Growth Rate 4.5% 4.8% 5.1% 5.3% 5.5%
12.0% Present Value of Cash Flows $2,573,833 $2,573,833 $2,573,833 $2,573,833 $2,573,833
Terminal Value $4,931,421 $5,190,969 $5,450,517 $5,710,066 $5,969,614
Enterprise Value $7,505,253 $7,764,801 $8,024,350 $8,283,898 $8,543,447
Less: Net Debt (2) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612)
Equity Value $6,027,641 $6,287,190 $6,546,738 $6,806,287 $7,065,835
Value per Share (3) $113.19 $118.56 $122.94 $127.82 $132.69
Enterprise Value / POP $288.88 $298.87 $308.86 $318.86 $328.85
Implied Perpetuity Growth Rate 5.4% 5.7% 6.0% 6.3% 6.5%
13.0% Present Value of Cash Flows $2,448,894 $2,448,894 $2,448,894 $2,448,894 $2,448,894
Terminal Value $4,540,426 $4,779,395 $5,018,365 $5,257,335 $5,496,305
Enterprise Value $6,989,320 $7,228,290 $7,467,259 $7,706,229 $7,945,199
Less: Net Debt (2) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612)
Equity Value $5,511,708 $5,750,678 $5,989,648 $6,228,617 $6,467,587
Value per Share (3) $103.51 $107.99 $112.48 $116.97 $121.46
Enterprise Value / POP $269.03 $278.22 $287.42 $296.62 $305.82
Implied Perpetuity Growth Rate 6.3% 6.7% 6.9% 7.2% 7.4%
14.0% Present Value of Cash Flows $2,332,145 $2,332,145 $2,332,145 $2,332,145 $2,332,145
Terminal Value $4,183,475 $4,403,658 $4,623,841 $4,844,024 $5,064,207
Enterprise Value $6,515,620 $6,735,803 $6,955,986 $7,176,168 $7,396,351
Less: Net Debt (2) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612)
Equity Value $5,038,008 $5,258,191 $5,478,374 $5,698,557 $5,918,740
Value per Share (3) $94.61 $98.75 $102.88 $107.02 $111.64
Enterprise Value / POP $250.79 $259.27 $267.74 $276.22 $284.69
Implied Perpetuity Growth Rate 7.3% 7.6% 7.9% 8.2% 8.4%
15.0% Present Value of Cash Flows $2,222,944 $2,222,944 $2,222,944 $2,222,944 $2,222,944
Terminal Value $3,857,344 $4,060,362 $4,263,380 $4,466,398 $4,669,416
Enterprise Value $6,080,288 $6,283,306 $6,486,324 $6,689,342 $6,892,360
Less: Net Debt (2) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612) ($1,477,612)
Equity Value $4,602,676 $4,805,694 $5,008,712 $5,211,730 $5,414,748
Value per Share (3) $86.44 $90.25 $94.06 $97.87 $101.69
Enterprise Value / POP $234.04 $241.85 $249.66 $257.48 $265.29
Implied Perpetuity Growth Rate 8.2% 8.5% 8.8% 9.1% 9.3%
</TABLE>
(1) Present values as of 9/15/95. Enterprise value per POP based on 1995 POPs.
(2) Based on 3/31/95 net debt of $1,560 million, less option proceeds of $108
million, based on 1,535,338 options outstanding as of 1/1/95 at an average
exercise price of $70.64 per public SEC filings.
(3) Based on fully diluted shares including 51,714,736 shares outstanding as of
3/31/95, plus 1,535,338 options outstanding as of 1/1/95 per the 10-K
WASSERSTEIN PERELLA & CO.
- -----------------------------------------------------------------------------
<PAGE>
Page 58
LIN BROADCASTING Discounted Cash Flow Analysis
- ------------------------------------------------------------------------------
WACC ASSUMPTIONS AND CALCULATIONS
<TABLE>
<CAPTION>
ASSUMPTIONS
<S> <C>
Tax Rate 40.00%
Risk Free Rate of Return 6.09%
Market Risk Premium 7.22%
</TABLE>
Risk Free Rate = 10 year U.S. Treasury as of 6/28/95
Market Risk Premium as per Ibbotson, 1994 Yearbook
<TABLE>
<CAPTION>
UNLEVERED BETAS (1)
<S> <C> <C> <C> <C> <C>
Current Mkt. Val. Mkt. Val. Debt/
Levered of Debt of Equity Total Unlevered
Company Beta (2) ($MM) ($MM) Capital Beta (3)
AirTouch Comm. 1.00 $494 $13,620 3.5% 0.98
LIN Broadcasting 1.05 52 6,628 19.2% 0.96
Cellular Comm. 0.72 57 1,825 3.0% 0.71
Vanguard Cellular 0.97 41 980 4.0% 0.95
Average 0.94 $161 $5,763 7.4% 0.90
</TABLE>
<TABLE>
<CAPTION>
WEIGHTED AVERAGE COST OF CAPITAL (4)
<S> <C> <C> <C> <C> <C> <C> <C>
Capital Cost of Cost of
Structure Equity Debt Wtd. Avg.
Debt/ Debt/ Relevered Cost of Before After Cost of
Capital Equity Beta (5) Equity Tax Tax Capital
0% 0% 0.90 12.58% 9.000% 5.40% 12.58%
5% 5% 0.93 12.78% 9.000% 5.40% 12.41%
10% 11% 0.96 13.01% 9.000% 5.40% 12.25%
15% 18% 0.99 13.27% 9.000% 5.40% 12.09%
20% 25% 1.03 13.55% 9.000% 5.40% 11.92%
25% 33% 1.08 13.88% 9.333% 5.60% 11.81%
30% 43% 1.13 14.25% 9.667% 5.80% 11.71%
35% 54% 1.19 14.67% 10.000% 6.00% 11.64%
</TABLE>
* WACC is widely acknowledged to be only an estimate of the cost of
capital, as the capital asset pricing model is no longer perfectly
consistent with recent finance theory.
(1) Assumes book value of debt approximates market value and
excludes minority interests.
(2) Predicted beta as per BARRA, U.S. Equity Beta Book, May 1995.
(3) Unlevered Beta = Levered Beta / { 1+ (Debt/Equity)*(1-Tax Rate)}.
(4) Based on the Weighted Average Cost of Capital and the Capital
Asset Pricing Model and on WP&Co. calculations.
(5) Relevered Beta = Unlevered Beta * {1 + (Debt/Equity)*(1-Tax Rate)}.
WASSERSTEIN PERELLA & CO.
- ---------------------------------------------------------------------------
<PAGE>
<PAGE>
EXHIBIT (b)(3) Materials prepared by Morgan Stanley & Co.
Incorporated.
<PAGE>
<PAGE>
MORGAN STANLEY CONFIDENTIAL MEMORANDUM
- -----------------------------------------------------------------
TO: Wasserstein Perella & Co. DATE: March 5, 1995
FROM: Morgan Stanley LIN Team
SUBJECT: Issues Relating to Potential Third Party Purchasers
- -----------------------------------------------------------------
We would like to take this opportunity to highlight three key
points relating to third party buyers which were not discussed at
our March 2 meeting. Additionally, we have attached a separate
memorandum that refutes the alleged inconsistencies in our
February 21 presentation.
I. Valuation Implications of Excluding AT&T and McCaw as
Potential Bidders
We find it inconceivable that LB/BS did not change their
valuation view after being instructed that their interpretation
that AT&T and McCaw were to be considered as potential bidders
was in fact incorrect.
In their presentation of February 14 to the LIN Independent
Directors, LB/BS devote an entire section to an analysis of the
pro forma effects of a business combination of AT&T with LIN,
presumably to demonstrate that AT&T could well afford to pay a
very high price for LIN with minimal dilution and modest
capitalization implications. Moreover, in the section relating
to third party buyers in the same presentation, AT&T is
specifically referenced as a potential buyer. LB/BS' special
counsel Fried, Frank, in their letter of February 22 to
Wasserstein Perella written at the request of LB/BS, note "the
increased value that would accrue to LIN if AT&T, this country's
telecommunications leader, was considered as a hypothetical
suitor. An interpretation of the Definition that would exclude
AT&T as a hypothetical suitor because it is now a related third
party would have the effect of reducing the Private Market Value
per Share."
Additionally, LB/BS relied extensively upon the operating
projections of equity research analysts in supporting the
reasonableness of the Base Case projections. Many of these
analysts, however, explicitly state that they have included AT&T
value-added in their projections. As a result, these projections
are likely to overstate LIN's performance if owned by an
unrelated third party. LB/BS also relied quite extensively on
Wall Street research estimates and commentary on LIN's potential
private market value. Virtually all of these estimates
explicitly or implicitly factor in AT&T value-added and the
assumed "virtual certainty" of the purchase of LIN by AT&T.
II. Valuation Implications of a Delayed Sale to an Unrelated
Third Party
To the extent 100% of LIN were to be offered for sale to an
unrelated third party, we believe an aggressive but realistic
timetable would include the execution of a definitive agreement
by June 30, 1995 and a closing on or about June 30, 1996. Since
LB/BS' valuation opinion "assumes a closing date for an
acquisition of LIN of June 30, 1995" and an unrelated third party
would likely close on an acquisition of LIN on or about June 30,
1996, two alternative conclusions can be drawn. One is that
LB/BS believe that, if LIN were to be offered for sale to an
unrelated third party, a purchase price of approximately $180 per
share would be agreed to with payment on or around June 30, 1996,
such that its value as of June 30, 1995 would be approximately
$155 per share. We note that an agreement to pay $180 per share
represents an $11 billion transaction requiring purchase
accounting treatment with a valuation of approximately $420 per
POP. Alternatively, one could conclude that LB/BS believe that
their $155 per share valuation view reflects an assumption that
an unrelated third party would agree to pay $155 per share on or
about June 30, 1996, thereby resulting in a value as of June 30,
1995 of less than $135 per share.
We continue to believe that a price of $105 per share payable on
or about June 30, 1995 is a much more consistent and realistic
equilibration of future values that could potentially be achieved
in 1996 through an agreement in 1995 to sell LIN to an unrelated
third party.
III. Review of Unrelated Third Party Potential Purchasers
In arriving at their characterization that "a deep market exists
for LIN's cellular properties," LB/BS have made a number of
misstatements and "tortured" assumptions.
In including AirTouch/US West and Bell Atlantic/NYNEX as
potential purchasers, LB/BS ignore the fact that AirTouch/US West
and Bell Atlantic/NYNEX announced that they had signed a
definitive partnership agreement on October 20, 1994. The
definitive partnership agreement expressly prohibits any partner
from acquiring any ownership interest in a cellular, ESMR or PCS
system (a "System") the service area of which overlaps in any
material respect with the service area of a System in which any
partner or its affiliates already holds an ownership interest.
The definitive agreement has a 99-year term, with earlier
termination only upon the occurrence of very limited specified
events. Each of the partners has agreed not to withdraw or do
anything to dissolve the partnership except by unanimous written
consent of the partners.
We do not understand what could lead LB/BS to assert that this
agreement "could easily be broken by either group to pursue LIN."
Similarly, to suggest that Pacific Telesis could credibly be
considered a buyer of all of LIN given the recent spin-off of all
of their cellular properties defies all logic.
The fact remains that at best there are three feasible bidders
for LIN. Although LB/BS suggest that LIN "could form the basis
of a national wireless strategy" for MCI, enabling MCI to
"leverage its brand name across LIN's markets" for a purchase
price in excess of $7 billion, MCI would only be able to place
its brand in New York and Dallas. Moreover, the notion that an
MCI purchase would "impair AT&T's nationwide wireless strategy"
ignores the fact that such an acquisition would place billions of
dollars in AT&T's hands without any restrictions on AT&T's
ability to compete with MCI in LIN's markets.
The observation that the "[a]ddition of New York would fill a
noticeable gap in SBC's northeastern presence" ignores the fact
that SBC declined to bid on PCS in New York, declined to pay $200
per POP for the SNET properties in New England and declined to
top Comcast's $185 per POP bid for Philadelphia a few years back.
Moreover, although "Los Angeles would give SBC a western
presence" it still would neither get their brand in the Los
Angeles market nor enable their highly regarded management team
to run the cellular operation in Los Angeles. Finally, they do
not appear to have been aggressively pursuing the San Diego
cellular property recently sold by US West.
With respect to BellSouth, although an acquisition of LIN would
give them "complete control of Houston and Los Angeles" the
strategic question is whether they are prepared to pay billions
of dollars to improve a co-control position to a control position
as well as purchase New York and Dallas at very robust per POP
valuations given the resulting dilution and their historically
disciplined approach to cellular values.
In summary, we would characterize third party interest in LIN as
anything but "deep."<PAGE>
<PAGE>
MORGAN STANLEY CONFIDENTIAL MEMORANDUM
- -----------------------------------------------------------------
TO: Wasserstein Perella & Co. DATE: March 5, 1995
FROM: Morgan Stanley LIN Team
SUBJECT: Rebuttal Points
- -----------------------------------------------------------------
The following is a rebuttal to the LB/BS alleged inconsistencies
in the Morgan Stanley presentation of February 21:
1. Use of LIN's Beta
LB/BS consistently gave great weight to LIN's standalone
beta in their presentations from February 9 through February
21 until Morgan Stanley pointed out that they had
incorrectly calculated LIN's standalone asset beta in their
cost of equity calculations (see Exhibit I). Since we have
highlighted this error, LB/BS now disavow the
appropriateness of using LIN's standalone beta in their cost
of equity calculation.
In relying on LIN's specific beta in their analysis
through February 21, BS/LB calculated LIN's asset beta,
or unlevered equity beta, to be 0.99. However, they
failed to re-lever this beta at their stated target
capitalization of 35% when attempting to estimate the
cost of equity for LIN at such a leverage ratio.
Re-levering LIN's equity beta of 0.99 at 35%
debt/capitalization would result in a predicted equity
beta of 1.31. Their cost of equity calculation (using
their assumptions regarding risk-free rate and tax
rate) would be as follows:
Cost of Equity = 7.86% + 1.31 * 7.22% = 17.32%
This calculation is far outside the assumed cost of equity
of 14-16% on which LB/BS relied.
Although LB/BS reference Brealey & Myers in an attempt to
support their position that industry averages are preferable
to individual company betas, Brealey & Myers, Principles of
Corporate Finance, Third Edition, use individual company
betas to determine individual company costs of equity (p.
140). Their caution in using individual company betas is
simply driven by the fact that betas in any one period are
based only on a limited number of observations (p. 178) and
are subject to measurement error. However, given that we
have looked at multiple observations of LIN's beta over
multiple measurement periods extending over a period of
years, we can use LIN's beta with confidence.
Again, referring to Brealey & Myers, we would point out that
a company's beta is a measure of that company's systematic
risk as opposed to nonsystematic risk. We are unaware of
any financial theory which would suggest that a company's
beta is affected by nonsystematic factors. Any movements in
LIN's share price as a result of specific events relating to
the PMVG are clearly nonsystematic and thus do not affect
the calculation of beta. Moreover, LIN's calculated beta
has been remarkably consistent over time, through the
appraisal date.
Finally, given the large-market concentration of LIN's POPs,
with its concomitant reliance on business customers, LIN's
results are arguably more sensitive to changes in overall
macroeconomic conditions than its publicly traded peers,
which is consistent with a higher observed asset beta.
LIN's Target Leverage
To the extent that one believes that a long-term target
capitalization is more appropriate to use than the current
capitalization in estimating a target capital structure, we
would suggest that long distance companies operating in a
competitive environment comprise the most direct universe of
comparable companies. These observed capital structures are
entirely consistent with our assertion that a capital
structure consisting of 20% debt for a cellular company is
indeed aggressive.
Company Net Debt/Market Cap
------- ------------------
MCI -2%
ALC 5%
Sprint(1) 9%
LDDS 19%
AT&T(2) 22%
Mean 11%
LIN's Cost of Debt
Floating debt rates are not appropriate for use in deriving
discount rates to apply to long-term cash flow projections.
- -------------------------
(1) Pro forma for proposed $4.2Bn equity investment by France
Telecom and Deutsche Telekom.
(2) Includes $5.4Bn of indebtedness at AT&T Credit Holdings.
Floating rates of interest today are lower than fixed rates, due
to expectations/risks of a future rise in short-term interest
rates. This risk can be measured by rates charged to swap
floating rate obligations into fixed rate obligations. As of
February 15, 1995, an applicable swap rate (based on LIN's
current credit facility, upon which LB/BS relied) would be T + 34
bp for a 5-year obligation. Based on a 5-year UST yield of
7.34%, a LIBOR obligation could be swapped to a fixed rate
obligation of 7.68%. In addition, the interest rate of LIBOR +
250 bp on this facility increases annually beginning in 1996 to
spreads of LIBOR + 300, + 350, and + 400. These interest rate
calculations are summarized below:
Today 2000
----- ----
Fixed Rate Benchmark (5-Year UST) 7.34% 7.34%
Applicable Swap Spread to
LIBOR (2/15/95) 0.34 0.34
------ ------
Base Swapped Rate 7.68% 7.68%
Bank Facility Spread to LIBOR(3) 2.53 4.06
Fixed-Rate Equivalent Yield 10.21% 11.74%
2. Financial Advisor Discount Rates/Terminal Values in
GTE/Contel Cellular Transaction
Careful analysis of the GTE/Contel Cellular proxy suggests
that with respect to the PaineWebber and Merrill Lynch DCF
valuation analyses, they were almost entirely predicated on
the five-year management projections. "Due to the
inherently less certain nature of the ten year projections,
and the fact that the Company had advised [PaineWebber and
Merrill Lynch] that it had not prepared the ten year
projections as part of its normal planning process,
[PaineWebber and Merrill Lynch] relied more heavily on the
analysis derived from the five year projections."
Lazard Freres, however, chose to use the 10-year Contel
Cellular projections although they had not been prepared as
part of the normal planning process and had cellular EBITDA
projections which showed essentially constant EBITDA from
year six through year ten. To the extent that LIN
Management were to present a business case wherein EBITDA
was projected to be flat from year six through year ten, one
might well attempt to address such conservatism by, among
other things, using lower discount rates and higher exit
multiples than otherwise. (See Exhibit II for further
analysis.)
- ------------------
(3) Represents bond equivalent yield of money market spread
3. Use of Analyst Projections
LB/BS claim that "AT&T [entered] into a $16Bn acquisition
[relying] solely on analyst projections." What Morgan
Stanley in fact stated was that AT&T relied heavily on
analyst revenue and EBITDA estimates through year-end 1994.
Near-term operating projections are far less subject to
error, and AT&T was instructed by McCaw at the time that
analyst estimates were entirely consistent with McCaw
management's internal forecasts for 1993 and 1994.
We have taken exception to analyst projections because they
have explicitly included AT&T value-added which is
explicitly not to be included in arriving at a private
market valuation for LIN. Moreover, we do not consider
research analysts to be experts in the derivation or
application of discount rates or terminal multiples which
would likely be used by third party buyers. Furthermore,
while the research analysts purport to derive the intrinsic
value of LIN assuming it continues to be owned by AT&T and
has the benefit of AT&T synergies, none of the research
analysts appear to have analyzed how an unrelated third
party would approach an acquisition of LIN and what they
might actually pay.
As further evidence of our point, if one accepts all of
Frank Governali's (First Boston research analyst) financial
and operating assumptions for LIN (including his discount
rates and his perpetual growth rates) but applies the
correct arithmetic, one derives values of approximately $100
per share including AT&T value-added.
4. Accuracy of Analyst Projections
The issue is not the fact that analyst projections have
increased over the past couple of years. The issue is
simply that analysts have increased their later year
projections notwithstanding the fact that actual cellular
results have consistently fallen short of previous
projections.
5. Understanding Cellular Fundamentals
We do not see how anyone can dispute the fact that if a
cellular operator achieves the same revenue base as
projected, but does so through more customers spending less
per month, the cellular business must be less profitable.
That is, in order to achieve the same revenue base, the
cellular operator has been forced to incur greater marketing
expenses associated with greater gross adds and greater
churn, as well as greater administrative and operating
expenses and increased capital expenditures.
6. Comparison of Actual vs. Projected LIN Results
After adjusting the 1992 projections to reflect LIN's
additional ownership in New York, actual revenue was only 4%
higher than the 1992 projections, while EBITDA was 18% lower
than those same projections. We do not see how missing the
1992 EBITDA forecast by 18%, which BS/LB have themselves
stated is the most relevant statistic in measuring a
cellular company's operating performance, while being
essentially on target with revenues, suggests anything other
than that LIN has fallen short of its 1992 projections.
7. Wireless Data
Using McCaw Management's assumptions for discount rate and
terminal multiple for Wireless Data of 20% and 10x for
projections over a six-year horizon ending in the year 2000,
implies a value for Wireless Data of $180MM. Morgan
Stanley, in using the ten-year projections for wireless data
derived values of $330MM, or more than 180% of the value
that McCaw management ascribes to the business. Moreover,
this valuation is entirely consistent with the aggregate
value placed on Contel Cellular's wireless division. We
continue to believe that a $330MM valuation is aggressive
since there is no evidence to support the assertion that an
unrelated third party would pay even this much for the
wireless data component.
8. $300 per POP Precedent Transactions
We would like to point out the following regarding precedent
transactions:
- McCaw acquired LIN for a combination of cash and
securities which on a blended basis provided value to
the LIN shareholders of approximately $285 per POP at
announcement and approximately $265 per POP at closing.
- Although Metromedia did pay $15.5MM for a 1.01%
interest in Philadelphia which transformed a 49%
noncontrol position into a 50.01% control position,
they shortly thereafter sold their controlling interest
in Philadelphia for approximately $185 per POP to
Comcast.
- The offer to acquire Associated Communications' 6%
interest in the SF/SJ markets was in part to prevent
Associated from attempting to assert any veto rights on
the proposed McCaw/Pacific Telesis resolution to their
"shotgun" agreement. Even so, the offer represented
only 15x 1993 EBITDA.
- CCI may have traded in excess of $300 per POP in the
public equity markets, but it has not been sold to a
third party so there is still no evidence as to what
someone would actually pay for CCI today.
- The arbitrary allocation of the Washington D.C.
purchase price was discussed in great detail at our
meeting on Thursday.
- Although the Dallas transaction was done at $280 per
POP, that still is not $300 per POP and represents only
7-10x estimated 1995 EBITDA reflecting the property's
superior financial performance resulting from SBC's
60%-plus market share in Dallas.
9. Public Trading Valuation
In reviewing various research reports relating to AirTouch,
we were unable to find any evidence that the analyst
community considers AirTouch's current 1995E EBITDA trading
multiples to be anything other than the approximately 11
times value noted in our presentation and the 11.3 times
noted in the LB/BS presentation of February 15, 1995.
In the course of this review, however, we did become aware
that Lehman Brothers' research analyst, John Bauer, uses a
14% WACC and a 10x EBITDA exit multiple in the year 2000 to
value AirTouch on a DCF basis.
10. SBC's Valuation of Cellular Properties
We continue to note that even though LB/BS attempt to
characterize SBC as a "very aggressive bidder for [the SNET]
properties," SBC was apparently unwilling to pay $200 per
POP for these strategic properties.
11. Original Expectations Re: AT&T/McCaw Closing Date
AT&T believed an 18-month drop dead date would have been
safer to ensure enough time to obtain regulatory approvals
but, recognizing McCaw's need to have the acquisition
resolved before commencement of the PMVG process, proposed a
drop dead date of December 31, 1994. McCaw argued that, if
the merger were not to close, McCaw needed to know that
sufficiently in advance of the PMVG process to give it time
to prepare. Ultimately, the September 30, 1994 drop dead
date was agreed to as a compromise.
AT&T recognized that, because of the nature of the
regulatory process, the drop dead date chosen would tend to
set the time frame and deadline for receipt of approvals.
Thus, AT&T expected that the regulatory approval process was
not likely to be completed much, if at all, in advance of
the drop dead date.
12. Other
There is no need to dignify these allegations with a
response.
<PAGE>
<PAGE>
EXHIBIT I
LIN Broadcasting
Weighted Average Cost of Capital Analysis
Cost of Equity Based on the Capital Asset Pricing Model
The cost of equity is equal to the following formula:
Ke = Rf + B(Rm - Rf)
where:
Ke = Expected rate of return on LIN Broadcasting's Common Stock
Rf = Risk-free rate, usually represented by the intermediate-term
U.S. Treasury Bond rate, herein assumed to be the 10-year
Treasury Bond rate - 7.86%
B = LIN Broadcasting's Equity Beta, herein assumed to be -
1.04(b)
Rm = The expected return on a fully diversified market portfolio
(Rm - Rf) = Expected market return over the risk-free rate.
Assumed - 7.22%(c)
Solving for Ke Using Industry Derived Unleveraged Equity Beta:
Ke = 7.86% + 1.04 * 7.22%
Ke = 15.36%
======
Equity Market Premium(d)
From To Mean (d)
---- ---- --------
1926-36 1993 7.28%
1937-46 1993 7.45%
1947-56 1993 6.44%
Notes: (a) Treasury Bond rate as of January 5, 1995.
(b) Per BETA Derivation Analysis
(c) Average (arithmetic mean) risk premium of Common
Stock over intermediate Treasury Bonds for the
period 1926-1993. Source: RG Ibbotson and RA
Sinquefield, Stocks, Bonds, Bills and Inflation:
1994 Yearbook.
(d) Mean of actual end of period equity market premium
for each year during specified period.<PAGE>
<PAGE>
Solving for Ke using LIN Unleveraged Equity Beta:
Ke = 7.86% + .99*7.22%
Ke = 15.03%
======
[The following are handwritten Morgan Stanley notes]
LIN's Re-Levered Beta = 0.99* [1 + .35/.65 (1 - .40)]
= 1.31
====
Ke at 35% Debt/Cap -->
Ke = 7.86% + 1.31 * 7.22% = 17.32%
======<PAGE>
<PAGE>
<TABLE>
EXHIBIT I
LIN Broadcasting
Weighted Average Cost of Capital Analysis
Calculation of Weighted Average Cost of Capital
<CAPTION>
Marginal
Pre-Tax After-Tax
Weight Rate Cost Weighted
-------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Assuming Industry Derived Beta
Debt 35.00%(b) 9.63%(c) 5.77% 2.02%
Common Equity 65.00% 15.36% 15.36% 9.98%
---------- -------
|---------------------------|
Total Capitalization 100.00% | WACC 12.00% |
======== |---------------------------|
Marginal
Pre-Tax After-Tax
Weight Rate Cost Weighted
-------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Assuming LIN's Unleveraged Equity Beta
Debt 35.00%(b) 9.63%(c) 5.77% 2.02%
Common Equity 65.00% 15.03% 15.03% 9.77%
---------- -------
|---------------------------|
Total Capitalization 100.00% | WACC 11.79% |
======== |---------------------------|
[The following are handwritten Morgan Stanley notes:]
Weight Pre-Tax After-Tax Weighted
-------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Assuming LIN's Re-Levered Beta:
Debt 35% 9.63% 5.77% 2.02%
Equity 65% 17.32% 17.32% 11.26%
-------- --------
|---------|
| 13.28% |
|---------|
Note: Morgan Stanley also differs with respect to the assumed cost of debt.
Notes: (a) Assumed tax rate: 40.0% based on weighted tax rates forthe four major LIN Broadcasting cellularr markets.
(b) Assumed target long-term capital structure.
(c) LIN cost of debt assumes average cost off debt based on the following debt capital strucutre: 50% bank debt
(LIBOR + 250b.p.) and 50% 7-yearr notes (assumed to be 10.50% based on current trading levels of comparable
companies.<PAGE>
<PAGE>
EXHIBIT I
LIN Broadcasting
Discount Rate Analysis and Terminal Value Derivation
<CAPTION>
Type of Percentage of Required Rate After Tax Weighted Average
Capital Capitalization of Return Cost of Capital Cost of Capital
- -------- -------------- ------------- --------------- ----------------
<S> <C> <C> <S><C> <C> <S><C> <C> <C>
Debt 35.0% 9.00% - 11.00% 5.40% - 6.60% 1.89% 2.31%
Equity 65.0% 14.00% - 16.00% 14.00% - 16.00% 9.10% 10.40%
------ ------
Total 100.0% 11.0% 12.7%
=====================================================================================================
- - The calculation of EBITDA multiple is based on the dividend growth model = (1/Kw - G) * 0.58
- - Kw is defined as the weighted average cost of capital (WACC)
- - G is defined as the future sustainable free cash flow growth rate
- - 1/(Kw - G) yields the resulting free cash flow multiple
- - Based on LIN projections, the ratio of Free Cash Flow to EBITDA averages 0.58 in the outer 3 years (2002-2004) of the
projection model (LIN Base)
Terminal Multiple Analysis
- --------------------------------------------------------------------------------------------------------
<CAPTION>
G = Sustainable Growth Rate
6.5% 7.0% 7.5% 8.0% 8.5%
------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Kw=WACC
----------- --------------------------------------------------------------------
11.00% 12.9x 14.5x 16.6x 19.3x 23.2x
11.50% 11.6x 12.9x 14.5x 16.6x 19.3x
12.00% 10.5x 11.6x 12.9x 14.5x 16.6x
12.50% 9.7x 10.5x 11.6x 12.9x 14.5x
13.00% 8.9x 9.7x 10.5x 11.6x 12.9x
----------- --------------------------------------------------------------------
<- Impact on
[The following are handwritten Morgan Stanley notes] Exit Multiple
13.28% 8.6x 9.2x 10.0x 11.0x 12.1x
<PAGE>
<PAGE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
GDP Mean GDP Mean Projected Real CPI Change(b)
Real Growth Nominal Growth GDP Growth(b)
--------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
1929-1993 4.2% 12.6% 1994 3.7% 3.0%
1950-1993 2.2% 10.7% 1995 2.7% 3.6%
1970-1993 1.9% 8.5% 1996 2.2% 3.5%
1980-1993 1.2% 5.9% 1997 2.3% 3.5%
1985-1993 1.4% 5.0% 1998 2.4% 3.5%
1990-1993 0.4% 3.9% 1999 2.4% 3.6%
--------------------------------------------------------------------------------------------------------
Notes: (a) Source: Statistical Abstract of the United States 1994 (11th Edition). Values expressed in constant 1987
dollars.
(b) Source: Country Data Forecasts 1994, Bank of America; Values expressed in constant 1980 dollars.
/TABLE
<PAGE>
<PAGE>
-----------------------------------------
FCF/EBITDA Mean FCF Growth
-----------------------------------------
1999-2004 0.559 99.3%
2000-2004 0.567 68.5%
2001-2004 0.575 43.6%
2002-2004 0.580 25.9%
2003-2004 0.588 10.3%
-----------------------------------------
<PAGE>
<PAGE>
EXHIBIT II
Assumptions of Financial Advisors
[The financial advisors in the GTE/Contel transaction relied on
different sets of projections for purpose of valuation...]
- -- "Paine Webber prepared and reviewed the results of an
unlevered discounted cash flow analysis... based on two sets
of financial projections[:] a five-year strategic plan and a
ten-year projection."
"Due to the inherently less certain nature of the ten-year
projections and the fact that the Company had advised Paine
Webber that it had not prepared the ten-year projections as part
of its normal planning process, Paine Webber relied more heavily
on the analysis derived from the five-year projections."
- -- "Merrill Lynch performed a discounted cash flow analysis
based upon... two sets of financial forecasts: a 5-year
strategic plan projection and a 10-year projection."
"Due to the inherently less certain nature of the 10-year
projections and the fact that the Company had advised Merrill
Lynch that it had not prepared the 10-year projections as part of
its normal planning process, Merrill Lynch relied more heavily on
the analysis derived from the five-year projections."
- -- Lazard Freres performed a discounted cash flow analysis of
the Company based upon... (i) the projected stream of the
company's unlevered cash flows for its cellular business
through the year 2004, and (ii) the projected terminal value
of the Company's cellular business at such year based upon a
range of multiples of cash flow in year 2004."<PAGE>
<PAGE>
EXHIBIT II
Financial Assumptions
[...which helps explain why Lazard Freres had to use aggressive
financial assumptions to arrive at similar values as Paine Webber
and Merrill Lynch]
- -- Lazard Freres' estimated exit multiples of 12-14x EBITDA in
2004 equate to 9.5-11.5x EBITDA in 2000, based on their
assumed discount rates
Implied Year 2000 Exit Multiple(1)
------------------------------------------------
Discount Rates
------------------------------------------------
Year 2004
Exit Multiples 11% 12% 13%
------------------------------------------------
12.0x 10.1x 9.8x 9.5x
13.0 10.8 10.4 10.1
14.0 11.5 11.1 10.7
------------------------------------------------
- -- Lazard Freres' financial assumptions are not directly
applicable to LIN, as projected
Notes: (1) Represents the year 2000 exit multiple equivalent
to the stated year 2004 exit multiple. <PAGE>
<PAGE>
EXHIBIT II
Cash Flow Projections
[The ten-year projections were significantly more conservative
than the five-year projections, and particularly conservative in
the years 2000-2004]
- ---------------------------------------
EBITDA ($MM)
- ---------------------------------------
5-Year 10-Year
Projections Projections(a)
- -----------------------------------------------------------------
1995 268 245 | | |
- --------------------------------------- | | |
1996 367 340 | | |
- --------------------------------------- | Horizon of | |
1997 464 415 |PaineWebber/ | |
- --------------------------------------- |Merrill Lynch | |
1998 540 467 | | |
- --------------------------------------- | |Horizon |
1999 659 562 | | of |
- -------------------------------------------------------| Lazard |
2000 573 | Freres |
- --------------------------------------- | |
2001 571 | |
- --------------------------------------- | |
2002 569 | |
- --------------------------------------- | |
2003 579 | |
- --------------------------------------- | |
2004 584 | |
- --------------------------------------- |--------|
<PAGE>
<PAGE>
<PAGE>
LIN BROADCASTING
Valuation Appraisal
February 15, 1995<PAGE>
<PAGE>
TABLE OF CONTENTS
SECTION I
Overview
SECTION II
Discounted Cash Flow Analysis
SECTION III
Precedent Transactions
SECTION IV
Review of Potential Purchasers
SECTION V
Reconciliation to Public Market Value
APPENDIX
Additional Information<PAGE>
<PAGE>
SECTION I<PAGE>
<PAGE>
SECTION I
Overview<PAGE>
<PAGE>
Tab A<PAGE>
<PAGE>
OVERVIEW
Introduction
[Morgan Stanley Charter]
Morgan Stanley has been retained by AT&T Corp. ("AT&T") on behalf
of its wholly-owned subsidiary McCaw Cellular Communications,
Inc. ("McCaw") to determine the Private Market Value of LIN
Broadcasting Corporation ("LIN") as defined by the 1989 Private
Market Value Guarantee Agreement as amended.
"On or about January 1, 1995, the Independent Directors will
designate an investment banking firm of recognized national
standing and the Offeror [McCaw] will designate an investment
banking firm of recognized national standing, in each case to
determine the private market value per Share."
Private Market Value Guarantee
December 11, 1989<PAGE>
<PAGE>
OVERVIEW
Definition of Private Market Value
[The PMVG Agreement is explicit as to the definition of Private
Market Value]
"...private market value per Share is the private market price
per Share (including control premium) that an unrelated third
party would pay if it were to acquire all outstanding Shares
(including the Shares held by Offeror [McCaw] and its affiliates)
in an arm's-length transaction, assuming the Company was being
sold in a manner designed to attract all possible participants
(including the Regional Bell Operating Companies) and to maximize
stockholder value, including if necessary through the sale or
other disposition (including tax-free spin-offs, if possible) of
businesses prohibited by legal restrictions to be owned by any
particular buyer or class of buyers (e.g., the Regional Bell
Operating Companies)."
Private Market Value Guarantee
December 11, 1989<PAGE>
<PAGE>
Tab B<PAGE>
<PAGE>
OVERVIEW
Definition of Private Market Value
[The Private Market Value definition has been widely
misunderstood]
Private Market Value Private Market Value
IS BY DEFINITION IS NOT BY DEFINITION
- -------------------------------- ------------------------
[green check] The price an [red x] The value of LIN
unrelated party to McCaw or AT&T
would pay for all
shares in a value- [red x] LIN's intrinsic
maximizing sale value
process
[red x] The price LIN's
- - Any necessary asset sales or public shareholders
spin-offs prior to the sale of expect
100% of LIN need be reflected at
the after-tax or public trading
values, respectively
<PAGE>
<PAGE>
OVERVIEW
Basis of Valuation Methodology
[In arriving at its valuation view, Morgan Stanley examined the
following, among other things:]
- -- LIN's intrinsic value implied by LIN management projections.
- -- Values implied by precedent transactions.
- -- Evaluation of potential unrelated third party acquirors of
LIN.
- -- LIN's "allocated" purchase price in the context of AT&T's
acquisition of McCaw/LIN.
- -- PMV price for LIN projected by McCaw in 1992 in the context
of its financial planning process.
- -- Evaluation of the 1989 contested battle for LIN.
- -- Likely public market trading value for LIN absent the PMVG
agreement.<PAGE>
<PAGE>
Tab C<PAGE>
<PAGE>
OVERVIEW
Summary of Valuation Methodologies
Private Market Value Price Per Share
- ------------------------ -----------------
Analyst Intrinsic
Value(1) $101-$120
LIN Management
Intrinsic Value(2) $103-$111
"Allocated" AT&T
Purchase Price(3) $98-$112
Precedent
Transactions(4) $93-$97
McCaw 10/92
Forecasted PMV(5) $113-$117
Public Market Value
Current Comparable
Company Trading(6) $80-$95
Morgan Stanley PMV
Estimate $105
Notes: See next page.<PAGE>
<PAGE>
OVERVIEW
Summary of Valuation Methodologies - Notes
Notes: (1) Based on Goldman Sachs, Salomon Brothers and
Merrill Lynch projections, using 10.0x-11.0x exit
multiples in year 2000 and 13.5% discount rate,
and First Boston projections using 9.5x to 10.5x
exit multiples in year 2004 and 13.5% discount
rate.
(2) Based on LIN Base Case excluding Wireless Data, New
Features and Long Distance, using 9.5x to 10.5x exit
multiples in year 2004 and 13.5% discount rate, plus
25% of McCaw's Wireless Data Division's projections
assuming 10.0x year 2004 EBITDA and a 20% discount
rate.
(3) Based on $16.2Bn projected year-end 1994 cellular asset
value at time of announcement, and McCaw and LIN 1994
and 1995 operating projections based on analyst
research at time of announcement.
(4) Based on $15.2Bn cellular asset value at 9/19/94
closing and McCaw and LIN operating projections based
on Salomon Brothers research, September 1994.
(5) Based on McCaw Management's assumed 15x 1995A EBITDA
multiple to calculate PMV at 12/31/95. Year-end 1995
equity value is discounted back to 2/15/95 at cost of
equity of 15.4% and accrued at 7.0% from 2/15/95 to
6/30/95.
(6) Based on estimated AirTouch trading multiple of 1995E
revenues, EBITDA and POPs (based on range of analyst
estimates of international asset values and 2/15/95
closing price). <PAGE>
<PAGE>
OVERVIEW
LIN Summary PMV Valuation
[Based on a variety of analyses, Morgan Stanley provided a final
view of LIN's PMV of $105 per share]
Summary Valuation
($MM)
- -----------------------------------------------------------------
Unadjusted $105 Adjusted $105
Per Share Per Share(3)
---------------- --------------
Value of Common Stock(1) $5,597MM $5,597MM
Plus: Net Debt(2) 1,398 1,648(3)
Total Aggregate Value 6,995 7,245
Less: Other Assets(4) (113) (113)
Total Cellular Value $6,882 $7,132
Value as a Multiple of: 17.7x 18.3x
1994A EBITDA
($390MM)
1995E EBITDA 13.3 13.7
($519MM)(5)
1995P EBITDA
($538MM)(6) 12.8 13.3
POPs (25.7MM) $268 $278
Notes: (1) Represents 51,632,000 common shares outstanding
and 1,671,862 options as of 12/31/94.
(2) Debt of $1,615MM as of 12/31/94 net of $94MM cash and
working capital and $143MM options proceeds, plus $20MM
estimated transaction fees.
(3) Includes $250MM of potential additional liabilities.
(4) Represents WOOD-TV valued at 9.5x 1995E EBITDA of
$9.3MM and 1,655,670 shares of AMSC stock valued at
2/15/95 closing price of $14.75.
(5) Average of 1995E EBITDA projected by Goldman Sachs
(8/4/94), Merrill Lynch (12/21/94), First Boston
(1/12/95) and Salomon Brothers (1/5/95).
(6) Represents LIN Base Case excluding Wireless Data, New
Features and Long Distance.<PAGE>
<PAGE>
SECTION II<PAGE>
<PAGE>
SECTION II
DISCOUNTED CASH FLOW ANALYSIS
<PAGE>
<PAGE>
Tab D<PAGE>
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
Section Overview
[Discounted cash flow analysis is a useful starting point in
assessing what an unrelated third party would pay for LIN,
although it does have its limitations]
Discounted cash flow analysis is a useful benchmark for
valuation, but does not in and of itself necessarily equate to
what an unrelated third party would pay for all of LIN.
- -- Desire to make positive NPV investments may result in actual
bids less than full value suggested by DCF analysis.
- -- Financial implications of acquisition may set a binding
constraint at values less than full DCF value.
- -- Competitive analysis may suggest that, given others'
conflicts, etc., one does not need to pay full DCF value in
order to prevail in a competitive situation.<PAGE>
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
Overview of Operating Projections
[It is difficult to know with any certainty what projections an
unrelated third party would use in its evaluation of LIN]
Although there is a relatively tight band of research analyst
forecasts, these projections have historically proven to be
too aggressive.
LIN/McCaw Management projections of Fall 1992 have to date also
proven to be far too aggressive as LIN 1993 and 1994 performance
has fallen significantly short of those projections.
LIN Management's Base Case was not prepared in the ordinary
course, was continually enhanced in each successive revision and
is more aggressive than LIN's 1992 projections which as noted
above have not been met to date.
LIN Management's Upside Case is higher than any third party
projection available to us and was apparently not given any
weight by LB/BS in arriving at their final private market value
views.<PAGE>
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
Overview of Discount Rates and Exit Multiple
[The correct range of discount rates is 13% - 14% and the correct
range of exit multiples is 9.5x - 10.5x]
LIN's current cost of capital is approximately 13.50%.
Morgan Stanley believes that an unrelated third party using the
most aggressive WACC assumptions would derive rates of 13%-14%
and appreciably higher rates for Wireless Data.
LB/BS, through a variety of mathematical and methodological
errors, arrive at discount rates for all free cash flow streams,
including wireless data, of 11%-13%.
Using perpetual growth rates of 6.5% to 7.5% as suggested by
LB/BS, together with the correct discount rate of approximately
13.5% results in 2004 EBITDA exit multiples of 9.2x - 10.9x,
compared to the 10.5x - 12.5x used by LB/BS.
<PAGE>
<PAGE>
Tab E<PAGE>
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
Review of LIN Management's "Base Case" Projections
[LIN Managment's "Base Case" operating projections include
significant non-cellular value]
Core Cellular Business + Additional Services = LIN Management
-- Wireless Data Base Case
-- New Features Operating
-- Long Distance Projections
<PAGE>
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
Review of Operating Projections
[LIN management's Base Case projections were not created in the
ordinary course planning process]
"LIN Management" in this instance consists of two corporate
executives who do not have direct operating responsibility.
Projections were not reviewed in any organized manner by the
individual market managements.
Projections were created recently for the sole purpose of the
PMVG process -- not in the ordinary course planning process.<PAGE>
<PAGE>
<TABLE>
DISCOUNTED CASH FLOW ANALYSIS
1992 LIN Projections vs. Actual Results
[Although penetration has increased more than expected, revenue/sub/month has fallen such that revenue per POP has been
less than previously forecast]
<CAPTION>
Penetration Revenue/Sub/Month Revenue/POP
--------------------------- --------------------------- ---------------------------
1992(2) 1993(2) 1994(2) 1992(2) 1993(2) 1994(2) 1992(2) 1993(2) 1994(2)
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Actual LIN 2.33% 3.01% 4.25% $93 $87 $83 $23 $28 $37
Downside(1) 2.39% 3.11% 3.72% $93 $87 $82 $23 $29 $33
Base(1) 2.39% 3.13% 3.84% $93 $89 $86 $23 $30 $36
Notes: (1) Represents October 1992 projections, excluding AT&T synergies.
(2) Excludes Philadelphia.
<PAGE>
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
1992 LIN Projections vs. Actual Results
[Due to the decline in revenue/sub/month, more subscribers have supported the same revenue base, dramatically depressing
margins and causing EBITDA/POP to fall significantly below projected levels]
<CAPTION>
Marketing Revenue EBITDA Margin EBITDA/POP
--------------------------- --------------------------- ---------------------------
1992(2) 1993(2) 1994(2) 1992(2) 1993(2) 1994(2) 1992(2) 1993(2) 1994(2)
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Actual LIN 23% 24% 27% 50% 48% 42% $11 $13 $15
Downside(1) 23% 22% 20% 50% 49% 50% $12 $14 $17
Base(1) 23% 19% 17% 50% 53% 54% $12 $16 $19
Notes: (1) Represents October 1992 projections, excluding AT&T synergies.
(2) Excludes Philadelphia.
/TABLE
<PAGE>
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
Old LIN Projections vs. Current LIN Projections
[Revenue per POP has tracked essentially as predicted, yet future
revenue per POP is projected to be well above previous Base Case;
EBITDA per POP has fallen well short of projections yet is
forecasted to meet previous projections]
Revenue/POP EBITDA/POP
---------------------- ----------------------
1996 1998 2000 2002 1996 1998 2000 2002
---- ---- ---- ---- ---- ---- ---- ----
LIN Base Case(1) $55 $71 $83 $96 $25 $33 $39 $47
Lin Base Case 57 76 93 102 26 35 45 56
1992 Downside 42 50 59 68 24 29 35 41
1992 Base 48 59 70 81 28 36 44 52
Note: (1) Excludes Wireless Data, New Features and Long Distance.<PAGE>
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
Review of LIN Operating Projections
[LIN Management's projections appear to have numerous
inconsistencies -- one simple example is the way they project
capital expenditures]
LIN Management's projections for capital expenditures are low on
two bases:
- -- Annual capital expenditures per net customer addition
declines in the face of projected increases in subscriber
usage.
- -- Annual capital expenditures do not seem to factor in
replacement cost as the projected net PP&E increases through
the year 1998 yet declines thereafter.
This forecast is inconsistent with the fundamental assumption of
LIN Management that increased revenues will come because
"average minutes of use are expected to increase because of lower
rates per minute, more user friendly phones, improved quality,
longer battery lives and new features and services on the
network."
PROJECTED CAPITAL EXPENDITURES(1)
- -----------------------------------------------------------------
1996 1998 2000 2002 2004
---- ---- ---- ---- ----
Net PP&E (MM) $919 $1055 $991 $784 $461
NET PP&E per SUB ($) $444 $365 $270 $180 $96
Note: (1) LIN base case projections exclude Wireless Data,
New Feature and Long Distance.
<PAGE>
<PAGE>
Tab F<PAGE>
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
Weighted Average Cost of Capital
[The defining elements of a company's WACC are the company's
asset beta, target leverage and corresponding cost of debt]
Components of a WACC
- -----------------------------------------------------------------
Component Comment
- -------------------- ---------------------------------------
Risk-Free Rate 10-year U.S. Treasury (7.44% - 2/15/95)
Market Risk Premium 7.22% (calculated by Ibbotson
Associates, 1994 Yearbook)
Asset Beta LIN's specific equity beta, adjusted
for existing capital structure
Target Capitalization Likely capitalization to be employed by
third party acquiror
Relevered Beta Asset Beta adjusted for target
capitalization
Cost of Debt Consistent with assumed target
capitalization<PAGE>
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
Weighted Average Cost of Capital
[LIN's asset beta has historically been between .95 and 1.05]
Historical Predicted Asset Beta(1)
----------------------------------
Jan-1993 0.94
Apr-1993 0.97
Jul-1993 1.01
Oct-1993 1.05
Jan-1994 1.03
Apr-1994 1.02
Jul-1994 0.96
Oct-1994 1.00
Jan-1995 0.98
Note: (1) Equity betas from BARRA, U.S. Equity Beta Book,
January 1995.<PAGE>
<PAGE>
<TABLE>
DISCOUNTED CASH FLOW ANALYSIS
Third Party Acquiror Cost of Capital
[While LIN's WACC is 13.55%, the WACC based on credit-neutral capitalization for these potential acquirors averages 14%,
although one could rationalize rates as low as 13%]
<CAPTION>
Implied WACC(1) Based on Capital
Capital Structure Structure of:
-------------------- ---------------------------------------
Cost of Current Target(2)
Debt Debt/ Debt/
Company Rating (Spread) Mkt Cap Mkt Cap Acquiror(3) Target(4) Cellular(5)
- ---------------- ------ -------- -------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Ameritech AA+/Aa2 0.40% 21.5% 5.0% 13.39% 14.25% 13.55%
Bell Atlantic A+/A1 0.60% 27.8% 9.0% 13.07% 14.05% 13.55%
BellSouth AAA/Aa1 0.40% 23.1% 5.0% 13.30% 14.25% 13.55%
NYNEX A/A3 0.60% 38.4% 9.0% 12.54% 14.05% 13.55%
Pacific Telesis A+/A1 0.50% 28.5% 9.0% 13.03% 14.05% 13.55%
SBC Communications A/A1 0.55% 22.9% 9.0% 13.33% 14.05% 13.55%
US West AA-/A1+ 0.50% 28.1% 9.0% 13.05% 14.05% 13.55%
GTE Corporation BBB+/A2 0.65% 32.0% 15.0% 12.88% 13.75% 13.55%
Sprint Corp. BBB/Ba2 0.70% 33.0% 15.0% 12.84% 13.75% 13.55%
MCI Communications(6) A-/A1 0.60% 18.2% 9.0% 13.58% 14.05% 13.55%
----- ----- ------ ------- -------
Median 28.1% 9.00% 13.05% 14.05% 13.55%
Notes: (1) WACCs assume risk-free rate of 7.44%, 7.22% market risk premium, and 38% tax rate.
(2) Represents maximum leverage capacity in cellular industry based on LIN's operating statistics in order to
maintain acquiror's current rating.
(3) Represents WACC assuming .98 asset beta, and cost of debt (based on premium to 10-year UST) and debt/mkt cap
of the acquiror.
(4) Represents WACC assuming .98 asset beta, cost of debt of acquiror (based on premium to 10-year UST) and
debt/mkt cap of target.
(5) Represents WACC assuming LIN's cost of debt (10.0%) and levered beta (1.10), and 20% debt/mkt cap.
(6) MCI debt and market cap are not net of cash.<PAGE>
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
Target Capitalization
[A single-A rated third-party acquiror, that finances the acquisition of LIN so as to be credit neutral, would be
unlikely to debt finance more than 10% of the purchase price]
<CAPTION>
Cellular Credit Stats (S&P)
- ----------------------------------------------------------------------------------------------------------
Rating of Third-Party
Standard Acquiror
----------------------------- ---------------------------
Statistic LIN 1994 AA A BBB AA A BBB
- -------------- -------- ------ ------- ------- ------ ------ -------
Implied Debt/Mkt Cap(1)(2)
----------------------------
<S> <C> <S><C> <C> <S><C> <C> <C> <C> <C> <C>
Debt/Book Cap(3) 21.5% <20% 20%-30% 30%-40% 20.0% 30.0% 40.0%
Cons. EBIT/Int 1.8 >10x 6x-10x 3x-6x 3.8% 6.1% 11.6%
Cons. EBITDA/Int 3.1 >15x 8x-15x 4x-8x 4.2% 7.6% 14.2%
Debt / POP $63 <$10 $10-$15 $15-$20 4.4% 6.5% 8.5%
Debt / Sub 1,478 <$400 $400-$700 $700-$1000 7.3% 12.2% 16.5%
----- ----- -----
Target 5.0% 9.0% 15.0%
Notes: (1) Assumes high end of debt range.
(2) Based on $105 per share.
(3) Assumes book equity equals market equity.
<PAGE>
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
WACC Estimate - Assumed Leverage
[At 35% debt to capital, LIN would most likely be no better than a CCC credit]
<CAPTION>
EBIT/ EBITDA/ Debt/ Debt/
Rating Interest Interest EBITDA POP
------ -------- -------- -------- ------
S&P Cellular Rating Guidelines - July 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <S><C> <S> <C>
AA 10+ 15+ N.M. below 10
A 6-10 8-15 N.M. 10-15
BBB 3-6 4-8 below 2.5 15-20
BB 1.5-3 2-4 2.5-6 20-50
B below 1.5 below 2 above 6 50+
LIN Broadcasting - Current Capitalization
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Proportionate 12/31/94(1) 2.23 3.61 4.01 63
Implied Rating BB BB BB B
Consolidated 12/31/94(2) 1.85 3.11 4.65 63
Implied Rating BB BB BB B
LIN Broadcasting - 35% Debt/Capital (Proportionate)(3)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Proportionate at $105/share
PMV 0.91 1.47 6.19 97
Implied Rating Estimate CCC B/CCC B B/CCC
Proportionate at $155/share
PMV 0.66 1.07 8.51 133
Implied Rating Estimate CCC CCC B/CCC CCC
Notes: (1) Reflects proportionate results as reported for 1994.
(2) Reflects consolidated results, excluding equity interest in unconsolidated affiliates.
(3) Assumes cost of debt at 11% for both $105/share and $155/share examples.
<PAGE>
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
Analyst WACCs vs. 10-Year UST
[Analyst discount rates range from 12.0-13.5%, although they do not appear to have a precise theoretical basis for
calculating WACCs, as their WACCs appear to stay constant despite dramatic changes in the risk-free rate].
The following information is depicted on a single graph:
<CAPTION>
10-Year
Date UST Yield DLJ Goldman(1) First Boston Merrill Lynch(2)
- ----------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
Jan-92 0.0703 0.1325
Feb-92 0.0734 0.1094
Mar-92 0.0754
Apr-92 0.0748
May-92 0.0739
Jun-92 0.0726
Jul-92 0.0684
Aug-92 0.0659
Sep-92 0.0642
Oct-92 0.0659
Nov-92 0.0687 0.135
Dec-92 0.0677
Jan-93 0.066
Feb-93 0.0626
Mar-93 0.0598
Apr-93 0.0597 0.12
May-93 0.0604
Jun-93 0.0596 0.12
Jul-93 0.0581 0.1325
Aug-93 0.0568
Sep-93 0.0536
Oct-93 0.0533
Nov-93 0.0572
Dec-93 0.0577
Jan-94 0.0575
Feb-94 0.0597
Mar-94 0.0648
Apr-94 0.0697 0.12 0.135
May-94 0.0718
Jun-94 0.071
Jul-94 0.073
Aug-94 0.0724 0.135
Sep-94 0.0746
Oct-94 0.0774
Nov-94 0.0796
Dec-94 0.0781 0.1325 0.1094
Jan-95 0.0778 0.1325 0.1177
Notes: (1) Represents midpoint of estimated 12-15% range.
(2) Represents Linda Runyon at Kidder Peabody (1992) and Merrill Lynch (1994). WACC based on IRR of stated
cellular asset value and unlevered free cash flows.
<PAGE>
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
WACC Calculation - Lehman/Bear Stearns Estimate
[Lehman/Bear Stearns understate the proper WACC for LIN, even using their own assumptions]
<CAPTION>
Lehman/Bear Stearns Comments Corrected
- ----------------------------------------------------------------------------------------------------------
Industry LIN 35% Debt/ 20% Debt/
Capital Capital
- ----------------------------------------------------------------------------------------------------------
<S> <C> <S> <C> <S> <C> <S> <C> <C>
Predicted
Equity Beta .98 - 1.13 Must use LIN's specific beta 1.10 1.10
Predicted
Asset Beta(1) .79 - .99 Must calculate asset beta 0.98 0.98
Target
Leverage 35.0% - 35.0% Observation: 35% leverage is 35.0% 20.0%
higher than any cellular
company or RBOC
Relevered
Equity Beta 1.04 - .99 And relever for assumed 1.29 1.12
leverage
Risk-Free Rate 7.86% 7.44% 7.44%
Risk Premium 7.22% 7.22% 7.22%
Cost of Equity 15.37 - 15.01% Must use relevered equity 16.78% 15.56%
(Calculated) beta to calculate cost of equity
=Rf + [symbol Beta] x
(Risk Premium)
Cost of Equity 14.00 - 16.00%
(Stated)
Cost of Debt 9.00 - 11.00% Cost of debt must be consistent 11.00- 9.50-
with target leverage -- at 35% 13.00% 11.50%
debt/cap, LIN would likely be
no better than a CCC credit
WACC - 11.00 - 13.00%
(Stated)
WACC -
(Calculated) 11.65 - 12.30% 13.22 - 13.59 -
13.64% 13.83%
- ------------------------------------------------------------------------------------------------------------
Note: (1) Assumes 17.1% debt/total capitalization for LIN based on share price of $140.50 (2/15/95) and net debt
of $1,537MM at 12/31/94.
<PAGE>
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
WACC Estimate
[Morgan Stanley's views on WACC are consistent with those of other financial advisors employed to value cellular
properties]
<CAPTION>
Change in
10-Yr. UST
Firm Date Stated WACC Since Opinion Adjusted WACC
- ----------------------------- -------- ------------ ------------- ---------------
<S> <C> <C> <C> <S><C> <C> <C> <S><C>
Salomon Brothers (AT&T/McCaw) 08/16/93 11.00 - 13.00% 1.76% 12.56 - 14.56%
Lazard Freres (AT&T/McCaw) 08/15/93 10.00 - 12.00% 1.76% 11.56 - 13.56%
Paine Webber (GTE/Contel) 12/27/94 13.00 - 15.00% -.32% 12.72 - 14.72%
Merrill Lynch (GTE/Contel) 12/27/94 12.00 - 14.00% -.32% 11.72 - 13.72%
----------------
Average 12.14 - 14.14%
Morgan Stanley 02/09/95 13.00 - 14.00%
Lehman/Bear Stearns - Adjusted @ 35% 02/09/95 13.22 - 13.64%(1)
Lehman/Bear Stearns - Adjusted @ 20% 02/09/95 13.59 - 13.83%(2)
Notes: (1) Reflects adjustments based on LIN asset beta of 0.98, 7.44% risk-free rate, 7.22% market risk premium,
35% debt/capital, and cost of debt of 11.0-13.0% (pre-tax).
(2) Reflects adjustments based on LIN asset beta of 0.98, 7.44% risk-free rate, 7.22% market risk premium,
20% debt/capital, and cost of debt of 9.50-11.50% (pre-tax).
/TABLE
<PAGE>
<PAGE>
Tab G<PAGE>
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
Exit Multiples
[A perpetual free cash flow growth rate estimate of 6.5% appears
consistent with the long term fundamentals of the cellular
business as well as with analyst estimates -- nevertheless 7.0%,
which is consistent with Lehman/Bear Stearns, discounted at the
appropriate WACC, yields exit multiples of 9.3x-10.8x]
Implied Exit Multiple of 2004 EBITDA(1)(2)
- -----------------------------------------------------------------
Discount Rate
------------------------------
13.00% 13.50% 14.00%
------ ------ ------
4.0% 7.0 6.6 6.3
4.5% 7.4 7.1 6.7
5.0% 8.0 7.5 7.1
Perpetual 5.5% 8.5 8.0 7.6
Growth Rate 6.0% 9.2 8.6 8.1
of FCF 6.5% 9.9 9.2 8.6
7.0% 10.8 10.0 9.3
7.5% 11.8 10.9 10.1
8.0% 13.1 11.9 11.0
Notes: (1) Assumes FCF/EBITDA ratio of 57% in perpetuity.
(2) Represents multiple of trailing EBITDA, based on
FCF x (1 + growth rate) x (1 + WACC) ^0.5/(WACC -
growth rate). <PAGE>
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
Analyst Estimates of Exit Multiples
[Analysts use 6.0-7.0% as perpetual growth rate -- however, their
average year of application is 2000 -- in 2004 the perpetual
growth rate should be appropriately lower]
Implied Perpetual Growth
- ----------------------------------------------------------------
Implied
Stated Stated Perpetual
Exit Discount FCF
Firm Exit Year Multiple Rate(1) Growth(2)
- -------------- --------- -------- -------- ---------
Salomon 2000 11.0x 10.80% 5.07%
Paine Webber 2000 12.0 10.80 5.52
Merrill 2000 11.0 11.77(3) 5.96
DLJ 1999 12.0 12.00 6.64
Gerard Klauer N.A. 13.5 11.60 6.83
First Boston 2004 N.A. 13.25 7.00
Nomura 2000 12.0 12.50 7.10
Goldman Sachs 2000 12.0 13.50 8.03
Median 2000 6.74%
Notes: (1) Represents estimated theoretical WACC for
analysts who only give equity discount rates,
assuming 20% debt/capital, 10% cost of debt.
(2) Assumes Free Cash Flow = 57% of EBITDA. Assumes
mid-year discounting.
(3) Based on IRR of stated asset value as of 12/31/94
and estimated unlevered free cash flows.
<PAGE>
<PAGE>
<TABLE>
DISCOUNTED CASH FLOW ANALYSIS
Exit Multiples
[Morgan Stanley's views on exit multiples are consistent with other financial advisors' views employed to value cellular
properties]
<CAPTION>
Terminal Multiples
----------------------------------------------------
Firm Date 1999 2000 2002 2004
- -------------------- ----------- ---- ---- ---- ----
<S> <C> <C> <C> <S><C> <C> <S><C>
Financial Advisors
Paine Webber(1) 12/27/94 10.5 - 12.5x [10.2 - 12.3x]
Merrill Lynch(1) 12/27/94 10.0 - 12.0x [9.6 - 11.7x]
Lazard Freres 08/16/93 [9.7 - 11.6x] 9.0 - 11.0x
Salomon Brothers 08/16/93 [10.6 - 11.6x] 10.0 - 11.0x
Average 10.0 - 11.8x
Appraisers
Morgan Stanley(2) 02/09/95 [9.9 - 10.9x] [9.4 - 10.2x] 9.5 - 10.5x
Lehman Bros./Bear Stearns(3) 02/09/95 [11.7 - 13.5x] [10.7 - 12.5x] 10.5 - 12.5x
*Non-bracketed data represents stated amount. [Bracketed] data is implied.
Notes: (1) Represents terminal multiple for five-year projection, which the advisors "relied more heavily on".
(2) Based on Base Case forecast and 13.50% discount rate for base cellular, excluding data, new features, and
long distance.
(3) Based on Base Case forecast and 12.00% discount rate for cellular, new features, and long distance,
excluding data.<PAGE>
<PAGE>
Tab H<PAGE>
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
Summary of DCF Values(1)
[Using LIN's Base Case excluding Wireless Data, New Features and Long Distance with discount rates of 13% - 14% and
EBITDA exit multiples of 9.5x - 10.5x yields values of $93-$110 per share]
<CAPTION>
Discount Rate 13.00% 13.50% 14.00%
---------------------- ---------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EBITDA Exit Multiple 9.5x 10.0x 10.5x 9.5x 10.0x 10.5x 9.5x 10.0x 10.5x
Implied FCF Perpetual
Growth Rate 5.9% 6.2% 6.5% 6.3% 6.7% 7.0% 6.8% 7.1% 7.4%
Value per Share $102 $106 $110 $98 $102 $106 $93 $97 $101
Multiple of 1994A EBITDA(2) 17.2x 17.8x 18.3x 16.6x 17.1x 17.7x 16.0x 16.5x 17.1x
Multiple of 1995E EBITDA(3) 12.9x 13.4x 13.8x 12.5x 12.9x 13.3x 12.1x 12.5x 12.8x
Multiple of 1995P EBITDA(2) 12.5x 12.9x 13.3x 12.0x 12.4x 12.8x 11.6x 12.0x 12.4x
Notes: (1) Values as of 2/15/95.
(2) EBITDA before headquarters expense. 1995 figure is LIN Base Case excluding Wireless Data, New Features
and Long Distance.
(3) Average projection of $519MM based on Goldman Sachs (8/4/94), Merrill Lynch (12/21/94), First Boston
(1/12/95)and Salomon Brothers (1/15/95).
<PAGE>
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
LIN Base Case vs. Analysts
[LIN Management's "unadorned" projections are consistent with analyst estimates which in turn include AT&T value-added]
<CAPTION>
EBITDA/POP DA-CapEx)/POP
--------------------------------------- ---------------------------------------
1995 1996 1997 1998 1999 2000 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LIN Base Case
"Unadorned"(1) $21 $25 $29 $33 $36 $40 $9 $14 $19 $26 $29 $34
Analyst
Average(2) $20 $25 $30 $35 $39 $44 $9 $14 $23 $25 $29 $39
Notes: (1) LIN Base Case excluding Wireless Data, Long Distance and New Features.
(2) Represents average of Goldman Sachs (8/4/94), Merrill Lynch (12/21/94) and First Boston (1/12/95).
</TABLE>
<PAGE>
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
Analyst's PMVs and DCF Values
[Adjusted for appropriate discount rates and exit multiples,
analysts' projections yield DCF values of $101 to $120 per share,
consistent with the valuation of the LIN Base Case]
Recalculated
DCF
PMV DCF Value Value as of
Firm Estimate(1) as of 6/30/95(2) 2/15/95(3)
- --------------- ---------- ---------------- ------------
Goldman Sachs $155 $137 $115
Salomon Brothers(4) 145 140 114
Merrill Lynch 139 129 114
First Boston 150 160 105
LIN Base Case
Unadorned 102
Notes: (1) Latest PMV estimate as of 2/15/95.
(2) Represents midpoint of analysts' stated DCF
values, adjusted to 6/30/95 using analysts' costs
of capital.
(3) Calculations assume a 13.5% WACC and 10.5x EBITDA
in year 2000 (Goldman, Salomon, Merrill) and 10.0x
EBITDA in year 2004 (First Boston).
(4) Assumes LIN Base case unadorned capital
expeditures and depreciation, since no capital
expenditures figures provided.<PAGE>
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
Other Projected Revenue Streams
[LIN Management's "Base Case" includes other revenue streams for
which potential buyers are unlikely to assign significant value]
Wireless Data
- -- Appropriately valued, wireless data opportunities represent
only a potential $5 - $6 of value per share.
- -- Given likely buyers' experience with wireless data, it is
unlikely that they will assign significant value.
- -- LIN's Management acknowledges their bias towards the future
of wireless data.
Other Features
- -- Includes "yet to be identified" features.
- -- Would represent only an additional $3 of value.
Long Distance
- -- Strategic buyers unable to capitalize on this revenue
stream.<PAGE>
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
Detailed Review of Wireless Data Projections
[LIN Management's projections for Wireless Data are very
aggressive, compared to common industry assumptions and even
McCaw's own Wireless Data Division projections for LIN]
LIN Management's Wireless Data forecasts are inconsistent with
McCaw's WDD projections
- -- LIN markets forecasted to be 50% of total McCaw/LIN wireless
data revenue by year 2000
- -- WDD believes LIN markets should be half that amount
LIN's Wireless Data assumptions are extremely aggressive and
appear to have no grounding
- -- Penetration assumptions are aggressive
- -- Pricing assumptions are almost impossible to achieve
Wireless Data history in marketplace has not been successful to
date
- -- IBM's Ardis has not been successful
- -- BellSouth's RAM Mobile Data has had significant setbacks,
and has not delivered on its initial promise
- -- Ameritech, among others, have had significant delays with
respect to CDPD launches
Note: (1) Based on WDD Business Plan, October 18, 1994.
<PAGE>
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
Wireless Data Value(1)
[LIN Management's aggressive views of Wireless Data, as
represented by their Base Case, imply significantly higher values
than do McCaw's own estimates of data -- a service to which a
third-party bidder would likely attribute nominal value]
Value per Total Value
LIN Share ($) ($MM)
-------------- -------------
LIN BASE CASE
- -------------
11.5x 2004 EBITDA
12.00% WACC $25.56 $1,362
10.0x 2004 EBITDA
20.00% WACC $11.87 $633
LIN's 25% of McCaw WDD Business Plan
- ------------------------------------
10.0x 2000 EBITDA
20.00% WACC $5.66 $322
MS Estimate of Third-Party Bidder's View
- ----------------------------------------
N.M. N.M.
Note: (1) Values as of 2/15/95.
<PAGE>
<PAGE>
SECTION III
<PAGE>
<PAGE>
SECTION III
PRECEDENT TRANSACTIONS<PAGE>
<PAGE>
Tab I<PAGE>
<PAGE>
PRECEDENT TRANSACTIONS
Introduction
[Since the PMV definition is what LIN will "fetch" as opposed to
what it may theoretically be worth, precedent tranactions are the
single most relevant method of determining PMV]
Prices paid in precedent cellular [blue arrow Buyer DCF
transactions represent empirical pointing Value
evidence as to the totality of right]
factors considered by sophisticated
buyers in competitive bidding
situations.
[blue arrow pointing diagonally down to left]
- -- What is appropriate business
case to construct
- -- What are the appropriate discount
rate and exit multiples
- -- What are available synergies
Buyer DCF Values in turn are [blue arrow Observed
affected by pointing Purchase
- -- Strategic value right] Price Paid
- -- Competitive situation in
- -- Financial implications Precedent
Transactions
<PAGE>
<PAGE>
<TABLE>
PRECEDENT TRANSACTIONS
Precedent Cellular Transactions
[Even in the most robust period for cellular valuations, few if any cellular properties were ever sold for $300 per
POP...]
<CAPTION>
Selected Precedent Cellular Transactions--per POP Benchmarks
- -----------------------------------------------------------------------------------------------------------
Date Aggregate Cellular
Announced Acquiror Acquiree Type of Deal Value Value/POP
- --------- --------------- ------------------ ------------ ($MM) ---------
-----------
<C> <C> <S> <C> <S> <C> <C>
Dec 94 GTE Contel Cellular 10% Stake $460 $198
Nov 94 SNET Bell Atlantic/NYNEX
(New England Property) Acquisition 450 199
Oct 94 LIN CSI (New York cellular) 5% Stake 145 185
Jul 94 AirTouch US West Joint Venture 13,500 N.M.
Jun 94 Bell Atlantic NYNEX Joint Venture 13,000 N.M.
Feb 94 SBC Comm. Associated Comm. Acquisition 680 187
Nov 93 SBC Comm. GTE (Dallas cellular) 10% Stake 124 280
Nov 93 SBC Comm. Syracuse Cellular Acquisition 215 160
Aug 93 AT&T McCaw Cellular Acquisition 17,616 268
Mar 92 Comcast Metromedia (Philadelphia) Acquisition 1,100 214
Sept 91 Bell Atlantic Metro Mobile Acquisition 2,375 204
May 90 LIN Metromedia
(New York cellular) 48% Stake 1,941 275
Sep 89 McCaw LIN Deferred Purchase 7,400 285
<PAGE>
<PAGE>
PRECEDENT TRANSACTIONS
Precedent Cellular Transactions
[In the past two years EBITDA multiples have become the standard measure of calibrating private market deals -- all of
these transactions have been clustered at or below 13x 1995 EBITDA]
<CAPTION>
Selected Precedent Cellular Transactions -- EBITDA Multiple Benchmark
- ---------------------------------------------------------------------------------------------------------
Aggregate Cellular Value/EBITDA
Date Closed Acquiror Acquiree Type of Deal Value ---------------------
- ----------- --------------- --------------- ------------ ($MM) 1994 1995
--------- ---- ----
<S> <C> <S> <C> <C> <C>
Pending GTE Contel Cellular 10% Stake $460(1) 19x(1) 13x(1)
Dec 94 SBC Comm. Associated Comm. Acquisition 699 17(2) 13(3)
Sep 94 AT&T McCaw Cellular Acquisition 16,805 16 13(3)
Nov 93 SBC Comm. GTE
(Dallas Cellular) 10% Stake 124 13(4) 10(3)
Notes: (1) Pending. Based on announced value.
(2) Based on Associated Proxy Statement.
(3) Assumed 25% growth in EBITDA.
(4) Assumes revenues 150% of LIN's Dallas market revenues and a 35% EBITDA margin.
/TABLE
<PAGE>
<PAGE>
Tab J<PAGE>
<PAGE>
PRECEDENT TRANSACTIONS
The AT&T/McCaw Transaction
[The single most relevant precedent transaction in determining
the PMV of LIN is undoubtedly AT&T's acquisition of McCaw
since...]
[green check] Approximately 20% of the cellular assets acquired
was McCaw's 52% stake in LIN Broadcasting.
[green check] At $17Bn, it is the only recent acquisition which
is reflective of the substantial size of LIN.
[green check] McCaw's financial operating characteristics are
quite similar to LIN's.<PAGE>
<PAGE>
PRECEDENT TRANSACTIONS
The AT&T/McCaw Transaction
[...however, even this transaction precedent has its limitations]
[red x] AT&T was prepared to pay for synergies no other
unrelated third party could pay for.
[red x] AT&T was able to account for the transaction as a
pooling of interests, while an unrelated third party
would need to utilize purchase accounting treatment to
buy LIN.
[red x] Interest rates have risen 176 basis point since
announcement, which overwhelms the fact that an
acquisition of LIN's 48% stake would not likely close
until Spring 1995.
[red x] The cellular industry has underperformed research
analyst projections in the period since announcement.
LIN itself has underperformed the LIN Management's
projections prepared in October 1992, with revenue
being only 98% and EBITDA being only 83% of projections
to date.
[red x] The period since announcement has also seen the
formation of significant strategic alliances whose
partners are operators in LIN's four markets: Bell
Atlantic/NYNEX, Airtouch/US West, GTE/SBC (Texas
markets). These alliances have two important factors:
- increased competition in LIN's markets, and
- lessened third party interest due to conflicts.<PAGE>
<PAGE>
PRECEDENT TRANSACTIONS
The AT&T/McCaw Transaction
[It is important to fully understand the context of the
AT&T/McCaw transaction given its importance as the most relevant
precedent]
From the initial November 1992 investment until announcement,
AT&T's stock increased 45%, allowing AT&T to use a "fully valued"
acquisition currency.
Given the required regulatory approvals, the transaction was
expected to close late in the third quarter of 1994 with the
"drop dead" date of September 1994, anticipating the timing of
regulatory approvals -- the deal was priced accordingly.
In the due diligence process, AT&T was not given access to any
non-public McCaw projected financial data, and as a result relied
heavily on research analyst revenue and EBITDA estimates through
year-end 1994.
To the extent McCaw without LIN was deemed to be of lessened
strategic importance to AT&T, the converse was equally true.
That it, LIN without McCaw was of questionable strategic value.
Accordingly, to the extent a "strategic premium" existed it was
equally allocated to all properties.<PAGE>
<PAGE>
PRECEDENT TRANSACTIONS
AT&T Stock as Currency in McCaw Transaction
[One principal reason AT&T was able to pay a nominal value of
approximately $60 per McCaw share was the almost 50% run-up in
its share price from the November 1992 announcement]
[Graph depicting daily indexed price of AT&T common stock and the
S&P 500 from October 1, 1992 to February 15, 1995 shows indexed
price of AT&T rising to approximately 150 in August 1993 and
subsequently declining to approximately 120 February 15, 1995,
while the indexed price of the S&P 500 increased only modestly
over the same, never exceeding 120.]
<PAGE>
<PAGE>
<TABLE>
PRECEDENT TRANSACTIONS
The AT&T/McCaw Transaction
[In August 1993, AT&T's expected 1994 purchase price was estimated to be as much as $16.2Bn -- at closing, the actual
price paid was $15.2Bn]
<CAPTION>
Announcement (Aug 16, 1993) Closing (Sept 19, 1994)
- ----------------------------------------------------- --------------------------------------------
<S> <C> <C> <S> <C> <C>
Equity Value: Equity Value:
Projected share price at closing(1) $64.386 Share price at closing (9/19/94) $55.000
Fully diluted shares outstanding(2) 202,000 Fully diluted shares outstanding(2) $208,800
------- --------
Total Equity Value $13,005 Total Equity Value $11,484
Plus: Plus:
Projected proportionate Proportionate debt (9/30/94)(4) 5,321
year-end 1994 debt(3)(4) 4,610
Less: Less:
Projected net working capital (256) Net working capital 73
McCaw other assets (paging and other)(3) (661) McCaw other assets (paging and other)(5) (954)
52.5% of LIN TV (291) 52.5% of LIN TV and other(6) (380)
Options proceeds (220) Options proceeds(7) (305)
-------- --------
Cellular Asset Value $16,187 Cellular Asset Value $15,239
Notes: (1) Based on $58.000 price on 8/23/93, 12.3% cost of equity at announcement, 2% AT&T dividend yield, and
10.1% implied annual share price appreciation for 13 months.
(2) Excludes 14.5MM AT&T shares previously purchased.
(3) Source: DLJ, July 1993.
(4) Includes additional $400MM of indebtedness to reflect previous AT&T investment in McCaw.
(5) Represents Hong Kong cellular at $243MM (1.62MM POPs at $150/POP), Mexico cellular at $35MM (0.88MM POPs
at $40/POP), Columbia cellular at $33MM (1.1MM POPs at $30/POP), paging at $273MM (682,000 pagers at
$400/pager) and Claircom at $370MM (capital invested as of 9/30/94). Source: McCaw estimates.
(6) Represents 1.656MM shares AMSC stock at 9/30/94 price of $16.00/share, WOOD-TV at 10.0x 1994 EBITDA of
$8.3MM and LIN TV at 10.0x 1994 EBITDA of $80.2MM less debt of $187.9MM.
(7) Actual McCaw options exchanged for AT&T options.<PAGE>
<PAGE>
PRECEDENT TRANSACTIONS
The AT&T/McCaw Transaction
[At announcement, AT&T's expected 9/94 purchase price of $16.2Bn implied an acquisition price at 9/94 for the LIN shares
of $98 - $112 -- based on the actual closing purchase price, the actual "allocated" price for the LIN shares was $93-$97]
<CAPTION>
Announcement(1) Closing
----------------------------------------- -----------
First Boston DLJ Goldman Salomon(2)
(7/93) (7/93) (11/92) (9/94)
------------ --------- --------- ----------
Estimated Analyst Transaction Multiples
- ---------------------------------------
<C> <S> <C> <C> <C> <C>
1994E Revenue 8.4x 8.0x 9.2x 6.9x
1994E EBITDA(3) 17.9 15.1 17.9 16.1
1995E Revenue NA 6.6 8.2 5.3
1995E EBITDA(3) NA 11.9 15.3 11.3
POPs $268 $268 $268 $247
Implied LIN Share Price Given LIN Analyst Estimates(4)
- ------------------------------------------------------
1994E Revenue $103 $100 $102 $97
1994E EBITDA(3) 111 108 112 96
1995E Revenue NA 98 101 93
1995E EBITDA(3) NA 104 111 95
Average $107 $103 $106 $95
POPs 106 106 106 95
Notes: (1) Analyst estimates are adjusted to exclude Philadelphia.
(2) Estimated is adjusted to include additional 5% of New York and exclude Philadelphia for entire year.
(3) EBITDA is before corporate overhead.
(4) Based on analysts' estimates of LIN's 1994 and 1995 operating statistics.
/TABLE
<PAGE>
<PAGE>
Tab K<PAGE>
<PAGE>
PRECEDENT TRANSACTIONS
Using Precedent Transactions to Imply Sale Values for LIN
[In comparing precedent transactions to LIN, one must first
"adjust" the precedent sale price up or down as the case may be
to reflect any changes in circumstance from the time the
precedent deal was struck to the present]
Adjustments to precedent sale prices are a function of
differential:
- -- Closing Dates
- -- Discount Rates
- -- Business Case
[blue arrow pointing down]
In comparing the AT&T/McCaw deal to LIN the first level analysis
is to determine:
"Based on all the changed circumstances since AT&T agreed
to purchase McCaw, what would the sale price likely be today
if AT&T were to now agree to acquire McCaw with a closing
expected in Spring 1995?"<PAGE>
<PAGE>
PRECEDENT TRANSACTIONS
Using Precedent Transactions to Imply Sale Values for LIN
(continued)
[Based on all information available, it appears that McCaw's sale
value today would be the same or less than when the original deal
was agreed to]
AT&T/McCaw Evaluation Date Expected Closing
- ---------- --------------- ----------------
Actual Summer 1993 Fall 1994
"Adjusted" Winter 1995 Spring 1995
Directional
Factor Changes Adjustment Magnitude
- ------ ------- ----------- ---------
Closing Date 6-9 months later [arrow pointing up] 10%
Discount Rate Rates 177 basis [arrow pointing 10-20%
points higher down]
Business Case Actual results [arrow pointing ?
less than right and left
projected and arrow pointing
down]
<PAGE>
<PAGE>
PRECEDENT TRANSACTIONS
Consistent Application of Transaction Multiples
[Precedent multiples are simply ratios designed to normalize sale
values for differential financial performance and thus must be
consistently applied]
Adjusted Precedent Sale Price = Implied LIN Value [large
- ----------------------------- ----------------- green
Precedent Company 1994 EBITDA LIN 1994 EBITDA check]
Adjusted Precedent Sale Price = Implied LIN Value [large
- ----------------------------- ----------------- green
Precedent Company 1995 EBITDA LIN 1995 EBITDA check]
Adjusted Precedent Sale Price [does Implied LIN Value [large
- ----------------------------- not ----------------- red x]
Precedent Company 1994 EBITDA equal] LIN 1995 EBITDA
<PAGE>
<PAGE>
PRECEDENT TRANSACTIONS
Applying the AT&T/McCaw Transaction to LIN
[Perhaps the best way to illustrate the fallacy of the "closing
year" cash flow multiple methodology is to use an example]
- -- Lehman Brothers/Bear Stearns state: "A multiple of 1994E
EBITDA for the AT&T/McCaw transaction is comparable to a
multiple of 1995E EBITDA for the LIN PMVG appraisal as each
is a multiple of a "closing year cash flow."
- -- In practice, this would suggest that at a 17.5x "closing
year" multiple, LIN was worth $104 per share if sold in 1994
and $154 if sold in 1995 -- a 48% increase in equity value
simply by waiting for calendar year 1995 to arrive.
"1994 Closing" "1995 Closing"
-------------- --------------
Closing Year EBITDA $390 $535
* Closing Year Multiple 17.5x 17.5x
= Closing Year Asset Value $6,822 $9,356
- - Closing Year Net Debt (1,265) (1,124)
------- -------
= Closing Year Equity Value 5,556 8,231
/ Closing Year Shares Outstanding 53.3 53.3
= Per Share Equity Value $104 $154
% Increase 48%
<PAGE>
<PAGE>
Tab L<PAGE>
<PAGE>
PRECEDENT TRANSACTIONS
Allocation of the Purchase Price between McCaw and LIN
[Financial/operating performance is the single best measure of a
cellular property's value]
Market demographics are helpful in considering the relative
attractiveness of properties in the absence of any meaningful
operating history. However, after almost a decade of operating
history and more than one million subscribers, the relative
attractiveness of the LIN markets is best captured by examining
its actual operating performance.
On this basis, McCaw's markets are every bit as attractive as
LIN's markets.
<PAGE>
<PAGE>
PRECEDENT TRANSACTIONS
Comparing McCaw to LIN: Relative Cellular Subscriber Growth
3Q 1994 vs. 3Q 1993
[Notwithstanding its large market focus, LIN's penetration levels
and subscriber growth rates are below many of its peers as well
as McCaw]
[Graph depicting the extent of market penetration versus the
increase in market penetration from the third quarter of 1993 to
the third quarter of 1994 for public cellular companies, RBOCs,
LIN and McCaw]
[Graph depicting the extent of market penetration versus rates of
subscriber growth from the third quarter of 1993 to the third
quarter of 1994 for public cellular companies, RBOCs, LIN and
McCaw]
<PAGE>
<PAGE>
PRECEDENT TRANSACTIONS
Comparing McCaw to LIN: Operating Performance
[Close examination of the actual operating performance of McCaw
and LIN shows that the properties are indeed quite comparable]
The true measures of a property's value is its operating
performance, not its demographics. Despite being concentrated in
large markets, LIN's POPs have not demonstrated significantly
superior operating performance to those of McCaw.
LTM 6/30/94 McCaw (Only) LIN (ex Phil.) % Premium
- ---------------- ------------ -------------- ---------
Penetration 3.66% 3.57% -2%
Revenue/Sub/Month $82 $85 4%
Marketing as % 25% 25% 1%
of Revenue
EBITDA/Sub/Month $35 $38 9%
EBITDA Margin 42% 44% 5%
Revenue/POP $30.00 $30.91 3%
EBITDA/POP $12.62 $13.64 8%
<PAGE>
<PAGE>
PRECEDENT TRANSACTIONS
Comparing McCaw to LIN: Market Size
[As further confirmation that market size alone does not
translate into superior operating performance, one need look no
further than LIN's own markets]
Revenue/POP EBITDA/POP
-------------------- -------------------
1994 1995(1) 1994 1995(1)
------ --------- ------ --------
Houston $42.19 $55.17 Houston $19.14 $26.82
Dallas $41.38 $53.17 Dallas $17.07 $23.29
LA $37.29 $46.61 LA $17.74 $23.34
NY $33.56 $41.95 NY $13.53 $18.94
Note: (1) LIN Base Case forecast.
<PAGE>
<PAGE>
PRECEDENT TRANSACTIONS
Comparing McCaw to LIN: EBITDA Growth Rates
[An EBITDA multiple is principally a function of projected EBITDA
growth. On this basis, McCaw has historically grown and is
projected to grow at a faster rate than LIN, and should
accordingly command an EBITDA multiple at least equal to, or
greater than, that applied to LIN]
Year-to-Year Growth
-------------------
McCaw LIN POP McCaw
EBITDA/POP (Alone) LIN(2) Premium (Alone) LIN(2)
- ---------- ------- ------ ------- ------- -------
1991 $6.27 $9.03 44.0%
1992 9.02 11.26 24.8% 43.9% 24.7%
1993 11.69 13.30 13.8% 29.6% 18.1%
1994E(1) 15.20 15.38 1.2% 30.0% 15.6%
Notes: (1) Based on 9/30/94 Salomon Brothers research report
estimate.
(2) Excludes Philadelphia in every year and includes
additional New York interest for second half of
1994.
<PAGE>
<PAGE>
PRECEDENT TRANSACTIONS
Comparing McCaw to LIN: Market Classification and Control
[Furthermore, on an operating control basis, McCaw controls 18%
more POPs than LIN on a relative basis and should command a
premium valuation on this dimension as well]
Market Classification [Pie Graph]
- ---------------------
McCaw - Only LIN
------------ -----
Controlled MSAs 82.0% 69.0%
Other: 18.0% 31.0%
Market Control
- --------------
Total Gross Control POPs 44.5 MM 19.8 MM
Total Net POPs 48.9 MM 25.7 MM
Gross Control POPs/Net POPs 91.0% 77.0%
<PAGE>
<PAGE>
PRECEDENT TRANSACTIONS
Implied LIN Values in the AT&T/McCaw Transaction
[A PMV of $105 per share for LIN implies multiples that are
consistent with, and give LIN a premium over, those observed in
the AT&T/McCaw transaction]
Cellular Asset Value
as Multiple of
Cellular ------------------------
Asset Value 1994 1994
PMV ($MM) EBITDA Revenue POPs
----- ----------- ------ ------- ----
LIN Statistic $389.8 $924.9 25,722
Morgan Stanley
PMV Estimate $105 $6,862 17.6x 7.4x $267
AT&T/McCaw Closing
Multiple(1) 16.1 6.9 247
Implied McCaw-only
Multiple(2) 15.8 6.8 240
Implied LIN Premium 11% 9% 11%
Lehman/Bear Stearns
PMV Estimate $155 $9,527 24.4x 10.3x $370
AT&T/McCaw Closing
Multiple(1) 16.1 6.9 247
Implied McCaw-only
Multiple(2) 13.9 6.0 211
Implied LIN Premium 75% 72% 75%
Notes: (1) Based on cellular asset value of $15.24 Bn, 1994E
revenue and EBITDA estimates of $2,205 and $946MM
from 9/30/94 Salomon Brothers report, adjusted pro
forma for exchange of Philadelphia POPs and
addition of New York POPs.
(2) Based on McCaw cellular asset value of $15.24 Bn,
less 52% of cellular asset value implied by PMV.
<PAGE>
<PAGE>
SECTION IV<PAGE>
<PAGE>
SECTION IV
REVIEW OF POTENTIAL PURCHASERS
<PAGE>
<PAGE>
Tab M
<PAGE>
<PAGE>
REVIEW OF POTENTIAL PURCHASERS
Review of Private Market Value Definition
[The definition of PMV calls for an assessment of LIN's private
market value if sold in a value maximizing process to an
unrelated third party]
"...private market value per Share is the private market price
per Share (including control premium) that an unrelated third
party would pay if it were to acquire all outstanding Shares
(including Shares held by the Offeror [McCaw] and its affiliates)
in an arm's-length transaction, assuming that the Company was
being sold in a manner designed to attract all possible
participants...."
Private Market Value Guarantee
December 11, 1989
The Value of LIN that could be achieved in a auction process
would be determined by the universe of potential purchasers other
than AT&T that could acquire LIN. These parties would consider
among other factors, the following in deciding whether to acquire
LIN:
- -- business case for LIN properties
- -- potential operating synergies
- -- potential negative operating impacts
- -- appropriate hurdle rate
- -- strategic value
- -- competitive sale dynamics
- -- regulatory conflicts
- -- earnings dilution
- -- balance sheet/ratings impact
- -- likely market reaction
Research analysts have focused entirely on AT&T as the purchaser
of LIN, and have not considered the likely values that would be
paid by an unrelated third party acquiror.
<PAGE>
<PAGE>
REVIEW OF POTENTIAL PURCHASERS
Determining the Universe of Potential Purchasers
[At $105 per share, the effective purchase price for LIN would be
in excess of $7Bn, making it far and away the largest U.S.
telecom purchase transaction ever -- efforts to reduce the
transaction size would likely result in taxable divestitures or
sub-optimal public market spin-offs]
Top Telecom Transactions(1)
----------------------------------------
Value ($BN)
-------------
LIN ($105/share) $7.2
LIN/McCaw $3.6
WilTel/LDDS $2.5
Metro Mobile/Bell Atlantic $2.4
Metromedia/SBC $1.7
Note: (1) Excludes McCaw/AT&T ($17.0Bn), Contel/GTE ($9.7Bn)
and Centel/Sprint ($5.0Bn), which were all pooling of
interest merger transactions.
<PAGE>
<PAGE>
<TABLE>
REVIEW OF POTENTIAL PURCHASERS
Assessing the Universe of Potential Purchasers
[A broad screen should be undertaken in order to determine the maximum likely universe of potential purchasers, after
which more detailed judgment can be applied]
<CAPTION>
Initial Screen + Additional Screen + Additional Screen = Resulting Screen
- ----------------- ------------------------- ------------------------- ------------------------
Telecom Service Total Universe of Likely
Cellular Operators PCS Bidders with Mkt Equity > Companies with Mkt Equity > Potential Purchasers with
> 10MM POPs(1) $5Bn(1)(2) $5Bn(1) Mkt Value > $5Bn(1)
- ----------------- ------------------------- ------------------------- ------------------------
Market Market
Total Equity Equity
POPs Leading Bids Value Value
Company (MM) Company ($MM) Company ($Bn) Company ($Bn)
- ------------------- ------ ------------ ------------ -------- ------ ----------- --------
<S> <C> <S> <C> <S><C> <S> <C> <S> <C> <S> <C>
NYNEX/Bell Atlantic 56 TCI/Sprint et al $1,844(3) MCI $12 GTE $30
AirTouch/US West 54 Pacific Telesis 500 ALLTEL 6 BellSouth 27
GTE 53 SBC
Communications 24
BellSouth 40 Bell Atlantic 22
SBC Communications 39 Ameritech 23
TDS (US Cellular) 24 US West 16
Ameritech 22 NYNEX `15
Sprint 22 AirTouch 14
Pacific Telesis 12
MCI 12
Sprint 10
TCI 10
ALLTEL 8
Notes: (1) Excludes AT&T.
(2) Bids as of February 15, 1995.
(3) As part of WirelessCo. L.P.
/TABLE
<PAGE>
<PAGE>
Tab N<PAGE>
<PAGE>
REVIEW OF POTENTIAL PURCHASERS
Assessing the Universe of Potential Purchasers
[An initial screen of potential acquirors with significant
regulatory/legal overlap would exclude Bell Atlantic, NYNEX,
AirTouch and US West as likely bidders]
Likely Universe of
Potential Purchasers
- -- Bell Atlantic
- -- NYNEX
- -- AirTouch
- -- US West
Ameritech
Pacific Telesis
ALLTEL
TDS
Sprint
TCI
GTE
MCI
BellSouth
SBC Comm
Bell Atlantic, NYNEX, AirTouch and US West are all prohibited
from purchasing LIN's New York and Los Angeles properties (81% of
LIN POPs) either due to existing market ownership or to conflicts
created by their strategic alliance
"In light of current regulatory and legal concerns arising from
partner-competitor overlaps in the same wireless services
geographic markets and in light of the need to avoid financial
conflicts that would impair productive coordination of the
Systems of Partners, and in light of the numerous potential
acquirors of wireless properties, no Partner may, directly or
indirectly, acquire any ownership Interest in or lease (as
lessee) any System (or license or permit therefor) the service
area of which overlaps, in any material respect, the service area
of a System (or license or permit therefor) which any Partners or
Affiliate thereof, directly or indirectly, has an ownership
interest in, or leases (as lessee). If such an overlap occurs as
a result of a larger acquisition made by a Partner or Affiliate
thereof, the acquiring Partner or Affiliate shall divest the
overlapping service area no later than six months after the
consummation of such acquisition."
Agreement of Limited Partnership between
Cellular Partnership (Bell Atlantic/NYNEX) and
WMC Partners, G.P. (AirTouch/US West)
October 20, 1994
<PAGE>
<PAGE>
REVIEW OF POTENTIAL PURCHASERS
Assessing the Universe of Potential Purchasers
[A second screen of potential acquirors with corporate strategies
inconsistent with an acquisition of LIN would exclude Ameritech
and Pacific Telesis as likely bidders]
Likely Universe of
Potential Purchasers
Bell Atlantic [words struck out]
NYNEX [words struck out]
AirTouch [words struck out]
US West [words struck out]
- -- Ameritech
- -- Pacific Telesis
ALLTEL
TDS
Sprint
TCI
GTE
MCI
BellSouth
SBC Comm
Pacific Telesis and Ameritech would most likely not be interested
in purchasing LIN based on their stated strategic plans.
Sam Ginn, Chairman and Chief Executive Officer of Pacific
Telesis, announced today that the Board of Directors has decided
to undertake an in-depth analysis of a proposal to separate the
Bell Companies from the other operations of Pacific Telesis... A
structural re-examination is important now, Mr. Ginn stated,
given several concerns that confront the present organization...
Moreover, Mr. Ginn said that he does not believe that the stock
markets have fully reflected the value of the Pacific Telesis
enterprises.
Sam Ginn
Chairman & CEO, Pacific Telesis
April 15, 1992
"While many other regional Bells have been seeking nationwide
opportunities in video services and wireless communications,
Ameritech has decided to focus on its own five-state Great Lakes
region and its core telecommunications network. It was
conspicuously absent from the merger frenzy last year among
telephone and cable television companies, and this fall it
spurned invitations to join long-distance carriers or other Bell
companies in a national alliance to develop wireless
communications network."
New York Times
November 22, 1994 <PAGE>
<PAGE>
<TABLE>
REVIEW OF POTENTIAL PURCHASERS
Assessing the Universe of Potential Purchasers
[A third screen of potential acquirors lacking the financial wherewithal to acquire significant LIN assets would exclude
ALLTEL and TDS as likely bidders]
Likely Universe of
Potential Purchasers
Bell Atlantic [words struck out]
NYNEX [words struck out]
AirTouch [words struck out]
US West [words struck out]
Ameritech [words struck out]
Pacific Telesis [words struck out]
- -- ALLTEL
- -- TDS
Sprint
TCI
GTE
MCI
BellSouth
SBC Comm
ALLTEL or TDS would suffer severe earnings dilution and adverse credit impacts if either were to acquire all or a
significant portion of LIN even at $105 per share or its equivalent value.
<CAPTION>
ALLTEL TDS
---------------------------------------- ------------------------------------
100% 50% Stock/ 100% 100% 50% Stock/ 100%
Current Stock 50% Cash Cash Current Stock 50% Cash Cash
------- ----- ---------- ---- ------- ----- ---------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LIN Price Per Share: $105
EPS Dilution:(1)
1995 52% 63% 86% 71% 143% 382%
1996 44% 50% 62% 51% 86% 200%
1998 32% 30% 25% 37% 40% 48%
Capital Impacts:(1)
Debt/Capital 26% 24% 43% 63% 17% 21% 47% 73%
Pretax Coverage 4.6x 3.4x 1.7x 1.2x 2.9x 2.1x 0.8x 0.5x
LIN Price Per Share: $155
EPS Dilution:(1)
1995 69% 91% 146% 98% 203% 651%
1996 62% 77% 115% 76% 134% 379%
1998 52% 58% 72% 61% 77% 148%
Capital Impacts:(1)
Debt/Capital 26% 20% 44% 69% 17% 16% 48% 79%
Pretax Coverage 4.6x 3.3x 1.4x 0.9x 2.9x 2.1x 0.6x 0.4x
Note: (1) Assumes LIN Base Case including Wireless Data, New Features and Long Distance.<PAGE>
<PAGE>
REVIEW OF POTENTIAL PURCHASERS
Assessing the Universe of Potential Purchasers
[Given the desire of WirelessCo to build a nationwide wireless footprint, and the lack of robust balance sheets of any
of its partners, it is highly unlikely that this consortium would spend $7Bn to control just two cellular markets--
moreover, the earnings dilution to Sprint would be severe]
Bell Atlantic [words struck out]
NYNEX [words struck out]
AirTouch [words struck out]
US West [words struck out]
Ameritech [words struck out]
Pacific Telesis [words struck out]
ALLTEL [words struck out]
TDS [words struck out]
- -- Sprint
- -- TCI
GTE
MCI
BellSouth
SBC Comm
<CAPTION>
PRO FORMA ACQUISITION IMPACTS CONSORTIUM COMPANIES' CREDIT
SPRINT(1) RATINGS
--------------------------------------- -----------------------------
100% 50% Stock/ 100%
Current Stock 50% Cash Cash Company Credit Rating
------- ----- ---------- ---- ------- --------------
<S> <C> <C> <C> <C> <C>
LIN Price Per Share: $105
TCI BBB-
EPS Dilution: 33% 33% 31%
1995 31% 28% 24% Comcast BB
1996 23% 18% 9%
1998 Cox NA(2)
Capital Impacts: 31% 29% 41% 53%
Debt/Capital 4.6x 4.0x 2.7x 2.1x
Pretax Coverage
LIN Price Pre Share: $155
EPS Dilution: 51% 52% 54%
1995 48% 48% 47%
1996 42% 38% 31%
1998
Capital Impacts: 31% 26% 44% 61%
Debt/Capital 4.6x 4.0x 2.3x 1.6x
Pretax Coverage
Notes: (1) Assumes LIN Base Case including Wireless Data, New Features and Long Distance.
(2) If rated not likely to command greater than BBB rating.
/TABLE
<PAGE>
<PAGE>
REVIEW OF POTENTIAL PURCHASERS
Assessing the Universe of Potential Purchasers
[A combination of questionable strategic imperatives...]
Likely Universe of
Potential Purchasers
Bell Atlantic [words struck out]
NYNEX [words struck out]
AirTouch [words struck out]
US West [words struck out]
Ameritech [words struck out]
Pacific Telesis [words struck out]
ALLTEL [words struck out]
TDS [words struck out]
Sprint [words struck out]
TCI [words struck out]
- -- GTE
MCI
BellSouth
SBC Comm
In addition to owning Houston, GTE's "Texas Alliance" with SBC
gives GTE access to the Dallas market which may well preclude it
from buying an interest in Dallas, and would in any event
eliminate a strategic need to do so.
It is also unclear what interest GTE would have in Los Angeles
given that it would not be able to ensure that its brand would be
available in the market.
<PAGE>
<PAGE>
<TABLE>
REVIEW OF POTENTIAL PURCHASERS
Assessing the Universe of Potential Purchasers
[... and severe financial implications appear to eliminate GTE as a likely bidder]
Likely Universe of
Potential Purchasers
Bell Atlantic [words struck out]
NYNEX [words struck out]
AirTouch [words struck out]
US West [words struck out]
Ameritech [words struck out]
Pacific Telesis [words struck out]
ALLTEL [words struck out]
TDS [words struck out]
Sprint [words struck out]
TCI [words struck out]
- -- GTE
MCI
BellSouth
SBC Comm
GTE would suffer severe earnings dilution and adverse credit impacts if it were to acquire LIN even at $105 per share
<CAPTION>
LIN Price Per Share: $105 $155
- ------------------- ---------------------------- -----------------------------
100% 50% Stock/ 100% 100% 50% Stock/ 100%
Current Stock 50% Cash Cash Stock 50% Cash Cash
--------- ----- --------- ---- ----- ---------- ----
<C> <S> <C> <C> <C> <C> <C> <C>
EPS Dilution:(1)
1995 NA 15% 14% 13% 23% 23% 22%
1996 NA 13% 12% 9% 22% 20% 18%
1998 NA 10% 7% 4% 18% 15% 11%
Capital Impacts:
Debt/Capital 30% 29% 34% 39% 28% 35% 42%
Pretax Coverage 4.1x 3.9x 3.3x 2.8x 3.9x 3.0x 2.5x
Payout Ratio 82% 99% 99% 98% 110% 110% 110%
Note: (1) Assumes LIN Base Case including Wireless Data, New Features and Long Distance.
</TABLE>
<PAGE>
<PAGE>
REVIEW OF POTENTIAL PURCHASERS
Summary of Universe of Potential Purchasers
[Based on the foregoing evaluation of regulatory conflicts,
strategic interest and financial constraints, MCI, SBC and
BellSouth would appear to be the most feasible bidders for LIN]
Rationale for Exclusion
---------------------------------------------------
Company Regulatory Strategic Financial Feasible
- --------- ---------- --------- --------- Bidders
--------
Bell Atlantic X
NYNEX X
AirTouch X
US West X
Ameritech X
Pacific Telesis X
ALLTEL X
TDS X
Sprint X X
TCI X X
GTE X X
MCI X
SBC Comm. X
BellSouth X
<PAGE>
<PAGE>
Tab O<PAGE>
<PAGE>
REVIEW OF POTENTIAL PURCHASERS
Detailed Review of Individual Potential Purchasers: MCI
[An acquisition of LIN is inconsistent with the strategic
direction of MCI and its significant shareholder BT]
MCI has pursued wireless opportunities having a national
footprint:
-- Terminated potential alliance with Nextel
-- Terminated strategic negotiations with AirTouch/US
West-Bell Atlantic/NYNEX consortium
-- Declined to participate in PCS auctions most likely due
to uncertainties and financing implications of gaining a
national footprint
To the extent that MCI is seeking a nationwide wireless
footprint, LIN offers very little:
-- At $105 per share, MCI would spend more than $7Bn and
gain control of only the New York and Dallas markets --
at $155 per share, the cost would exceed $9Bn
-- Based on BT's previous U.S. cellular experience it is
doubtful they would be supportive of such an initiative
From a competitive perspective, one also must assess the
likelihood of MCI purchasing LIN including AT&T's stake, thereby
placing $4Bn to $6Bn in AT&T's hands with full knowledge that
AT&T would in all likelihood re-enter these markets.
<PAGE>
<PAGE>
REVIEW OF POTENTIAL PURCHASERS
Detailed Review of Individual Potential Purchasers: MCI
[Nothing in MCI's financial past suggests that it would be
prepared to accept the 30% plus earnings dilution associated with
a purchase of LIN at $105 per share which...]
Aggregate Value Announced EPS
Date Announced ($MM) Transaction Dilution(2)
- -------------- --------------- ----------- --------------
Feb 1994 $1,300 Nextel (17%)(1) "4%"
April 1990 1,400 Telecom-USA "5%"
Notes: (1) Transaction terminated.
(2) Dilution is based on analyst estimates.
<PAGE>
<PAGE>
<TABLE>
REVIEW OF POTENTIAL PURCHASERS
Detailed Review of Individual Potential Purchasers: MCI
[...would still be more than 10% dilutive in 1998 at $105 per share and 30% dilutive in 1998 at $155 per share]
<CAPTION>
$105 $155
---------------------------- -----------------------------
100% 50% Stock/ 100% 100% 50% Stock/ 100%
Stock 50% Cash Cash Stock 50% Cash Cash
----- --------- ---- ----- ---------- ----
<C> <C> <C> <C> <C> <C> <C>
EPS Dilution:(1)
1995 28% 27% 27% 40% 42% 45%
1996 24% 22% 19% 36% 38% 36%
1997 21% 18% 13% 33% 31% 27%
1998 18% 13% 7% 30% 26% 21%
Note: (1) Assumes LIN Base Case including Wireless Data and New Features and excluding Long Distance.
<PAGE>
<PAGE>
REVIEW OF POTENTIAL PURCHASERS
Detailed Review of Individual Potential Purchasers: MCI
[A $7Bn acquisition of LIN financed principally with debt would significantly strain MCI's balance sheet while...]
<CAPTION>
1994E Pro Forma Statistics (1)
--------------------------------------------
LIN Price 50% Cash/
Per Share Current 100% Stock 50% Stock 100% Cash
- --------- -------- ---------- --------- ---------
<C> <S> <C> <S> <C> <C> <C> <C>
$105 Debt/Mkt Cap 0% 4% 24% 31%
Debt/Book Cap 0% 4% 30% 38%
Pretax Coverage NM 16.0x 5.1x 3.0x
Cash Flow/Debt NM 294% 37% 29%
$155 Debt/Mkt Cap 0% 3% 27% 39%
Debt/Book Cap 0% 4% 32% 47%
Pretax Coverage NM 16.0x 3.8x 2.2x
Cash Flow/Debt NM 285% 27% 18%
Note: (1) Assumes LIN Base Case including Wireless Data and New Features and excluding Long Distance.
</TABLE>
<PAGE>
<PAGE>
REVIEW OF POTENTIAL PURCHASERS
Detailed Review of Individual Potential Purchasers: MCI
[. . . MCI's recent stock price performance suggests that the
issuance of equity would be problematic]
[Graph of Indexed MCI stock price, IXC Index(1) and S&P 500 from
12/31/93 to 2/15/95]
Note: (1) Includes AT&T, Sprint, LDDS, ALC and LCI.
<PAGE>
<PAGE>
Tab P<PAGE>
<PAGE>
<TABLE>
REVIEW OF POTENTIAL PURCHASERS
Detailed Review of Individual Potential Purchasers: SBC Comm.
[SBC has historically been a disciplined, opportunistic buyer of cellular properties. . .]
<CAPTION>
Aggregate Implied Value 1995
Date Value Acquisition per POP EBITDA Multiple
- --------- ($MM) -------------------------- ------------- ---------------
---------
<C> <C> <C> <S> <C> <C> <C>
Feb 1994 $699 Associated Comm. $192 13x
Nov 1993 124 Dallas (10% Minority Stake) 280 10x
Nov 1993 215 Syracuse Cellular 160 N.A.
June 1986 1,650 Metromedia 75 N.M.
</TABLE>
<PAGE>
<PAGE>
REVIEW OF POTENTIAL PURCHASERS
Detailed Review of Individual Potential Purchasers: SBC Comm.
[. . . a discipline which has restrained it from buying strategic
properties when the "asking prices" have exceeded its calculated
valuation analysis]
Even though SBC owns Boston and Washington D.C. and would
presumably like to "fill in" the Northeast corridor if possible,
it has "passed" on strategic transactions:
- -- SBC did not purchase Metromedia's Philadelphia property in
1990 - - instead Comcast was the winning bidder for $185 per
POP.
- -- Most recently, SBC did not purchase Bell Atlantic/NYNEX's
New England properties which are adjacent to its Boston
market. SNET was the winning bidder paying $200 per POP.
<PAGE>
<PAGE>
REVIEW OF POTENTIAL PURCHASERS
Detailed Review of Individual Potential Purchasers: SBC Comm.
[Three of LIN's four cellular markets would likely not be
considered strategic by SBC]
SBC already operates on the B-band side of the Dallas market
where it competes with LIN.
Due to its "Texas Alliance" with GTE, SBC may in fact be
prohibited from buying LIN's stake in Houston, but in any event
would find little strategic value given that the current GTE
agreement enables SBC to place its brand in the Houston market
while SBC would be unable to control LIN's Houston market.
Given the high regard SBC has for its cellular management, the
inability to place its management team in Los Angeles would be
viewed unfavorably.
<PAGE>
<PAGE>
REVIEW OF POTENTIAL PURCHASERS
Detailed Review of Individual Potential Purchasers: SBC Comm.
[The most dilutive acquisition ever undertaken by SBC was the
Metromedia cellular acquisition which produced 6.5% earnings
dilution but earned out quickly due to the relatively low
purchase price...]
Date Aggregate Announced
Announced Value Transaction EPS Dilution
- --------- ($MM) ------------------------- ------------
----------
Oct 1994 $626 Compagnie Generale des Eaux "Minimal"
Feb 1994 693 Associated Comm. "2%-3%"
Dec 1993 1,600 CoxCable (JV)(1) 2%-4%(2)
Feb 1993 650 Hauser Comm. (cable systems) "Minimal"
Dec 1990 953 Telefonos de Mexico (10%) Minimal
June 1986 1,650 Metromedia "6.5%"(2)
Notes: (1) Transaction terminated.
(2) Dilution is based on analyst estimates.
<PAGE>
<PAGE>
<TABLE>
REVIEW OF POTENTIAL PURCHASERS
Detailed Review of Individual Purchasers: SBC Comm.
...whereas a $105 per share purchase price would dilute SBC's 1995 earnings almost 20%, persisting for years to come]
<CAPTION>
Purchase Price: 105 per share Purchase Price: $155 per share
---------------------------- -----------------------------
100% 50% Stock/ 100% 100% 50% Stock/ 100%
Stock 50% Cash Cash Stock 50% Cash Cash
----- --------- ---- ----- ---------- ----
<C> <C> <C> <C> <C> <C> <C>
EPS Dilution:(1)
1995 18% 18% 17% 28% 28% 29%
1996 16% 15% 13% 25% 25% 25%
1997 14% 12% 9% 23% 22% 20%
1998 11% 9% 5% 21% 19% 16%
Note: (1) Assumes LIN Base Case including Wireless Data and New Features and excluding Long Distance.
<PAGE>
<PAGE>
REVIEW OF POTENTIAL PURCHASERS
Detailed Review of Individual Potential Purchasers: SBC Comm.
[Even at $105 per share a meaningful cash component would likely
reduce SBC's credit rating from A to BBB or worse]
<CAPTION>
1994E Pro Forma Statistics (1)
--------------------------------------------
LIN Price 50% Cash/
Per Share Current 100% Stock 50% Stock 100% Cash
- --------- -------- ---------- --------- ---------
<C> <S> <C> <S> <C> <C> <C> <C>
$105 Debt/Mkt Cap 22% 22% 29% 36%
Debt/Book Cap 46% 39% 51% 63%
Pretax Coverage 5.5x 4.8x 3.4x 2.6x
Cash Flow/Debt 50% 42% 31% 24%
Payout Ratio 58% 73% 74% 74%
$155 Debt/Mkt Cap 22% 21% 30% 40%
Debt/Book Cap 46% 35% 51% 67%
Pretax Coverage 5.5x 4.7x 3.0x 2.2x
Cash Flow/Debt 50% 41% 27% 19%
Payout Ratio 58% 83% 86% 89%
Note: (1) Assumes LIN Base Case including Wireless Data and New Features and excluding Long Distance.
/TABLE
<PAGE>
<PAGE>
Tab Q<PAGE>
<PAGE>
REVIEW OF POTENTIAL PURCHASERS
Detailed Review of Individual Potential Purchasers: BellSouth
[BellSouth, like SBC, has historically been a disciplined buyer
of cellular properties]
Implied
Aggregate Value per
Date Value Acquisition POP
- ---------- ($MM) ---------------------------- ---------
---------
April 1991 $170 Graphic Scanning $ 95
Dec 1990 410 McCaw Cellular (properties) 172
Jan 1988 710 Mobile Comm. Corp. of America 95
<PAGE>
<PAGE>
REVIEW OF POTENTIAL PURCHASERS
Detailed Review of Individual Potential Purchasers: BellSouth
[Even under LIN Management's aggressive Base Case forecast,
acquiring LIN would cause severe earnings dilution to BellSouth
for the next several years -- an unlikely corporate action given
that the 1990 LIN deal was terminated when the dilution
approached 9%]
Date Aggregate Announced
Announced Value Transaction EPS Dilution
- --------- ($MM) ------------------------- ------------
----------
Announced
Nov 1993 $1,500 QVC (14%)(1) "2%-3%"
Oct 1991 335+ RAM Properties "4%"
April 1991 2,500 Puerto Rico Telephone N.M.
Authority(1)
April 1991 410 McCaw Cellular (properties) "2%-3%"
Mar 1991 102 GTE (minority properties) Minimal
Dec 1990 170 Graphic Scanning "2%"(2)
Sept 1989 6,858 LIN Broadcasting(1) "Minimal"
Jan 1988 710 Mobile Comm. Corp. of America "2%"
Unannounced
Oct 1989 $8,350 LIN Broadcasting "9%"
(@ $120 per share)
Notes: (1) Transaction terminated.
(2) Dilution is based on analyst estimates.<PAGE>
<PAGE>
<TABLE>
REVIEW OF POTENTIAL PURCHASERS
Detailed Review of Individual Potential Purchasers: BellSouth
[At $105 per share BellSouth's 1995 earnings would be diluted about 15%, and at $155 per share the dilution would
increase to about 25% ]
<CAPTION>
Purchase Price: 105 per share Purchase Price: $155 per share
---------------------------- -----------------------------
100% 50% Stock/ 100% 100% 50% Stock/ 100%
Stock 50% Cash Cash Stock 50% Cash Cash
----- --------- ---- ----- ---------- ----
<C> <C> <C> <C> <C> <C> <C>
EPS Dilution:(1)
1995 16% 15% 14% 25% 24% 23%
1996 14% 13% 11% 23% 22% 20%
1997 13% 10% 8% 21% 19% 17%
1998 10% 8% 5% 19% 17% 13%
Note: (1) Assumes LIN Base Case including Wireless Data and New Features and excluding Long Distance.
<PAGE>
<PAGE>
REVIEW OF POTENTIAL PURCHASERS
Detailed Review of Individual Potential Purchasers: BellSouth
[Even at $105 per share a meaningful cash component would severely impact BellSouth's AAA rating]
<CAPTION>
1994E Pro Forma Statistics (1)
--------------------------------------------
LIN Price 50% Cash/
Per Share Current 100% Stock 50% Stock 100% Cash
- --------- -------- ---------- --------- ---------
<C> <S> <C> <S> <C> <C> <C> <C>
$105 Debt/Mkt Cap 24% 24% 30% 36%
Debt/Book Cap 39% 35% 44% 53%
Pretax Coverage 5.9x 5.3x 4.1x 3.3x
Cash Flow/Debt 57% 50% 38% 31%
Payout Ratio 67% 82% 81% 81%
$155 Debt/Mkt Cap 24% 22% 31% 39%
Debt/Book Cap 39% 32% 45% 57%
Pretax Coverage 5.9x 5.3x 3.6x 2.8x
Cash Flow/Debt 57% 49% 34% 26%
Payout Ratio 67% 91% 92% 92%
Note: (1) Assumes LIN Base Case including Wireless Data and New Features and excluding Long Distance.
/TABLE
<PAGE>
<PAGE>
SECTION V<PAGE>
<PAGE>
SECTION V
RECONCILIATION TO PUBLIC MARKET VALUE
<PAGE>
<PAGE>
Tab R<PAGE>
<PAGE>
RECONCILIATION TO PUBLIC MARKET VALUE
LIN Historical Price Performance vs. Selected Analyst Current PMV
Estimates
[LIN's trading value has closely followed research analysts'
estimates of 1995 PMV]
The following information is depicted on a single graph:
Price Per Share
- ---------------------------------------------------------
Date LINB Closing PV of All-American
Price(1) 1995 PMV Estimate(2)
- --------- --------------- ----------------------
08-Jan-94 97.5
15-Jan-94 95.75
22-Jan-94 99
25-Jan-94 99.53
29-Jan-94 103
- --------------------------------------------------------
05-Feb-94 103
12-Feb-94 101.38
19-Feb-94 102.75
26-Feb-94 99.25
- --------------------------------------------------------
05-Mar-94 100.75
09-Mar-94 107.42
12-Mar-94 99.38
19-Mar-94 98.5
26-Mar-94 100
- --------------------------------------------------------
02-Apr-94 95.5
09-Apr-94 93.25
14-Apr-94 104.69
16-Apr-94 93.25
19-Apr-94 104.89
23-Apr-94 93
30-Apr-94 93.75
- --------------------------------------------------------
05-May-94 108.94
07-May-94 100
11-May-94 110.05
14-May-94 99.75
16-May-94 119.66
21-May-94 103.25
28-May-94 106
31-May-94 115.19
- --------------------------------------------------------
Notes: (1) Reflects closing stock price, less $12/share
prior to spin-off of LIN TV.
(2) Represents 1995 PMV estimate, discounted at 15%
from June 30, 1995.
<PAGE>
<PAGE>
Price Per Share
- ---------------------------------------------------------
Date LINB Closing PV of All-American
Price(1) 1995 PMV Estimate(2)
- --------- --------------- ----------------------
4-Jun-94 107
10-Jun-94 111.32
11-Jun-94 107.5
14-Jun-94 112.35
18-Jun-94 107.5
25-Jun-94 103.25
- --------------------------------------------------------
02-Jul-94 108.5
09-Jul-94 108
16-Jul-94 113.25
23-Jul-94 113.25
30-Jul-94 113
- --------------------------------------------------------
04-Aug-94 123.38
06-Aug-94 114.38
13-Aug-94 115
20-Aug-94 117
27-Aug-94 120.25
31-Aug-94 124.66
- --------------------------------------------------------
03-Sep-94 122.13
10-Sep-94 124.25
17-Sep-94 127
21-sep-94 123.88
24-Sep-94 127.5
- --------------------------------------------------------
01-Oct-94 127.13
08-Oct-94 123.25
15-Oct-94 124
22-Oct-94 123.25
29-Oct-94 124.5
- --------------------------------------------------------
05-Nov-94 126.25
12-Nov-94 128
19-Nov-94 128.13
26-Nov-94 127.13
- --------------------------------------------------------
03-Dec-94 130.5
10-Dec-94 128.38
15-Dec-94 134.46
17-Dec-94 130
21-Dec-94 129.2
24-Dec-94 133.25
31-Dec-94 133.5
- --------------------------------------------------------
Notes: (1) Reflects closing stock price, less $12/share prior
to spin-off of LIN TV.
(2) Represents 1995 PMV estimate, discounted at 15%
from June 30, 1995.<PAGE>
<PAGE>
Price Per Share
- ---------------------------------------------------------
Date LINB Closing PV of All-American
Price(1) 1995 PMV Estimate(2)
- --------- --------------- ----------------------
05-Jan-95 133.55
07-Jan-95 132.25
14-Jan-95 134.75
21-Jan-95 137.63
24-Jan-95 136.54
28-Jan-95 138
- --------------------------------------------------------
04-Feb-95 139.13
10-Feb-95 138.75
15-Feb-95 140.5
- --------------------------------------------------------
Notes: (1) Reflects closing stock price, less $12/share prior
to spin-off of LIN TV.
(2) Represents 1995 PMV estimate, discounted at 15%
from June 30, 1995.
<PAGE>
<PAGE>
<TABLE>
RECONCILIATION TO PUBLIC MARKET VALUE
LIN Historical Price Performance vs. Selected Analyst 1995 PMV Estimates
[PMV estimates have been repeatedly increased as analysts have continuously revised upward their 1995 PMV estimates as
LIN shares traded through their target ranges]
The following information is depicted on a single graph:
<CAPTION>
Price Per Share(1)
- --------------------------------------------------------------------------------------------------------
Date LIN(1) Merrill DLJ Prudential Goldman Cowen Salomon
- ---------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
08-Jan-94 97.5
15-Jan-94 95.75
22-Jan-94 99 121.5
29-Jan-94 103
05-Feb-94 103
12-Feb-94 101.38
19-Feb-94 102.75
26-Feb-94 99.25
05-Mar-94 100.75
12-Mar-94 99.38 129
19-Mar-94 98.5
26-Mar-94 100
02-Apr-94 95.5
09-Apr-94 93.25
16-Apr-94 93.25 124 130
23-Apr-94 93 124
30-Apr-94 93.75
07-May-94 100 129 128
14-May-94 99.75 140.5
21-May-94 103.25
28-May-94 106 134
04-Jun-94 107
11-Jun-94 107.5 129 130
18-Jun-94 107.5
25-Jun-94 103.25
02-Jul-94 108.5
09-Jul-94 108
16-Jul-94 113.25
23-Jul-94 113.25
30-Jul-94 113
06-Aug-94 114.38 140.5
13-Aug-94 115
20-Aug-94 117
27-Aug-94 120.25 140
03-Sep-94 122.13
10-Sep-94 124.25
17-Sep-94 127
24-Sep-94 127.5 138
01-Oct-94 127.13
08-Oct-94 123.25
15-Oct-94 124
22-Oct-94 123.25
29-Oct-94 124.5
05-Nov-94 126.25
12-Nov-94 128
19-Nov-94 128.13
26-Nov-94 127.13
03-Dec-94 130.5
10-Dec-94 128.38
17-Dec-94 130 142.5 145
24-Dec-94 133.25 139
31-Dec-94 133.5
07-Jan-95 132.25 145
14-Jan-95 134.75
21-Jan-95 137.63 145.3 145 144.7
28-Jan-95 138
04-Feb-95 139.13
10-Feb-95 138.75
15-Feb-95 140.5
Note: (1) Reflects closing stock price, less $12/share prior to spin-off of LIN TV.
</TABLE>
<PAGE>
<PAGE>
RECONCILIATION TO PUBLIC MARKET VALUE
Analyst Operating Projections
[... notwithstanding the fact that LIN's 1994 revenues were
mostly on target while 1994 EBITDA was significantly below
expectations]
Revenue/POP(1) EBTIDA/POP(1)
-------------- -------------
Actual as % of Actual as % of
Estimate Estimate
-------------- -------------
Prudential (3/94) 103.7% 94.2%
Merrill Lynch (4/94) N.A. 88.5%
Salomon (4/94) 102.5% 88.4%
Goldman (11/92) 107.5% 83.7%
DLJ (7/93) 106.2% 82.0%
Note: (1) Based on LIN actual pro forma for exchange of
Philadelphia and acquisition of additional 5% of
New York POPs.
<PAGE>
<PAGE>
RECONCILIATION TO PUBLIC VALUATION
LIN Indexed 1994 Price Performance
[Collectively these ever-increasing PMV estimates helped drive
LIN's stock price 30% above the cellular index since year-end
1993]
[Graph of Indexed LIN(1) daily stock price and Cellular Index(2)
from 12/31/93 to 2/15/95]
Notes: (1) Includes LIN TV after 12/28/94.
(2) Index includes AirTouch, CCI, Vanguard, Comnet, US
Cellular and Centennial. Excludes Contel Cellular
and Associated Communications due to announced
acquisitions during 1994.
<PAGE>
<PAGE>
RECONCILIATION TO PUBLIC MARKET VALUE
Analysts' PMV Estimates
(continued)
[These PMV estimates have been further inflated by including 100%
of AT&T synergies in LIN's projections ... ]
"The logic in better results for LIN than the industry overall is
basically related to the demographics of its markets, combined
with the benefits of being owned by AT&T."
Frank Governali - First Boston
January 12, 1995
"LIN is clearly a significant beneficiary of the transaction,
because all of the benefits accruing to McCaw automatically
accrue to LIN. In fact, these benefits may be even more
important for LIN because it operates in the country's largest
markets where new business opportunities are likely to be the
greatest, as will be the possible competition."
Barry Kaplan - Goldman Sachs
November 24, 1992
"The AT&T strategic alliance should result in higher market share
and lower costs and thus higher cash flows and values. The AT&T
brand name is one of the most formidable in the country . . .
McCaw and LIN would also have access to AT&T's customer lists,
its salespeople, and its phone centers, at which wireless service
would be sold . . . For McCaw and LIN, enhanced market share and
lower costs should raise values as well."
Dennis Leibowitz - DLJ
November 17, 1992
<PAGE>
<PAGE>
<TABLE>
RECONCILIATION TO PUBLIC MARKET VALUE
Selected Analyst 1995 PMV Estimates and Revisions
[...as can be seen by the fact that analysts raised their PMV estimates after the AT&T/McCaw merger announcement,
despite the fact that the transaction represented no new information about LIN's PMV as defined]
<CAPTION>
1995 PMV Estimate(1)
(ex-TV)
-----------------------------------------------------------------
Pre-Merger (11/92-8/93)(3) Post-Merger (after 8/16/93)(2)
-------------------------- ------------------------------
PMV Date PMV Date
------- --------- ---------- ---------
<S><C> <C> <C> <C> <C>
DLeibowitz
DLJ* $123 7/9/93 $137 5/31/94
SPassoni
Smith Barney/Cowen* $123 11/16/92 $128 5/5/94
JBauer
Prudential* $108 8/2/93 $128 3/9/94
FGovernali
CSFB $118 11/6/92 $133 2/18/94
PJurczak
Merrill/Nomura $111 5/4/93 $128 2/22/94
CPhillips
Shearson Lehman/Smith Barney $113 2/19/93 $113 4/7/94
Mean $116 $128
*Institutional Investor All-American
Notes: (1) Reflects estimated 1995 PMV per share price less $12/share assumed value attributed to TV spin-off.
(2) Represents first estimate after announcement of AT&T/McCaw merger on August 16, 1993 (based on
Investext).
(3) Represents last estimate prior to announcement of AT&T/McCaw merger on August 16, 1993.
/TABLE
<PAGE>
<PAGE>
RECONCILIATION TO PUBLIC MARKET VALUE
Analysts' PMV Estimates in Precedent Cellular Transactions
[These errors are further compounded since analysts' PMV
estimates are typically 35% above actual private market
transaction prices]
Mean Analyst PMV as Premium to Transaction Price
------------------------------------------------
Contel Cellular (10%)/ 17%
GTE
McCaw/AT&T 21%
Metro Mobile/Bell Atlantic 35%
Contel/GTE 37%
Associated/SBC 43%
Centel/Sprint 50%
US West New Vector (19%)/ 64%
US West
<PAGE>
<PAGE>
RECONCILIATION TO PUBLIC MARKET VALUE
Analyst DCF Values
[Most of this can be explained by the fact that analysts are not
rigorous in applying accurate discount rates and exit multiples .
. .]
Stated PMV Estimates
- --------------------
Goldman Sachs $155
Salomon Brothers $145
Merrill Lynch $140
First Boston $150
DCF Value at 6/30/95
- --------------------
Goldman Sachs(1) $125-$149
Salomon Brothers $140
Merrill Lynch $119-$138
First Boston $149-$170
"Recalculated" DCF Value at 2/15/95(2)
- --------------------------------------
Goldman Sachs(3) $110-$120
Salomon Brothers(3)(4) $109-$120
Merrill Lynch(3) $108-$119
First Boston(5) $101-$110
Notes: (1) Excludes $10/share value of LIN TV.
(2) All calculated values assume $1,615MM debt, $143MM
options proceeds, $94MM cash and working capital,
$88MM WOOD-TV value, $24MM AMSC value, and 53.3MM
shares.
(3) Assumes 10.0x to 11.0x EBITDA in year 2000 and
13.5% WACC.
(4) Assumes "LIN Base Case" unadorned capital
expenditures and depreciation.
(5) Assumes 9.5x to 10.5 EBITDA in year 2004 and 13.5%
WACC.
<PAGE>
<PAGE>
RECONCILIATION TO PUBLIC MARKET VALUE
Case Study of Merrill Lynch Research Analyst Errors
[... and/or make errors of logic ...]
- -- Runyon calculates prior transaction multiples correctly...
"McCaw was trading at approximately 19 times operating
cash flow when the AT&T deal was announced and 15 times
when it closed."
- -- ... but then applies a higher multiple to LIN's 1995E EBITDA.
"If we run through this exercise and apply a [sic] 18
times multiple [to LIN], we arrive at a range of $142-$158
(including LIN TV)."
- -- In actuality, 18x 1995E EBITDA implies a multiple of 24.2x
1994 EBITDA...
18x$520MM/$386MM=24.2x
- -- ... or a 60% premium over the empirical transaction multiple
of 15x
<PAGE>
<PAGE>
<TABLE>
RECONCILIATION TO PUBLIC MARKET VALUE
Case Study of CSFB Research Analyst Errors
[... or simple arithmetic errors]
CSFB/Frank Governali Projection for LIN - January 12, 1995
<CAPTION>
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Cash Flow 495 621 778 900 991 1,164 1,314 1,454 1,621 1,753
Unlevered Free Cash Flow 10 42 199 273 305 441 586 665 801 963
<CAPTION>
Morgan Stanley
Governali Report on LIN - January 12, 1995 Comments Calculation
- ------------------------------------------ ---------------------------------------- ---------------
13.0% 13.5% 13.0% 13.5%
----- ----- ----- -----
<S> <C> <C> <S> <C> <C>
NPV of FCF $6,190 $5,789 Gross calculation error $1,883 $1,830
NPV of Terminal Value
assuming 7% perpetual
growth 3,780 3,097 Gross calculation error 5,007 4,422
------ ------ ------ ------
Total Value $9,971 $8,887 $6,889 $6,252
Plus: Other Assets - - Doesn't reflect the spin of TV debt or
give credit for other assets 351 351
Less: Net Debt (1,725) (1,725) (1,615) (1,615)
------- ------- ------- -------
Equals: Equity Value $8,246 $7,162 $5,625 $4,988
Shares Outstanding 52.1 52.1 53.3 53.3
Per Share $158 $137 Errors have big impact on value $106 $94
Multiple of 1994 OCF 24.5x 21.8x 16.9x 15.3x
Multiple of 1995 OCF 20.1x 17.9x 13.9x 12.6x
Alternatively, to get to his values,
one would need to use a 16x 2004
EBITDA multiple
/TABLE
<PAGE>
<PAGE>
APPENDIX<PAGE>
<PAGE>
APPENDIX: IMPLIED PUBLIC TRADING VALUE
Demographic Overview of Public Cellular Companies
[LIN and AirTouch have the most similar markets
demographically...]
% of POPs in Top % of POPs in Top
10 Markets 50 Markets % Majority Control
- ---------------- ---------------- ------------------
LIN 98% LIN 98% ICEL 100%
ATI(1) 33% ATI(1) 80% COMMA 97%
COMMA 29% COMMA 69% VCELA 95%
CCXLA 15% CCXLA 42% USM 89%
USM 4% CYCL 9% ATI(1) 89%
CYCL 2% USM 7% CYCL 81%
CELS 0% CELS 0% LIN 77%
ICEL 0% ICEL 0% CELS 73%
VCELA 0% VCELA 0% CCXLA 69%
% Workforce in Key
Salaries > $50,000 Commuting Time Cellular Industries
% of Total POPs Minutes % of Total POPs
- ------------------ -------------- -------------------
LIN 21% LIN 26 ATI(1) 40%
ATI(1) 19% ATI(1) 22 LIN 36%
CCXLA 16% CCXLA 21 CCXLA 35%
COMMA 16% COMMA 21 CELS 34%
CYCL 16% ICEL 21 CYCL 33%
USM 15% USM 20 COMMA 33%
VCELA 14% CYCL 18 USM 33%
CELS 10% VCELA 18 ICEL 29%
ICEL 6% CELS 17 VCELA 29%
Note: (1) Pro forma for AirTouch's 70% interest in
AirTouch/USWest joint venture.<PAGE>
<PAGE>
APPENDIX: IMPLIED PUBLIC TRADING VALUE
Operating Comparison of Public Cellular Companies(1)
[...as well as from a financial perspective...]
Penetration Revenue/Sub/Month
------------------ ---------------------
COMMA 3.99% LIN $84
ATI(2) 3.82% USM $76
LIN 3.79% ATI(2) $74
ICEL 3.24% CYCL $73
CCXLA 2.89% COMMA $72
VCELA 2.88% VCELA $72
CELS 2.55% CCXLA $70
CYCL 1.93% CELS $70
USM 1.56% ICEL $47
Revenue/POP EBITDA/POP
------------------ ---------------------
LIN $37 LIN $17
COMMA $35 COMMA $13
ATI(2) $30 ICEL $13
CCXLA $28 ATI(2) $12
ICEL $27 CCXLA $9
VCELA $24 VCELA $7
CELS $23 CELS $6
USM $15 CYCL $6
CYCL $13 USM $5
Notes: (1) As of third quarter 1994
(2) Pro forma for AirTouch's 70% interest in
AirTouch/US West joint venture.
<PAGE>
<PAGE>
APPENDIX: IMPLIED PUBLIC TRADING VALUE
Operating Comparison of Public Cellular Companies
[...and a growth perspective.]
Subscriber Growth(1) Revenue Growth(1)
-------------------- ---------------------
CYCL 69% CELS 74%
CELS 64% CCXLA 39%
VCELA 64% CYCL 37%
USM 55% ATI(3) 36%
CCXLA 52% LIN 34%
ATI(3) 49% VCELA 33%
LIN 46% COMMA 27%
COMMA 45% USM 20%
EBITDA Growth(1) EBITDA Margin(2)
-------------------- ---------------------
USM 114% CYCL 46%
CCXLA 52% LIN 46%
VCELA 49% ATI(3) 40%
CYCL 32% COMMA 37%
ATI(3) 31% CCXLA 32.5%
CELS 27% USM 32.2%
LIN 23% VCELA 30%
COMMA 22% CELS 24.9%
Notes: (1) Represents year-to-year third quarter growth.
(2) As of third quarter 1994.
(3) Pro forma for AirTouch's 70% interest in
AirTouch/USWest joint venture.
<PAGE>
<PAGE>
<TABLE>
APPENDIX: IMPLIED PUBLIC TRADING VALUE
AirTouch Trading Analysis
[AirTouch, which is the most directly comparable company to LIN, trades at 10.4 to 11.7x 1995E EBITDA]
<CAPTION>
Implied AirTouch Trading Multiple of(1)(2)
-----------------------------------------------------------
Domestic Revenue
Range of ($MM) Domestic EBITDA ($MM)
International Discount to ------------------- ---------------------
Asset Values Consensus(3) POPs 1994 1995E 1994 1995E
- ------------- ------------ ------- ------ ------- ------ -------
<C> <S><C> <C> <C> <C> <C> <C>
35.0 $1,142 $1,451 $479 $657
$4,400 -18.5% $236 7.2x 5.7x 17.2x 12.6x
4,600 -14.8% 230 7.1 5.6 16.8 12.3
4,800 -11.1% 225 6.9 5.4 16.4 12.0
- ----------------------------------------------------------------------------------------------------------
5,000 -7.4% 219 6.7 5.3 16.0 11.7
5,200 -3.7% 213 6.5 5.1 15.6 11.4
5,400 0.0% 207 6.4 5.0 15.2 11.1
5,600 3.7% 202 6.2 4.9 14.7 10.8
5,800 7.4% 196 6.0 4.7 14.3 10.4
- ----------------------------------------------------------------------------------------------------------
6,000 11.1% 190 5.8 4.6 13.9 10.1
6,200 14.8% 185 5.7 4.5 13.5 9.8
6,400 18.5% 179 5.5 4.3 13.1 9.5
Notes: (1) Source of 1994 and 1995 estimates: mean of Merrill Lynch and PaineWebber. Estimates are for domestic
cellular only.
(2) Multiples assume share price of $27.250 as of February 15, 1995.
(3) Assume analyst consensus value of $5.4Bn, based on the following ranges: $4.5-$5.4Bn (Goldman Sachs),
$5.8-$6.7Bn (Merrill Lynch), and $5.2-$6.6 Bn (Morgan Stanley). Goldman Sachs and Merrill Lynch include
$200-$300MM value of Spain (Morgan Stanley estimate). Excludes Lehman Brothers 1/11/95 estimate of
$9.7Bn.
/TABLE
<PAGE>
<PAGE>
APPENDIX: IMPLIED PUBLIC TRADING VALUE
Implied LIN Valuation Based on AirTouch Trading
[AirTouch's public trading multiples imply LIN share prices of
$80-$95 per share]
Implied
AirTouch LIN Value
LIN Measure Trading Multiple Per Share(1)
- ------------------------- ---------------- ------------
POPs(MM) 25.7 $196 - $219 $70.69 - $81.70
Revenue ($MM) (2)
1994 $924.9 6.0 - 6.7 80.51 - 92.66
1995E 1,160.0 4.7 - 5.3 79.17 - 91.17
EBITDA ($MM) (2)
1994 389.8 14.3 -16.0 81.03 - 93.24
1995E 537.9 10.4 - 11.7 81.68 - 93.97
Notes: (1) Based on 53.3MM LIN shares, $1615MM of debt and
$350MM of cash and other assets.
(2) 1995 estimates are LIN Base Case excluding
Wireless Data, Long Distance and Additional
Features.
<PAGE>
<PAGE>
<PAGE>
<PAGE>
LIN BROADCASTING
Valuation Review
March 2, 1995<PAGE>
<PAGE>
TABLE OF CONTENTS
SECTION I
Review of Morgan Stanley Valuation Analysis
SECTION II
Review of Bear Stearns/Lehman Brothers Valuation Analysis
Tab A
Competitive Position
Tab B
Discounted Cash Flow Analysis
Tab C
Precedent Transactions
Tab D
Review of Potential Purchasers
Tab E
Public Market Valuation
<PAGE>
<PAGE>
SECTION I<PAGE>
<PAGE>
SECTION I
REVIEW OF MORGAN STANLEY VALUATION ANALYSIS
<PAGE>
<PAGE>
REVIEW OF MORGAN STANLEY VALUATION ANALYSIS
Basis of Valuation Methodology
[In arriving at its valuation view, Morgan Stanley examined the
following, among other things:]
- -- LIN's intrinsic value implied by LIN management projections.
- -- Values implied by precedent transactions.
- -- Evaluation of potential unrelated third party acquirors of
LIN.
- -- LIN's "allocated" purchase price in the context of AT&T's
acquisition of McCaw/LIN.
- -- PMV price for LIN projected by McCaw in 1992 in the context
of its financial planning process.
- -- Evaluation of the 1989 contested battle for LIN.
- -- Likely public market trading value for LIN absent the PMVG
agreement.<PAGE>
<PAGE>
REVIEW OF MORGAN STANLEY VALUATION ANALYSIS
Review of Operating Projections
[LIN Management's Base Case projections for the core cellular
business represent an aggressive set of operating assumptions]
LIN Management's Base Case was not prepared in the ordinary
course but rather for the sole purpose of the PMVG process.
Base Case assumptions are inconsistent with operating performance
to date as results since have fallen short of the LIN Management
projections prepared in October 1992.
EBITDA margins are projected to improve from 42% in 1994 to 50%
in 2004 due primarily to decreased marketing expenditures, in
spite of increased competition due to the formation of strategic
alliances, whose partners are in LIN's four markets, as well as
new PCS entrants.
Projections for capital expenditures appear to include no
allocation for replacement capital, causing net PP&E per
subscriber to decline almost fourfold from 1998 to 2004.
Base case assumptions do not take into account potential
"negative synergies" and "dislocations" -- including the prospect
of competing against AT&T Wireless.
<PAGE>
<PAGE>
REVIEW OF MORGAN STANLEY VALUATION ANALYSIS
Discounted Cash Flow Analysis
[Simpley adjusting LIN Management's Base Case operating
projections for higher marketing costs, such that EBITDA margins
do not exceed 45%, and for replacement capital expenditures
yields values for LIN of $81 to $88 per share]
DCF Valuation
- --------------------------------------------------------------
Low(1) High(2)
--------- -----------
LIN Management's
Base Case $103 $111
Adjusted for Higher
Marketing Costs 92 99
Additionally Adjusted for
Replacement Capital
Expenditures 81 88
Notes: (1) Low value based on WACC of 13.50% and 2004 EBITDA
exit multiple of 9.5 as of 2/15/95.
(2) High value based on WACC of 13.50% and 2004 EBITDA
exit multiple of 10.5 as of 2/15/95.
<PAGE>
<PAGE>
REVIEW OF MORGAN STANLEY VALUATION ANALYSIS
Analyst Intrinsic Values
[Analysts have included AT&T synergies in their LIN projections,
raising their PMV estimates an average of $12 per share as a
result of AT&T's acquisition of McCaw/LIN]
"The logic in better results for LIN than the industry overall is
basically related to the demographics of its markets, combined
with the benefits of being owned by AT&T."
Frank Governali - First Boston
January 12, 1995
"LIN is clearly a significant beneficiary of the transaction,
because all of the benefits accruing to McCaw automatically
accrue to LIN.
Barry Kaplan - Goldman Sachs
November 24, 1992
"The AT&T strategic alliance should result in higher market share
and lower costs and thus higher cash flows and values. The AT&T
brand name is one of the most formidable in the country . . .
McCaw and LIN would also have access to AT&T's customer lists,
its salespeople, and its phone centers, at which wireless service
would be sold . . . For McCaw and LIN, enhanced market share and
lower costs should raise values as well."
Dennis Leibowitz - DLJ
November 17, 1992
<PAGE>
<PAGE>
REVIEW OF MORGAN STANLEY VALUATION ANALYSIS
Analyst Intrinsic Values
[Analysts' unchallenged projections for LIN yield DCF values of
$101-120, which include AT&T value-added in their projections]
Analysts' Intrinsic Valuations(1)
- --------------------------------------------------------------
Estimated DCF
Value w/o AT&T
Analyst DCF Value Value-added(4)
- ----------------- ----------- ----------------
Goldman Sachs $110 - 120 $98 - 108
Salomon Brothers(2) 109 - 120 97 - 108
Merrill Lynch 108 - 119 96 - 107
First Boston(3) 101 - 110 89 - 98
Notes: (1) Represents DCF value as of 2/15/95 based on
analysts' projections, 13.50% WACC, and 10-11x
exit multiples in 2000.
(2) Assumes Base Case CapEx projections.
(3) Based on 9.5-10.5x exit multiple in 2004.
(4) Reflects DCF value less $12/share, based on mean
increase in PMV estimates after announcement of
AT&T/McCaw merger.
<PAGE>
<PAGE>
REVIEW OF MORGAN STANLEY VALUATION ANALYSIS
The AT&T/McCaw Transaction
[The single most relevant precedent transaction in determining
the PMV of LIN is AT&T's acquisition of LIN, although the
precedent does have its limitations]
While Morgan Stanley agrees that AT&T/McCaw is the most relevant
precedent, it is important to understand that McCaw/LIN valuation
is in many ways a ceiling not a floor on LIN's standalone
valuation.
- -- AT&T was able to achieve a level of synergies which no other
third party could achieve.
- -- Transaction incorporated a valuation premium to reflect the
strategic benefit to AT&T's core business of owning both the
McCaw and LIN properties.
- -- AT&T was able to achieve pooling of interests accounting
treatment.
- -- Wireless arena has grown more competitive since the
AT&T/McCaw transaction was announced.
- -- Interest rates have risen almost 200 basis points since the
AT&T/McCaw transaction was announced.
<PAGE>
<PAGE>
REVIEW OF MORGAN STANLEY VALUATION ANALYSIS
The AT&T/McCaw Transaction
[At announcement, AT&T's expected 9/94 purchase price of $16.2Bn
implied an acquisition price at 9/94 for the LIN shares of $98-$112.]
Implied LIN Share Price based on Analyst Estimates
- -----------------------------------------------------------------
Announcement(1)
-----------------------------------------------
First Boston DLJ Goldman
(7/93) (7/93) (11/92)
------------ -------- ---------
1994E Revenue $103 $100 $102
1994E EBITDA(2) 111 108 112
1995E Revenue NA 98 101
1995E EBITDA(2) NA 104 111
Average $107 $103 $106
POPs 106 106 106
Notes: (1) Analyst estimates are adjusted to exclude
Philadelphia.
(2) EBITDA is before corporate overhead.
<PAGE>
<PAGE>
REVIEW OF MORGAN STANLEY VALUATION ANALYSIS
Summary of Universe of Likely Potential Purchasers
Rationale for Exclusion
---------------------------------------------------
Company Regulatory Strategic Financial Feasible
- --------- ---------- --------- --------- Bidders
--------
Bell Atlantic X
NYNEX X
AirTouch X
US West X
Ameritech X
Pacific Telesis X
ALLTEL X
TDS X
Sprint X X
TCI X X
GTE X X
MCI X
SBC Comm. X
BellSouth X
<PAGE>
<PAGE>
REVIEW OF MORGAN STANLEY VALUATION ANALYSIS
Detailed Review of Individual Potential Purchasers
[Any of the three most likely purchasers would face significant
transaction hurdles in acquiring LIN]
MCI -- Acquisition of LIN potentially inconsistent
with MCI's wireless strategy.
-- An acquisition of LIN at $105 per share would
dilute earnings by 30% in 1995, and have
severe impacts on MCI's balance sheet.
-- An acquisition of LIN by MCI also seems
inconsistent with the strategic direction of
its significant shareholder, BT.
SBC -- Almost 50% of LIN's assets would be
non-strategic:
- SBC is prohibited from owning Dallas.
- The alliance with GTE obviates the need
to acquire an interest in Houston.
- LIN's interest in Los Angeles does not
offer SBC control.
-- An acquisition of LIN at $105 per share would
dilute earnings by 20% in 1995, and have
significant impacts on SBC's balance sheet.
BellSouth -- BellSouth has proven a disciplined buyer of
cellular properties in the past, purchasing
assets on an opportunistic basis.
-- Given BellSouth's decision to pass on LIN in
1989 when dilution became significant, it
seems unlikely that it would seek to purchase
LIN when the earnings dilution would be
significantly higher.
-- An acquisition of LIN at $105 per share would
dilute earnings by 20% in 1995, and have
significant negative impacts on BellSouth's
balance sheet.
<PAGE>
<PAGE>
REVIEW OF MORGAN STANLEY VALUATION ANALYSIS
Summary of Valuation Methodologies: Review
Price Per Share
-------------------
Private Market Value
LIN Management
Intrinsic Value $103-$111
"Adjusted" LIN
Management
Intrinsic Value $81-$88
Analyst Intrinsic
Value $101-$120
"Adjusted" Analyst
Intrinsic Value $89-$108
"Allocated" AT&T
Purchase Price $98-$112
Public Market Value
Current Comparable
Company Trading $80-$95
Morgan Stanley PMV Estimate $105
<PAGE>
<PAGE>
SECTION II<PAGE>
<PAGE>
SECTION II
REVIEW OF BEAR STEARNS/LEHMAN BROTHERS
[IDA] VALUATION ANALYSIS<PAGE>
<PAGE>
Tab A
<PAGE>
<PAGE>
Tab A
COMPETITIVE POSITION
<PAGE>
<PAGE>
<TABLE>
COMPETITIVE POSITION
Review of Market Characteristics
['[LIN's] four markets are characterized by superior 'cellular' demographics, ranking well above the national average in
terms of selected indicators of future cellular usage. . ." ]
New York's "cellular" demographics (representing 57% of LIN's POPs) are themselves misleading due to unusually high use
of public transportation that occurs in the market. This use of public, not private, transportation is a major
contributor to the market's below-average penetration levels.
<CAPTION>
Demographics and Penetration Statistics Indexed to National Average
- ------------------------------------------------------------------------------------------------------------
Population/ % Households High Profile Commute Local Interstate
Square Mile >$50k POPs >30 Min. Traffic Density Penetration
----------- ------------ ------------- --------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
New York 53.4x 1.6x 1.3x 1.8x 3.2x 0.97
<PAGE>
<PAGE>
COMPETITIVE POSITION
LIN vs. Peer Group
["Given that cellular is still in an early growth stage, demographic statistics for particular markets are probably the
best indicators of future demand for cellular service."]
Demographic statistics are not necessarily indicative of demand for cellular service, as evidenced by LIN's own markets.
<CAPTION>
Demographics Analysis - Indexed vs. National Average
- ------------------------------------------------------------------------------------------------------------
POPs/ % HH High Profile Commute Local Interstate 1994 LIN
Market Sq. Mile >$50k POPs >30 Min. Traffic Density Penetration
- ------- ----------- ------------ ------------- --------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
New York 53.4 1.6 1.3 1.8 3.2 1.0
6.4 1.3 1.0 1.4 3.3 1.0
7.1 1.3 1.1 1.3 2.0 1.2
7.7 1.3 1.3 1.5 3.5 1.4
</TABLE>
<PAGE>
<PAGE>
COMPETITIVE POSITION
Comparison of Historical Operating Performance
[Notwithstanding claims that "McCaw's decision to focus LIN on
subscriber growth...diminished operating cash flow in the near
term," LIN's peers have grown subscribers and EBITDA more rapidly
than LIN.]
Subscriber Growth(1)
- -----------------------------------------------------------------
1993 1994
- ----------------------------- -----------------------------
MCAWA (Only) 44% MCAWA (Only) 51%
ATI 41% ATI 49%
BLS 39% BLS 42%
LIN(2) 29% LIN(2) 38%
EBITDA Growth(1)
- -----------------------------------------------------------------
1993 1994
- ----------------------------- -----------------------------
ATI 36% BLS 36%
BLS 36% ATI 26%
MCAWA (Only) 33% LIN(2) 16%
LIN(2) 20% MCAWA (Only) N.A.
Notes: (1) For full year 1994.
(2) Excludes Philadelphia.
<PAGE>
<PAGE>
COMPETITIVE POSITION
LIN vs. Peer Group
[Notwithstanding "efforts to accelerate growth of its . . .
subscriber base in the near term . . .,"
LIN's actual 1994 subscriber growth was significantly below the
average of its peers.]
1994 Subscriber Growth(1)
- ---------------------------------------------------------------
BEL 62%
USW 61%
NYN 57%
AIT 51%
MCAWA(Only) 51%
ATI 49%
GTE 46%
SBC 45%
LIN(2) 42%
BLS 38%
Notes: (1) Year-end 1994 vs. year-end 1993.
(2) Actual figure, pro forma for additional 5% of New
York, excluding recent acquisitions and excluding
Philadelphia.
Source: Paul Kagan Associates
<PAGE>
<PAGE>
Tab B
<PAGE>
<PAGE>
Tab B
DISCOUNTED CASH FLOW ANALYSIS
<PAGE>
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
Review of Operating Projections
[-- "These projections did not include the impact of synergies
that a buyer may bring."
- -- "The IDA found that LIN's assumptions are reasonable
relative to those of Wall Street analysts."
- -- "EBITDA per POP is an important valuation measure which
combines penetration, ARPU and EBITDA margin and, thus,
represents a good summary view of projected
performance...."]
Comparison of Operating Projections
- ---------------------------------------------------------------
2000 2004
-------- --------
EBITDA/POP
- ---------------------------------------------------------------
LIN Management Base Case $44.55 $65.06
First Boston(1) 42.63 61.72
LIN Premium 4.5% 5.4%
(EBITDA-CapEx)/POP
- ---------------------------------------------------------------
LIN Management Base Case $38.34 $62.40
First Boston(1) 28.60 51.86
LIN Premium 34.1% 20.3%
"The logic in better results for LIN than the industry overall is
basically related to the demographics of its markets, combined
with the benefits of being owned by AT&T."
Frank Governali - First Boston
January 12, 1995
Note: (1) Based on 1/12/95 report.
<PAGE>
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
Target Capitalization
["The IDA assumes a target debt to market capitalization of 35%
based on an analysis of the leverage ratios of cable companies,
television broadcasting companies, and RBOCs"]
Standalone Public Cellular Companies
- ---------------------------------------------------------------
Company Current Debt/Market Cap(1)
- --------------------- ------------------------------
LIN 17%
AirTouch 0%
Cellular Comm. 8%
Vanguard 21%
S&P Target Capitalization(2)
- ---------------------------------------------------------------
Rating: B BBB
- ------ -------------- --------------
LIN Share Price: $105 $155 $105 $155
- --------------- ----- ---- ----- ----
Cons. EBIT/Int. 19.2% 13.8% 10.6% 7.4%
Cons. EBITDA/Int. 23.1 16.8 13.0 9.2
Debt/POP 18.9 13.6 8.5 5.9
Debt/Sub 25.0 18.4 16.4 11.7
------ ----- ----- -----
Mean 21.6% 15.7% 12.1% 8.6%
Notes: (1) Market equity as of 2/15/95.
(2) Represents maximum debt/market capitalization to
meet S&P cellular rating guidelines, July 1994.
Assume 10.5% cost of debt.
<PAGE>
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
Cost of Equity
["To derive LIN's beta, we calculated a mean industry unlevered
predicted beta."]
- -- To derive LIN's asset beta, one need look no further than
LIN itself, since LIN's specific equity beta is observable.
- -- Moreover, LIN's estimated asset beta has been remarkably
stable over time.
Historical Predicted Asset Beta(1)
- ---------------------------------------------------------------
Jan-1993 0.94
Apr-1993 0.97
Jul-1993 1.01
Oct-1993 1.05
Jan-1994 1.03
Apr-1994 1.02
Jul-1994 0.96
Oct-1994 1.00
Jan-1995 0.98
Yellow area upper bound 1.05
Yellow are lower bound 0.95
Note: (1) Equity betas from BARRA, U.S. Equity Beta Book.
<PAGE>
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
Cost of Debt
["The IDA estimated LIN's cost of debt assuming a targeted debt
mix of 50% short term bank debt and 50% long-term public debt.
The cost of bank debt was estimated at LIBOR +2.5% based on the
company's most recent bank credit agreements. We assumed the
public debt would have . . . an average borrowing rate of 10.5%
based on the current trading levels of various cellular companies
high yield debt.]
- -- It is inappropriate to use short or intermediate term debt
rates in calculating the rates at which to discount a
perpetual stream of cash flows.
- -- The IDA's assumed floating rate of LIBOR + 250 bp is the
swapped equivalent of a fixed rate of 10.21%.
- -- 35% debt/cap implies CCC credit rating at best.
- -- CCC wireless credits trading at 11.84% - 13.06% (2/15/95).
Selected Cellular Debt Trading Levels
- ---------------------------------------------------------------
Issuer Rating 2/15/95 YTM
- --------------- -------------- ----------------
CommNet [Sr. Sub] Caa/CCC 11.84%
Horizon Cellular [Sr. Sub] Caa/CCC+ 13.06%
Note: (1) Based on LIBOR swap spread of T+34 over 5-year UST of
7.34% (2/15/95).
<PAGE>
<PAGE>
<TABLE>
DISCOUNTED CASH FLOW ANALYSIS
WACC Estimate
["This WACC range [of 11-13%] is consistent with the WACC ranges used in comparable cellular acquisitions . . ."]
<CAPTION>
Change in 10-Yr. UST
Firm Date Stated WACC Since Opinion Adjusted WACC
- ------------------ ------- ------------- -------------------- --------------
<C> <C> <C> <S><C> <C> <C> <S><C>
Financial Advisors
Salomon Brothers
(AT&T/McCaw) 08/16/93 11.00 - 13.00% 1.76% 12.56 - 14.56%
Lazard Freres
(AT&T/McCaw) 08/15/93 10.00 - 12.00% 1.76% 11.56 - 13.56%
Paine Webber
(GTE/Contel) 12/27/94 13.00 - 15.00% -.32% 12.72 - 14.72%
Merrill Lynch
(GTE/Contel) 12/27/94 12.00 - 14.00% -.32% 11.72 - 13.72%
Average 12.14 - 14.14%
Appraisers
Morgan Stanley 02/15/95 13.00 - 14.00%
Lehman/Bear Stearns -
Stated 02/15/95 11.00 - 13.00%
Lehman/Bear Stearns -
Adjusted @ 35% 02/15/95 13.22 - 13.64%(1)
Lehman/Bear Stearns -
Adjusted @ 20% 02/15/95 13.59 - 13.83%(2)
Notes: (1) Reflects adjustments based on LIN asset beta of 0.98, 7.44% risk-free rate, 7.22% market risk premium,
35% debt/capital, and cost of debt of 11.0-13.0% (pre-tax).
(2) Reflects adjustments based on LIN asset beta of 0.98, 7.44% risk-free rate, 7.22% market risk premium,
20% debt/capital, and cost of debt of 9.50-11.50% (pre-tax).
<PAGE>
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
WACC Calculation - Lehman/Bear Stearns Estimate
[Lehman/Bear Stearns understate the proper WACC for LIN, even using their own assumptions]
<CAPTION>
Lehman/Bear Stearns Comments Corrected
- ----------------------------------------------------------------------------------------------------------
Industry LIN 35% Debt/ 20% Debt/
Capital Capital
- ----------------------------------------------------------------------------------------------------------
<S> <C> <S> <C> <S> <C> <S> <C> <C>
Predicted
Equity Beta .98 - 1.13 Must use LIN's specific beta 1.10 1.10
- ----------------------------------------------------------------------------------------------------------
Predicted
Asset Beta(1) .79 - .99 Must calculate asset beta 0.98 0.98
- ----------------------------------------------------------------------------------------------------------
Target
Leverage 35.0% - 35.0% Observation: 35% leverage is 35.0% 20.0%
higher than any cellular
company or RBOC
- ----------------------------------------------------------------------------------------------------------
Relevered
Equity Beta 1.04 - .99 And relever for assumed 1.29 1.12
leverage
- ----------------------------------------------------------------------------------------------------------
Risk-Free Rate 7.86% 7.44% 7.44%
- ----------------------------------------------------------------------------------------------------------
Risk Premium 7.22% 7.22% 7.22%
- ----------------------------------------------------------------------------------------------------------
Cost of Equity 15.37 - 15.01% Must use relevered equity 16.78% 15.56%
(Calculated) beta to calculate cost of equity
=Rf + [symbol Beta] x
(Risk Premium)
- ----------------------------------------------------------------------------------------------------------
Cost of Equity 14.00 - 16.00%
(Stated)
- ----------------------------------------------------------------------------------------------------------
Cost of Debt 9.00 - 11.00% Cost of debt must be consistent 11.00- 9.50
with target leverage -- at 35% 13.00% 11.50%
debt/cap, LIN would likely be
no better than a CCC credit
- ----------------------------------------------------------------------------------------------------------
WACC - 11.00 - 13.00%
(Stated)
- ----------------------------------------------------------------------------------------------------------
WACC -
(Calculated) 11.65 - 12.30% 13.22 - 13.59 -
13.64% 13.83%
Note: (1) Assumes 17.1% debt/total capitalization for LIN based on share price of $140.50 (2/15/95) and net debt of
$1,537MM at 12/31/94.
</TABLE>
<PAGE>
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
Exit Multiples
["...cable television transaction multiples are a reasonable
indicator of future 'steady-state'
transaction multiples and terminal value multiples for the
cellular sector. Recent precedent M&A transactions involving
cable television companies have generally been consummated at
EBITDA multiples ranging from 10x-13x..."]
- -- Cable TV properties are currently being sold for
approximately 10x-11x EBITDA.
- -- Moreover, these benchmarks are somewhat specious given that
terminal values are a function of both discount rate and
perpetual growth rate and cable companies have weighted
average costs of capital which are 150 to 200 basis points
lower than cellular companies.
<PAGE>
<PAGE>
<TABLE>
DISCOUNTED CASH FLOW ANALYSIS
Exit Multiples
["We reviewed the terminal value multiples used by . . . other financial advisors in selected precedent M&A transactions
involving cellular companies."]
<CAPTION>
Terminal Multiples
----------------------------------------------------
Firm Date 1999 2000 2002 2004
- ------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Financial Advisors
Paine Webber(1) 12/27/94 10.5-12.5x [10.2-12.3x]
Merrill Lynch(1) 12/27/94 10.0-12.0x [9.6-11.7x]
Lazard Freres 08/16/93 [9.7-11.6x] 9.0-11.0x
Salomon Brothers 08/16/93 [10.6-11.6x] 10.0-11.0x
Average 10.0-11.8x
Appraisers
Morgan Stanley(2) 02/09/95 [9.9-10.9x] [9.4-10.2x] 9.5-10.5x
Lehman Bros./
Bear Stearns(3) 02/09/95 [11.7-13.5x] [10.7-12.5x] 10.5-12.5x
Notes: (1) Represents terminal multiple for five-year projection, which the advisors "relied more heavily on."
(2) Based on Base Case forecast and 13.50% discount rate for base cellular, excluding data, new features, and
long distance.
(3) Based on Base Case forecast and 12.00% discount rate for cellular, new features, and long distance,
excluding data.
Note: Non-bracketed data represents stated amount. [Bracketed] data is implied.
</TABLE>
<PAGE>
<PAGE>
Tab C<PAGE>
<PAGE>
Tab C
PRECEDENT TRANSACTIONS
<PAGE>
<PAGE>
PRECEDENT TRANSACTIONS
The AT&T/McCaw Transaction
["The most relevant transaction is AT&T's purchase of McCaw." ]
While Morgan Stanley agrees that AT&T/McCaw is the most relevant
precedent, it is important to understand that McCaw/LIN valuation
is in many ways a ceiling not a floor on LIN's standalone
valuation.
- -- AT&T was able to achieve a level of synergies which no other
third party could achieve.
- -- Transaction incorporated a valuation premium to reflect the
strategic benefit to AT&T's core business of owning both the
McCaw and LIN properties.
- -- AT&T was able to achieve pooling of interests accounting
treatment.
- -- Wireless arena has grown more competitive since the
AT&T/McCaw transaction was announced.
- -- Interest rates have risen almost 200 basis points since the
AT&T/McCaw transaction was announced.
<PAGE>
<PAGE>
PRECEDENT TRANSACTIONS
Allocation of LIN Purchase Price in AT&T/McCaw Transaction
[Factors used in calculating "Imputed Valuation of LIN Based on
AT&T/McCaw Transaction":
- - "Assumed per POP Value of McCaw's non-LIN Properties"
- - "Imputed Value for McCaw's Majority Stake in LIN"
"Based upon various qualitative and quantitative measures
including the attractive demographics of LIN's markets and their
great strategic value, the IDA concluded that LIN's properties
are more attractive than McCaw's properties (excluding McCaw's
interest in LIN) and therefore, the IDA believes that LIN should
command a premium to the McCaw [valuation multiple]."]
From a financial perspective, McCaw has historically grown faster
and is expected to continue to grow faster than LIN and thus
should be accorded an equal or greater EBITDA multiple.
From a strategic perspective, LIN without McCaw was no more
strategic than McCaw without LIN and thus any strategic premium
was for LIN with McCaw.
AT&T did not value the LIN properties on a different basis than
the McCaw properties.
<PAGE>
<PAGE>
PRECEDENT TRANSACTIONS
Applying the AT&T/McCaw Transaction
["A multiple of 1994E EBITDA for the AT&T/McCaw transaction is
comparable to a multiple of 1995E EBITDA for the LIN PMVG
appraisal, as each is a multiple of a 'closing year' cash flow."
"When using a transaction multiple of a precedent transaction to
evaluate a current transaction, the IDA believes that it is most
appropriate to compare the multiple of forward cash flow of the
precedent transaction with the multiple of forward cash flow of
the transaction being evaluated."
"The IDA believes that the DCF methodology is especially relevant
in light of McCaw's decision to accelerate subscriber growth,
which will depress operating cash flow in the near term, but
which should lead to greater cash flows in the long term."]
In practice, this "closing year" cash flow methodology would
suggest that LIN was worth $104 per share if sold in 1994 and
$154 if sold in 1995 -- a 48% increase in equity value simply
from waiting for calendar year 1995 to arrive.
Moreover, constant EBITDA multiples from 1994 to 1995 are
entirely inconsistent with the IDA's DCF results.
<PAGE>
<PAGE>
<TABLE>
PRECEDENT TRANSACTIONS
Evidence of Declining Multiples
<CAPTION>
Multiple of Trailing EBITDA Implied by DCF(1)
- ----------------------------------------------------------------------------------------------------------
Valuation Date
-----------------------------------------------------------------------
12/94 12/95 12/96 12/97 12/98 12/99
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
MS Base Case Unadorned(2) 16.9x 13.7x 12.2x 11.5x 10.9x 10.6x
IDA Base Case(3) 23.1x 18.9x 16.6x 15.4x 14.5x 13.8x
Notes: (1) EBITDA before corporate overhead.
(2) Represents LIN Base Case excluding Wireless Data, New Features and Long Distance, assuming 13.75% WACC
and 10.0x exit multiple, resulting in a value of $105/share at 6/30/95.
(3) Represents LIN Base Case assuming 13.20% WACC and 11.5x exit multiple, resulting in a value of
$155/share at 6/30/95.
/TABLE
<PAGE>
<PAGE>
Tab D
<PAGE>
<PAGE>
Tab D
REVIEW OF POTENTIAL PURCHASERS
<PAGE>
<PAGE>
REVIEW OF POTENTIAL PURCHASERS
Universe of Potential Purchasers
[-- "LIN would give instant scale and credibility to any company
trying to establish a nationwide communications company."
- -- LIN would "serve as the cornerstone of a national wireless
strategy."
- -- "The IDA believes that a deep market exists for LIN, if sold
in its entirety and/or if broken up by market."]
It is difficult to believe that a potential purchaser would view
LIN as being the cornerstone of a national wireless strategy
given that it would need to spend $7Bn or more to obtain control
of two markets -- multiples of what it would take to acquire a
national PCS footprint.
Significant earnings dilution and negative balance sheet impacts
would be incurred by any potential purchaser of LIN.
A screen of the universe of potential purchasers generates only
three feasible potential purchasers for LIN -- MCI, SBC and
BellSouth -- each of whom would need to overcome major issues.
<PAGE>
<PAGE>
REVIEW OF POTENTIAL PURCHASERS
Summary of Universe of Likely Potential Purchasers
Rationale for Exclusion
---------------------------------------------------
Company Regulatory Strategic Financial Feasible
- --------- ---------- --------- --------- Bidders
--------
Bell Atlantic X
NYNEX X
AirTouch X
US West X
Ameritech X
Pacific Telesis X
ALLTEL X
TDS X
Sprint X X
TCI X X
GTE X X
MCI X
SBC Comm. X
BellSouth X
<PAGE>
<PAGE>
REVIEW OF POTENTIAL PURCHASERS
Detailed Review of Individual Purchasers: MCI
[An acquisition of LIN is inconsistent with the strategic
direction of MCI
and its significant shareholder BT]
Strategic Issues
- -- MCI has pursued and terminated other wireless opportunities
via alliances and consortia.
- -- MCI has declined to participate in the PCS auctions.
- -- Analysts have speculated that MCI is most likely to pursue
cellular resale on a national scale given its available
alternatives to enter wireless.
- -- Purchasing LIN would only give MCI control of two markets
after spending $7Bn or more.
Financial Impacts
- -- An acquisition at $105 per share would dilute MCI earnings
roughly 30% in 1995, and would still be at least 10%
dilutive in 1998.
- -- A $7Bn acquisition of LIN financed principally with debt
would significantly strain MCI's balance sheet.
- -- In addition, MCI's stock has declined almost 30% during 1994
making the issuance of equity problematic.
<PAGE>
<PAGE>
REVIEW OF POTENTIAL PURCHASERS
Detailed Review of Individual Purchasers: SBC Comm.
[An acquisition of LIN at $105 per share would run contrary to
SBC's past demonstration of being a disciplined buyer of cellular
properties as well as avoiding significant
earnings dilution]
Strategic Issues
- -- SBC has historically been a disciplined, opportunistic buyer
of cellular properties.
- -- SBC has passed on buying strategic properties when "asking
prices" have exceeded calculated values.
- -- SBC would receive no strategic value from purchasing Los
Angeles due to LIN's co-control of the market, or Houston,
due to SBC's alliance with GTE, -- and it is prohibited from
owning Dallas.
Financial Impacts
- -- An acquisition at $105 per share would dilute SBC's earnings
almost 20% in 1995, and significant dilution would persist
for several years.
- -- Even at $105 per share a meaningful cash component would
likely reduce SBC's credit rating from A to BBB or worse.
<PAGE>
<PAGE>
REVIEW OF POTENTIAL PURCHASERS
Detailed Review of Individual Purchasers: BellSouth
[An acquisition of LIN at $105 per share would seem unlikely
given that BellSouth, like SBC, has been a disciplined buyer of
cellular properties and has avoided transactions involving
significant earnings dilution]
Strategic Issues
- -- BellSouth, like SBC, has historically been a disciplined
buyer of cellular properties at relatively low valuation
levels.
- -- BellSouth has not made a significant cellular acquisition
since it purchased Graphic Scanning in April 1991.
- -- Acquiring LIN at $105 per share would cause severe earnings
dilution, a hurdle which BellSouth presumably could not
overcome when it bid for LIN in 1989.
Financial Impacts
- -- At $105 per share, an acquisition of LIN would dilute
BellSouth's earnings about 15% in 1995 and would persist for
several years.
- -- Even at $105 per share a meaningful cash component would
severely impact BellSouth's credit rating.
<PAGE>
<PAGE>
Tab E
<PAGE>
<PAGE>
Tab E
PUBLIC MARKET VALUATION
<PAGE>
<PAGE>
<TABLE>
PUBLIC MARKET VALUATION
LIN vs. AirTouch
["The IDA believes that if LIN were an independent public company that it would most likely trade at a premium to
AirTouch because of its superior collection of properties."]
The demographic and operating characteristics of LIN and AirTouch are extremely similar.
<CAPTION>
Comparison of Demographics and Operations
- -----------------------------------------------------------------------------------------------------------
% Workforce in
POPs in POPs in % Majority Salaries Commuting Key Cellular
Demographics Top 10 Mkts Top 50 Mkts Control >50K Time Industries
- ------------ ----------- ----------- ---------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
LIN 98% 98% 77% 21% 26 40%
AirTouch 50 82 83 19 22 36
Rev./
Pene- Sub/ Rev./ EBITDA/ Sub/ Rev. EBITDA EBITDA
Operations(1) tration Month POP POP Growth Growth Growth Margin
- ------------- ------- ----- ------ ------- ------ -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LIN 4.25% $83 $37 $15 44% 31% 16% 42%
AirTouch 4.40% 73 33 $14 49 28 26 42
Note: (1) As of year-end 1994.
/TABLE
<PAGE>
<PAGE>
PUBLIC MARKET VALUATION
Implied LIN Trading Value
["The IDA believes that an appropriate EBITDA multiple for LIN
were it to trade on an independent stand-alone basis, is 14x
1995E EBITDA."]
AirTouch currently trades at 9.8x-11.1x 1995E EBITDA, based on a
range of estimates of its international asset value.
Implied LIN Trading Value
- ----------------------------------------------------------------
Multiple of 1995E EBITDA(1) Implied LIN Share Price(2)
- -------------------------------- -----------------------------
10.0x $77
10.5 82
11.0 87
11.5 92
Notes: (1) Assumes LIN Base Case 1995 projection.
(2) Assumes $1,615MM debt, $350MM cash and other
assets and 53.3MM fully diluted shares
outstanding.
<PAGE>
<PAGE>
<TABLE>
PUBLIC MARKET VALUATION
AirTouch Trading Analysis
<CAPTION>
Implied AirTouch Domestic Cellular Valuation
----------------------------------------------------------------------------------
Implied AirTouch
Trading Multiple of(1)(2)
-----------------------------------------------
Domestic Domestic
Range of Revenue ($MM) EBITDA ($MM)
International Discount to --------------- ----------------
Asset Values Consensus(3) POPs 1994 1995E 1994 1995E
------------- ------------ ---- ---- ----- ---- -----
<C> <C> <C> <C> <C> <C> <C>
35.0 $1,142 $1,451 $479 $657
$4800 (17.2)% $225 6.9x 5.4x 16.4x 12.0x
5000 (13.8) 219 6.7 5.3 16.0 11.7
5200 (10.3) 213 6.5 5.1 15.6 11.4
Goldman Sachs 5300 (8.6) 210 6.4 5.1 15.4 11.2
- --------------------------------------------------------------------------------------------------------
| 5400 (6.9) 207 6.4 5.0 15.2 11.1 |
| 5600 (3.4) 202 6.2 4.9 14.7 10.8 |
Consensus | 5800 0.0 196 6.0 4.7 14.3 10.4 |
| 6000 3.4 190 5.8 4.6 13.9 10.1 |
| 6200 6.9 185 5.7 4.5 13.5 9.8 |
- --------------------------------------------------------------------------------------------------------
Morgan Stanley 6300 8.6 182 5.6 4.4 13.3 9.7
6400 10.3 179 5.5 4.3 13.1 9.5
6600 13.8 173 5.3 4.2 12.7 9.2
Merrill Lynch 6700 15.5 170 5.2 4.1 12.4 9.1
6800 17.2 167 5.1 4.0 12.2 8.9
Lehman Brothers 9700 67.2 85 2.6 2.0 6.2 4.5
Notes: (1) Source of 1994 and 1995 estimates: mean of Merrill Lynch and PaineWebber. Estimates are for domestic
cellular only.
(2) Multiples assume share price of $27.250 as of February 15, 1995.
(3) Assumes analyst consensus value of $5.8Bn, based on the following ranges: $4.9-$5.8Bn (Goldman Sachs),
$6.2Bn-$7.1Bn (Merrill Lynch), and $5.6-$7.0Bn (Morgan Stanley). Goldman Sachs and Merrill Lynch include
$200-$300MM value of Spanish license and $400MM for German license (Morgan Stanley estimates). Consensus
excludes Lehman Brothers' 1/11/95 estimate of $9.7Bn.
</TABLE>
<PAGE>
<PAGE>
PUBLIC MARKET VALUATION
Analysts' PMV Estimates in Precedent Cellular Transactions
[Although analyst PMV estimates average $145 per share for LIN,
analyst PMV estimates have been significantly above actual
private market transaction prices]
Mean Analyst PMV as Premium to Transaction Price
------------------------------------------------
Contel Cellular (10%)/GTE 17%
McCaw/AT&T 21%
Metro Mobile/Bell Atlantic 35%
Contel/GTE 37%
Associated/SBC 43%
Centel/Sprint 50%
US West New Vector (19%)/US West 64%
<PAGE>
<PAGE>
<PAGE>
<PAGE>
LIN BROADCASTING
Valuation Review
April 28, 1995
<PAGE>
<PAGE>
SECTION I Valuation Summary
SECTION II Review of Morgan Stanley Valuation Analysis
Tab A Review of Operating Projections
Tab B Discounted Cash Flow Analysis
Tab C Precedent Transactions
Tab D Review of Potential Purchasers
SECTION III Lehman Brothers/Bear Stearns Valuation Analysis
SECTION IV Reconciliation to Public Market<PAGE>
<PAGE>
SECTION I
<PAGE>
<PAGE>
SECTION I
VALUATION SUMMARY
<PAGE>
<PAGE>
OVERVIEW
Introduction
Morgan Stanley Charter
[Morgan Stanley was retained by AT&T Corp. ("AT&T") on behalf of
its wholly-owned subsidiary McCaw Cellular Communications, Inc.
("McCaw") to determine the Private Market Value of LIN
Broadcasting Corporation ("LIN") as defined by the 1989 Private
Market Value Guarantee Agreement as amended.]
"...private market value per Share is the private market price
per Share (including control premium) that an unrelated third
party would pay if it were to acquire all outstanding Shares
(including the Shares held by Offeror [McCaw] and its affiliates)
in an arm's-length transaction, assuming the Company was being
sold in a manner designed to attract all possible participants
(including the Regional Bell Operating Companies) and to maximize
stockholder value, including if necessary through the sale or
other disposition (including tax-free spin-offs, if possible) of
businesses prohibited by legal restrictions to be owned by any
particular buyer or class of buyers (e.g., the Regional Bell
Operating Companies)."
Private Market Value Guarantee
3December 11, 1989
<PAGE>
<PAGE>
VALUATION SUMMARY
Basis of Valuation Methodology
[In arriving at its view of Private Market Value (as defined) for
LIN Broadcasting of $105 per share, Morgan Stanley examined the
following, among other things:]
- - Intrinsic value implied by LIN Management projections.
- - Values implied by precedent transactions.
- - Evaluation of potential unrelated third party acquirors of
LIN.
- - "Allocated" purchase price for LIN in the context of AT&T's
acquisition of McCaw/LIN.
- - 1995 PMV price for LIN projected by McCaw in 1992 in the
context of its financial planning process.
- - Evaluation of the 1989 contested battle for LIN.
- - Likely public market trading value for LIN absent the PMVG
agreement.
<PAGE>
<PAGE>
VALUATION SUMMARY
Summary of Valuation Methodologies: Review
Price Per Share
---------------
Private Market Value
Lin Management Intrinsic Value $103-$111
"Adjusted" LIN Management Intrinsic Value $81-$88
Analyst Intrinsic Value $101-$120
"Adjusted" Analyst Intrinsic Value $89-$108
"Allocated" AT&T Purchase Price $98-$112
Public Market Value
Comparable Company Trading Value $80-$95
Morgan Stanley PMV View $105
<PAGE>
<PAGE>
SECTION II<PAGE>
<PAGE>
SECTION II
REVIEW OF MORGAN STANLEY VALUATION ANALYSIS
<PAGE>
<PAGE>
Tab A
<PAGE>
<PAGE>
Tab A
REVIEW OF OPERATING PROJECTIONS
<PAGE>
<PAGE>
REVIEW OF MORGAN STANLEY VALUATION ANALYSIS
Review of LIN Management's "Base Case" Projections
[LIN Management's "Base Case" operating projections include
significant non-cellular value]
Core Cellular Business + Additional Services = LIN Management
-- Wireless Data Base Case
-- New Features Operating
-- Long Distance Projections
<PAGE>
<PAGE>
<TABLE>
REVIEW OF MORGAN STANLEY VALUATION ANALYSIS
1992 LIN Projections vs. Actual Results
[Although penetration has increased more than expected, revenue/sub/month has fallen such that revenue per POP has been
less than previously forecast]
<CAPTION>
Penetration Revenue/Sub/Month Revenue/POP
---------------------------- ---------------------------- ----------------------------
1992(2) 1993(2) 1994(2) 1992(2) 1993(2) 1994(2) 1992(2) 1993(2) 1994(2)
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Actual LIN 2.33% 3.01% 4.25% $93 $87 $83 $23 $28 $37
10/92
Downside(1) 2.39% 3.11% 3.72% $93 $87 $82 $23 $29 $33
10/92 Base(1) 2.39% 3.13% 3.84% $93 $89 $86 $23 $30 $36
Notes: (1) Represents October 1992 projections, excluding AT&T synergies.
(2) Excludes Philadelphia.
<PAGE>
<PAGE>
REVIEW OF MORGAN STANLEY VALUATION ANALYSIS
1992 LIN Projections vs. Actual Results
[Due to the decline in revenue/sub/month, more subscribers have supported the same revenue base, dramatically depressing
margins and causing EBITDA/POP to fall significantly below projected levels]
<CAPTION>
Marketing/Revenue EBITDA Margin EBITDA/POP
----------------------------- ---------------------------- -----------------------------
1992(2) 1993(2) 1994(2) 1992(2) 1993(2) 1994(2) 1992(2) 1993(2) 1994(2)
------ ------ ------ ------ ------ ------ ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Actual LIN 23% 24% 27% 50% 48% 42% $11 $13 $15
Downside(1) 23% 22% 20% 50% 49% 50% $12 $14 $17
Base(1) 23% 19% 17% 50% 53% 54% $12 $16 $19
Notes: (1) Represents October 1992 projections, excluding AT&T synergies.
(2) Excludes Philadelphia.
<PAGE>
<PAGE>
REVIEW OF MORGAN STANLEY VALUATION ANALYSIS
Old LIN Projections vs. Current LIN Projections
[Revenue per POP has tracked essentially as predicted, yet future revenue per POP is projected to be well above previous
Base Case; EBITDA per POP has fallen well short of projections yet is forecasted to meet previous projections]
<CAPTION>
Revenue/POP EBITDA/POP
------------------------------------- -------------------------------------
1996 1998 2000 2002 1996 1998 2000 2002
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LIN Base Case(1) $55 $71 $83 $96 $25 $33 $39 $47
Lin Base Case $57 $76 $93 $102 $26 $35 $45 $56
10/92 Downside $42 $50 $59 $68 $24 $29 $35 $41
10/92 Base $48 $59 $70 $81 $28 $36 $44 $52
Note: (1) Excludes Wireless Data, New Features and Long Distance.
</TABLE>
<PAGE>
<PAGE>
REVIEW OF MORGAN STANLEY VALUATION ANALYSIS
Review of LIN Operating Projections
[LIN Management projections appear to have several
inconsistencies -- one example is the way capital expenditures
are projected]
LIN Management projections for capital expenditures are low on
two bases:
- -- Annual capital expenditures per net customer addition
declines in the face of projected increases in subscriber
usage.
- -- Annual capital expenditures do not seem to factor in
replacement cost as the projected net PP&E increases through
the year 1998 yet declines thereafter.
This forecast appears to be inconsistent with the fundamental
assumption of LIN Management that increased revenues will come
because "average minutes of use are expected to increase because
of lower rates per minute, more user friendly phones, improved
quality, longer battery lives and new features and services on
the network."
Projected Capital Expenditures(1)
-----------------------------------------
1996 1998 2000 2002 2004
---- ---- ---- ---- ----
Net PP&E ($MM) $919 $1055 $991 $784 $461
NET PP&E per Sub ($) $444 $365 $270 $180 $96
Note: (1) LIN base case projections exclude Wireless Data,
New Feature and Long Distance.
<PAGE>
<PAGE>
REVIEW OF MORGAN STANLEY VALUATION ANALYSIS
Other Projected Revenue Streams
[LIN Management "Base Case" also includes other revenue streams
for which potential buyers are unlikely to assign significant
value]
Wireless Data
- -- Appropriately valued, wireless data opportunities represent
only $5 - $6 per share of value.
- -- Buyers of cellular properties are likely to assign little if
any value to the wireless data opportunity.
Other Features
- -- Includes "yet to be identified" features.
- -- Would represent only an additional $3 per share of value.
Long Distance
- -- Strategic buyers unable to capitalize on this revenue
stream.
<PAGE>
<PAGE>
Tab B<PAGE>
<PAGE>
Tab B
DISCOUNTED CASH FLOW ANALYSIS
<PAGE>
<PAGE>
REVIEW OF MORGAN STANLEY VALUATION ANALYSIS
Financial Parameters
[An appropriate discount rate for LIN is in the range of 13 - 14%
which, combined with long-term growth rates of 6.5 - 7.5%,
implies exit multiples of 9.5 - 10.5x]
Implied Exit Multiple of 2004 EBITDA(1)(2)
-----------------------------------------
Discount Rate
-------------------------------
13.00% 13.50% 14.00%
------ ------ ------
Perpetual
Growth Rate
of FCF 6.0% 9.2 8.6 8.1
6.5% 9.9 9.2 8.6
7.0% 10.8 10.0 9.3
7.5% 11.8 10.9 10.1
8.0% 13.1 11.9 11.0
Notes: (1) Assumes FCF/EBITDA ratio of 57% in perpetuity.
(2) Represents multiple of trailing EBITDA, based on
FCF x (1 + growth rate) x (1 + WACC) ^0.5/(WACC -
growth rate).
<PAGE>
<PAGE>
REVIEW OF MORGAN STANLEY VALUATION ANALYSIS
Discounted Cash Flow Analysis
[Applying a 13.5% discount rate and 9.5-10.5x exit multiples to
LIN Management Base Case yields DCF values of approximately $105;
modest sensitivity analysis results in values of approximately
$85-95]
DCF Valuation
--------------------
Low(1) High(2)
------ -------
LIN Management Base Case $103 $111
Adjusted for Higher
Marketing Costs 92 99
Additionally Adjusted for
Replacement Capital Expenditures 81 88
Notes: (1) Low value based on WACC of 13.50% and 2004 EBITDA
exit multiple of 9.5 as of 2/15/95.
(2) High value based on WACC of 13.50% and 2004 EBITDA
exit multiple of 10.5 as of 2/15/95.
<PAGE>
<PAGE>
REVIEW OF MORGAN STANLEY VALUATION ANALYSIS
Analyst Intrinsic Values
[Analyst operating projections for LIN include AT&T synergies]
"The logic in better results for LIN than the industry overall is
basically related to the demographics of its markets, combined
with the benefits of being owned by AT&T."
Frank Governali - First Boston
January 12, 1995
"LIN is clearly a significant beneficiary of the transaction,
because all of the benefits accruing to McCaw automatically
accrue to LIN.
Barry Kaplan - Goldman Sachs
November 24, 1992
"The AT&T strategic alliance should result in higher market share
and lower costs and thus higher cash flows and values. The AT&T
brand name is one of the most formidable in the country . . .
McCaw and LIN would also have access to AT&T's customer lists,
its salespeople, and its phone centers, at which wireless service
would be sold . . . For McCaw and LIN, enhanced market share and
lower costs should raise values as well."
Dennis Leibowitz - DLJ
November 17, 1992
<PAGE>
<PAGE>
REVIEW OF MORGAN STANLEY VALUATION ANALYSIS
Analyst Intrinsic Values
[Analysts' projections for LIN yield DCF values of $101-120
including AT&T valued-added and values of $89-108 excluding such
operating synergies]
Analysts' Intrinsic Valuations (1)
- -----------------------------------------------------------------
Analyst DCF Value Estimated DCF value w/o
- ------------------- ------------ AT&T Value-Added(4)
-----------------------
Goldman Sachs $110 - 120 $98 - 108
Salomon Brothers(2) 109-120 97-108
Merrill Lynch 108-119 96-107
First Boston(3) 101-110 89-98
Notes: (1) Represents DCF value as of 2/15/95 based on
analysts' projections, 13.50% WACC, and 10-11x
exit multiples in 2000.
(2) Assumes Base Case CapEx projections.
(3) Based on 9.5-10.5x exit multiple in 2004.
(4) Reflects DCF value less $12/share, based on mean
increase in PMV estimates after announcement of
AT&T/McCaw merger.
<PAGE>
<PAGE>
Tab C<PAGE>
<PAGE>
Tab C
PRECEDENT TRANSACTIONS
<PAGE>
<PAGE>
<TABLE>
REVIEW OF MORGAN STANLEY VALUATION ANALYSIS
[Even in the most robust period for cellular valuations, few if any cellular properties were ever sold for $300 per
POP...]
<CAPTION>
Selected Precedent Cellular Transactions--per POP Benchmarks
- ------------------------------------------------------------------------------------------------------------
Date Aggregate Cellular
Announced Acquiror Acquiree Type of Deal Value Value/POP
- --------- --------------- ------------------ ------------ ($MM) ---------
-----------
<C> <C> <S> <C> <S> <C> <C>
Dec 94 GTE Contel Cellular 10% Stake $460 $198
Nov 94 SNET Bell Atlantic/NYNEX
(New England Property) Acquisition 450 199
Oct 94 LIN CSI (New York cellular) 5% Stake 145 185
Feb 94 SBC Comm. Associated Comm. Acquisition 680 187
Nov 93 SBC Comm. GTE (Dallas cellular) 10% Stake 124 280
Aug 93 AT&T McCaw Cellular Acquisition 17,616 268
Mar 92 Comcast Metromedia (Philadelphia) Acquisition 1,100 214
Sept 91 Bell Atlantic Metro Mobile Acquisition 2,375 204
May 90 LIN Metromedia
(New York cellular) 48% Stake 1,941 275
Sep 89 McCaw LIN Deferred Purchase 7,400 269
[However, EBITDA multiples have become the standard measure of calibrating private market deals -- with transactions
clustered at or below 13x 1995 EBITDA]
<CAPTION>
Selected Precedent Cellular Transactions -- EBITDA Multiple Benchmark
- ---------------------------------------------------------------------------------------------------------
Aggregate Cellular Value/EBITDA
Date Closed Acquiror Acquiree Type of Deal Value ---------------------
- ----------- --------------- --------------- ------------ ($MM) 1994 1995
--------- ---- ----
<S> <C> <S> <C> <C> <C>
Pending GTE Contel Cellular 10% Stake $460(1) 19x(1) 13x(1)
Dec 94 SBC Comm. Associated Comm. Acquisition 699 17(2) 13(3)
Sep 94 AT&T McCaw Cellular Acquisition 16,805 16 13(3)
Nov 93 SBC Comm. GTE
(Dallas Cellular) 10% Stake 124 13(4) 10(3)
Notes: (1) Pending. Based on announced value.
(2) Based on Associated Proxy Statement.
(3) Assumed 25% growth in EBITDA.
(4) Assumes revenues 150% of LIN's Dallas market revenues and a 35% EBITDA margin.
</TABLE>
<PAGE>
<PAGE>
REVIEW OF MORGAN STANLEY VALUATION ANALYSIS
The AT&T/McCaw Transaction
[The single most relevant precedent transaction in determining
the PMV of LIN is AT&T's acquisition of McCaw, although the
precedent does have its limitations]
While AT&T/McCaw is the most relevant precedent, it is important
to understand that McCaw/LIN valuation is in many ways a ceiling
not a floor on LIN's standalone valuation.
- -- AT&T was able to achieve a level of synergies which no other
third party could achieve.
- -- Transaction incorporated a valuation premium to reflect the
strategic benefit to AT&T's core business of owning both the
McCaw and LIN properties.
- -- AT&T was able to achieve pooling of interests accounting
treatment.
- -- Wireless arena has grown more competitive since the
AT&T/McCaw transaction was announced.
- -- Interest rates have risen almost 200 basis points since the
AT&T/McCaw transaction was announced.
<PAGE>
<PAGE>
REVIEW OF MORGAN STANLEY VALUATION ANALYSIS
The AT&T/McCaw Transaction
[At announcement, AT&T's expected 9/94 purchase price of $16.2Bn
implied an acquisition price at 9/94 for the LIN shares of $98 -
$112]
Implied LIN Share Price based on AT&T/McCaw Transaction Multiples
and Analyst Estimates
Implied Value at Announcement (1)
---------------------------------------------
Basis First Boston DLJ Goldman
- ----- (7/93) (7/93) (11/92)
------------ ---------- ---------
1994 Revenue $103 $100 $102
1994E EBITDA(2) 111 108 112
1995E Revenue NA 98 101
1995E EBITDA(2) NA 104 111
Average $107 $103 $106
POPs 106 106 106
Notes: (1) Based on same multiple applied to McCaw and LIN
operating estimates. Analyst estimates are
adjusted to exclude Philadelphia.
(2) EBITDA is before corporate overhead.
<PAGE>
<PAGE>
Tab D<PAGE>
<PAGE>
Tab D
REVIEW OF POTENTIAL PURCHASERS
<PAGE>
<PAGE>
REVIEW OF MORGAN STANLEY VALUATION ANALYSIS
Summary of Universe of Likely Potential Purchasers
[Only a small number of potential buyers could be expected to
show a serious interest in purchasing all of LIN]
Rationale for Exclusion
Feasible
Company Regulatory Strategic Financial Bidders
- ---------- ---------- --------- --------- --------
Bell Atlantic X
NYNEX X
AirTouch X
US West X
Ameritech X
Pacific Telesis X
ALLTEL X
TDS X
Sprint X X
TCI X X
GTE X X
MCI X
SBC Comm. X
BellSouth X
<PAGE>
<PAGE>
REVIEW OF MORGAN STANLEY VALUATION ANALYSIS
Detailed Review of Individual Potential Purchasers
[Even these three most likely purchasers would face significant
transaction hurdles in acquiring LIN]
MCI -- Acquisition of LIN potentially
inconsistent with MCI's wireless
strategy.
-- An acquisition of LIN at $105 per
share would dilute earnings by 30%
in 1995, and have severe impacts on
MCI's balance sheet.
-- An acquisition of LIN by MCI also
seems inconsistent with the
strategic direction of its
significant shareholder, BT.
SBC -- Almost 50% of LIN's assets would be
non-strategic:
- SBC is prohibited from owning
Dallas.
- The alliance with GTE obviates
the need to acquire an
interest in Houston.
- LIN's interest in Los Angeles
does not offer SBC control.
-- An acquisition of LIN at $105 per
share would dilute earnings by 20%
in 1995, and have significant
impacts on SBC's balance sheet.
BellSouth -- BellSouth has proven a disciplined
buyer of cellular properties in the
past, purchasing assets on an
opportunistic basis.
-- Given BellSouth's decision to pass
on LIN in 1989 when dilution became
significant, it seems unlikely that
it would seek to purchase LIN when
the earnings dilution would be
significantly higher.
-- An acquisition of LIN at $105 per
share would dilute earnings by 20%
in 1995, and have significant
negative impacts on BellSouth's
balance sheet.
<PAGE>
<PAGE>
SECTION III<PAGE>
<PAGE>
SECTION III
LEHMAN BROTHERS/BEAR STEARNS VALUATION ANALYSIS
<PAGE>
<PAGE>
<TABLE>
LEHMAN BROTHERS/BEAR STEARNS VALUATION ANALYSIS
Overview of Arguments
[Lehman Brothers/Bear Stearns employed the following methodologies and assumptions in arriving at their view of Private
Market Value as defined]
<CAPTION>
Methodology/Assumption Issues Raised
Discounted Cash Flow
<S> <S>
- -- Operating Projections per LIN Management Base Case -- Core cellular projections aggressive
-- Includes non-core cellular revenues
- -- Financial Parameters -- Methodological differences
- Discount Rates of 11-13%
- Exit Multiples of 10.5-12.5x
- -- Interpretation of DCF Results -- Buyers may not pay full DCF value
Precedent Transactions
- -- AT&T/McCaw Transaction -- Allocation of purchase price between McCaw/LIN
- -- "Closing Year" Methodology -- Flawed application
Potential Purchasers
- -- Unclear -- Depth of market/purchaser appetite
/TABLE
<PAGE>
<PAGE>
LEHMAN BROTHERS/BEAR STEARNS VALUATION ANALYSIS
Financial Parameters
[Morgan Stanley calculated the appropriate cost of capital for
LIN to be 13-14%, which is consistent with discount rates used by
other financial advisors in cellular transactions]
Summary of WACC Calculations
----------------------------
Morgan Stanley Estimate 13.00 - 14.00%
Other Financial Advisors(1) 12.14 - 14.14%
Lehman Brothers/Bear Stearns 11.00 - 13.00%
Lehman Brothers/Bear Stearns,
adjusted(2) 13.59 - 13.83%
... this difference flows through to exit multiple calculation
Summary of Exit Multiple Calculations
-------------------------------------
Morgan Stanley Estimate 9.5x - 10.5x
Lehman Brothers/Bear Stearns
Estimate 10.5x - 12.5x
Lehman Brothers/Bear Stearns,
adjusted(3) 8.2x - 9.4x
Notes:(1) Average of discount rates used by four other financial
advisors, adjusted for change in U.S. Treasury rates
since the dates of their estimates.
(2) Based on Lehman/Bear Stearns' methodology, using LIN
asset beta of 0.98, 7.44% risk-free rate, 7.22% market
risk premium, 35% debt/capital, and cost of debt of
11.0-13.0%.
(3) Assumes exit multiple calculated as .577x/(WACC-growth
rate). WACC adjusted from 12.0% to 13.5%, using 7.38%
and 6.50% implied growth rates.
<PAGE>
<PAGE>
LEHMAN BROTHERS/BEAR STEARNS VALUATION ANALYSIS
Wireless Data Value (1)
[These differences are compounded further when wireless data has
significantly greater risk characteristics than existing
cellular]
Value per Total Value
LIN Share ($) ($MM)
-------------- ------------
LIN BASE CASE
11.5x 2004 EBITDA
12.00% WACC $25.56 $1,362
10.0x 2004 EBITDA
20.00% WACC $11.87 $633
LIN's 25% of MCaw WDD Business Plan
10.0x 2000 EBITDA
20.00% WACC $5.66 $322
MS Estimate of Third-Party
Bidder's view N.M. N.M.
Note: (1) Values as of 2/15/95.
<PAGE>
<PAGE>
LEHMAN BROTHERS/BEAR STEARNS VALUATION ANALYSIS
Implied LIN Values in the AT&T/McCaw Transaction
[A PMV of $105 per share for LIN implies multiples that are
consistent with, and give LIN a premium over, those observed in
the AT&T/McCaw transaction -- a PMV of $155 implies multiples
that are inconsistent with the AT&T/McCaw transaction and yield
an unjustifiable premium]
Cellular Asset Value
as Multiple of:
Cellular ------------------------
Asset Value 1994 1994
PMV ($MM) EBITDA Revenue POPs
----- ----------- ------ ------- ----
LIN Statistic ($MM) $389.8 $924.9 25,722
Morgan Stanley
PMV Estimate $105 $6,862 17.6x 7.4x $267
AT&T/McCaw Closing
Multiple(1) 16.1 6.9 247
Implied McCaw-only
Multiple(2) 15.8 6.8 240
Implied LIN Premium 11% 9% 11%
Lehman/Bear Stearns
PMV Estimate $155 $9,527 24.4x 10.3x $370
AT&T/McCaw Closing
Multiple(1) 16.1 6.9 247
Implied McCaw-only
Multiple(2) 13.9 6.0 211
Implied LIN Premium 75% 72% 75%
Notes: (1) Based on cellular asset value of $15.24 Bn, 1994E
revenue and EBITDA estimates of $2,205 and $946MM
from 9/30/94 Salomon Brothers report, adjusted pro
forma for exchange of Philadelphia POPs and
addition of New York POPs.
(2) Based on McCaw cellular asset value of $15.24 Bn,
less 52% of cellular asset value implied by PMV.<PAGE>
<PAGE>
LEHMAN BROTHERS/BEAR STEARNS VALUATION ANALYSIS
Comparing McCaw to LIN: Operating Performance
[Close examination of the actual operating performance of McCaw
and LIN shows that the properties are indeed quite comparable]
The true measure of a property's value is its operating
performance, not its demographics. Despite being concentrated in
large markets, LIN's POPs have not demonstrated significantly
superior operating performance to those of McCaw.
LTM 6/30/94 McCaw (Only) LIN (ex Phil.) % Premium
- ------------- ------------ -------------- ---------
Penetration 3.66% 3.57% -2%
Revenue/Sub/Month $82 $85 4%
Marketing as % of Revenue 25% 25% 1%
EBITDA/Sub/Month $35 $38 9%
EBITDA Margin 42% 44% 5%
Revenue/POP $30.00 $30.91 3%
EBITDA/POP $12.62 $13.64 8%
<PAGE>
<PAGE>
LEHMAN BROTHERS/BEAR STEARNS VALUATION ANALYSIS
Comparing McCaw to LIN: Market Size
[As further confirmation that market size alone does not
translate into superior operating performance, one need look no
further than LIN's own markets]
Revenue/POP EBITDA/POP
---------------- ----------------
1994 1995 1994 1995
------ ------ ------ ------
Houston $42.19 $55.17 Houston $19.14 $26.82
Dallas $41.38 $53.17 Dallas $17.07 $23.29
LA $37.29 $46.61 LA $17.74 $23.34
NY $33.56 $41.95 NY $13.53 $18.94
<PAGE>
<PAGE>
LEHMAN BROTHERS/BEAR STEARNS VALUATION ANALYSIS
Consistent Application of Transaction Multiples
[Precedent multiples are simply ratios designed to normalize sale
values for differential financial performance and thus must be
consistently applied]
Adjusted Precedent Sale Price = Implied LIN Value [large
- ----------------------------- ----------------- green
Precedent Company 1994 EBITDA LIN 1994 EBITDA check]
Adjusted Precedent Sale Price = Implied LIN Value [large
- ----------------------------- ----------------- green
Precedent Company 1995 EBITDA LIN 1995 EBITDA check]
Adjusted Precedent Sale Price [does Implied LIN Value
[large
- ----------------------------- not ----------------- red
x]
Precedent Company 1994 EBITDA equal] LIN 1995 EBITDA
<PAGE>
<PAGE>
LEHMAN BROTHERS/BEAR STEARNS VALUATION ANALYSIS
Applying the AT&T/McCaw Transaction to LIN
[Perhaps the best way to illustrate the fallacy of the "closing
year" cash flow multiple methodology is to use an example]
Lehman Brothers/Bear Stearns state: "A multiple of 1994E EBITDA
for the AT&T/McCaw transaction is comparable to a multiple of
1995E EBITDA for the LIN PMVG appraisal as each is a multiple of
a "closing year cash flow."
In practice, this would suggest that at a 17.5x "closing year"
multiple, LIN was worth $104 per share if sold in 1994 and $154
if sold in 1995 -- a 48% increase in equity value simply by
waiting for calendar year 1995 to arrive.
"1994 Closing" "1995 Closing"
-------------- --------------
Closing Year EBITDA $390 $535
* Closing Year Multiple 17.5x 17.5x
= Closing Year Asset Value $6,822 $9,356
- - Closing Year Net Debt (1,265) (1,124)
------- -------
= Closing Year Equity Value 5,556 8,231
/ Closing Year Shares Outstanding 53.3 53.3
= Per Share Equity Value $104 $154
% Increase 48%
<PAGE>
<PAGE>
SECTION IV<PAGE>
<PAGE>
SECTION IV
RECONCILIATION TO PUBLIC MARKET VALUE<PAGE>
<PAGE>
RECONCILIATION TO PUBLIC MARKET VALUE
LIN Historical Price Performance vs. Selected Analyst Current PMV
Estimates
[LIN's trading value has closely followed research analysts'
estimates of 1995 PMV]
The following information is depicted on a single graph:
Price Per Share
- ---------------------------------------------------------
Date LINB Closing PV of All-American
Price(1) 1995 PMV Estimate(2)
- --------- --------------- ----------------------
08-Jan-94 97.5
15-Jan-94 95.75
22-Jan-94 99
25-Jan-94 99.53
29-Jan-94 103
- --------------------------------------------------------
05-Feb-94 103
12-Feb-94 101.38
19-Feb-94 102.75
26-Feb-94 99.25
- --------------------------------------------------------
05-Mar-94 100.75
09-Mar-94 107.42
12-Mar-94 99.38
19-Mar-94 98.5
26-Mar-94 100
- --------------------------------------------------------
02-Apr-94 95.5
09-Apr-94 93.25
14-Apr-94 104.69
16-Apr-94 93.25
19-Apr-94 104.89
23-Apr-94 93
30-Apr-94 93.75
- --------------------------------------------------------
05-May-94 108.94
07-May-94 100
11-May-94 110.05
14-May-94 99.75
16-May-94 119.66
21-May-94 103.25
28-May-94 106
31-May-94 115.19
- --------------------------------------------------------
Notes: (1) Reflects closing stock price, less $12/share prior
to spin-off of LIN TV.
(2) Represents 1995 PMV estimate, discounted at 15%
from June 30, 1995.<PAGE>
<PAGE>
Price Per Share
- ---------------------------------------------------------
Date LINB Closing PV of All-American
Price(1) 1995 PMV Estimate(2)
- --------- --------------- ----------------------
04-Jun-94 107
10-Jun-94 111.32
11-Jun-94 107.5
14-Jun-94 112.35
18-Jun-94 107.5
25-Jun-94 103.25
- --------------------------------------------------------
02-Jul-94 108.5
09-Jul-94 108
16-Jul-94 113.25
23-Jul-94 113.25
30-Jul-94 113
- --------------------------------------------------------
04-Aug-94 123.38
06-Aug-94 114.38
13-Aug-94 115
20-Aug-94 117
27-Aug-94 120.25
31-Aug-94 124.66
- --------------------------------------------------------
03-Sep-94 122.13
10-Sep-94 124.25
17-Sep-94 127
21-sep-94 123.88
24-Sep-94 127.5
- --------------------------------------------------------
01-Oct-94 127.13
08-Oct-94 123.25
15-Oct-94 124
22-Oct-94 123.25
29-Oct-94 124.5
- --------------------------------------------------------
05-Nov-94 126.25
12-Nov-94 128
19-Nov-94 128.13
26-Nov-94 127.13
- --------------------------------------------------------
03-Dec-94 130.5
10-Dec-94 128.38
15-Dec-94 134.46
17-Dec-94 130
21-Dec-94 129.2
24-Dec-94 133.25
31-Dec-94 133.5
- --------------------------------------------------------
Notes: (1) Reflects closing stock price, less $12/share prior
to spin-off of LIN TV.
(2) Represents 1995 PMV estimate, discounted at 15%
from June 30, 1995.<PAGE>
<PAGE>
Price Per Share
- ---------------------------------------------------------
Date LINB Closing PV of All-American
Price(1) 1995 PMV Estimate(2)
- --------- --------------- ----------------------
05-Jan-95 133.55
07-Jan-95 132.25
14-Jan-95 134.75
21-Jan-95 137.63
24-Jan-95 136.54
28-Jan-95 138
- --------------------------------------------------------
04-Feb-95 139.13
10-Feb-95 138.75
15-Feb-95 140.5
- --------------------------------------------------------
Notes: (1) Reflects closing stock price, less $12/share prior
to spin-off of LIN TV.
(2) Represents 1995 PMV estimate, discounted at 15%
from June 30, 1995.<PAGE>
<PAGE>
<TABLE>
RECONCILIATION TO PUBLIC MARKET VALUE
LIN Historical Price Performance vs. Selected Analyst 1995 PMV Estimates
[PMV estimates have been repeatedly increased as analysts have continuously revised upward their 1995 PMV estimates as
LIN shares traded through their target ranges]
The following information is depicted on a single graph:
<CAPTION>
Price Per Share(1)
- --------------------------------------------------------------------------------------------------------
Date LIN(1) Merrill DLJ Prudential Goldman Cowen Salomon
- ---------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
08-Jan-94 97.5
15-Jan-94 95.75
22-Jan-94 99 121.5
29-Jan-94 103
05-Feb-94 103
12-Feb-94 101.38
19-Feb-94 102.75
26-Feb-94 99.25
05-Mar-94 100.75
12-Mar-94 99.38 129
19-Mar-94 98.5
26-Mar-94 100
02-Apr-94 95.5
09-Apr-94 93.25
16-Apr-94 93.25 124 130
23-Apr-94 93 124
30-Apr-94 93.75
07-May-94 100 129 128
14-May-94 99.75 140.5
21-May-94 103.25
28-May-94 106 134
04-Jun-94 107
11-Jun-94 107.5 129 130
18-Jun-94 107.5
25-Jun-94 103.25
02-Jul-94 108.5
09-Jul-94 108
16-Jul-94 113.25
23-Jul-94 113.25
30-Jul-94 113
06-Aug-94 114.38 140.5
13-Aug-94 115
20-Aug-94 117
27-Aug-94 120.25 140
03-Sep-94 122.13
10-Sep-94 124.25
17-Sep-94 127
24-Sep-94 127.5 138
01-Oct-94 127.13
08-Oct-94 123.25
15-Oct-94 124
22-Oct-94 123.25
29-Oct-94 124.5
05-Nov-94 126.25
12-Nov-94 128
19-Nov-94 128.13
26-Nov-94 127.13
03-Dec-94 130.5
10-Dec-94 128.38
17-Dec-94 130 142.5 145
24-Dec-94 133.25 139
31-Dec-94 133.5
07-Jan-95 132.25 145
14-Jan-95 134.75
21-Jan-95 137.63 145.3 145 144.7
28-Jan-95 138
04-Feb-95 139.13
10-Feb-95 138.75
15-Feb-95 140.5
Note: (1) Reflects closing stock price, less $12/share prior to spin-off of LIN TV.
<PAGE>
<PAGE>
RECONCILIATION TO PUBLIC MARKET VALUE
Selected Analyst 1995 PMV Estimates and Revisions
[Analysts raised their PMV estimates after the AT&T/McCaw merger announcement, despite the fact that the transaction
represented no new information about LIN's PMV as defined]
<CAPTION>
1995 PMV Estimate(1)
(ex-TV)
-----------------------------------------------------------------
Pre-Merger (11/92-8/93)(3) Post-Merger (after 8/16/93)(2)
-------------------------- ------------------------------
PMV Date PMV Date
------- --------- ---------- ---------
<S><C> <C> <C> <C> <C>
DLeibowitz
DLJ* $123 7/9/93 $137 5/31/94
SPassoni
Smith Barney/Cowen* $123 11/16/92 $128 5/5/94
JBauer
Prudential* $108 8/2/93 $128 3/9/94
FGovernali
CSFB $118 11/6/92 $133 2/18/94
PJurczak
Merrill/Nomura $111 5/4/93 $128 2/22/94
CPhillips
Shearson Lehman/Smith Barney $113 2/19/93 $113 4/7/94
Mean $116 $128
*Institutional Investor All-American
Notes: (1) Reflects estimated 1995 PMV per share price less $12/share assumed value attributed to TV spin-off.
(2) Represents first estimate after announcement of AT&T/McCaw merger on August 16, 1993 (based on
Investext).
(3) Represents last estimate prior to announcement of AT&T/McCaw merger on August 16, 1993.
</TABLE>
<PAGE>
<PAGE>
RECONCILIATION TO PUBLIC MARKET VALUE
Analysts' PMV Estimates in Precedent Cellular Transactions
[Moreover, analysts' PMV estimates have typically been 35% above
actual private market transaction prices]
Mean Analyst PMV as Premium to Transaction Price
------------------------------------------------
Contel Cellular (10%)/GTE 17%
McCaw/AT&T 21%
Metro Mobile/Bell Atlantic 35%
Contel/GTE 37%
Associated/SBC 43%
Centel/Sprint 50%
US West New Vector (19%)/US West 64%
<PAGE>
<PAGE>
EXHIBIT (b)(4) Materials prepared by Bear Stearns & Co., Inc.
and Lehman Brothers Inc.
<PAGE>
<PAGE>
<TABLE>
February 15, 1995
Committee of Independent Directors
LIN Broadcasting Corporation
5295 Carillon Point
Kirkland, WA 98033
Attention: William G. Herbster
Wilma H. Jordan
Richard W. Kislik
Ladies and Gentlemen:
We understand that, pursuant to the Private Market Value Guarantee
("PMVG") dated December 11, 1989, as amended, between LIN Broadcasting
Corporation ("LIN" or the "Company") and McCaw Cellular Communications,
Inc. ("McCaw"), which has since been acquired by AT&T Corp. ("AT&T"), the
LIN Independent Directors' Appraiser must determine the Private Market
Value per Share of LIN. We also understand that Private Market Value per
Share is defined in the PMVG as "the private market price per Share
(including control premium) that an unrelated third party would pay if it
were to acquire all outstanding Shares (including the shares held by the
Offeror [McCaw] and its affiliates) in an arm's-length transaction, assuming
that the Company was being sold in a manner designed to attract all possible
participants (including the Regional Bell Operating Companies) and to
maximize stockholder value, including if necessary through the sale or other
disposition (including tax-free spin-offs, if possible) of businesses
prohibited by legal restrictions to be owned by any particular buyer or class
of buyers (e.g., the Regional Bell Operating Companies)."
You have asked us, acting jointly with Lehman Brothers Inc. ("Lehman
Brothers"), as the Independent Directors' Appraiser, to determine the
Private Market Value of LIN per Share as contemplated by the PMVG.
<PAGE>
<PAGE>
Committee of Independent Directors
LIN Broadcasting Corporation
February 15, 1995
Page 2
Pursuant to the PMVG, acting jointly with Lehman Brothers, we
determined our "initial view" of the Private Market Value per
Share of LIN and thereafter consulted with Morgan Stanley & Co.
Incorporated, the Offeror's Appraiser, with respect thereto. This
letter sets forth our final view of the Private Market Value per
Share of LIN, pursuant to the PMVG. A summary of our analyses used
to determine the Private Market Value per Share is included in the
report dated February 14, 1995, delivered by us to the Committee
of Independent Directors (the "Report").
In the course of our analyses for determining the Private Market
Value per Share of LIN, we have:
1. reviewed the PMVG;
2. reviewed LIN's Annual Reports to Shareholders and Annual
Reports on Form 10-K for the years ended December 1990 through 1993,
and its Quarterly Reports on Form 10-Q for the periods ended March
31, 1994, June 30, 1994 and September 30, 1994;
3. reviewed certain operating and financial informations including
projections, provided to us by the management of LIN relating to its
business, operations and prospects;
4. met with certain members of LIN's and McCaw's senior managements
to discuss LIN's business, operations, historical financial results,
financial condition and prospects;
5. visited LIN's facilities in Kirkland, WA, Los Angeles, CA,
New York, NY, and Dallas, TX;
<PAGE>
<PAGE>
Committee of Independent Directors
LIN Broadcasting Corporation
February 15, 1995
Page 3
6. reviewed various business, financial and legal information and documents relating to
LIN and its subsidiaries and partnerships including a review of the organizational
structure, partnership agreements, tax bases and loan documentation, provided to us by
LIN;
7. reviewed the historical prices and trading volume of the common stock of LIN;
8. performed discounted cash flow analyses, including discounted cash flow analyses
based on the projections provided by the management of LIN;
9. reviewed publicly available financial data, stock market performance data and
valuation parameters of certain other companies which we deemed relevant:
10. reviewed the terms of AT&T's acquisition of McCaw and the terms of certain other
precedent acquisitions or cellular companies which we deemed relevant;
11. reviewed potential third-party interest in an acquisition of or an investment in LIN,
including the possibility of tax-efficient transaction structures (although, at your direction,
we did not contact any third parties to determine their potential interest);
12. reviewed historical operating and financial results of the wireless industry and Wall
Street research analysts' and cellular industry experts' analyses of the prospects and
projected trends of the wireless industry.
13. reviewed Wall Street research analysts' and cellular industry experts' analyses and
estimates of the Private Market Value per Share of LIN; and
<PAGE>
<PAGE>
Committee of Independent Directors
LIN Broadcasting Corporation
February 15, 1995
Page 4
14 conducted such other studies, analyses, inquiries and investigations as we deemed
appropriate.
In addition to the foregoing, we considered LIN's unique position in the wireless industry,
including its control or shared control of four of the country's ten largest cellular markets,
its large number of subscribers and substantial revenues and its superior historical
operating measures in comparison to other publicly traded cellular companies.
In the course of our review, we have assumed and relied upon the accuracy and
completeness of the financial and other information provided to us by LIN or otherwise
used by us. With respect to LIN's projected financial results. we have assumed that the
"base case" and "upside case" financial projections provided by LIN have been
reasonably prepared on a basis reflecting the best currently available estimates and
judgments of the management of LIN as to the Company's expected future financial
performance. We also reviewed and considered the "sensitivity case" financial
projections derived by us from the "base case" financial projections provided by LIN, and
we reviewed and considered financial projections for LIN prepared and provided to us by
McCaw. We have not assumed any responsibility for independent verification of the
information or projections provided to us and we have further relied upon the assurances
of the management of LIN that they are unaware of any facts that would make such
information or projections inaccurate, incomplete or misleading. In arriving at our final
view of Private Market Value per Share, we have not performed or obtained any
independent evaluation or appraisal of the assets or liabilities of LIN. Our view of the
Private Market Value per Share is as of the date hereof but, with the consent of the
Committee of Independent Directors of
<PAGE>
<PAGE>
Committee of Independent Directors
LIN Broadcasting Corporation
February 15, 1995
Page 5
LIN, assumes a closing date for an acquisition of LIN of June 30, 1995. Our view is
necessarily based on economic, market and other conditions, and information as they
exist on, and can be evaluated as of, the date hereof.
Based upon and subject to the foregoing, our final view pursuant to the PMVG is that the
Private Market Value per Share or LIN as of the date hereof, but assuming a closing date
for an acquisition of LIN of June 30, 1995, is $155.
We and Lehman Brothers will each receive a fee for acting jointly as the Independent
Directors' Appraiser in connection with the appraisal process specified in the PVMG,
payment of a significant portion of which is contingent upon the consummation of the
acquisition of LIN's public minority shares by AT&T or an acquisition of LIN by a third
party. In addition, LIN has agreed to indemnify us and Lehman Brothers for certain
liabilities which may arise out of the rendering of this letter. We have performed various
investment banking services for AT&T in the past (including the underwriting of debt and
equity securities) and have received customary fees for such services. In the ordinary
course of our business, we actively trade the debt and equity securities of LIN and AT&T
for our own account and for the accounts of our customers and, accordingly, may at any
time hold a long or short position in such securities.
<PAGE>
<PAGE>
Committee of Independent Directors
LIN Broadcasting Corporation
February 15, 1995
Page 6
This letter and the Report are solely for the use of LIN and the Committee of Independent
Directors of LIN in connection with the PMVG, and may not be used for any other
purpose or relied upon by any third party (other than the Offeror's Appraiser and the
Mutually Designated Appraiser pursuant to the PMVG), without the prior written
approval of Bear Steans and Lehman Brothers, although this letter and the Report may be
disclosed in filings made by LIN with the Securities and Exchange Commission and in
communications by LIN to its stockholders.
Very truly yours,
BEAR, STEARNS & CO. INC.
<PAGE>
<PAGE>
April 28, 1995
Committee of Independent Directors
LIN Broadcasting Corporation
5295 Carillon Point
Kirkland, WA 98033
Attention: William G. Herbster
Wilma H. Jordan
Richard W. Kislik
Ladies and Gentlemen:
We understand that, pursuant to the Private Market Value Guarantee (the
"PMVG"), dated December 11, 1989, between LIN Broadcasting Corporation ("LIN")
and McCaw Cellular Communications, Inc. ("McCaw"), which has since been acquired
by AT&T Corp. ("AT&T"), AT&T, the beneficial owner of approximately 52% of the
outstanding shares of LIN, has proposed (the "AT&T Proposal") to purchase all Public
Shares (as defined in the PMVG) in accordance with the process set forth in the PMVG.
Acting jointly with Lehman Brothers Inc. ("Lehman") as the Independent
Directors' Appraiser (as defined in the PMVG), pursuant to the PMVG, we have
previously determined and delivered to you, in our separate letters of February 15, 1995
(the "February 15 Letters"), our "final view" of "private market value per Share" (as
defined in the PMVG).
<PAGE>
<PAGE>
You have requested our view, acting jointly with Lehman, as to whether there is a
substantial likelihood that the price at which Public Shares would initially trade, on a
fully distributed basis, would be less than $127.50 per share, assuming the AT&T
Proposal were not consummated by reason of the AT&T Proposal not being approved by
a Majority Vote of the Public Stockholders (as defined in the PMVG) and assuming no
change in market, economic, financial and other conditions (including, without limitation,
conditions affecting the cellular industry generally or LIN specifically) as they exist on
and can be evaluated as of the date hereof.
Based on (i) the factors set forth in the February 15 Letters, which factors we
considered as of such date in connection with our arriving at our view of "private market
value per Share," (ii) certain additional factors we have considered and analyses we have
performed as of the date hereof, including a review of (a) the Form 10-K of LIN for the
year ended December 31, 1994, and other publicly available financial data, stock market
performance data, ownership profiles and valuation parameters of LIN that have been
made available since the date of the February 15 Letters and that we deemed relevant, (b)
publicly available financial data, stock market performance data, ownership profiles and
valuation parameters of certain other companies that have been made available since the
date of the February 15 Letters and that we deemed relevant, (c) Wall Street research
analysts' views of the public market trading value of LIN's stock in the event the AT&T
Proposal is not consummated by reason of the AT&T Proposal not being approved by a
Majority Vote of the Public Stockholders and (d) such other analyses that we deemed
relevant and (iii) the ongoing protections afforded to the holders of Public Shares under
the PMVG in the event that the AT&T Proposal is not consummated by reason of the
AT&T Proposal not being approved by a Majority Vote of the Public
2
<PAGE>
<PAGE>
Stockholders, and subject to the succeeding paragraphs of this letter and the general
qualifications and assumptions set forth in the February 15 Letters, it is our view that,
assuming (x) the vote of the holders of Public Shares regarding the AT&T Proposal were
held and the AT&T Proposal failed to be approved by a Majority Vote of the Public
Stockholders, (y) Public Shares held by arbitrageurs and others who are holding such
shares in anticipation of consummation of the AT&T Proposal or an alternative
transaction were fully redistributed and (z) there were no change in market, economic,
financial and other conditions (including, without limitation, conditions affecting the
cellular industry generally or LIN specifically) as they exist on and can be evaluated as of
the date hereof, there is a substantial likelihood that the price at which Public Shares
would initially trade would be less than $127.50 per share.
The estimation of public market trading prices of securities is subject to
uncertainties and contingencies, all of which are difficult to predict and beyond the
control of the firm making such estimates. The market prices of securities will fluctuate
with changes in market conditions, the conditions and prospects of the industry and the
particular company involved, and other factors which generally influence the prices of
securities. Our view is necessarily based on market, economic, financial and other
conditions as they exist on and can be evaluated as of the date hereof. In addition, we
have assumed, with your permission, that AT&T has no intention to acquire Public
Shares in the event that the AT&T Proposal is not consummated.
There can be no assurance that our view expressed herein will conform with actual
public market trading prices of LIN's shares.
3
<PAGE>
<PAGE>
Our view stated herein does not constitute an opinion as to the fairness of the
AT&T Proposal in any respect, and does not constitute a recommendation to any
shareholder of LIN as to how such shareholder should vote on the AT&T Proposal.
We and Lehman will each receive a fee for acting jointly as the Independent
Directors' Appraiser in connection with the appraisal process specified in the PMVG,
payment of a significant portion of which is contingent upon the consummation of the
acquisition of Public Shares by AT&T or an acquisition of LIN by a third party. In
addition, LIN has agreed to indemnify us and Lehman for certain liabilities which may
arise out of the rendering of this letter. We have performed various investment banking
services for AT&T in the past (including the underwriting of debt and equity securities)
and have received customary fees for such services. In the ordinary course of our
business we actively trade the debt and equity securities of LIN and AT&T for our
account and for the accounts of our customers and, accordingly, at any time hold a long or
short position in such securities.
This letter is solely for the use of LIN and the Independent Directors in connection
with the PMVG, and may not be used for any other purpose or relied upon by any third
party without the prior written approval of both us and Lehman, although this letter may
be disclosed, but only in its entirety, in filings made by LIN with the Securities and
Exchange Commission and in communications by LIN to its shareholders (or, if not
disclosed in its entirety, then only with the prior written approval of both us and Lehman,
which approval will not be unreasonably withheld).
Very truly yours,
BEAR, STEARNS & CO. INC.
4
<PAGE>
<PAGE>
February 15, 1995
Committee of Independent Directors
LIN Broadcasting Corporation
5295 Carillon Point
Kirkland, WA 98033
Attention: William G. Herbster
Wilma H. Jordan
Richard W. Kislik
Ladies and Gentlemen:
We understand that, pursuant to the Private Market Value Guarantee ("PMVG") dated
December 11, 1989, as amended, between LIN Broadcasting Corporation ("LIN" or the
"Company") and McCaw Cellular Communications, Inc. ("McCaw"), which has since
been acquired by AT&T Corp. ("AT&T"), the LIN Independent Directors' Appraiser
must determine the Private Market Value per Share of LIN. We also understand that
Private Market Value per Share is defined in the PMVG as "the private market price per
Share (including control premium) that an unrelated third party would pay if it were to
acquire all outstanding Shares (including the shares held by the Offeror [McCaw] and its
affiliates) in an arm's-length transaction, assuming that the Company was being sold in a
manner designed to attract all possible participants (including the Regional Bell
Operating Companies) and to maximize stockholder value, including if necessary through
the sale or other disposition (including tax-free spin-offs, if possible) of businesses
prohibited by legal restrictions to be owned by any particular buyer or class of buyers
(e.g., the Regional Bell Operating Companies)."
You have asked us, acting jointly with Bear, Stearns & Co. Inc. ("Bear Stearns"), as
the Independent Directors' Appraiser, to determine the Private Market Value per Share of
LIN as contemplated by the PMVG.
<PAGE>
<PAGE>
Committee of Independent Directors
LIN Broadcasting Corporation
February 15, 1995
Page 2
Pursuant to the PMVG, acting jointly with Bear Stearns, we determined our "initial
view" of the Private Market Value per Share of LIN and thereafter consulted with
Morgan Stanley & Co. Incorporated, the Offeror's Appraiser, with respect thereto. This
letter sets forth our "final view" of the Private Market Value per Share of LIN, pursuant
to the PMVG. A summary of our analyses used to determine the Private Market Value
per share is included in the report dated February 14, 1995 delivered by us to the
Committee of Independent Directors (the "Report").
In the course of our analyses for determining the Private Market Value per Share of
LIN, we have:
1. reviewed the PMVG;
2. reviewed LIN's Annual Reports to Shareholders and Annual Reports on Form 10-K
for the years ended December 1990 through 1993, and its Quarterly Reports on Form 10-
Q for the periods ended March 31, 1994, June 30, 1994 and September 30, 1994;
3. reviewed certain operating and financial information, including projections, provided
to us by the management of LIN relating to its business, operations and prospects;
4. met with certain members of LIN's and McCaw's senior managements to discuss
LIN's business, operations, historical financial results, financial condition and prospects;
5. visited LIN's facilities in Kirkland, WA, Los Angeles, CA, New York, NY, and
Dallas, TX;
<PAGE>
<PAGE>
Committee of Independent Directors
LIN Broadcasting Corporation
February 15, 1995
Page 3
6. reviewed various business, financial and legal information and documents relating to
LIN and its subsidiaries and partnerships, including a review of the organizational
structure, partnership agreements, tax bases and loan documentation, provided to us by
LIN;
7. reviewed the historical prices and trading volume of the common stock of LIN;
8. performed discounted cash flow analyses, including discounted cash flow analyses
based on the projections provided by the management of LIN;
9. reviewed publicly available financial data, stock market performance data and
valuation parameters of certain other companies which we deemed relevant;
10. reviewed the terms of AT&T's acquisition of McCaw and the terms of certain other
precedent acquisitions of cellular companies which we deemed relevant;
11. reviewed potential third-party interest in an acquisition of or an investment in LIN,
including the possibility of tax-efficient transaction structures (although, at your direction,
we did not contact any third parties to determine their potential interest);
12. reviewed historical operating and financial results of the wireless industry and Wall
Street research analysts' and cellular industry experts' analyses of the prospects and
projected trends of the wireless industry;
<PAGE>
<PAGE>
Committee of Independent Directors
LIN Broadcasting Corporation
February 15, 1995
Page 4
13. reviewed Wall Street research analysts' and cellular industry experts' analyses and
estimates of the Private Market Value per Share of LIN; and
14. conducted such other studies, analyses, inquiries and investigations as we deemed
appropriate.
In addition to the foregoing, we considered LIN's unique position in the wireless
industry, including its control or shared control of four of the country's ten largest cellular
markets, its large number of subscribers and substantial revenues and its superior
historical operating measures in comparison to other publicly traded cellular companies.
In the course of our review, we have assumed and relied upon the accuracy and
completeness of the financial and other information provided to us by LIN or otherwise
used by us. With respect to LIN's projected financial results, we have assumed that the
"base case" and "upside case" financial projections provided by LIN have been
reasonably prepared on a basis reflecting the best currently available estimates and
judgments of the management of LIN as to LIN's expected future financial performance.
We also reviewed and considered the "sensitivity case" financial projections derived by
us from the "base case" financial projections provided by LIN, and we reviewed and
considered financial projections for LIN prepared and provided to us by McCaw. We
have not assumed any responsibility for independent verification of the information or
projections provided to us and we have further relied upon the assurances of the
management of LIN that they are unaware of any facts that would make such information
or projections inaccurate, incomplete or misleading. In arriving at our final view of
<PAGE>
<PAGE>
Committee of Independent Directors
LIN Broadcasting Corporation
February 15, 1995
Page 5
Private Market Value per Share, we have not performed or obtained any independent
evaluation or appraisal of the assets or liabilities of LIN. Our view of the Private Market
Value per Share is as of the date hereof but, with the consent of the Committee of
Independent Directors of LIN, assumes a closing date for an acquisition of LIN of June
30, 1995. Our view is necessarily based on economic, market and other conditions, and
information as they exist on, and can be evaluated as of, the date hereof.
Based upon and subject to the foregoing, our final view pursuant to the PMVG is that
the Private Market Value per Share of LIN as of the date hereof, but assuming a closing
date for an acquisition of LIN of June 30, 1995, is $155.
We and Bear Stearns will each receive a fee for acting jointly as the Independent
Directors' Appraiser in connection with the appraisal process specified in the PMVG,
payment of a significant portion of which is contingent upon the consummation of the
acquisition of LIN's public minority shares by AT&T or an acquisition of LIN by a third
party. In addition, LIN has agreed to indemnify us and Bear Stearns for certain liabilities
which may arise out of the rendering of this letter. We have in the past performed various
investment banking services for the Committee of Independent Directors, including the
evaluation of the fairness of LIN's purchase of certain minority interest in LIN's New
York cellular licensee, and the fairness of LIN's purchase of WTNH-TV New Haven-
Hartford and concurrent spin-off of LIN Television Corporation, for which we have
received customary fees. We also have performed various investment banking services
for AT&T in the past (including the underwriting of debt and equity securities) and have
received customary fees for such services. In the ordinary course of our business, we
actively trade the debt and equity securities of LIN and AT&T for our own account and
for the accounts of our customers and, accordingly, may at any time hold a long or short
position in such securities.
<PAGE>
<PAGE>
Committee of Independent Directors
LIN Broadcasting Corporation
February 15, 1995
Page 6
This letter and the Report are solely for the use of LIN and the Committee of
Independent Directors of LIN in connection with the PMVG, and may not be used for any
other purpose or relied upon by any third party (other than the Offeror's Appraiser and the
Mutually Designated Appraiser pursuant to the PMVG), without the prior written
approval of Lehman Brothers and Bear Stearns, although this letter and the Report may
be disclosed in filings made by LIN with the Securities and Exchange Commission and in
communications by LIN to its stockholders.
Very truly yours,
LEHMAN BROTHERS INC.
Lehman Brothers Inc.
3 World Financial Center New York, NY 10285
<PAGE>
<PAGE>
April 28, 1995
Committee of Independent Directors
LIN Broadcasting Corporation
5295 Carillon Point
Kirkland, WA 98033
Attention: William G. Herbster
Wilma H. Jordan
Richard W. Kislik
Ladies and Gentlemen:
We understand that, pursuant to the Private Market Value Guarantee (the
"PMVG"), dated December 11, 1989, between LIN Broadcasting Corporation ("LIN")
and McCaw Cellular Communications, Inc. ("McCaw"), which has since been acquired
by AT&T Corp. ("AT&T"), AT&T, the beneficial owner of approximately 52% of the
outstanding shares of LIN, has proposed (the "AT&T Proposal") to purchase all Public
Shares (as defined in the PMVG) in accordance with the process set forth in the PMVG.
Acting jointly with Bear, Stearns & Co. Inc. ("Bear Stearns") as the Independent
Directors' Appraiser (as defined in the PMVG), pursuant to the PMVG, we have
previously determined and delivered to you, in our separate letters of February 15, 1995
(the "February 15 Letters"), our "final view" of "private market value per Share" (as
defined in the PMVG).
<PAGE>
<PAGE>
You have requested our view, acting jointly with Bear Stearns, as to whether there
is a substantial likelihood that the price at which Public Shares would initially trade, on a
fully distributed basis, would be less than $127.50 per share, assuming the AT&T
Proposal were not consummated by reason of the AT&T Proposal not being approved by
a Majority Vote of the Public Stockholders (as defined in the PMVG) and assuming no
change in market, economic, financial and other conditions (including, without limitation,
conditions affecting the cellular industry generally or LIN specifically) as they exist on
and can be evaluated as of the date hereof.
Based on (i) the factors set forth in the February 15 Letters, which factors we
considered as of such date in connection with our arriving at our view of "private market
value per Share," (ii) certain additional factors we have considered and analyses we have
performed as of the date hereof, including a review of (a) the Form 10-K of LIN for the
year ended December 31, 1994, and other publicly available financial data, stock market
performance data, ownership profiles and valuation parameters of LIN that have been
made available since the date of the February 15 Letters and that we deemed relevant, (b)
publicly available financial data, stock market performance data, ownership profiles and
valuation parameters of certain other companies that have been made available since the
date of the February 15 Letters and that we deemed relevant, (c) Wall Street research
analysts' views of the public market trading value of LIN's stock in the event the AT&T
Proposal is not consummated by reason of the AT&T Proposal not being approved by a
Majority Vote of the Public Stockholders and (d) such other analyses that we deemed
relevant and (iii) the ongoing protections afforded to the holders of Public Shares under
the PMVG in the event that the AT&T Proposal is not consummated by reason of the
AT&T Proposal not being approved by a Majority Vote of the Public Stockholders, and
subject to the succeeding paragraphs of this letter and the general qualifications and
assumptions set forth in the February 15 Letters, it is our view that, assuming (x) the vote
of the holders of Public Shares regarding the AT&T Proposal were held and the AT&T
Proposal
2
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<PAGE>
failed to be approved by a Majority Vote of the Public Stockholders, (y) Public Shares
held by arbitrageurs and others who are holding such shares in anticipation of
consummation of the AT&T Proposal or an alternative transaction were fully
redistributed and (z) there were no change in market, economic, financial and other
conditions (including, without limitation, conditions affecting the cellular industry
generally or LIN specifically) as they exist on and can be evaluated as of the date hereof,
there is a substantial likelihood that the price at which Public Shares would initially trade
would be less than $127.50 per share.
The estimation of public market trading prices of securities is subject to
uncertainties and contingencies, all of which are difficult to predict and beyond the
control of the firm making such estimates. The market prices of securities will fluctuate
with changes in market conditions, the conditions and prospects of the industry and the
particular company involved, and other factors which generally influence the prices of
securities. Our view is necessarily based on market, economic, financial and other
conditions as they exist on and can be evaluated as of the date hereof. In addition, we
have assumed, with your permission, that AT&T has no intention to acquire Public
Shares in the event that the AT&T Proposal is not consummated.
There can be no assurance that our view expressed herein will conform with actual
public market trading prices of LIN's shares.
Our view stated herein does not constitute an opinion as to the fairness of the
AT&T Proposal in any respect, and does not constitute a recommendation to any
shareholder of LIN as to how such shareholder should vote on the AT&T Proposal.
3
<PAGE>
<PAGE>
We and Bear Stearns will each receive a fee for acting jointly as the Independent
Directors' Appraiser in connection with the appraisal process specified in the PMVG,
payment of a significant portion of which is contingent upon the consummation of the
acquisition of Public Shares by AT&T or an acquisition of LIN by a third party. In
addition, LIN has agreed to indemnify us and Bear Stearns for certain liabilities which
may arise out of the rendering of this letter. We have in the past performed various
investment banking services for the Committee of Independent Directors, for which we
have received customary fees. We have performed various investment banking services
for AT&T in the past (including the underwriting of debt and equity securities) and have
received customary fees for such services. In the ordinary course of our business we
actively trade the debt and equity securities of LIN and AT&T for our account and for the
accounts of our customers and, accordingly, at any time hold a long or short position in
such securities.
This letter is solely for the use of LIN and the Independent Directors in connection
with the PMVG, and may not be used for any other purpose or relied upon by any third
party without the prior written approval of both us and Bear Stearns, although this letter
may be disclosed, but only in its entirety, in filings made by LIN with the Securities and
Exchange Commission and in communications by LIN to its shareholders (or, if not
disclosed in its entirety, then only with the prior written approval of both us and Bear
Stearns, which approval will not be unreasonably withheld).
Very truly yours,
LEHMAN BROTHERS INC.
4
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<PAGE>
{keywords |LIN Broadcasting Corporation}
Presentation to the
Committee of Independent Directors
of LIN Broadcasting Corporation
Executive Summary
February 14, 1995
<PAGE>
<PAGE>
{keywords |LIN Broadcasting Corporation}
Table of Contents
Tab
I Executive Summary
II Valuation Analyses
A Valuation Matrix
B Discounted Cash Flow Analyses
C Other Valuation Benchmarks
III Pro Forma Business Combination Between AT&T and LIN
IV Potential Third Party Interest
<PAGE>
<PAGE>
{keywords |LIN Broadcasting Corporation}
Section I
Executive Summary
<PAGE>
<PAGE>
{keywords |LIN Broadcasting Corporation}
Introduction
This presentation represents the joint work product of Bear Stearns and Lehman
Brothers.
Lehman Brothers and Bear Stearns have jointly determined a range of private market
values per share of LIN Broadcasting Corporation ("LIN" or the "Company") from which
they determined their "initial view" and "final view" of private market value per share as
contemplated by the Private Market Value Guarantee ("PMVG") dated December 11,
1989, as amended, between LIN and McCaw Cellular Communications, Inc. ("McCaw"),
which has since been acquired by AT&T Corp. ("AT&T").
"Private Market Value" is defined in the PMVG as:
"the private market value per Share (including control premium) that an unrelated third
party would pay if it were to acquire all outstanding Shares (including the shares held by
[AT&T] and its affiliates) in an arm's-length transaction, assuming that the Company was
being sold in a manner designed to attract all possible participants (including the Regional
Bell Operating Companies) and to maximize stockholder value, including if necessary
through the sale or other disposition (including tax-free spin-offs, if possible) of
businesses prohibited by legal restrictions to be owned by any particular buyer or class of
buyers (e.g., the Regional Bell Operating Companies)."
Page 1
<PAGE>
{keywords |LIN Broadcasting Corporation}
Introduction
Bear Stearns and Lehman Brothers determined their "initial view", "final view" and a
valuation range of LIN assuming a closing date of June 30, 1995.
A price adjustment mechanism will need to be established to address the possibility
that a transaction does not close by June 30, 1995.
Page 2
<PAGE>
{keywords |LIN Broadcasting Corporation}
PMVG Timeline
LIN Broadcasting Corporation
Appraisal and Sale Process
Prescribed by the PMVG
T=1 (January 1, 1995) Initiation Date - The appraisal process begins. Bear Stearns and
Lehman Brothers selected as Independent Directors' Appraiser. Morgan Stanley selected
by AT&T as its Appraiser (collectively the "Appraisers")
T+30 (January 31, 1995) Appraisers determine initial valuations
Consultation between Appraisers
T+45 (February 15, 1995) Appraisers determine final valuations
Is the Higher Appraised Amount greater than 110% of the Lower Appraised Amount?
No:
Price=average of
two valuations
Yes:
Appraisers select Mutually Designated Appraiser
T+65 (March 7, 1995) Mutually Designated
Appraiser determines Mutually Appraised Amount
Price will be (x) the Mutually Appraised
Amount if such amount is greater than 1/3
and less than 2/3 of the way between the
Lower Appraised Amount and the Higher Appraised
Amount or (y) the average of the Mutually
Appraised Amount and the Appraised Amount
which is closest to the Mutually Appraised
Amount, though no lower than the Lower Appraised
Amount a higher than the Higher Appraised Amount
_______________________________________________________________________
[Once Price is determined,] AT&T has 45 days to decide whether or not to proceed with
the acquisition.
AT&T Proceeds with
the Acquisition:
_______________________________________________________________________
Shareholder approval obtained?
No:
PMVG Process Ends
Yes:
T+365 (January 1, 1996) Is acquisition
completed. Is acquisition completed
within 12 months (or 20 months due to
a regulation delay) following Initiation Date?
Yes:
Sale to AT&T
No:
Independent Directors have right to sell 100% of the Company (subject to shareholder
approval)
AT&T does not proceed with
the Acquisition:
_______________________________________________________________________
Independent Directors have right to sell 100% of the Company (subject to shareholder
approval)
Page 3
<PAGE>
{keywords |LIN Broadcasting Corporation}
PMVG Valuation Range
Valuation Range of LIN Used to Determine Initial and Final Views(1)
Private Market Valuation Range
Low Final View Initial View High
________________________________________________________________
Per Share $140 $155 $162 $170
Equity Value ($MM)(2) $7,463 $8,262 $8,635 $9,062
Equity Value - Public Stake(3) 3,684 4,079 4,263 4,473
Equity Value - AT&T Stake(4) 3,779 4,183 4,372 4,588
Enterprise Value ($MM)(2) $8,879 $9,679 $10,052 $10,478
__________
(1) For purposes of "initial view" and "final view" pursuant to the PMVG, Lehman
Brothers and Bear Stearns have assumed a closing date of June 30, 1995.
(2) Based on 51,632,000 shares and 1,671,862 stock options outstanding as of December
31, 1994. Assumes options are exercised at an average exercise price of $85.56. Includes
net debt estimated at $1,560 million as of June 30, 1995.
(3) Represents fully diluted equity value (not reduced by stock option proceeds) less
AT&T's stake of 26,989,500 shares as of the LIN proxy statement dated June 2, 1994.
(4) Represents AT&T's stake of 26,989,500 shares as of the LIN proxy statement dated
June 2, 1994.
Page 4
<PAGE>
{keywords |LIN Broadcasting Corporation}
Additional Valuation Considerations Since Initial View
Since our previous presentation to the Committee of Independent Directors, dated January
19, 1995, we have considered the following additional factors, among others, in
determining our "final view" of the private market value of LIN:
We reviewed and considered the alternative projections for LIN prepared by AT&T /
McCaw furnished to us on January 18, 1995 (and additional backup to such projections
furnished to us on February 9, 1995), LIN management's comments on such projections
dated January 23, 1995 and thereafter, and our due diligence inquiries of AT&T / McCaw
regarding such projections on January 25, 1995.
We considered the potential appropriateness of using discount rates and terminal
value multiples specific to the wireless data business in performing discounted cash flow
analysis on that segment.
We revisited the potential impact of the shared control aspects of LIN's Los Angeles
and Houston markets on our overall valuation of the Company.
We conducted discussions with AT&T's appraiser, Morgan Stanley, in order to gain
an understanding of AT&T's / Morgan Stanley's perspectives of LIN's competitive
position and business prospects, historical and projected financial performance, financial
condition and attendant private market valuation.
We reviewed Wall Street research estimates of LIN's potential private market value
published subsequent to January 19, 1995.
We reviewed the trading prices for LIN's stock since January 19, 1995 through
February 13, 1995.
Page 5
<PAGE>
{keywords |LIN Broadcasting Corporation}
Summary Valuation Matrix
Summary Valuation Matrix
($ in millions, except per share data) Private Market Valuation Range
of LIN as Contemplated by the
PMVG(10)
Final Initial
View View
$140 $155 $162 $170
________________________________________________________________
Value of Outstanding Common Shares (1) $7,228 $8,003 $8,364 $8,777
Add: Exercise of Stock Options (2) 234 259 271 284
________________________________________________________________
Equity Value $7,463 $8,262 $8,635 $9,062
Equity Value - Public Stake (3) 3,684 4,079 4,263 4,473
Equity Value - AT&T Stake (4) 3,779 4,183 4,372 4,588
Add: Net Debt @ 6/30/95 (5) 1,560 1,560 1,560 1,560
Less: Stock Option Proceeds (2) (143) (143) (143) (143)
Gross Enterprise Value $8,879 $9,679 $10,052 $10,478
Less: Other Operations (6) (112) (112) (112) (112)
Cellular Enterprise Value $8,767 $9,566 $9,939 $10,366
Cellular Enterprise Value /
Proportionate Cellular EBITDA:
Actual 1994 (7) $389.4 22.5x 24.6x 25.5x 26.6x
Estimated 1995- Management Base Case (8) 534.6 16.4 17.9 18.6 19.4
- Wall Street Forecasts(9) 510.0 17.2 18.8 19.5 20.3
Estimated 1996- Management Base Case (8) 674.4 13.0 13.8 14.2 14.7
Cellular Enterprise Value /
Proportionate POPs @ 12/31/94 25.384 $345 $377 $392 $408
<PAGE>
_________________
(1) Based on 51,632,000 shares outstanding as of December 31, 1994 per LIN's
management.
(2) In-the-money stock options based on 1,671,862 stock options outstanding as of
December 31, 1994 with an assumed average exercise price of $85.56.
(3) Represents fully diluted equity value (not reduced by stock option proceeds) less
AT&T stake of 26,989,500 shares as of the LIN proxy statement dated June 2, 1994.
(4) Represents AT&T's stake of 26,989,500 shares as of the LIN proxy statement dated
June 2, 1994.
(5) Since valuation assumes a closing date of June 30, 1995, Bear Stearns and Lehman
Brothers have projected LIN's debt and cash accounts based on data provided by LIN's
management.
(6) The adjustment includes: (i) $88.4 million for WOTV and WOOD-TV (which
remained with LIN when it spun off LIN-TV) valued at 9.5x estimated 1995 EBITDA
and
(ii) $24.0 million for LIN's shares in American Mobile Satellite Corp. (SKYC) (1,655,670
shares at a publicly traded market value of $14.50 per share).
(7) Actual proportionate EBITDA which excludes Philadelphia.
(8) LIN management's Base Case projections.
(9) Based on mean of recent Wall Street research analysts' estimates of LIN's operating
cash flow.
(10) Valuation range used to determine "initial view" and "final view".
Page 6
<PAGE>
{keywords |LIN Broadcasting Corporation}
Valuation Methodologies and Considerations
Valuation Methodologies
Discount Precedent Comparable
Cash Flow M&A Public
Analyses Transactions Companies
Valuation
LIN's Historical LIN's
Wireless Wall Street Equity Financial and Business
Communications Research Estimates Operating Performance Strategy & Market
Trends and Commentary and Future Prospects Position
Potential Third Ownership and
Most Attractive Party Interests Potential Control
Independent and Tax Efficient Characteristics of
Cellular Company Financial Impacts Sale Transactions LIN's Markets
Page 7
<PAGE>
{keywords |LIN Broadcasting Corporation}
LIN's Unique Position
Control or shared control of four of the country's ten largest cellular markets
- New York (#1)
- Los Angeles (#2)
- Dallas (#6)
- Houston (#8)
- All of these properties have great strategic value to potential purchasers and would,
collectively, serve as the cornerstone of a national wireless strategy
- Demographics and business mix of LIN's markets will enable LIN to maximize
revenue and cash flow during the next wave of cellular growth
- Characterized as McCaw's "crown jewels" by Alex Mandl, CEO of AT&T's
Communications Services Group, in his sworn affidavit of May 26,1994
1.1 million proportionate subscribers
Almost $1 billion in revenues
Superior historical operating results: Highest EBITDA/POP ratio and revenue per
subscriber per month of any publicly traded cellular company
Operations are well positioned to capitalize on new revenue sources such as wireless
data and other advanced services.
Page 8
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{keywords |LIN Broadcasting Corporation}
Summary of Valuation Analyses
Summary of Valuation Analyses
Per Share Range
Valuation Analysis Low High
DCF Analyses(1)
Base Case(2) $141 $194
Upside Case(2) $172 $235
Sensitivity Case(2) $104 $144
Precedent M&A Transactions(3) $140 $180
Public Market Reference Valuation
LIN's Stock Price(4) $139
LIN's Valuation Based on Peer Group(5) 116
____________
(1) Lehman Brothers and Bear Stearns reviewed three cases: (i) LIN management's
Base Case, (ii) LIN management's Upside Case and (iii) Bear Stearns / Lehman Brothers
Sensitivity Case.
(2) Valuation range assumes a discount rate of 11% {symbol 45 \f "Symbol" \s 8|} 13%
and a 2004 EBITDA exit multiple of 10.5x {symbol 45 \f "Symbol" \s 8|} 12.5x.
(3) Based on a detailed analysis of AT&T's acquisition of McCaw.
(4) Based on LIN's closing price of $138.75 on February 10, 1995.
(5) Based on Bear Stearns and Lehman Brothers estimate of public market 1995E
EBITDA multiple of 14.0x.
Page 9
<PAGE>
{keywords |LIN Broadcasting Corporation}
LIN Share Price Profile - Past Year
LIN Daily Stock Price Performance(1)
January 1, 1994 to February 10, 1995
[Graph of LIN daily stock price for January 1, 1994 to February 10, 1995 shows a stock
price per share of LIN Broadcasting Corporation beginning at $97 and rising to $139,
versus a valuation range determined by Bear Stearns and Lehman Brothers $140 to $170.]
Valuation Range Premium
Compared to: $140 $155 $162 $170
LIN's Closing Price on 2/10/95 $138.75 0.9% 11.7% 16.8% 22.5%
______________
(1) Prices prior to December 29, 1994 have been adjusted downward by $12.00 per
share to reflect spin-off of LIN-TV.
Page 10
<PAGE>
{keywords |LIN Broadcasting Corporation}
LIN Share Price Profile - Past Six Years(1)
LIN Stock Price / Volume Performance
Monthly: June 30, 1988 to February 10, 1995
[Graph of LIN monthly stock price and volume performance for June 30, 1988 to
February 10, 1995 shows a stock price of approximately (i) $50 on June 30, 1988, (ii) $60
immediately prior to McCaw's bid of $120(2) per share of LIN, (iii) $108 on the day
McCaw bid $154(2) per share for control of LIN, (iv) $70 after 46.3 million LIN shares
were tendered, (v) $66 when AT&T announced its bid for 33% of McCaw, (vi) $115
when AT&T and the Department of Justice signed antitrust consent decree, (vii) $128
when Nextel/MCI deal was terminated, and (viii) $135 when LIN-TV was spun off. The
volume performance of LIN shares is heavy (up to 18,000,000) during the period in
which McCaw was bidding for the shares of LIN dropping off after 46.3 million LIN
shares were tendered to McCaw, with a slight rise in volume when AT&T announced its
bid for 33% of McCaw (up to approximately 6,000,000) and when LIN-TV is spun off
(up to approximately 5,800,000)]
____________
(1) Source: IDD Information Services. Prices prior to December 29, 1994 have been
adjusted downward by $12.00 per share to reflect spin-off of LIN-TV.
(2) Not adjusted for LIN-TV spin-off.
Page 11
<PAGE>
{keywords |LIN Broadcasting Corporation}
Summary of Recent Wall Street Research Estimates
Summary of Wall Street Research Commentary on LIN
Target Target
PMV Less: Cellular PMV Range Net of
Including PMV of PMV Net LIN-TV
Firm Date LIN TV LIN TV of LIN TV Low High
Goldman Sachs 01/24/95 {symbol 190 \f "Symbol" \s 9|} {symbol 190 \f
"Symbol" \s 9|} $155.00 $155.00 $155.00
Salomon 01/24/95 {symbol 190 \f "Symbol" \s 9|} {symbol 190 \f "Symbol" \s
9|} 145.00 145.00 {symbol 190 \f "Symbol" \s 9|}
PaineWebber 01/24/95 {symbol 190 \f "Symbol" \s 9|} {symbol 190 \f "Symbol"
\s 9|} 140.00 140.00 152.00
Smith Barney 01/24/95 {symbol 190 \f "Symbol" \s 9|} {symbol 190 \f "Symbol"
\s 9|} 142.00 142.00 142.00
Paul Kagan 01/20/95 {symbol 190 \f "Symbol" \s 9|} {symbol 190 \f "Symbol"
\s 9|} 150.00 145.00 155.00
Wheat First 01/18/95 {symbol 190 \f "Symbol" \s 9|} {symbol 190 \f "Symbol"
\s 9|} 159.00(1)158.00 160.00
CS First Boston 01/12/95 {symbol 190 \f "Symbol" \s 9|} {symbol 190 \f "Symbol"
\s 9|} 150.00 137.00 158.00
Merrill Lynch 12/21/94 $150.00 (12.00)(2) 138.00(2) 130.00 146.00
DLJ 12/15/94 157.50 (15.00) 142.50 140.00 145.00
Gerard Klauer 12/02/94 170.00 (14.00) 156.00 156.00 156.00
High $159.00 $158.00 $160.00
Mean 147.75 144.80 152.11
Median 147.50 143.50 155.00
Low 138.00 130.00 142.00
____________
(1) Midpoint of stated range.
(2) In December 1994, LIN completed a spin-off of its television operations. Where not
specifically commented on by the research analyst, Bear Stearns and Lehman Brothers
have estimated the private market value of LIN-TV at $12.00 per LIN share.
Page 12
<PAGE>
{keywords |LIN Broadcasting Corporation}
Section II
Valuation Analyses
<PAGE>
{keywords |LIN Broadcasting Corporation}
Section II-A
Valuation Matrix
<PAGE>
{keywords |LIN Broadcasting Corporation}
Valuation Matrix
Closing Price
2/10/95
$138.75
Premium (Discount) to:
Closing Price on 2/10/95 $138.750(1) 0.0%
LTM High Price on 2/6/95 139.375(1) -0.4%
LTM Low Price on 4/6/94 94.313(1) 47.1%
Consideration
Outstanding Common Shares(2) $7,164
Add: Exercise of Stock Options(3) $232
Equity Value $7,396
Public Stake-Equity Value(4) $3,651
AT&T Stake-Equity Value(5) $3,745
Add: Project Net Debt @ 6/30/95(6) $1,560
Less: Stock Option Proceeds(3) ($143)
Gross Enterprise Value $8,812
Less: Other Operations(7) ($112)
Cellular Enterprise Value $8,700
Valuation Parameters
Cellular Enterprise Value/
Proportionate Cellular EBITDA:
Actual 1994(8) $389.4 22.3x
Latest Quarter Annualized 386.3 22.5
Estimated 1995-Management Base Case(9) 535.2 16.3
Estimated 1995-Wall Street Forecasts(10) 510.0 17.1
Estimated 1996-Management Base Case(9) 674.4 12.9
Cellular Enterprise Value/
Proportionate POPs @ 12/31/94 25.384 $343
Hypothetical Private Market Values
$140.00 $150.00 $155.00 $162.00 $170.00
0.9% 8.1% 11.7% 16.8% 22.5%
0.4% 7.6% 11.2% 16.2% 22.0%
48.4% 59.0% 64.3% 71.8% 80.3%
$7,228 $7,745 $8,003 $8,364 $8,777
$234 $251 $259 $271 $284
$7,463 $7,996 $8,262 $8,635 $9,062
$3,684 $3,947 $4,079 $4,263 $4,473
$3,779 $4,048 $4,183 $4,372 $4,588
$1,560 $1,560 $1,560 $1,560 $1,560
($143) ($143) ($143) ($143) ($143)
$8,879 $9,412 $9,679 $10,052 $10,478
($112) ($112) ($112) ($112) ($112)
$8,767 $9,300 $9,566 $9,939 $10,366
22.5x 23.9x 24.6x 25.5x 26.6x
22.7 24.1 24.8 25.7 26.8
16.4 17.4 17.9 18.6 19.4
17.2 18.2 18.8 19.5 20.3
13.0 13.8 14.2 14.7 15.4
$345 $366 $377 $392 $408
(1) Stock price and historical high and low adjusted to reflect spin-off of LIN-TV at
$12.00 per share
(2) Based on 51,632,000 shares outstanding as of December 31, 1994.
(3) Stock options based on 1,671,862 stock options outstanding as of December 31,
1994 at an assumed average exercise price of $85.56.
(4) Represents fully diluted equity value (not reduced by stock option proceeds) less
AT&T stake of 26,989,500 shares as of the LIN proxy statement dated June 2, 1994.
(5) Represents AT&T stake of 26,989,500 shares as of the LIN proxy statement dated
June 2, 1994.
(6) Since valuation is as of June 30, 1995, Lehman Brothers and Bear Stearns have
projected LIN's debt and cash accounts based on data provided by LIN's management.
(7) The adjustment includes: (i) $88,378,500 for WOTV and WOOD-TV valued at 9.5x
estimated 1995 EBITDA and (ii) $24.0 million for LIN's shares in American Mobile
Satellite Corp. (SKYC)(1,655,670 shares at a publicly traded market value of $14.50 per
share).
(8) Actual proportionate EBITDA which excludes Philadelphia.
(9) Management's Base Case projections dated January 6, 1995.
(10) Based on mean of recent Wall Street research analysts' estimates of LIN's operating
cash flow.
Page 13
<PAGE>
{keywords |LIN Broadcasting Corporation}
Section II-B
Discounted Cash Flow Analyses
<PAGE>
{keywords |LIN Broadcasting Corporation}
Discounted Cash Flow Analyses
We performed discounted cash flow (DCF) analyses based on projections provided by
LIN's senior management under three operating scenarios:
- Base Case: This case assumes that LIN's revenue, subscriber and cash flow growth
is highest in 1995 and declines each year thereafter, with more rapid declines in the first
several years as the wireless communications industry matures and becomes more
competitive.
- Upside Case: This case is similar to the Base Case except that LIN's management
has projected that (i) penetration is higher because wireless telephones replace a portion
of landline telephones and new PCS and ESMR entrants gain less market share than
anticipated in the Base Case; (ii) average revenue per subscriber per month ("ARPU")
decreases at a slower rate than in the Base Case due to a higher use of advanced services
such as wireless data transfer, two-way alphanumeric messaging, voice mail, call waiting,
call forwarding, caller ID and other services; and (iii) LIN provides more long distance
services.
- Sensitivity Case: Bear Stearns and Lehman Brothers jointly derived this case from
the Base Case projections provided by LIN's management. This case reflects wireless
industry growth at a slower rate than the Base Case such that: (i) the wireless industry and
LIN achieve a lower penetration; (ii) ARPU is reduced due to price reductions and lower
use of wireless data transfer; and (iii) margins are "squeezed" due to competition and the
carriers' pursuit of more low usage customers.
Page 14
<PAGE>
{keywords |LIN Broadcasting Corporation}
Discounted Cash Flow Analyses
Because the cellular sector is rapidly growing and evolving, Lehman Brothers and
Bear Stearns believe that DCF analysis is an important valuation methodology for
determining the private market value of LIN.
In our DCF analyses Lehman Brothers and Bear Stearns focused on different areas of
the range of discount rates and terminal value multiples depending on the assumptions,
risks and forecast growth of the cellular business inherent in the projections.
In performing our DCF analyses, we have considered several specific factors which
may potentially impact valuation:
- Potential impact of using discount rates and terminal value multiples specific to the
wireless data business segment.
- Potential effect of the shared control aspects of LIN's Los Angeles and Houston
markets.
Page 15
<PAGE>
{keywords |LIN Broadcasting Corporation}
Discounted Cash Flow Analyses
Base Case
Equity Value per Share
Discount Rate(1)
11% 12% 13%
EBITDA 10.5x $168 $154 $141
Multiple 11.5x 181 166 152
12.5x 194 178 163
1995E Cash Flow Multiple
Discount Rate(1)
11% 12% 13%
EBITDA 10.5x 19.2x 17.8x 16.5x
Multiple 11.5x 20.5x 19.0x 17.6x
12.5x 21.8x 20.2x 18.7x
Implied Perpetual Growth Rate (2)
Discount Rate(1)
11% 12% 13%
EBITDA 10.5x 5.3% 6.3% 7.3%
Multiple 11.5x 5.8% 6.8% 7.8%
12.5x 6.2% 7.2% 8.2%
Terminal Value as % of Present Value
Discount Rate(1)
11% 12% 13%
EBITDA 10.5x 70.1% 69.5% 68.8%
Multiple 11.5x 72.0% 71.4% 70.7%
12.5x 73.7% 73.0% 72.4%
Upside Case
Equity Value per Share
Discount Rate(1)
11% 12% 13%
EBITDA 10.5x $204 $188 $172
Multiple 11.5x 220 202 185
12.5x 236 216 199
1995E Cash Flow Multiple
Discount Rate(1)
11% 12% 13%
EBITDA 10.5x 22.7x 21.0x 19.5x
Multiple 11.5x 24.2x 22.4x 20.8x
12.5x 25.8x 23.8x 22.1x
Implied Perpetual Growth Rate (2)
Discount Rate(1)
11% 12% 13%
EBITDA 10.5x 5.5% 6.5% 7.5%
Multiple 11.5x 6.0% 7.0% 8.0%
12.5x 6.4% 7.4% 8.4%
Terminal Value as % of Present Value
Discount Rate(1)
11% 12% 13%
EBITDA 10.5x 71.7% 71.1% 70.5%
Multiple 11.5x 73.5% 72.9% 72.3%
12.5x 75.1% 74.6% 74.0%
Sensitivity Case
Equity Value per Share
Discount Rate(1)
11% 12% 13%
EBITDA 10.5x $125 $114 $104
Multiple 11.5x 134 123 113
12.5x 144 132 121
1995E Cash Flow Multiple
Discount Rate(1)
11% 12% 13%
EBITDA 10.5x 17.3x 16.1x 14.9x
Multiple 11.5x 18.4x 17.1x 15.9x
12.5x 19.5x 18.1x 16.8x
Implied Perpetual Growth Rate (2)
Discount Rate(1)
11% 12% 13%
EBITDA 10.5x 5.7% 6.7% 7.7%
Multiple 11.5x 6.1% 7.1% 8.1%
12.5x 6.5% 7.5% 8.5%
Terminal Value as % of Present Value
Discount Rate(1)
11% 12% 13%
EBITDA 10.5x 67.9% 67.1% 66.4%
Multiple 11.5x 69.8% 69.1% 68.4%
12.5x 71.6% 70.9% 70.1%
____________
(1) Weighted average cost of capital reflects (i) a risk free rate of 7.57% which
represents the 10-year U.S. Treasury rate; (ii) a market risk premium of 7.22%; (iii) an
estimated predicted Beta of 1.13 for LIN and 1.04 based on an analysis of predicted Betas
for comparable companies (as provided by BARRA); and (iv) total debt / total
capitalization of 35% with long-term and short-term assumed to be split equally.
(2) Represents required perpetual compounded annual growth in terminal year free cash
flow necessary to justify terminal value calculated using indicated multiple of EBITDA.
Page 16
<PAGE>
{keywords |LIN Broadcasting Corporation}
Summary of Projections
Comparison of Projections
10 Year
Compounded
Annual Growth
1994 2000 2004 Rate (CAGR)
Subscribers (000)
Sensitivity Case 1,079 3,043 3,867 13.6%
Base Case 1,079 3,666 4,801 16.1%
Upside Case 1,079 3,808 5,155 16.9%
Revenue ($MM)
Sensitivity Case $912 $2,089 $2,771 11.8%
Base Case 912 2,541 3,666 14.9%
Upside Case 912 2,793 4,451 17.2%
EBITDA ($MM)
Sensitivity Case $389 $1,004 $1,389 13.6%
Base Case 389 1,216 1,849 16.9%
Upside Case 389 1,411 2,246 19.2%
Penetration
Sensitivity Case 4.3% 11.2% 13.6% --
Base Case 4.3 13.4 16.9 --
Upside Case 4.3 14.0 18.2 --
ARPU(1)
Sensitivity Case $82.57 $59.43 $61.20 --
Base Case 82.57 60.95 64.93 --
Upside Case 82.57 64.55 73.93 --
______________
(1) Average revenue per subscriber per month which is in nominal terms and includes
wireless data.
Page 17
<PAGE>
{keywords |LIN Broadcasting Corporation}
Summary of Projections
Cellular Penetration
1992 1993 1994 1995 1996 1997 1998
Historical 2.2% 3.0% 4.2%
Base Case 6.0% 7.9% 9.3% 10.8%
Upside Case 6.0% 7.8% 9.5% 11.0%
Sensitivity Case 6.2% 7.8% 8.8% 9.7%
1999 2000 2001 2002 2003 2004
Historical
Base Case 12.0% 13.4% 14.5% 15.4% 16.2% 16.8%
Upside Case 12.3% 13.8% 15.0% 16.0% 17.1% 18.0%
Sensitivity Case 10.2% 11.2% 11.8% 12.2% 13.0% 13.7%
Revenue/Average Subscriber/Month(1)(2)
1992 1993 1994 1995 1996 1997 1998
Historical $90 $84 $83
Base Case $74 $68 $65 $63
Upside Case $75 $69 $66 $65
Sensitivity Case $74 $68 $64 $61
1999 2000 2001 2002 2003 2004
Historical
Base Case $61 $61 $61 $62 $63 $65
Upside Case $64 $65 $67 $69 $71 $73
Sensitivity Case $59.5 $59 $59 $59.5 $60 $60
(1) Projected Revenue/Average Subscriber/Month is in nominal terms and, thus, is not
adjusted for inflation.
(2) Includes wireless data and feature revenues.
Page 18
<PAGE>
{keywords |LIN Broadcasting Corporation}
Summary of Projections
Cellular Subscribers
1992 1993 1994 1995 1996 1997 1998
Historical 500 750 1,050
Base Case 1,600 2,000 2,500 2,900
Upside Case 1,500 2,000 2,550 2,950
Sensitivity Case 1,600 2,000 2,400 2,500
1999 2000 2001 2002 2003 2004
Historical
Base Case 3,300 3,700 4,000 4,300 4,600 4,700
Upside Case 3,400 3,800 4,100 4,500 4,800 5,100
Sensitivity Case 2,800 3,000 3,200 3,500 3,700 3,900
Cellular Subscriber Growth
1992 1993 1994 1995 1996 1997 1998
Historical 32% 30% 45%
Base Case 45% 30.5% 20% 16%
Upside Case 44% 31% 25% 16%
Sensitivity Case 51% 24% 14% 10%
1999 2000 2001 2002 2003 2004
Historical
Base Case 14% 11% 10% 8% 6% 4%
Upside Case 13% 11% 10% 8.5% 7% 5.5%
Sensitivity Case 9% 8% 7% 7% 6% 5%
Page 19
<PAGE>
{keywords |LIN Broadcasting Corporation}
Summary of Projections
Cellular Revenues
1992 1993 1994 1995 1996 1997 1998
Historical $500 $650 $950
Base Case $1,200 $1,475 $1,750 $2,000
Upside Case $1,200 $1,475 $1,800 $2,150
Sensitivity Case $1,200 $1,475 $1,650 $1,800
1999 2000 2001 2002 2003 2004
Historical
Base Case $2,250 $2,500 $2,800 $3,100 $3,400 $3,600
Upside Case $2,400 $2,750 $3,150 $3,600 $4,000 $4,400
Sensitivity Case $1,900 $2,000 $2,250 $2,400 $2,500 $2,750
Cellular Revenue Growth
1992 1993 1994 1995 1996 1997 1998
Historical 26% 23% 38%
Base Case 28% 24.7% 18% 15%
Upside Case 28% 25% 20.5% 19%
Sensitivity Case 32% 23.5% 11% 7.5%
1999 2000 2001 2002 2003 2004
Historical
Base Case 12% 12% 11% 10.5% 9% 7.5%
Upside Case 13% 13.5% 14% 13.5% 12% 10%
Sensitivity Case 7.5% 7.5% 7.5% 7.5% 7.5% 7%
Page 20
<PAGE>
{keywords |LIN Broadcasting Corporation}
Summary of Projections
Cellular EBITDA
1992 1993 1994 1995 1996 1997 1998
Historical $250 $300 $400
Base Case $500 $700 $800 $900
Upside Case $500 $750 $850 $1,050
Sensitivity Case $450 $650 $750 $800
1999 2000 2001 2002 2003 2004
Historical
Base Case $1,100 $1,250 $1,350 $1,550 $1,700 $1,850
Upside Case $1,250 $1,400 $1,600 $1,800 $2,000 $2,250
Sensitivity Case $900 $1,000 $1,100 $1,200 $1,250 $1,350
Cellular EBITDA Margin
1992 1993 1994 1995 1996 1997 1998
Historical 50% 48% 43%
Base Case 45% 45.3% 45.5% 45.7%
Upside Case 45% 47% 47.5% 49%
Sensitivity Case 37.5% 42.5% 44.5% 45%
1999 2000 2001 2002 2003 2004
Historical
Base Case 46.5% 47.5% 48% 49% 50% 50%
Upside Case 50.1% 50.2% 50.1% 50% 50.1% 50%
Sensitivity Case 47% 48% 48.5% 49% 49.7% 49.8%
Page 21
<PAGE>
{keywords |LIN Broadcasting Corporation}
Due Diligence Review With McCaw and LIN Management
Future Growth
of Cellular
This is an incredible business
- New York General Manager Tim Donahue
I don't see this business slowing down at all
- Donahue
This (the cellular industry) will blow wide open in two to three years
- Donahue
We have typically underestimated the growth of this business
- Donahue
LA is a diamond in the cellular world. It is an ideal cellular market
- Gene Welsh Los Angeles CFO
Penetration and
Subscriber Growth
ESMR will only capture 3% - 4% of total wireless market
- Former McCaw President Jim Barksdale
A PCS competitor may gain up to 10% market share by 2000
- Barksdale
10% market share points for PCS in 2000 would be "upside"
- Donahue
Wireless penetration in 2004 will be 40% with cellular capturing 35%
- Houston general manager Dan Kovalevich
30% annual subscriber growth at "minimum" over next five years; and I can "go
fishing" and still get 2 million subscribers in NY by 2000
- Donahue
Penetration in LA will go from lagging the country average to outpacing it
- Welsh
Margins and Operating
Expenses
Margins will remain in the mid-40% to 50% range over time because of operating
efficiencies
- Donahue
50% margins will return
- Welsh
Operating expenses per MOU will decline from $0.15 to $0.10 over time
- Barksdale
By 1997, operating costs/sub will decline from $22 to $16 and operating costs / MOU
will decline to $0.10
- McCaw President Steve Hooper (January '94 Presentation)
Cost per gross add is the single most important variable
- Barksdale
We're not as efficient as we could be
- Barksdale
Marketing costs per gross add will decrease over time
- Marketing [Vice President] Dick Bryan
We control distribution in NY
- Donahue
ARPU and Price
Competition
$40 - $60 ARPU in real terms in 2004
- Donahue
McCaw/LIN will be price competitive and retain market share despite competition
- Barksdale
PCS will never recoup investment if they "low-ball" on price
- Donahue
Selling minutes is our product
- Barksdale
We have 350 cell sites in New York. PCS needs more than cellular and NY is a tough
market in which to secure cell sites
- Donahue
PCS operators are underestimating what it's going to take to get into NY
- Donahue
Other
Wireless Data
The data business will be huge
- Barksdale
50% - 60% market share for LIN. Wireless data at 25% of cellular revenues is
reasonable
- Wireless Data Marketing Manager Jeff Damir
Wireless data business plan is conservative. "We think the numbers will be much
bigger [than projected]"
- Damir
50% gross margin is definitely attainable
- Damir
Churn
1% is sustainable in long-term
- Barksdale
1% to 1.2% churn per month is achievable
- Donahue
Market Share
Greater than 50% in NY and LA. Less than 50% in Dallas and Houston
- Local managements
Management
Management problems in Los Angeles market have been fixed
- Barksdale
Page 22
<PAGE>
{keywords |LIN Broadcasting Corporation}
Operating Statistics - LIN vs. Public Market Peer Group
EBITDA Margin(1)
LIN 43.5%
PEER Group 39.3%
AirTouch 43.8%
CellularComm 34.7%
Centennial 49.9%
Contel 30.1%
CommNet 17.8%
U.S. Cellular 23.4%
Vanguard 24.1%
EBITDA/POP(2)
LIN $14.64
PEER Group $12.10
AirTouch $13.52
CellularComm $10.68
Centennial $5.28
Contel $7.39
CommNet $2.84
U.S. Cellular $2.81
Vanguard $5.32
________________
(1) Represents consolidated EBITDA margin for Contel Cellular, U.S. Cellular,
Vanguard and Centennial. Represents proportionate EBITDA margin for AirTouch,
Cellular Communications and CommNet.
(2) Represents estimated proportionate EBITDA for all companies.
(3) Peer Group includes AirTouch and Cellular Communications.
Page 23
<PAGE>
{keywords |LIN Broadcasting Corporation}
Wall Street Views of Wireless Industry
Comparison of LIN Projected EBITDA/POP to Equity Research Views(1)
Actual Estimated Projected
1992 1993 1994 2000 2004
Industry Average
DLJ $8.01 $11.05 $15.74 $36.24 {symbol 190 \f "Symbol" \s 12|}
Kagan {symbol 190 \f "Symbol" \s 12|} 7.23 10.95 41.07 $49.24
LIN $10.92 $13.14
Base Case $15.34 $44.55 $65.08
Upside Case 15.34 51.70 79.07
Sensitivity Case 15.34 36.79 48.89
CS First Boston (1/12/95) 15.88 42.63 61.72
Merrill Lynch (12/21/94) 15.94 45.69 {symbol 190 \f "Symbol" \s
12|}
Salomon Brothers (4Q94) 15.67 40.66 {symbol 190 \f "Symbol" \s
12|}
_____________
(1) This measure takes into account the three main drivers of value: penetration,
revenue per subscriber and operating cash flow (EBITDA) margin.
Page 24
<PAGE>
{keywords |LIN Broadcasting Corporation}
Wall Street Views of LIN
Comparison of LIN Projections to Wall Street Views
Estimated Projected Compound Annual Growth Rate
1994 2000 2004 1994-2000 1994-2004
Revenues
Base Case $912 $2,541 $3,666 17.9% 14.9%
Upside Case 912 2,793 4,451 20.5% 17.2%
Sensitivity Case 912 2,089 2,771 14.8% 11.8%
CS First Boston (1/12/95) 956 2,347 3,426 16.1% 13.6%
Salomon Brothers (4Q94) 958 2,281 {symbol 190 \f "Symbol" \s 9|} 15.6%
{symbol 190 \f "Symbol" \s 9|}
Merrill Lynch (12/21/94) 953 2,512 {symbol 190 \f "Symbol" \s 9|} 17.5%
{symbol 190 \f "Symbol" \s 9|}
Cash Flow Before Marketing
Base Case $636 $1,606 $2,187 16.7% 13.1%
Upside Case 636 1,753 2,618 18.4% 15.2%
Sensitivity Case 636 1,281 1,685 12.4% 10.2%
CS First Boston (1/12/95) 665 1,623 2,317 16.0% 13.3%
Salomon Brothers (4Q94) 665 1,471 {symbol 190 \f "Symbol" \s 9|} 14.1%
{symbol 190 \f "Symbol" \s 9|}
Merrill Lynch (12/21/94) 663 1,759 {symbol 190 \f "Symbol" \s 9|} 17.7%
{symbol 190 \f "Symbol" \s 9|}
Cash Flow After Marketing
Base Case $389 $1,216 $1,849 20.9% 16.9%
Upside Case 389 1,411 2,246 24.0% 19.2%
Sensitivity Case 389 1,004 1,389 17.1% 13.6%
CS First Boston (1/12/95) 408 1,164 1,753 19.1% 15.7%
Salomon Brothers (4Q94) 406 1,193 {symbol 190 \f "Symbol" \s 9|} 19.7%
{symbol 190 \f "Symbol" \s 9|}
Merrill Lynch (12/21/94) 410 1,225 {symbol 190 \f "Symbol" \s 9|} 20.0%
{symbol 190 \f "Symbol" \s 9|}
Page 25
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{keywords |LIN Broadcasting Corporation}
Wall Street Views of Wireless Industry
Comparison of LIN Projected Penetration to
Wall Street Views
Estimated Projected
Total Wireless Penetration 1994 2000 2004
DLJ 8.28% 26.08% 41.26%(1)
Kagan 9.11 28.82 40.16
Cowen 9.11 25.72 41.72
Goldman Sachs (October 1994) N.A. 21.20 N.A.
Morgan Stanley (11/25/94) N.A. N.A. 35.00(2)
Merrill Lynch (7/25/94) N.A. N.A. 40.00
Penetration of One Average Cellular Provider(3)
DLJ 4.11% 9.59% 12.75%(1)
Kagan 4.54 12.43 14.59
Cowen 4.55 9.93 12.93
Merrill Lynch (7/25/94) N.A. N.A. 17.85
LIN Penetration
Management Base Case 4.25% 13.43% 16.90%
Management Upside Case 4.25 13.95 18.15
Sensitivity Case 4.25 11.15 13.61
CS First Boston (1/12/95) 4.17 12.72 17.27
Merrill Lynch (12/21/94) 4.19 12.75 N.A.
Salomon Brothers (4Q94) 4.19 11.02 N.A.
_____________
(1) DLJ projections are available only to 2003. Data for 2004 has been extrapolated
by Lehman Brothers and Bear Stearns.
(2) At "industry maturity" which is assumed to be 2004.
(3) Assumes that both cellular competitors in each market will have an equal market
share.
Page 26
<PAGE>
{keywords |LIN Broadcasting Corporation}
Wall Street Views of Wireless Industry
Comparison of LIN Projected ARPU(1)
to Wall Street Views
Estimated Projected
Industry Projected ARPU(1) 1994 2000 2004
Kagan $69.16 $55.66 $51.90
Merrill Lynch(2) N.A. N.A. 52.40
LIN Projected ARPU(1)
Management Base Case $82.57 $60.95 $64.93
Management Upside Case 82.57 64.55 73.93
Sensitivity Case 82.57 59.43 61.20
CS First Boston (1/12/95) 83.00 61.00 60.00
Merrill Lynch (12/21/94) 82.00 65.00 N.A.
Salomon Brothers (4Q94) 82.63 61.65 N.A.
_____________
(1) Average revenue per subscriber per month including wireless data.
(2) Research report does not specify whether or not this figure includes wireless data.
Page 27
<PAGE>
{keywords |LIN Broadcasting Corporation}
Calculation of Discount Rates and Terminal Multiples
Because discount rates and terminal multiples are critical inputs to our DCF analyses, we
have reviewed various data in connection with estimating the appropriate ranges for LIN,
including:
LIN's business strategy, market position, future prospects and financial projections.
Wireless industry trends and projections.
Perpetual growth rates implied by our assumed terminal value multiples relative to:
- Certain expectations for the economy in terms of real GDP growth and inflation.
- CS First Boston's terminal value calculation for LIN using a perpetual growth rate
of 7%.
- Morgan Stanley's terminal value calculations for Comcast's cable and cellular
businesses using perpetual growth rates of 7% and 8%, respectively.
Wall Street research analysts' views on discount rates and terminal value multiples
used in estimating the potential private market value of LIN.
Financial advisors' views on discount rates and terminal value multiples used in
performing DCF analyses in connection with certain precedent M&A transactions in the
cellular sector.
<PAGE>
{keywords |LIN Broadcasting Corporation}
Cable television transaction multiples, which may be a reasonable indicator of future
"steady state" transaction multiples and terminal value multiples for the cellular sector.
Page 28
<PAGE>
{keywords |LIN Broadcasting Corporation}
Terminal Multiples and Discount Rates of Analysts and Advisors
Wall Street Equity Research Analyst Views Used to Value LIN
Terminal Terminal Discount
Firm Date Multiples Year Rate
Salomon Brothers 01/04/95 11.0x 2000 12.0%
Merrill Lynch 12/21/94 11.0x 2000 12.0% - 15.0%
Gerard Klauer Mattison 12/02/94 12.0x - 14.5x 2003 12.0% - 15.0%
Goldman Sachs 08/04/94 12.0x 2000 12.0% - 15.0%
Financial Advisor Views
Terminal Discount
Firm Date Transaction Multiples Rate
Lazard Freres 12/27/94 GTE/Contel 12.0x - 14.0x 11.0% - 13.0%
PaineWebber 12/27/94 GTE/Contel 10.5x - 12.5x 10.0% - 15.0%
Merrill Lynch 12/27/94 GTE/Contel 10.0x - 12.0x 10.0% - 14.0%
Lazard Freres 2/2/94 AT&T/McCaw 9.0x - 11.0x 9.0% - 13.0%
Salomon Brothers 2/2/94 AT&T/McCaw 10.0x - 11.0x 11.0% - 13.0%
Page 29
<PAGE>
{keywords |LIN Broadcasting Corporation}
Estimate of Weighted Average Cost of Capital
In deriving the Beta used in calculating LIN's assumed cost of equity, we compared
LIN's predicted Beta (estimated by BARRA) with those of comparable companies.
LIN Based on
Industry
LIN(1) Average (2)
LIN's Predicted Beta 1.13 1.04
With these Betas, we estimated LIN's cost of equity to be 14%-16% based on the
Capital Asset Pricing Model.
Assuming a debt-to-capitalization ratio of 35%(3) and a pre-tax cost of debt of 9.0% to
11.0% (5.4% to 6.6% after-tax), LIN's weighted average cost of capital is estimated to be
11%-13%.
_____________
(1) Predicted by BARRA.
(2) Companies whose predicted Betas are included in the industry average: AirTouch,
Cellular Communications, CommNet, Centennial, Contel Cellular, United States Cellular
and Vanguard.
(3) Assumes a 35% debt to total market capitalization based on 50% bank debt at
LIBOR + 2.5% and 50% 7-year notes at an assumed rate of 10.5% based on current
trading levels of comparable companies. Leverage ratio based on leverage analysis of
cable companies, broadcast companies and Regional Bell Operating Companies.
Page 30
<PAGE>
{keywords |LIN Broadcasting Corporation}
Calculation of Terminal Multiples
Derived Terminal Multiples(1)
Perpetual Growth Rate(2)
6.5% 7.0% 7.5% 8.0% 8.5%
WACC (3)
11.0% 12.9x 14.5x 16.6x 19.3x 23.2x
11.5% 11.6x 12.9x 14.5x 16.6x 19.3x
12.0% 10.5x 11.6x 12.9x 14.5x 16.6x
12.5% 9.7x 10.5x 11.6x 12.9x 14.5x
13.0% 8.9x 9.7x 10.6x 11.6x 12.9x
GDP Mean GDP Mean Projected Projected
Real Nominal Real GDP CPI Nominal GDP
Growth(4) Growth Growth(5) Change(5) Growth (6)
1929-1993 4.2% 12.6% 1994 3.7% 3.0% 6.7%
1950-1993 2.2% 10.7% 1995 2.7% 3.6% 6.3%
1970-1993 1.9% 8.5% 1996 2.2% 3.5% 5.7%
1980-1993 1.2% 5.9% 1997 2.3% 3.5% 5.8%
1985-1993 1.4% 5.0% 1998 2.4% 3.5% 5.9%
1990-1993 0.4% 3.9% 1999 2.4% 3.6% 6.0%
____________________
(1) Terminal multiple of EBITDA calculated based on the formula: 1 / (WACC
{symbol 45 \f "Symbol" \s 8|} Perpetual Growth Rate) multiplied by the average ratio of
free cash flow (i.e., EBITDA less capital expenditures less working capital needs less
unlevered taxes) to EBITDA in the years 2002 through 2004 (i.e., 0.580) as estimated in
LIN management's Base Case projections.
(2) Represents nominal growth rate.
(3) Weighted Average Cost of Capital.
(4) Source: Statistical Abstract of the United States 1994 (11th Edition). Values
expressed in constant 1987 dollars.
(5) Source: Country Data Forecasts 1994, Bank of America. Values expressed in
constant 1980 dollars.
(6) Represents Projected Real GDP Growth plus CPI Change.
Page 31
<PAGE>
{keywords |LIN Broadcasting Corporation}
Section II-C
Other Valuation Benchmarks
<PAGE>
{keywords |LIN Broadcasting Corporation}
Precedent M&A Transactions and Comparable Companies
As part of our valuation, we also analyzed selected precedent M&A transactions and
public trading parameters of other cellular companies. It is important to note the
following:
- Cellular companies have historically traded on the basis of the long-term potential
cash flow that would be generated as a company penetrated its markets and gained
subscribers, and this value translated to a certain enterprise value per POP.
- Recently, many leading cellular companies have begun to generate meaningful
operating cash flow; accordingly, enterprise value / EBITDA multiples have become the
most relevant valuation benchmark in many cases.
- Because each cellular company's markets and degree of penetration are unique, per
POP values may be more relevant for certain less mature companies whereas EBITDA
multiples are more relevant for more mature companies.
- Therefore, when reviewing the valuation parameters of precedent M&A transactions
in the cellular sector and publicly traded cellular companies, each specific case must be
carefully considered to determine which valuation benchmarks are the most relevant
under the circumstances.
Page 32
<PAGE>
{keywords |LIN Broadcasting Corporation}
Precedent M&A Transactions and Comparable Companies
Given LIN's unique position within the cellular sector, high quality portfolio of
properties, large size and significant cash flow generation, we note the following:
- EBITDA multiples are the most relevant benchmark for valuing LIN, and per POP
values are more of a "fall-back" short-hand valuation methodology.
- The universe of relevant M&A transactions and comparable publicly traded cellular
companies is fairly limited.
- The most relevant transaction is AT&T's purchase of McCaw.
Page 33
<PAGE>
{keywords |LIN Broadcasting Corporation}
AT&T's Acquisition of McCaw
Transaction Description and History
Deal History
November 4, 1992: AT&T announces its intention to invest $3.9 billion for a 33%
interest in McCaw.
August 16, 1993: AT&T announces its intention to acquire all of McCaw. AT&T
stock price at $62.375.
September 19, 1994: AT&T/McCaw merger closed. AT&T stock price at $54.00.
Summary Terms
Each Class A and Class B common share of McCaw, including BT's shares, was
exchanged for one AT&T common share.
If AT&T stock traded above $71.73 per share during a specified period of time shortly
before the closing of the merger, the exchange rate would have been adjusted downward
to provide AT&T stock worth $71.73 for each McCaw share, subject to a minimum of
0.909 AT&T shares.
If AT&T stock traded below $53.00 per share during a specified period of time shortly
before the closing of the merger, the exchange rate would have been adjusted upward to
provide AT&T stock worth $53.00 for each McCaw share, subject to a maximum of
1.111 AT&T shares.
AT&T shares closed at $54.00 the day the transaction closed. Therefore no
adjustment was made.
The transaction was tax-free to McCaw shareholders and was accounted for as a
"pooling of interests."
Transaction Valuation Parameters
<PAGE>
{keywords |LIN Broadcasting Corporation}
Announced Equity Enterprise Adjusted Enterprise
(Closed) Value Value(1) Value(2)
8/16/93
(9/19/94) $13,559 $17,387 $16,825
Adjusted Enterprise Value /
1993E EBITDA(3) 1994E EBITDA POPs(4)
21.1x 15.9x $280
(1) Equity value plus $4,410 million of debt (100% of McCaw's and 52% of LIN's) less
$358 million of cash (100% of McCaw's and 52% of LIN's adjusted to exclude an
estimated $12.5 million payable in connection with the redemption of the LCH Preferred
Stock) less option proceeds of $224 million for 11.2 million McCaw options, assuming an
average exercise price of $20 per option.
(2) Adjusted enterprise value is enterprise value less non-cellular operations which
include: (i) 472,500 paging units (the average of 1992 and 1993 year-end paging
subscribers); (ii) 52% of LIN's media operations valued at 8x LTM EBITDA of $67.5
million (excluding an estimated $2 million attributable to Guest Informant); and (iii)
McCaw's and 52% of LIN's ownership interest in AMSC valued at $44.5 million.
(3) Based on estimated 1994 EBITDA of $1,056 million (excluding an estimated $18.6
million of EBITDA attributable to McCaw's interests in LIN's Philadelphia market) based
on consensus of Wall Street analysts at the time the transaction was announced.
(4) Based on 60.0 million net POPs excluding 48% of LIN's net POPs and LIN's
Philadelphia POPs.
Page 34
<PAGE>
{keywords |LIN Broadcasting Corporation}
LIN versus McCaw Stand-Alone
LIN versus McCaw Stand-Alone Demographic and Operating Comparisons (1)
LIN McCaw (Excl. LIN)
Qualitative Measure
Controlled Top 5 Markets(2) 2 0
Controlled Top 10 Markets(2) 4 1
Net POPs (MM) 24.8 48.9
Total Top 10 Market Net POPs (MM) 24.3 2.8
% Controlled POPs(3) 100% 96%
% RSA POPs(3) 1.6% 5.6%
% Households Income > $50K(4) 38.7% 27.2%
% Commute Time > 30 min. (4) 46.1% 28.1%
POPs / Square Mile(4) 2,453 496
Quantitative Measure
Penetration 3.7% 3.8%
Revenue (Proportionate) ($MM) $426.5 $790.6
Revenue / Sub / Month $85.45 $80.69
EBITDA ($MM) $350.8 $615.0
EBITDA Margin 44.3% 42.1%
EBITDA / POP $14.17 $12.96
<PAGE>
{keywords |LIN Broadcasting Corporation}
________________
(1) All data is for last twelve month period ending June 30, 1994.
(2) Controlled or shared (equal) control.
(3) Source for McCaw: DLJ (Summer '94); excludes international POPs.
(4) POP weighted average.
Page 35
<PAGE>
{keywords |LIN Broadcasting Corporation}
Imputed Valuation of LIN Based on
AT&T / McCaw Transaction
Imputed Value for McCaw's Majority Stake
in LIN
Cellular
Assumed per POP Enterprise Imputed
Value of McCaw's Value 1994E 6/30/95 Per
non-LIN Properties (100% of EBITDA Share Value
LIN)(1) Per POP(2) Multiple(3) of LIN(4)
(MM)
$235 $10,927 $447 27.7x $188
250 9,563 391 24.2 162
265 8,199 335 20.8 135
280 6,835 280 17.3 109
Implied McCaw LIN
Stand Alone Premium to Implied
Multiple of McCaw Implied 6/30/95 LIN
"Closing Year" Stand Alone Multiple for Stock
EBITDA Multiple LIN Price(5)
15.9x 0% 15.9x $135
15.6x 10% 17.2x 148
15.3x 20% 18.4x 160
15.0x 30% 19.5x 171
_________________
(1) Based on (i) cellular enterprise value for McCaw of $16,825 million and (ii) a private
market value of McCaw's 47.3 million non-LIN net POPs (i.e., excluding McCaw's 52%
stake in LIN) at $235 to $280 per POP.
(2) Based on 24.4 million net LIN POPs at announcement date.
(3) Based on 1994E EBITDA of $395 million which is a consensus of Wall Street
analysts' forecasts at the time the transaction was announced (excluding an estimated
$35.8 million of EBITDA attributable to LIN's interest in Philadelphia).
(4) Based on POP values.
(5) Based on (i) management's 1995E EBITDA of $535 million; (ii) projected June 30,
1995 net debt of $1,560 million; and (iii) other operations of $112 million which include
WOTV and WOOD-TV and LIN's AMSC investment.
Page 36
<PAGE>
{keywords |LIN Broadcasting Corporation}
Other Precedent M&A Transactions
In general, we believe that other precedent M&A transactions presented on the
following page have only limited relevance for assessing the private market value of LIN,
primarily for the following reasons:
- Most of these transactions involve the acquisition of less attractive cellular
properties than LIN. For example, only 49% of the total POPs merged in the Bell
Atlantic / NYNEX transaction were located in the top twenty U.S. markets. Similarly,
only 52% of the total POPs merged in the U S WEST / AirTouch transaction were located
in the top twenty U.S. markets. Conversely, over 98% of LIN's POPs are in the top ten
U.S. markets.
- Two of these transactions (i.e., U S WEST / AirTouch and Bell Atlantic / NYNEX)
involve cellular joint ventures as opposed to outright acquisitions.
- Several of these transactions involve minority buy-ins (i.e., GTE / Contel Cellular)
or the purchase of a minority stake (i.e., CGE / SBC Communications), which do not
include full control premiums.
Because of these various considerations and LIN's preeminent market position, we
are comfortable that our private market value of LIN is based on EBITDA multiples and
per POP values which are significantly different than those reflected in the precedent
M&A transactions shown on the following page.
Page 37
<PAGE>
{keywords |LIN Broadcasting Corporation}
Other Precedent M&A Transactions
Other Precedent M&A Transactions
($ millions, except per POP data)
Date
Announced Acquirer Target Type of Deal
Dec-94 GTE Contel Cellular Minority Buy-In
Nov-94 SNET Bell Atlantic/RI 100% Acquisition
Oct-94 CGE SBC Comm. Minority Stake
Jul-94 Cellular JV U S WEST/AirTouch Joint Venture
Jun-94 Cellular JV Bell Atlantic/NYNEX Joint Venture
Jun-94 LIN CSI Minority Buy-In
Feb-94 SBC Comm. Associated Comm. 100% Acquisition
Cellular Enterprise
Value /
Total Projected
Enterprise Cellular
Value(1) EBITDA POP
$254 18.0x(2) $191(5)
360 N.A. 236
247 N.A. 295(6)
13,500 N.A. 253
12,750 N.A. 237
145 13.8x(3) 185
680 20.9x 186(2)
(1) Includes both cellular and non-cellular enterprise value.
(2) Represents multiple of 1995E EBITDA.
(3) Represents multiple of 1994E proportionate EBITDA.
(4) Represents a multiple of 1994E proportionate EBITDA, which is estimated by
multiplying consolidated EBITDA for the period ending September 30, 1993 by the ratio
of proportionate POPs to consolidated POPs and growing this value by 50%.
(5) Lazard Freres values the GTE/Contel Cellular minority transaction at 21.2x - 23.2x
1995E consolidated EBITDA (GAAP basis) and $196 - $215 per POP. Lazard Freres
performed a market-by-market valuation of Contel Cellular in which Lazard estimated the
value of Contel Cellular's Los Angeles and Houston markets at $316 and $311 per POP,
respectively.
(6) Lazard Freres valued SBC/CGE minority transaction at $323 per POP.
Page 38
<PAGE>
{keywords |LIN Broadcasting Corporation}
Selected Publicly Traded Cellular Companies
Trading Data for Selected Publicly Traded Cellular Companies
Adjusted Enterprise Value /
As of February 10, 1995
($ in millions, except per POP data)
<CAPTION>
Gross Adjusted 1994E 1995E
Enterprise Enterprise Cellular Cellular
Value Value(1) EBITDA(2)(3) EBITDA(2)(3) POPs
<S> <C> <C> <C> <C> <C>
Major City Operations
LIN $8,800 $8,702 20.7x 17.1x $343
AirTouch(4) 12,702 $7,539 14.7 11.3 215
Cellular Communications 2,225 2,167 22.2 16.2 276
Semi-Urban Operations
Contel Cellular(5) $4,564 $4,564 25.1x 17.9x $188
U.S. Cellular 2,818 2,818 38.9 21.0 116
Vanguard Cellular 1,344 1,324 29.8 16.8 200
Small Rural Operations
Centennial Cellular $734 $731 16.2x 10.8x $118
CommNet Cellular 490 434 38.2 22.9 138
<PAGE>
{keywords |LIN Broadcasting Corporation}
(1) Represents gross enterprise value less estimated values of non-cellular assets.
(2) Most cellular companies have substantial operations that are not consolidated or that
are consolidated but are less than 100% owned. Therefore, EBITDA is presented on a
proportionate basis when available (AirTouch, Cellular Communications, LIN and
CommNet). When only consolidated financial data are available (Contel Cellular,
Centennial Cellular, U.S. Cellular and Vanguard Cellular), we have estimated
proportionate EBITDA by multiplying consolidated EBITDA by the ratio of
proportionate POPs/consolidated POPs.
(3) Based on EBITDA estimates from recent Wall Street research reports.
(4) AirTouch has large international cellular operations which are removed from
enterprise value to arrive at a domestic cellular valuation. International operations are
valued at the midpoint of a $60 to $100 range per POP.
(5) Trading parameters reflect pending acquisition of Contel Cellular's public minority
shares by GTE.
Page 39
<PAGE>
{keywords |LIN Broadcasting Corporation}
Summary of McCaw / LIN 1989 Transaction
In 1989, McCaw won a hotly contested battle with BellSouth for control of LIN.
At the time, McCaw held 5.1 million shares (approximately 10%) of LIN.
McCaw agreed to:
- Purchase 21.9 million LIN shares (approximately 42%) for $154.11 in cash ($3.4
billion).
- Contribute McCaw's 5% interest in Los Angeles to LIN.
- Enter into the PMVG to provide the public shareholders with a mechanism for
receiving private market value for their remaining shares.
In addition, LIN purchased $425 million worth of McCaw stock and distributed it to its
shareholders.
At a price of approximately $154 per share, LIN was valued at $385 per POP.
Page 40
<PAGE>
{keywords |LIN Broadcasting Corporation}
Potential Investor Returns (IRRs)
IRR Sensitivity to
Different PMVG Outcomes
Price as of 2/10/95 = $138.75
Annualized IRR with Buyout on:
Buyout Unadjusted
Price 6/30/95 9/30/95 12/31/95 6/30/96 Return(1)
$135 -6.9% -4.2% -3.0% -2.0% -2.7%
140 2.4% 1.4% 1.0% 0.6% 0.9%
145 12.2% 7.2% 5.1% 3.2% 4.5%
150 22.5% 13.0% 9.2% 5.8% 8.1%
155 33.5% 19.0% 13.3% 8.3% 11.7%
160 45.0% 25.1% 17.4% 10.8% 15.3%
162 49.8% 27.6% 19.1% 11.8% 16.8%
165 57.1% 31.3% 21.6% 13.3% 18.9%
170 69.8% 37.7% 25.7% 15.8% 22.5%
175 83.2% 44.1% 29.9% 18.2% 26.1%
(1) Actual return which is not annualized (e.g., $155 vs. $138.75 = 11.7% return).
Page 41
<PAGE>
LIN Broadcasting Corporation
Section III
Pro Forma Business Combination Between
AT&T and LIN
<PAGE>
LIN Broadcasting Corporation
Pro Forma Business Combination Analysis
AT&T / LIN Business Combination Analysis
All Cash All Common Stock(1)
Purchase Price (per share) $140 $155 $170 $140 $155 $170
Year
EPS Impact(2) 1995E (1.7%) (2.0%) (2.3%) (2.4%) (2.8%) (3.1%)
1996E (2.3%) (2.8%) (3.3%) (4.3%) (5.0%) (5.3%)
Pre-Tax Synergies for No Dilution:
Dollar Amount (millions)1995E $151 $178 $204 $221 $254 $286
1996E $229 $282 $335 $415 $483 $551
Percent of LIN's Proportionate Revenue
1995E(3) 25.6% 30.1% 34.6% 37.4% 43.0% 48.5%
1996E 15.4% 19.0% 22.6% 27.9% 32.5% 37.1%
Total Debt / Total Capital:
Pro Forma 9/30/94(4) 62.1% 62.4% 62.8% 54.3% 53.9% 53.4%
AT&T Standalone 9/30/94 58.0% 58.0% 58.0% 58.0% 58.0% 58.0%
Pro Forma LIN Ownership in AT&T(5) {symbol 45 \f "Symbol" \s 10|} {symbol 45 \f
"Symbol" \s 10|} {symbol 45 \f "Symbol" \s 10|} 4.7% 5.2% 5.6%
(1) Based on assumed AT&T share price of $52.25 on February 10, 1995.
(2) Assumptions: (i) AT&T standalone earnings per share projections based on
consensus Wall Street research estimates (i.e., 1995E = $3.54; 1996E = $3.99); (ii) LIN
projections based on Base Case; (iii) AT&T short-term borrowing rate of 5.50%, long-
term borrowing rate of 8.25% and tax rate of 38%; (iv) goodwill amortization of 40 years;
and (v) June 30, 1995 closing.
(3) Since a June 30, 1995 closing is assumed, figures represent the dollar amount of
synergies that need to be generated during the second half of 1995 divided by one half of
LIN's proportionate 1995 revenue (to reflect the fact that synergies must be realized in the
six month period from July 1, 1995 to December 31, 1995).
(4) AT&T September 30, 1994 capitalization and pro forma projected June 30, 1995
LIN capitalization.
(5) Based on 1,563,000,000 AT&T common shares outstanding at October 31, 1994.
Page 42
<PAGE>
LIN Broadcasting Corporation
Section IV
Potential Third Party Interest
<PAGE>
LIN Broadcasting Corporation
Potential Third Party Interest in LIN
It is the joint view of Bear Stearns and Lehman Brothers that a deep market exists for
LIN. Demand would come from individual strategic buyers and consortia.
Among the factors supporting our conclusions are:
- LIN's premier collection of cellular assets.
- Cellular markets which would form the cornerstone of a nationwide wireless strategy.
- The acquisition of LIN from AT&T would impair AT&T's nationwide wireless and
local bypass strategies.
- New York, Los Angeles, Dallas and Houston are key markets in an international
strategy for a U.S. or non-U.S. company.
- The recent experiences of Bear Stearns and Lehman Brothers in representing wireless
buyers and sellers.
- The assertion by AT&T's Communications Services Group head that LIN properties
would attract a high level of interest: "McCaw can be forced to sell out its 52% interest
[in LIN], which BellSouth originally sought to buy and other RBOCs are assuredly
interested in buying. Given McCaw's financial condition, there is, to say the least, a great
risk that its LIN interests will be lost to RBOCs . . . " Alex Mandl in a sworn affidavit
dated 5/26/94 regarding AT&T's purchase of McCaw.
Page 43
<PAGE>
LIN Broadcasting Corporation
Potential Third Party Buyers of LIN
Under the PMVG, the Appraisers must consider what potential purchasers would pay
for LIN.
Potential buyers for all or part of LIN in addition to AT&T/McCaw would include:
AirTouch/U S WEST(1) Comcast SBC Communications
Ameritech GTE Sprint/Wireless Co.
Bell Atlantic/NYNEX(1) MCI TDS/U.S. Cellular
BellSouth Pacific Telesis Craig McCaw
Certain foreign buyers, such as Vodafone, British Telecom, Deutsche Telecom, STET,
Compagnie Generale des Eaux, NTT and France Telecom, may be interested in
participating as partners of a U.S. buyer in a transaction involving one or more of the LIN
properties.
Non-telecommunications companies which may also have an interest in LIN include
EDS, General Electric and Time Warner.
(1) AirTouch/U S WEST and Bell Atlantic/NYNEX are each considered single buyers
as each pair of companies has agreed to operate their domestic cellular businesses as joint
ventures.
Page 44
<PAGE>
LIN Broadcasting Corporation
Potential Transaction Structures
A Morris Trust, and similar spin-offs or series of spin-offs, are transaction structures
that will allow LIN to sell markets separately in a tax efficient manner.
Another tax efficient way for LIN to sell markets separately would be through the use
of a minority tax certificate pursuant to Section 1071.
- Market acceptance of a tax certificate sale is evidenced by the LIN/McCaw/BellSouth
offer to U S WEST for San Diego cellular which included such a structure, although
Congress is currently reviewing the ability to use tax certificates and it is possible that
this structure may not be available to a purchaser in the future.
The chart on the following page details potential buyers and their interests in LIN
properties.
Page 45
<PAGE>
LIN Broadcasting Corporation
Potential Third Party Buyers of LIN
Entire Company
BellSouth, Sprint/Wireless Co. (1), Ameritech, Sprint (1), MCI
Selected Property Combinations
L.A., Dallas, Houston:
BellSouth, Ameritech, Sprint(1), MCI
N.Y., Dallas, Houston:
BellSouth, Ameritech, Sprint(1), MCI
N.Y., L.A., Houston:
BellSouth, SBC, Ameritech, Sprint(1), MCI
N.Y., L.A., Dallas:
BellSouth, GTE, Ameritech, Sprint(1), MCI
N.Y., Dallas:
BellSouth, GTE, Ameritech, Sprint(1), MCI
N.Y., Houston:
BellSouth, SBC, Ameritech, Sprint(1), MCI
L.A., Houston:
BellSouth, SBC, Ameritech, Sprint(1), MCI
L.A., Dallas:
BellSouth, GTE, Ameritech, Sprint(1), MCI
Individual Properties
New York:
SBC, BellSouth, Comcast, GTE, Ameritech, Sprint(1), MCI
Los Angeles:
BellSouth, SBC, GTE, Ameritech, Sprint(1), MCI
Dallas:
BellSouth, Consortium(2), GTE, Ameritech, Sprint(1), MCI,
TDS/U.S. Cellular, SNET
Houston:
BellSouth, SBC, Consortium(2), Ameritech, Sprint(1), MCI,
TDS/U.S. Cellular, SNET
_________________
(1) Sprint includes Wireless Co. which is a PCS Consortium consisting of Sprint, TCI,
Cox and Comcast.
(2) Consists of Bell Atlantic, NYNEX, AirTouch, US West or PCS PRIMECO, their
wireless joint venture.
Page 46
<PAGE>
LIN Broadcasting Corporation
Potential Third Party Buyers of LIN
Transaction Structures - Entire Company
Example 1: BellSouth buys all of LIN
BellSouth could buy LIN for all cash, all stock or a combination of cash and stock.
Advantages to BellSouth:
- BellSouth will become the largest U.S. cellular operator.
- BellSouth will control four of the top ten markets.
- 100% control of Los Angeles and Houston.
- Close to 100% control of New York.
- Expanded footprint in the Southwest.
BellSouth could bring in a partner(s), such as EDS and/or Vodafone, to provide
financing and to absorb part of the dilution.
- In a taxable transaction, there would be no limit on the form or amount of an
investment by an outside investor, although foreign investors cannot control more than
25% of the equity of a U.S. cellular holding company.
Page 47
<PAGE>
LIN Broadcasting Corporation
Potential Third Party Buyers of LIN
Transaction Structures - Entire Company
Example 2: MCI buys all of LIN
MCI could also buy LIN for some combination of stock and cash.
Advantages to MCI:
- LIN could form the cornerstone of national wireless strategy for MCI.
- Gives MCI wireless access to the local loop in four of the top ten U.S. markets.
- Forces AT&T to find alternative wireless providers in four major markets in order
to effect nationwide wireless strategy.
MCI could also bring in a financial partner.
- Given that BT has already invested in MCI, BT could be a logical partner for a
major acquisition.
Page 48
<PAGE>
LIN Broadcasting Corporation
Potential Third Party Buyers of LIN
Transaction Structures - Entire Company
Example 3: A partnership formed by MCI, BellSouth and Ameritech buys all of LIN
Partnership would buy LIN for all cash.
LIN would form cornerstone of national wireless strategy for all three partners.
All three partners, jointly, would be better positioned to compete against AT&T.
Forces AT&T to find alternative wireless providers in four major markets in order to
implement nationwide wireless (and local) strategy.
Partnership structure will minimize earnings dilution to each partner relative to solo
acquisition.
Page 49
<PAGE>
LIN Broadcasting Corporation
Potential Third Party Buyers of LIN
Transaction Structures - Parts of LIN
Example 4: SBC Communications buys all of LIN except Dallas; GTE (or AirTouch or
BellSouth) buys Dallas
Southwestern Bell could buy LIN for stock.
Immediately prior to this purchase, LIN could spin off Dallas to LIN shareholders.
GTE could then buy Dallas for stock.
Advantages to SBC Communications and GTE include:
- Gives SBC Communications control of four of the major Northeast corridor
markets: New York, Boston, Washington and Baltimore. This transaction would better
position SBC Communications to compete against the US WEST/AirTouch/Bell
Atlantic/NYNEX Consortium which also controls these markets.
- GTE would be able to expand its footprint in the Texas market.
An outside investor, such as Compagnie Generale des Eaux or Deutsche Telecom,
could invest in LIN with SBC Communications, provided that it did not receive securities
which conferred greater than 20% voting interest in LIN.
Page 50
<PAGE>
LIN Broadcasting Corporation
Potential Third Party Buyers of LIN
Transaction Structures - Parts of LIN
Example 5: SBC Communications buys all of LIN except Dallas; GTE buys Dallas
using a minority tax certificate
LIN sells Dallas to a minority-controlled entity in which GTE is an investor, and LIN
receives a tax certificate in addition to cash consideration.
A tax certificate can be used by LIN or a subsequent purchaser of LIN to eliminate
capital gains tax on the sale of one or more markets if LIN, or a subsequent purchaser of
LIN,
- reinvests the proceeds from the sale in like assets within approximately two years;
or
- writes down assets by amount of gain.
LIN (ex-Dallas) is then sold for cash, stock or a combination to SBC
Communications.
Page 51
<PAGE>
<PAGE>
<PAGE>
EXHIBIT (b)(5) Materials prepared by Wasserstein Perella & Co.
<PAGE>
<PAGE>
</TABLE>
<TABLE> CONFIDENTIAL
LIN BROADCASTING
Mutually Designated Appraiser Valuation
March 7, 1995
Wasserstein Perella & Co.
<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
Table of Contents
1. Introduction
A. Overview of Appraisal Process
B. Overview of LIN Broadcasting
C. Summary Analysis of LIN at Various Prices
D. General Valuation Considerations
2. Discounted Cash Flow Analysis
A. Summary of Bear Stearns/Lehman Brothers and
Morgan Stanley DCF Valuations
B. LIN Management Case
C. LIN Cellular McCaw Case (without AT&T Synergies)
D. LIN Cellular Sensitivity Case
E. DCF Discussion
3. Precedent Transactions and Public Company Trading Analysis
A. AT&T's Acquisition of McCaw: Summary Analysis and Perspective
B. Summary of Other Precedent Transactions
C. Selected Public Company Trading Analysis
4. Discussion of Potential Third Party Purchasers and Alternatives
A. Summary Observations
B. Selected Illustrative Dilution Analysis
5. Selected Recent Analyst Comments on LIN
6. Appendices
A. LIN Cellular Segmented DCF (Management Case)
B. LIN's Organizational Structure
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
Introduction
Wasserstein Perella & Co.<PAGE>
<PAGE>
Overview of
Appraisal Process
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
Overview of Appraisal Process
Wasserstein Perella & Co. Charter
Wasserstein Perella & Co. (WP&Co.) has been retained by McCaw Cellular
Communications, Inc. ("McCaw"), a wholly owned subsidiary of AT&T Corp. ("AT&T"), and
LIN Broadcasting Corporation ("LIN") to act as the "Mutually Designated Appraiser"
and to determine the "Mutually Appraised Amount" pursuant to the "Private Market
Value Guarantee" dated December 11, 1989, between the McCaw and LIN.
Definition of Private Market Value
". . . private market value per Share is the private market price per Share
(including control premium) that an unrelated third party would pay if it were to
acquire all outstanding Shares (including the Shares held by Offeror [McCaw] and its
affiliates) in an arm's-length transaction, assuming the Company was being sold in a
manner designed to attract all possible participants (including the Regional Bell
Operating Companies) and to maximize stockholder value, including if necessary
through the sale or other disposition (including tax-free spin-offs, if possible) of
businesses prohibited by legal restrictions to be owned by any particular buyer or
class of buyers (e.g., the Regional Bell Operating Companies)."
Interpretation
In arriving at its view, at the request of both the Independent Committee and McCaw,
WP&Co. has applied the definition of private market value based on the interpretation
of Paul Weiss Rifkind Wharton & Garrison set forth in such firm's opinion to WP&Co.
dated March 7, 1995, set forth in Appendix C. WP&Co. has also relied on advice from
Cravath Swaine and Moore on taxation and other relevant legal considerations (not
including the interpretation of the Private Market Value Guarantee).
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
Overview of Appraisal Process (cont'd)
WP&Co. Senior Team
Bruce Wasserstein Chairman & CEO
Fred Seegal President
Laurence Grafstein Managing Director
Andrew Moore Managing Director
Joe Yurcik Managing Director
WP&Co. was assisted in its valuation process by the cooperation and professionalism of the
numerous parties involved in the appraisal process, including LIN management, AT&T/McCaw
management, Bear Stearns, Lehman Brothers, Morgan Stanley, and their various legal
representatives. We are greatly appreciative of the efforts expended on our behalf.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
Overview of
LIN Broadcasting
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
Top Ten Cellular Markets
<CAPTION>
LIN serves 4 of the 10 largest cellular markets in the U.S.
Top Ten Cellular Markets
Population
Rank Market ('000) A-Side B-Side
- ------ ---------------- ---------- ----------- ---------
<C> <S> <C> <S>
- ---------------------------------------------------------------------------------------
1 New York 14,939 LIN NYNEX
- ---------------------------------------------------------------------------------------
2 Los Angeles 14,588 BellSouth/LIN AirTouch
- ---------------------------------------------------------------------------------------
3 Chicago 7,506 SBC Ameritech
4 Philadelphia 4,918 Comcast Bell Atlantic
5 Detroit 4,607 AirTouch Ameritech
- ---------------------------------------------------------------------------------------
6 Dallas 4,202 LIN SBC
- ---------------------------------------------------------------------------------------
7 Boston 4,010 SBC NYNEX
- ---------------------------------------------------------------------------------------
8 Houston 3,892 LIN/BellSouth GTE
- ---------------------------------------------------------------------------------------
9 San Francisco 3,832 AT&T/AirTouch GTE
10 Washington 3,804 SBC Bell Atlantic
<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
Overview of LIN's Cellular Operations
Controlling Interests in Top Ten Markets
<CAPTION>
Total
Population(1)
('000)
-------------
<C> <S> <C> <C>
1 Consortium(2) 50,936
-------------------------------------------------------
2 LIN Broadcasting 37,953
-------------------------------------------------------
3 SBC 19,608
4 BellSouth 18,619
5 GTE 7,732
6 Ameritech 7,506
7 Comcast 4,918
8 AT&T 3,832
- ------------------
(1) Total population of control and co-control ownership interests in top ten cellular
markets.
(2) Consortium of Bell Atlantic/NYNEX/AirTouch/US West.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
Summary of LIN's Cellular Operations(1)
<CAPTION>
LIN's Interests Population Market B-Block
Name and Location Equity Voting (MM)(2) Rank(2) Competition
- ----------------- ------ ------ ---------- ------- ---------------
Propor-
Total tionate
----- -------
<S> <C> <C> <C> <C> <C> <C> <S> <C> <S>
Cellular One, 98.33% 100.0% 14.9 14.7 1 NYNEX/Bell Atlantic
New York
Los Angeles Cellular
Telephone Company,
Los Angeles 40.0%(3) 50.0% 14.6 5.8 2 AirTouch
Communications
Metrocel,
Dallas-Ft. Worth 60.4% 60.4% 4.2 2.5 6 SBC Communications
Houston Cellular
Telephone Company,
Houston 56.3%(3) 50.0% 3.9 2.2 8 GTE
Galveston Cellular
Telephone Company,
Galveston 34.6% 50.0% 0.2 0.8 169 GTE
Cellular One
Texas RSA-17,
Newton, TX 100.0% 100.0% 0.2 0.2 N.A. GTE
Connecticut RSA-1,
Litchfield, CT 100.0% 100.0% 0.2 0.2 N.A. SNET\NYNEX
------ ------
TOTAL 38.3 25.7
- ---------------------
(1) Source: LIN Management.
(2) Source: Donnelley Marketing Information Services Estimate for 1993.
(3) BellSouth ownes 60% of LA Cellular equity and 44% of Houston Cellular equity.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
LIN Cellular Market Breakdown by POPs
[Pie Chart Illustrating LIN Cellular Market
Breakdown by POPulation]
--------------------------------------------
Market POPs(mm) % of Total
------ -------- ----------
New York 14.69 57.1%
Los Angeles 5.83 22.7%
Dallas 2.54 9.9%
Houston 2.19 8.5%
Litchfield, CT 0.23 .9%
Newton, TX 0.17 .7%
Galveston, TX 0.08 .3%
TOTAL POPs 25.7MM
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
Pie Chart Illustrating Proportionate Revenues and Cash Flows by Cellular Market ($MM)(1)
<CAPTION>
Market 1995E Revenues % of Total Market 1995E Cash Flows % of Total
- ------------- -------------- ---------- ------------- ---------------- ----------
<S> <C> <C> <S> <C> <C>
New York $634.5 54.7% New York $286.6 53.2%
Los Angeles $270.4 23.3% Los Angeles $135.5 25.2%
Dallas $133.3 11.5% Dallas $58.4 10.8%
Houston $113.2 9.8% Houston $55.1 10.2%
Newton, TX $4.2 .4% Newton, TX $1.8 .3%
Galveston, TX $2.1 .2% Galveston, TX $1.0 .2%
Litchfield, CT $2.1 .2%
--------- --------
Total $1,159.9(2) Total $538.3(3)
- ----------------------
(1) Based on LIN management base case projections.
(2) Excludes wireless date, long distance and additional products.
(3) Excludes the Litchfield, CT RSA, as its csh flows are negative for 1995E.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
Market Share by System(1)
Pie Charts Illustrating Market Share By System
<CAPTION>
New York Los Angeles
- -------------------------------------- -------------------------------------------
<S> <C> <S> <C> <S> <C> <S> <C>
LIN 52% NYNEX 48% LA Cellular 49% AirTouch 51%
(LIN/BellSouth)
Dallas Houston
- -------------------------------------- -------------------------------------------
LIN 41% SBC 59% HCTC 46% GTE 54%
(LIN/BellSouth)
- ---------------------
(1) Based on LIN management estimates conveyed at due diligence session.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
Bar Charts Illustrating Demographic Characteristics of LIN's Major Markets
<CAPTION>
Percentage of Households with
Population per Square Mile Greater than $50,000 Annual Income
- -------------------------------------- -------------------------------------------
<S> <C> <S> <C>
New York 3,952 New York 41.8%
Houston 567 Los Angeles 35.5%
Dallas 525 Houston 34.7%
Los Angeles 471 Dallas 34.6%
U.S. Average 74 U.S. Average 26.5%
Commute Time Greater Than 30 Minutes Local Interstate Traffic Density
- -------------------------------------- -------------------------------------------
New York 51.1% Houston 101,527
Houston 42.3% Los Angeles 96,042
Los Angeles 40.5% New York 92,690
Dallas 36.5% Dallas 58,816
U.S. Average 28.5% U.S. Average 29,090
- -----------------
Source: Kagan's Cellular Telephone Atlas.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
Overview of LIN's Other Assets
<CAPTION>
Patents,
American Trademarks
Customer Mobile and Intellectual Other
Information WOOD-TV Satellite Property LIN/McCaw
System Corporation Rights Assets
- ------------- ---------- -------------- ---------------- --------------
<S> <S> <S> <S> <S>
- - Developing - Acquired in - Owns 1,860,214 - Owns a pro rata - May have rights
(with Rogers April 1993 American Mobile share of all to other assets
Cantel, Inc. and affiliated Satellite (AMSC) patents, trade- and businesses
of Canada) a with the NBC shares (7.6% of marks and intel- of McCaw that
new generation Network outstanding lectual property have been
of customer shares rights developed developed or
information - Serves the by or for McCaw obtained by
systems Grand Rapids- - AMSC expects to since McCaw McCaw utilizing
to improve Kalamazoo- launch its first obtained control funds of LIN/
customer Battle Creek satellite to of LIN McCaw or
service Market, with provide mobile employees of
a population voice service - Has not applied LIN
- - System uses of aprox. to areas not for patents or
proprietary 1.7 million served by trademarks in its
software cellular in the own name subse-
being U.S. quent to McCaw's
developed by acquisition in
LIN/McCaw - AMSC is publicly 1990
traded on NASDAQ
- - Phases 1 and 2
have been rolled
out in a number
of markets.
Entire system will
be rolled out
throughout the
LIN markets by
the end of 1995
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
Wireless Data Overview(CDPD)
- -- Wireless data can be transmitted via public or public network
- -- Private wireless data networks typically include wireless LANS and networks which
lease satellite transmission facilities
- -- Public wireless data networks include:
1. One-way broadcast (paging)
2. Two-way, circuit-switched (cellular voice networks using modems for data
transmission)
3. Two-way, packet-switched (Ardis, RAM, CDPD)
- -- Circuit-switched networks establish an end-end transmission channel similar to that
of a voice call
- -- Packet-switched networks converts messages into small data packets and send each
packet over the network with a destination address
- -- Cellular Digital Packet Data (CDPD) is simply packet-switched data over the existing
cellular network
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
Tax Basis Summary(1)
Tax Basis in Cellular Assets
(Partnership interests)
New York $1,607,727,552
Los Angeles 123,192,225
Texas 193,866,571
Litchfield 33,000,000
---------------
$1,957,786,378
IN Cellular Holdings Basis in Stock of Holdings Companies
LCCNY (owns NY interest) $1,643,046,283
LCCCA 175,482,013
LCCTX 163,696,179
Litchfield Acquisition Corp. 1,000
---------------
$1,982,225,475
- -----------------
(1) Source: LIN Management.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
Annotated Bar Graphs Illustrating LIN Stock Price and Volume History
(Monthly from January 1, 1989 - February 28, 1995)
- -- June 6, 1989 McCaw bid $120 per share for LIN
- -- December 6, 1989 McCaw bid $154.11 per share for LIN
- -- November 4, 1992 AT&T announced bid for 33% of McCaw
- -- August 13, 1993 AT&T announced 100% acquisition of McCaw
- -- June 5, 1994 Announced spin-off of LIN-TV
- -- September 14, 1994 AT&T closed acquisition of McCaw
- -- February 15, 1995 Morgan Stanley (AT&T valued LIN at $105 a share
Bear Stearns/Lehman Brothers (LIN Independent Directors) valued LIN at $155 a share
- -- December, 1994 Completed Spin-Off of LIN-TV
1/31/89 6/30/89 12/31/89 6/30/90
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Volume
(000)
(Bars) 12,339 9,201 6,505 5,156 8,476 15,999 18,287 9,019 10,586 14,144 9,523 10,796 15,851 7,928 7,453 8,432 6.073 3,255
Stock
Price
Line 82 88 88 95 102 116 109 106 111 112 120 120 106 112 82 64 73 74
12/31/90 6/30/90 12/21/91
Volume
(000)
(Bars) 3,740 5,500 3,810 4,653 4,564 3,417 5,035 3,763 2,032 2,250 1,996 2,347 2,236 1,864 1,340 1,632 2,513 2,281
Stock
Price
Line 66 54 45 43 58 62 65 67 63 68 68 59 68 73 74 72 63 72
6/30/92 12/31/92 6/30/93
Volume
(000)
(Bars) 3,638 1,272 1,177 1,370 2,908 2,237 1,958 1,316 1,323 2,180 2,430 2,066 5,795 2,619 2,046 2,157 2,366 1,433
Stock
Price
Line 75 79 75 73 67 64 70 67 74 68 78 77 78 83 84 89 98 99
12/31/93 6/30/94 12/31/94
Volume
(000)
(Bars) 2,634 4,217 3,168 3,923 2,287 1,281 3,090 1,756 1,619 3,433 1,692 2,144 2,327 2,114 2,477 1,995 1,621 1,923
Stock
Price
Line 100 118 116 114 110 111 116 112 108 106 117 120 125 134 139 138 144 134
2/28/95
Volume
(000)
(Bars) 5,515 4,800
Stock
Price
Line 139 129
Wasserstein Perella & Co.
<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
Annotated Bar Graph and Line Chart of LIN Stock Price and Volume History
(Weekly from January 1, 1994 - March 3, 1995)
- -- June 5, 1994 Announced spin-off of LIN-TV
- -- September 19,1994 AT&T closed acquisition of McCaw
- -- February 15, 1995 Morgan Stanley (AT&T) valued LIN at $105 a share
Bear Stearns/Lehman Brothers (LIN Independent Directors)
valued LIN at $155 a share
<CAPTION>
Date 1/7/94 3/4/94
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Volume
(000)
(Bars) 783 856 590 583 499 632 490 346 481 212 390 127 476 1,049 679
Stock
Price
Line 110 108 111 115 115 113 115 111 113 111 111 112 108 105 105
Date 4/29/94 6/24/94
Volume
(000)
(Bars) 1,019 687 448 222 498 483 204 492 264 258 1,025 397 730 814 329 293
Stock
Price
Line 105 106 112 112 115 118 119 120 120 115 121 120 125 125 125 126
Date 8/19/94 10/14/94
Volume
(000)
(Bars) 378 393 601 555 364 1,053 663 289 601 650 363 336 160 131 648 290
Stock
Price
Line 127 129 132 134 136 139 140 139 135 136 135 137 138 140 140 139
Date 12/9/94 2/3/95 3/3/95
Volume
(000)
(Bars) 1,007 657 322 257 118 2,869 355 1,093 969 840 519 2,724 569 1,224
Stock
Price
Line 143 140 142 145 134 132 135 138 138 139 139 129 130 129
Wasserstein Perella & Co.
<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
Wireless Data - Summary Observations
- -- Many forces are driving the demand for wireless data services
- Mobile workforce
- Remote enterprise access and information exchange
- Mobile computing technology
- -- Existing technologies have been unsuccessful owing to:
- Performance: Speed, latency, reliability, security
- Device size and battery requirements
- Limited coverage
- Limited applications
- Service cost
- -- The market window is open but CDPD technology is unproven
- -- Alternative technologies could confuse customers and impair adoption
- CSC data service is available
- ARDIS and RAM offer nationwide packet radio service
- ESMR service
- Narrowband PCS services
- -- Wireless data success is dependent on the information technology industry
Wasserstein Perella & Co.
<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
Wireless Data Industry Situation Analysis
-----------------------------------------
CDPD Momentum | User Device Application Software | Challenges
- ------------------ | | -----------------
| |
- - Compelling Application | Device | - Integration
| | Requirements
- - Mobile Computing | Wireless Data Services |
Paradigm | | - Information
| | Technology Industry
| | Dependency
| |
- - Latent Demand | Communication Communication | - Multiplicity of
| | Applications
| |
- - Technology Convergence | Software Hardware | - Corporate MIS
| | Concerns
----------------------------------------
- Industry
Fragmentation
- Distribution Channel
Development
- Customer Support
Development
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
Wireless Data Penetration Analysis
Bar chart illustrating penetration forecast for notebook computers and personal intelligent communicators
<CAPTION>
Penetration Analysis - Baseline Scenario (000'2) 1995 1996 1997 1998 1999 2000
<S> <C> <C> <C> <C> <C> <C>
Reference Notebook Computers 13,000 15,900 19,210 22,899 27,000 31,300
Personal Intelligent Communicators 700 1,300 2,200 3,600 5,400 7,401
Installed Base
Penetration Notebook Computers 0.53% 2.5% 5.0% 7.5% 10.0% 12.0%
Personal Intelligent Communicators 0.44% 5.6% 9.8% 12.0% 13.3% 15.5%
- ------------------
Source: BIS, IDC, McCaw
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
Cellular Data Services
Packet and Circuit Switching will be Complementary Services
VAS PSTN FAX PSTN Bulletin
Board
Airdata VAS Cellular ONE VAS
Van Enterprise Fax
Modem Pool Modem Enterprise
Pool
AirData CellularONE
Packet Switched System Circuit Switched System
Pro: Con: Pro: Con:
- - Virtual Connection - Lack of Availability - Available - Per Minute Pricing
- - Reliable Connection - No Dial-Out Service - PSTN Paradigm - Roaming Charges
- - Usage Based Pricing - No MIS Support - Performance
Required Reliability
- ------------------
Source: McCaw Cellular Wireless Data Division Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
Summary Analysis
of LIN at Various Prices
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
LIN at Various Prices
(in millions, except per share and per POP values)
<S> <C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
Private Market Price $105.00 $110.00 $120.00 $127.50 $130.00 $140.00 $150.00 $155.00
Premium to Market (1) (18.6%) (14.7%) (7.0%) (1.2%) 0.8% 8.5% 16.3% 20.2%
No. of Shares Outstanding (2) 53.292 53.292 53.292 53.292 53.292 53.292 53.292 53.292
Equity Value $5,596 $5,862 $6,395 $6,795 $6,928 $7,461 $7,994 $8,260
Plus: Net Debt (3 $1,560 $1,560 $1,560 $1,560 $1,560 $1,560 $1,560 $1,560
Less: Option Proceeds (2) ($142) ($142) ($142) ($142) ($142) ($142) ($142) ($142)
Enterprise Value $7,014 $7,280 $7,813 $8,213 $8,346 $8,879 $9,412 $9,820
Less:
Non-Cellular Assets (4) ($118) ($118) ($118) ($118) ($118) ($118) ($118) ($118)
Cellular Enterprise Value $6,896 $7,162 $7,695 $8,095 $8,228 $8,761 $9,294 $9,702
Cellular Enterprise Value as a Multiple of:
LIN Management Base Case
1994 Cellular EBITDA $390 17.7x 18.4x 19.7x 20.8x 21.1x 22.5x 23.8x 24.9x
1995E Cellular EBITDA $535 12.9 13.4 14.4 15.1 15.4 16.4 17.4 18.1
1996E Cellular EBITDA $674 10.2 10.6 11.4 12.0 12.2 13.0 13.8 14.4
McCaw Projections w/o AT&T Synergies
1995E Cellular EBITDA $518 13.3x 13.8x 14.9x 15.6x 15.9x 16.9x 17.9x 18.7x
1996E Cellular EBITDA $638 10.8 11.2 12.1 12.7 12.9 13.7 14.6 15.2
Value per POP (12/31/94) 25.72 $268 $278 $299 $315 $320 $341 $361 $377
Value per POP (6/30/95E) 25.85 $267 $277 $298 $313 $318 $339 $360 $375
(1) Based on 3/3/95 closing price of $129.00.
(2) Based on 51.632 million primary shares outstanding as of 12/31/94, 1.660 million outstanding options exerciseable at an average
exercise price of $85.46 as of 1/31/95 per LIN management.
(3) As of 12/31/94 per LIN management.
(4) $88.379 million based on 9.5x 1995E WOOD-TV and WOTV-TV EBITDA of $9.303million, and $29.80 million for 1.656 million shares of
American Mobile Satellite, based on $18.00 a share as of 3/3/95.
Wasserstein Perella & Co.<PAGE>
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LIN BROADCASTING
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LIN Share Price at Various EBITDA Multiples
<CAPTION>
EBITDA Multiples
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EBITDA Estimates ($MM) 10.0 x 11.0 x 12.0x 13.0x 14.0x 15.0x 16.0x 17.0x 18.0x 19.0x 20.0x
1994 Actual EBITDA $390 $49 $56 $63 $71 $78 $85 $93 $100 $107 $115 $122
LIN Management Base Case
LTM 6/30/95
Cellular EBITDA $472 $64 $73 $82 $91 $100 $108 $117 $126 $135 $144 $153
1995E Cellular EBITDA $535 $76 $86 $96 $106 $116 $126 $136 $146 $156 $166 $176
LTM 6/30/96
Cellular EBITDA $604 $89 $100 $112 $123 $134 $146 $157 $168 $180 $191 $202
1996E Cellular EBITDA $674 $102 $115 $127 $140 $153 $165 $178 $191 $203 $216 $229
McCaw Projections w/o ATT Synergies
LTM 6/30/95
Cellular EBITDA $464 $63 $71 $80 $89 $97 $106 $115 $124 $132 $141 $150
1995E Cellular EBITDA $518 $73 $83 $92 $102 $112 $121 $131 $141 $151 $160 $170
LTM 6/30/96
Cellular EBITDA $578 $84 $95 $106 $117 $128 $138 $149 $160 $171 $182 $193
1996E Cellular EBITDA $638 $95 $107 $119 $131 $143 $155 $167 $179 $191 $203 $215
(1) Calculations add back non-cellular assets worth $118MM to the cellular enterprise value, subtract net debt of $1,560MM, add
option proceeds of $142MM based on 1.6MM options outstanding and an average exercise price of $85.458, and divide by the fully
diluted shares outstanding of 53.3MM.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
General Valuation
Considerations
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
General Valuation Considerations
- -- In arriving at the Mutually Appraised Amount, WP&Co.:
- Applied the Private Market Value Guarantee as interpreted by Paul Weiss
- Assumed sale of the company with a closing at 6/30/95
- Considered the feasibility of various transactions in the current marketplace,
taking into account regulatory, legal, and tax issues
- -- As well as performing valuation analysis, WP&Co. considered extensive materials and
arguments provided by Bear Stearns/Lehman and Morgan Stanley
- -- Qualitative factors examined in the context of our analysis include (but are in no
way limited to) the following:
- Wireless communication and demographic trends on the whole and in LIN's markets
- LIN's historical financial and operating performance and future prospects in the
context of its business strategy, market position and current and prospective
competition
- LIN's technological, marketing and product strategy (including new services and
its entry into the wireless data business)
- LIN management projections, McCaw management projections, and a sensitivity case
- LIN's shared control (with BellSouth) of the LA and Houston markets
- Evaluation of potential acquirors for all or part of LIN and their potential
perspectives on value and regulatory restrictions on ownership of parts of LIN
- Evaluation of the breadth and depth of potential acquisition universe for LIN
(in a manner consistent with the legal interpretation of the Private Market
Value Guarantee)
- Evaluation of the feasibility of various potential value-maximizing transaction
structures, having regard to regulatory, legal and taxation considerations
- Regulatory restrictions on AT&T with respect to its ability to receive equity
consideration from potential buyers of all or part of LIN
- Potential public market trading value of LIN as a standalone entity
- Wall Street analyst commentary, research and valuation estimates
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
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Discounted Cash Flow
Analysis
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
Assumptions Common to LIN Management and McCaw Management Projections
- -- Continued growth in penetration and revenue over 10-year forecast period
- -- As penetration increases, revenue/subscriber/month declines in both real and nominal
terms
- -- Margins continue to hold at high levels
- -- No major replacement capital modeled for out years
- -- Marketing expense per gross addition will rise in 1997 and 1998 when competition
increases (e.g. PCS entry)
- -- Cash flow margin before marketing and direct expense per subscriber per month are
very similar throughout period
- -- Churn is expected to decline over the period despite expected increased competition
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
Major Areas of Difference between LIN Management and McCaw Cases
- -- McCaw's Steve Hooper attempted to strip out AT&T synergies from LIN Management Base
Case in arriving at McCaw Management numbers
- LIN Management stated that it did not incorporate meaningful AT&T synergies in
its base case
- -- McCaw assumes lower penetration by LIN (14.5% vs. 16.9% in year 2004)
- -- McCaw revenue/subscriber/month is lower in later years of model approximately ($49
vs. approximately $52 in Management Case)
- -- McCaw marketing costs per gross addition are higher throughout period but especially
so in last five years of period
- -- Wireless data expectations are more modest (approximately one-half the cash flow in
year 2004)
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
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Sensitivity Case Assumptions
- -- WP&Co. analyzed a Sensitivity Case following its due diligence with LIN and McCaw
Management
- -- Sensitivity Case uses McCaw marketing cost assumptions for cellular business and
adopts LIN Management revenue and penetration growth rates
- Higher marketing costs may well be necessary to support robust revenue growth as
the wireless market approaches maturity
- -- Wireless data assumptions give equal weight to LIN Management's views and McCaw
Management views in an embryonic period of the industry
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
Summary of Bear Stearns/
Lehman Brothers and
Morgan Stanley DCF
Valuations
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
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Summary Comparison of Discounted Cash Flow Analysis of Bear Stearns/Lehman Brothers and Morgan Stanley
Bear Stearns / Lehman Brothers Morgan Stanley
LIN Management Base LIN Management Base
Case Including Wireless Case Not Including
Data, Long Distance and Wireless Data, Long Distance
Additional Products and Additional Products
<CAPTION>
Discount Exit Multiples Discount Exit Multiples
Rate 10.5x 11.5x 12.5x Rate 9.5x 10.0x 10.5x
<C> <S> <C> <C> <C> <C> <S> <C> <C> <C>
11.0% Value per Share $168 $181 $194 13.0% Value per Share $102 $106 $110
Implied Perpetuity Implied Perpetuity
Growth 5.3% 5.8% 6.2% Growth 5.9% 6.2% 6.5%
Multiple of 1995E Multiple of 1995E
EBITDA 19.2x 20.5x 21.8x EBITDA 12.9x 13.4x 13.8x
12.0% Value per Share $154 $166 $178 13.5% Value per Share $98 $102 $106
Implied Perpetuity Implied Perpetuity
Growth 6.3% 6.8% 7.2% Growth 6.3% 6.7% 7.0%
Multiple of 1995E Multiple of 1995E
EBITDA 17.8x 19.0x 20.2x EBITDA 12.5x 12.9x 13.3x
13.0% Value per Share $141 $152 $163 14.0% Value per Share $93 $97 $101
Implied Perpetuity Implied Perpetuity
Growth 7.3% 7.8% 8.2% Growth 6.8% 7.1% 7.4%
Multiple of 1995E Multiple of 1995E
EBITDA 16.5x 17.6x 18.7x EBITDA 12.1x 12.5x 12.8x
Morgan Stanley assigns
$5-$6 of value per share
for Wireless Data and
$3 value per share for
Additional Services
Morgan Stanley stated
that LIN Management
Case did not reflect
Morgan Stanley's view
of DCF valuation. Rather,
Morgan Stanley applied
its own valuation parameters
to LIN Management Case
for illustrative purposes
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
LIN Management
Case
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
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LIN: not including Wireless Data, including Long Distance, including Additional Products
(in thousands, except per POP values)
<CAPTION>
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total No.
of POPS 25,722 25,980 26,240 26,502 26,767 27,034 27,304 27,578 27,854 28,133 28,414
% Growth
Rate NA 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Beginning
Subscribers 771.302 1,092.076 1,587.399 2,070.865 2,481.767 2,886.521 3,284.306 3,666.878 4,024.885 4,352.573 4,610.246
Gross
Subscribers
Added 557.510 744.662 822.650 805.766 855.424 899.623 934.151 947.786 944.519 968.685 881.533
Deactiva-
tions (236.737) (249.339) (339.184) (394.864) (450.669) (501.838) (551.579) (589.779) (616.831) (711.013) (689.666)
Annual %
Churn (25.41%) (18.61%) (18.54%) (17.35%) (16.79%) (16.26%) (15.87%) (15.34%) (14.73%) (15.87%) (14.65%)
Monthly %
Churn (2.12%) (1.55%) (1.55%) (1.45%) (1.40%) (1.36%) (1.32%) (1.28%) (1.23%) (1.32%) (1.22%)
Net
Subscribers
Added 320.774 495.322 483.466 410.902 404.754 397.785 382.573 358.007 327.688 257.673 191.867
Ending Sub-
cribers 1,092.076 1,587.399 2,070.865 2,481.767 2,886.521 3,284.306 3,666.878 4,024.885 4,352.573 4,610.246 4,802.113
Average Sub-
cribers 931.689 1,339.737 1,829.132 2,276.316 2,684.144 3,085.413 3,475.592 3,845.882 4,188.729 4,481.410 4,706.180
Total
Penetration 4.25% 6.11% 7.89% 9.36% 10.78% 12.15% 13.43% 14.59% 15.63% 16.39% 16.90%
% Penetration
Growth NA 43.9% 29.2% 18.7% 15.2% 12.7% 10.5% 8.7% 7.1% 4.9% 3.1%
Annual Pene-
tration (1) 1.25% 1.91% 1.84% 1.55% 1.51% 1.47% 1.40% 1.30% 1.18% 0.92% 0.68%
% Growth NA 52.9% (3.4%) (15.9%) (2.5%) (2.7%) (4.8%) (7.3%) (9.4%) (22.1%) (26.3%)
(1) Defined as net subscribers added in a period divided by the population at the end of the period.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
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LIN: not including Wireless Data, including Long Distance, including Additional Products (cont'd)
(in thousands, except per POP values)
<CAPTION>
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Income Statement
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue/
Subscriber/
Month $82.60 $73.09 $66.84 $62.53 $60.13 $57.29 $55.83 $55.17 $54.94 $54.75 $54.15
% Growth NA (11.5%) (8.6%) (6.4%) (3.8%) (4.7%) (2.6%) (1.2%) (0.4%) (0.3%) (1.1%)
Total
Revenues $923,546 $1,175,108 $1,467,136 $1,708,154 $1,936,835 $2,121,322 $2,328,346 $2,546,174 $2,761,366 $2,944,454 $3,057,837
% Growth NA 27.2% 24.9% 16.4% 13.4% 9.5% 9.8% 9.4% 8.5% 6.6% 3.9%
Direct
Operating
Expenses $279,817 $339,134 $461,244 $559,882 $665,940 $750,474 $858,201 $975,525 $1,096,295 $1,193,546 $1,261,177
% of
Revenues 30.3% 28.9% 31.4% 32.8% 34.4% 35.4% 36.9% 38.3% 39.7% 40.5% 41.2%
Cash Flow
Before
Marketing $643,729 $835,974 $1,005,891 $1,148,272 $1,270,895 $1,370,848 $1,470,145 $1,570,650 $1,665,070 $1,750,908 $1,796,660
Margin 69.7% 71.1% 68.6% 67.2% 65.6% 64.6% 63.1% 61.7% 60.3% 59.5% 58.8%
Sales &
Marketing $249,855 $291,999 $325,330 $353,397 $366,809 $371,665 $358,705 $333,537 $295,195 $266,198 $246,266
% of
Revenues 27.1% 24.8% 22.2% 20.7% 18.9% 17.5% 15.4% 13.1% 10.7% 9.0% 8.1%
Sales &
Marketing /
Gross
Addition $448 $392 $395 $439 $429 $413 $384 $352 $313 $275 $279
Corporate
Expenses $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
% of
Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total
Operating
Expenses $529,672 $631,133 $786,574 $913,279 $1,032,748 $1,122,138 $1,216,906 $1,309,061 $1,391,491 $1,459,744 $1,507,443
Operating Cash
Flow (OCF) $393,873 $543,976 $680,561 $794,875 $904,086 $999,183 $1,111,440 $1,237,113 $1,369,875 $1,484,710 $1,550,394
Margin 42.6% 46.3% 46.4% 46.5% 46.7% 47.1% 47.7% 48.6% 49.6% 50.4% 50.7%
Depreciation &
Amortiz-
ation $128,184 $188,818 $238,986 $260,674 $261,625 $248,446 $227,060 $202,078 $175,851 $152,833 $130,473
% of
Revenues 13.9% 16.1% 16.3% 15.3% 13.5% 11.7% 9.8% 7.9% 6.4% 5.2% 4.3%
EBIT $265,689 $355,157 $441,575 $534,201 $642,461 $750,737 $884,380 $1,035,035 $1,194,024 $1,331,877 $1,419,920
Margin 28.8% 30.2% 30.1% 31.3% 33.2% 35.4% 38.0% 40.7% 43.2% 45.2% 46.4%
Taxes $97,012 $129,116 $160,463 $194,295 $233,716 $273,434 $322,519 $377,675 $435,945 $486,770 $519,785
Effective
Tax Rate 36.5% 36.4% 36.3% 36.4% 36.4% 36.4% 36.5% 36.5% 36.5% 36.5% 36.6%
Unlevered
Net Income $168,677 $226,042 $281,112 $339,906 $408,745 $477,303 $561,861 $657,360 $758,079 $845,107 $900,136
Net
Margin 18.3% 19.2% 19.2% 19.9% 21.1% 22.5% 24.1% 25.8% 27.5% 28.7% 29.4%
Free Cash
Flow
Unlevered
Net Income $168,677 $226,042 $281,112 $339,906 $408,745 $477,303 $561,861 $657,360 $758,079 $845,107 $900,136
Depreciation &
Amortiz-
ation $128,184 $188,818 $238,986 $260,674 $261,625 $248,446 $227,060 $202,078 $175,851 $152,833 $130,473
Capital
Expendi-
tures ($190,343) ($301,124) ($294,122) ($279,903) ($202,317) ($186,996) ($169,646) ($142,256) ($130,292) ($102,451) ($76,298)
Change in
Working
Capital $0 ($25,156) ($29,203) ($24,102) ($22,868) ($18,449) ($20,702) ($21,783) ($21,519) ($18,309) ($11,338)
As a % of Change
in Revenues NA 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Free Cash
Flow (FCF) $106,518 $88,580 $196,773 $296,575 $445,186 $520,305 $598,573 $695,400 $782,119 $877,181 $942,973
Wasserstein Perella & Co.<PAGE>
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LIN BROADCASTING
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LIN: not including Wireless Data, including Long Distance, including Additional Products (cont'd) (1)
(in thousands, except per share and per POP values)
<CAPTION>
Discount Rate Perpetuity Growth Rates of Free Cash Flow
4.0% 5.0% 5.5% 6.0% 6.5% 7.0%
<C> <S> <C> <C> <C> <C> <C> <C>
11.0% Present Value of Cash Flows $2,831,829 $2,831,829 $2,831,829 $2,831,829 $2,831,829 $2,831,829
Terminal Value $5,198,360 $6,123,068 $6,711,519 $7,417,660 $8,280,721 $9,359,547
Enterprise Value $8,030,190 $8,954,898 $9,543,349 $10,249,489 $11,112,551 $12,191,377
Less: Net Debt (2) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191)
Equity Value $6,611,999 $7,536,707 $8,125,158 $8,831,299 $9,694,360 $10,773,186
Value per Share (3) $124.07 $141.42 $152.46 $165.72 $181.91 $202.15
Enterprise Value / POP $310.63 $346.40 $369.16 $396.48 $429.87 $471.60
Implied Exit Multiple of EBITDA 9.0x 10.6x 11.7x 12.9x 14.4x 16.3x
12.0% Present Value of Cash Flows $2,687,344 $2,687,344 $2,687,344 $2,687,344 $2,687,344 $2,687,344
Terminal Value $4,177,068 $4,819,693 $5,215,155 $5,676,528 $6,221,786 $6,876,096
Enterprise Value $6,864,412 $7,507,038 $7,902,500 $8,363,872 $8,909,130 $9,563,440
Less: Net Debt (2) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191)
Equity Value $5,446,221 $6,088,847 $6,484,309 $6,945,682 $7,490,940 $8,145,250
Value per Share (3) $102.20 $114.25 $121.68 $130.33 $140.56 $152.84
Enterprise Value / POP $265.54 $290.39 $305.69 $323.54 $344.63 $369.94
Implied Exit Multiple of EBITDA 7.9x 9.1x 9.9x 10.7x 11.8x 13.0x
13.0% Present Value of Cash Flows $2,552,684 $2,552,684 $2,552,684 $2,552,684 $2,552,684 $2,552,684
Terminal Value $3,412,283 $3,875,730 $4,153,798 $4,471,590 $4,838,273 $5,266,071
Enterprise Value $5,964,966 $6,428,414 $6,706,482 $7,024,274 $7,390,957 $7,818,755
Less: Net Debt (2) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191)
Equity Value $4,546,776 $5,010,223 $5,288,291 $5,606,083 $5,972,767 $6,400,564
Value per Share (3) $85.32 $94.01 $99.23 $105.20 $112.08 $120.10
Enterprise Value / POP $230.74 $248.67 $259.43 $271.72 $285.90 $302.45
Implied Exit Multiple of EBITDA 7.0x 8.0x 8.6x 9.2x 10.0x 10.8x
14.0% Present Value of Cash Flows $2,427,056 $2,427,056 $2,427,056 $2,427,056 $2,427,056 $2,427,056
Terminal Value $2,824,468 $3,168,473 $3,370,830 $3,598,480 $3,856,485 $4,151,347
Enterprise Value $5,251,524 $5,595,529 $5,797,886 $6,025,537 $6,283,541 $6,578,403
Less: Net Debt (2) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191)
Equity Value $3,833,333 $4,177,339 $4,379,695 $4,607,346 $4,865,350 $5,160,212
Value per Share (3) $71.93 $78.39 $82.18 $86.45 $91.30 $96.83
Enterprise Value / POP $203.14 $216.45 $224.28 $233.09 $243.07 $254.47
Implied Exit Multiple of EBITDA 6.3x 7.1x 7.5x 8.1x 8.6x 9.3x
(1) Present values as of 6/30/95. Enterprise value per POP based on 6/30/95 estimated POPs, which is the average of 12/31/94 and
12/31/95E POPs.
(2) Based on 12/31/94 net debt of $1,560 million, less option proceeds of $142 million, based on 1,659,986 options outstanding as of
1/31/95 at an average exercise price of $85.46 per LIN mgmt.
(3) Based on fully diluted shares including 51,632,000 shares outstanding as of 12/31/94, plus 1,659,986 options outstanding as of
1/31/95 per LIN management.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------
LIN: not including Wireless Data, including Long Distance, including Additional Products
(in thousands, except per share and per POP values)
Discount Rate Perpetuity Growth Rates of Free Cash Flow
<CAPTION>
4.0% 5.0% 5.5% 6.0% 6.5% 7.0%
<C> <S> <C> <C> <C> <C> <C> <C>
11.0% Cellular Enterprise Value $8,030,190 $8,954,898 $9,543,349 $10,249,489 $11,112,551 $12,191,377
As a Multiple of (1):
1994 Cellular EBITDA $393,873 20.4x 22.7x 24.2x 26.0x 28.2x 31.0x
1995E Cellular EBITDA $543,976 14.8 16.5 17.5 18.8 20.4 22.4
1996E Cellular EBITDA $680,561 11.8 13.2 14.0 15.1 16.3 17.9
Value per Share (2) $124.07 $141.42 $152.46 $165.72 $181.91 $202.15
12.0% Cellular Enterprise Value $6,864,412 $7,507,038 $7,902,500 $8,363,872 $8,909,130 $9,563,440
As a Multiple of (1):
1994 Cellular EBITDA $393,873 17.4x 19.1x 20.1x 21.2x 22.6x 24.3x
1995E Cellular EBITDA $543,976 12.6 13.8 14.5 15.4 16.4 17.6
1996E Cellular EBITDA $680,561 10.1 11.0 11.6 12.3 13.1 14.1
Value per Share (2) $102.20 $114.25 $121.68 $130.33 $140.56 $152.84
13.0% Cellular Enterprise Value $5,964,966 $6,428,414 $6,706,482 $7,024,274 $7,390,957 $7,818,755
As a Multiple of (1):
1994 Cellular EBITDA $393,873 15.1x 16.3x 17.0x 17.8x 18.8x 19.9x
1995E Cellular EBITDA $543,976 11.0 11.8 12.3 12.9 13.6 14.4
1996E Cellular EBITDA $680,561 8.8 9.4 9.9 10.3 10.9 11.5
Value per Share (2) $85.32 $94.01 $99.23 $105.20 $112.08 $120.10
14.0% Cellular Enterprise Value $5,251,524 $5,595,529 $5,797,886 $6,025,537 $6,283,541 $6,578,403
As a Multiple of (1):
1994 Cellular EBITDA $393,873 13.3x 14.2x 14.7x 15.3x 16.0x 16.7x
1995E Cellular EBITDA $543,976 9.7 10.3 10.7 11.1 11.6 12.1
1996E Cellular EBITDA $680,561 7.7 8.2 8.5 8.9 9.2 9.7
Value per Share (2) $71.93 $78.39 $82.18 $86.45 $91.30 $96.83
(1) EBITDA figures based on discounted cash flow analysis.
(2) Values per share based on discounted cash flow analysis.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
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Segment Values per Share
Discount Rate Perpetuity Growth Rates of Free Cash Flow
<CAPTION>
4.0% 5.0% 5.5% 6.0% 6.5% 7.0%
<C> <S> <C> <C> <C> <C> <C> <C>
11.0% New York $82.60 $92.20 $98.32 $105.65 $114.61 $125.82
Los Angeles $34.18 $37.97 $40.39 $43.28 $46.82 $51.25
Dallas $14.41 $16.05 $17.09 $18.35 $19.88 $21.79
Houston $11.24 $12.49 $13.28 $14.23 $15.39 $16.85
Galveston $0.33 $0.37 $0.40 $0.43 $0.47 $0.52
Litchfield $0.56 $0.63 $0.68 $0.73 $0.80 $0.88
Newton $1.03 $1.16 $1.24 $1.34 $1.46 $1.61
Long Distance $2.60 $2.87 $3.04 $3.25 $3.50 $3.82
Additional Products $3.73 $4.28 $4.63 $5.06 $5.57 $6.22
SubTotal $150.68 $168.03 $179.08 $192.33 $208.52 $228.77
Less: Value of debt ($26.61) ($26.61) ($26.61) ($26.61) ($26.61) ($26.61)
Value per Share $124.07 $141.42 $152.46 $165.72 $181.91 $202.15
12.0% New York $70.52 $77.19 $81.30 $86.09 $91.76 $98.55
Los Angeles $29.35 $31.99 $33.61 $35.50 $37.74 $40.42
Dallas $12.33 $13.47 $14.17 $14.99 $15.96 $17.12
Houston $9.66 $10.53 $11.06 $11.68 $12.41 $13.30
Galveston $0.28 $0.31 $0.33 $0.35 $0.37 $0.40
Litchfield $0.48 $0.52 $0.56 $0.59 $0.63 $0.68
Newton $0.87 $0.96 $1.02 $1.08 $1.16 $1.25
Long Distance $2.25 $2.44 $2.55 $2.69 $2.85 $3.04
Additional Products $3.07 $3.46 $3.69 $3.97 $4.30 $4.69
SubTotal $128.81 $140.87 $148.29 $156.94 $167.18 $179.45
Less: Value of debt ($26.61) ($26.61) ($26.61) ($26.61) ($26.61) ($26.61)
Value per Share $102.20 $114.25 $121.68 $130.33 $140.56 $152.84
13.0% New York $61.20 $66.01 $68.90 $72.20 $76.01 $80.46
Los Angeles $25.62 $27.52 $28.66 $29.96 $31.47 $33.22
Dallas $10.73 $11.55 $12.05 $12.61 $13.26 $14.02
Houston $8.44 $9.06 $9.44 $9.86 $10.36 $10.93
Galveston $0.24 $0.26 $0.27 $0.29 $0.30 $0.32
Litchfield $0.41 $0.44 $0.46 $0.49 $0.52 $0.55
Newton $0.75 $0.81 $0.85 $0.90 $0.95 $1.01
Long Distance $1.98 $2.11 $2.19 $2.29 $2.40 $2.52
Additional Products $2.57 $2.85 $3.02 $3.21 $3.43 $3.68
SubTotal $111.93 $120.63 $125.84 $131.81 $138.69 $146.72
Less: Value of debt ($26.61) ($26.61) ($26.61) ($26.61) ($26.61) ($26.61)
Value per Share $85.32 $94.01 $99.23 $105.20 $112.08 $120.10
14.0% New York $53.82 $57.39 $59.49 $61.85 $64.53 $67.60
Los Angeles $22.65 $24.06 $24.89 $25.82 $26.88 $28.09
Dallas $9.46 $10.07 $10.43 $10.83 $11.29 $11.81
Houston $7.47 $7.93 $8.20 $8.51 $8.86 $9.25
Galveston $0.21 $0.22 $0.23 $0.24 $0.25 $0.27
Litchfield $0.35 $0.38 $0.40 $0.41 $0.43 $0.45
Newton $0.65 $0.70 $0.73 $0.76 $0.80 $0.84
Long Distance $1.76 $1.86 $1.92 $1.99 $2.06 $2.15
Additional Products $2.18 $2.39 $2.51 $2.65 $2.80 $2.98
SubTotal $98.54 $105.00 $108.79 $113.07 $117.91 $123.44
Less: Value of debt ($26.61) ($26.61) ($26.61) ($26.61) ($26.61) ($26.61)
Value per Share $71.93 $78.39 $82.18 $86.45 $91.30 $96.83
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------
LIN Wireless Data Operating Model
(in thousands)
<CAPTION>
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Income Statement
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total
Revenues $0 $2,250 $9,000 $23,750 $44,500 $73,500 $106,500 $138,450 $179,985 $233,981 $304,175
% Growth NA NM 300.0% 163.9% 87.4% 65.2% 44.9% 30.0% 30.0% 30.0% 30.0%
Direct
Operating
Expenses $0 $4,225 $7,000 $11,000 $17,000 $20,000 $22,750 $29,575 $38,448 $49,982 $64,976
% of
Revenues NA 187.8% 77.8% 46.3% 38.2% 27.2% 21.4% 21.4% 21.4% 21.4% 21.4%
Cash Flow
Before
Marketing $0 ($1,975) $2,000 $12,750 $27,500 $53,500 $83,750 $108,875 $141,537 $183,999 $239,199
Margin NA (87.8%) 22.2% 53.7% 61.8% 72.8% 78.6% 78.6% 78.6% 78.6% 78.6%
Sales &
Marketing $0 $2,750 $5,250 $9,500 $15,500 $22,000 $32,000 $41,600 $54,080 $70,304 $91,395
% of
Revenues NA 122.2% 58.3% 40.0% 34.8% 29.9% 30.0% 30.0% 30.0% 30.0% 30.0%
Corporate
Expenses $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
% of
Revenues NA 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total
Operating
Expenses $0 $6,975 $12,250 $20,500 $32,500 $42,000 $54,750 $71,175 $92,528 $120,286 $156,371
Operating Cash
Flow (OCF) $0 ($4,725) ($3,250) $3,250 $12,000 $31,500 $51,750 $67,275 $87,457 $113,695 $147,804
Margin NA (210.0%) (36.1%) 13.7% 27.0% 42.9% 48.6% 48.6% 48.6% 48.6% 48.6%
Depreciation &
Amortization $0 $10,600 $11,160 $8,696 $9,197 $10,149 $8,416 $6,666 $6,330 $6,071 $5,524
% of
Revenues NA 471.1% 124.0% 36.6% 20.7% 13.8% 7.9% 4.8% 3.5% 2.6% 1.8%
EBIT $0 ($15,325) ($14,410) ($5,446) $2,803 $21,351 $43,334 $60,609 $81,127 $107,624 $142,280
Margin NA (681.1%) (160.1%) (22.9%) 6.3% 29.0% 40.7% 43.8% 45.1% 46.0% 46.8%
Taxes $0 ($5,824) ($5,476) ($2,069) $1,065 $8,113 $16,467 $23,031 $30,828 $40,897 $54,066
Effective
Tax Rate 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0%
Unlevered Net
Income $0 ($9,502) ($8,934) ($3,377) $1,738 $13,238 $26,867 $37,578 $50,299 $66,727 $88,214
Net Margin NA (422.3%) (99.3%) (14.2%) 3.9% 18.0% 25.2% 27.1% 27.9% 28.5% 29.0%
Free Cash Flow
Unlevered Net
Income $0 ($9,502) ($8,934) ($3,377) $1,738 $13,238 $26,867 $37,578 $50,299 $66,727 $88,214
Depreciation &
Amortization $0 $10,600 $11,160 $8,696 $9,197 $10,149 $8,416 $6,666 $6,330 $6,071 $5,524
Capital
Expenditures $0 ($19,000) ($5,000) ($5,000) ($10,000) ($10,000) ($5,250) ($5,250) ($5,250) ($5,250) ($5,250)
Change in
Working
Capital $0 ($225) ($675) ($1,475) ($2,075) ($2,900) ($3,300) ($3,195) ($4,154) ($5,400) ($7,019)
As a % of
Change in
Revenues NA 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Free Cash
Flow (FCF) $0 ($18,127) ($3,449) ($1,156) ($1,140) $10,487 $26,733 $35,799 $47,225 $62,148 $81,468
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------
LIN : Wireless Data (1)
(in thousands, except per share values)
Discount Rate Perpetuity Growth Rates of Free Cash Flow
<CAPTION>
6.0% 8.0% 10.0% 12.0% 14.0%
<C> <S> <C> <C> <C> <C> <C>
18.0% Present Value of Cash Flows $61,284 $61,284 $61,284 $61,284 $61,284
Terminal Value $149,360 $182,613 $232,494 $315,628 $481,897
Enterprise Value $210,644 $243,897 $293,778 $376,912 $543,181
Net Debt $0 $0 $0 $0 $0
Equity Value $210,644 $243,897 $293,778 $376,912 $543,181
Value per Share $3.95 $4.58 $5.51 $7.07 $10.19
Implied Exit Multiple of EBITDA 4.9x 6.0x 7.6x 10.3x 15.7x
19.0% Present Value of Cash Flows $56,869 $56,869 $56,869 $56,869 $56,869
Terminal Value $127,249 $153,223 $190,740 $249,696 $355,817
Enterprise Value $184,118 $210,092 $247,609 $306,566 $412,686
Net Debt $0 $0 $0 $0 $0
Equity Value $184,118 $210,092 $247,609 $306,566 $412,686
Value per Share $3.45 $3.94 $4.65 $5.75 $7.74
Implied Exit Multiple of EBITDA 4.5x 5.4x 6.7x 8.8x 12.6x
#### Present Value of Cash Flows $52,775 $52,775 $52,775 $52,775 $52,775
Terminal Value $109,130 $129,721 $158,547 $201,788 $273,855
Enterprise Value $161,905 $182,496 $211,322 $254,563 $326,630
Net Debt $0 $0 $0 $0 $0
Equity Value $161,905 $182,496 $211,322 $254,563 $326,630
Value per Share $3.04 $3.42 $3.97 $4.78 $6.13
Implied Exit Multiple of EBITDA 4.2x 5.0x 6.1x 7.7x 10.5x
21.0% Present Value of Cash Flows $48,975 $48,975 $48,975 $48,975 $48,975
Terminal Value $94,133 $110,664 $133,207 $165,769 $216,937
Enterprise Value $143,108 $159,639 $182,182 $214,744 $265,912
Net Debt $0 $0 $0 $0 $0
Equity Value $143,108 $159,639 $182,182 $214,744 $265,912
Value per Share $2.69 $3.00 $3.42 $4.03 $4.99
Implied Exit Multiple of EBITDA 3.9x 4.6x 5.5x 6.9x 9.0x
(1) Present values as of 6/30/95.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------
LIN Television Stations: WOOD-TV and WOTV-TV
(in thousands)
<CAPTION>
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Income Statement
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Revenues $21,795 $22,909 $24,100 $25,022 $26,320 $26,957 $28,112 $28,794 $30,031 $30,761 $32,068
% Growth NA 5.1% 5.2% 3.8% 5.2% 2.4% 4.3% 2.4% 4.3% 2.4% 4.2%
Direct
Operating
Expenses $7,296 $7,128 $7,471 $7,739 $8,113 $8,298 $8,628 $8,825 $9,181 $9,387 $9,720
% of
Revenues 33.5% 31.1% 31.0% 30.9% 30.8% 30.8% 30.7% 30.6% 30.6% 30.5% 30.3%
SG&A and
Promotion
Expenses $6,197 $6,478 $6,772 $7,003 $7,324 $7,487 $7,773 $7,945 $8,249 $8,432 $8,807
% of
Revenues 28.4% 28.3% 28.1% 28.0% 27.8% 27.8% 27.7% 27.6% 27.5% 27.4% 27.5%
Corporate
Expenses $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
% of
Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total Operating
Expenses $13,493 $13,606 $14,243 $14,742 $15,437 $15,785 $16,401 $16,770 $17,430 $17,819 $18,527
Operating Cash
Flow (OCF) $8,302 $9,303 $9,857 $10,280 $10,883 $11,172 $11,711 $12,024 $12,601 $12,942 $13,541
Margin 38.1% 40.6% 40.9% 41.1% 41.3% 41.4% 41.7% 41.8% 42.0% 42.1% 42.2%
Depreciation &
Amortization $1,265 $1,599 $1,802 $2,010 $2,221 $2,437 $1,391 $1,282 $1,307 $1,334 $1,356
% of
Revenues 5.8% 7.0% 7.5% 8.0% 8.4% 9.0% 4.9% 4.5% 4.4% 4.3% 4.2%
EBIT $7,037 $7,704 $8,055 $8,271 $8,662 $8,736 $10,320 $10,742 $11,294 $11,609 $12,185
Margin 32.3% 33.6% 33.4% 33.1% 32.9% 32.4% 36.7% 37.3% 37.6% 37.7% 38.0%
Taxes $2,674 $2,928 $3,061 $3,143 $3,292 $3,319 $3,922 $4,082 $4,292 $4,411 $4,630
Effective
Tax Rate 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0%
Unlevered Net
Income $4,363 $4,776 $4,994 $5,128 $5,371 $5,416 $6,398 $6,660 $7,002 $7,197 $7,555
Net Margin 20.0% 20.8% 20.7% 20.5% 20.4% 20.1% 22.8% 23.1% 23.3% 23.4% 23.6%
Free Cash Flow
Unlevered Net
Income $4,363 $4,776 $4,994 $5,128 $5,371 $5,416 $6,398 $6,660 $7,002 $7,197 $7,555
Depreciation &
Amortization $1,265 $1,599 $1,802 $2,010 $2,221 $2,437 $1,391 $1,282 $1,307 $1,334 $1,356
Capital
Expenditures ($843) ($2,003) ($1,219) ($1,244) ($1,268) ($1,294) ($1,319) ($1,346) ($1,373) ($1,401) ($1,401)
Change in Working
Capital $0 ($111) ($119) ($92) ($130) ($64) ($116) ($68) ($124) ($73) ($131)
As a % of Change
in Revenues NA 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Free Cash
Flow (FCF) $4,785 $4,261 $5,458 $5,801 $6,194 $6,495 $6,355 $6,528 $6,813 $7,057 $7,379
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------
LIN Television Stations: WOOD-TV and WOTV-TV (cont'd)(1)
(in thousands, except per share values)
<CAPTION>
Discount Rate Perpetuity Growth Rates of Free Cash Flow
4.0% 5.0% 5.5% 6.0% 6.5% 7.0%
<C> <S> <C> <C> <C> <C> <C> <C>
11.0% Present Value of Cash Flows $35,169 $35,169 $35,169 $35,169 $35,169 $35,169
Terminal Value $40,678 $47,914 $52,518 $58,044 $64,798 $73,240
Enterprise Value $75,846 $83,082 $87,687 $93,213 $99,966 $108,408
Less: Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $75,846 $83,082 $87,687 $93,213 $99,966 $108,408
Value per Share (3) $1.42 $1.56 $1.65 $1.75 $1.88 $2.03
Implied Exit Multiple of EBITDA 8.1x 9.5x 10.5x 11.6x 12.9x 14.6x
12.0% Present Value of Cash Flows $33,705 $33,705 $33,705 $33,705 $33,705 $33,705
Terminal Value $32,686 $37,715 $40,809 $44,419 $48,686 $53,806
Enterprise Value $66,391 $71,420 $74,514 $78,125 $82,391 $87,511
Less: Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $66,391 $71,420 $74,514 $78,125 $82,391 $87,511
Value per Share (3) $1.25 $1.34 $1.40 $1.47 $1.55 $1.64
Implied Exit Multiple of EBITDA 7.1x 8.2x 8.8x 9.6x 10.6x 11.7x
13.0% Present Value of Cash Flows $32,333 $32,333 $32,333 $32,333 $32,333 $32,333
Terminal Value $26,702 $30,328 $32,504 $34,991 $37,860 $41,208
Enterprise Value $59,035 $62,661 $64,837 $67,324 $70,193 $73,541
Less: Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $59,035 $62,661 $64,837 $67,324 $70,193 $73,541
Value per Share (3) $1.11 $1.18 $1.22 $1.26 $1.32 $1.38
Implied Exit Multiple of EBITDA 6.3x 7.2x 7.7x 8.3x 8.9x 9.7x
14.0% Present Value of Cash Flows $31,046 $31,046 $31,046 $31,046 $31,046 $31,046
Terminal Value $22,102 $24,794 $26,377 $28,159 $30,177 $32,485
Enterprise Value $53,148 $55,840 $57,423 $59,204 $61,223 $63,531
Less: Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $53,148 $55,840 $57,423 $59,204 $61,223 $63,531
Value per Share (3) $1.00 $1.05 $1.08 $1.11 $1.15 $1.19
Implied Exit Multiple of EBITDA 5.7x 6.4x 6.8x 7.2x 7.7x 8.3x
(1) Present values as of 6/30/95.
(2) Segment net debt is assumed to be $0, and is consolidated with the parent debt.
(3) Based on fully diluted shares including 51,632,000 shares outstanding as of 12/31/94, plus 1,659,986 options outstanding as of
1/31/95 per LIN management.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------
LIN Television Stations: WOOD-TV and TOTV-TV (cont'd)
(in thousands, except per share values
Discount Rate
Perpetuity Growth Rates of Free Cash Flow
<CAPTION>
4.0% 5.0% 5.5% 6.0% 6.5% 7.0%
<C> <S> <C> <C> <C> <C> <C> <C> <C>
11.0% Television Enterprise Value $75,846 $83,082 $87,687 $93,213 $99,966 $108,408
As a Multiple of (1):
1994 Segment EBITDA $8,302 9.1x 10.0x 10.6x 11.2x 12.0x 13.1x
1995E Segment EBITDA $9,303 8.2 8.9 9.4 10.0 10.7 11.7
1996E Segment EBITDA $9,857 7.7 8.4 8.9 9.5 10.1 11.0
Value per Share (2) $1.42 $1.56 $1.65 $1.75 $1.88 $2.03
12.0% Television Enterprise Value $66,391 $71,420 $74,514 $78,125 $82,391 $87,511
As a Multiple of (1):
1994 Segment EBITDA $8,302 8.0x 8.6x 9.0x 9.4x 9.9x 10.5x
1995E Segment EBITDA $9,303 7.1 7.7 8.0 8.4 8.9 9.4
1996E Segment EBITDA $9,857 6.7 7.2 7.6 7.9 8.4 8.9
Value per Share (2) $1.25 $1.34 $1.40 $1.47 $1.55 $1.64
13.0% Television Enterprise Value $59,035 $62,661 $64,837 $67,324 $70,193 $73,541
As a Multiple of (1):
1994 Segment EBITDA $8,302 7.1x 7.5x 7.8x 8.1x 8.5x 8.9x
1995E Segment EBITDA $9,303 6.3 6.7 7.0 7.2 7.5 7.9
1996E Segment EBITDA $9,857 6.0 6.4 6.6 6.8 7.1 7.5
Value per Share (2) $1.11 $1.18 $1.22 $1.26 $1.32 $1.38
14.0% Television Enterprise Value $53,148 $55,840 $57,423 $59,204 $61,223 $63,531
As a Multiple of (1):
1994 Segment EBITDA $8,302 6.4x 6.7x 6.9x 7.1x 7.4x 7.7x
1995E Segment EBITDA $9,303 5.7 6.0 6.2 6.4 6.6 6.8
1996E Segment EBITDA $9,857 5.4 5.7 5.8 6.0 6.2 6.4
Value per Share (2) $1.00 $1.05 $1.08 $1.11 $1.15 $1.19
(1) EBITDA figures based on discounted cash flow analysis.
(2) Values per share based on discounted cash flow analysis.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
LIN Cellular - McCaw Case
(Without AT&T Synergies)
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
LIN: not including Wireless Data, including Long Distance, including Additional Products
(in thousands, except per POP values)
<CAPTION>
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total No.
of POPS 25,722 25,980 26,240 26,502 26,767 27,034 27,304 27,578 27,854 28,133 28,414
% Growth
Rate NA 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Beginning
Subscribers 767.205 1,084.603 1,542.510 1,968.679 2,292.740 2,612.018 2,925.895 3,227.817 3,510.390 3,769.132 3,972.509
Gross
Subscribers
Added 543.305 719.061 768.441 707.998 738.034 768.469 790.638 799.337 794.478 770.801 744.273
Deactiva-
tions (221.777) (274.801) (343.355) (384.671) (419.506) (454.870) (487.558) (518.039) (535.439) (568.246) (593.681)
Annual %
Churn (23.95%) (20.92%) (19.56%) (18.05%) (17.11%) (16.43%) (15.85%) (15.38%) (14.71%) (14.68%) (14.67%)
Monthly %
Churn (2.00%) (1.74%) (1.63%) (1.50%) (1.43%) (1.37%) (1.32%) (1.28%) (1.23%) (1.22%) (1.22%)
Net Subscribers
Added 321.528 444.260 425.086 323.327 318.528 313.599 303.080 281.298 259.039 202.555 150.592
Ending Sub-
scribers 1,084.603 1,542.510 1,968.679 2,292.740 2,612.018 2,925.895 3,227.817 3,510.390 3,769.132 3,972.509 4,123.789
Average
Subscribers 925.904 1,313.557 1,755.595 2,130.710 2,452.379 2,768.957 3,076.856 3,369.104 3,639.761 3,870.821 4,048.149
Total Pene-
tration 4.22% 5.94% 7.50% 8.65% 9.76% 10.82% 11.82% 12.73% 13.53% 14.12% 14.51%
% Penetration
Growth NA 40.8% 26.4% 15.3% 12.8% 10.9% 9.2% 7.7% 6.3% 4.4% 2.8%
Annual Pene-
tration (1) 1.25% 1.71% 1.62% 1.22% 1.19% 1.16% 1.11% 1.02% 0.93% 0.72% 0.53%
% Growth NA 36.8% (5.3%) (24.7%) (2.5%) (2.5%) (4.3%) (8.1%) (8.8%) (22.6%) (26.4%)
(1)Defined as net subscribers added in a period divided by the population at the end of the period.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
LIN: not including Wireless Data, including Long Distance, including Additional Products (cont'd)
(in thousands, except per POP values)
<CAPTION>
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Income Statement
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue/
Subscriber/
Month $83.46 $73.56 $65.70 $60.81 $57.42 $54.60 $52.44 $51.11 $50.03 $49.46 $48.90
% Growth NA (11.9%) (10.7%) (7.4%) (5.6%) (4.9%) (3.9%) (2.5%) (2.1%) (1.1%) (1.1%)
Total Rev-
enues $927,344 $1,159,472 $1,384,214 $1,554,849 $1,689,892 $1,814,133 $1,936,371 $2,066,517 $2,185,024 $2,297,456 $2,375,415
% Growth NA 25.0% 19.4% 12.3% 8.7% 7.4% 6.7% 6.7% 5.7% 5.1% 3.4%
Direct
Operating
Expenses $292,577 $346,573 $431,471 $512,801 $590,145 $659,929 $732,158 $812,259 $894,278 $979,774 $1,035,697
% of Revenues 31.5% 29.9% 31.2% 33.0% 34.9% 36.4% 37.8% 39.3% 40.9% 42.6% 43.6%
Cash Flow
Before
Marketing $634,767 $812,899 $952,743 $1,042,048 $1,099,747 $1,154,204 $1,204,213 $1,254,258 $1,290,746 $1,317,682 $1,339,718
Margin 68.5% 70.1% 68.8% 67.0% 65.1% 63.6% 62.2% 60.7% 59.1% 57.4% 56.4%
Sales &
Marketing $235,251 $294,815 $314,292 $320,015 $328,425 $328,136 $320,999 $312,541 $297,929 $281,342 $260,496
% of Revenues 25.4% 25.4% 22.7% 20.6% 19.4% 18.1% 16.6% 15.1% 13.6% 12.2% 11.0%
Sales &
Marketing/
Gross
Addition $433 $410 $409 $452 $445 $427 $406 $391 $375 $365 $350
Corporate
Expenses $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
% of Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total
Operating
Expenses $527,828 $641,388 $745,763 $832,816 $918,570 $988,065 $1,053,157 $1,124,800 $1,192,207 $1,261,116 $1,296,193
Operating
Cash
Flow (OCF) $399,516 $518,084 $638,451 $722,033 $771,322 $826,068 $883,214 $941,717 $992,817 $1,036,340 $1,079,222
Margin 43.1% 44.7% 46.1% 46.4% 45.6% 45.5% 45.6% 45.6% 45.4% 45.1% 45.4%
Depreciation &
Amortiz-
ation $118,070 $147,554 $206,333 $200,825 $193,549 $182,849 $172,149 $151,996 $131,711 $112,727 $93,804
% of Revenues 12.7% 12.7% 14.9% 12.9% 11.5% 10.1% 8.9% 7.4% 6.0% 4.9% 3.9%
EBIT $281,445 $370,530 $432,118 $521,208 $577,773 $643,219 $711,065 $789,721 $861,105 $923,613 $985,419
Margin 30.3% 32.0% 31.2% 33.5% 34.2% 35.5% 36.7% 38.2% 39.4% 40.2% 41.5%
Taxes $106,949 $140,801 $164,205 $198,059 $219,554 $244,423 $270,205 $300,094 $327,220 $350,973 $374,459
Effective
Tax Rate 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0%
Unlevered
Net Income $174,496 $229,729 $267,913 $323,149 $358,219 $398,796 $440,861 $489,627 $533,885 $572,640 $610,960
Net Margin 18.8% 19.8% 19.4% 20.8% 21.2% 22.0% 22.8% 23.7% 24.4% 24.9% 25.7%
Free Cash Flow
Unlevered
Net Income $174,496 $229,729 $267,913 $323,149 $358,219 $398,796 $440,861 $489,627 $533,885 $572,640 $610,960
Depreciation &
Amortiz-
ation $118,070 $147,554 $206,333 $200,825 $193,549 $182,849 $172,149 $151,996 $131,711 $112,727 $93,804
Capital
Expendi-
tures ($175,325) ($235,316) ($253,936) ($215,639) ($149,673) ($137,623) ($128,619) ($107,000) ($97,588) ($75,566) ($54,854)
Change in
Working
Capital $0 ($23,213) ($22,474) ($17,064) ($13,504) ($12,424) ($12,224) ($13,015) ($11,851) ($11,243) ($7,796)
As a %
of Change
in Revenues NA 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Free Cash Flow
(FCF) $117,242 $118,754 $197,836 $291,271 $388,591 $431,597 $472,166 $521,609 $556,158 $598,558 $642,113
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
LIN: not including Wireless Data, including Long Distance, including Additional Products (cont'd)(1)
(in thousands, except per share and per POP values)
Discount Rate Perpetuity Growth Rates of Free Cash Flow
<CAPTION>
4.0% 5.0% 5.5% 6.0% 6.5% 7.0%
<C> <S> <C> <C> <C> <C> <C> <C>
11.0% Present Value of Cash Flows $2,259,146 $2,259,146 $2,259,146 $2,259,146 $2,259,146 $2,259,146
Terminal Value $3,539,800 $4,169,476 $4,570,179 $5,051,022 $5,638,720 $6,373,342
Enterprise Value $5,798,946 $6,428,622 $6,829,325 $7,310,168 $7,897,866 $8,632,488
Less: Net Debt (2) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191)
Equity Value $4,380,755 $5,010,431 $5,411,134 $5,891,978 $6,479,675 $7,214,297
Value per Share (3) $82.20 $94.02 $101.54 $110.56 $121.59 $135.37
Enterprise Value / POP $224.32 $248.68 $264.18 $282.78 $305.51 $333.93
Implied Exit Multiple of EBITDA 8.8x 10.4x 11.4x 12.6x 14.1x 15.9x
12.0% Present Value of Cash Flows $2,150,765 $2,150,765 $2,150,765 $2,150,765 $2,150,765 $2,150,765
Terminal Value $2,844,355 $3,281,949 $3,551,237 $3,865,406 $4,236,697 $4,682,247
Enterprise Value $4,995,120 $5,432,713 $5,702,002 $6,016,171 $6,387,462 $6,833,011
Less: Net Debt (2) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191)
Equity Value $3,576,930 $4,014,523 $4,283,811 $4,597,980 $4,969,272 $5,414,821
Value per Share (3) $67.12 $75.33 $80.38 $86.28 $93.25 $101.61
Enterprise Value / POP $193.23 $210.15 $220.57 $232.72 $247.09 $264.32
Implied Exit Multiple of EBITDA 7.7x 8.9x 9.7x 10.5x 11.5x 12.7x
13.0% Present Value of Cash Flows $2,049,545 $2,049,545 $2,049,545 $2,049,545 $2,049,545 $2,049,545
Terminal Value $2,323,578 $2,639,161 $2,828,510 $3,044,909 $3,294,601 $3,585,907
Enterprise Value $4,373,123 $4,688,705 $4,878,055 $5,094,454 $5,344,145 $5,635,452
Less: Net Debt (2) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191)
Equity Value $2,954,933 $3,270,515 $3,459,864 $3,676,263 $3,925,955 $4,217,261
Value per Share (3) $55.45 $61.37 $64.92 $68.98 $73.67 $79.14
Enterprise Value / POP $169.17 $181.37 $188.70 $197.07 $206.73 $218.00
Implied Exit Multiple of EBITDA 6.9x 7.8x 8.4x 9.0x 9.7x 10.6x
14.0% Present Value of Cash Flows $1,954,918 $1,954,918 $1,954,918 $1,954,918 $1,954,918 $1,954,918
Terminal Value $1,923,309 $2,157,558 $2,295,351 $2,450,369 $2,626,056 $2,826,841
Enterprise Value $3,878,227 $4,112,476 $4,250,270 $4,405,287 $4,580,974 $4,781,759
Less: Net Debt (2) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191)
Equity Value $2,460,036 $2,694,285 $2,832,079 $2,987,097 $3,162,784 $3,363,569
Value per Share (3) $46.16 $50.56 $53.14 $56.05 $59.35 $63.12
Enterprise Value / POP $150.02 $159.08 $164.41 $170.41 $177.21 $184.97
Implied Exit Multiple of EBITDA 6.2x 6.9x 7.4x 7.9x 8.4x 9.1x
(1) Present values as of 6/30/95. Enterprise value per POP based on 6/30/95 estimated POPs, which is the average of 12/31/94 and
12/31/95E POPs.
(2) Based on 12/31/94 net debt of $1,560 million, less option proceeds of $142 million, based on 1,659,986 options outstanding as of
1/31/95 at an average exercise price of $85.46 per LIN mgmt.
(3) Based on fully diluted shares including 51,632,000 shares outstanding as of 12/31/94, plus 1,659,986 options outstanding as of
1/31/95 per LIN management.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
LIN: not including Wireless Data, including Long Distance, including Additional Products
(in thousands, except per share and per POP values)
Discount Rate Perpetuity Growth Rates of Free Cash Flow
<CAPTION>
4.0% 5.0% 5.5% 6.0% 6.5% 7.0%
<C> <S> <C> <C> <C> <C> <C> <C>
11.0% Cellular Enterprise Value $5,798,946 $6,428,622 $6,829,325 $7,310,168 $7,897,866 $8,632,488
As a Multiple of (1):
1994 Cellular EBITDA $399,516 14.5x 16.1x 17.1x 18.3x 19.8x 21.6x
1995E Cellular EBITDA $518,084 11.2 12.4 13.2 14.1 15.2 16.7
1996E Cellular EBITDA $638,451 9.1 10.1 10.7 11.4 12.4 13.5
Value per Share (2) $82.20 $94.02 $101.54 $110.56 $121.59 $135.37
12.0% Cellular Enterprise Value $4,995,120 $5,432,713 $5,702,002 $6,016,171 $6,387,462 $6,833,011
As a Multiple of (1):
1994 Cellular EBITDA $399,516 12.5x 13.6x 14.3x 15.1x 16.0x 17.1x
1995E Cellular EBITDA $518,084 9.6 10.5 11.0 11.6 12.3 13.2
1996E Cellular EBITDA $638,451 7.8 8.5 8.9 9.4 10.0 10.7
Value per Share (2) $67.12 $75.33 $80.38 $86.28 $93.25 $101.61
13.0% Cellular Enterprise Value $4,373,123 $4,688,705 $4,878,055 $5,094,454 $5,344,145 $5,635,452
As a Multiple of (1):
1994 Cellular EBITDA $399,516 10.9x 11.7x 12.2x 12.8x 13.4x 14.1x
1995E Cellular EBITDA $518,084 8.4 9.1 9.4 9.8 10.3 10.9
1996E Cellular EBITDA $638,451 6.8 7.3 7.6 8.0 8.4 8.8
Value per Share (2) $55.45 $61.37 $64.92 $68.98 $73.67 $79.14
14.0% Cellular Enterprise Value $3,878,227 $4,112,476 $4,250,270 $4,405,287 $4,580,974 $4,781,759
As a Multiple of (1):
1994 Cellular EBITDA $399,516 9.7x 10.3x 10.6x 11.0x 11.5x 12.0x
1995E Cellular EBITDA $518,084 7.5 7.9 8.2 8.5 8.8 9.2
1996E Cellular EBITDA $638,451 6.1 6.4 6.7 6.9 7.2 7.5
Value per Share (2) $46.16 $50.56 $53.14 $56.05 $59.35 $63.12
(1) EBITDA figures based on discounted cash flow analysis.
(2) Values per share based on discounted cash flow analysis.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
LIN: Wireless Data Operating Model
(in thousands)
<CAPTION>
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Income Statement
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total
Revenues $0 $2,250 $9,000 $23,750 $44,500 $73,500 $106,500 $138,450 $179,985 $233,981 $304,175
% Growth NA NM 300.0% 163.9% 87.4% 65.2% 44.9% 30.0% 30.0% 30.0% 30.0%
Direct
Operating
Expenses $0 $4,225 $7,000 $11,000 $17,000 $20,000 $22,750 $29,575 $38,448 $49,982 $64,976
% of
Revenues NA 187.8% 77.8% 46.3% 38.2% 27.2% 21.4% 21.4% 21.4% 21.4% 21.4%
Cash Flow Before
Marketing $0 ($1,975) $2,000 $12,750 $27,500 $53,500 $83,750 $108,875 $141,537 $183,999 $239,199
Margin NA (87.8%) 22.2% 53.7% 61.8% 72.8% 78.6% 78.6% 78.6% 78.6% 78.6%
Sales &
Marketing $0 $2,750 $5,250 $9,500 $15,500 $22,000 $32,000 $41,600 $54,080 $70,304 $91,395
% of
Revenues NA 122.2% 58.3% 40.0% 34.8% 29.9% 30.0% 30.0% 30.0% 30.0% 30.0%
Corporate
Expenses $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
% of
Revenues NA 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total
Operating
Expenses $0 $6,975 $12,250 $20,500 $32,500 $42,000 $54,750 $71,175 $92,528 $120,286 $156,371
Operating Cash
Flow (OCF) $0 ($4,725) ($3,250) $3,250 $12,000 $31,500 $51,750 $67,275 $87,457 $113,695 $147,804
Margin NA (210.0%) (36.1%) 13.7% 27.0% 42.9% 48.6% 48.6% 48.6% 48.6% 48.6%
Depreciation &
Amorti-
zation $0 $10,600 $11,160 $8,696 $9,197 $10,149 $8,416 $6,666 $6,330 $6,071 $5,524
% of
Revenues NA 471.1% 124.0% 36.6% 20.7% 13.8% 7.9% 4.8% 3.5% 2.6% 1.8%
EBIT $0 ($15,325) ($14,410) ($5,446) $2,803 $21,351 $43,334 $60,609 $81,127 $107,624 $142,280
Margin NA (681.1%) (160.1%) (22.9%) 6.3% 29.0% 40.7% 43.8% 45.1% 46.0% 46.8%
Taxes $0 ($5,824) ($5,476) ($2,069) $1,065 $8,113 $16,467 $23,031 $30,828 $40,897 $54,066
Effective
Tax Rate 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0%
Unlevered Net
Income $0 ($9,502) ($8,934) ($3,377) $1,738 $13,238 $26,867 $37,578 $50,299 $66,727 $88,214
Net Margin NA (422.3%) (99.3%) (14.2%) 3.9% 18.0% 25.2% 27.1% 27.9% 28.5% 29.0%
Free Cash Flow
Unlevered Net
Income $0 ($9,502) ($8,934) ($3,377) $1,738 $13,238 $26,867 $37,578 $50,299 $66,727 $88,214
Depreciation &
Amorti-
zation $0 $10,600 $11,160 $8,696 $9,197 $10,149 $8,416 $6,666 $6,330 $6,071 $5,524
Capital
Expenditures $0 ($19,000) ($5,000) ($5,000) ($10,000) ($10,000) ($5,250) ($5,250) ($5,250) ($5,250) ($5,250)
Change in Working
Capital $0 ($225) ($675) ($1,475) ($2,075) ($2,900) ($3,300) ($3,195) ($4,154) ($5,400) ($7,019)
As a % of
Change in
Revenues NA 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Free Cash
Flow (FCF) $0 ($18,127) ($3,449) ($1,156) ($1,140) $10,487 $26,733 $35,799 $47,225 $62,148 $81,468
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
LIN: Wireless Data
(in thousands, except per share values)
Discount Rate Perpetuity Growth Rates of Free Cash Flow
<CAPTION>
6.0% 8.0% 10.0% 12.0% 14.0%
<C> <S> <C> <C> <C> <C> <C>
18.0% Present Value of Cash Flows $61,284 $61,284 $61,284 $61,284 $61,284
Terminal Value $149,360 $182,613 $232,494 $315,628 $481,897
Enterprise Value $210,644 $243,897 $293,778 $376,912 $543,181
Net Debt $0 $0 $0 $0 $0
Equity Value $210,644 $243,897 $293,778 $376,912 $543,181
Value per Share $3.95 $4.58 $5.51 $7.07 $10.19
Implied Exit Multiple of EBITDA 4.9x 6.0x 7.6x 10.3x 15.7x
19.0% Present Value of Cash Flows $56,869 $56,869 $56,869 $56,869 $56,869
Terminal Value $127,249 $153,223 $190,740 $249,696 $355,817
Enterprise Value $184,118 $210,092 $247,609 $306,566 $412,686
Net Debt $0 $0 $0 $0 $0
Equity Value $184,118 $210,092 $247,609 $306,566 $412,686
Value per Share $3.45 $3.94 $4.65 $5.75 $7.74
Implied Exit Multiple of EBITDA 4.5x 5.4x 6.7x 8.8x 12.6x
#### Present Value of Cash Flows $52,775 $52,775 $52,775 $52,775 $52,775
Terminal Value $109,130 $129,721 $158,547 $201,788 $273,855
Enterprise Value $161,905 $182,496 $211,322 $254,563 $326,630
Net Debt $0 $0 $0 $0 $0
Equity Value $161,905 $182,496 $211,322 $254,563 $326,630
Value per Share $3.04 $3.42 $3.97 $4.78 $6.13
Implied Exit Multiple of EBITDA 4.2x 5.0x 6.1x 7.7x 10.5x
21.0% Present Value of Cash Flows $48,975 $48,975 $48,975 $48,975 $48,975
Terminal Value $94,133 $110,664 $133,207 $165,769 $216,937
Enterprise Value $143,108 $159,639 $182,182 $214,744 $265,912
Net Debt $0 $0 $0 $0 $0
Equity Value $143,108 $159,639 $182,182 $214,744 $265,912
Value per Share $2.69 $3.00 $3.42 $4.03 $4.99
Implied Exit Multiple of EBITDA 3.9x 4.6x 5.5x 6.9x 9.0x
(1) Present values as of 6/30/95.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
LIN Cellular -
Sensitivity Case
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
LIN: not including Wireless Data, including Long Distance, including Additional Products
(in thousands, except per POP values)
<CAPTION>
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total No.
of POPS 25,722 25,980 26,240 26,502 26,767 27,034 27,304 27,578 27,854 28,133 28,414
% Growth
Rate NA 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Beginning
Subscribers 771.302 1,092.076 1,587.399 2,070.865 2,481.767 2,886.521 3,284.306 3,666.878 4,024.885 4,352.573 4,610.246
Gross
Subscribers
Added 557.510 744.662 822.650 805.766 855.424 899.623 934.151 947.786 944.519 968.685 881.533
Deactiva-
tions (236.737) (249.339) (339.184) (394.864) (450.669) (501.838) (551.579) (589.779) (616.831) (711.013) (689.666)
Annual %
Churn (25.41%) (18.61%) (18.54%) (17.35%) (16.79%) (16.26%) (15.87%) (15.34%) (14.73%) (15.87%) (14.65%)
Monthly %
Churn (2.12%) (1.55%) (1.55%) (1.45%) (1.40%) (1.36%) (1.32%) (1.28%) (1.23%) (1.32%) (1.22%)
Net Subscribers
Added 320.774 495.322 483.466 410.902 404.754 397.785 382.573 358.007 327.688 257.673 191.867
Ending Sub-
scribers 1,092.076 1,587.399 2,070.865 2,481.767 2,886.521 3,284.306 3,666.878 4,024.885 4,352.573 4,610.246 4,802.113
Average
Subscribers 931.689 1,339.737 1,829.132 2,276.316 2,684.144 3,085.413 3,475.592 3,845.882 4,188.729 4,481.410 4,706.180
Total
Penetration 4.25% 6.11% 7.89% 9.36% 10.78% 12.15% 13.43% 14.59% 15.63% 16.39% 16.90%
% Penetration
Growth NA 43.9% 29.2% 18.7% 15.2% 12.7% 10.5% 8.7% 7.1% 4.9% 3.1%
Annual Pene-
tration (1) 1.25% 1.91% 1.84% 1.55% 1.51% 1.47% 1.40% 1.30% 1.18% 0.92% 0.68%
% Growth NA 52.9% (3.4%) (15.9%) (2.5%) (2.7%) (4.8%) (7.3%) (9.4%) (22.1%) (26.3%)
(1) Defined as net subscribers added in a period divided by the population at the end of the period.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
LIN: not including Wireless Data, including Long Distance, including Additional Products (cont'd)
(in thousands, except per POP values)
<CAPTION>
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Income Statement
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue/
Subscriber/
Month $82.60 $73.09 $66.84 $62.53 $60.13 $57.29 $55.83 $55.17 $54.94 $54.75 $54.15
% Growth NA (11.5%) (8.6%) (6.4%) (3.8%) (4.7%) (2.6%) (1.2%) (0.4%) (0.3%) (1.1%)
Total
Revenues $923,546 $1,175,108 $1,467,136 $1,708,154 $1,936,835 $2,121,322 $2,328,346 $2,546,174 $2,761,366 $2,944,454 $3,057,837
% Growth NA 27.2% 24.9% 16.4% 13.4% 9.5% 9.8% 9.4% 8.5% 6.6% 3.9%
Direct
Operating
Expenses $279,817 $339,134 $461,244 $559,882 $665,940 $750,474 $858,201 $975,525 $1,096,295 $1,193,546 $1,261,177
% of Rev-
enues 30.3% 28.9% 31.4% 32.8% 34.4% 35.4% 36.9% 38.3% 39.7% 40.5% 41.2%
Cash Flow
Before
Marketing $643,729 $835,974 $1,005,891 $1,148,272 $1,270,895 $1,370,848 $1,470,145 $1,570,650 $1,665,070 $1,750,908 $1,796,660
Margin 69.7% 71.1% 68.6% 67.2% 65.6% 64.6% 63.1% 61.7% 60.3% 59.5% 58.8%
Sales &
Marketing $241,402 $305,311 $336,464 $364,206 $380,663 $384,139 $379,265 $370,584 $354,195 $353,570 $308,537
% of Rev-
enues 26.1% 26.0% 22.9% 21.3% 19.7% 18.1% 16.3% 14.6% 12.8% 12.0% 10.1%
Sales &
Marketing/
Gross
Addition $433 $410 $409 $452 $445 $427 $406 $391 $375 $365 $350
Corporate
Expenses $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
% of Rev-
enues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total
Operating
Expenses $521,219 $644,446 $797,708 $924,088 $1,046,603 $1,134,613 $1,237,467 $1,346,109 $1,450,490 $1,547,117 $1,569,714
Operating
Cash Flow
(OCF) $402,327 $530,663 $669,428 $784,066 $890,232 $986,709 $1,090,879 $1,200,065 $1,310,876 $1,397,338 $1,488,123
Margin 43.6% 45.2% 45.6% 45.9% 46.0% 46.5% 46.9% 47.1% 47.5% 47.5% 48.7%
Depreciation &
Amorti-
zation $128,184 $188,818 $238,986 $260,674 $261,625 $248,446 $227,060 $202,078 $175,851 $152,833 $130,473
% of Rev-
enues 13.9% 16.1% 16.3% 15.3% 13.5% 11.7% 9.8% 7.9% 6.4% 5.2% 4.3%
EBIT $274,143 $341,845 $430,442 $523,392 $628,606 $738,263 $863,819 $997,988 $1,135,025 $1,244,505 $1,357,650
Margin 29.7% 29.1% 29.3% 30.6% 32.5% 34.8% 37.1% 39.2% 41.1% 42.3% 44.4%
Taxes $104,174 $129,901 $163,568 $198,889 $238,870 $280,540 $328,251 $379,235 $431,309 $472,912 $515,907
Effective
Tax Rate 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0%
Unlevered
Net Income $169,968 $211,944 $266,874 $324,503 $389,736 $457,723 $535,568 $618,752 $703,715 $771,593 $841,743
Net Margin 18.4% 18.0% 18.2% 19.0% 20.1% 21.6% 23.0% 24.3% 25.5% 26.2% 27.5%
Free Cash Flow
Unlevered
Net Income $169,968 $211,944 $266,874 $324,503 $389,736 $457,723 $535,568 $618,752 $703,715 $771,593 $841,743
Depreciation &
Amorti-
zation $128,184 $188,818 $238,986 $260,674 $261,625 $248,446 $227,060 $202,078 $175,851 $152,833 $130,473
Capital
Expendi-
tures ($190,343) ($301,124) ($294,122) ($279,903) ($202,317) ($186,996) ($169,646) ($142,256) ($130,292) ($102,451) ($76,298)
Change in
Working
Capital $0 ($25,156) ($29,203) ($24,102) ($22,868) ($18,449) ($20,702) ($21,783) ($21,519) ($18,309) ($11,338)
As a % of
Change in
Revenues NA 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Free Cash
Flow (FCF) $107,810 $74,482 $182,535 $281,172 $426,176 $500,725 $572,280 $656,792 $727,755 $803,666 $884,580
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
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LIN: not including Wireless Data, including Long Distance, including Additional Products (cont'd)(1)
(in thousands, except per share and per POP values)
Discount Rate Perpetuity Growth Rates of Free Cash Flow
<CAPTION>
4.0% 5.0% 5.5% 6.0% 6.5% 7.0%
<C> <S> <C> <C> <C> <C> <C> <C>
11.0% Present Value of Cash Flows $2,664,463 $2,664,463 $2,664,463 $2,664,463 $2,664,463 $2,664,463
Terminal Value $4,876,457 $5,743,903 $6,295,915 $6,958,328 $7,767,945 $8,779,966
Enterprise Value $7,540,919 $8,408,366 $8,960,377 $9,622,791 $10,432,408 $11,444,429
Less: Net Debt (2) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191)
Equity Value $6,122,729 $6,990,175 $7,542,187 $8,204,600 $9,014,217 $10,026,238
Value per Share (3) $114.89 $131.17 $141.53 $153.96 $169.15 $188.14
Enterprise Value / POP $291.70 $325.26 $346.61 $372.24 $403.56 $442.70
Implied Exit Multiple of EBITDA 8.8x 10.4x 11.4x 12.6x 14.1x 15.9x
12.0% Present Value of Cash Flows $2,528,756 $2,528,756 $2,528,756 $2,528,756 $2,528,756 $2,528,756
Terminal Value $3,918,407 $4,521,238 $4,892,212 $5,325,014 $5,836,508 $6,450,300
Enterprise Value $6,447,163 $7,049,995 $7,420,968 $7,853,770 $8,365,264 $8,979,056
Less: Net Debt (2) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191)
Equity Value $5,028,972 $5,631,804 $6,002,778 $6,435,580 $6,947,074 $7,560,866
Value per Share (3) $94.37 $105.68 $112.64 $120.76 $130.36 $141.88
Enterprise Value / POP $249.40 $272.71 $287.06 $303.81 $323.59 $347.34
Implied Exit Multiple of EBITDA 7.7x 8.9x 9.6x 10.5x 11.5x 12.7x
13.0% Present Value of Cash Flows $2,402,254 $2,402,254 $2,402,254 $2,402,254 $2,402,254 $2,402,254
Terminal Value $3,200,980 $3,635,729 $3,896,578 $4,194,691 $4,538,668 $4,939,974
Enterprise Value $5,603,234 $6,037,983 $6,298,832 $6,596,945 $6,940,922 $7,342,228
Less: Net Debt (2) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191)
Equity Value $4,185,044 $4,619,792 $4,880,641 $5,178,754 $5,522,731 $5,924,038
Value per Share (3) $78.53 $86.69 $91.58 $97.18 $103.63 $111.16
Enterprise Value / POP $216.75 $233.57 $243.66 $255.19 $268.50 $284.02
Implied Exit Multiple of EBITDA 6.9x 7.8x 8.4x 9.0x 9.7x 10.6x
14.0% Present Value of Cash Flows $2,284,215 $2,284,215 $2,284,215 $2,284,215 $2,284,215 $2,284,215
Terminal Value $2,649,565 $2,972,269 $3,162,094 $3,375,648 $3,617,676 $3,894,279
Enterprise Value $4,933,780 $5,256,484 $5,446,309 $5,659,863 $5,901,890 $6,178,493
Less: Net Debt (2) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191) ($1,418,191)
Equity Value $3,515,589 $3,838,293 $4,028,118 $4,241,672 $4,483,700 $4,760,303
Value per Share (3) $65.97 $72.02 $75.59 $79.59 $84.13 $89.32
Enterprise Value / POP $190.85 $203.34 $210.68 $218.94 $228.30 $239.00
Implied Exit Multiple of EBITDA 6.2x 6.9x 7.4x 7.9x 8.4x 9.1x
(1) Present values as of 6/30/95. Enterprise value per POP based on 6/30/95 estimated POPs, which is the average of 12/31/94 and
12/31/95E POPs.
(2) Based on 12/31/94 net debt of $1,560 million, less option proceeds of $142 million, based on 1,659,986 options outstanding as of
1/31/95 at an average exercise price of $85.46 per LIN mgmt.
(3) Based on fully diluted shares including 51,632,000 shares outstanding as of 12/31/94, plus 1,659,986 options outstanding as of
1/31/95 per LIN management.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
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LIN: not including Wireless Data, including Long Distance, including Additional Products
(in thousands, except per share and per POP values)
Discount Rate Perpetuity Growth Rates of Free Cash Flow
<CAPTION>
4.0% 5.0% 5.5% 6.0% 6.5% 7.0%
<C> <S> <C> <C> <C> <C> <C> <C> <C>
11.0% Cellular Enterprise Value $7,540,919 $8,408,366 $8,960,377 $9,622,791 $10,432,408 $11,444,429
As a Multiple of (1):
1994 Cellular EBITDA $402,327 18.7x 20.9x 22.3x 23.9x 25.9x 28.4x
1995E Cellular EBITDA $530,663 14.2 15.8 16.9 18.1 19.7 21.6
1996E Cellular EBITDA $669,428 11.3 12.6 13.4 14.4 15.6 17.1
Value per Share (2) $114.89 $131.17 $141.53 $153.96 $169.15 $188.14
12.0% Cellular Enterprise Value $6,447,163 $7,049,995 $7,420,968 $7,853,770 $8,365,264 $8,979,056
As a Multiple of (1):
1994 Cellular EBITDA $402,327 16.0x 17.5x 18.4x 19.5x 20.8x 22.3x
1995E Cellular EBITDA $530,663 12.1 13.3 14.0 14.8 15.8 16.9
1996E Cellular EBITDA $669,428 9.6 10.5 11.1 11.7 12.5 13.4
Value per Share (2) $94.37 $105.68 $112.64 $120.76 $130.36 $141.88
13.0% Cellular Enterprise Value $5,603,234 $6,037,983 $6,298,832 $6,596,945 $6,940,922 $7,342,228
As a Multiple of (1):
1994 Cellular EBITDA $402,327 13.9x 15.0x 15.7x 16.4x 17.3x 18.2x
1995E Cellular EBITDA $530,663 10.6 11.4 11.9 12.4 13.1 13.8
1996E Cellular EBITDA $669,428 8.4 9.0 9.4 9.9 10.4 11.0
Value per Share (2) $78.53 $86.69 $91.58 $97.18 $103.63 $111.16
14.0% Cellular Enterprise Value $4,933,780 $5,256,484 $5,446,309 $5,659,863 $5,901,890 $6,178,493
As a Multiple of (1):
1994 Cellular EBITDA $402,327 12.3x 13.1x 13.5x 14.1x 14.7x 15.4x
1995E Cellular EBITDA $530,663 9.3 9.9 10.3 10.7 11.1 11.6
1996E Cellular EBITDA $669,428 7.4 7.9 8.1 8.5 8.8 9.2
Value per Share (2) $65.97 $72.02 $75.59 $79.59 $84.13 $89.32
(1) EBITDA figures based on discounted cash flow analysis.
(2) Values per share based on discounted cash flow analysis.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
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DCF Discussion
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
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DCF Discussion
- -- DCF valuation ranges are extremely sensitive to changes in both operating assumptions and valuation parameters given nature of
cellular and wireless data industries
- -- In performing DCF analysis, WP&Co. looked at different assumptions regarding weighted average cost of capital and terminal
value
- WP&Co. also considered the conflicting arguments presented by Bear Stearns/Lehman and Morgan Stanley regarding both the
cellular segment and the wireless data segment
- High variability regarding appropriate valuation of wireless data segment is not unusual in industries that are in a
relatively early stage of development
- -- Valuation parameters were applied to the Management Case, the McCaw Case, and a Sensitivity Case (the latter case being
analyzed following completion of due diligence process)
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
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Assumptions and Calculations*
ASSUMPTIONS UNLEVERED BETAS (1)
Current Mkt. Val. Mkt. Val. Debt/
Tax Rate 40.00% Levered of Debt of Equity Total Unlevered
Risk Free 7.40% Company Beta (2) ($MM) ($MM) Capital Beta (3)
Rate of Return
Market 7.22% AirTouch
Risk Premium Comm. 0.86 $87 $13,388 0.6% 0.86
LIN
Broadcasting 1.10 1,596 6,680 19.3% 0.96
Cellular
Comm. 0.78 355 2,011 15.0% 0.71
Vanguard
Cellular 1.04 303 979 23.6% 0.88
Risk Free Rate Average 0.95 $585 $5,764 14.6% 0.85
= 10 year
U.S. Treasury
as of 3/6/95
Market Risk
Premium as
per Ibbotson,
1994
Yearbook
WEIGHTED
AVERAGE
COST OF
CAPITAL (4)
Capital Cost of Equity Cost of Debt Wtd. Avg.
Structure
Debt/ Debt/ Relevered Cost of Before After Cost of
Capital Equity Beta (5) Equity Tax Tax Capital
0% 0% 0.85 13.54% 9.000% 5.40% 13.54%
5% 5% 0.88 13.73% 9.000% 5.40% 13.32%
10% 11% 0.91 13.95% 9.000% 5.40% 13.10%
15% 18% 0.94 14.19% 9.000% 5.40% 12.87%
20% 25% 0.98 14.46% 9.000% 5.40% 12.65%
25% 33% 1.02 14.77% 9.333% 5.60% 12.48%
30% 43% 1.07 15.12% 9.667% 5.80% 12.32%
35% 54% 1.13 15.52% 10.000% 6.00% 12.19%
* WACC is widely acknowledged to be only an estimate of the cost of capital, as the capital asset pricing model is no longer
perfectly consistent with recent finance theory.
(1) Assumes book value of debt approximates market value and excludes minority interests.
(2) Predicted beta as per BARRA, U.S. Equity Beta Book, January 1995.
(3) Unlevered Beta = Levered Beta / { 1+ (Debt/Equity)*(1-Tax Rate)}.
(4) Based on the Weighted Average Cost of Capital and the Capital Asset Pricing Model and on WP&Co. calculations.
(5) Relevered Beta = Unlevered Beta * {1 + (Debt/Equity)*(1-Tax Rate)}.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
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Implied Perpetuity Growth Rates Based on a Range of Exit Multiples and Discount Rates
Sample Method:
EBITDAyear10*Exit Multipleyear10 = FCFyear10*(1+Growth Rate)
(WACC - Growth Rate)
Assumption: (1)
FCFyear10 / EBITDAyear10 = 60.8%
Discount Rate Exit Multiple
7.5x 8.0x 8.5x 9.0x 9.5x 10.0x 10.5x 11.0x 11.5x 12.0x 12.5x 13.0x
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10.0% 1.8% 2.2% 2.7% 3.0% 3.4% 3.7% 4.0% 4.2% 4.5% 4.7% 4.9% 5.1%
10.5% 2.2% 2.7% 3.1% 3.5% 3.9% 4.2% 4.5% 4.7% 5.0% 5.2% 5.4% 5.6%
11.0% 2.7% 3.2% 3.6% 4.0% 4.3% 4.6% 4.9% 5.2% 5.4% 5.6% 5.9% 6.0%
11.5% 3.1% 3.6% 4.1% 4.4% 4.8% 5.1% 5.4% 5.7% 5.9% 6.1% 6.3% 6.5%
12.0% 3.6% 4.1% 4.5% 4.9% 5.3% 5.6% 5.9% 6.1% 6.4% 6.6% 6.8% 7.0%
12.5% 4.1% 4.6% 5.0% 5.4% 5.7% 6.1% 6.3% 6.6% 6.9% 7.1% 7.3% 7.5%
13.0% 4.5% 5.0% 5.5% 5.8% 6.2% 6.5% 6.8% 7.1% 7.3% 7.6% 7.8% 8.0%
13.5% 5.0% 5.5% 5.9% 6.3% 6.7% 7.0% 7.3% 7.6% 7.8% 8.0% 8.2% 8.4%
14.0% 5.5% 5.9% 6.4% 6.8% 7.1% 7.5% 7.8% 8.0% 8.3% 8.5% 8.7% 8.9%
14.5% 5.9% 6.4% 6.9% 7.3% 7.6% 7.9% 8.2% 8.5% 8.8% 9.0% 9.2% 9.4%
15.0% 6.4% 6.9% 7.3% 7.7% 8.1% 8.4% 8.7% 9.0% 9.2% 9.5% 9.7% 9.9%
(1) Based on LIN Management Case FCFyear10 / EBITDAyear10 including long distance and additional products, but not including
wireless data.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
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Precedent Transactions
and Public Company
Trading Analysis
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
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Precedent M&A Transactions and Public Company Trading Analysis
- -- Determining relevance in the context of either precedent M&A transactions or trading
multiples analysis requires qualitative judgments and careful qualifications
- -- LIN lacks a precise analogue among publicly traded cellular companies given its
predominant major-market presence and its lack of international assets
- -- LIN's trading pattern has been affected by existence of the Private Market Value
Guarantee
- -- Although there have been a number of recent cellular transactions, there have been
few recent acquisitions of comparable scale to LIN's potential overall valuation
- -- While the "per-POP" approach to analyzing the cellular industry has become less
influential than cash-flow multiples as the business matures, many companies continue
to disclose valuations on a per POP basis
- -- The transaction environment has a degree of volatility over time because of such
macroeconomic factors as interest rate and equity market fluctuations as well as such
microeconomic factors as industry results and growth expectations
- -- The wireless industry in particular has undergone dramatic changes in recent years
and faces continued dynamic evolution
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
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AT&T's Acquisition of
McCaw: Summary
Analysis and Perspective
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
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Summary Comparison of Assessment of AT&T's Acquisition of McCaw
(in thousands, except per share and per POP values)
<CAPTION>
Bear Stearns/Lehman Brothers Morgan Stanley
Transaction Transaction
Transaction Announcement Announcement Closing
(8/13/93) (8/13/93) (9/19/94)
<S> <C> <C> <C> <C> <C>
Fully Diluted Shares Outstanding 217,374 202,000 (1) 208,800 (1)
Share Price Used in Computation $62.38 $64.39 $55.00
Equity Value $13,334,925 (2) $13,005,972 $11,484,000
Net Debt $4,045,608 $4,134,000 (3) $5,089,000 (3)
Total Enterprise Value $17,380,533 $17,139,972 $16,573,000
Less: Value of Non-Cellular Assets $559,574 $952,000 $1,334,000
Cellular Enterprise Value $16,820,959 $16,187,972 $15,239,000
No. of POPs 59,989 60,403 (4) 61,696 (4)
Value per POP $280 $268 $247
LTM 6/30/93 Cellular EBITDA $655,028 (5) NA NA
Multiple of LTM 6/30/93 EBITDA 25.7x NA NA
1993 Cellular EBITDA $797,940 (5) NA NA
Multiple of 1993 EBITDA 21.1x NA NA
LTM 6/30/94 Cellular EBITDA NA NA NA
Multiple of LTM 6/30/94 EBITDA NA NA NA
1994E Cellular EBITDA $1,056,385 (5) $904,356 (6) $946,522 (6)
Multiple of 1994E EBITDA 15.9x 17.9x 16.1x
1995E Cellular EBITDA NA $1,190,292 (6) $1,348,584 (6)
Multiple of 1995E EBITDA NA 13.6x 11.3x
(1) Morgan Stanley excluded 14.5 million shares AT&T already owned.
(2) Includes option spread.
(3) Includes option proceeds.
(3) Actual values from McCaw public documents.
(4) Implied POPs from per POP values provided by Morgan Stanley.
(5) Source: Analyst reports estimates used by Bear Stearns / Lehman Brothers.
(6) Implied EBITDA values from cash flow multiples provided by Morgan Stanley.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
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AT&T's Acquisition of McCaw - Summary Transaction Analysis as Viewed by Bear Stearns/Lehman Brothers and Morgan Stanley
(in thousands, except per share and per POP values)
<S> <C> <C> <S>
Bear Stearns / Lehman Brothers View Morgan Stanley View
AT&T Share Price (8/13/93) $62.375 Announcement
McCaw Share Price (8/13/93) $51.250 Equity Value:
Premium 21.7% Projected Share Price at Closing $64.39
Fully Diluted Shares (excl. 14.5MM shares
AT&T already owned) 202,000
No. of McCaw Shares Outstanding (6/30/93) 206,185 Total Equity Value $13,005,972
Equity Value $12,860,802 Plus:
Options Outstanding -(12/31/92) 11,189 Projected Proportionate year-end 1994 net debt $4,610,000
Option Spread - Average Exercise
Price $20.00 $474,123 Less:
Total Equity Value $13,334,925 Projected net working capital ($256,000)
McCaw other assets (paging, international and other) ($661,000)
Net Debt (6/30/93) $4,809,922 52.5% of LIN-TV ($291,000)
Less: 48% of LIN Net Debt (1) ($764,314) Option Proceeds ($220,000)
Total Net Debt $4,045,608 Cellular Enterprise Value $16,187,972
Value per POP $268
Total Enterprise Value $17,380,533 Cellular Enterprise Value as a Multiple of:
1994E EBITDA (5) 1995E EBITDA (5)
Less: Value of Non-Cellular Assets (2) ($559,574) 17.9x 13.6x
Closing
Cellular Enterprise Value $16,820,959 Equity Value:
Share Price at Closing $55.00
Total Net POPs (3) 59,989 Fully Diluted Shares (excl. 14.5MM shares
AT&T already owned) 208,800
Value per POP $280 Total Equity Value $11,484,000
Plus:
Cellular Enterprise Value as a
Multiple of (4): Proportionate 9/30/94 net debt $5,321,000
Less:
LTM OCF (6/30/93) $655,028 25.7x Projected net working capital $73,000
1993 OCF $797,940 21.1 McCaw other assets (paging, international and other) ($954,000)
1994E OCF $1,056,385 15.9 52.5% of LIN-TV ($380,000)
Option Proceeds ($305,000)
Cellular Enterprise Value $15,239,000
Value per POP $247
Cellular Enterprise Value as a Multiple of:
1994E EBITDA (5) 1995E EBITDA (5)
16.1x 11.3x
(1) Excludes $1,238 million of preferred stock exchangeable for LIN's 49.99% interest in Philadelphia, which is assumed to be
redeemed.
(2) Includes McCaw's estimated 472,500 pagers at $500 a pager, 52% of 8x LTM LIN's media properties cash flow of $67.0 million
as of 6/30/93,
McCaw's direct and indirect interest in American Mobile Satellite (AMSAT) equivalent to an equity value of $44.50 million as
of 12/31/93.
(3) Source: LB/BS.
(4) Proportionate cellular OCF values from research estimates as used by LB/BS. Excludes Philadelphia (in millions): LTM as of
6/30/93 - $22.2; 1993 - $27.0;1994 - $35.8.
(5) Obtained by Morgan Stanley from analyst reports and Morgan Stanley estimates.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
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Implied Value of LIN Based on AT&T's Acquisition of McCaw as Derived by Bear Stearns/Lehman Brothers and Morgan Stanley
(in thousands, except per share data)
Bear Stearns/:Lehman Brothers Methodology Morgan Stanley Methodology
Apply 1994E EBITDA multiple as derived from Apply 1994E and 1995E EBITDA multiples derived from
AT&T-McCaw transaction announcement date to AT&T McCaw transaction closing date to the 1994E
the 1995E EBITDA of LIN, and add a range and 1995E EBITDA for LIN to come up with a range of LIN's
of premia to that multiple to come up with current implied values
a range of LIN's current applied values
<S> <C> <S> <C>
Assumptions Assumptions
No. of Fully Diluted LIN Shares 53,292 No. of Fully Diluted LIN Shares 53,292
Net Debt Including Option Proceeds $1,418,191 Net Debt Including Option Proceeds $1,418,191
1995E Cash Flow $534,555 1994E Cash Flow (1) $395,200
Value of Non-Cellular Assets $112,000 Multiple of 1994E EBITDA 16.1x
1995E Cash Flow (1) $560,800
Multiple of 1995E EBITDA 11.3x
Implied McCaw Value of Non-Cellular Assets $112,000
Standalone LIN
Multiple of Implied Premium to Implied 6/30/95
Closing Year 1995E EBITDA McCaw Standalone LIN Value
EBITDA Multiple for LIN Multiple per Share Implied LIN Value per Share
<C> <C> <C> <C> <S> <C> <S> <C>
15.9x 15.9x 0.0% $135 Based on 1994E EBITDA $95
15.6x 17.2x 10.0% $148 Based on 1995E EBITDA $94
15.3x 18.4x 20.0% $160 Stated Range in Morgan Stanley Presentation
15.0x 19.5x 30.0% $171 $93 $97
(1) LIN EBITDA values obtained by Morgan Stanley from Salomon Brothers research dated 9/94.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
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Analysis of AT&T's Acquisition of McCaw
- -- WP&Co. analyzed AT&T's acquisition of McCaw as follows:
- Transaction announcement date of August 13, 1993
- The shares outstanding were obtained from McCaw 10-Q dated 6/30/93
-- The options outstanding and estimated strike price were obtained from
McCaw 10-K dated 12/31/92
- McCaw net debt was obtained from McCaw 10-Q dated 6/30/93, and excluded the
48% of LIN debt that it did not own
- The value of International and non-cellular assets was estimated as
follows:
-- 472,500 estimated pagers at $500 a pager
- -- Approximately 52% of LIN media estimated as follows:
- 9.5x LTM as of 6/30/93 EBITDA of LIN's media properties of $69.5 million
from McCaw and LIN's public documents
- -- $44.3 million for McCaw and LIN's pro rata ownership interests in American Mobile
Satellite based on trading value at 12/13/93 (first day of public trading)
- -- 1.7 million Hong Kong POPs at $10 per POP and 0.92 Mexican cellular POPs at $10 per
POP (as of announcement date)
- Proportionate cellular cash flow values for McCaw for LTM as of 6/30/93,
year-ending 1993 and LTM as of 6/30/94 were obtained from McCaw public
documents
- Proportionate cellular cash flow estimate for McCaw for 1994 was a mean
from selected research reports (Salomon Brothers - 9/94; CS First Boston -
7/94; Wheat First - 8/94)
- Proportionate cellular cash flow estimate for McCaw for 1995 was a mean
from selected research reports (Salomon Brothers - 9/94; Wheat First -
8/94)
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
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AT&T's Acquisition of McCaw - Summary Transaction Analysis: WP&Co. View
(in thousands, except per share and per POP values)
Transaction Announcement (8/13/93)
AT&T Share Price (8/13/93) $62.375
McCaw Share Price (8/13/93) $51.250
Premium 21.7%
No. of McCaw Shares Outstanding (6/30/93) 206,185
Equity Value $12,860,802
Options Outstanding -(12/31/92) 11,189
Option Spread - Average Exercise Price $20.00 $474,123
Total Equity Value $13,334,925
Net Debt (6/30/93) $4,809,922
Less: 48% of LIN Net Debt (1) ($764,314)
Total Net Debt $4,045,608
Total Enterprise Value $17,380,533
Less: Value of Non-Cellular Assets (2) ($649,814)
Cellular Enterprise Value $16,730,720
Total Net POPs (3) 59,161
Value per POP $283
Cellular Enterprise Value as a Multiple of (4):
LTM OCF (6/30/93) $660,130 25.3x
1993 OCF $730,901 22.9
LTM 6/30/94 OCF $798,605 20.9
1994E OCF $925,800 18.1
1995E OCF $1,283,350 13.0
(1) Excludes $1,238 million of preferred stock exchangeable for LIN's 49.99% interest in
Philadelphia, which is assumed to be redeemed.
(2) Includes McCaw's estimated 472,500 pagers at $500 a pager, 52% of 9.5x LTM LIN's media
properties cash flow of $69.5 million as of 6/30/93,
McCaw's direct and indirect interest in American Mobile Satellite (AMSAT) of 8.85% and
AMSAT's equity value of $500.2 million as of 12/13/93, license for 1.7 million Hong Kong
POPs at $10 a POP, and cellular license in Mexico for $10 a POP and 0.92 million POPs.
(3) Includes all proportionate POPs, and excludes LIN's Philadelphia POPs. Source: DLJ -
Spring 1993.
(4) Proportionate cellular OCF values from McCaw 10-K and 10-Q. Excludes Philadelphia (in
millions): LTM as of 6/30/93 - $13.9; 1993 - $18.0; LTM as of 6/30/94 - $29.8.
Philadelphia estimates from LIN appraisal information, except for OCF of LTM as of
6/30/94, which is based on pro rata CAGR from 1992 to 1993. 1994 and 1995 OCF estimates
from research analyst reports.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
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Implied Value of LIN as Part of AT&T's Acquisition of McCaw (Assuming No Difference in Value between McCaw and LIN)
(in thousands, except per share and per POP values)
Transaction Announcement (8/13/93)
Based on Cellular EBITDA Multiples:
<CAPTION>
LIN Implied
Multiples based on Cellular LIN Cellular
AT&T-McCaw EBITDA (1) Enterprise Value
<C> <C> <C> <C>
LTM (6/30/93) 25.3x $317,961 $8,058,600
1993 22.9 $338,749 $7,754,143
1994 18.1 $389,760 $7,043,600
Implied LIN Cellular Enterprise Value $7,043,600 - $8,058,600
Plus: Value of LIN Non-Cellular Assets (2) $694,062
Total LIN Implied Enterprise Value $7,737,663 - $8,752,662
Less: LIN Net Debt (6/30/93) (3) (4) ($1,529,779)
Implied LIN Equity Value $6,207,884 - $7,222,883
No. of LIN Shares Outstanding (6/30/93) 51,447
No. of LIN Options Outstanding (12/31/92) 1,263
Fully Diluted LIN Shares 52,710
Implied LIN Value per Share (5) $117.77 - $137.03
LIN Share Price (8/13/93) $102.25
Implied Value as a Premium to Market 15.2% - 34.0%
Implied Value per LIN POP (24.4 million POPs) $288.22 - $329.76
LIN Trading Value per POP $254.74
Implied per POP Value Premium to Market 13.1% - 29.4%
(1) Cellular EBITDA values do not include Philadelphia (in millions): LTM as of 6/30/93 - $13.9; 1993 - $18.0; LTM as of 6/30/94 -
$29.8.
1995 estimates from appraisal information.
(2) Includes media properties at 9.5x LTM cash flow of $69.5 million as of 6/30/93, and equity value in American Mobile Satellite of
$33.5 million as of 12/13/93.
(3) Excludes $1,238 million of preferred stock exchangeable for LIN's 49.99% interest in Philadelphia, which is assumed to be
redeemed.
(4) Includes option proceeds from options outstanding at an average exercise price of $49.51.
(5) Includes TV assets subsequently spun-off. Estimated range after backing out approximately $12 per share of TV equates to $105.77
- - $125.03 per share.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
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Implied Value of LIN as Part of AT&T's Acquisition of McCaw (Assuming No Difference in
Value between McCaw and LIN) (cont'd)
(in thousands, except per share and per POP values)
Transaction Announcement (8/13/93)
Based on Contributed POPs:
McCaw Proportionate POPs (1) 59,161
LIN Proportionate POPs in McCaw (1) 12,708
McCaw Cellular Enterprise Value $16,730,720
LIN Proportionate Enterprise Value in McCaw $3,593,735
LIN Implied Cellular Enterprise Value $6,911,030
Implied Value per LIN POP $282.80
Plus: Value of LIN Non-Cellular Assets (2) $694,062
LIN Total Implied Enterprise Value $7,605,092
Less: LIN Net Debt (6/30/93) (3) (4) ($1,529,779)
Implied LIN Equity Value $6,075,313
LIN Fully Diluted Shares 52,710
Implied LIN Value per Share (5) $115.26
Premium to Market (8/13/93) 12.7%
Based on Contributed Subscribers:
McCaw Proportionate Subscribers (6) 1,558,000
LIN Proportionate Subs. in McCaw (6) 379,600
McCaw Cellular Enterprise Value $16,730,720
LIN Proportionate Enterprise Value in McCaw $4,076,368
LIN Implied Cellular Enterprise Value $7,839,169
Implied Value per LIN POP $320.78
Plus: Value of LIN Non-Cellular Assets (2) $694,062
LIN Total Implied Enterprise Value $8,533,231
Less: LIN Net Debt (6/30/93) (3) (4) ($1,529,779)
Implied LIN Equity Value $7,003,452
LIN Fully Diluted Shares 52,710
Implied LIN Value per Share (7) $132.87
Premium to Market (8/13/93) 29.9%
(1) Includes all proportionate POPs including McCaw's 52% POPs of LIN, and excludes LIN's
Philadelphia POPs.
Source: DLJ - Spring 1993 for transaction announcement.
(2) Includes media properties at 9.5x LTM cash flow of $69.5 million as of 6/30/93, and
equity value in American Mobile Satellite of $33.5 million as of 12/13/93.
(3) Excludes $1,238 million of preferred stock exchangeable for LIN's 49.99% interest in
Philadelphia, which is assumed to be redeemed.
(4) Includes media properties at 9.5x LTM cash flow of $71.5 million as of 6/30/94, and
equity value in American Mobile Satellite of $27.1 million as of 9/19/94.
(5) Includes TV assets subsequently spun-off. Estimated range after backing out
approximately $12 per share of TV equates to $103.26 per share.
(6) Subscriber figures from analyst reports.
(7) Includes TV assets subsequently spun-off. Estimated range after backing out
approximately $12 per share of TV equates to $120.87 per share.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
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Summary of
Other Precedent
Transactions
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
Comparison of the Calculation of EBITDA Multiples in Recent Precedent Transactions
* The main difference between Morgan Stanley and Bear Stearns/Lehman Bros. is the use of absolute vs. relative acquisition
multiples.
* Morgan uses an absolute year reference (e.g., 1995 EBITDA), while Bear Stearns/Lehman Bros. use "next year's" cash flow which
is relative to the year of the acquisition.
* Thus Bear Stearns/Lehman Bros. provide a Price/1994E EBITDA multiple for the SBC/Associated transaction and a Price/1995E
EBITDA multiple for the GTE/Contel transaction, while defining both to be a multiple to "next year's" cash flow.
<CAPTION>
Morgan Stanley Bear Stearns/Lehman Bros.
------------------------------ -------------------------
Date Price 1994E Price 1995E Price/1994E Price 1995E
Announced Buyer/Bidder Seller/Target EBITDA EBITDA EBITDA EBITDA
- --------- ------------ ------------- ----------- ---------- ------------ -------------
<C> <C> <S> <C> <C> <C> <C>
Sep. 1994 GTE Contel Cellular 19.0x 13.0x 25.7x 18.0x(1)
Feb. 1994 SBC Associated
Communications Communications 17.0x 13.0x 20.9x N.A.(2)
Nov. 1993 SBC GET
Communications (Dallas Cellular) 13.0x 10.0x N.A. N.A.(3)
(1) Differences between the multiples are explained by the different sources for EBITDA estimates, and also by the adjustments for
non-consolidated POPs, the EBITDA for which is included on a proportionate basis. Bear Stearns/Lehman Bros. use Kagan Wireless
Telecom Investor for their EBITDA estimates. Morgan Stanley's EBITDA source is not disclosed.
(2) The different multiples can be accounted for by the differing assumptions used in projecting historical Associated EBITDA
numbers. Morgan Stanley uses the 7/29/94 Associated Merger Proxy document, which explicitly specifies the pro-forma income of
the cellular businesses sold to SBC, and assumes a 25% growth between 1994 and 1995; Bear Stearns/Lehman Bros. use the 1993
10-K as their source, exclude non-cellular assets and assume a 50% growth rate between 1993 and 1994.
(3) Morgan Stanley estimates EBITDA by assuming revenues 150% LIN's management projected Dallas market revenues, and a 35% EBITDA
margin. Bear Stearns/Lehman Bros. looked at per POP values only.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
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Selected Recent Cellular Transactions - EBITDA Multiples
<CAPTION>
Date Buyer/ Seller/ Purchase LTM 1994 1995E Price/LTM Price/1994 Price/1995
Announced Market(s) Bidder Target Price EBITDA EBITDA EBITDA EBITDA E EBITDA E EBITDA
<C> <C> <S> <C> <C> <C> <C> <C> <C> <C>
Sep. 1994 GTE Contel $456.68(2) 18.0(3) 21.0(3) 36.1(3) 25.4x 21.7x 12.7x
(1) Includes Cellular
19.5MM
adjusted (acquired
MSA POPs an
and 4.4MM additional
adjusted 10%
RSA POPs. stake)
Feb. 1994 Buffalo, SBC Associated $680.00(4) 23.6(5) 34.2(5) 42.7(5) 28.8x 19.9x 15.9x
NY (75.0%) Communi- Communi-
Rochester, cations cations
NY
(85.7%)
Albany, NY
Pittsburgh,
PA (35.7%)
San
Francisco
(3.0%)
Nov. 1993 Dallas, TX SBC GTE $120.00 7.4(6) 9.4 (6) 11.9 (6) 16.2x 12.8x 10.1x
Communi- (Dallas
cations Cellular)
(acquired
an
additional
10%
stake)
Aug. 1993 Nationwide AT&T McCaw $16,730.72(7) 660.1(8) 925.8(8) 1,283.4(8) 25.3x 18.1x 13.0x
markets Cellular
including:
Dallas TX,
San
Francisco
CA,
Miami FL
(*) Notes on the following page.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
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Selected Recent Cellular Transactions - EBITDA Multiples
NOTES
(1) Transaction is still pending. Closing is subject to the consummation of the Bell Atlantic/NYNEX cellular joint venture, which
required the sale of these properties.
(2) Purchase offer consisted of a cash offer of $25.50 per share for all 9.97MM outstanding Class B shares (10% of outstanding
stock). The implied enterprise purchase price (for 100% of the stock) includes 2.02 billion of net debt, as per the 9/30/94
Contel 10-Q. The purchase price shown is 10% of this adjusted total price.
(3) LTM EBITDA is as of 9/30/94. 1994 EBITDA is the 12/31/94 actual fiscal EBITDA. 1995E EBITDA is based on management
projections, as listed in the 1/31/95 Contel Merger Proxy. All EBITDA numbers are multiplied by the proportionate ratio of
total to consolidated POPs of 1.43 (source: 1/30/95 Merger Proxy). to derive total cellular EBITDA. EBITDA was also adjusted
for minority interest to reflect average 94.1% ownership in consolidated EBITDA. The EBITDA numbers presented represent 10%
of total EBITDA.
(4) Purchase price includes the assumption of $128MM in liabilities. In connection with the transaction, Associated shareholders
received pro-rated shares of a new company to be formed with the non-cellular assets that were not sold to SBC (these include
holdings in TCI, Liberty Media, General Communications, Republic Pictures, as well as Mexican cellular (2.1MM POPs) operations.
(5) LTM 12/31/93 historical EBITDA of merged cellular assets ($19.7MM) taken from the 7/29/94 Associated Merger Proxy.
Proportional EBITDA based on ratio of total POPs to consolidated POPs of 1.33, and 90.2% average proportionate interest in
consolidated cellular EBITDA. 1994 EBITDA assumes a 45% growth rate over 1993. 1995 EBITDA assumes a 25% growth rate over
1994 EBITDA.
(6) EBITDA numbers are based on LIN actual and management base case revenue projections for its Dallas cellular market.
Calculations assume revenues 135% of LIN's Dallas market revenues, and a 40% EBITDA margin. (SBC has 60% market share compared
to LIN's 40%, but offers 10% lower prices). The EBITDA numbers represent 10% of total EBITDA.
(7) Net debt calculation excludes $1,238 million of preferred stock exchangeable for LIN's 49.99% interest in Philadelphia, which
is assumed to be redeemed. Purchase price includes McCaw's estimated 472,500 pagers at $500 a pager, 52% of 9.5x LTM LIN's
media properties cash flow of $69.5 million as of 6/30/93, McCaw's direct and indirect interest in American Mobile Satellite
(AMSAT) of 8.85% and AMSAT's equity value of $506.4 million as of 12/31/93.
(8) Proportionate cellular OCF values from McCaw 10-K and 10-Q. Excludes Philadelphia (in millions): LTM as of 6/30/93 - $13.9;
1993 - $18.0; LTM as of 6/30/94 - $29.8. Philadelphia estimates from LIN appraisal information, except for OCF of LTM as of
6/30/94, which is based on pro rata CAGR from 1993 to 1994. 1994 and 1995 OCF estimates from research analyst reports.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------------------------------------------
Summary of Per POP Values in Selected Cellular Transactions
<CAPTION>
Date Aggregate Purchase Price Per
Announced Acquiror Seller Type of Deal Price ($MM) POP
- --------- -------- ------ ------------ ------------------ ---------
<C> <C> <S> <C> <S> <C> <C>
Nov. 94 SNET Bell Atlantic/NYNEX Acquisition $450 $196(1)
(Rhode Island, Massachusetts
and Connecticut markets)
Oct. 94 CGE SBC Communications
(Washington D.C.) Joint Venture $215 $295(2)
Sep. 94 GTE Contel Cellular 10% Stake $457 $191
Jul. 94 AirTouch US WEST Joint Venture $13,250 $250(3)
Jun. 94 Bell Atlantic NYNEX Joint Venture $13,000 $236(4)
Feb. 94 SBC Communications Associated Communications Acquisition $680 $189
Nov. 93 SBC Communications GTE (Dallas Cellular) 10% Stake $120 $286
Jan. 90 McCaw Cellular Cellular Communications
(Dallas) Acquisition $60 $276
Dec. 89 McCaw Cellular LIN Broadcasting 42.2% Stake $3,775 $321(5)
Oct. 89 LIN Broadcasting Metromedia
(New York Cellular) 48% Stake $1,881 $275
(1) Purchase price and per POP calculation based on the 11/22/94 SNET 8-K.
(2) CGE invested $215MM (excluding non-cellular investments) for a 10% ownership stake in SBC's Washington D.C./Baltimore cellular
operations. Concurrently SBC invested $626MM to gain a 10% stake in CGE's cellular subsidiary in France, SFR, as well as
minority ownership positions in other communications businesses controlled by CGE, including mobile data and paging services.
(3) Joint venture combined all of the domestic cellular assets of US WEST and AirTouch. Markets comprise 9 of the top 20
including: Los Angeles, San Francisco, Detroit, Atlanta, Seattle and Denver. US WEST owns 30% and AirTouch owns 70% of the
joint venture.
(4) Joint venture combined all of the domestic cellular assets of NYNEX and Bell Atlantic. Markets comprise 7 of the top 20
including: New York, Boston, Philadelphia, Baltimore and Washington, D.C. Bell Atlantic owns 62.35% and NYNEX owns 37.65%.
(5) Based on average per POP value derived from alternative valuation analyses.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
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Selected Cellular Acquisitions - Per POP Implied Valuation
<CAPTION>
Date Purchase POP's Price Per
Announced Market(s) Buyer/Bidder Seller/Target Price ($MM) (MM) POP*
- --------- -------- ------------ ------------ ----------- ------ ---------
<C> <C> <S> <C> <S> <C> <C> <C> <C>
Nov. 94(1) Providence, RI SNET Bell Atlantic/NYNEX $450(2) 2.300(2) $196
New Bedford, MA
(Bell Atlantic)
Pittsfield, MA (80.0%)
8 other markets in CT, MA
(16.1%)
(NYNEX)
Oct. 1994 Washington D.C./Baltimore Cie Generale(3) SBC Communications (3) $215(4) 0.730 $295
markets (10% ownership) des Eaux (CGE)
Sep. 1994 Includes 19.5MM adjusted GTE Contel Cellular $457(5) 2.390(6) $191
MSA POPs and 4.4MM (acquired an additional
adjusted RSA POPs 10% stake)
Jul. 94 Covers 9 to the top 20 U.S. U.S. WEST AirTouch
markets including (Joint Venture (Joint Venture - owns 70%) $13,250(7) 53.000(7) $250
Los Angeles,
San Francisco
Detroit,
Atlanta,
Seattle,
and Denver
* All price per POP calculations exclude non-cellular assets.
(1) The closing of this transaction is subject to the consummation of the Bell Atlantic/NYNEX cellular joint venture.
(2) Purchase price and per POP calculation based on the 11/22/94 SNET 8-K.
(3) In a concurrent transaction, SBC communications invested $626MM to gain a 10% stake in CGE's cellular subsidiary in France,
SFR, as well as minority ownership positions in other communications businesses controlled by CGE, including mobile data and
paging services.
(4) Purchase price excludes $32MM of net other investments with CGE made in SBC, as per the 10/11/94 SBC Investor Briefing report.
(5) Purchase offer consisted of a cash offer of $25.50 per share for all 9.97MM outstanding Class B shares (10% of outstanding
stock). The implied total purchase price (for 100% of outstanding stock) includes 2.02 billion of net debt, as per the 9/30/94
Contel 10-Q.
(6) Adjusted to reflect GTE's 10% ownership.
(7) Estimated, based on news articles.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
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Selected Cellular Acquisitions - Per POP Implied Valuation (Cont'd)
<CAPTION>
Date Purchase POP's Price Per
Announced Market(s) Buyer/Bidder Seller/Target Price ($MM) (MM) POP*
- --------- -------- ------------ ------------ ----------- ------ ---------
<C> <C> <S> <C> <S> <C> <S> <C> <C> <C>
Jun. 94 Covers 7 of the top 20 Bell Atlantic NYNEX $13,000(1) 55.000(1) $236
U.S. markets including (Joint Venture (Joint Venture
New York, Boston, - owns 62.35%) - owns 37.65%)
Philadelphia, Baltimore
and Washington D.C.
Feb. 1994 Buffalo, NY (75.0%) SBC Communications Associated Communications $680(2) 3.600 $189
Rochester, NY (85.7%)
Albany, NY
Pittsburgh, PA (35.7%)
San Francisco (3.0%)
Nov. 1993 Dallas, TX SBC Communications GTE $120 0.420 $286
(acquired an additional (Dallas Celllular
10% stake)
Aug. 1993 Nationwide markets AT&T McCaw Cellular $16,731 59.161 $283(3)
include: Dallas, TX,
San Francisco, CA,
Miami, FL
* All price per POP calculations exclude non-cellular assets.
(1) Estimated, based on news articles.
(2) Purchase price includes the assumption of $128MM in liabilities. In connection with the transaction, Associated shareholders
received pro-rated shares of a new company to be formed with the non-cellular assets that were not sold to SBC. These assets
include holdings in TCI, Liberty Media, General Communications, Republic Pictures, as well as Mexican cellular with 2.1MM POPs.
(3) Purchase price includes McCaw's estimated 472,500 pagers at $500 a pager, 52% of 9.5x LTM LIN's media properties cash flow of
$69.5 million as of 6/30/93, McCaw's direct and indirect interest in American Mobile Satellite (AMSAT) of 8.85%, AMSAT's equity
value of $506.4 million as of 12/31/93 and license for 1.7 million Hong Kong POPs at $10 a POP.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
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Selected Cellular Acquisitions - Per POP Implied Valuation (Cont d)
<CAPTION>
Date Purchase POP's Price Per
Announced Market(s) Buyer/Bidder Seller/Target Price ($MM) (MM) POP*
- --------- -------- ------------ ------------ ----------- ------ ---------
<C> <C> <S> <C> <S> <C> <C> <C>
Aug. 1992 Albany, NY Associated McCaw Cellular $90(1) 0.689(2) $131
Rochester, NY Communications
Glens Falls, NY
May 1992 Nationwide; Markets Sprint Centel $4,412(3) 16.570 $115-$135
include: New York, NY,
Chicago, IL, Houston, TX
Oct. 1991 Omaha Lincoln Centel $36(4) 16.570 $214
(50% ownership in JV) Telecommunications
Sept. 1991 Wisconsin Bell South McCaw Cellular $410(5) 2.220(6) $184
Illinois
Indiana
* All prices per POP calculations exclude non-cellular assets.
(1) Includes assumption of $7.5 million in debt.
(2) The parties also formed a joint venture, with McCaw donating its 50% interest in Buffalo and Associated its 6% interest in San
Francisco/San Jose.
(3) Includes $1,363 billion in net debt. Assuming a value of $1,300 to $1,500 per access line for Centel's 1.599 million access
lines and the market value ($102.8 million) of its holdings in Rochester Telephone, Centel's cellular assets have an implied
value of $115 to $135 per POP.
(4) Purchase price represents $11.9 million in cash and the assumption of a $23.8 million note.
(5) Includes an agreement to let McCaw out of a $50 million obligation originally incurred by Graphics Scanning and due to
BellSouth.
(6) BellSouth acquired 2.5 million POPs from McCaw and gave McCaw its interest in Rochester (280,000 POPs), resulting in a net gain
of 2.22 million POPs.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
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Selected Cellular Acquisitions - Per POP Implied Valuation (Cont d)
<CAPTION>
Date Purchase POP's Price Per
Announced Market(s) Buyer/Bidder Seller/Target Price ($MM) (MM) POP*
- --------- -------- ------------ ------------ ----------- ------ ---------
<C> <C> <S> <C> <S> <C> <C> <C>
Sept. 1991 Milwaukee, WI Bell South Graphic Scanning $310(1) 1.153 $178(2)
Indianapolis, IN
Terre Haute, IN
Bloomington, IN
Sept. 1991 18 MSAs nationwide, Bell Atlantic Metro Mobile $2,448(3) 11.530 $206
including:
Phoenix, AZ
Hartford, CT
Providence, RI
Bridgeport, CT
New Haven, CT
Charlotte, NC
Tucson, AZ
Aug. 1991 Wichita, KN Pacific Telesis McCaw Cellular $100 0.619 $162
Topeka, KN
Aug. 1991 Ohio, Michigan MSAs Pacific Telesis Cellular Communications $90(4) 0.476 $189
(5% interest)
July 1991 Waco, TX McCaw Cellular Crowley Cellular $107 0.609 $176
Daytona Beach, FL
* All price per POP calculations exclude non-cellular assets.
(1) Comprised of $168 million in cash and $142 million in Graphic Scanning liabilities assumed by BellSouth.
(2) Assumes a value of $18.9 million for Graphic Scanning's 315,000 paging subscribers and $86 million for its UK cellular and
paging assets (analyst estimates).
(3) Includes liquid petroleum business valued at approximately $70 MM. Purchase price represents equity valued at $1,623 million
and the assumption of $825 million in debt.
(4) Part of larger transaction, including the formation of a joint venture with 8.86 million POPs.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
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Selected Cellular Acquisitions - Per POP Implied Valuation (Cont d)
<CAPTION>
Date Purchase POP's Price Per
Announced Market(s) Buyer/Bidder Seller/Target Price ($MM) (MM) POP*
- --------- -------- ------------ ------------ ----------- ------ ---------
<C> <C> <S> <C> <S> <C> <C> <C>
June 1991 Philadelphia, PA Comcast Cellular Metromedia $1,110 5.155 $198(1)
Long Branch, NJ
New Brunswick, NJx
May 1991 St. Louis MSA Ameritech CyberTel $512 2.815 $159(2)
surrounding RSAs
Mar. 1991 35 cities in Midwest and U.S. West U.S. West NewVector $476(3) 16.901 $148
Western U.S. including
Minneapolis-St. Paul, San
Diego and Denver
Mar. 1991 Athens, GA
Lexington, KY
3 RSAs around Atlanta Bell South GTE Mobilnet $102 0.903 $111
Jan. 1991 Minority interests in 20
markets in seven states Centel Rochester Telephone(4) $35 0.435 $79
Oct. 1990 Springfield, IL Southwestern Bell Crowley Cellular N.A. 0.613 N.A.
Decatur, IL
Bloomington-Normal, IL
Champaign-Urbana, IL
* All price per POP calculations exclude non-cellular assets.
(1) Purchased based on $310 MM in cash, $250MM in cash or Comcast Class A stock and Comcast Cellular participating preferred stock
(valued by analysts at $550 MM). Assuming a range of 6.0x-8.0x EBITDA (estimated by analysts at $12.8 MM) for Guest Informant
division and 15% interest in WOTV purchased, the value of Metromedia's cellular assets is $196-%$200 per POP.
(2) Assumes a value of $37.5 million for 750,000 pagers and $26 million for non-compete agreement and net operating loss (NOL)
carry forward.
(3) Reflects U.S. West's acquisition of the remaining 19% of NewVector that it did not already own.
(4) Assuming a range of 8.75x-9.75x EBITD, or $1,800-$2,000 per access line (as estimated by analysts) for the 85,000 Centel access
lines transferred to Rochester, less the cash and equity (based on RTC's closing stock price on 4/3/91) given up by Rochester,
the value of Rochester's cellular assets being transferred is $60-$99 per POP.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
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Selected Cellular Acquisitions - Per POP Implied Valuation (Cont d)
<CAPTION>
Date Purchase POP's Price Per
Announced Market(s) Buyer/Bidder Seller/Target Price ($MM) (MM) POP*
- --------- -------- ------------ ------------ ----------- ------ ---------
<C> <C> <C> <S> <C> <S><C> <S> <C> <C> <C>
Sept. 1990 51 RSAs nationwide, U.S. Cellular Telephone and Data Systems $176 2.500 $70
in states including:
Florida
Iowa
Missouri
North Carolina
Texas
Virginia
July 1990 67 cities nationwide including GTE Contel Cellular(1) $3,901 22.386 $174
majority and minority (Contel Corp.)
interests. Among the markets
covered were: Los Angeles,
San Francisco, Washington
DC, Minneapolis-St. Paul
July 1990 Cleveland, Cincinnati, Pacific Telesis Cellular Communications(2) $1,375 7.253 $184
Columbus, Dayton, Akron,
and 5 other OH cities
Apr. 1990 Wisconsin PacificCorp North-West Telecom $272(3) 0.575 $176
Apr. 1990 12 MSAs in the Southwest, GTE Providence Journal $710 3.500 $203
including:
Raleigh, NC
Greensboro, NC
Charleston, SC
Augusta, GA
* All price per POP calculations exclude non-cellular assets.
(1) Assuming a range of 3.0x-4.0x EBITD, or $1,200-$1,600 in equity per access line, for Contel telephone operations, and 6.0x-8.0x
EBITD for other Contel non-cellular assets, plus a pro rata share of Contel net debt for the non-cellular assets of Contel, and
based on GTE's 4/3/91 closing stock price, the price paid for the cellular assets of Contel is $133-$216 per POP.
(2) Based on $39/share for initial 5% in 1991 and $60/share MRO price in 1995, adjusted for net debt, implied discounted price is
approximately $184 per POP.
(3) Assuming a value of $2,000-$2,300 per access line for North-West's $64,500 access lines, and a value (based on analyst
estimates) of $32 million for its Cable TV, printing and publishing assets, the value of the cellular assets being transferred
is $164-$188 per POP.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------
Selected Cellular Acquisitions - Per POP Implied Valuation (Cont d)
<CAPTION>
Date Purchase POP's Price Per
Announced Market(s) Buyer/Bidder Seller/Target Price ($MM) (MM) POP*
- --------- -------- ------------ ------------ ----------- ------ ---------
<C> <C> <S> <C> <C> <C>
Mar. 1990 Greensboro-Winston-Salem GTE Providence Journal $700 3.373 $207
Raleigh-Durham
Charleston
Fayetteville
Savannah
Lynchburg
Jan. 1990 Dallas McCaw Cellular Cellular $60 0.219 $276
Communications, Inc. Communications, Inc.
Dec. 1989 New York McCaw Cellular LIN Broadcasting $3,375(1) 24.948 $321
Los Angeles Communications, Inc.
Philadelphia
Dallas
Houston
Oct. 1989 New York LIN Broadcasting Metromedia $1,881 6.840 $275
Oct. 1989 13 Southeast markets Contel Cellular Inc. McCaw Cellular $1,300(2) 6.100 $205
Communications, Inc.
Mar. 1989 18 Midwestern markets Century Telephone Universal Telephone $23 0.410(3) $56(4)
Jan. 1989 Numerous regional clusters British Telecom plc McCaw Cellular $1,544 50.388 $139(5)
Communications, Inc.
* All price per POP calculations exclude non-cellular assets.
(1) For a 42.2% interest in LIN Broadcasting.
(2) Analyst estimates.
(3) Cellular assets comprised of 130,000 MSA POPs and 280,000 RSA POPs.
(4) Assuming a range of $1,800-$2,150 for Universal's 48,000 access lines, Universal's cellular assets are worth $36-$77 per POP.
(5) Acquisition of 22% minority position; BT is barred from obtaining control position.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------
Selected Cellular Acquisitions - Per POP Implied Valuation (Cont d)
<CAPTION>
Date Purchase POP's Price Per
Announced Market(s) Buyer/Bidder Seller/Target Price ($MM) (MM) POP*
- --------- -------- ------------ ------------ ----------- ------ ---------
<C> <C> <S> <C> <C> <C>
Mar. 1988 New Brunswick Comcast American Cellular Network $209 1.700 $122
Long Branch
Trenton
Princeton
Atlantic City
Harrisburg
Wilmington
Mar. 1988 16 states including: Centel United Telecom's $797 7.200 $105
Ohio United TeleSpectrum
Indiana
North Carolina
South Carolina
Texas
Feb. 1988 Los Angeles BellSouth Mobile Communications $727 5.300 $96
Gary/Hammond
Houston, East Chicago
Milwaukee, Richmond,
Indianapolis,Jackson
Rochester, Bakersfield
Honolulu, Mobile
July 1987 Miami/Ft. Lauderdale McCaw Cellular Washington Post $230 3.000 $77
West Palm Beach Communications, Inc.
1987 Orlando McCaw Cellular Maxcell Telecom Plus $157 9.000 $17
Tampa Communications, Inc. Charisma Communications
Jacksonville
Memphis
Louisville
Nashville
Birmingham
* All price per POP calculations exclude non-cellular assets.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------
Selected Cellular Acquisitions - Per POP Implied Valuation (Cont d)
<CAPTION>
Date Purchase POP's Price Per
Announced Market(s) Buyer/Bidder Seller/Target Price ($MM) (MM) POP*
- --------- -------- ------------ ------------ ----------- ------ ---------
<C> <C> <S> <C> <C> <C>
Dec. 1986 Detroit Pacific Telesis Graphic Scanning $316 6.900 $46
Toledo Rapid-American
Grand Rapids Western Union
Flint Washington Post
Lansing-E. Lansing
1986 Chicago/Gary Southwestern Bell Metromedia $746 18.200 $41(1)
Boston/Worcester
DC/Baltimore
1986 San Diego U.S. West NewVector Communications Industries $46 2.300 $20
July 1985 Pittsburgh McCaw Cellular MCI $120 6.900 $17(2)
Minneapolis Communications, Inc.
Denver
Kansas City
San Antonio
Sacramento
Salt Lake City
Fresno
March 1985 San Francisco/ McCaw Cellular Graphic Scanning $37 2.300 $16
San Jose Communications, Inc.
Seattle/Tacoma
Portland
Sacramento
San Antonio
* All price per POP calculations exclude non-cellular assets.
(1) Price per POP actually lower, information on non-cellular assets not available.
(2) Price per POP based on allocation among parties; sale included non-cellular assets.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------
Selected Public Company Trading Analysis
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------
Trading Analysis of Selected Pure Cellular Companies ($MM, except per POP Values)
<CAPTION>
Estimated
Adjusted Estimated
Market Adjusted Estimated Estimated Adjusted Market Value
Value of Market Implied Of Cellular Operations/
Non-U.S. Value of Enteprise ---------------------------------- LTM LTM LTM
and Non- Domestic Domestic Value per LTM LTM 1994E 1995E Cellular Cellular Cellular
Market Market Cellular Cellular Pops Domestic Cellular Cellular Cellular Cellular EBITDA EBITDA EBITDA
Value(1) Value(2) Operations Operations (MM) Pop Sales EBITDA EBITDA EBIDTA per Pop per Pop per Pop
------- ------- ---------- ---------- ------- --------- -------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LIN Broad-
casting(3) $6,733 $8,293 $118 $8,174 25.7 $318 8.8x 21.0x 21.0x 15.3x $15.16 $15.16 $20.79
AirTouch
Comm.(4) $13,388 $12,34 $5,000 $7,348 34.9 $211 6.4x 15.5x 15.3x 11.2x $13.56 $13.73 $18.83
Cellular
Comm.(5) 2,004 2,192 0 2,192 7.9 279 8.1 26.1 22.4 16.4 10.68 12.44 17.04
Vanguard
Cellular(6) 979 1,278 19 1,260 7.0 180 7.7 37.4 28.3 16.0 4.83 6.37 11.29
Note: Figures are for publicly available LTM data available for each company, except for LIN figures provided by LIN management.
Estimates from analyst reports.
(1) Market values based on 3/3/1995 closing stock price: Air touch $27.13; CCI'A' $50.00; CCI Convertible Preferred $49.75;
LIN $129.00; Vanguard $25.25.
(2) Defined as market value plus debt, preferred stock and minority interests less cash and equivalents.
(3) Non-cellular assets consist of 1.656 million shares of American Mobile Satellite (equity value of $30.0 million as of
3/3/1995), and television stations at 9.5x 1995E EBITDA of $9.30 million. Equity value includes option spread on 1.660 million
stock options outstanding at an average exercise price of $85.46 as of 1/31/95 as provided by LIN management. Operating data
based on proportionate ownership.
(4) Non-cellular assets consist of international operations and paging and other assets at $5,000MM.
(5) Market values assume conversion of convertible preferred stock related to the AirTouch transaction. Operating data based on
CCI's proportional ownership interest in cellular operations, not consolidated financials.
(6) Vanguard's non-cellular operations are based on 2.5 million share holdings of Geotek Communications, and a $7.44 share price of
Geotek as of 3/3/1995.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------
Comparison with AirTouch
- -- Among the companies considered in the public company trading analysis, AirTouch Communications is arguably the most directly
relevant to LIN
<CAPTION>
AirTouch LIN
---------------------- -----------------------
<C> <S> <C> <C> <S> <C> <S>
Market Enterprise Value(1) $12,348 million $8,293 million
Major Domestic Markets Los Angeles, San Francisco, New York, Los Angeles,
San Diego, Atlanta, Detroit, Dallas, Houston
Cleveland, San Jose,
Sacramento, Cincinnati,
Kansas City
No. of Domestic POPs 34.9 million 25.7 million
- -- The following is a summary comparison of AirTouch and LIN:
% of POPs in Top 10 Markets 33% 98%
1994E Domestic Cellular EBITDA/POP(2) $13.73 $15.16
1994E LIN EBITDA/POP Premium to AirTouch 10.0%
1995E Domestic Cellular EBITDA/POP(2) $18.83 $20.79
1995E LIN EBITDA/POP Premium to AirTouch 10.4%
- -- The following are AirTouch's domestic per POP and EBITDA trading multiples (after backing out a range of estimates of
international and other asset value)
AirTouch
-----------------------------------------
Market Domestic Cellular Enterprise Value Per Domestic POP(1) (2) $196 - $218
Market Domestic Cellular Enterprise Value/ 14.3x - 15.9x
1994E Domestic Cellular EBITDA(1) (2)
Market Domestic Cellular Enterprise Value/ 10.4x - 11.6x
1995E Domestic Cellular EBITDA(1) (2)
(1) Based on closing stock prices as of 3/3/95: AirTouch - $27.125; LIN - $129.00.
(2) Based on AirTouch's 1994E domestic cellular EBITDA of $479 million and 1995E domestic cellular EBITDA of $657 million from
analyst reports; LIN's 1994 cellular EBITDA of $390 million and 1995E EBITDA of $535 million as provided by LIN management.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------
Comparison with AirTouch (cont'd)
(in millions)
<CAPTION>
AirTouch's International and Other Assets
International Cellular
POPs (million) POPs (million)
<S> <C> <S> <C>
Germany 23.2 Russia 5.3
Japan 10.4 Sweden 4.4
Spain 6.3 Portugal 2.4
Italy 5.9 Belgium 2.0
South Korea 5.0
Total International POPs 64.9 million
International Paging 111,000 subscribers
Domestic Paging 1,270,000 subscribers
Other Investments Qualcomm, IDC Long Distance, Air-to-Ground
Service, SMR operations, KICC
Market Equity Value (3/3/1995) $13,388 1994E Domestic Cellular EBITDA (1) $479
Net Debt (9/30/94) ($1,040) 1995E Domestic Cellular EBITDA (1) $657
Market Enterprise Value $12,348 No. of Domestic POPs (million) 34.9
Sensitivity of AirTouch's Trading Analysis to Valuation of International and Other Assets
Range of Implied Implied Domestic Cellular Enterprise Value /
International and Other Domestic Cellular Domestic 1994E Domestic 1995E Domestic
Asset Values Enterprise Value POPs Cellular EBITDA Cellular EBITDA
<C> <C> <C> <C> <C>
$4,750 $7,598 $218 15.9x 11.6x
$5,000 $7,348 $211 15.3x 11.2x
$5,250 $7,098 $203 14.8x 10.8x
$5,500 $6,848 $196 14.3x 10.4x
AirTouch started trading publicly in April, 1994
(1) Source: Analyst reports.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------
Indexed Price History of Selected Companies (Weekly from April 1, 1994 - March 3, 1995)
<CAPTION>
Date 4/8/94 5/6/94 6/3/94 7/1/94 8/5/94
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Price
LIN
Broadcasting 100 100 100 100 106 106 110 112 113 114 114 110 114 114 119 119 119 120
AirTouch
Communications 100 109 105 113 110 111 113 111 118 116 111 110 110 114 113 119 120 114
Date 9/2/94 10/7/94 11/4/94 12/2/94
Stock Price
LIN
Broadcasting 121 123 126 127 129 132 133 132 129 129 129 130 131 133 133 132 135 133
AirTouch
Communications 122 122 125 130 130 132 128 132 126 134 133 139 128 129 128 121 124 121
Date 1/6/95 2/3/95 3/3/95
Stock Price
LIN
Broadcasting 135 138 127 126 128 131 131 132 132 123 123 123
AirTouch
Communications 128 128 134 134 132 128 126 129 129 125 128 125
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------
Indexed Price History of Selected Companies (Weekly from April 1, 1994 - March 3, 1995)
<CAPTION>
Date 4/8/94 5/6/94 6/3/94 7/1/94 8/5/94
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LIN
Broadcasting 100 100 100 100 106 106 110 112 113 114 114 110 114 114 119 119 119 120
Cellular 100 102 100 102 103 103 106 103 105 103 107 106 108 107 111 116 117 115
Communications
(Class A)
Vanguard
Cellular 100 107 104 111 111 112 113 110 114 114 116 117 112 122 121 121 127 126
AirTouch
Communications 100 109 105 113 110 111 113 111 118 116 111 110 110 114 113 119 120 114
Date 9/2/94 10/7/94 11/4/94 12/2/94
LIN
Broadcasting 121 123 126 127 129 132 133 132 129 129 129 130 131 133 133 132 135 133
Cellular
Communications
(Class A) 116 121 119 118 115 120 117 119 121 120 119 119 119 120 120 115 113 112
Vanguard
Cellular 131 132 138 137 137 146 142 133 132 138 140 137 137 143 143 135 135 129
AirTouch
Communications 122 122 125 130 130 132 128 132 126 134 133 139 128 129 128 121 124 121
Date 1/6/95 2/3/95 3/3/95
LIN
Broadcasting 135 138 127 126 128 131 131 132 132 123 123 123
Cellular
Communications
(Class A) 112 115 120 115 113 116 113 114 109 112 113 112
Vanguard
Cellular 125 127 130 132 128 128 129 132 137 138 134 126
AirTouch
Communications 128 128 134 134 132 128 126 129 129 125 128 125
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
- -----------------------------------------------------
Indexed Price History of Selected Companies (Weekly from January 1, 1991 - February 28, 1995)
<CAPTION>
Date 1/31/91 6/30/91 12/31/91 6/30/92
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LIN
Broadcasting 100 102 97 105 104 90 104 112 113 110 96 110 114 120 114 112 103 98
Vanguard
Cellular 100 116 129 120 112 103 106 129 141 154 129 141 147 156 148 134 132 128
Cellular
Communications
(Class A) 100 105 105 115 107 102 112 104 102 116 115 125 121 112 118 115 115 111
Date 12/31/92 6/30/93 12/31/93
LIN
Broadcasting 107 103 113 103 120 117 120 126 128 136 149 152 154 181 177 174 169 169
Vanguard
Cellular 125 115 108 106 142 138 116 114 125 117 123 136 141 168 151 166 152 151
Cellular
Communications
(Class A) 119 112 112 107 109 115 105 117 126 125 131 129 134 153 148 157 145 155
Date 6/30/94 12/31/94
LIN
Broadcasting 178 171 165 162 180 184 192 205 213 211 220 205 213 198
Vanguard
Cellular 164 160 150 170 166 170 195 217 203 225 205 199 195 201
Cellular
Communications
(Class A) 150 160 147 150 151 159 172 176 175 176 165 177 166 168
<PAGE>
<PAGE>
LIN BROADCASTING
Discussion of
Potential Third Party
Purchasers and Alternatives
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
Summary Observations
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
Potential Third Party Purchasers
- -- The following is a summary list of potential third party purchasers/investors for all or part of
LIN. The list is not intended to be exhaustive but rather representative of the potential third
party purchasers
<CAPTION>
Wireless Providers/ Long Distance
Telcos Service Providers Foreign Other
- ----------------- ----------------- ------------------ ----------------
<S> <C> <S>
AirTouch (1) MCI Bell Canada International EDS
ALLTEL Sprint British Telecom General Electric
Ameritech LDDS Cable and Wireless TCI
Bell Atlantic (1) Compagnie Generale des Eaux Time Warner
BellSouth Deutsche Telekom Craig McCaw
Comcast France Telecom Financial Buyer
GTE(2) NTT
NYNEX (1) Singapore Telecom
Pacific Telesis STET
SBC(2) Telefonica de Espana
SNET Vodafone
TDS/U.S. Cellular
US WEST (1)
- --------------------------
(1) AirTouch/US WEST/Bell Atlantic/NYNEX have a joint venture agreement that prohibits the parties
from owning competing properties.
(2) GTE and SBC have a "B side" cooperation agreement in Dallas and Houston.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
Potential Third Party Purchasers and Alternatives
- -- In assessing the feasibility and attractiveness of a transaction or transactions with one or more
parties we have taken into account, among other things:
(A) Tax considerations (e.g. corporate level treatment of potential multiple party
transactions);
(B) MFJ considerations (e.g. AT&T ownership of RBOC securities);
(C) FCC regulations (e.g. foreign ownership restrictions): and;
(D) Antitrust issues (e.g. "A" side, "B" side overlaps)
- -- WP&Co was not authorized to, and was expressly asked by AT&T/McCaw and the Independent Directors
of LIN not to, contact any third parties with respect to whether or at what price any third party
might be interested in an acquisition of LIN
- -- WP&Co. has noted that because LIN is an approximately 52% owned subsidiary of McCaw which in turn
is a subsidiary of AT&T, "pooling of interests" accounting is not possible. We have also noted
that certain transactions would be subject to rights of first refusal
- -- WP&Co reviewed with Bear Stearns/Lehman Brothers and Morgan Stanley the views of these firms on
potential purchasers
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
Cellular and Potential PCS Overlaps
<CAPTION>
Conflicted Cellular Market Potential Conflicted PCS Markets(1)
<S> <S> <S>
AirTouch Los Angeles/New York(5) Dallas/Houston(2)
Ameritech None None
Bell Atlantic New York/Los Angeles(5) Dallas/Houston(2)
BellSouth None(3) None
GTE Houston/Dallas(4) None
NYNEX New York/Los Angeles(5) Dallas/Houston(2)
Pacific Telesis None Los Angeles
SBC Dallas None
U S WEST Los Angeles(5) Dallas/Houston(2)
(1) Based on PCS bid submissions through March 1, 1995.
(2) As per most recent Primeco bid. (Primeco is a joint venture formed by NYNEX/Bell Atlantic/US
West/AirTouch.)
(3) BellSouth owns 60% of the Los Angeles "A" side market and 44% of the Houston "A" side market but
shares control in both markets with LIN.
(4) GTE holds a minority interest in Dallas.
(5) Conflict through AirTouch/US WEST/Bell Atlantic/NYNEX venture.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
Potential Third Party Purchasers and Alternatives
- -- In addition to potential acquisition of 100% of the stock of LIN by a single buyer we considered
the potential for the break up of LIN through separate transactions and the potential of
consortium bids
- -- The following table outlines properties selected potential bidders may be able to acquire
(subject to the pending PCS auctions):
<CAPTION>
Potential Bidder NY LA Houston Dallas
<S>
Ameritech X X X X
BellSouth X X X X
GTE X X X
MCI X X X X
SBC X X X
Pacific Telesis X X X X
Sprint X X X X
AirTouch/US West/Bell Atlantic/NYNEX X X
- -- Other potential bidders and purchase strategies exist. The examples above simply attempt to
illustrate some of the perceived possibilities
- -- Divestiture of small minority interests are assumed for cases in which a potential acquiror would
significantly increase its market interest by acquiring LIN s interest for a particular market
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
Selected Illustrative
Dilution Analysis
This section shows estimated pro forma EPS dilution and payout ratio and cash flow coverage effects to
a range of possible purchasers of all or part of the assets of LIN. It is not meant to show either
the most likely alternative transactions or to exclude other potential structures or transactions. It
is included for illustrative purposes only as part of the overall analysis of third party purchasers.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
BellSouth (Buys all of LIN)(1)
<CAPTION>
Price Per LIN Share $105
EPS Dilution (%) Payout Ratio (%) EBITDA/Interest Payment
PF 1995 1996 1997 1994 PF 1995 1996 1997 1994 PF 1995 1996 1997
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
100% Stock 16.9 14.9 12.7 66.8 77.8 67.8 61.4 10.9 10.5 11.9 12.7
50% Cash/
50% Stock 15.7 13.1 10.7 66.8 76.7 66.4 60.0 10.9 8.0 8.6 9.3
100% Cash 14.3 10.9 8.2 66.8 75.4 64.7 58.9 10.9 6.5 6.9 7.3
Price Per LIN Share $155
EPS Dilution (%) Payout Ratio (%) EBITDA/Interest Payment
PF 1995 1996 1997 1994 PF 1995 1996 1997 1994 PF 1995 1996 1997
100% Stock 25.4 23.3 21.1 66.8 86.6 75.2 67.9 10.9 10.6 11.5 12.8
50% Cash/
50% Stock 24.8 21.7 19.2 66.8 86.0 73.7 66.4 10.9 7.3 7.8 8.3
100% Cash 24.1 19.7 16.8 66.8 85.1 71.8 64.5 10.9 5.5 5.9 6.1
(1) Assumes LIN Management Case including Wireless Data and New Features and excluding Long Distance.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
BellSouth (Buys all assets except NY, Litchfield, Dallas)(1)
<CAPTION>
Price per LIN Share $28.78(2)
EPS Dilution (%) Payout Ratio (%) EBITDA/Interest Payment
PF 1995 1996 1997 1994 PF 1995 1996 1997 1994 PF 1995 1996 1997
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
100% Stock 4.6 3.8 2.8 66.8 67.1 60.0 55.2 10.9 11.3 12.2 13.5
50% Cash/
50% Stock 3.9 3.0 2.0 66.8 67.3 59.5 54.7 10.9 10.3 11.1 12.1
100% Cash 3.2 2.1 1.1 66.8 66.8 59.8 54.2 10.9 9.5 10.2 11.0
Price per LIN Share $44.37(2)
EPS Dilution (%) Payout Ratio (%) EBITDA/Interest Payment
PF 1995 1996 1997 1994 PF 1995 1996 1997 1994 PF 1995 1996 1997
100% Stock 8.1 7.2 6.2 66.8 70.3 62.2 57.1 10.9 11.4 12.2 13.5
50% Cash/50% Stock 7.2 6.1 5.0 66.8 69.7 61.4 56.4 10.9 9.9 10.6 11.5
100% Cash 6.3 4.8 3.7 66.8 69.0 60.6 55.7 10.9 8.7 9.3 10.0
(1) Assumes LIN Management Case including Wireless Data and New Features and excluding Long Distance.
(2) Based on $267/POP at $105 per share and $370/POP at $155 per share.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
EDS (Buys all of LIN)(1)
<CAPTION>
Price per LIN Share $$105
EPS Dilution % Payout Ratio % EBITDA/Interest Payment
PF 1995 1996 1997 1994 PF 1995 1996 1997 1994 PF 1995 1996 1997
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
100% Stock 36.3 29.9 23.6 28.1 41.9 33.0 26.4 44.0 17.1 20.6 25.7
50% Cash/50% Stock 45.1 34.9 26.0 28.1 48.7 35.5 27.3 44.0 7.0 8.2 9.2
100% Cash 58.9 42.6 29.8 28.1 64.9 40.2 28.7 44.0 4.4 5.1 5.6
Price per LIN Share $155
EPS Dilution % Payout Ratio % EBITDA/Interest Payment
PF 1995 1996 1997 1994 PF 1995 1996 1997 1994 PF 1995 1996 1997
100% Stock 52.8 46.3 40.0 28.1 56.5 43.0 33.7 44.0 17.4 20.9 25.9
50% Cash/50% Stock 69.4 57.7 48.0 28.1 87.4 54.6 38.8 44.0 5.6 6.4 7.2
100% Cash 99.6 78.2 62.4 28.1 106.0 53.6 44.0 3.3 3.8 4.2
(1) Assumes LIN Management Case including Wireless Data, New Features and Long Distance.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
GTE (Buys all assets except Houston)(1)
<CAPTION>
Price Per LIN Share $87.83(2)
EPS Dilution % Payout Ratio % EBITDA/Interest Payment
PF 1995 1996 1997 1994 PF 1995 1996 1997 1994 PF 1995 1996 1997
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
100% Stock 12.5 10.8 8.8 76.5 84.3 76.5 69.5 7.7 7.9 8.4 9.1
50% Cash/
50% Stock 11.3 9.1 7.0 76.5 83.1 74.1 68.2 7.7 6.7 7.1 7.6
100% Cash 9.8 7.2 5.0 76.5 81.7 73.6 66.7 7.7 5.8 6.2 6.5
Price Per LIN Share $133.12(2)
EPS Dilution % Payout Ratio % EBITDA/Interest Payment
PF 1995 1996 1997 1994 PF 1995 1996 1997 1994 PF 1995 1996 1997
100% Stock 20.1 18.1 16.1 76.5 92.2 83.4 75.5 7.7 7.9 8.4 9.1
50% Cash/
50% Stock 18.9 16.4 14.2 76.5 90.8 81.7 73.9 7.7 6.3 6.6 7.0
100% Cash 17.4 14.3 11.9 76.5 89.2 79.7 71.9 7.7 5.2 5.5 5.7
(1) Assumes LIN Management Case including Wireless Data, New Features and Long Distance.
(2) Based on $267/POP at $105.00 per Share and $378 POP at $155/Share.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
MCI (Buys all of LIN)(1)
<CAPTION>
Price Per LIN Share $105
EPS Dilution % Payout Ratio % EBITDA/Interest Payment
PF 1995 1996 1997 1994 PF 1995 1996 1997 1994 PF 1995 1996 1997
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
100% Stock 29.7 26.3 22.6 3.8 4.7 4.1 3.5 17.2 12.2 14.0 17.0
50% Cash/
50% Stock 29.4 24.7 20.0 3.8 4.7 3.9 3.2 17.2 6.8 7.8 8.8
100% Cash 29.1 22.5 16.3 3.8 4.7 4.0 3.4 17.2 4.7 5.4 6.0
Price Per LIN Share $155
EPS Dilution % Payout Ratio % EBITDA/Interest Payment
PF 1995 1996 1997 1994 PF 1995 1996 1997 1994 PF 1995 1996 1997
100% Stock 42.3 38.9 35.2 3.8 5.8 5.0 4.2 17.2 12.4 14.2 17.1
50% Cash/
50% Stock 44.8 39.6 34.5 3.8 6.5 5.1 4.1 17.2 5.7 6.5 7.3
100% Cash 48.9 40.8 33.5 3.8 6.0 5.0 4.1 17.2 3.7 4.2 4.6
(1) Assumes LIN Management Case including Wireless Data and New Features and excluding Long Distance.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
SBC Communications (Buys all except Dallas)(1)
<CAPTION>
Price Per LIN Share $86.14(2)
EPS Dilution % Payout Ratio % EBITDA/Interest Payment
PF 1995 1996 1997 1994 PF 1995 1996 1997 1994 PF 1995 1996 1997
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
100% Stock 15.4 13.4 11.2 57.6 61.2 54.4 48.2 10.3 9.6 11.1 13.6
50% Cash/
50% Stock 14.3 11.7 9.2 57.6 60.4 53.4 47.2 10.3 7.2 8.2 9.4
100% Cash 13.0 9.7 6.9 57.6 59.5 52.2 46.0 10.3 5.8 6.4 7.2
Price Per LIN Share $130.57(2)2
EPS Dilution % Payout Ratio % EBITDA/Interest Payment
PF 1995 1996 1997 1994 PF 1995 1996 1997 1994 PF 1995 1996 1997
100% Stock 24.8 22.2 19.9 57.6 68.4 60.6 53.5 10.3 9.7 11.2 13.7
50% Cash/
50% Stock 23.7 20.8 18.1 57.6 67.9 59.5 52.3 10.3 6.5 7.2 8.2
100% Cash 23.0 19.0 15.7 57.6 67.2 58.2 50.8 10.3 4.8 5.3 5.8
(1) Assumes LIN Management Case including Wireless Data and New Features and excluding Long Distance.
(2) Based on $267/POP at $105.00 per Share and $370/POP at $155.00 per Share.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
Sprint (Buys all of LIN)(1)
<CAPTION>
Price Per LIN Share $105
EPS Dilution % Payout Ratio % EBITDA/Interest Payment
PF 1995 1996 1997 1994 PF 1995 1996 1997 1994 PF 1995 1996 1997
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
100% Stock 34.7 30.0 25.1 39.2 58.9 53.0 46.6 6.1 6.6 8.4 9.2
50% Cash/
50% Stock 33.3 27.6 22.0 39.2 55.8 48.8 42.3 6.1 4.4 5.3 5.7
100% Cash 31.0 24.0 17.5 39.2 57.6 51.2 44.7 6.1 3.3 3.9 4.1
Price Per LIN Share $155
EPS Dilution % Payout Ratio % EBITDA/Interest Payment
PF 1995 1996 1997 1994 PF 1995 1996 1997 1994 PF 1995 1996 1997
100% Stock 47.8 43.1 38.2 39.2 73.6 65.2 56.5 6.1 6.7 8.5 9.3
50% Cash/
50% Stock 49.4 43.2 37.3 39.2 75.9 65.3 55.7 6.1 3.9 4.6 4.9
100% Cash 52.2 43.5 35.9 39.2 80.5 65.7 54.4 6.1 2.8 3.2 3.3
(1) Asumes LIN Management Case including Wireless Data and New Features and excluding Long Distance.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
Selected Recent Analyst
Comments on LIN
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
Selected Analyst Response to Feb. 15th Appraisal Results
Frederick W. Moran, Salomon Brothers Feb. 16, 1995
..."We find the current situation unacceptable. We are confident that a third appraiser,
with an unbiased perspective and fundamental understanding of the cellular industry
dynamics, will in the next 20 days appraise LIN Shares at a reasonable value. Given our
strong conviction that there is a high probability of the third appraiser rendering a
valuation of between $135 and $150 per share....."
Dennis Leibowitz, DLJ Feb. 19, 1995
..."We do not know how one could come up with $105 per share, which is the equivalent of
$271 per POP. Furthermore, in August 1993, AT&T agreed to buy McCaw Cellular for 17 times
expected 1994 cash flow. If we apply this multiple to our forecast for LIN s 1995
operating cash flow, we believe the company is worth $137 per share. If one took the
twelve months following the appraisal, the figure would be higher. We believe, however,
that the true value of LIN is higher based on our five-year discounted cash flow analysis,
which suggests a 1995 value of $147 to $158 per share..."
Harry Kaplan, Goldman Sachs Feb. 16, 1995
..."One can never be sure, as yesterday s news demonstrates what number any appraiser will
arrive at, however we continue to believe the underlying private market value is closer to
the independent LIN director s value, and we would view significant weakness in the stock
as an attractive opportunity. Goldman private market value $150 -$155 per share..."
Susan Passoni, Cowen & Co. Feb. 16, 1995
... "We believe that the renegotiated price will be materially higher than the $105 set by
AT&T and could be well above the $155 set by LIN s banker."
Phillips/Long, Smith Barney Feb. 16, 1995
"Our 1995 private market value for LIN is $142 per share; however we believe that AT&T
should be buying LIN based on 1996 numbers, which would imply a PMV closer to the mid-$150
range."
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
Selected Analyst Response to Feb. 15th Appraisal Results (Cont d)
Steven Yanis, Oppenheimer & Co. Feb. 16, 1995
"We believe AT&T will not be able to acquire LIN for a lower EBITDA multiple than AT&T
paid for McCaw. At the time McCaw/AT&T deal was announced, AT&T paid 17.5 times forward
operating cash flow."
Jeffrey Hines, PaineWebber Feb. 16, 1995
..."Our point PMV on LIN, has been, and remains $140 with upside potential to $152. We
believe that $117 - $152 represents plausible range of prices for LIN. We could
characterize AT&T s initial bid ridiculously low."
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
Appendices
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
LIN Cellular
Segmented DCF
(Management Case)
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
LIN Operating Model
(in thousands, except per POP values)
<CAPTION>
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total No.
of POPs 15,232 15,384 15,538 15,694 15,850 16,009 16,169 16,331 16,494 16,659 16,826
% Growth
Rate NA 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Beginning
Subscribers 396.239 595.417 877.405 1,163.309 1,403.030 1,642.373 1,882.510 2,116.963 2,339.063 2,553.487 2,715.081
Gross Sub-
scribers
Added 316.715 425.000 487.935 470.691 504.293 536.227 558.411 564.323 566.688 540.930 502.982
Deactivations (117.537) (143.012) (202.031) (230.970) (264.950) (296.090) (323.958) (342.223) (352.264) (379.336) (398.495)
Annual %
Churn (23.71%) (19.42%) (19.80%) (18.00%) (17.40%) (16.80%) (16.20%) (15.36%) (14.40%) (14.40%) (14.40%)
Monthly %
Churn (1.98%) (1.62%) (1.65%) (1.50%) (1.45%) (1.40%) (1.35%) (1.28%) (1.20%) (1.20%) (1.20%)
Net Sub-
scribers
Added 199.178 281.988 285.904 239.721 239.343 240.137 234.453 222.100 214.424 161.594 104.487
Ending
Subscribers 595.417 877.405 1,163.309 1,403.030 1,642.373 1,882.510 2,116.963 2,339.063 2,553.487 2715.081 2819.568
Average
Subscribers 495.828 736.411 1,020.357 1,283.170 1,522.702 1,762.442 1,999.737 2,228.013 2,446.275 2,634.284 2,767.325
Total
Penetration 3.91% 5.70% 7.49% 8.94% 10.36% 11.76% 13.09% 14.32% 15.48% 16.30% 16.76%
% Penetration
Growth NA 45.9% 31.3% 19.4% 15.9% 13.5% 11.3% 9.4% 8.1% 5.3% 2.8%
Annual
Penetration (1) 1.31% 1.83% 1.84% 1.53% 1.51% 1.50% 1.45% 1.36% 1.30% 0.97% 0.62%
% Growth NA 40.2% 0.4% (17.0%) (1.1%) (0.7%) (3.3%) (6.2%) (4.4%) (25.4%) (36.0%)
(1) Defined as net subscribers added in a period divided by the population at the end of the period.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
LIN Operating Model (Cont d)
(in thousands, except per POP values)
<CAPTION>
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income Statement
Revenue/
Subscriber/
Month $84.17 $73.02 $65.35 $61.16 $59.35 $56.29 $54.36 $53.09 $52.37 $51.99 $50.77
% Growth NA (13.2%) (10.5%) (6.4%) (3.0%) (5.2%) (3.4%) (2.3%) (1.4%) (0.7%) (2.4%)
Total
Revenues $500,829 $645,306 $800,205 $941,754 $1,084,438 $1,190,517 $1,304,374 $1,419,469 $1,537,478 $1,643,588 $1,685,930
% Growth NA 28.8% 24.0% 17.7% 15.2% 9.8% 9.6% 8.8% 8.3% 6.9% 2.6%
Direct Operating
Expenses $147,455 $195,304 $251,052 $307,703 $370,389 $415,512 $475,916 $540,618 $614,895 $672,777 $705,970
% of
Revenues 29.4% 30.3% 31.4% 32.7% 34.2% 34.9% 36.5% 38.1% 40.0% 40.9% 41.9%
Cash Flow
Before
Marketing $353,374 $450,002 $549,153 $634,051 $714,049 $775,005 $828,458 $878,851 $922,583 $970,811 $979,960
Margin 70.6% 69.7% 68.6% 67.3% 65.8% 65.1% 63.5% 61.9% 60.0% 59.1% 58.1%
Sales &
Marketing $151,415 $158,515 $184,260 $203,670 $216,292 $222,605 $215,403 $197,505 $166,143 $147,373 $135,309
% of
Revenues 30.2% 24.6% 23.0% 21.6% 19.9% 18.7% 16.5% 13.9% 10.8% 9.0% 8.0%
Sales &
Marketing /
Gross
Addition $478 $373 $378 $433 $429 $415 $386 $350 $293 $272 $269
Corporate
Expenses $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
% of
Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total
Operating
Expenses $298,870 $353,819 $435,312 $511,373 $586,681 $638,117 $691,319 $738,123 $781,038 $820,150 $841,279
Operating Cash
Flow (OCF) $201,959 $291,487 $364,893 $430,381 $497,757 $552,400 $613,055 $681,346 $756,440 $823,438 $844,651
Margin 40.3% 45.2% 45.6% 45.7% 45.9% 46.4% 47.0% 48.0% 49.2% 50.1% 50.1%
Depreciation &
Amorti-
zation $69,123 $98,578 $128,435 $141,466 $144,351 $141,082 $133,522 $121,308 $108,280 $95,692 $80,671
% of
Revenues 13.8% 15.3% 16.1% 15.0% 13.3% 11.9% 10.2% 8.5% 7.0% 5.8% 4.8%
EBIT $132,836 $192,909 $236,458 $288,915 $353,406 $411,318 $479,533 $560,038 $648,160 $727,746 $763,980
Margin 26.5% 29.9% 29.5% 30.7% 32.6% 34.5% 36.8% 39.5% 42.2% 44.3% 45.3%
Taxes $46,893 $67,918 $83,160 $101,520 $124,092 $144,361 $168,237 $196,413 $227,256 $255,111 $267,793
Effective Tax
Rate 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0%
Unlevered Net
Income $85,943 $124,991 $153,298 $187,395 $229,314 $266,957 $311,296 $363,625 $420,904 $472,635 $496,187
Net Margin 17.2% 19.4% 19.2% 19.9% 21.1% 22.4% 23.9% 25.6% 27.4% 28.8% 29.4%
Free Cash Flow
Unlevered Net
Income $85,943 $124,991 $153,298 $187,395 $229,314 $266,957 $311,296 $363,625 $420,904 $472,635 $496,187
Depreciation &
Amorti-
zation $69,123 $98,578 $128,435 $141,466 $144,351 $141,082 $133,522 $121,308 $108,280 $95,692 $80,671
Capital
Expendi-
tures ($74,139) ($170,039) ($157,247) ($161,811) ($119,672) ($114,065) ($105,504) ($88,840) ($85,770) ($64,637) ($41,795)
Change in Working
Capital $0 ($14,448) ($15,490) ($14,155) ($14,268) ($10,608) ($11,386) ($11,510) ($11,801) ($10,611) ($4,234)
As a % of
Change in
Revenues NA 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Free Cash
Flow (FCF) $80,927 $39,082 $108,996 $152,895 $239,725 $283,366 $327,929 $384,583 $431,613 $493,079 $530,829
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
LIN Valuation
(in thousands, except per POP values)
<CAPTION>
Discount Rate Perpetuity Growth Rates of Free Cash Flow
4.0% 5.0% 5.5% 6.0% 6.5% 7.0%
<C> <S> <C> <C> <C> <C> <C> <C>
11.0% Present Value of Cash Flows $1,550,319 $1,550,319 $1,550,319 $1,550,319 $1,550,319 $1,550,319
Terminal Value $2,926,318 $3,446,865 $3,778,122 $4,175,630 $4,661,474 $5,268,779
Enterprise Value $4,476,637 $4,997,184 $5,328,441 $5,725,949 $6,211,793 $6,819,098
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $4,476,637 $4,997,184 $5,328,441 $5,725,949 $6,211,793 $6,819,098
Proportionate Equity Value $4,401,877 $4,913,731 $5,239,456 $5,630,326 $6,108,056 $6,705,219
Value per Share $82.60 $92.20 $98.32 $105.65 $114.61 $125.82
Enterprise Value / POP $292.43 $326.44 $348.08 $374.05 $405.78 $445.46
Implied Exit Multiple of EBITDA 9.3x 11.0x 12.1x 13.3x 14.9x 16.8x
12.0% Present Value of Cash Flows $1,470,458 $1,470,458 $1,470,458 $1,470,458 $1,470,458 $1,470,458
Terminal Value $2,351,401 $2,713,154 $2,935,772 $3,195,493 $3,502,436 $3,870,767
Enterprise Value $3,821,859 $4,183,613 $4,406,230 $4,665,951 $4,972,894 $5,341,225
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $3,821,859 $4,183,613 $4,406,230 $4,665,951 $4,972,894 $5,341,225
Proportionate Equity Value $3,758,034 $4,113,746 $4,332,646 $4,588,030 $4,889,847 $5,252,027
Value per Share $70.52 $77.19 $81.30 $86.09 $91.76 $98.55
Enterprise Value / POP $249.66 $273.29 $287.84 $304.80 $324.85 $348.91
Implied Exit Multiple of EBITDA 8.2x 9.4x 10.2x 11.1x 12.2x 13.4x
13.0% Present Value of Cash Flows $1,396,052 $1,396,052 $1,396,052 $1,396,052 $1,396,052 $1,396,052
Terminal Value $1,920,879 $2,181,768 $2,338,301 $2,517,196 $2,723,614 $2,964,434
Enterprise Value $3,316,931 $3,577,820 $3,734,353 $3,913,248 $4,119,666 $4,360,486
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $3,316,931 $3,577,820 $3,734,353 $3,913,248 $4,119,666 $4,360,486
Proportionate Equity Value $3,261,538 $3,518,070 $3,671,989 $3,847,897 $4,050,867 $4,287,666
Value per Share $61.20 $66.01 $68.90 $72.20 $76.01 $80.46
Enterprise Value / POP $216.68 $233.72 $243.95 $255.63 $269.12 $284.85
Implied Exit Multiple of EBITDA 7.3x 8.2x 8.8x 9.5x 10.3x 11.2x
14.0% Present Value of Cash Flows $1,326,659 $1,326,659 $1,326,659 $1,326,659 $1,326,659 $1,326,659
Terminal Value $1,589,980 $1,783,632 $1,897,544 $2,025,696 $2,170,935 $2,336,922
Enterprise Value $2,916,639 $3,110,291 $3,224,204 $3,352,355 $3,497,594 $3,663,581
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $2,916,639 $3,110,291 $3,224,204 $3,352,355 $3,497,594 $3,663,581
Proportionate Equity Value $2,867,932 $3,058,349 $3,170,359 $3,296,371 $3,439,184 $3,602,399
Value per Share $53.82 $57.39 $59.49 $61.85 $64.53 $67.60
Enterprise Value / POP $190.53 $203.18 $210.62 $218.99 $228.48 $239.32
Implied Exit Multiple of EBITDA 6.5x 7.3x 7.8x 8.3x 8.9x 9.6x
(1) Present values as of 6/30/95. Values per POP are based on 6/30/95E estimated POPs, which is the average of 12/31/94 and
12/31/95E POPs.
(2) Assumes no debt allocated to segments, as it is consolidated at the parent level.
Wasserstein Perella & Co.
<PAGE>
<PAGE>
LIN BROADCASTING
LIN Operating Model
(in thousands, except per POP values)
<CAPTION>
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total No.
of POPs 14,368 14,512 14,657 14,803 14,951 15,101 15,252 15,404 15,558 15,714 15,871
% Growth
Rate NA 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Beginning
Subscribers 477.316 618.632 911.556 1,181.248 1,410.706 1,637.973 1,861.473 2,075.005 2,275.268 2,430.857 2,556.573
Gross
Subscribers
Added 322.911 434.847 445.488 439.406 465.064 485.958 508.769 526.534 508.549 499.774 502.920
Deacti-
vations (181.595) (141.923) (175.796) (209.948) (237.797) (262.458) (295.237) (326.271) (352.960) (374.058) (391.819)
Annual %
Churn (33.14%) (18.55%) (16.80%) (16.20%) (15.60%) (15.00%) (15.00%) (15.00%) (15.00%) (15.00%) (15.00%)
Monthly %
Churn (2.76%) (1.55%) (1.40%) (1.35%) (1.30%) (1.25%) (1.25%) (1.25%) (1.25%) (1.25%) (1.25%)
Net Subscri-
Added 141.316 292.924 269.692 229.458 227.267 223.500 213.532 200.263 155.589 125.716 111.101
Ending
Subscribers 618.632 911.556 1,181.248 1,410.706 1,637.973 1,861.473 2,075.005 2,275.268 2,430.857 2556.573 2667.674
Average
Subscribers 547.974 765.094 ######## 1,295.977 1,524.340 1,749.723 1,968.239 2,175.137 2,353.063 2,493.715 2,612.124
Total Pene-
tration 4.31% 6.28% 8.06% 9.53% 10.96% 12.33% 13.60% 14.77% 15.62% 16.27% 16.81%
% Penetration
Growth NA 45.9% 28.3% 18.2% 15.0% 12.5% 10.4% 8.6% 5.8% 4.1% 3.3%
Annual Pene-
tration(1) 0.98% 2.02% 1.84% 1.55% 1.52% 1.48% 1.40% 1.30% 1.00% 0.80% 0.70%
% Growth NA 105.2% (8.8%) (15.8%) (1.9%) (2.6%) (5.4%) (7.1%) (23.1%) (20.0%) (12.5%)
(1) Defined as net subscribers added in a period divided by the population at the end of the period.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
LIN Operating Model (Cont d)
(in thousands, except per POP values)
<CAPTION>
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income Statement
Revenue/
Subscriber/
Month $82.75 $73.68 $70.16 $65.09 $61.67 $58.91 $57.62 $57.50 $57.50 $56.51 $55.85
% Growth NA (11.0%) (4.8%) (7.2%) (5.3%) (4.5%) (2.2%) (0.2%) 0.0% (1.7%) (1.2%)
Total
Revenues $544,106 $676,438 $880,997 $1,012,249 $1,127,995 $1,236,885 $1,360,972 $1,500,792 $1,623,679 $1,691,124 $1,750,524
% Growth NA 24.3% 30.2% 14.9% 11.4% 9.7% 10.0% 10.3% 8.2% 4.2% 3.5%
Direct Operating
Expenses $167,851 $179,683 $259,436 $311,060 $370,161 $425,120 $494,005 $572,429 $639,080 $687,226 $725,496
% of
Revenues 30.8% 26.6% 29.4% 30.7% 32.8% 34.4% 36.3% 38.1% 39.4% 40.6% 41.4%
Cash Flow
Before
Marketing $376,255 $496,755 $621,561 $701,189 $757,834 $811,765 $866,967 $928,363 $984,599 $1,003,898 $1,025,028
Margin 69.2% 73.4% 70.6% 69.3% 67.2% 65.6% 63.7% 61.9% 60.6% 59.4% 58.6%
Sales &
Marketing $117,488 $157,797 $177,538 $190,761 $188,874 $188,375 $179,676 $170,463 $162,368 $149,034 $140,138
% of
Revenues 21.6% 23.3% 20.2% 18.8% 16.7% 15.2% 13.2% 11.4% 10.0% 8.8% 8.0%
Sales &
Marketing /
Gross
Addition $364 $363 $399 $434 $406 $388 $353 $324 $319 $298 $279
Corporate
Expenses $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
% of
Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total
Operating
Expenses $285,339 $337,480 $436,974 $501,821 $559,035 $613,495 $673,681 $742,892 $801,448 $836,260 $865,634
Operating Cash
Flow (OCF) $258,767 $338,958 $444,023 $510,428 $568,960 $623,390 $687,291 $757,900 $822,231 $854,864 $884,890
Margin 47.6% 50.1% 50.4% 50.4% 50.4% 50.4% 50.5% 50.5% 50.6% 50.6% 50.6%
Depreciation &
Amorti-
zation $65,507 $94,783 $129,060 $146,641 $146,052 $136,903 $121,801 $106,452 $89,434 $73,939 $62,405
% of
Revenues 12.0% 14.0% 14.6% 14.5% 12.9% 11.1% 8.9% 7.1% 5.5% 4.4% 3.6%
EBIT $193,260 $244,175 $314,963 $363,787 $422,908 $486,487 $565,490 $651,448 $732,797 $780,925 $822,485
Margin 35.5% 36.1% 35.8% 35.9% 37.5% 39.3% 41.6% 43.4% 45.1% 46.2% 47.0%
Taxes $72,473 $91,540 $117,938 $136,983 $159,945 $184,855 $215,708 $249,125 $281,225 $301,535 $318,935
Effective
Tax Rate 37.5% 37.5% 37.4% 37.7% 37.8% 38.0% 38.1% 38.2% 38.4% 38.6% 38.8%
Unlevered Net
Income $120,788 $152,635 $197,025 $226,804 $262,963 $301,632 $349,782 $402,323 $451,572 $479,390 $503,550
Net
Margin 22.2% 22.6% 22.4% 22.4% 23.3% 24.4% 25.7% 26.8% 27.8% 28.3% 28.8%
Free Cash Flow
Unlevered Net
Income $120,788 $152,635 $197,025 $226,804 $262,963 $301,632 $349,782 $402,323 $451,572 $479,390 $503,550
Depreciation &
Amorti-
zation $65,507 $94,783 $129,060 $146,641 $146,052 $136,903 $121,801 $106,452 $89,434 $73,939 $62,405
Capital
Expendi-
tures ($103,782) ($176,633) ($182,042) ($160,621) ($113,634) ($100,575) ($90,751)($80,105) ($62,236)($50,286) ($44,441)
Change in
Working
Capital $0 ($13,233) ($20,456) ($13,125) ($11,575) ($10,889) ($12,409) ($13,982)($12,289)($6,745) ($5,940)
As a % of
Change in
Revenues 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Free Cash
Flow (FCF) $82,513 $57,552 $123,587 $199,699 $283,806 $327,071 $368,423 $414,688 $466,481 $496,299 $515,574
Wasserstein Perella & Co.
<PAGE>
<PAGE>
LIN BROADCASTING
LIN Valuation
(in thousands, except per POP values
<CAPTION>
Discount Rate Perpetuity Growth Rates of Free Cash Flow
4.0% 5.0% 5.5% 6.0% 6.5% 7.0%
<C> <S> <C> <C> <C> <C> <C> <C>
11.0% Present Value of Cash Flows $1,715,230 $1,715,230 $1,715,230 $1,715,230 $1,715,230 $1,715,230
Terminal Value $2,842,222 $3,347,810 $3,669,547 $4,055,632 $4,527,514 $5,117,366
Enterprise Value $4,557,452 $5,063,040 $5,384,777 $5,770,862 $6,242,744 $6,832,596
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $4,557,452 $5,063,040 $5,384,777 $5,770,862 $6,242,744 $6,832,596
Proportionate Equity Value $1,821,614 $2,023,697 $2,152,295 $2,306,614 $2,495,225 $2,730,989
Value per Share $34.18 $37.97 $40.39 $43.28 $46.82 $51.25
Enterprise Value / POP $315.62 $350.63 $372.91 $399.65 $432.33 $473.18
Implied Exit Multiple of EBITDA 8.7x 10.2x 11.2x 12.4x 13.8x 15.6x
12.0% Present Value of Cash Flows $1,629,702 $1,629,702 $1,629,702 $1,629,702 $1,629,702 $1,629,702
Terminal Value $2,283,827 $2,635,185 $2,851,405 $3,103,662 $3,401,784 $3,759,530
Enterprise Value $3,913,529 $4,264,887 $4,481,107 $4,733,364 $5,031,486 $5,389,232
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $3,913,529 $4,264,887 $4,481,107 $4,733,364 $5,031,486 $5,389,232
Proportionate Equity Value $1,564,238 $1,704,675 $1,791,099 $1,891,926 $2,011,085 $2,154,076
Value per Share $29.35 $31.99 $33.61 $35.50 $37.74 $40.42
Enterprise Value / POP $271.02 $295.36 $310.33 $327.80 $348.44 $373.22
Implied Exit Multiple of EBITDA 7.6x 8.7x 9.5x 10.3x 11.3x 12.5x
13.0% Present Value of Cash Flows $1,549,907 $1,549,907 $1,549,907 $1,549,907 $1,549,907 $1,549,907
Terminal Value $1,865,678 $2,119,069 $2,271,104 $2,444,858 $2,645,343 $2,879,243
Enterprise Value $3,415,585 $3,668,977 $3,821,011 $3,994,765 $4,195,251 $4,429,150
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $3,415,585 $3,668,977 $3,821,011 $3,994,765 $4,195,251 $4,429,150
Proportionate Equity Value $1,365,209 $1,466,490 $1,527,258 $1,596,708 $1,676,842 $1,770,331
Value per Share $25.62 $27.52 $28.66 $29.96 $31.47 $33.22
Enterprise Value / POP $236.54 $254.09 $264.62 $276.65 $290.53 $306.73
Implied Exit Multiple of EBITDA 6.7x 7.6x 8.2x 8.8x 9.5x 10.4x
14.0% Present Value of Cash Flows $1,475,388 $1,475,388 $1,475,388 $1,475,388 $1,475,388 $1,475,388
Terminal Value $1,544,288 $1,732,374 $1,843,013 $1,967,482 $2,108,547 $2,269,764
Enterprise Value $3,019,676 $3,207,762 $3,318,401 $3,442,870 $3,583,935 $3,745,152
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $3,019,676 $3,207,762 $3,318,401 $3,442,870 $3,583,935 $3,745,152
Proportionate Equity Value $1,206,964 $1,282,142 $1,326,365 $1,376,115 $1,432,499 $1,496,937
Value per Share $22.65 $24.06 $24.89 $25.82 $26.88 $28.09
Enterprise Value / POP $209.12 $222.15 $229.81 $238.43 $248.20 $259.36
Implied Exit Multiple of EBITDA 6.1x 6.8x 7.2x 7.7x 8.3x 8.9x
(1) Present values as of 6/30/95. Values per POP are based on 6/30/95E estimated POPs, which is the average of 12/31/94 and
12/31/95E POPs.
(2) Assumes no debt allocated to segments, as it is consolidated at the parent level.
Wasserstein Perella & Co.
<PAGE>
<PAGE>
LIN BROADCASTING
LIN Operating Model
(in thousands, except per POP values)
<CAPTION>
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total No.
of POPs 4,108 4,149 4,191 4,232 4,275 4,318 4,361 4,404 4,448 4,493 4,538
% Growth Rate NA 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Beginning
Subscribers 162.681 215.774 297.340 374.862 443.003 505.519 565.530 620.037 668.483 715.189 760.116
Gross
Subscribers
Added 94.493 125.000 139.634 141.625 145.323 150.782 151.960 151.076 153.387 243.911 156.982
Deacti-
vations (41.400) (43.434) (62.112) (73.484) (82.807) (90.771) (97.453) (102.630) (106.681) (198.984) (116.144)
Annual %
Churn (21.88%) (16.93%) (18.48%) (17.97%) (17.46%) (16.95%) (16.44%) (15.93%) (15.42%) (26.98%) (14.88%)
Monthly %
Churn (1.82%) (1.41%) (1.54%) (1.50%) (1.46%) (1.41%) (1.37%) (1.33%) (1.28%) (2.25%) (1.24%)
Net Subscri-
Added 53.093 81.566 77.522 68.141 62.516 60.011 54.507 48.446 46.706 44.927 40.838
Ending
Subscribers 215.774 297.340 374.862 443.003 505.519 565.530 620.037 668.483 715.189 760.116 800.954
Average
Subscribers 189.228 256.557 336.101 408.933 474.261 535.525 592.784 644.260 691.836 737.653 780.535
Total Pene-
tration 5.25% 7.17% 8.95% 10.47% 11.83% 13.10% 14.22% 15.18% 16.08% 16.92% 17.65%
% Penetration
Growth NA 36.4% 24.8% 17.0% 13.0% 10.8% 8.6% 6.7% 5.9% 5.2% 4.3%
Annual Pene-
tration(1) 1.29% 1.97% 1.85% 1.61% 1.46% 1.39% 1.25% 1.10% 1.05% 1.00% 0.90%
% Growth NA 52.1% (5.9%) (13.0%) (9.2%) (5.0%) (10.1%) (12.0%) (4.5%) (4.8%) (10.0%)
(1) Defined as net subscribers added in a period divided by the population at the end of the period.
Wasserstein Perella & Co.
<PAGE>
<PAGE>
LIN BROADCASTING
LIN Operating Model (Cont d)
(in thousands, except per POP values)
<CAPTION>
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income Statement
Revenue/
Subscriber/
Month $76.50 $71.65 $66.90 $63.74 $61.06 $58.35 $56.34 $55.43 $54.85 $54.76 $54.27
% Growth NA (6.3%) (6.6%) (4.7%) (4.2%) (4.4%) (3.5%) (1.6%) (1.0%) (0.2%) (0.9%)
Total
Revenues $173,718 $220,577 $269,802 $312,781 $347,477 $375,003 $400,769 $428,533 $455,368 $484,730 $508,333
% Growth NA 27.0% 22.3% 15.9% 11.1% 7.9% 6.9% 6.9% 6.3% 6.4% 4.9%
Direct Operating
Expenses $50,520 $55,811 $83,317 $101,895 $118,571 $132,000 $147,802 $165,861 $182,208 $199,396 $214,871
% of
Revenues 29.1% 25.3% 30.9% 32.6% 34.1% 35.2% 36.9% 38.7% 40.0% 41.1% 42.3%
Cash Flow Before
Marketing $123,198 $164,766 $186,485 $210,886 $228,906 $243,003 $252,967 $262,672 $273,160 $285,334 $293,462
Margin 70.9% 74.7% 69.1% 67.4% 65.9% 64.8% 63.1% 61.3% 60.0% 58.9% 57.7%
Sales &
Marketing $51,535 $68,165 $72,593 $75,393 $77,545 $75,377 $69,013 $61,261 $53,217 $44,908 $37,771
% of
Revenues 29.7% 30.9% 26.9% 24.1% 22.3% 20.1% 17.2% 14.3% 11.7% 9.3% 7.4%
Sales &
Marketing/
Gross
Addition $545 $545 $520 $532 $534 $500 $454 $405 $347 $184 $241
Corporate
Expenses $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
% of
Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total Operating
Expenses $102,055 $123,976 $155,910 $177,288 $196,116 $207,377 $216,815 $227,122 $235,425 $244,304 $252,642
Operating Cash
Flow (OCF) $71,663 $96,601 $113,892 $135,493 $151,361 $167,626 $183,954 $201,411 $219,943 $240,426 $255,691
Margin 41.3% 43.8% 42.2% 43.3% 43.6% 44.7% 45.9% 47.0% 48.3% 49.6% 50.3%
Depreciation &
Amorti-
zation $25,976 $39,081 $46,494 $47,763 $46,232 $43,155 $37,424 $31,123 $25,484 $22,215 $19,878
% of
Revenues 15.0% 17.7% 17.2% 15.3% 13.3% 11.5% 9.3% 7.3% 5.6% 4.6% 3.9%
EBIT $45,687 $57,520 $67,398 $87,730 $105,129 $124,471 $146,530 $170,288 $194,459 $218,211 $235,813
Margin 26.3% 26.1% 25.0% 28.0% 30.3% 33.2% 36.6% 39.7% 42.7% 45.0% 46.4%
Taxes $17,327 $21,814 $25,561 $33,272 $39,870 $47,206 $55,572 $64,582 $73,749 $82,757 $89,432
Effective Tax
Rate 37.9% 37.9% 37.9% 37.9% 37.9% 37.9% 37.9% 37.9% 37.9% 37.9% 37.9%
Unlevered Net
Income $28,360 $35,706 $41,837 $54,458 $65,259 $77,265 $90,958 $105,706 $120,710 $135,454 $146,381
Net Margin 16.3% 16.2% 15.5% 17.4% 18.8% 20.6% 22.7% 24.7% 26.5% 27.9% 28.8%
Free Cash Flow
Unlevered Net
Income $28,360 $35,706 $41,837 $54,458 $65,259 $77,265 $90,958 $105,706 $120,710 $135,454 $146,381
Depreciation &
Amorti-
zation $25,976 $39,081 $46,494 $47,763 $46,232 $43,155 $37,424 $31,123 $25,484 $22,215 $19,878
Capital
Expenditures ($54,152) ($60,000) ($54,266) ($44,291) ($34,384) ($33,006) ($27,253) ($19,378) ($18,682) ($17,971) ($16,335)
Change in
Working
Capital $0 ($4,686) ($4,923) ($4,298) ($3,470) ($2,753) ($2,577) ($2,776) ($2,684) ($2,936) ($2,360)
As a % of
Change in
Revenues NA 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Free Cash
Flow (FCF) $184 $10,101 $29,143 $53,632 $73,637 $84,662 $98,553 $114,675 $124,829 $136,762 $147,564
Wasserstein Perella & Co.
<PAGE>
<PAGE>
LIN BROADCASTING
LIN Valuation
(in thousands, except per POP values)
<CAPTION>
Discount Rate Perpetuity Growth Rates of Free Cash Flow
4.0% 5.0% 5.5% 6.0% 6.5% 7.0%
<C> <S> <C> <C> <C> <C> <C> <C>
11.0% Present Value of Cash Flows $456,924 $456,924 $456,924 $456,924 $456,924 $456,924
Terminal Value $813,479 $958,184 $1,050,270 $1,160,772 $1,295,830 $1,464,653
Enterprise Value $1,270,402 $1,415,108 $1,507,193 $1,617,695 $1,752,754 $1,921,577
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $1,270,402 $1,415,108 $1,507,193 $1,617,695 $1,752,754 $1,921,577
Proportionate Equity Value $767,831 $855,291 $910,948 $977,735 $1,059,364 $1,161,401
Value per Share $14.41 $16.05 $17.09 $18.35 $19.88 $21.79
Enterprise Value / POP $307.71 $342.76 $365.07 $391.83 $424.55 $465.44
Implied Exit Multiple of EBIDTA 8.6x 10.1x 11.1x 12.2x 13.7x 15.4x
12.0% Present Value of Cash Flows $433,694 $433,694 $433,694 $433,694 $433,694 $433,694
Terminal Value $653,659 $754,222 $816,107 $888,306 $973,632 $1,076,024
Enterprise Value $1,087,353 $1,187,916 $1,249,801 $1,322,000 $1,407,326 $1,509,718
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $1,087,353 $1,187,916 $1,249,801 $1,322,000 $1,407,326 $1,509,718
Proportionate Equity Value $657,196 $717,976 $755,380 $799,017 $850,588 $912,473
Value per Share $12.33 $13.47 $14.17 $14.99 $15.96 $17.12
Enterprise Value / POP $263.37 $287.73 $302.72 $320.21 $340.88 $365.68
Implied Exit Multiple of EBITDA 7.5x 8.7x 9.4x 10.2x 11.2x 12.4x
13.0% Present Value of Cash Flows $412,034 $412,034 $412,034 $412,034 $412,034 $412,034
Terminal Value $533,980 $606,504 $650,018 $699,748 $757,130 $824,075
Enterprise Value $946,014 $1,018,538 $1,062,052 $1,111,783 $1,169,164 $1,236,109
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $946,014 $1,018,538 $1,062,052 $1,111,783 $1,169,164 $1,236,109
Proportionate Equity Value $571,771 $615,604 $641,904 $671,962 $706,643 $747,104
Value per Share $10.73 $11.55 $12.05 $12.61 $13.26 $14.02
Enterprise Value / POP $229.14 $246.71 $257.25 $269.29 $283.19 $299.41
Implied Exit Multiple of EBITDA 6.7x 7.6x 8.1x 8.7x 9.5x 10.3x
14.0% Present Value of Cash Flows $391,819 $391,819 $391,819 $391,819 $391,819 $391,819
Terminal Value $441,994 $495,827 $527,493 $563,118 $603,492 $649,634
Enterprise Value $833,813 $887,646 $919,312 $954,937 $995,311 $1,041,453
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $833,813 $887,646 $919,312 $954,937 $995,311 $1,041,453
Proportionate Equity Value $503,957 $536,493 $555,632 $577,164 $601,566 $629,454
Value per Share $9.46 $10.07 $10.43 $10.83 $11.29 $11.81
Enterprise Value / POP $201.96 $215.00 $222.67 $231.30 $241.08 $252.26
Implied Exit Multiple of EBITDA 6.0x 6.7x 7.2x 7.6x 8.2x 8.8x
(1) Present values as of 6/30/95. Values per POP are based on 6/30/95E estimated POPs, which is the average of 12/31/94 and
12/31/95E POPs.
(2) Assumes no debt allocated to segments, as it is consolidated at the parent level.
Wasserstein Perella & Co.
<PAGE>
<PAGE>
LIN BROADCASTING
LIN Operating Model
(in thousands, except per POP values)
<CAPTION>
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total No.
of POPs 3,613 3,649 3,686 3,722 3,760 3,797 3,835 3,874 3,912 3,951 3,991
% Growth
Rate NA 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Beginning Sub-
cribers 163.123 218.844 303.044 378.235 441.522 501.681 554.846 604.708 649.258 688.384 719.998
Gross
Subscribers
Added 97.121 126.223 128.331 126.245 130.899 132.404 136.828 138.597 139.449 137.242 141.036
Deacti-
vations (41.400) (42.023) (53.140) (62.958) (70.740) (79.239) (86.966) (94.047) (100.323) (105.628) (110.304)
Annual %
Churn (21.68%) (16.10%) (15.60%) (15.36%) (15.00%) (15.00%) (15.00%) (15.00%) (15.00%) (15.00%) (15.00%)
Monthly %
Churn (1.81%) (1.34%) (1.30%) (1.28%) (1.25%) (1.25%) (1.25%) (1.25%) (1.25%) (1.25%) (1.25%)
Net Subscri-
bers Added 55.721 84.200 75.191 63.287 60.159 53.165 49.862 44.550 39.126 31.614 30.732
Ending
Subscribers 218.844 303.044 378.235 441.522 501.681 554.846 604.708 649.258 688.384 719.998 750.730
Average
Subscribers 190.984 260.944 340.640 409.879 471.602 528.264 579.777 626.983 668.821 704.191 735.364
Total Pene-
tration 6.06% 8.30% 10.26% 11.86% 13.34% 14.61% 15.77% 16.76% 17.60% 18.22% 18.81%
% Penetration
Growth NA 37.1% 23.6% 15.6% 12.5% 9.5% 7.9% 6.3% 5.0% 3.6% 3.2%
Annual Pene-
tration(1) 1.54% 2.31% 2.04% 1.70% 1.60% 1.40% 1.30% 1.15% 1.00% 0.80% 0.77%
% Growth NA 49.6% (11.6%) (16.7%) (5.9%) (12.5%) (7.1%) (11.5%) (13.0%) (20.0%) (3.8%)
(1) Defined as net subscribers added in a period divided by the population at the end of the period.
Wasserstein Perella & Co.
<PAGE>
<PAGE>
LIN BROADCASTING
LIN Operating Model (Cont d)
(in thousands, except per POP values)
<CAPTION>
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Income Statement
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue/
Subscriber/
Month $70.18 $64.29 $52.92 $49.26 $46.78 $45.58 $44.99 $44.58 $44.56 $44.59 $44.59
% Growth NA (8.4%) (17.7%) (6.9%) (5.0%) (2.6%) (1.3%) (0.9%) (0.1%) 0.1% (0.0%)
Total
Revenues $160,845 $201,304 $216,322 $242,266 $264,710 $288,951 $313,039 $335,419 $357,622 $376,836 $393,513
% Growth NA 25.2% 7.5% 12.0% 9.3% 9.2% 8.3% 7.1% 6.6% 5.4% 4.4%
Direct
Operating
Expenses $47,676 $50,974 $64,472 $76,008 $86,848 $98,906 $111,434 $123,037 $134,624 $145,788 $157,499
% of
Revenues 29.6% 25.3% 29.8% 31.4% 32.8% 34.2% 35.6% 36.7% 37.6% 38.7% 40.0%
Cash Flow
Before
Marketing $113,169 $150,330 $151,850 $166,258 $177,862 $190,045 $201,605 $212,382 $222,998 $231,048 $236,014
Margin 70.4% 74.7% 70.2% 68.6% 67.2% 65.8% 64.4% 63.3% 62.4% 61.3% 60.0%
Sales &
Marketing $40,183 $52,449 $47,151 $49,002 $48,948 $49,326 $48,216 $45,343 $41,683 $35,847 $29,026
% of
Revenues 25.0% 26.1% 21.8% 20.2% 18.5% 17.1% 15.4% 13.5% 11.7% 9.5% 7.4%
Sales &
Marketing /
Gross
Addition $414 $416 $367 $388 $374 $373 $352 $327 $299 $261 $206
Corporate
Expenses $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
% of
Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total Operating
Expenses $87,859 $103,423 $111,623 $125,010 $135,796 $148,232 $159,650 $168,380 $176,307 $181,635 $186,525
Operating Cash
Flow (OCF) $72,986 $97,881 $104,699 $117,256 $128,914 $140,719 $153,389 $167,039 $181,315 $195,201 $206,988
Margin 45.4% 48.6% 48.4% 48.4% 48.7% 48.7% 49.0% 49.8% 50.7% 51.8% 52.6%
Depreciation &
Amorti-
zation $32,591 $44,021 $45,802 $45,233 $43,827 $37,415 $30,559 $26,066 $21,492 $17,889 $15,382
% of
Revenues 20.3% 21.9% 21.2% 18.7% 16.6% 12.9% 9.8% 7.8% 6.0% 4.7% 3.9%
EBIT $40,395 $53,860 $58,897 $72,023 $85,087 $103,304 $122,830 $140,973 $159,823 $177,312 $191,606
Margin 25.1% 26.8% 27.2% 29.7% 32.1% 35.8% 39.2% 42.0% 44.7% 47.1% 48.7%
Taxes $15,320 $20,426 $22,337 $27,315 $32,269 $39,178 $46,583 $53,464 $60,613 $67,246 $72,667
Effective
Tax Rate 37.9% 37.9% 37.9% 37.9% 37.9% 37.9% 37.9% 37.9% 37.9% 37.9% 37.9%
Unlevered Net
Income $25,075 $33,434 $36,560 $44,708 $52,818 $64,126 $76,247 $87,509 $99,210 $110,066 $118,939
Net Margin 15.6% 16.6% 16.9% 18.5% 20.0% 22.2% 24.4% 26.1% 27.7% 29.2% 30.2%
Free Cash Flow
Unlevered Net
Income $25,075 $33,434 $36,560 $44,708 $52,818 $64,126 $76,247 $87,509 $99,210 $110,066 $118,939
Depreciation &
Amorti-
zation $32,591 $44,021 $45,802 $45,233 $43,827 $37,415 $30,559 $26,066 $21,492 $17,889 $15,382
Capital
Expendi-
tures ($76,855) ($40,000) ($50,754) ($41,136) ($30,080) ($23,925) ($21,191) ($17,820) ($15,650) ($12,646) ($12,293)
Change in
Working
Capital $0 ($4,046) ($1,502) ($2,594) ($2,244) ($2,424) ($2,409) ($2,238) ($2,220) ($1,921) ($1,668)
As a %
of Change
in Revenues NA 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Free Cash
Flow (FCF) ($19,189) $33,409 $30,107 $46,211 $64,320 $75,192 $83,206 $93,517 $102,832 $113,388 $120,361
Wasserstein Perella & Co.
<PAGE>
<PAGE>
LIN BROADCASTING
LIN Valuation
(in thousands, except per POP values)
<CAPTION>
Discount Rate Perpetuity Growth Rates of Free Cash Flow
4.0% 5.0% 5.5% 6.0% 6.5% 7.0%
<C> <S> <C> <C> <C> <C> <C> <C>
11.0% Present Value of Cash Flows $401,546 $401,546 $401,546 $401,546 $401,546 $401,546
Terminal Value $663,517 $781,546 $856,656 $946,787 $1,056,948 $1,194,649
Enterprise Value $1,065,063 $1,183,092 $1,258,202 $1,348,334 $1,458,494 $1,596,195
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $1,065,063 $1,183,092 $1,258,202 $1,348,334 $1,458,494 $1,596,195
Proportionate Equity Value $599,098 $665,489 $707,739 $758,438 $820,403 $897,860
Value per Share $11.24 $12.49 $13.28 $14.23 $15.39 $16.85
Enterprise Value / POP $293.32 $325.83 $346.51 $371.33 $401.67 $439.59
Implied Exit Multiple of EBITDA 8.6x 10.2x 11.2x 12.3x 13.8x 15.6x
12.0% Present Value of Cash Flows $382,026 $382,026 $382,026 $382,026 $382,026 $382,026
Terminal Value $533,159 $615,184 $665,660 $724,550 $794,146 $877,662
Enterprise Value $915,185 $997,210 $1,047,687 $1,106,576 $1,176,172 $1,259,688
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $915,185 $997,210 $1,047,687 $1,106,576 $1,176,172 $1,259,688
Proportionate Equity Value $514,792 $560,931 $589,324 $622,449 $661,597 $708,575
Value per Share $9.66 $10.53 $11.06 $11.68 $12.41 $13.30
Enterprise Value / POP $252.04 $274.63 $288.53 $304.75 $323.92 $346.92
Implied Exit Multiple of EBITDA 7.6x 8.7x 9.4x 10.3x 11.3x 12.4x
13.0% Present Value of Cash Flows $363,812 $363,812 $363,812 $363,812 $363,812 $363,812
Terminal Value $435,542 $494,697 $530,189 $570,752 $617,555 $672,159
Enterprise Value $799,355 $858,509 $894,001 $934,564 $981,368 $1,035,971
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $799,355 $858,509 $894,001 $934,564 $981,368 $1,035,971
Proportionate Equity Value $449,637 $482,911 $502,876 $525,692 $552,019 $582,734
Value per Share $8.44 $9.06 $9.44 $9.86 $10.36 $10.93
Enterprise Value / POP $220.14 $236.43 $246.21 $257.38 $270.27 $285.31
Implied Exit Multiple of EBITDA 6.7x 7.6x 8.2x 8.8x 9.5x 10.4x
14.0% Present Value of Cash Flows $346,800 $346,800 $346,800 $346,800 $346,800 $346,800
Terminal Value $360,514 $404,423 $430,251 $459,309 $492,240 $529,876
Enterprise Value $707,314 $751,223 $777,052 $806,109 $839,041 $876,677
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $707,314 $751,223 $777,052 $806,109 $839,041 $876,677
Proportionate Equity Value $397,864 $422,563 $437,092 $453,436 $471,960 $493,131
Value per Share $7.47 $7.93 $8.20 $8.51 $8.86 $9.25
Enterprise Value / POP $194.80 $206.89 $214.00 $222.00 $231.07 $241.44
Implied Exit Multiple of EBITDA 6.0x 6.8x 7.2x 7.7x 8.3x 8.9x
(1) Present values as of 6/30/95. Values per POP are based on 6/30/95E estimated POPs, which is the average of 12/31/94 and
12/31/95E POPs.
(2) Assumes no debt allocated to segments, as it is consolidated at the parent level.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
LIN Operating Model
(in thousands, except per POP values)
<CAPTION>
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total No.
of POPs 232 234 237 239 241 244 246 249 251 254 256
% Growth
Rate NA 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Beginning
Subscribers 2.380 4.399 6.740 9.814 13.396 17.255 20.422 23.375 26.109 28.367 30.142
Gross
Subscribers
Added 2.804 3.544 4.790 5.892 6.788 6.623 6.710 6.831 6.572 6.268 5.787
Deacti-
vations (0.785) (1.203) (1.716) (2.310) (2.929) (3.456) (3.757) (4.097) (4.314) (4.493) (4.507)
Annual %
Churn (23.16%) (21.60%) (20.73%) (19.91%) (19.11%) (18.35%) (17.16%) (16.56%) (15.84%) (15.36%) (14.64%)
Monthly %
Churn (1.93%) (1.80%) (1.73%) (1.66%) (1.59%) (1.53%) (1.43%) (1.38%) (1.32%) (1.28%) (1.22%)
Net Subscri-
Added 2.019 2.341 3.074 3.582 3.859 3.167 2.953 2.734 2.258 1.775 1.280
Ending
Subscribers 4.399 6.740 9.814 13.396 17.255 20.422 23.375 26.109 28.367 30.142 31.422
Average
Subscribers 3.390 5.570 8.277 11.605 15.326 18.839 21.899 24.742 27.238 29.255 30.782
Total Pene-
tration 1.90% 2.88% 4.15% 5.60% 7.15% 8.38% 9.49% 10.50% 11.29% 11.88% 12.26%
% Penetration
Growth NA 51.7% 44.2% 35.1% 27.5% 17.2% 13.3% 10.6% 7.6% 5.2% 3.2%
Annual Pene-
tration(1) 0.87% 1.00% 1.30% 1.50% 1.60% 1.30% 1.20% 1.10% 0.90% 0.70% 0.50%
% Growth NA 14.8% 30.0% 15.4% 6.7% (18.7%) (7.7%) (8.3%) (18.2%) (22.2%) (28.6%)
(1) Defined as net subscribers added in a period divided by the population at the end of the period.
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
LIN Operating Model (Cont d)
(in thousands, except per POP values)
<CAPTION>
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income Statement
Revenue/
Subscriber/
Month $117.77 $92.77 $78.00 $70.49 $66.80 $63.15 $61.00 $60.00 $59.88 $59.76 $59.64
% Growth NA (21.2%) (15.9%) (9.6%) (5.2%) (5.5%) (3.4%) (1.6%) (0.2%) (0.2%) (0.2%)
Total
Revenues $4,790 $6,200 $7,747 $9,816 $12,285 $14,276 $16,030 $17,814 $19,572 $20,979 $22,030
% Growth NA 29.4% 25.0% 26.7% 25.2% 16.2% 12.3% 11.1% 9.9% 7.2% 5.0%
Direct Operating
Expenses $1,666 $1,800 $2,834 $3,689 $4,727 $5,746 $6,688 $7,546 $8,214 $8,822 $9,283
% of
Revenues 34.8% 29.0% 36.6% 37.6% 38.5% 40.2% 41.7% 42.4% 42.0% 42.1% 42.1%
Cash Flow
Before
Marketing $3,124 $4,400 $4,913 $6,127 $7,558 $8,530 $9,342 $10,268 $11,358 $12,157 $12,747
Margin 65.2% 71.0% 63.4% 62.4% 61.5% 59.8% 58.3% 57.6% 58.0% 57.9% 57.9%
Sales &
Marketing $753 $1,600 $2,130 $2,368 $2,675 $2,510 $2,415 $2,418 $2,322 $2,060 $1,553
% of
Revenues 15.7% 25.8% 27.5% 24.1% 21.8% 17.6% 15.1% 13.6% 11.9% 9.8% 7.0%
Sales &
Marketing /
Gross
Addition $269 $451 $445 $402 $394 $379 $360 $354 $353 $329 $268
Corporate
Expenses $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
% of
Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total
Operating
Expenses $2,419 $3,400 $4,964 $6,057 $7,402 $8,256 $9,103 $9,964 $10,536 $10,882 $10,836
Operating
Cash Flow
(OCF) $2,371 $2,800 $2,783 $3,759 $4,883 $6,020 $6,927 $7,850 $9,036 $10,097 $11,194
Margin 49.5% 45.2% 35.9% 38.3% 39.7% 42.2% 43.2% 44.1% 46.2% 48.1% 50.8%
Depreciation &
Amorti-
zation $0 $468 $1,364 $2,150 $2,238 $1,809 $1,445 $1,143 $792 $528 $419
% of
Revenues 0.0% 7.5% 17.6% 21.9% 18.2% 12.7% 9.0% 6.4% 4.0% 2.5% 1.9%
EBIT $2,371 $2,332 $1,419 $1,609 $2,645 $4,211 $5,482 $6,707 $8,244 $9,569 $10,775
Margin 49.5% 37.6% 18.3% 16.4% 21.5% 29.5% 34.2% 37.7% 42.1% 45.6% 48.9%
Taxes $899 $884 $538 $610 $1,003 $1,597 $2,079 $2,544 $3,127 $3,629 $4,086
Effective
Tax Rate 37.9% 37.9% 37.9% 37.9% 37.9% 37.9% 37.9% 37.9% 37.9% 37.9% 37.9%
Unlevered Net
Income $1,472 $1,448 $881 $999 $1,642 $2,614 $3,403 $4,163 $5,117 $5,940 $6,689
Net
Margin 30.7% 23.3% 11.4% 10.2% 13.4% 18.3% 21.2% 23.4% 26.1% 28.3% 30.4%
Free Cash Flow
Unlevered Net
Income $1,472 $1,448 $881 $999 $1,642 $2,614 $3,403 $4,163 $5,117 $5,940 $6,689
Depreciation &
Amorti-
zation $0 $468 $1,364 $2,150 $2,238 $1,809 $1,445 $1,143 $792 $528 $419
Capital
Expendi-
tures $0 ($2,341) ($3,074) ($3,582) ($1,158) ($633) ($591) ($547) ($452) ($355) ($256)
Change in Working
Capital $0 ($141) ($155) ($207) ($247) ($199) ($175) ($178) ($176) ($141) ($105)
As a %
of Change in
Revenues NA 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Free Cash
Flow (FCF) $1,472 ($566) ($984) ($640) $2,475 $3,591 $4,082 $4,581 $5,282 $5,972 $6,746
Wasserstein Perella & Co.
<PAGE>
<PAGE>
LIN BROADCASTING
LIN Valuation
(in thousands, except per POP values)
<CAPTION>
Discount Rate Perpetuity Growth Rates of Free Cash Flow
4.0% 5.0% 5.5% 6.0% 6.5% 7.0%
<C> <S> <C> <C> <C> <C> <C> <C>
11.0% Present Value of Cash Flows $14,361 $14,361 $14,361 $14,361 $14,361 $14,361
Terminal Value $37,192 $43,807 $48,017 $53,069 $59,244 $66,963
Enterprise Value $51,553 $58,168 $62,378 $67,430 $73,605 $81,324
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $51,553 $58,168 $62,378 $67,430 $73,605 $81,324
Proportionate Equity Value $17,683 $19,952 $21,396 $23,129 $25,247 $27,894
Value per Share $0.33 $0.37 $0.40 $0.43 $0.47 $0.52
Enterprise Value / POP $221.10 $249.48 $267.53 $289.20 $315.69 $348.79
Implied Exit Multiple of EBITDA 9.0x 10.5x 11.6x 12.8x 14.3x 16.1x
12.0% Present Value of Cash Flows $13,458 $13,458 $13,458 $13,458 $13,458 $13,458
Terminal Value $29,885 $34,482 $37,312 $40,613 $44,514 $49,195
Enterprise Value $43,343 $47,940 $50,770 $54,071 $57,972 $62,653
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $43,343 $47,940 $50,770 $54,071 $57,972 $62,653
Proportionate Equity Value $14,867 $16,444 $17,414 $18,546 $19,884 $21,490
Value per Share $0.28 $0.31 $0.33 $0.35 $0.37 $0.40
Enterprise Value / POP $185.89 $205.61 $217.75 $231.90 $248.63 $268.71
Implied Exit Multiple of EBITDA 7.8x 9.0x 9.8x 10.6x 11.7x 12.9x
13.0% Present Value of Cash Flows $12,620 $12,620 $12,620 $12,620 $12,620 $12,620
Terminal Value $24,413 $27,729 $29,718 $31,992 $34,615 $37,676
Enterprise Value $37,033 $40,349 $42,338 $44,612 $47,236 $50,296
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $37,033 $40,349 $42,338 $44,612 $47,236 $50,296
Proportionate Equity Value $12,702 $13,840 $14,522 $15,302 $16,202 $17,252
Value per Share $0.24 $0.26 $0.27 $0.29 $0.30 $0.32
Enterprise Value / POP $158.83 $173.05 $181.59 $191.34 $202.59 $215.72
Implied Exit Multiple of EBITDA 7.0x 7.9x 8.5x 9.1x 9.9x 10.7x
14.0% Present Value of Cash Flows $11,842 $11,842 $11,842 $11,842 $11,842 $11,842
Terminal Value $20,208 $22,669 $24,117 $25,745 $27,591 $29,701
Enterprise Value $32,049 $34,511 $35,958 $37,587 $39,433 $41,543
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $32,049 $34,511 $35,958 $37,587 $39,433 $41,543
Proportionate Equity Value $10,993 $11,837 $12,334 $12,892 $13,526 $14,249
Value per Share $0.21 $0.22 $0.23 $0.24 $0.25 $0.27
Enterprise Value / POP $137.46 $148.01 $154.22 $161.21 $169.12 $178.17
Implied Exit Multiple of EBITDA 6.3x 7.0x 7.5x 8.0x 8.6x 9.2x
(1) Present values as of 6/30/95. Values per POP are based on 6/30/95E estimated POPs, which is the average of 12/31/94 and
12/31/95E POPs.
(2) Assumes no debt allocated to segments, as it is consolidated at the parent level.
Wasserstein Perella & Co.
<PAGE>
<PAGE>
LIN BROADCASTING
LIN Operating Model
(in thousands, except per POP values)
<CAPTION>
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total No.
of POPs 177 179 181 183 184 186 188 190 192 194 196
% Growth
Rate NA 1.10% 1.10% 1.10% 0.50% 1.10% 1.10% 1.10% 1.10% 1.00% 1.00%
Beginning
Subscribers - 2.252 4.042 6.031 8.405 10.434 12.110 13.615 14.946 16.097 17.066
Gross
Subscribers
Added 2.252 2.785 3.034 3.811 3.829 3.744 3.771 3.745 3.671 3.553 3.395
Deacti-
vations - (0.995) (1.045) (1.437) (1.800) (2.068) (2.266) (2.414) (2.520) (2.584) (2.611)
Annual
% Churn 0.00% (31.62%) (20.75%) (19.91%) (19.11%) (18.35%) (17.62%) (16.90%) (16.24%) (15.58%) (14.96%)
Monthly %
Churn 0.00% (2.63%) (1.73%) (1.66%) (1.59%) (1.53%) (1.47%) (1.41%) (1.35%) (1.30%) (1.25%)
Net Subscri-
Added 2.252 1.790 1.989 2.374 2.029 1.676 1.505 1.331 1.151 0.969 0.784
Ending Sub-
scribers 2.252 4.042 6.031 8.405 10.434 12.110 13.615 14.946 16.097 17.066 17.850
Average Sub-
scribers 1.126 3.147 5.037 7.218 9.420 11.272 12.863 14.281 15.522 16.582 17.458
Total Pene-
tration 1.27% 2.26% 3.33% 4.60% 5.68% 6.52% 7.25% 7.87% 8.38% 8.80% 9.11%
% Penetration
Growth NA 77.5% 47.6% 37.8% 23.5% 14.8% 11.2% 8.6% 6.5% 5.0% 3.6%
Annual Pene-
tration(1) 1.27% 1.00% 1.10% 1.30% 1.10% 0.90% 0.80% 0.70% 0.60% 0.50% 0.40%
% Growth NA (21.4%) 9.9% 18.1% (15.0%) (18.3%) (11.2%) (12.5%) (14.5%) (16.6%) (19.9%)
(1) Defined as net subscribers added in a period divided by the population at the end of the period.
Wasserstein Perella & Co.
<PAGE>
<PAGE>
LIN BROADCASTING
LIN Operating Model (Cont d)
(in thousands, except per POP values)
<CAPTION>
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income Statement
Revenue/
Subscriber/
Month $0.00 $55.61 $50.03 $49.54 $49.05 $48.56 $48.07 $47.59 $47.11 $46.64 $46.18
% Growth NA NA (10.0%) (1.0%) (1.0%) (1.0%) (1.0%) (1.0%) (1.0%) (1.0%) (1.0%)
Total
Revenues $0 $2,100 $3,024 $4,291 $5,544 $6,568 $7,420 $8,155 $8,775 $9,281 $9,674
% Growth NA NA 44.0% 41.9% 29.2% 18.5% 13.0% 9.9% 7.6% 5.8% 4.2%
Direct
Operating
Expenses $0 $1,800 $1,694 $2,283 $2,800 $3,150 $3,379 $3,526 $3,602 $3,794 $3,995
% of
Revenues NA 85.7% 56.0% 53.2% 50.5% 48.0% 45.5% 43.2% 41.0% 40.9% 41.3%
Cash Flow
Before
Marketing $0 $300 $1,330 $2,008 $2,744 $3,418 $4,041 $4,629 $5,173 $5,487 $5,679
Margin NA 14.3% 44.0% 46.8% 49.5% 52.0% 54.5% 56.8% 59.0% 59.1% 58.7%
Sales &
Marketing $0 $700 $729 $1,057 $1,164 $1,127 $1,124 $1,105 $1,038 $928 $784
% of
Revenues NA 33.3% 24.1% 24.6% 21.0% 17.2% 15.1% 13.5% 11.8% 10.0% 8.1%
Sales &
Marketing/
Gross
Addition $0 $251 $240 $277 $304 $301 $298 $295 $283 $261 $231
Corporate
Expenses $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
% of
Revenues NA 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total
Operating
Expenses $0 $2,500 $2,423 $3,340 $3,964 $4,277 $4,503 $4,631 $4,640 $4,722 $4,779
Operating Cash
Flow (OCF) $0 ($400) $601 $951 $1,580 $2,291 $2,917 $3,524 $4,135 $4,559 $4,895
Margin NA (19.0%) 19.9% 22.2% 28.5% 34.9% 39.3% 43.2% 47.1% 49.1% 50.6%
Depreciation &
Amorti-
zation $0 $2,758 $3,371 $3,855 $3,829 $3,488 $3,251 $3,049 $2,811 $2,660 $2,622
% of
Revenues NA 131.3% 111.5% 89.8% 69.1% 53.1% 43.8% 37.4% 32.0% 28.7% 27.1%
EBIT $0 ($3,158) ($2,770) ($2,904) ($2,249) ($1,197) ($334) $475 $1,324 $1,899 $2,273
Margin NA (150.4%) (91.6%) (67.7%) (40.6%) (18.2%) (4.5%) 5.8% 15.1% 20.5% 23.5%
Taxes $0 ($1,200) ($1,053) ($1,104) ($855) ($455) ($127) $181 $503 $722 $864
Effective
Tax Rate 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0%
Unlevered Net
Income $0 ($1,958) ($1,717) ($1,800) ($1,394) ($742) ($207) $295 $821 $1,177 $1,409
Net Margin NA (93.2%) (56.8%) (42.0%) (25.2%) (11.3%) (2.8%) 3.6% 9.4% 12.7% 14.6%
Free Cash Flow
Unlevered Net
Income $0 ($1,958) ($1,717) ($1,800) ($1,394) ($742) ($207) $295 $821 $1,177 $1,409
Depreciation &
Amorti-
zation $0 $2,758 $3,371 $3,855 $3,829 $3,488 $3,251 $3,049 $2,811 $2,660 $2,622
Capital
Expenditures $0 ($1,790) ($1,989) ($2,374) ($406) ($335) ($301) ($266) ($230) ($194) ($157)
Change in
Working
Capital $0 ($210) ($92) ($127) ($125) ($102) ($85) ($74) ($62) ($51) ($39)
As a % of
Change in
Revenues NA 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Free Cash
Flow (FCF) $0 ($1,200) ($428) ($446) $1,903 $2,308 $2,658 $3,004 $3,340 $3,593 $3,835
Wasserstein Perella & Co.
<PAGE>
<PAGE>
LIN BROADCASTING
LIN Valuation
(in thousands, except per POP values)
<CAPTION>
Discount Rate Perpetuity Growth Rates of Free Cash Flow
4.0% 5.0% 5.5% 6.0% 6.5% 7.0%
<C> <S> <C> <C> <C> <C> <C> <C>
11.0% Present Value of Cash Flows $8,936 $8,936 $8,936 $8,936 $8,936 $8,936
Terminal Value $21,141 $24,902 $27,295 $30,167 $33,677 $38,064
Enterprise Value $30,077 $33,838 $36,231 $39,103 $42,613 $47,000
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $30,077 $33,838 $36,231 $39,103 $42,613 $47,000
Proportionate Equity Value $30,077 $33,838 $36,231 $39,103 $42,613 $47,000
Value per Share $0.56 $0.63 $0.68 $0.73 $0.80 $0.88
Enterprise Value / POP $169.00 $190.13 $203.58 $219.71 $239.43 $264.09
Implied Exit Multiple of EBITDA 11.6x 13.7x 15.0x 16.6x 18.5x 21.0x
12.0% Present Value of Cash Flows $8,371 $8,371 $8,371 $8,371 $8,371 $8,371
Terminal Value $16,988 $19,601 $21,209 $23,086 $25,303 $27,964
Enterprise Value $25,359 $27,972 $29,580 $31,457 $33,674 $36,335
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $25,359 $27,972 $29,580 $31,457 $33,674 $36,335
Proportionate Equity Value $25,359 $27,972 $29,580 $31,457 $33,674 $36,335
Value per Share $0.48 $0.52 $0.56 $0.59 $0.63 $0.68
Enterprise Value / POP $142.48 $157.17 $166.21 $176.75 $189.21 $204.16
Implied Exit Multiple of EBITDA 10.2x 11.8x 12.7x 13.8x 15.2x 16.8x
13.0% Present Value of Cash Flows $7,846 $7,846 $7,846 $7,846 $7,846 $7,846
Terminal Value $13,877 $15,762 $16,893 $18,185 $19,677 $21,416
Enterprise Value $21,723 $23,608 $24,739 $26,031 $27,522 $29,262
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $21,723 $23,608 $24,739 $26,031 $27,522 $29,262
Proportionate Equity Value $21,723 $23,608 $24,739 $26,031 $27,522 $29,262
Value per Share $0.41 $0.44 $0.46 $0.49 $0.52 $0.55
Enterprise Value / POP $122.06 $132.65 $139.00 $146.26 $154.64 $164.42
Implied Exit Multiple of EBITDA 9.1x 10.3x 11.0x 11.9x 12.8x 14.0x
14.0% Present Value of Cash Flows $7,357 $7,357 $7,357 $7,357 $7,357 $7,357
Terminal Value $11,487 $12,886 $13,709 $14,635 $15,684 $16,883
Enterprise Value $18,844 $20,243 $21,066 $21,992 $23,041 $24,240
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $18,844 $20,243 $21,066 $21,992 $23,041 $24,240
Proportionate Equity Value $18,844 $20,243 $21,066 $21,992 $23,041 $24,240
Value per Share $0.35 $0.38 $0.40 $0.41 $0.43 $0.45
Enterprise Value / POP $105.88 $113.74 $118.37 $123.57 $129.46 $136.20
Implied Exit Multiple of EBITDA 8.1x 9.1x 9.7x 10.4x 11.1x 12.0x
(1) Present values as of 6/30/95. Values per POP are based on 6/30/95E estimated POPs, which is the average of 12/31/94 and
12/31/95E POPs.
(2) Assumes no debt allocated to segments, as it is consolidated at the parent level.
Wasserstein Perella & Co.
<PAGE>
<PAGE>
LIN BROADCASTING
LIN Operating Model
(in thousands, except per POP values)
<CAPTION>
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total No.
of POPs 230 233 235 237 240 242 244 247 249 252 254
% Growth
Rate NA 1.20% 0.90% 0.90% 1.30% 0.80% 0.80% 1.20% 0.80% 1.20% 0.80%
Beginning
Subscribers - 2.061 3.769 6.117 9.201 12.794 16.181 19.358 22.320 24.813 26.827
Gross Sub-
scribers
Added 2.061 2.400 3.544 4.862 6.045 6.488 6.828 7.072 6.955 6.708 6.341
Deacti-
vations - (0.692) (1.196) (1.778) (2.452) (3.101) (3.651) (4.110) (4.462) (4.694) (4.815)
Annual %
Churn 0.00% (23.74%) (24.20%) (23.21%) (22.30%) (21.40%) (20.55%) (19.72%) (18.93%) (18.18%) (17.45%)
Monthly %
Churn 0.00% (1.98%) (2.02%) (1.93%) (1.86%) (1.78%) (1.71%) (1.64%) (1.58%) (1.51%) (1.45%)
Net Subscri-
bers Added 2.061 1.708 2.348 3.084 3.593 3.387 3.177 2.962 2.493 2.014 1.526
Ending
Subscribers 2.061 3.769 6.117 9.201 12.794 16.181 19.358 22.320 24.813 26.827 28.353
Average
Subscribers 1.031 2.915 4.943 7.659 10.998 14.488 17.770 20.839 23.567 25.820 27.590
Total Pene-
tration 0.90% 1.62% 2.60% 3.88% 5.33% 6.69% 7.94% 9.04% 9.97% 10.65% 11.17%
% Penetration
Growth NA 80.7% 60.9% 49.1% 37.3% 25.5% 18.7% 13.9% 10.3% 6.8% 4.8%
Annual Pene-
tration(1) 0.90% 0.73% 1.00% 1.30% 1.50% 1.40% 1.30% 1.20% 1.00% 0.80% 0.60%
% Growth NA (18.1%) 36.2% 30.2% 15.0% (6.5%) (6.9%) (7.9%) (16.5%) (20.2%) (24.8%)
(1) Defined as net subscribers added in a period divided by the population at the end of the period.
Wasserstein Perella & Co.
<PAGE>
<PAGE>
LIN BROADCASTING
LIN Operating Model (Cont d)
(in thousands, except per POP values)
<CAPTION>
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income Statement
Revenue/
Subscriber/
Month $0.00 $121.27 $103.02 $89.36 $78.16 $68.61 $64.29 $63.01 $61.76 $60.76 $59.92
% Growth NA NA (15.0%) (13.3%) (12.5%) (12.2%) (6.3%) (2.0%) (2.0%) (1.6%) (1.4%)
Total
Revenues $0 $4,242 $6,111 $8,213 $10,315 $11,927 $13,708 $15,758 $17,465 $18,826 $19,837
% Growth NA NA 44.1% 34.4% 25.6% 15.6% 14.9% 15.0% 10.8% 7.8% 5.4%
Direct
Operating
Expenses $0 $1,337 $2,429 $3,294 $4,449 $5,209 $5,990 $6,861 $7,414 $7,543 $7,750
% of Revenues NA 31.5% 39.7% 40.1% 43.1% 43.7% 43.7% 43.5% 42.5% 40.1% 39.1%
Cash Flow
Before
Marketing $0 $2,905 $3,682 $4,919 $5,866 $6,718 $7,718 $8,897 $10,051 $11,283 $12,087
Margin NA 68.5% 60.3% 59.9% 56.9% 56.3% 56.3% 56.5% 57.5% 59.9% 60.9%
Sales &
Marketing $0 $1,109 $1,328 $1,881 $2,153 $2,192 $2,297 $2,330 $2,203 $2,040 $1,848
% of Revenues NA 26.1% 21.7% 22.9% 20.9% 18.4% 16.8% 14.8% 12.6% 10.8% 9.3%
Sales &
Marketing /
Gross
Addition $0 $462 $375 $387 $356 $338 $336 $329 $317 $304 $291
Corporate
Expenses $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
% of Revenues NA 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total
Operating
Expenses $0 $2,446 $3,757 $5,175 $6,602 $7,401 $8,287 $9,191 $9,617 $9,583 $9,598
Operating Cash
Flow (OCF) $0 $1,796 $2,354 $3,038 $3,713 $4,526 $5,421 $6,567 $7,848 $9,243 $10,239
Margin NA 42.3% 38.5% 37.0% 36.0% 37.9% 39.5% 41.7% 44.9% 49.1% 51.6%
Depreciation &
Amorti-
zation $0 $2,701 $3,407 $4,054 $4,116 $3,763 $3,529 $3,333 $3,058 $2,855 $2,774
% of Revenues NA 63.7% 55.8% 49.4% 39.9% 31.6% 25.7% 21.2% 17.5% 15.2% 14.0%
EBIT $0 ($905) ($1,053) ($1,016) ($403) $763 $1,892 $3,234 $4,790 $6,388 $7,465
Margin NA (21.3%) (17.2%) (12.4%) (3.9%) 6.4% 13.8% 20.5% 27.4% 33.9% 37.6%
Taxes $0 ($343) ($399) ($385) ($153) $289 $718 $1,226 $1,817 $2,423 $2,831
Effective
Tax Rate 37.9% 37.9% 37.9% 37.9% 37.9% 37.9% 37.9% 37.9% 37.9% 37.9% 37.9%
Unlevered Net
Income $0 ($562) ($654) ($631) ($250) $474 $1,174 $2,008 $2,973 $3,965 $4,634
Net Margin NA (13.2%) (10.7%) (7.7%) (2.4%) 4.0% 8.6% 12.7% 17.0% 21.1% 23.4%
Free Cash Flow
Unlevered Net
Income $0 ($562) ($654) ($631) ($250) $474 $1,174 $2,008 $2,973 $3,965 $4,634
Depreciation &
Amorti-
zation $0 $2,701 $3,407 $4,054 $4,116 $3,763 $3,529 $3,333 $3,058 $2,855 $2,774
Capital
Expenditures $0 ($1,967) ($2,348) ($3,083) ($719) ($677) ($635) ($592) ($499) ($403) ($305)
Change In
Working
Capital $0 ($424) ($187) ($210) ($210) ($161) ($178) ($205) ($171) ($136) ($101)
As a %
of Change
in Revenues NA 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Free Cash
Flow (FCF) $0 ($252) $218 $130 $2,937 $3,398 $3,890 $4,544 $5,362 $6,281 $7,002
Wasserstein Perella & Co.
<PAGE>
<PAGE>
LIN BROADCASTING
LIN Valuation
(in thousands, except per POP values)
<CAPTION>
Discount Rate Perpetuity Growth Rates of Free Cash Flow
4.0% 5.0% 5.5% 6.0% 6.5% 7.0%
<C> <S> <C> <C> <C> <C> <C> <C>
11.0% Present Value of Cash Flows $16,464 $16,464 $16,464 $16,464 $16,464 $16,464
Terminal Value $38,599 $45,465 $49,835 $55,078 $61,486 $69,497
Enterprise Value $55,063 $61,929 $66,298 $71,541 $77,950 $85,960
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $55,063 $61,929 $66,298 $71,541 $77,950 $85,960
Proportionate Equity Value $55,063 $61,929 $66,298 $71,541 $77,950 $85,960
Value per Share $1.03 $1.16 $1.24 $1.34 $1.46 $1.61
Enterprise Value / POP $237.97 $267.65 $286.53 $309.19 $336.89 $371.51
Implied Exit Multiple of EBITDA 10.2x 12.0x 13.1x 14.5x 16.2x 18.3x
12.0% Present Value of Cash Flows $15,515 $15,515 $15,515 $15,515 $15,515 $15,515
Terminal Value $31,016 $35,787 $38,724 $42,150 $46,198 $51,057
Enterprise Value $46,531 $51,302 $54,239 $57,664 $61,713 $66,571
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $46,531 $51,302 $54,239 $57,664 $61,713 $66,571
Proportionate Equity Value $46,531 $51,302 $54,239 $57,664 $61,713 $66,571
Value per Share $0.87 $0.96 $1.02 $1.08 $1.16 $1.25
Enterprise Value / POP $201.10 $221.72 $234.41 $249.22 $266.72 $287.71
Implied Exit Multiple of EBITDA 8.9x 10.3x 11.1x 12.1x 13.2x 14.6x
13.0% Present Value of Cash Flows $14,633 $14,633 $14,633 $14,633 $14,633 $14,633
Terminal Value $25,337 $28,778 $30,843 $33,203 $35,925 $39,102
Enterprise Value $39,970 $43,411 $45,476 $47,836 $50,558 $53,735
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $39,970 $43,411 $45,476 $47,836 $50,558 $53,735
Proportionate Equity Value $39,970 $43,411 $45,476 $47,836 $50,558 $53,735
Value per Share $0.75 $0.81 $0.85 $0.90 $0.95 $1.01
Enterprise Value / POP $172.75 $187.62 $196.54 $206.74 $218.51 $232.24
Implied Exit Multiple of EBITDA 7.9x 9.0x 9.6x 10.4x 11.2x 12.2x
14.0% Present Value of Cash Flows $13,813 $13,813 $13,813 $13,813 $13,813 $13,813
Terminal Value $20,972 $23,527 $25,029 $26,720 $28,635 $30,825
Enterprise Value $34,785 $37,340 $38,842 $40,533 $42,448 $44,638
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $34,785 $37,340 $38,842 $40,533 $42,448 $44,638
Proportionate Equity Value $34,785 $37,340 $38,842 $40,533 $42,448 $44,638
Value per Share $0.65 $0.70 $0.73 $0.76 $0.80 $0.84
Enterprise Value / POP $150.34 $161.38 $167.87 $175.18 $183.46 $192.92
Implied Exit Multiple of EBITDA 7.1x 8.0x 8.5x 9.1x 9.7x 10.5x
(1) Present values as of 6/30/95. Values per POP are based on 6/30/95E estimated POPs, which is the average of 12/31/94 and
12/31/95E POPs.
(2) Assumes no debt allocated to segments, as it is consolidated at the parent level.
Wasserstein Perella & Co.
<PAGE>
<PAGE>
LIN BROADCASTING
LIN Long Distance Operating Model
(in thousands)
<CAPTION>
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income Statement
Total
Revenues $16,488 $15,188 $31,618 $36,341 $40,660 $43,725 $46,839 $50,842 $54,839 $58,448 $60,307
% Growth NA (7.9%) 108.2% 14.9% 11.9% 7.5% 7.1% 8.5% 7.9% 6.6% 3.2%
Direct
Operating
Expenses $9,811 $9,113 $18,971 $21,805 $24,396 $26,235 $28,103 $30,505 $32,903 $35,069 $36,184
% of
Revenues 59.5% 60.0% 60.0% 60.0% 60.0% 60.0% 60.0% 60.0% 60.0% 60.0% 60.0%
Cash Flow
Before
Marketing $6,677 $6,075 $12,647 $14,536 $16,264 $17,490 $18,736 $20,337 $21,936 $23,379 $24,123
Margin 40.5% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0%
Sales &
Marketing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
% of
Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Corporate
Expenses $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
% of
Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total
Operating
Expenses $9,811 $9,113 $18,971 $21,805 $24,396 $26,235 $28,103 $30,505 $32,903 $35,069 $36,184
Operating Cash
Flow (OCF) $6,677 $6,075 $12,647 $14,536 $16,264 $17,490 $18,736 $20,337 $21,936 $23,379 $24,123
Margin 40.5% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0%
Depreciation &
Amorti-
zation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
% of
Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
EBIT $6,677 $6,075 $12,647 $14,536 $16,264 $17,490 $18,736 $20,337 $21,936 $23,379 $24,123
Margin 40.5% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0%
Taxes $2,537 $2,309 $4,806 $5,524 $6,180 $6,646 $7,120 $7,728 $8,336 $8,884 $9,167
Effective
Tax Rate 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0%
Unlevered Net
Income $4,140 $3,767 $7,841 $9,012 $10,084 $10,844 $11,616 $12,609 $13,600 $14,495 $14,956
Net Margin 25.1% 24.8% 24.8% 24.8% 24.8% 24.8% 24.8% 24.8% 24.8% 24.8% 24.8%
Free Cash Flow
Unlevered Net
Income $4,140 $3,767 $7,841 $9,012 $10,084 $10,844 $11,616 $12,609 $13,600 $14,495 $14,956
Depreciation &
Amorti-
zation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Capital
Expendi-
tures $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Change in
Working
Capital $0 $130 ($1,643) ($472) ($432) ($307) ($311) ($400) ($400) ($361) ($186)
As a % of
Change in
Revenues 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Free Cash
Flow (FCF) $4,140 $3,897 $6,198 $8,540 $9,652 $10,537 $11,305 $12,209 $13,201 $14,134 $14,770
Wasserstein Perella & Co.
<PAGE>
<PAGE>
LIN BROADCASTING
LIN Valuation
(in thousands)
<CAPTION>
Discount Rate Perpetuity Growth Rates of Free Cash Flow
4.0% 5.0% 5.5% 6.0% 6.5% 7.0%
<C> <S> <C> <C> <C> <C> <C> <C>
11.0% Present Value of Cash Flows $56,915 $56,915 $56,915 $56,915 $56,915 $56,915
Terminal Value $81,425 $95,909 $105,127 $116,187 $129,706 $146,604
Enterprise Value $138,340 $152,824 $162,041 $173,102 $186,621 $203,519
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $138,340 $152,824 $162,041 $173,102 $186,621 $203,519
Proportionate Equity Value $138,340 $152,824 $162,041 $173,102 $186,621 $203,519
Value per Share $2.60 $2.87 $3.04 $3.25 $3.50 $3.82
Implied Exit Multiple of EBITDA 9.1x 10.7x 11.7x 13.0x 14.5x 16.4x
12.0% Present Value of Cash Flows $54,298 $54,298 $54,298 $54,298 $54,298 $54,298
Terminal Value $65,428 $75,494 $81,688 $88,915 $97,456 $107,704
Enterprise Value $119,725 $129,791 $135,986 $143,212 $151,753 $162,002
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $119,725 $129,791 $135,986 $143,212 $151,753 $162,002
Proportionate Equity Value $119,725 $129,791 $135,986 $143,212 $151,753 $162,002
Value per Share $2.25 $2.44 $2.55 $2.69 $2.85 $3.04
Implied Exit Multiple of EBITDA 8.0x 9.2x 9.9x 10.8x 11.9x 13.1x
13.0% Present Value of Cash Flows $51,850 $51,850 $51,850 $51,850 $51,850 $51,850
Terminal Value $53,449 $60,708 $65,063 $70,041 $75,785 $82,486
Enterprise Value $105,299 $112,558 $116,914 $121,892 $127,635 $134,336
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $105,299 $112,558 $116,914 $121,892 $127,635 $134,336
Proportionate Equity Value $105,299 $112,558 $116,914 $121,892 $127,635 $134,336
Value per Share $1.98 $2.11 $2.19 $2.29 $2.40 $2.52
Implied Exit Multiple of EBITDA 7.1x 8.0x 8.6x 9.3x 10.0x 10.9x
14.0% Present Value of Cash Flows $49,560 $49,560 $49,560 $49,560 $49,560 $49,560
Terminal Value $44,241 $49,630 $52,799 $56,365 $60,406 $65,025
Enterprise Value $93,802 $99,190 $102,360 $105,925 $109,967 $114,585
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $93,802 $99,190 $102,360 $105,925 $109,967 $114,585
Proportionate Equity Value $93,802 $99,190 $102,360 $105,925 $109,967 $114,585
Value per Share $1.76 $1.86 $1.92 $1.99 $2.06 $2.15
Implied Exit Multiple of EBITDA 6.4x 7.1x 7.6x 8.1x 8.7x 9.4x
(1) Present values as of 6/30/95.
(2) Assumes no debt allocated to segments, as it is consolidated at the parent level.
Wasserstein Perella & Co.
<PAGE>
<PAGE>
LIN BROADCASTING
LIN: Additional Products Operating Model
(in thousands)
<CAPTION>
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income Statement
Total
Revenues $0 $0 $0 $0 $0 $0 $10,000 $22,000 $36,400 $53,680 $74,416
% Growth NM NM NM NM NM NM NM 120.0% 65.5% 47.5% 38.6%
Direct
Operating
Expenses $0 $0 $0 $0 $0 $0 $1,000 $2,200 $3,640 $5,368 $7,442
% of Revenues NM NM NM NM NM NM 10.0% 10.0% 10.0% 10.0% 10.0%
Cash Flow Before
Marketing $0 $0 $0 $0 $0 $0 $9,000 $19,800 $32,760 $48,312 $66,974
Margin NM NM NM NM NM NM 90.0% 90.0% 90.0% 90.0% 90.0%
Sales &
Marketing $0 $0 $0 $0 $0 $0 $2,000 $4,400 $7,280 $10,736 $14,883
% of Revenues NM NM NM NM NM NM 20.0% 20.0% 20.0% 20.0% 20.0%
Corporate
Expenses $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
% of Revenues NM NM NM NM NM NM 0.0% 0.0% 0.0% 0.0% 0.0%
Total
Operating
Expenses $0 $0 $0 $0 $0 $0 $3,000 $6,600 $10,920 $16,104 $22,325
Operating Cash
Flow (OCF) $0 $0 $0 $0 $0 $0 $7,000 $15,400 $25,480 $37,576 $52,091
Margin NM NM NM NM NM NM 70.0% 70.0% 70.0% 70.0% 70.0%
Depreciation &
Amorti-
zation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
% of Revenues NM NM NM NM NM NM 0.0% 0.0% 0.0% 0.0% 0.0%
EBIT $0 $0 $0 $0 $0 $0 $7,000 $15,400 $25,480 $37,576 $52,091
Margin NM NM NM NM NM NM 70.0% 70.0% 70.0% 70.0% 70.0%
Taxes $0 $0 $0 $0 $0 $0 $2,660 $5,852 $9,682 $14,279 $19,795
Effective
Tax Rate 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0%
Unlevered Net
Income $0 $0 $0 $0 $0 $0 $4,340 $9,548 $15,798 $23,297 $32,296
Net Margin NM NM NM NM NM NM 43.4% 43.4% 43.4% 43.4% 43.4%
Free Cash Flow
Unlevered Net
Income $0 $0 $0 $0 $0 $0 $4,340 $9,548 $15,798 $23,297 $32,296
Depreciation &
Amorti-
zation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Capital
Expenditures $0 $0 $0 $0 $0 $0 ($100) ($100) ($100) ($100) ($100)
Change in
Working
Capital $0 $0 $0 $0 $0 $0 ($1,000) ($1,200) ($1,440) ($1,728)
($2,074)
As a %
of Change
in Revenues 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Free Cash
Flow (FCF) $0 $0 $0 $0 $0 $0 $3,240 $8,248 $14,258 $21,469 $30,123
Wasserstein Perella & Co.
<PAGE>
<PAGE>
LIN BROADCASTING
LIN Valuation
(in thousands)
<CAPTION>
Discount Rate Perpetuity Growth Rates of Free Cash Flow
4.0% 5.0% 5.5% 6.0% 6.5% 7.0%
<C> <S> <C> <C> <C> <C> <C> <C>
11.0% Present Value of Cash Flows $32,548 $32,548 $32,548 $32,548 $32,548 $32,548
Terminal Value $166,059 $195,598 $214,396 $236,954 $264,524 $298,986
Enterprise Value $198,607 $228,147 $246,944 $269,502 $297,072 $331,534
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $198,607 $228,147 $246,944 $269,502 $297,072 $331,534
Proportionate Equity Value $198,607 $228,147 $246,944 $269,502 $297,072 $331,534
Value per Share $3.73 $4.28 $4.63 $5.06 $5.57 $6.22
Implied Exit Multiple of EBITDA 8.6x 10.1x 11.1x 12.3x 13.7x 15.5x
12.0% Present Value of Cash Flows $30,237 $30,237 $30,237 $30,237 $30,237 $30,237
Terminal Value $133,434 $153,963 $166,596 $181,334 $198,752 $219,654
Enterprise Value $163,672 $184,200 $196,833 $211,571 $228,989 $249,891
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $163,672 $184,200 $196,833 $211,571 $228,989 $249,891
Proportionate Equity Value $163,672 $184,200 $196,833 $211,571 $228,989 $249,891
Value per Share $3.07 $3.46 $3.69 $3.97 $4.30 $4.69
Implied Exit Multiple of EBITDA 7.5x 8.7x 9.4x 10.2x 11.2x 12.4x
13.0% Present Value of Cash Flows $28,112 $28,112 $28,112 $28,112 $28,112 $28,112
Terminal Value $109,004 $123,808 $132,691 $142,843 $154,556 $168,222
Enterprise Value $137,116 $151,921 $160,803 $170,955 $182,669 $196,334
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $137,116 $151,921 $160,803 $170,955 $182,669 $196,334
Proportionate Equity Value $137,116 $151,921 $160,803 $170,955 $182,669 $196,334
Value per Share $2.57 $2.85 $3.02 $3.21 $3.43 $3.68
Implied Exit Multiple of EBITDA 6.7x 7.6x 8.1x 8.8x 9.5x 10.3x
14.0% Present Value of Cash Flows $26,157 $26,157 $26,157 $26,157 $26,157 $26,157
Terminal Value $90,226 $101,215 $107,680 $114,952 $123,194 $132,613
Enterprise Value $116,383 $127,372 $133,836 $141,108 $149,350 $158,769
Net Debt (2) $0 $0 $0 $0 $0 $0
Equity Value $116,383 $127,372 $133,836 $141,108 $149,350 $158,769
Proportionate Equity Value $116,383 $127,372 $133,836 $141,108 $149,350 $158,769
Value per Share $2.18 $2.39 $2.51 $2.65 $2.80 $2.98
Implied Exit Multiple of EBITDA 6.0x 6.7x 7.2x 7.7x 8.2x 8.8x
(1) Present values as of 6/30/95.
(2) Assumes no debt allocated to segments, as it is consolidated at the parent level.
Wasserstein Perella & Co.
<PAGE>
<PAGE>
LIN BROADCASTING
LIN s Organizational
Structure
Wasserstein Perella & Co.
<PAGE>
<PAGE>
LIN BROADCASTING
Overview
See LIN Broadcasting Corporation Organization Chart
Wasserstein Perella & Co.
<PAGE>
<PAGE>
LIN BROADCASTING
LIN Cellular Group
See LIN Cellular Group Organization Chart
Wasserstein Perella & Co.
<PAGE>
<PAGE>
LIN BROADCASTING
LIN California Group
See LIN California Group Organization Chart
Wasserstein Perella & Co.
<PAGE>
<PAGE>
LIN BROADCASTING
LIN Texas Group
See LIN Texas Group Organization Chart
Wasserstein Perella & Co.<PAGE>
<PAGE>
LIN BROADCASTING
LIN Satellite Group
See LIN Satellite Group Structure Chart
Wasserstein Perella & Co.
/TABLE
<PAGE>
<PAGE>
EXHIBIT (b)(6) Letter delivered by Bear Stearns & Co., Inc. to
the LIN Independent Directors, dated April 28,
1995.
<PAGE>
<PAGE>
The following is the full text of a letter delivered by Bear
Stearns to the three LIN Independent Directors on April 28,
1995:
Committee of Independent Directors
LIN Broadcasting Corporation
5295 Carillon Point
Kirkland, WA 98033
Attention: William G. Herbster
Wilma H. Jordan
Richard W. Kislik
Ladies and Gentlemen:
We understand that, pursuant to the Private Market Value
Guarantee (the "PMVG"), dated December 11, 1989, between LIN
Broadcasting Corporation ("LIN") and McCaw Cellular
Communications, Inc. ("McCaw"), which has since been
acquired by AT&T Corp. ("AT&T"), AT&T, the beneficial owner
of approximately 52% of the outstanding shares of LIN, has
proposed (the "AT&T Proposal") to purchase all Public Shares
(as defined in the PMVG) in accordance with the process set
forth in the PMVG.
Acting jointly with Lehman Brothers Inc. ("Lehman") as the
Independent Directors' Appraiser (as defined in the PMVG),
pursuant to the PMVG, we have previously determined and
delivered to you, in our separate letters of February 15,
1995 (the "February 15 Letters"), our "final view" of
"private market value per Share" (as defined in the PMVG).
You have requested our view, acting jointly with Lehman, as
to whether there is a substantial likelihood that the price
at which Public Shares would initially trade, on a fully
distributed basis, would be less than $127.50 per share,
assuming the AT&T Proposal were not consummated by reason of
the AT&T Proposal not being approved by a Majority Vote of
the Public Stockholders (as defined in the PMVG) and
assuming no change in market, economic, financial and other
conditions (including, without limitation, conditions
affecting the cellular industry generally or LIN
specifically) as they exist on and can be evaluated as of
the date hereof.
Based on (i) the factors set forth in the February 15
Letters, which factors we considered as of such date in
connection with our arriving at our view of "private market
value per Share," (ii) certain additional factors we have
considered and analyses we have performed as of the date
hereof, including a review of (a) the Form 10-K of LIN for
the year ended December 31, 1994, and other publicly
available financial data, stock market performance data,
ownership profiles and valuation parameters of LIN that have
been made available since the date of the February 15
Letters and that we deemed relevant, (b) publicly available
financial data, stock market performance data, ownership
profiles and valuation parameters of certain other companies
that have been made available since the date of the February
15 Letters and that we deemed relevant, (c) Wall Street
research analysts' views of the public market trading value
of LIN's stock in the event the AT&T Proposal is not
consummated by reason of the AT&T Proposal not being
approved by a Majority Vote of the Public Stockholders and
(d) such other analyses that we deemed relevant and (iii)
the ongoing protections afforded to thc holders of Public
Shares under the PMVG in the event that the AT&T Proposal is
not consummated by reason of the AT&T Proposal not being
approved by a Majority Vote of the Public Stockholders, and
subject to the succeeding paragraphs of this letter and the
general qualifications and assumptions set forth in the
February 15 Letters, it is our view that, assuming (x) the
vote of the holders of Public Shares regarding the AT&T
Proposal were held and the AT&T Proposal failed to be
approved by a Majority Vote of the Public Stockholders, (y)
Public Shares held by arbitrageurs and others who are
holding such shares in anticipation of consummation of the
AT&T Proposal or an alternative transaction were fully
redistributed and (z) there were no change in market,
economic, financial and other conditions (including, without
limitation, conditions affecting the cellular industry
generally or LIN specifically) as they exist on and can be
evaluated as of the date hereof, there is a substantial
likelihood that the price at which Public Shares would
initially trade would be less than $127.50 per share.
The estimation of public market trading prices of securities
is subject to uncertainties and contingencies, all of which
are difficult to predict and beyond the control of the firm
making such estimates. The market prices of securities will
fluctuate with changes in market conditions, the conditions
and prospects of the industry and the particular company
involved, and other factors which generally influence the
prices of securities. Our view is necessarily based on
market, economic, financial and other conditions as they
exist on and can be evaluated as of the date hereof. In
addition, we have assumed, with your permission, that AT&T
has no intention to acquire Public Shares in the event that
the AT&T Proposal is not consummated.
There can be no assurance that our view expressed herein
will conform with actual public market trading prices of
LIN's shares.
Our view stated herein does not constitute an opinion as to
the fairness of the AT&T Proposal in any respect, and does
not constitute a recommendation to any shareholder of LIN as
to how such shareholder should vote on the AT&T Proposal.
We and Lehman will each receive a fee for acting jointly as
the Independent Directors' Appraiser in connection with the
appraisal process specified in the PMVG, payment of a
significant portion of which is contingent upon the
consummation of the acquisition of Public Shares by AT&T or
an acquisition of LIN by a third party. In addition, LIN has
agreed to indemnify us and Lehman for certain liabilities
which may arise out of the rendering of this letter. We
have performed various investment banking services for AT&T
in the past (including the underwriting of debt and equity
securities) and have received customary fees for such
services. In the ordinary course of our business we
actively trade the debt and equity securities of LIN and
AT&T for our account and for the accounts of our customers
and, accordingly, at any time hold a long or short position
in such securities.
This letter is solely for the use of LIN and the Independent
Directors in connection with the PMVG, and may not be used
for any other purpose or relied upon by any third party
without the prior written approval of both us and Lehman,
although this letter may be disclosed, but only in its
entirety, in filings made by LIN with the Securities and
Exchange Commission and in communications by LIN to its
shareholders (or, if not disclosed in its entirety, then
only with the prior written approval of both us and Lehman,
which approval will not be unreasonably withheld).
Very truly yours,
BEAR STEARNS & CO INC.
By: /s/ Pierce J. Roberts
---------------------------
Senior Managing Director
<PAGE>
<PAGE>
EXHIBIT (b)(7) Letter delivered by Lehman Brothers Inc. to the
LIN Independent Directors, dated April 28, 1995.
<PAGE>
<PAGE>
The following is the full text of a letter delivered by
Lehman Brothers to the three LIN Independent Directors on April
28, 1995:
Committee of Independent Directors
LIN Broadcasting Corporation
5295 Carillon Point
Kirkland, WA 98033
Attention: William G. Herbster
Wilma H. Jordan
Richard W. Kislik
Ladies and Gentlemen:
We understand that, pursuant to the Private Market
Value Guarantee (the "PMVG"), dated December 11, 1989,
between LIN Broadcasting Corporation ("LIN") and McCaw
Cellular Communications, Inc. ("McCaw"), which has since
been acquired by AT&T Corp. ("AT&T"), AT&T, the beneficial
owner of approximately 52% of the outstanding shares of LIN,
has proposed (the "AT&T Proposal") to purchase all Public
Shares (as defined in the PMVG) in accordance with the
process set forth in the PMVG.
Acting jointly with Bear, Stearns & Co. Inc. ("Bear
Stearns") as the Independent Directors' Appraiser (as
defined in the PMVG), pursuant to the PMVG, we have
previously determined and delivered to you, in our separate
letters of February 15, 1995 (the "February 15 Letters"),
our "final view" of "private market value per Share" (as
defined in the PMVG).
You have requested our view, acting jointly with Bear
Stearns, as to whether there is a substantial likelihood
that the price at which Public Shares would initially trade,
on a fully distributed basis, would be less than $127.50 per
share, assuming the AT&T Proposal were not consummated by
reason of the AT&T Proposal not being approved by a Majority
Vote of the Public Stockholders (as defined in the PMVG) and
assuming no change in market, economic, financial and other
conditions (including, without limitation, conditions
affecting the cellular industry generally or LIN
specifically) as they exist on and can be evaluated as of
the date hereof.
Based on (i) the factors set forth in the February 15
Letters, which factors were considered as of such date in
connection with our arriving at our view of "private market
value per Share," (ii) certain additional factors we have
considered and analyses we have performed as of the date
hereof, including a review of (a) the Form 10-K of LIN for
the year ended December 31, 1994, and other publicly
available financial data, stock market performance data,
ownership profiles and valuation parameters of LIN that have
been made available since the date of the February 15
Letters and that we deemed relevant, (b) publicly available
financial data, stock market performance data, ownership
profiles and valuation parameters of certain other
companies that have been made available since the date of
the February 15 Letters and that we deemed relevant, (c)
Wall Street research analysts' views of the public market
trading value of LIN's stock in the event the AT&T Proposal
is not consummated by reason of the AT&T Proposal not being
approved by a Majority Vote of the Public Stockholders and
(d) such other analyses that we deemed relevant and (iii)
the ongoing protections afforded to the holders of Public
Shares under the PMVG in the event that the AT&T Proposal is
not consummated by reason of the AT&T Proposal not being
approved by a Majority Vote of the Public Stockholders, and
subject to the succeeding paragraphs of this letter and the
general qualifications and assumptions set forth in the
February 15 Letters, it is our view that, assuming (x) the
vote of the holders of Public Shares regarding the AT&T
Proposal were held and the AT&T Proposal failed to be
approved by a Majority Vote of the Public Stockholders, (y)
Public Shares held by arbitrageurs and others who are
holding such shares in anticipation of consummation of the
AT&T Proposal or an alternative transaction were fully
redistributed and (z) there were no change in market,
economic, financial and other conditions (including, without
limitation, conditions affecting the cellular industry
generally or LIN specifically) as they exist on and can be
evaluated as of the date hereof, there is a substantial
likelihood that the price at which Public Shares would
initially trade would be less than $127.50 per share.
The estimation of public market trading prices of
securities is subject to uncertainties and contingencies,
all of which are difficult to predict and beyond the control
of the firm making such estimates. The market prices of
securities will fluctuate with changes in market conditions,
the conditions and prospects of the industry and the
particular company involved, and other factors which
generally influence the prices of securities. Our view is
necessarily based on market, economic, financial and other
conditions as they exist on and can be evaluated as of the
date hereof. In addition, we have assumed, with your
permission, that AT&T has no intention to acquire Public
Shares in the event that the AT&T Proposal is not
consummated.
There can be no assurance that our view expressed
herein will conform with actual public market trading prices
of LIN's shares.
Our view stated herein does not constitute an opinion
as to the fairness of the AT&T Proposal in any respect, and
does not constitute a recommendation to any shareholder of
LIN as to how such shareholder should vote on the AT&T
Proposal.
We and Bear Stearns will each receive a fee for acting
jointly as the Independent Directors' Appraiser in
connection with the appraisal process specified in the PMVG,
payment of a significant portion of which is contingent upon
the consummation of the acquisition of Public Shares by AT&T
or an acquisition of LIN by a third party. In addition, LIN
has agreed to indemnify us and Bear Stearns for certain
liabilities which may arise out of the rendering of this
letter. We have in the past performed various investment
banking services for the Committee of Independent Directors,
for which we have received customary fees. We have
performed various investment banking services for AT&T in
the past (including the underwriting of debt and equity
securities) and have received customary fees for such
services. In the ordinary course of our business we
actively trade the debt and equity securities of LIN and
AT&T for our account and for the accounts of our customers
and, accordingly, at any time hold a long or short position
in such securities.
This letter is solely for the use of LIN and the
Independent Directors in connection with the PMVG, and may
not be used for any other purpose or relied upon by any
third party without the prior written approval of both us
and Bear Stearns, although this letter may be disclosed, but
only in its entirety, in filings made by LIN with the
Securities and Exchange Commission and in communications by
LIN to its shareholders (or, if not disclosed in its
entirety, then only with the prior written approval of both
us and Bear Stearns, which approval will not be unreasonably
withheld).
Very truly yours,
LEHMAN BROTHERS INC.
By: /s/ Jill Greenthal
-----------------------
Managing Director
<PAGE>
<PAGE>
EXHIBIT (c)(3) Memorandum of Understanding, dated June 22, 1995,
with respect to the proposed settlement of
litigation.
<PAGE>
<PAGE>
MEMORANDUM OF UNDERSTANDING
WHEREAS there is now pending the consolidated action
entitled In re LIN Broadcasting Corporation Shareholders
Litigation, Consolidated C.A. No. 14039, and the action entitled
Unger v. MMM Holdings, Inc., et al., C.A. No. 14123, in the Court
of Chancery of the State of Delaware, New Castle County (the
"Delaware Actions"), and the actions entitled Katz v. Allen, et
al., Index No. 95-104259, Luke v. Wasserstein Perella & Co., et
al., Index No. 95-105973, and Frank v. Alberg, et al., Index No.
95-108949, in the Supreme Court of the State of New York, County
of New York (the "New York Actions") (collectively, the
"Actions").
WHEREAS the Actions were filed as putative class
actions on behalf of holders of LIN Common Shares, naming as
defendants AT&T Corp. ("AT&T"), McCaw Cellular Communications,
Inc. ("McCaw"), a wholly-owned subsidiary of AT&T, MMM Holdings,
Inc. ("MMM"), a wholly-owned subsidiary of McCaw, certain
individual officers and directors of AT&T, McCaw and LIN,
Wasserstein Perella & Co. Inc. and Morgan Stanley & Co.
Incorporated.
WHEREAS the Actions variously seek injunctive relief,
monetary damages and/or rescission on the grounds that the
conduct of the various defendants in connection with a proposed
plan of merger among LIN, McCaw and two subsidiaries of McCaw
(the "Merger") and the determination of the private market value
of the LIN Common Shares pursuant to the Private Market Value
Guarantee entered into between LIN and McCaw in 1989 (the
"PMVG"), which private market value was determined to be $127.50
per LIN Common Share and proposed as consideration in the Merger,
constitutes, inter alia, a breach of the PMVG, unjust enrichment,
and a breach of fiduciary duties.
WHEREAS there is now pending an action entitled Newman
v. McCaw Cellular Communications and AT&T Corp., C.A. No. 95 Civ.
1583, in the United States District Court for the Southern
District of New York (the "Federal Action") that asserts certain
federal claims and plaintiff has filed a Notice of Dismissal of
the Federal Action seeking to voluntarily dismiss the Federal
Action without prejudice and without costs.
WHEREAS, following extensive negotiations, counsel for
the parties have reached an agreement in principle providing for
the settlement of the Actions (the "Settlement") on the terms and
subject to the conditions set forth below.
WHEREAS counsel for the parties believe that the
Settlement is in the best interests of the parties and the LIN
stockholders.
IT IS HEREBY AGREED IN PRINCIPLE AS FOLLOWS:
1. Instead of the transaction previously
contemplated, as a result of the aforesaid litigation, McCaw has
agreed, if the Settlement contemplated herein is consummated, to
pay in the Merger $129.50 per LIN Common Share, plus up to an
additional $.25 per LIN Common Share as contemplated by
paragraph 6 hereof (the "Merger Consideration"), at least $2.00
per LIN Common Share above the private market value determined
pursuant to the PMVG, representing an aggregate increase of
approximately $60 million over the PMVG private market value. If
the Merger has not been completed by September 15, 1995, McCaw
will pay simple interest on the Merger Consideration at an annual
rate of 5-1/2% from September 15, 1995 to the closing of the
Merger. As conditions to the Settlement, the terms of the
Settlement must be approved by the Independent Directors, the
Independent Directors must assent to the scheduled conversion by
certain LIN systems to equal access and the marketing of certain
LIN services under the AT&T name pending the Merger, and LIN must
receive a fairness opinion at or around the date of approval of
the Merger Agreement by the LIN Board from a mutually acceptable
investment banking firm as to the fairness of the Merger
Consideration. The parties agree that Wasserstein Perella & Co.
is an acceptable investment banking firm for purposes of the
preceding sentence.
2. The parties to the Actions will attempt in good
faith to agree upon and execute an appropriate Stipulation of
Settlement (the "Stipulation") and such other documentation as
may be required in order to obtain final Court approval of the
Settlement and the dismissal of the Actions upon the terms set
forth in this Memorandum of Understanding. As part of the
Settlement, plaintiffs shall file a consolidated amended
complaint in the consolidated Delaware Action incorporating the
allegations made in the New York Actions.
3. The parties to the respective Actions will present
the Settlement to the Delaware Court of Chancery for approval as
soon as practicable following appropriate notice to the
stockholders of LIN on whose behalf the Actions were instituted,
and will use their best efforts to obtain final Court approval of
the Settlement and the dismissal of the Actions pending in the
Delaware and New York state courts with prejudice as to all
claims asserted in the Actions as against the named plaintiffs
and the stockholders of LIN on whose behalf the Actions were
brought with no right to opt-out of the Settlement and without
costs to any party (except as provided in paragraph 6 below).
The Stipulation will expressly provide, inter alia, for entry of
a judgment and for a complete release and settlement of all
claims against defendants and their predecessors, successors,
parents, subsidiaries, affiliates and agents (including, without
limitation, any investment bankers or attorneys and any past,
present or future officers, directors or employees of defendants
and their predecessors, successors, parents, subsidiaries,
affiliates and agents) which have been, or could have been,
asserted relating to the Merger, the actions of the LIN Board of
Directors relating to the AT&T/McCaw Merger, the PMVG, the proxy
statement, the actions of the Board of Directors of AT&T, McCaw
or LIN relating to the Merger, or any of the transactions,
disclosures, facts and allegations that are the subject of the
Actions; that defendants have denied and continue to deny that
they have committed or attempted to commit any violations of law
or breaches of duty to LIN or its stockholders; and that
defendants are entering into the Stipulation solely because the
proposed Settlement as described above would eliminate the burden
and expense of further litigation and is in the best interests of
LIN and all its stockholders. As used herein, "final Court
approval" of the Settlement means that the Delaware Court of
Chancery has entered an order approving the Settlement and the
New York Court has entered orders dismissing the New York Actions
with prejudice and each of such orders is finally affirmed on
appeal or is no longer subject to appeal.
4. The consummation of the Settlement is subject to:
(a) the drafting and execution of an appropriate Stipulation and
such other documentation as may be required to obtain final Court
approval of the Settlement; (b) the completion by plaintiffs of
appropriate confirmatory discovery in the Actions reasonably
satisfactory to plaintiffs' counsel; and (c) final Court approval
of the Settlement and dismissal of the Actions with prejudice and
without awarding costs to any party (except as provided in
paragraph 6 below). This Memorandum of Understanding shall be
null and void and of no force and effect should any of these
conditions not be met or should plaintiffs' counsel in the
Actions determine that the Settlement is not fair and reasonable
and, in that event, this Memorandum of Understanding shall
neither be deemed to prejudice in any way the positions of the
parties with respect to the Actions nor entitle any party to
recover any costs or expenses incurred in connection with the
implementation of this Memorandum of Understanding.
5. The Settlement contemplated hereby shall be
conditioned upon consummation of the Merger. In addition, the
Settlement contemplated hereby will not be binding upon any party
if the Merger Agreement is terminated in accordance with its
terms. AT&T and McCaw shall have the option to withdraw from the
Settlement in the event that the Merger is terminated or in the
event that final Court approval of the Settlement has not been
obtained by November 30, 1995.
6. Plaintiffs' counsel intend to apply to the
Delaware Court of Chancery for an award of attorneys' fees and
reasonable out-of-pocket disbursements (together, the "Fees").
Subject to the terms and conditions of this Memorandum of
Understanding and the Stipulation of Settlement contemplated by
paragraphs 2 and 5 above, plaintiffs' counsel will apply for a
fee of up to $4 million plus $.25 per LIN public share, which
will not be opposed by the parties. If the Court finally awards
a total fee of $4 million or less, McCaw will pay that amount to
the plaintiffs' attorneys and an additional $.25 per LIN public
share will be paid to the LIN public stockholders as additional
Merger Consideration. If the Court finally awards a total fee
of more than $4 million, the amount in excess of $4 million will
be deducted from the $.25 per LIN public share and, if any amount
remains after such deduction, the remaining amount will be paid
to the public stockholders as additional Merger Consideration.
If final Court approval of the settlement is obtained but the
amount of the attorneys' fee is still in dispute, McCaw will
close the Merger and pay $129.50 per LIN public share plus
accrued interest, if any, in the Merger. In such case, the
additional amount of $.25 per LIN public share will be deposited
into an interest bearing account. Following final Court
determination of the attorneys' fee, the amount in such account
(including pro rata interest) will be paid in whole or in part to
the plaintiffs' attorneys and/or in whole or in part to the
public stockholders who receive the Merger Consideration, as
ordered by the Delaware Court. In the event that the Merger is
consummated and, for whatever reason, plaintiffs' counsel is not
yet entitled to the payment of the Fees, McCaw shall pay the
lesser of $4 million or the amount of Fees awarded by the
Delaware Court within five days after the consummation of the
Merger into an interest bearing escrow account and, upon the
receipt of final Court approval, shall cause the amount finally
awarded by the Court, together with any interest, to be paid to
plaintiff's counsel. McCaw shall pay the costs and expenses
related to providing notice of the Settlement to the LIN
stockholders.
Dated: June 22, 1995
ABBEY & ELLIS
/s/
-------------------------------------
By Arthur Abbey
212 East 39th Street
New York, NY 10016
(212) 889-3700
Member of Plaintiffs' Executive
Committee in the Delaware Action and
Attorneys for Plaintiff Frank in the
New York Action
WOLF POPPER ROSS WOLF & JONES, L.L.P.
/s/
-------------------------------------
By Lester L. Levy
845 Third Avenue
New York, NY 10022
(212) 759-4600
Co-Chair of the Plaintiffs' Executive
Committee in the Delaware Action
and on behalf of the plaintiffs in
the Katz, Luke and Unger Actions
BERNSTEIN LIEBHARD & LIFSHITZ
/s/
-------------------------------------
By Stanley D. Bernstein
274 Madison Avenue
New York, NY 10016
(212) 779-1414
Co-Chair of the Plaintiffs' Executive
Committee in the Delaware Action
and on behalf of the plaintiffs in
the Katz, Luke and Unger Actions
WACHTELL, LIPTON, ROSEN & KATZ
/s/
-------------------------------------
By Marc Wolinsky
51 West 52nd Street
New York, NY 10019
(212) 403-1000
Attorneys for Defendants AT&T Corp.,
McCaw Cellular Communications, Inc.
MMM Holdings, Inc. and the
Individual Director Defendants of
AT&T, McCaw and LIN (except the LIN
Independent Director Defendants)
