===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT
(PURSUANT TO SECTION 14(d)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
(Amendment No. 1)
AND
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 14)
Loctite Corporation
(Name Of Subject Company)
HC Investments, Inc.
Henkel KGaA
(Bidders)
-------------------
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Including Any Associated Stock Purchase Rights)
(Title of Class of Securities)
540137 10 6
(CUSIP Number of Class of Securities)
-------------------
Dr. Karl Gruter
Henkel KGaA
Henkelstrasse 67
D-40191 Dusseldorf
Germany
49-211-797-2137
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications on Behalf of Bidder)
-------------------
COPY TO:
William A. Groll, Esq.
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
(212) 225-2000
<PAGE>
HC Investments, Inc. and Henkel KGaA hereby amend and
supplement their Tender Offer Statement on Schedule 14D-1 (the
"Statement") originally filed on November 6, 1996, with respect
to the offer by HC Investments, Inc. to purchase all outstanding
shares of Common Stock, par value $0.01 per share, of Loctite
Corporation, a Delaware corporation, including the associated
common stock purchase rights issued pursuant to the Rights
Agreement, dated as of April 14, 1994, between the Company and
the First National Bank of Boston, as Rights Agent, and all
benefits that may inure to holders thereof, for a purchase price
of $57.75 per share, net to the seller in cash, without interest
thereon, as set forth in this Amendment No. 1. This amendment
also amends and supplements the Schedule 13D of Purchaser with
respect to the Shares. Capitalized terms not defined herein have
the meanings assigned thereto in the Statement.
ITEM 10. ADDITIONAL INFORMATION.
Item 10(f) of the Statement is hereby amended and
supplemented by adding thereto the following:
In response to a request from legal counsel to the
Special Committee, Purchaser and Parent have delivered to the
Special Committee copies of reports prepared for Parent by
Rothschild Inc., dated August, 1996, September, 1996 and October
4, 1996, copies of which are included as exhibits (g)(1),(g)(2)
and (g)(3) hereto, respectively (collectively, the "Rothschild
Reports"). The information contained in the Rothschild Reports is
incorporated herein by reference. The Rothschild Report dated
August, 1996 refers to an option presented by Rothschild Inc. to
Parent for its preliminary consideration that would have involved
the sale by Purchaser of its shares of stock of The Clorox
Company ("Clorox") in conjunction with an acquisition of Shares
of the Company. While this option was among several options
considered by Parent, it was definitively rejected by Parent.
Parent and Purchaser have no current intention to sell any shares
of Clorox stock and have so advised Clorox.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
Item 11 of the Statement is hereby amended to add the
following exhibits:
(g)(1) Report of Rothschild Inc. dated August, 1996.
(g)(2) Report of Rothschild Inc. dated September, 1996.
(g)(3) Report of Rothschild Inc. dated October 4, 1996.
<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.
Dated: November 15, 1996
HC INVESTMENTS, INC.
by /s/ Karl Gruter
------------------
Name: Karl Gruter
Title: Chairman of the Board of Directors
HENKEL KGaA
by /s/ Karl Gruter
-------------------
Name: Karl Gruter
Title: General Counsel
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER EXHIBIT NAME
(g)(1) Report of Rothschild Inc. dated August, 1996.
(g)(2) Report of Rothschild Inc. dated September, 1996.
(g)(3) Report of Rothschild Inc. dated October 4, 1996.
Exhibit (g)(1)
HENKEL CORPORATION
Project LINK - Periodic Review of Strategic Options
(Current Intentions Remain Unchanged)
August 1996
<PAGE>
HENKEL CORPORATION
Project LINK - Periodic Review of Strategic Options
(Current Intentions Remain Unchanged)
Topics for Discussion
---------------------
Section Page
- ------- ----
1. Assumed Objectives 3
2. Key Issues
- Effect on H and H Adhesives 4
- Consideration of the Shareholder Rights Agreement 5
- Tax 7
- Valuation 8
3. LINK: Sale Options
- Summary 13
- Sale to a Strategic Buyer 14
- Public Offering 21
- Sale of Shares to LINK 25
- Exchange of LINK Shares for LINK Assets 29
- Sale of Equity Linked Securities 31
4. LINK: Purchase Options
- Summary 38
- Full Takeover of LINK for Cash 39
- Sale of TUSA Shares; Purchase of LINK 42
5. Synergy Analysis 48
<PAGE>
Assumed Objectives
------------------
o H to maximize shareholder value.
o H to consider selling certain minority stakes to refocus and
strengthen its core businesses and balance sheet.
o H to receive the maximum proceeds possible while minimizing
the tax impact from a sale.
o H to invest proceeds in its wholly-owned core businesses as
a means of increasing critical mass.
o H to continue to expand in adhesives and consumer products
(controlled entities).
o H to minimize the impact of the sale on its subsidiaries.
o H to minimize the impact of the sale on other holdings and
joint ventures.
o H to sell the stakes within the parameters of existing
shareholder agreements.
o H to avoid strengthening competitors.
o H to consider purchasing remaining 65% in LINK.
<PAGE>
LINK: Key Issues - Effect on H and H Adhesives
-------------------------------------------------
H and LINK are at a crossroads. One road would involve more
active integration and a possible exchange of assets. The
other road may lead to increasing business conflict and could
suggest either the sale of H's LINK shares (and reinvestment
in adhesives) or, possibly, the purchase by H of the rest of
LINK.
H's LINK stake has appreciated substantially over the past
several years. Any sale of the stake would allow H to realize
a significant profit which could then be applied to making
another acquisition or strengthening its balance sheet. Before
consummating a sale, however, the transaction should be
accretive to H. Unless offset by H of A tax loss
carryforwards, H will incur a meaningful tax liability upon
the sale. The tax issue as well as issues concerning the
effect the shareholder rights agreement will have on the sale
process and specific sale options will be addressed in more
detail later in this presentation. H will also have to be
cognizant of the impact the sale will have on other holdings
such as Ecolab and joint ventures. A program will have to be
implemented to reassure executives at these companies that H's
attitude toward these holdings is unchanged, preferably prior
to or upon announcement of the sale.
While a sale of the LINK stake will end H's successful
involvement with a worldwide manufacturer of adhesives and, if
a trade sale were to occur, possibly strengthen one of H
Adhesives' competitors, H Adhesives will be in a position to
make acquisitions. Such acquisition(s) could allow H Adhesives
to gain critical mass, expand geographically and develop the
synergy opportunities never fully exploited through the LINK
relationship. These acquisitions could involve the acquisition
of one large company, or H Adhesives can make several smaller
acquisitions worldwide, pinpointing beneficial add-on
opportunities. In any event, H Adhesives can now take
advantage of acquisition opportunities it was not able to
before for fear of disturbing the LINK relationship.
<PAGE>
LINK: Key Issues - Consideration of the Shareholder Rights Agreement
H entered into a new shareholder rights agreement with LINK in
April 1994. In addition to allowing H to own up to 35% of
LINK's common stock, increasing H's representation on the LINK
board and dissolving LINK's Shareholder Relations Committee,
it attempts to define under what circumstances H may sell LINK
shares. It should be noted that in a sale of the LINK stake, in
addition to any taxes paid, H will be obligated to pay to LINK
any profits made on purchases of LINK stock within six months
prior to the sale of the stake. If H changes its present
intentions, H will also have to update its 13D filing to
reflect such a change in intention with respect to LINK. Once
filed, the 13D will alert the public that H plans on selling
its stake.
The circumstances in which H may sell its stake under the
agreement are outlined below:
Rule 144
Under Rule 144, H is only allowed to sell a small number of
shares during any three-month period. As H's LINK stake is
substantial, full disposal of the stake will take some time.
Prices received by LINK for the shares it sell will be at
prevailing market rates. The fact that H will be selling may
have a depressive effect on the LINK stock price.
Widely distributed transfer of shares through a public
offering
H may sell its entire stake through a widely
distributed public offering. Full disposal of the LINK stake
will take place at one or possibly two public offerings. The
public offerings will involve a slight discount from the
market and a meaningful (4% +/-) offering expense.
<PAGE>
LINK: Key Issues - Consideration of the Shareholder Rights Agreement
Sale to a strategic buyer
The most advantageous price for H's LINK stake will be
realized from another strategic buyer. H may be limited,
however, in its choice of strategic purchasers of the LINK
stake. The shareholder agreement between LINK and H prevents H
from selling its stake to a group that the unaffiliated board
members of LINK feel is an adverse person. An adverse person
is someone the board feels will act against the interests of
LINK in a material way.
A strategic purchaser will be subject to the same ownership
limitations as H with respect to the LINK poison pill and may
encounter resistance from LINK if it chooses to increase its
ownership beyond the H stake. As a strategic buyer of the LINK
stake will most likely want to acquire all of LINK at some
point, a sale of the LINK stake will ultimately become a
three-way negotiation between H, LINK and the buyer. A
strategy will also have to be developed as to whether to
proceed with the sale discreetly or publicly. Either way, LINK
would then be in play and given the attraction of LINK as a
property, a battle to control LINK could ensue.
<PAGE>
LINK: Key Issues - Tax
H will be subject to capital gains tax upon sale of the LINK
stake. The table below outlines H's potential tax liability
(before adjusting for expenses associated with a transaction)
assuming a 35% capital gains tax and no use of H of A tax loss
carry-forwards.
(in millions except LINK share price)
LINK LINK
Shares Share Discount/ Tax Taxable Net
Owned* Price Premium Proceeds Basis Proceeds Tax Proceeds
11.2 $38.03 -10% $426.2 $156.9 $269.3 $94.3 $331.9
11.2 $40.14 -5% $449.9 $156.9 $293.0 $102.5 $347.3
11.2 $42.25 Market $473.5 $156.9 $316.7 $110.8 $362.7
11.2 $46.48 10% $520.9 $156.9 $364.0 $127.4 $393.5
11.2 $50.70 20% $568.3 $156.9 $411.4 $144.0 $424.3
11.2 $54.93 30% $615.6 $156.9 $458.7 $160.6 $455.1
11.2 $59.15 40% $663.0 $156.9 $506.1 $177.1 $485.8
The extent to which H may be able to avoid taxes (through tax
loss carryforwards or other mechanisms) or defer taxes will be
a consideration when deciding how H will sell its stake.
Clearly, additional investigation with respect to the tax
impact of the sale is required.
* Approximately 35% of LINK's currently outstanding shares.
<PAGE>
LINK: Key Issues - Valuation
LINK appears to be close to fully valued based on an analysis of
the multiples of comparable US grading companies, European
trading companies and transactions:
1996e 1996e 1996e Book
Sales EBIT Net Inc. Value
US specialty chemical and 1.2x 9.7x 15.5x 3.0x
adhesive universe
US adhesive universe 1.0x 10.6x 16.8x 2.7x
European chemical universe 1.1x 12.1x 16.1x 2.4x
Transactions universe* 1.3x 11.0x 18.4x 3.9x
LINK 1.9x 11.4x 14.6x 4.2x
*Multiples based on latest twelve months prior to the transaction.
Given LINK's valuation relative to its peers, if one were to
acquire all of LINK one would most likely pay only a control
premium. For purposes of this analysis, we have assumed a control
premium for LINK would be in the range of 20-40%. Additional
details on multiples follow.
<PAGE>
CURRENT TRADING MULTIPLES
$/share ($ millions)
Company Shares 08/14/96 Market Value Enterprise Value
Specialty Chemicals
ECOLAB INC. 64.4 $30.50 $1,964.8 $1,863.4
ENGELHARD CORP. 141.5 20.75 2,937.0 3,088.9
FERRO CORP. 26.6 26.75 710.6 897.0
GT LAKES CHEMICAL 64.5 59.50 3,839.5 4,007.0
HANNA (M.A.) CO. 52.1 19.38 1,010.3 1,199.6
LEARONAL INC. 8.8 22.50 198.3 158.6
ROHM AND HAAS 67.3 61.63 4,148.9 4,895.9
RPM, INC. 77.4 15.06 1,166.4 1,575.0
WD-40 CO. 7.7 44.75 345.0 345.5
WITCO CORP. 56.6 30.00 1,697.0 2,567.7
Adhesives and Sealants
AVERY DENNISON 52.8 $51.75 $2,730.8 $3,224.6
FULLER (H.B.) 14.0 35.25 493.8 742.2
MORTON INT'L 147.1 37.88 5,571.4 5,710.0
LINK 32.7 42.25 1,380.4 1,527.4
<PAGE>
CURRENT TRADING MULTIPLES (continued)
Adjusted Market
Capitalization - to -
LTM 1996E 1997E LTM 1996E
Company Sales Sales Sales EBITDA EBITDA
Specialty Chemicals
ECOLAB INC. 1.4 1.2 1.1 7.6 6.8
ENGELHARD CORP. 1.1 1.0 0.9 10.6 9.7
FERRO CORP. 0.7 0.6 0.6 NA 5.5
GT LAKES CHEMICAL 1.7 1.7 1.5 6.5 6.3
HANNA (M.A.) CO. 0.6 0.6 0.5 6.9 6.1
LEARONAL INC. 0.7 0.6 0.5 6.6 5.5
ROHM AND HAAS 1.3 1.2 1.1 6.4 5.6
RPM, INC. 1.4 1.4 1.3 7.6 8.3
WD-40 CO. 2.9 2.6 2.5 10.6 9.5
WITCO CORP. 1.3 1.0 1.0 10.1 7.6
Mean 1.3 1.2 1.1 8.1 7.1
Adhesives and Sealants
AVERY DENNISON 1.0 1.0 0.9 8.5 7.6
FULLER (H.B.) 0.6 0.6 0.5 6.9 6.3
MORTON INT'L 1.6 1.6 1.4 8.3 8.2
Mean 1.1 1.0 1.0 7.9 7.4
Spec. Chem.+Adhesives
& Sealants
General Mean 1.3 1.2 1.1 8.1 7.2
LINK 1.9 1.9 1.7 9.8 9.1
LINK Implied Market Value
($ millions)
Specialty Chemicals Multiples 884 829 848 1,118 1,039
Adhesives and Sealants
Multiples 707 700 717 1,084 1,086
Spec. Chem + Adhesives &
Sealants Multiples 843 799 818 1,110 1,050
LINK Implied Price per Share ($)
Specialty Chemicals Multiples 27.05 25.37 25.96 34.23 31.80
Adhesives and Sealants
Multiples 21.65 21.41 21.96 33.18 33.25
Spec. Chem + Adhesives &
Sealants Multiples 25.81 24.46 25.04 33.97 32.14
<PAGE>
CURRENT TRADING MULTIPLES (continued)
Adjusted Market Capitalization - to -
Company 1997E LTM 1996E 1997E
Specialty Chemicals EBITDA EBIT EBIT EBIT
ECOLAB INC. 6.2 11.3 10.5 9.5
ENGELHARD CORP. 8.6 13.7 12.5 10.9
FERRO CORP. 5.1 NA 8.0 7.4
GT LAKES CHEMICAL 5.9 8.0 7.8 7.2
HANNA (M.A.) CO. 5.6 10.7 9.1 8.4
LEARONAL INC. 4.7 7.8 6.4 5.4
ROHM AND HAAS 5.3 9.4 7.9 7.6
RPM, INC. 7.3 9.3 10.6 9.3
WD-40 CO. 8.8 10.9 9.8 9.1
WITCO CORP. 6.8 19.1 12.0 10.4
Mean 6.4 11.1 9.5 8.5
Adhesives and Sealants
AVERY DENNISON 6.9 11.8 10.7 9.5
FULLER (H.B.) 5.6 12.1 10.2 8.7
MORTON INT'L 7.4 11.1 11.1 9.9
Mean 6.6 11.6 10.6 9.4
Spec. Chem.+Adhesives
& Sealants 6.5 11.3 9.7 8.7
General Mean LINK 8.2 12.3 11.4 10.0
LINK Implied Market Value
($ millions)
Specialty Chemicals
Multiples 1,057 1,233 1,121 1,147
Adhesives and Sealants
Multiples 1,090 1,296 1,280 1,282
Spec. Chem + Adhesives &
Sealants Multiples 1,064 1,249 1,158 1,179
LINK Implied Price per
Share ($)
Specialty Chemicals Multiples 32.34 37.73 34.32 35.12
Adhesives and Sealants
Multiples 33.36 39.68 39.19 39.25
Spec. Chem + Adhesives &
Sealants Multiples 32.58 38.21 35.44 36.07
<PAGE>
CURRENT TRADING MULTIPLES (continued)
Market Value - to -
LTM Net Inc. 1996E Net 1997E Net
Inc. Inc. Book Value
Company
Specialty Chemicals
ECOLAB INC. 19.9 17.9 16.1 4.3
ENGELHARD CORP. 20.8 18.9 16.0 3.9
FERRO CORP. 15.0 14.5 12.7 2.3
GT LAKES CHEMICAL 13.1 12.5 10.9 2.6
HANNA (M.A.) CO. 18.8 15.5 13.4 2.0
LEARONAL INC. 12.9 11.3 9.8 1.8
ROHM AND HAAS 14.6 11.7 10.7 2.5
RPM, INC. 17.1 17.1 15.1 2.7
WD-40 CO. 13.2 16.3 14.9 7.4
WITCO CORP. 17.6 15.4 13.0 1.7
Mean 16.3 15.1 13.3 3.1
Adhesives and Sealants
AVERY DENNISON 18.5 16.7 14.4 3.3
FULLER (H.B.) 19.2 16.8 13.8 1.7
MORTON INT'L 17.5 16.8 14.6 3.2
Mean 18.4 16.8 14.3 2.7
Spec. Chem.+Adhesives
& Sealants General Mean 16.8 15.5 13.5 3.0
LINK 15.8 14.6 12.8 4.2
LINK Implied Market Value
($ millions)
Specialty Chemicals Multiples 1,422 1,431 1,429 1,040
Adhesives and Sealants
Multiples 1,604 1,589 1,537 908
Spec. Chem + Adhesives
& Sealants Multiples 1,464 1,468 1,454 1,010
LINK Implied Price per
Share ($)
Specialty Chemicals Multiples 43.54 43.81 43.74 31.85
Adhesives and Sealants
Multiples 49.09 48.64 47.04 27.80
Spec. Chem + Adhesives &
Sealants Multiples 44.82 44.92 44.50 30.91
<PAGE>
Rothschild Inc.
Selected European Companies
(millions)
Enter-
Recent Shares Market prise P/E Multiple
Price Outst Value Value 1995 1996E
Belgian Chemical Companies
Recticel (Bf) 285.0 27.4 7,806 17,502 NMF NMF
Solvay (US$) 59.8 83.3 4,977 6,161 11.8 11.3
Tessenderlo Chemie (Bf) 10,400.0 2.6 27,162 28,641 7.9 7.6
UCB Sa (Bf) 60,100.0 1.5 87,550 NA 39.1 34.4
Mean 19.6 17.8
British Chemical Companies
Boc Group (US$) 12.8 480.5 6,126 7,830 15.5 13.7
Courtaulds ((pound)) 6.7 405.5 2,729 2,901 26.8 33.3
Imperial Chem. Ind. (US$) 49.0 181.3 8,881 9,016 14.6 12.3
Mean 18.9 19.8
Dutch Chemical Companies
Akzo Nobel (US$) 56.0 142.2 7,963 10,237 9.7 10.5
DSM (US$) 23.6 144.8 3,421 3,422 5.1 9.0
Mean 7.4 9.8
French Chemical Companies
L'Air Liquide (US$) 34.8 325.4 11,308 12,121 21.0 20.6
Primagaz (FF) 550.0 20.2 11,099 11,287 31.5 26.1
Rhone-Poulenc (US$) 25.8 314.1 8,088 12,738 18.8 18.2
Mean 23.8 21.6
German Chemical Companies
BASF (US$) 28.0 609.8 17,073 15,579 9.8 13.4
Bayer (US$) 35.1 693.0 24,342 27,195 14.5 13.8
Degussa (DM) 502.0 8.6 4,317 9,550 14.5 13.8
Hoechst (US$) 34.5 588.0 20,286 18,336 11.0 5.4
Mean 12.5 11.6
Swiss Chemical Companies
CIBA-Geigy (US$) 62.1 587.0 36,467 34,518 19.8 9.7
Roche Holding (US$) 75.3 862.6 64,975 59,608 22.6 21.1
Mean 21.2 15.4
General Mean 17.3 16.1
LINK Implied
Market Value ($ millions) 1,509 1,527
LINK Implied Price per
Share ($) 46.17 46.74
<PAGE>
Enterprise Value/
Sales EBIT Market Val./
Book
1995 1996E 1995 1996E Value
Belgian Chemical Companies
Recticel (Bf) 0.5 0.5 52.6 22.2 0.9
Solvay (US$) 0.7 0.7 11.6 11.0 1.5
Tessenderlo Chemie (Bf) 0.6 0.5 NA NA 3.9
UCB Sa (Bf) 0.0 0.0 NA NA 6.0
0.5 0.4 32.1 16.6 3.1
British Chemical Companies
Boc Group (US$) 1.4 1.4 9.9 9.71 2.3
Courtaulds ((pound)) 1.4 1.3 17.1 17.8 4.2
Impreial Chem. Ind. (US$) 0.6 0.5 10.4 8.8 1.3
1.1 1.1 12.5 12.1 2.6
Dutch Chemical Companies
Akzo Nobel (US$) 0.8 0.8 8.3 9.0 1.9
DSM (US$) 0.6 0.6 3.6 5.3 1.1
0.7 0.7 5.9 7.2 1.5
French Chemical Companies
L'Air Liquide (US$) 1.9 1.8 14.7 14.3 2.3
Primagaz (FF) 1.5 1.3 20.1 NA 2.7
Rhone-Poulenc (US$) 0.7 0.7 10.1 8.2 0.9
1.4 1.2 15.0 11.3 2.0
German Chemical Companies
BASF (US$) 0.5 0.5 5.7 6.0 1.4
Bayer (US$) 0.9 0.9 9.4 9.3 1.9
Degussa (DM) 0.7 0.7 21.2 21.2 2.4
Hoechst (US$) 1.0 0.8 7.1 4.2 2.3
0.8 0.7 10.8 10.2 2.0
Swiss Chemical Companies
CIBA-Geigy (US$) 2.0 1.6 13.3 7.9 1.5
Roche Holding (US$) 4.7 5.0 22.9 26.4 3.9
Mean 3.4 3.3 18.1 17.2 2.7
General Mean 1.1 1.1 14.9 12.1 2.4
LINK Implied Market Value
($ millions) 747 735 1,695 1,473 783
LINK Implied Price
per Share ($) 22.88 22.51 51.90 45.09 23.97
<PAGE>
COMPARABLE ACQUISITIONS IN THE SPECIALTY CHEMICALS INDUSTRY
Since January 1, 1993
(Dollars in Millions)
- -----------
Date Ann'd Target Business
Target Name Description
- -----------
03/08/93 American Cryogas Industries Mnfr liquid carbon dioxide
03/18/93 Spectrum Colors Inc Mnfr color concentrates
04/30/93 Super Glue Corp Mnfr super glue
06/30/93 Quantum Chemical Corp Mnfr polyethylene, propane gas
11/02/93 INDSPEC Chemical Corp Mnfr resorcinol, derivatives
11/23/93 Unchem International Inc Mnfr industrial chemicals
12/13/93 Kalama Chemical Inc-Specialty Mnfr specialty chemicals
02/10/94 Nobel Industrier Mnfr specialty chemicals
04/14/94 ICP West Inc Mnfr industrial chemicals
02/28/94 United Coatings Inc Mnfr whl paper, varnishes
03/10/94 ChemDesign Corp Mnfr fine chemcials
05/03/94 Rust-Oleum Corp Manufacture paint products
07/18/94 Moline Paint Manufacturing Co Mnfr paints, allied products
09/15/94 Nobel Pharma Chemicals Mnfr specialty chemicals
10/03/94 Chomerics Inc (WR Grace & Co) Mnfr conductive materials
12/09/94 Crop Genetics International Mnfr microbial pesticides
12/16/94 JT Baker Inc (Richardson-Vicks) Mnfr inorganic chemicals
01/09/95 Standard Brands Paint Co Mnfr paints, varnishes
01/24/95 Pioneer Americas Inc Mnfr chlorine & caustic soda
04/12/95 Chattem Inc-Specialty Chem div. Specialty Chemical Division
04/28/95 Grow Group Inc Mnfr paints, chemicals
03/11/96 WR Grace & Co-Dearborn Water Mnfr industrial organic chemicals
04/03/96 Healstar Pharmaceutical Inc Mnfr synthetic rubber, plastic
04/22/96 Mearl Corp Mnfr pearlescent pigments
<PAGE>
COMPARABLE ACQUISITIONS IN THE SPECIALTY CHEMICALS INDUSTRY (cont'd)
since January 1, 1993
(Dollars in Millions)
- -----------
Date Ann'd
Acquiror Name
- -----------
03/08/93 Messer Griesheim Industries
03/18/93 Sandoz Chemicals Corp
04/30/93 Pacer Technology
06/30/93 Hanson PLC
11/02/93 Castle Harlan Partners (LBO)
11/23/93 Western Co of North America
12/13/93 Nipa Laboratories Inc (BTP PLC)
02/10/94 Akzo NV
04/14/94 Brent International PLC
02/28/94 Pratt & Lambert Inc
03/10/94 Miles Inc. (Bayer USABayer AG)
05/03/94 RPM Inc.
07/18/94 Guardsman Products Inc
09/15/94 Cambrex Corporation
10/03/94 Paker Hannifin Corp
12/09/94 biosys
12/16/94 Mallinckrodt Group Inc
01/09/95 Corimon Corp & Pinancle Ptnrs
01/24/95 GEV Corp
04/12/95 Elcat
04/28/95 ICI PLC
03/11/96 Betz Laboratories
04/03/96 Vital Signs Inc.
04/22/96 Engelhard Corp
<PAGE>
COMPARABLE ACQUISITIONS IN THE SPECIALTY CHEMICALS INDUSTRY (cont'd)
Since January 1, 1993
(Dollars in millions)
Equity Value (1)
Enterprise Equity Enterprise Value (1) / Net Book
Value Value Sales EBITDA EBIT Income Value
----- ----- ----- ------ ---- ------ -----
$14.0 $14.0 1.0 x NA NA NA NA
$30.4 $30.4 1.0 NA NM NA NA
$6.4 $3.6 0.7 NM NM NM NM
$3,019.5 $719.9 1.3 12.7 NM 18.5 NM
$228.0 $63.3 2.4 6.5 10.9 16.8 NM
$20.0 NA 0.7 NA NA NA NA
$80.0 NA 0.8 NA 7.1 NA NA
$3,353.7 $1,800.0 1.2 10.7 NM NM 2.6
$3.9 $3.9 0.8 NA 6.5 NA NA
$128.0 $98.9 0.7 7.4 8.0 6.6 NM
$126.2 $106.7 2.8 17.5 NM NM 2.3
$182.6 $176.5 1.4 10.8 12.8 22.0 7.2
$25.7 $21.6 0.7 9.9 11.6 18.2 6.5
$135.0 $130.0 1.5 7.5 16.0 20.5 2.1
$40.0 $40.0 0.7 NA NA NA NA
$9.1 $8.1 3.4 NM NM NM NM
$100.0 NA 0.7 NA NA NA NA
$111.6 $16.0 1.0 NM NM NM NM
$212.0 $162.0 1.3 NA NA NA NA
$25.0 $25.0 1.9 NA NA NA NA
$383.1 $354.2 0.8 12.7 15.4 26.2 2.5
$632.0 NA NA NA NA NA NA
$2.9 $1.7 NA NA NA NA NA
$272.7 NA 2.0 NA NA NA NA
Low 0.7 6.5 6.5 6.6 2.1
Mean 1.3 10.6 11.0 18.4 3.9
High 3.4 17.5 16.0 26.2 7.2
LINK Implied Market
Value (Mean) ($
millions) 880 1,513 1,221 1,605 1,285
LINK Implied Price per
Share (Mean) ($) 26.94 46.31 37.38 49.13 39.34
(1) Assumes 100% Acquisition
Note: Includes mergers and acquisitions with disclosed values in
which the targets SIC codes includes 2891 (adhesive and sealants)
and/or 2800 (chemicals).
Source: Securities Data Company, Inc.
<PAGE>
CURRENT TRADING MULTIPLES
LINK Implied Multiple Analysis
($ in millions, except share price)
LINK
Share Market Enterprise
Price Value Value
$37.0 $1,208.8 $1,355.9
40.0 1,306.8 1,453.9
43.0 1,404.9 1,551.9
46.0 1,502.9 1,650.0
49.0 1,600.9 1,748.0
52.0 1,698.9 1,846.0
55.0 1,796.9 1,944.0
Adjusted Market Capitalization -to-
LTM 1996E 1997E LTM 1996E 1997E LTM 1996E 1997E
Sales Sales Sales EBITDA EBITDA EBITDA EBIT EBIT EBIT
1.7 1.7 1.5 8.7 8.1 7.2 10.9 10.1 8.9
1.8 1.8 1.6 9.3 8.7 7.8 11.7 10.8 9.6
2.0 1.9 1.7 9.9 9.3 8.3 12.5 11.6 10.2
2.1 2.0 1.8 10.6 9.9 8.8 13.3 12.3 10.8
2.2 2.1 1.9 11.2 10.5 9.3 14.1 13.0 11.5
2.3 2.3 2.1 11.8 11.0 9.9 14.9 13.8 12.1
2.5 2.4 2.2 12.5 11.6 10.4 15.7 14.5 12.8
Market Value -to-
LTM 1996E 1997E Book
Net Inc. Net Inc. Net Inc. Value
13.9 12.8 11.2 3.6
15.0 13.8 12.1 3.9
16.1 14.8 13.0 4.2
17.2 15.9 13.9 4.5
18.4 16.9 14.8 4.8
19.5 17.9 15.8 5.1
20.6 19.0 16.7 5.4
<PAGE>
LINK: Sale Options - Summary
Sale to a Sale of Shares
Strategic Public to LINK
Buyer Offering for Cash
Premium received 20-40% -5% 0-10%
Tax impact on H Immediate Immediate Immediate
Gross proceeds $568.3 -663.0 $449.9 $473.5 - 520.9
(in millions)
Net proceeds(a) $416.9 - 477.2 $335.6 $356.6 - 386.7
(in millions)
H 1997e
accretion/(dilution)(c) 0.3% - 1.7% (1.5%) (1.0%) - (0.4%)
Other issues to consider - Adverse person - Cost - Capacity of
- LINK - Timing LINK to
cooperation - Impact on repurchase
- Goodwill stock price shares
Exchange of Sale of
LINK Shares for Equity Linked
LINK Assets Securities
Premium received 10% Market
Tax impact on H None Deferred
Gross proceeds None $473.5
(in millions)
Net proceeds(a) None (b)
(in millions)
H 1997e
accretion/(dilution)(c) (1.7%) 5.7%(d)
Other issues to consider - Willingness of - May require H to
LINK to part file registration
with business statement
- Investor appetite
- Cost
- Timing
- Impact on stock price
(a) Assumes a 35% tax rate and no use of H of A tax loss
carryforwards and includes expenses associated with the
transaction.
(b) Taxes are dependent on the redemption price of the equity linked
securities. H will have a sizable tax liability upon redemption
(c) Assumes a 14.0% pre-tax return on proceeds.
(d) Accretion in the year 2000 (after redemption) is estimated
to be 0.9%. This accretion is primarily the result of the
assumed 14% pre-tax compound annual returns from invested
proceeds.
<PAGE>
LINK: Sale Options - Sale to Strategic Buyer
As discussed above, a sale of the LINK stake to a strategic
buyer will result in the highest price received by H for the
stake. Tax implications will be negative, however, as the
opportunity for deferring or avoiding tax on the sale is most
likely limited. LINK's view on a sale of the stake to a
strategic buyer is also important as a buyer is likely to be
interested in acquiring 100% of LINK, not just H's shares.
Discussions with respect to who is an adverse person may
become acrimonious and ultimately LINK will have the final say
with respect to amending its poison pill (LINK will ultimately
have to redeem its poison pill at an appropriate offer price
for all of LINK) and determining a buyer once it is put into
play. Possible bidders for the LINK stake have been divided
into two lists, A and B. Those buyers in the A list are the
most likely to bid for the LINK stake. It should be noted that
because H will receive cash for its stake (unless acquiror
buys LINK for shares and H is willing to accept such shares),
an acquiror of all of LINK will not be eligible for pooling
under US GAAP. Goodwill, therefore, will be a significant
consideration for any acquiror.
"A" Buyers "B" Buyers
Ashland Inc Akzo Nobel.
Elf Aquitaine BASF
Minnesota Mining and Manufacturing Dow Chemical
Morton International DuPont
Total Unilever
Additional information on each of the prospective buyers is
presented below.
<PAGE>
LINK: Sale Options - Sale to Strategic Buyer
Prospective Buyers: "A" List
Ashland Inc. Market Value: $2.5 billion
Ashland refines, transports and markets petroleum, markets gasoline
and motor oil, chemicals and coal, and provides highway construction.
Within its chemical segment the company manufactures specialty
chemicals including adhesives for structural wood bonding,
bonding fiberglass reinforced plastics, composites,
thermoplastics and metals in automotive, recreational and
industrial applications. Ashland would like to expand its
chemical division through acquisition. Given Ashland's market
value, size and goodwill may be a problem.
Elf Aquitaine Market Value: $19.6 billion
Elf explores for, refines and markets petroleum. The company also
manufactures specialty, basic and fine chemicals, polymers, plastic
additives and metal plating. As part of its specialty chemical
business, Elf manufactures adhesives for automotive,
construction, furniture, packaging, personal care and
household applications. In January 1996, Elf acquired US-based
Findley Adhesives, a manufacturer of high performance and
industrial adhesives, for $200 million. Elf would like to
develop its specialty chemicals activity and strengthen its
non-French presence.
Minnesota Mining and Manufacturing Market Value: $27.9 billion
3M is a diversified manufacturer of industrial, commercial and
health care products. The company specializes in developing
technologies for pressure sensitive adhesives. 3M is active in
automotive and chemical markets and keen to expand in non-US
markets. An acquisition of LINK would complement 3M's
automotive activities and help establish 3M's non-US
credentials in adhesives.
<PAGE>
LINK: Sale Options - Sale to Strategic Buyer
Prospective Buyers: "A" List (continued)
Morton International Market Value: $5.6 billion
Morton is involved in the specialty chemical, salt and inflatable
restraint system industries. As part of the specialty chemical
segment, Morton manufactures industrial and packaging
adhesives. Morton's mission within its Specialty Chemical
segment is to strengthen its worldwide presence and seek
acquisitions. An acquisition of LINK would expand Morton's
adhesive product line and expand its worldwide presence.
Total Market Value: $16.9 billion
Total is a leading French integrated oil and gas company. In addition
to oil and gas interests, Total has significant operations in
specialty chemicals including Bostik adhesives. Bostik is the fifth
largest adhesives company worldwide and is active in
construction, industrial, consumer and transport markets.
Total would like to expand its specialty chemicals business
from $4.3 billion in revenues to $6 billion by 2000 and
Bostik, with revenues of approximately $320 million, has been
acquisitive in the US and Europe. While LINK is larger than
Bostik, an acquisition of LINK would help Total achieve its
planned growth and expand its product line.
<PAGE>
LINK: Sale Options - Sale to Strategic Buyer
Prospective Buyers: "B" List
Akzo Nobel Market Value: $8.1 billion
Akzo produces basic, specialty and functional chemicals for a
variety of industries worldwide. Within its coatings segment,
the company produces some industrial adhesives. Akzo is a
well-diversified chemical company, and can make a major
commitment to adhesives if it believed the opportunity to be
attractive.
BASF Market Value: $16.9 billion
BASF is a diversified manufacturer of chemicals which are used
in a variety of industries including oil and natural gas,
agriculture, synthetic materials and chemicals. The company
also manufactures dyes and consumer products for sale
worldwide. BASF is looking for faster growth and is placing
greater emphasis on its pharmaceutical and specialty chemicals
businesses. While BASF does not have a presence in adhesives,
LINK may be a high growth business in which the company could
be interested.
Dow Chemical Market Value: $19.4 billion
Dow is the fifth largest chemical company in the world. The company
provides chemicals, plastics, energy, agricultural products, consumer
goods and environmental services worldwide. Dow manufactures
some adhesives within its Performance Plastics segment. The
company has been making non-core divestitures and currently
has approximately $5.3 billion of cash to pursue new
opportunities. Given LINK's high margins and growth prospects,
it may have interest to Dow.
<PAGE>
LINK: Sale Options - Sale to Strategic Buyer
Prospective Buyers: "B" List (continued)
DuPont Market Value: $45.9 billion
DuPont is a widely diversified chemical and petroleum company
which manufactures some adhesives. The company has the
financial ability to expand in this sector if it feels it is
appropriate.
Unilever Market Value: $39.6 billion
Unilever manufactures branded and packaged consumer goods, including
food, detergents and personal care products. The company also owns
National Starch and Chemical which produces, among other
things, adhesives. Unilever certainly has the size to purchase
LINK but appears to be focusing on acquisitions on the
consumer side. H would have a view as to whether it wishes to
deal with Unilever.
<PAGE>
LINK: Sale Options - Sale to Strategic Buyer
The effect on H's DVFA earnings from a sale to a strategic buyer
will be as follows:
(DM millions) Premium* 20.0% Premium* 30.0% Premium* 40.0%
$1.00 = DM 1.52 1996e 1997e 1996e 1997e 1996e 1997e
DVFA result(a) 538.0 600.0 538.0 600.0 538.0 600.0
Eliminate equity in net
income of LINK(b) (44.0) (55.6) (44.0) (55.6) (44.0) (55.6)
Return on proceeds(c) 57.7 57.7 61.8 61.8 66.0 66.0
----- ----- ----- ----- ----- -----
New DVFA result 551.7 602.1 555.8 606.2 560.0 610.4
Shares outstanding 146.0 146.0 146.0 146.0 146.0 146.0
New DVFA EPS 3.78 4.12 3.81 4.15 3.84 4.18
Projected DVFA EPS 3.68 4.11 3.68 4.11 3.68 4.11
Accretion/(dilution) 2.5% 0.3% 3.3% 1.0% 4.1% 1.7%
Pre-tax return required
for no dilution 10.7% 13.5% 10.0% 12.6% 9.3% 11.8%
New net debt/total cap.(d) 25.8% 25.6% 25.4%
Current net debt/total cap. 27.2% 27.2% 27.2%
* Based on current market price of $42.25 at August 14, 1996.
Adjustments have been made in accordance with U.S. generally
accepted accounting principles. German accounting principles may
cause these results to differ. Please see footnotes on following page.
<PAGE>
LINK: Sale Options - Sale to Strategic Buyer
(in millions)
$1.00 = DM 1.52
(a) H 1996 estimates are company projections. H 1997
estimates are based on Credit Lyonnais projections.
(b) In 1996, H will eliminate its 33.4% interest in LINK net income
from its income statement. In 1997, H will eliminate its 34.8%
interest in LINK net income from its income statement. (Source of 1996
LINK projections: H. Source of 1997 LINK projections: Value Line)
1996e 1997e
----- -----
Projected net income $86.8 DM 131.9 $105.0 DM 159.6
H portion of LINK net income $28.9 DM 44.0 $36.6 DM 55.6
(c) Proceeds to H from the sale of its stake to a
strategic buyer will be as follows:
Premium 20.0% Premium 30.0% Premium 40.0%
Pre-tax proceeds $568.3 DM 863.8 $615.6 DM 935.7 $663.0 DM 1,007.7
Assumed basis (156.9) (238.5) (156.9) (238.5) (156.9) (238.5)
Expenses @ 2.0% (11.4) (17.3) (12.3) (18.7) (13.3) (20.2)
------ ------ ------ ------ ------ ------
Taxable proceeeds $400.0 DM 608.0 $446.4 DM 678.5 $492.8 DM 749.1
Assumed tax
@ 35.0% ($140.0) (DM 212.8) ($156.2) (DM 237.5) ($172.5) (DM 262.2)
Net after-tax
proceeds $416.9 DM 633.7 $447.1 DM 679.5 $477.2 DM 725.4
------ -------- ------ -------- ------ ----------
(pre-tax proceeds - expenses - tax)
We assume H will invest these proceeds at its internal hurdle rate of 14.0%
Pre-tax return
on proceeds $58.4 DM 88.7 $62.6 DM 95.1 $66.8 DM 101.6
Assumed tax
@ 35.0% (20.4) 31.1 (21.9) (33.3) (23.4) (35.5)
------ ---- ------ ------ ------ ------
After-tax return
on proceeds $37.9 DM 57.7 $40.7 DM 61.8 $43.4 DM 66.0
----- -------- ----- -------- ----- ----------
(d) Upon the sale, H will eliminate the book value of its LINK investment
from its balance sheet
Book value of
LINK investment $225.7 DM 343.0
Adjustments to equity are as follows
Premium 20.0% Premium 30.0% Premium 40.0%
Book value of
LINK investment ($225.7) (DM 343.0) ($225.7) (DM 343.0) ($225.7) (DM 343.0)
Net after-tax gain 416.9 633.7 447.1 679.5 477.2 725.4
----- ----- ----- ----- ----- -----
Total adjustment
to H equity $191.2 DM 290.7 $221.4 DM 336.5 $251.6 DM 382.4
------ -------- ------ -------- ------ ----------
<PAGE>
LINK: Sale Options - Public Offering
Given the size of H's holding, a public offering would
probably have to be a full global offering with stock being
sold in Europe and Asia in addition to the U.S. Two key issues
which will determine the pricing and feasibility of global
public offering will be the size of H's LINK holding compared
with the average daily traded volume of LINK stock (as a
measure of supply and demand) and the performance of the LINK
stock price recently and over the longer term:
TABLE OF LINK STOCK PRICE & VOLUMES OVER LAST FIVE YEARS
<PAGE>
LINK: Sale Options - Public Offering
H's LINK stake represents over 200 trading days of volume in
LINK stock, making a public offering of H's LINK stock a
"heavy issue"; in secondary offerings it is usual to see the
offering size at 40 to 60 trading days of volume. The public
offering price is therefore likely to be set at a relatively
large discount (perhaps 5% or more, equivalent to $24 million
or more) to the LINK stock price on the day the public
offering is priced. In addition, upon the announcement of such
a large offering either through the amendment of the 13D
statement or when the initial filing with the SEC is made,
LINK's stock price may trade down from present levels causing
H to lose further value. Underwriting and other expenses are
also likely to be around 4% of the value of the offering, or
approximately $18 million. H will also be subject to capital
gains tax on the proceeds of the offering.
It may be possible to sell a smaller amount of stock than H's
entire holding through a public offering and achieve tighter
pricing in the offering and less downward pressure on the LINK
stock price. This will however create considerable uncertainty
as regards the remaining LINK stock held by Henkel; such stock
overhanging the market will likely depress LINK's stock price
until the stock is sold, a situation that will be unattractive
to LINK. If a public offering is pursued for the sale of LINK
stock, we would advocate selling the entire holding in one
offering, unless any stock not sold by H through the public
offering could simultaneously be sold back to LINK thereby
disposing of its entire holding.
H should note that a public offering of stock will take a
couple of months and require the active participation of LINK
management, especially in presentations to prospective
investors.
<PAGE>
LINK: Sale Options - Public Offering
The effect on H's DVFA earnings from a public offering will be
as follows:
(DM millions) Discount* -5.0%
$1.00 = DM 1.52
1996e 1997e
DVFA result(a) 538.0 600.0
Eliminate equity in net (44.0) (55.6)
income of LINK(b)
Return on proceeds(c) 46.4 46.4
----- -----
New DVFA result 540.4 590.8
Shares outstanding 146.0 146.0
New DVFA EPS 3.70 4.05
Projected DVFA EPS 3.68 4.11
Accretion/(dilution) 0.5% (1.5%)
Pre-tax return required 13.3% 16.6%
for no dilution
New net debt/total 26.4%
cap.(d)
Current net debt/total 27.2%
cap.
* Based on current market price of $42.25 at August 14, 1996.
Adjustments have been made in accordance with US generally
accepted accounting principles. German accounting principles may
cause these results to differ. Please see footnotes on following page.
<PAGE>
LINK: Sale Options - Public Offering
(in millions)
$1.00 = DM 1.52
(a) H 1996 estimates are based on company projections. H 1997 estimates are
based on Credit Lyonnais projections.
(b) In 1996, H will eliminate its 33.4% interest in LINK net income from
its income statement in 1997. H will eliminate its 34.8% interest
in LINK net income from its income statement (Source of 1996 LINK
projections: H. Source of 1997 LINK projections: Value line)
1996e 1997e
----- -----
Projected net income $86.8 DM131.9 $105.0 DM159.6
H portion of LINK net income $28.9 DM 44.0 $36.6 DM 55.6
(c) Proceeds to H are as follows: Discount -5.0%
-------- -----
Public offering proceeds $449.9 DM683.8
Expenses @ 4.0% (18.0) (27.4)
Assumed basis (156.9) (238.5)
------- -------
Taxable proceeds $275.0 DM418.0
Assumed tax @ 35.0% ($96.2) (DM143.6)
After-tax proceeds (offering
proceeds - expenses - tax) $335.6 DM510.2
------ -------
We assume H will invest the proceeds at its internal hurdle rate
of 14.0%
Pre-tax return on proceeds $47.0 DM 71.4
Assumed tax @ 35.0% (16.4) (25.0)
------ --------
After-tax return on proceeds $30.5 DM 46.4
----- -------
(d) Upon the sale, H will eliminate the book value of its LINK investment
from its balance sheet.
Book value of LINK investment $225.7 DM343.0
Adjustments to equity are as follows:
Discount -5.0%
-------- -----
Book value of LINK investment($225.7) (DM 343.0)
Net after-tax gain 335.6 510.2
------ --------
Total adjustment to
H equity $110.0 DM 167.2
------ --------
<PAGE>
LINK: Sale Options - Sale of Share to LINK
LINK may be interested in purchasing H's stake, possibly at a
slight premium to the market. As a public offering by H may have
a depressive effect on the LINK stock price, the market may view
this scenario, whereby LINK purchases the shares from H, as
positive. This sale will allow H to avoid adverse person
discussions. H will, of course, be subject to capital gains tax.
The impact on LINK from dilution and leverage perspectives will
be as follows:
($ millions) Premium* 0.0% Premium* 10.0%
LINK purchase price 473.5 520.9
1996e 1997e 1996e 1997e
Source: Value Line
LINK Operating profit 134.1 152.2 134.1 152.2
Interest and other (8.4) (8.4) (8.4) (8.4)
New interest(a) (37.9) (37.9) (41.7) (41.7)
------ ------ ------ ------
Pre-tax profit 87.8 106.0 84.0 102.2
Taxes @ 26.5% (23.3) (28.1) (22.3) (27.1)
---- ---- ---- ----
Net profit 64.5 77.9 61.7 75.1
---- ---- ---- ----
New shares outstanding 20.8 21.8 20.8 21.8
New EPS $3.10 $3.57 $2.97 $3.45
Projected EPS $2.90 $3.30 $2.90 $3.30
Accretion/(dilution) 7.0% 8.3% 2.4% 4.4%
EBIT/Interest 2.9 3.3 2.7 3.0
New net debt/total capitalization 65.6% 67.2%
Current net debt/total capitalization 32.7% 32.7%
* Based on current market price of $42.25 at August 14, 1996.
(a) Assumes LINK pays 8.0% interest per annum.
<PAGE>
LINK: Sale Options - Sale of Shares to LINK
The effect on H's DVFA earnings from a sale of shares to LINK
will be as follows:
(DM millions) Premium* 0.0% Premium* 10.0%
$1.00 = DM 1.52
1996e 1997e 1996e 1997e
DVFA result(a) 538.0 600.0 538.0 600.0
Eliminate equity in net income of LINK(b) (44.0) (55.6) (44.0) (55.6)
Return on proceeds(c) 49.3 49.3 53.5 53.5
----- ----- ----- -----
New DVFA result 543.3 593.7 547.5 597.9
Shares outstanding 146.0 146.0 146.0 146.0
New DVFA EPS 3.72 4.07 3.75 4.10
Projected DVFA EPS 3.68 4.11 3.68 4.11
Accretion/(dilution) 1.0% (1.0%) 1.8% (0.4%)
Pre-tax return required for no dilution 12.5% 15.8% 11.5% 14.5%
New net debt/total cap.(d) 26.2% 26.0%
Current net debt/total cap. 27.2% 27.2%
* Based on current market price of $42.25 at August 14, 1996.
Adjustments have been made in accordance with US generally
accepted accounting principles. German accounting principles may
cause these results to differ. Please see footnotes on following page.
<PAGE>
LINK: Sale Options - Sale of Shares to LINK
(a) H 1996 estimates are based on company projections.
H 1997 estimates are based on Credit Lyonnais
projections.
(b) In 1996, H will eliminate its 33.4% interest in LINK net
income from its income statements. In 1997, H will
eliminate its 34.8% interest in LINK net income from its
income statement. (Source of 1996 LINK projections: H.
Source of 1997 LINK projections: Value Line)
1996e 1997e
Projected net income $86.8 DM 131.9 $105.0 DM 159.6
H portion of LINK net income $28.9 DM 44.0 $36.6 DM 55.6
(c) Proceeds to H are as follows:
Premium 0.0% Premium 10.0%
Pre-tax proceeds $173.5 DM 719.8 $520.9 DM 791.8
Assumed basis (156.9) (238.5) (156.9) (238.5)
Expenses @ 2.0% (9.5) (14.4) (10.4) (15.8)
------ -------- ------ --------
Taxable proceeds $307.2 DM 466.9 $353.6 DM 537.5
Taxes @ 35.0% ($107.5) (DM 163.4) ($123.8) (DM 188.1)
Net after-tax proceeds $356.6 DM 542.0 $386.7 DM 587.8
------- --------- ------ --------
(pre-tax proceeds -
expenses - tax)
We assume H will invest these proceeds at its internal hurdle rate
of 14.0%:
Pre-tax return on proceeds $49.9 DM 75.9 $54.1 DM 83.3
Assumed tax @ 35.0% (17.5) (26.6) (18.9) (28.8)
After-tax return on ----- ------- ----- -------
proceeds $32.4 DM 49.3 $35.2 DM 53.5
----- ------- ----- -------
(d) Upon the sale, H will eliminate the book value of its LINK investment
from its balance sheet
Book value of LINK
investment $225.7 DM 343.0
Adjustments to equity are
as follows:
Premium 0.0% Premium 10.0%
Book value of LINK
investment ($225.7) (DM 343.0) ($225.7) (DM 343.0)
Net after-tax gain 356.6 542.0 386.7 587.8
Total adjustments to ------ -------- ------ --------
H equity $130.9 DM 199.0 $161.1 DM 244.8
------ -------- ------ --------
<PAGE>
LINK: Sale Options - Sale of Shares to LINK
(possibly linked with a public offering)
A buyback of the entire LINK stake leaves LINK highly leveraged.
LINK's EBIT interest coverage is approximately 3.0 times in 1997
assuming a 10% premium is paid for H's LINK shares. As BBB-rated
companies generally have EBIT interest coverage of around 2.9
times and A-rated companies have EBIT interest coverage of
approximately 5.7 times, LINK credit quality may be of concern.
Assuming LINK management would feel comfortable at 4.0 times, new
debt capacity would be approximately $371 million, allowing LINK
to purchase 8.0 million shares at a 10% premium to market or 8.8
million shares at market. H could sell the balance of its stake
through a public offering. The effect on LINK would be as
follows:
($ millions) Premium* 0.0% Premium* 10.0%
Source: Value Line
1996e 1997e 1996e 1997e
LINK Operating profit 134.1 152.2 134.1 152.2
Interest and other (8.4) (8.4) (8.4) (8.4)
New interest(a) (29.7) (29.7) (29.7) (29.7)
------ ------ ------ ------
Pre-tax profit 96.0 114.2 96.0 114.2
Taxes @ 26.5% (25.4) (30.2) (25.4) (30.2)
------ ------ ------ ------
Net profit 70.6 83.9 70.6 83.9
------ ---- ---- ----
New shares outstanding 23.2 24.2 24.0 25.0
New EPS $3.04 $3.46 $2.94 $3.35
Projected EPS $2.90 $3.30 $2.90 $3.30
Accretion/(dilution) 4.8% 5.0% 1.3% 1.6%
EBIT/Interest 3.5 4.0 3.5 4.0
New net debt/total 61.6% 61.6%
capitalization
Current net debt/total
capitalization 32.7% 32.7%
* Based on current market price of $42.25 at August 14, 1996.
(a) Assumes LINK pays 8.0% interest per annum.
<PAGE>
LINK: Sale Options - Exchange of LINK Shares for LINK Assets
Alternatively, LINK may be interested in exchanging assets such
as its consumer adhesives business in exchange for the LINK
stock. This exchange will allow H to increase its critical mass,
provide synergistic opportunities and avoid the adverse person
issue. From a tax perspective, the transaction may be tax-free to
both H and LINK provided that a legitimate business purpose
underpins the rationale for the transaction. If the rationale is
a simple exit strategy for H from its LINK stake, then the
transaction would not be tax-free. If, however, LINK believed its
consumer business to be non-core and the transaction with H
brought operational benefits to both parties, a split-off could
be effected. A split-off is a transaction whereby certain
shareholders exchange shares held in a company for shares in a
subsidiary of that company. Upon completion of the transaction,
the subsidiary is independent of its former parent and the
subsidiary's current shareholders are former shareholders of the
parent. Link may, however, feel obligated to offer the exchange
to all shareholders to allow them to participate in the same
opportunity. Assuming that this transaction is tax-free and there
is an even exchange of LINK's consumer adhesive business for H's
LINK stake, the impact on LINK's earnings will be as follows:
($ millions)
Source: Value Line
1996e 1997e
LINK Operating profit 134.1 152.2
Est. LINK consumer adhesives operating profit(a) (43.1) (46.1)
----- -----
New LINK operating profit 91.0 106.1
Interest and other (8.4) (8.4)
---- -----
Pre-tax profit 82.6 97.7
Taxes @ 26.5% (21.9) (25.9)
---- ----
Net profit 60.7 71.8
---- ----
New shares outstanding 20.8 21.8
New EPS $2.92 $3.30
Projected EPS $2.90 $3.30
Accretion/(dilution) 0.7% (0.1%)
(a)Rothschild estimate.
<PAGE>
LINK: Sale Options - Exchange of LINK Shares for LINK Assets
Assuming there can be an even exchange of LINK's consumer
adhesive business for H's LINK stake, the impact on H's DVFA
earnings will be as follows:
(DM millions)
$1.00 = DM 1.52
1996e 1997e
DVFA result(a) 538.0 600.0
Eliminate equity in net income
of LINK (b) (44.0) (55.6)
LINK consumer adhesives (c) 42.6 45.6
Synergies -- --
----- -----
New DVFA result 536.6 590.0
Shares outstanding 146.0 146.0
New DVFA EPS 3.68 4.04
Projected DVFA EPS 3.68 4.11
Accretion/(dilution) (0.3%) (1.7%)
Pre-tax synergies required for no dilution 2.5 15.4
Post-tax synergies required for no dilution 1.6 10.0
(a) H 1996 estimates are based on company projections. H 1997 estimates
are based on Credit Lyonnais projections.
(b) In 1996, H will eliminate its 33.4% interest in LINK net income from
its income statement. In 1997, H will eliminate its 34.8% interest
in LINK net income from its income statement. (Source of 1996 LINK
projections: H. Source of 1997 LINK projections: Value Line)
1996e 1997e
Projected net income $86.8 DM131.9 $105.0 DM159.6
H portion of LINK net income $28.9 DM 44.0 $36.6 DM 55.6
(c) Rothschild estimate. Assumes a tax rate of 35%.
<PAGE>
LINK: Sale Options - Sale of Equity Linked Securities
Another option for H is to monetize its LINK stake either by
issuing convertible debentures to investors which are
convertible into the LINK shares or by issuing premium equity
participating securities or PEPs. The convertible debentures
would be convertible into LINK shares held by H at a premium
to the current share price of LINK stock. Convertible
debentures may ultimately have to be redeemed in cash by H if
the holders of the debentures choose not to convert because
the price of LINK stock has not risen above the premium. The
PEPs would be redeemed in LINK shares held by H regardless of
the performance of LINK stock. The number of shares eligible
for redemption is based on a formula tied to the performance
of the LINK stock.
A registration for a PEP offering was recently filed with the
SEC by Times Mirror as a way of monetizing approximately $58
million of its investment in the Internet software provider,
Netscape. In a PEP tied to LINK, H would issue the PEPs at a
price equal to the market price of one share of LINK. H could
issue up to a total of 11.2 million PEPs in line with the 11.2
million shares of LINK it owns. PEPs have the following
characteristics:
- - PEPs pay a quarterly dividend. In the case of the Times Mirror
transaction, the dividend will be between 3% and 3.75% per
year. PEPs tied to the LINK stock will have to have a yield in
excess on LINK stock, currently about 2.8%
- - PEPs have varying maturity dates. H could, for example, issued
PEPs with a three-year maturity.
- - the unique aspect of PEPs is that they are redeemed using a formula
based on the market price of the underlying stock at the issue date
and at the maturity date. If LINK stock remains the same or falls over
the three-year period from the issue date, H redeems the PEP at the
market price per share of LINK stock at the PEP maturity date. If the
LINK stock rises, say more than 15% over three years, the PEPs are
redeemed at some discount to the market price per share of the LINK
stock on the PEP maturity date. In the Times Mirror transaction, the
PEPs are to be redeemed at 87% of the market price per share of
the Netscape stock. If the LINK stock rises less than 15% then the
PEPs are redeemed at H's original PEP issue price. This structure is
illistrated on the following page.
<PAGE>
LINK: Strategic Options - Sale of Equity Linked Securities
Assumed Stock Price At Issuance of PEPs (at market) $42.250
Minimum Upside Participation by H 15.0%
Final Number
Future LINK LINK Shares Value to Value to H
Price Per per 100 Holder of from Sale Total Value
Common Stock PEPS 100 PEPS of 100 PEPS to H*
$39.75 100.0 $3,975 $4,225 $4,225
$42.25 100.0 $4,225 $4,225 $4,225
$44.75 94.4 $4,225 $4,225 $4,475
$47.25 89.4 $4,225 $4,225 $4,725
$49.75 87.0 $4,326 $4,225 $4,874
$52.25 87.0 $4,543 $4,225 $4,907
$54.75 87.0 $4,761 $4,225 $4,939
Table of Total Value Received by H from Sale and Conversion of 100 PEPs
* Ignores PEP interest cost, dividends on underlying stock and time value of
upside to H.
<PAGE>
LINK: Sale Options - Sale of Equity Linked Securities
The advantage for the investor in a PEP is that he shares in
some of the upside of a particular stock and at the same time
receives dividend payments in excess of the stock's current
yield. The advantage for H in either issuing a convertible
debenture tied to the LINK stock or PEPs tied to the LINK
stock is that H is able to monetize its LINK stake and defer
tax until maturity of the convertible debt or PEP. In the case
of PEPs, H will also continue to share in the upside of the
LINK stock. In addition, a public offering of these securities
is not disruptive to LINK, although it would probably require
the participation of LINK management in road shows. There
will, however, be expenses associated with this offering.
Like a public offering, an offering of PEPs will be subject to
timing, cost (typically 3% to 4%) and impact on LINK stock
price considerations. An announcement of the proposed offering
may also create downward pressure on LINK stock, as current
LINK stockholders sell LINK common stock in order to fund
purchases of PEPs which have a higher yield. Additionally, the
investor universe may be more limited than it would be with a
public offering of LINK shares because of the hybrid nature of
the security. Although there have been issues of similar such
securities, issuing $500 million of LINK may require a
relatively high coupon in order to attract investors. In
addition, H will be required to file a registration statement
if it wishes to sell these securities publicly in the US. H
could avoid the rigors (and cost) of a US filing by selling
these shares either privately or outside the US, but the
investor universe would be even more limited.
<PAGE>
LINK: Sale Options - Sale of Equity Linked Securities
The effect on H's DVFA earnings from a sale of PEPs will be as
follows:
(DM millions)
$1.00 = DM 1.52 Premium* 0.0%
1996e 1997e 2000e
DVFA result(a) 538.0 600.0 800.0
Return on proceeds(b) 62.9 62.9 93.2
Payment of dividend(c) (28.8) (28.8) 0.0
New interest(d) 0.0 0.0 (6.3)
Eliminate equity in net income of LINK(e) 0.0 0.0 (79.4)
----- ----- ------
New DVFA result 572.1 634.1 807.4
Shares outstanding 146.0 146.0 146.0
New DVFA EPS 3.92 4.34 5.53
Projected DVFA EPS 3.68 4.11 5.48
Accretion/(dilution) 6.3% 5.7% 0.9%
Pre-tax return required for no dilution 6.4% 6.4% 13.2%
New net debt/total cap.(f) 35.5% 27.1%
Current net debt/total cap. 27.2% 27.2%
*Based on current market price of $42.25 at August 14, 1996
Adjustments have been made in accordance with US generally
accepted accounting principles. German accounting principles may
cause these results to differ. Please see footnotes on following page.
<PAGE>
LINK: Sale Options - Sale of Equity Linked Securities
(in millions)
$1.00 = DM 1.52
(a) H 1996 estimates are based on company projections.
H 1997 estimates are based on Credit Lyonnais projections.
H 2000 estimates are Rothschild projections.
(b) Proceeds to H from the sale of PEPs will be as follows:
Premium 0.0%
Proceeds $ 473.5 DM 719.8
Expenses @ 4.0% (18.9) (28.8)
-------- --------
Net proceeds $454.6 DM 691.0
======== ========
We assume H will invest these proceeds
at its internal hurdle rate of 14.0%
Pre-tax return on proceeds $63.6 DM 96.7
Assumed tax @ 35.0% (22.3) (33.9)
-------- --------
After-tax return on proceeds $41.4 DM 62.9
======== ========
Proceeds from the offering will compound annually such
that in the year 2000 when the PEPs are redeemed, the
return on proceeds will be as follows:
1997 1998
---- ----
Pre-tax return on proceeds $63.6 DM 96.7 $72.6 DM 110.3
Assumed tax @ 35.0% (22.3) (33.9) (25.4) (38.6)
-------- -------- -------- --------
After-tax return on proceeds $41.4 DM 62.9 $47.2 DM 71.7
======== ======== ======== ========
1999 2000
---- ----
Pre-tax return on proceeds $82.7 DM 125.7 $94.3 DM 143.3
Assumed tax @ 35.0% (28.9) (44.0) (33.0) (50.2)
-------- -------- -------- --------
After-tax return on proceeds $53.8 DM 81.7 $61.3 DM 93.2
======== ======== ======== ========
(c) We assume that the annual dividend on the PEPs will be 4.0%
Proceeds $473.5 DM 719.8
Annual dividend $18.9 DM 28.8
<PAGE>
LINK: Sale Options - Sale of Equity Linked Securities
(d) Assuming the price of LINK is $54.75 at redemption, the value
to the PEP investors and to H are as follows:
Value
-----
Shares owned by H in LINK 11.2 $613.7 DM 932.7
Shares redeemed @ 87.0% 9.8 $533.9 DM 811.5
Shares assumed sold by H 1.5 $79.8 DM 121.3
Tax incurred by H to redeem the shares and to sell its own shares
is as follows (H is assumed to incur additional debt to pay tax)
Assumed tax basis $156.9 DM 238.5
Tax upon redemption and sale
@ 35.0% $159.9 DM 243.0
Proceeds to H upon sale (79.8) (121.3)
------ --------
Total debt $80.1 DM 121.7
Pre-tax interest @ 8.0% $6.4 DM 9.7
After-tax interest @ 35.0% $4.2 DM 6.3
(e) In 1996, H will eliminate its 33.4% interest in LINK net
income from its income statement. In 1997 and 2000, H
will eliminate its 34.8% interest in LINK net income
from its income statement.
1996e 1997e 2000e
----- ----- -----
Projected net
income $86.8 DM 131.9 $105.0 DM 159.6 $150.0 DM 228.0
H Portion of 28.9 DM 44.0 $36.6 DM 55.6 $52.3 DM 79.4
LINK net income
(f) Upon the redemption, H will eliminate the book value of
its LINK investment from its balance sheet, and record a
gain and incur additional debt discussed in footnote d.
Book value of LINK investment $225.7 DM 343.0
Adjustments to equity and debt are as follows
1996e 2000e
----- ----
H increase in
debt as a result
of net proceeds/
redemption $473.5 DM 719.8 ($473.5) (DM 719.8)
H increase in
debt as a result
of redemption 0.0 0.0 80.1 121.7
-------- ------- -------- --------
Total debt
adjustment
to H $473.5 DM 719.8 ($393.5) (DM 598.1)
======== ========= ======== =========
Net 2000
Adjustments
-----------
H increase in
debt as a result
of net proceeds/
redemption $0.0 DM 0.0
H increase in
debt as a result
of redemption 80.1 121.7
---- --------
Total debt
adjustment
to H $80.1 DM 121.7
----- --------
2000e
-----
Book value of LINK investment ($225.7) (DM 343.0)
Gross proceeds on redemption and sale 613.7 932.7
Tax upon redemption and sale (159.9) (243.0)
-------- --------
Total equity adjustment to H $228.1 DM 346.8
======== ========
Net 2000
Adjustments
-----------
Book value of LINK investment ($225.7) (DM 343.0)
Gross proceeds on redemption and sale 613.7 932.7
Tax upon redemption and sale (159.9) (243.0)
-------- --------
Total equity adjustment to H $228.1 DM 346.8
======== ========
<PAGE>
LINK: Purchase Options - Summary
---------------------------------
Full Takeover Sale of TUSA Shares
of LINK for Cash and Purchase of LINK
---------------- --------------------
Premium paid 20.0% - 40.0% 20.0% - 40.0%
Price Paid for LINK
shares not owned by H
(in millions) $1,088.2 - $1,269.5 $1,088.2 - $1,269.5
Price paid for LINK
shares plus
net debt (in millions) $1,272.3 - $1,459.1 $1,272.3 - $1,459.1
Tax impact on H
(in millions) none $407.2 (a)
H 1997e accretion/
(dilution) 0.6% - (1.9%) (6.1%) - (8.5%)(b)
Other issues to
consider - Would place LINK into public - Would place LINK into
auction process public auction process
- Significant leverage - Would lose benefits
from TUSA relationship
(a) From the sale of TUSA shares.
(b) A sale of the TUSA stake without the purchase of LINK
would result in accretion of 6.3% in 1996 and 2.3% in
1997. A sale of TUSA shares and purchase of LINK is
dilutive because the pretax return on the purchase of
the balance of LINK not currently owned by H is
approximately 9%. This return yields less than sale of
TUSA for cash where we assumed a pretax return of 14% on
the proceeds.
<PAGE>
LINK: Purchase Options - Full Takeover of LINK for Cash
--------------------------------------------------------
A full takeover of LINK is an option available to H should the
sale of the LINK stage prove unattractive. Acquiring all of LINK
increases H Adhesives' critical mass and geographic diversity,
provides synergy opportunities and avoids future conflict with
LINK. An announced takeover of LINK, however, places LINK into a
public auction process and there is no assurance H will emerge
with a successful bid. An acquisition of LINK will also add
significant leverage to the H balance sheet. The effect on H's
DVFA earnings assuming full takeover of LINK at various premiums
to the market is outlined below.
($ millions) Premium* 20.0% Premium* 30.0% Premium * 40.0%
LINK shares outstanding (a) 32.7 32.7 32.7
Less: Shares owned by H (11.2) (11.2) (11.2)
-------- -------- ----------
Shares to be acquired by H 21.5 21.5 21.5
Price paid per share $50.70 $54.93 $59.15
Total price for shares $1,088.2 $1,178.9 $1,269.5
LINK net debt $147.1 $147.1 $147.1
-------- -------- ---------
Pre-expense cost of acquisition $1,235.3 $1,325.9 $1,416.6
Expenses @ 3.0% 37.1 39.8 42.5
Total cost of acquisition $1,272.3 $1,365.7 $1,459.1
========= ========= --------
Estimated additional goodwill $972.4 $1,065.8 $1,159.2
========= ========= --------
Implied multiple of 1996 earnings 19.5x 21.1x 22.8x
* Based on current market price of $42.25 at August 14, 1996
(a) includes 501,055 shares for outstanding options.
<PAGE>
LINK: Purchase Options - Full Takeover of LINK for Cash
(DM millions) Premium* 20.0% Premium* 30.0%
$1.00 = DM 1.52
1996e 1997e 1996e 1997e
DVFA result (a) 538.0 600.0 538.0 600.0
Add balance of LINK net income(b) 87.9 104.0 87.9 104.0
New after-tax interest (c) (100.6) (100.6) (107.9) (107.9)
Synergies -- -- -- --
-------- ------ -------- -------
DVFA earnings 525.4 603.4 518.0 596.0
========= ====== ======= ======
Shares outstanding 146.0 146.0 146.0 146.0
New DVFA EPS 3.60 4.13 3.55 4.08
Projected DVFA EPS 3.68 4.11 3.68 4.11
Accretion/(dilution) (2.3%) 0.6% (3.7%) (0.7%)
Pre-tax synergies required
for no dilution 19.5 0.0 30.9 6.2
Post-tax synergies required
for no dilution 12.7 0.0 20.1 4.0
New net debt/total cap (d) 45.9% 46.9%
Current net debt/total cap 27.2% 27.2%
(DM millions) Premium* 40.0%
$1.00 = DM 1.52
1996e 1997e
-------- --------
DVFA result (a) 538.0 600.0
Add balance of LINK
net income (b) 87.9 104.0
New after-tax
interest (c) (115.3) (115.3)
Synergies -- --
------- -------
DVFA earnings 510.6 588.7
------- -------
Shares outstanding 146.0 146.0
New DVFA EPS 3.50 4.03
Projected DVFA EPS 3.68 4.11
Accretion/(dilution) (5.1%) (1.9%)
Pre-tax synergies
required for no
dilution 42.3 17.2
Post-tax synergies
required for no
dilution 27.5 11.2
New net debt/total
cap(d) 47.8%
Current net debt/
total cap 27.2%
Note: DVFA earnings do not include goodwill charges.
* Based on current market price of $42.25 at August 14, 1996
Adjustments have been made in accordance with US generally
accepted accounting principles. German accounting principles may
cause these results to differ. Please see footnotes on following page.
<PAGE>
LINK: Purchase Options - Full Takeover of LINK for Cash
(in millions)
$1.00 = DM 1.52
(a) H 1996 estimates are based on company projections.
H 1997 estimates are based on Credit Lyonnais projections.
(b) In 1996, H will incorporate an additional 66.7% of LINK net income
as a result of the purchase of the balance of LINK.
In 1997 H will incorporate an additional 65.2% of LINK net income as
a result of the purchase of the balance of LINK.
(Source of 1996 LINK projections: H. Source of 1997 LINK
projections: Value Line)
1996e 1996e 1997e 1997e
----- ----- ---- -----
Projected net income $86.8 DM 131.9 $105.0 DM 159.6
Additional H portion of
LINK net income $57.9 DM 87.9 $68.4 DM 104.0
(c) Interest on the full takeover of LINK is calculated as follows:
Premium 20.0% Premium 30.0%
----------- ------- ----------- -------
Purchase price $1,088.2 DM 1,654.0 $1,178.9 DM 1,791.9
LINK net debt
assumed 147.1 223.6 147.1 223.6
-------- -------- -------- --------
Pre-expense debt $1,235.5 DM 1,877.6 $1,325.9 DM 2,015.4
Expenses @ 3.0% 37.1 56.3 39.8 60.5
-------- -------- -------- --------
New H debt $1,272.3 DM 1,933.9 $1,365.7 DM 2,075.9
Interest @ 8.0% $101.8 DM 154.7 $109.3 DM 166.1
Taxes @ 35.0% (35.6) (54.1) (38.2) (58.1)
-------- -------- -------- --------
After-tax interest $66.2 DM 100.6 $71.0 DM 107.9
========= ========= ========= =========
Premium 40.0%
----------- -------
Purchase price $1,269.5 DM 1,929.7
LINK net debt
assumed 147.1 223.6
-------- --------
Pre-expense debt $1,416.6 DM 2,153.3
Expenses @ 3.0% 42.5 64.6
-------- --------
New H debt $1,459.1 DM 2,217.8
Interest @ 8.0% $116.7 DM 177.4
Taxes @ 35.0% (40.9) (62.1)
-------- --------
After-tax interest $75.9 DM 115.3
========= =========
(d) New net debt and total capitalization includes net H debt
incurred with the acquisition of the balance of LINK.
<PAGE>
Sale of TUSA
As a means of strengthening its balance sheet, H could sell its
stake in TUSA. Assuming H were to sell the TUSA stake at a 5%
discount to the market, proceeds to H are as follows:
(in millions except per share price)
TUSA shares owned 15.4
TUSA share price (at a 5%
discount to market) $86.69
--------
Gross proceeds $1,337.4
Tax basis (147.3)
Expenses @ 2.0% (26.7)
--------
Taxable proceeds $1,163.4
Tax rate 35.0%
Tax ($407.2)
Net proceeds $903.5
The impact on H's income statement and balance sheet is presented
below.
<PAGE>
Sale of TUSA
(DM millions) Discount* -0.5%
$1.00 = DM 1.52 -------------------------------
1996e 1997e
----- -----
DVFA result (a) 538.0 600.0
Eliminate equity in net income
of TUSA (b) (91.0) (111.3)
Return on proceeds (c) 125.0 125.0
-------- --------
New DVFA result 572.0 613.7
Shares outstanding 146.0 146.0
New DVFA EPS 3.92 4.20
Projected DVFA EPS 3.68 4.11
Accretion/(dilution) 6.3% 2.3%
Pre-tax return required for no dilution 10.2% 12.4%
New net debt/rotal cap. (d) 23.9%
Current net debt/total cap. 27.2%
* Based on current market price of $91.25 at August 14, 1996.
Adjustments have been made in accordance with US generally
accepted accounting principles. German accounting principles may
cause these results to differ. Please see footnotes on following page.
<PAGE>
Sale of TUSA
(in millions)
$1.00 = DM 1.52
(a) H 1996 estimates are based on company projections.
H 1997 estimates are based on Credit Lyonnais projections.
(b) In 1996, H will eliminate its 27.8% interest in TUSA from its income
statement. In 1997, H will eliminate its 29.9% interest in TUSA
from its income statement. Source of TUSA 1996 projections: H.
(Source of TUSA 1997 projections: Value Line.)
1996e 1997e
----- ----
Projected net income $215.0 DM 326.9 $245.0 DM 372.4
H portion of TUSA net income $59.9 DM 91.0 $73.2 DM 111.3
(c) After-tax proceeds $903.5 DM 1,373.3
We assume H will invest these proceeds at its internal
hurdle rate of 14.0%.
Pre-tax return on proceeds $126.5 DM 192.3
Assumed tax @ 35.0% (44.3) (67.3)
-------- --------
After-tax return on proceeds $82.2 DM 125.0
======== ========
(d) Upon sale, H will eliminate the book value of its TUSA
investment from its balance sheet and include the net
after-tax proceeds as part of equity:
Book Value of TUSA investment $402.0 DM 611.0
Adjustment to equity is as
follows:
Book Value of TUSA investment ($102.0) (DM 611.0)
After-tax proceeds $903.5 DM 1,373.3
-------- --------
$501.5 DM 762.3
======== ========
<PAGE>
LINK: Purchase Options - Sale of TUSA Sahres and Purchase of LINK
H could use the proceeds from the sale of its TUSA stake to fund
the purchase of the portion of LINK it does not own. The impact
on H's balance sheet and income statement are presented below
assuming H sells its TUSA stake at market and buys the LINK
shares at various premiums to market.
Cost of acquiring LINK:
($ millions) Premium* 20.0% Premium* 30.0% Premium* 40.0%
Total price for shares $1,125.2 $1,218.6 $1,312.0
(including expenses)
LINK net debt 147.1 147.1 147.1
----- ----- -----
Total cost of acquisition $1,272.3 $1,365.7 $1,459.1
Net proceeds from the sale
of the TUSA stake (including
expenses) $903.5 $903.5 $903.5
------ ----- -----
Additional debt incurred
by H to acquire all of LINK $368.8 $462.2 $555.6
------ ------ ------
*Based on Current Market Price of $42.25 at August 14, 1996
<PAGE>
LINK: Purchase Options - Sale of TUSA Shares and Purchase of LINK
(DM millions) Premium* 20.0% Premium* 30.0% Premium* 40.0%
$1.00 = DM 1.52 -------- ------ -------- ------ ------- -----
1996e 1997e 1996e 1997e 1996e 1997e
------ ------ ------ -------- ------- --------
DVFA result(a) 538.0 600.0 518.0 600.0 538.0 600.0
Add Balance of LINK
net income(b) 87.9 104.0 87.9 104.0 87.9 104.0
Eliminate equity in
net income of TUSA (c) (91.0) (111.3) (91.0) (111.3) (91.0) (111.3)
New after-tax interest (29.2) (29.2) (36.5) (36.5) (43.9) (43.9)
Synergies -- -- -- -- -- --
------ ------ ------ ------- ------ ------
DVFA earnings 505.8 563.6 498.4 556.2 491.0 548.8
======= ====== ======= ====== ====== ======
Shares outstanding 146.0 146.0 146.0 146.0 146.0 146.0
New DVFA EPS 3.46 3.86 3.41 3.81 3.36 3.76
Projected DVFA EPS 3.68 4.11 3.68 4.11 3.68 4.11
Accretion/(dilution) (6.0%) (6.1%) (7.4%) (7.3%) (8.7%) (8.5%)
Pre-tax Synergies
required for no
dilution 49.2 56.2 60.8 67.7 72.3 78.5
Post tax Synergies
required for dilution 32.0 36.5 39.5 44.0 47.0 51.0
New net debt/total 37.5% 39.1% 40.6%
cap(d)
Current net debt/ 27.2% 27.2% 27.2%
total cap
Note: DVFA earnings do not include goodwill charges. The
principle reason why the sale of TUSA shares and purchase of LINK
scenario appears to give a more dilutive result than the full
takeover of LINK for cash scenario is because LINK provides an
apparent pre-tax return of about 9% whereby the sale of TUSA for
cash scenario shows a pre-tax return of about 11% to avoid
dilutation; using H's return of 14%, the sale of TUSA shares is
accretive.
* Based on current market price of $42.25 at August 14, 1996.
Adjustments have been made in accordance with US generally
accepted accounting principles. German accounting principles may
cause these results to differ. Please see footnotes on following
page.
<PAGE>
LINK: Purchase Options - Sale of TUSA Shares and Purchase of LINK
(in millions)
$1.00=DM 1.52
(a) H 1996 estimates are based on company projections.
H 1997 estimates are based on Credit Lyonnais projections.
(b) In 1996, H will incorporate an additional 66.7% of LINK net
income as a result of the purchase of the balance of LINK.
In 1996 H will incorporate an additional 65.2% of LINK net
income as a result of the purchase of the balance of LINK.
(Source of 1996 LINK projections: H. Source of 1997 LINK
projections, Value Line)
1996e 1997e
Projected net income $86.8 DM 131.9 $105.0 DM 159.6
Additional LINK net income $57.9 DM 87.9 $ 68.4 DM 104.0
In 1996, H will eliminate its 27.8% interest in TUSA's net
income from its income statement. In 1997, H will eliminate its
29.9% interest in TUSA's net income from its income statement.
1996e 1997e
Projected net income $ 215.0 DM 326.9 $245.0 DM 372.4
Additional LINK net income $ 59.9 DM 91.0 $ 73.2 DM 111.3
(c) Interest on the full takeover of LINK is calculated as follows:
Premium 20.0% Premium 30.0% Premium 40.0%
Additional debt incurred
by H to acquire all of
LINK $ 368.8 DM560.6 $ 462.2 DM 702.6 $ 555.6 DM 844.6
Interest at 8.0% $ 29.5 DM 44.8 $ 37.0 DM 56.2 $ 44.5 DM 67.6
Taxes at 35.0% (10.3) (15.7) (12.9) (19.7) (15.6) (23.6)
------ ------ ------ ------ ------ ------
After-tax interest $ 19.2 DM 29.2 $ 24.0 DM 36.5 $ 28.9 DM 43.9
====== ======= ======= ======= ======= ======
(d) Upon sale: H will eliminate the book value of its TUSA investment from
its balance sheet
Book Value of TUSA investment $402.0 DM611.0
Premium 10.0% Premium 20.0%
Adjustment to equity is
as follows:
Book value of TUSA ($402.0) (DM611.0) ($402.0) (DM611.0)
investment
Adjustment to debt is as
follows:
Additional debt incurred $368.8 DM560.6 $462.2 DM702.6
by H ===== ======= ====== =======
Premium 30.0%
Adjustment to equity is
as follows:
Book value of TUSA
investment ($402.0) (DM611.0)
Adjustment to debt is as
follows:
Additional debt incurred
by H $555.6 DM844.6
====== =======
<PAGE>
Synergy Analysis
The level of synergies required for no dilution in the full takeover of LINK
scenario is influenced by interest charges, taxes, DVFA adjustments, etc. in
addition to the return generated by the LINK investment. Presented below are
the pre-tax synergies required to achieve H's pretax internal hurdle rate of
14% based solely on the return on the investment in LINK. We have measured
the return in two ways - one, based exclusively on the return generated by
the investment required to purchase the balance of LINK and two, on the return
generated by H's stake valued at current market and the investment required
to purchase the balance of LINK.
Scenario One-Calculation Based on the Balance of LINK Only
(in millions)
$1.00 = DM 1.52
Premium* 20.0% Premium* 30.0%
Purchase price of Link
shares not owned by H $1,088.2 DM 1,1654.0 $1,178.9 DM1,791.9
Link projected 1997
pre-tax income $161.5 DM 245.5 $161.5 DM 245.5
Percent of LINK purchased 65.2% 65.2% 65.2% 65.2%
Additional pre-tax
income to H $105.3 DM 160.0 $105.3 DM 160.0
Pre-tax return on
investment 9.7% 9.7 8.9% 8.9%
Pre-tax synergies
required to meet H's
internal hurdle rate of
14% $47.0 DM 71.4 $60.0 DM 91.2
===== ======= ===== =======
Premium* 40.0%
Purchase price of Link
shares not owned by H $1,269.5 DM1,929.7
Link projected 1997
pre-tax income $61.5 DM 245.5
Percent of LINK purchased 65.2% 65.2%
Additional pre-tax
income to H $105.3 DM 160.0
Pre-tax return on
investment 8.3% 8.3%
Pre-tax synergies
required to meet H's
internal hurdle rate of
14% $72.0 DM 109.4
===== ========
* Based on current market price of $42.25 at August 14, 1996
<PAGE>
Synergy Analysis (continued)
----------------------------
Scenario Two - Calculations Based on H's Current Stake and the
Balance of LINK
(in millions)
$1.00 = DM 1.52
Current Market Price of LINK Shares $42.25
Shares owned by H 11.2
Value of H's current stake $473.5
Purchase price
of LINK shares Premium* 20.0% Premium* 30.0% Premium* 40.0%
not owned by H $1,088.2 DM 1,654.0 $1,178.9 DM 1,791.9 $1,269.5 DM 1,929.7
Value of H's
current stake 473.5 719.8 473.5 719.8 473.5 719.8
-------- ---------- -------- ---------- -------- ----------
Total LINK
value $1,561.7 DM 2,373.8 $1,652.4 DM 2,511.7 $1,743.1 DM 2,649.5
LINK projected
pre-tax income $161.5 DM245.5 $161.5 DM245.5 $161.5 DM245.5
Pre-tax return
on investment 10.3% 10.3% 9.8% 9.8% 9.3% 9.3%
Pre-tax synergies
required to
meet H's
internal hurdle
rate of 14% $57.0 DM 86.6 $70.0 DM106.4 $82.0 DM124.6
----- ------- ----- ------- ----- -------
*Based on current market price of $42.25 at August 14, 1996
PROJECT LINK Exhibit (g)(2)
Analysis of Alternatives to H
Periodic Review of Strategic Options
(Current Intentions Remain Unchange)
September 1996
<PAGE>
PROJECT LINK
Analysis of Alternatives to H
Periodic Review of Strategic Options
(Current Intentions Remain Unchange)
Table of Contents
Page
Summary and Conclusion 1
Competitive Offers 1
LINK Leveraged Buyout 4
LINK Share Repurchase 5
Spinoff of LINK Subsidiary 6
Detailed Analysis
LINK Purchase Price 7
Estimated Goodwill 7
3M Dilution and Balance Sheet Impact 8
Elf Dilution and Balance Sheet Impact 9
TOTAL Dilution and Balance Sheet Impact 10
IRR Calculations 11
LINK Share Repurchase 16
Exhibit I
Full Leverage Buyout Analysis
<PAGE>
Project LINK: Analysis of Alternatives to H
Periodic Review of Strategic Options
(Current Intentions Remain Unchanged)
Summary and Conclusion
Outlined below are several possible responses, by LINK and
others, to an H offer for the balance of Link H does not own.
These responses include: 1) competitive offers for all of LINK
from the three most likely (and financially able) buyers, 3M, Elf
Aquitaine and Total; 2) an offer to shareholders from LINK
management in the form of a leveraged buyout; 3) the effects on
LINK of a massive share buyback program at a premium to the
current price of LINK stock; and 4) a possible spinoff of LINK
assets.
While the LBO, share buyback program and spinoff do not deliver
sufficient value to shareholders, offers from 3M, Elf and Total
are possible in the $55.00 per share range, if the significant
synergies assumed here ($100 million) can truly be achieved from
the combination of LINK with these companies' respective adhesive
operations.
We have summarized the results of this analysis for the four
scenarios. More detailed analysis of each of these scenarios
follows.
1. Competitive Offers
3M, Elf and TOTAL are substantial companies with significant
operations in adhesives. 3M has a market capitalization of $28.4
billion. Its adhesives operations are part of its industrial and
consumer segment which has sales of $8.4 billion and operating
profit of $1.3 billion. 3M is the world leader in pressure-
sensitive tapes. Its adhesive technologies serve as the basis for
more than 900 varieties of tapes. 3M primarily serves the
automotive and consumer adhesives markets. It is thus possible
that the assumed synergies could be obtained, but there could be
significant antitrust issues.
Elf has a market capitalization of $20.7 billion. In addition to
its oil and gas activities, it is the world's fifth largest
producer of adhesives. Its interest in the US is keen. At the
beginning of 1996 it acquired US-based Findley Adhesives for an
estimated $200 million. Elf provides adhesives for the
automotives, construction, furniture, packaging and consumer
markets. While it appears more problematic that Elf could achieve
the required synergies because of its modest US operations,
substantial foreign synergies are possible.
TOTAL has a market capitalization of $17.8 billion. TOTAL'S
adhesives operations are conducted through Bostik which has
revenues of approximately $320 million. Thirty-six percent of
Bostik's revenues are generated in North America. Bostik produces
adhesives for the automotive, aerospace, construction and
consumer markets. Bostik has been acquisitive lately, having made
acquisitions in Sweden, the US, Norway and Australia. The full
assumed synergies appear difficult to achieve.
A summary of the effects a full takeover of LINK for cash has on
the income statements and balance sheets of 3M, Elf and TOTAL
assuming purchase prices per share of $55 and $60 per share, $100
million of synergies are generated post-acquisition, the
acquisition is financed entirely with debt at 8.0% per annum and
goodwill is amortized over a twenty-year period is presented below.
<PAGE>
As detailed in the backup material attached, this analysis
suggests that the relatively modest dilution shown is entirely
dependent on the assumed $100 million of synergies. Without
these, the operating income from LINK ($134 million) is exceeded
by purchase interest alone ($159 million) in the most favorable
all debt case, even before deducting goodwill amortization ($80
million).
Also presented below are the five-year internal rates of return
("IRRs") on the investment in LINK for each of the potential
acquirors for two different cases. The high and probably
unrealistic case assumes that in year five LINK's value will be
based on the same multiple of EBITDA (earnings before interest,
taxes, depreciation and interest) at which LINK was originally
purchased by the acquiror (at $55 per share this multiple is
11.7x and at $60 per share this multiple is 12.7x. Note: LINK
currently trades at a 1996e EBITDA multiple of 9.4x) and the
EBITDA margin increases from 20.5% currently to 23.0%. The base
case assumes that in year five LINK's value will be based on a
25% discount to the multiple of EBITDA at which LINK was
originally purchased by the acquiror (at $55 per share this
multiple is 8.8x and at $60 per share this multiple is 9.5x) and
the EBITDA margin remains the same. Note all cases assume that
the purchase of LINK is funded using 50% equity and 50% debt.
Assumed purchase price per share: $55.00(a)
3M Elf TOTAL
Projected 1997 eps(b) $4.06 $5.64 $4.84
New 1997 eps $4.04 $5.64 $4.80
1997e accretion/(dilution)(c) -0.4% 0.0% -0.8%
Additional synergies required
for no dilution (millions) $12.0 $0.0 $14.0
Purchase price required for
no dilution (c) $52.75 $55.00 $52.25
Current net debt/total cap. 13.9% 32.1% 15.0%
Net debt/total cap post
acquisition 32.8% 37.4% 26.9%
Assumed purchase price per share: $60.00(d)
3M Elf TOTAL
Projected 1997 eps(b) $4.06 $5.64 $4.84
New 1997 eps $4.00 $5.59 $4.72
1997e accretion/(dilution)(c) -1.4% -1.0% -2.3%
Additional synergies required
for no dilution (millions) $38.0 $30.0 $40.0
Purchase Price required for
no dilution(c) $52.75 $55.0 $52.25
Current net debt/total cap. 13.9% 32.1% 15.0%
Net debt/total cap post
acquisition 34.0% 37.8% 27.8%
<PAGE>
Note that with only $30 million of synergies (perhaps a more
realistic assumption in terms of first year synergies), dilution
changes significantly. The table below summarizes this dilution
at purchase prices of $55 and $60 per share:
3M Elf TOTAL
Dilution at $55 per share -3.1% -2.3% -4.9%
Dilution at $60 per share -4.1% -3.3% -6.5%
IRRs (e)
Presented below are the IRRs under various assumptions. The IRRs
are based entirely on the terminal value after five years as all
excess cash flow is assumed to retire debt.
High case at $55 per share with $100 million of
synergies (terminal EBITDA multiple: 11.7x) 34.4%
High case at $55 per share without synergies
(terminal EBITDA multiple: 11.7x) 23.1%
Base case at $55 per share with $100 million
of synergies (terminal EBITDA multiple: 8.8x) 23.6%
Base case at $55 per share without synergies
(terminal EBITDA multiple:8.8x) 10.0%
High case at $60 per share with $100 million
of synergies (terminal EBITDA multiple: 12.7x) 34.0%
High case at $60 per share without synergies
(terminal EBITDA Multiple: 12.7x) 22.7%
Base case at $60 per share with $100 million
of synergies (terminal EBITDA multiple: 9.5x) 22.9%
Base case at $60 per share without synergies
(terminal EBITA multiple: 9.5x) 9.1%
Other information
3M Elf TOTAL
LINK est. 5-year eps growth (f) 12.8% 12.8% 12.8%
Acquiror est. 5-year eps growth 11.0%(h) 17.0%(i) 23.0%(g)
LINK 1996e return on equity(f) 26.5% 26.5% 26.5%
Acquiror 1996e return on eq.(g) 22.6% 8.4% 9.3%
Notes
(a) This represents a 24.3% premium to LINK's share price of
$44.25 on September 11, 1996.
(b) 3M projections are an average of CS First Boston,
Merrill Lynch, Morgan Stanley and Prudential
estimates.
Elf projections are an average of CS First Boston, Daiwa
and Merrill Lynch estimates.
Total projections are an estimate of Kleinwort Benson,
Merrill Lynch and Morgan Stanley estimates.
(c) Assumes $100 million of synergies.
(d) This represents a 35.6% premium to LINK's share price of
$44.25 on September 11, 1996.
(e) Assumes the purchase price is funded internally 50% debt and
50% equity.
(f) An average of DLJ, Morgan Stanley, Smith Barney and Value
Line estimates. Return on equity is a Value Line estimate.
(g) Merrill Lynch estimate.
(h) An average of CS First Boston, Merrill Lynch and Morgan
Stanley estimates.
(i) An average of CS First Boston and Merrill Lynch estimates.
<PAGE>
2. Leveraged Buyout (LBO) by LINK Management
There is a possibility LINK management, with a financial partner,
would want to consider acquiring the company through a leveraged
buyout. If LINK management were to acquire the company through an
LBO, the uppermost purchase price would be around $47.25 per
share. This analysis assumes the following:
Equity as a percentage of the total transaction value 33.7%
Five-year return on equity (minimum necessary for a
financial partner) 29.2%
Interest on senior debt 8.5%
Interest on subordinated debt 12.0%
1997e EBITA interest coverage 1.3x
1997e EBITDA interest coverage 1.6x
1997e EBITA+depreciation-capital expenditures
interest coverage 1.2x
Total debt/1997e EBITDA 6.1x
All senior debt is repaid within eight years
We have also assumed, rather aggressively, that the LINK EBITDA
margin goes from 20.5% currently to 23.0% by the year 2000. Even
under this assumption, a leveraged buyout on the part of LINK
management could not be competitive with an offer from an
industry player mostly due to lack of synergies. Even though the
five-year return on equity is respectable at 29%, an offer as
high as $47.25 is problematical given the very tight interest
coverage ratios.
<PAGE>
3. Share Repurchase
An alternative to making an offer for the entire company would be
for management to offer to repurchase a significant amount of
outstanding stock. While this approach does not deliver the same
total value to shareholders that an acquisition of the entire
company would, it will be an alternative LINK management will
consider as a means of delivering some value to LINK
shareholders. LINK management could offer to repurchase a
significant portion of its outstanding shares if the board felt
the highest tender price was too low and therefore disapprove the
offer. The shares would be purchased at a premium to an offer,
say through a Dutch auction mechanism. Assuming the average price
per share repurchased was between $47 and $55 per share and LINK
management did not want to have EBIT interest coverage fall below
a BBB-rating of 2.9 times, the impact on LINK's income statement
and balance sheet will be as follows:
Share buyback price $47.00 $47.00
Target EBIT/interest coverage 3.0 3.5
Percent of company repurchased 37.5% 32.1%
Assumed interest rate on new debt 8.5% 8.5%
Projected 1997 eps $3.30 $3.30
New 1997 eps $3.33 $3.30
1997e LINK dilution 1.0% 0.0%
Purchase price required for no dilution $47.80 $47.00
Current LINK net debt/total capitalization 31.8% 31.8%
New LINK net debt/total capitalization 68.2% 65.6%
Share buyback price $55.00 $55.00
Target EBIT/interest coverage 3.0 3.5
Percent of company repurchased 32.0% 27.4%
Assumed interest rate on new debt 8.5% 8.5%
Projected 1997 eps $3.30 $3.30
New 1997 eps $3.08 $3.10
l997e LINK dilution -6.8% -6.2%
Purchase price required for no dilution $47.80 $47.00
Current LINK net debt/total capitalization 31.8% 31.8%
New LINK net debt/total capitalization 68.2% 65.6%
From a dilution standpoint, a buyback may be possible at levels
around $47.00 per share but again, this does not deliver the
value to shareholders that some of the alternative scenarios do.
Even at $47.00 per share, however, the LINK board may feel
uncomfortable with such a large buyback given the impact on
LINK's balance sheet. At higher buyback prices, dilution is a
strong negative (see the $55 case above).
<PAGE>
4. Spinoff of LINK Subsidiary
Oftentimes a company will try to unlock shareholder value by
distributing shares in a subsidiary to existing shareholders in a
spinoff. A company will consider doing this if it believes the
value of the subsidiary is not fully reflected in the market
value of the entire company. A successful spinoff is usually one
that does not generate tax on the increased value of the spun-off
subsidiary to either the company or to existing shareholders. The
key elements of a tax-free spinoff include:
- Parent shareholders must have a material continuing
interest in the distributed subsidiary.
- There has to be a valid business purpose for the
transaction.
- The subsidiary must be at least 80% owned by the parent
prior to the spinoff.
- Virtually all parent-owned stock of the subsidiary must
be distributed.
- The parent and subsidiary must have actively conducted
business for five years.
- The subsidiary must not have been acquired in a
taxable transaction in five years preceding the
distribution.
Assuming the LINK business segments meet these criteria LINK
could try to unlock shareholder value by spinning off say the
consumer segment from the other industrial business. Given,
however, that LINK is primarily an adhesives company and valued
by the market as an adhesives company and, in fact, valued at a
premium to other adhesives companies, it is hard to see
significant shareholder value being unlocked by separating one
adhesives division from another. There may be some additional
value ascribed to the consumer segment because it has some brand
name products but probably not enough additional value to warrant
a spinoff.
Spinoffs are sometimes used as defensive measures in takeover
battles. As an example, after being approached by an undesired
suitor, as a means of making a takeover more expensive LINK could
spin off its consumer business segment.
The consumer segment being spun off could indemnify LINK against
any tax liabilities that might arise if it were subsequently
acquired. If the suitor were then to acquire the spunoff entity a
tax liability would be created. According to US tax laws, because
acquisition discussions had taken place between LINK and
the suitor prior to the spinoff, the tax-free implications of the
spinoff are negated. Upon takeover of the spun off entity, the
suitor would be responsible for the LINK taxes thereby driving up
the cost of the acquisition, effectively acting as a "poison
pill".
A key to this type of defense is that prior to the initial
approach by the suitor LINK would have had to have actively
considered the spinoff in order to receive a tax-free ruling. If
LINK has not considered the spinoff prior to the approach by the
suitor then this defense will not work. This type of defense also
usually works when a company has a "crown jewel" which can easily
be separated from the company. While it is somewhat difficult to
tell, LINK does not appear to have an easily separable crown
jewel. LINK may be able to separate its consumer business from
its industrial business but spinning off the consumer business
may still leave the industrial business vulnerable to takeover.
LINK will most likely not consider a spinoff as a viable option.
<PAGE>
HENKEL CORPORATION
Project LINK - Periodic Review of Strategic Options
(Current Intentions Remain Unchanged)
Full Takeover of LINK for Cash - LINK Purchase Price
(in millions) Price (a): $55.00 Price (b): $60.00
LINK shares outstanding (c) 32.0 32.0
Options outstanding (d) 0.5 0.5
-------- --------
Total shares outstanding 32.5 32.5
Price paid per share $55.00 $60.00
--------- ---------
Total price for shares $1,788.7 $1,951.3
LINK debt 211.6 211.6
LINK cash (e) (69.4) (69.4)
-------- --------
Pre-expense cost of acquisition $1,930.9 $2,093.5
Expenses @ 3.0% 57.9 62.8
-------- --------
Total LINK purchase price $1,988.8 $2,156.3
======== ========
Full Takeover of LINK for Cash - Estimated Goodwill
(in millions) Price (a): $55.00 Price (b): $60.00
Total price for shares $1,788.7 $1,951.3
Expenses 57.9 62.8
-------- --------
Total price including expenses $1,846.6 $2,014.1
LINK tangible book value 239.9 239.9
-------- --------
Goodwill $1,606.7 $1,774.2
======== ========
Amortization period (years) 20 20
Yearly amortization $80.3 $88.7
======== ========
(a) This represents a 24.3% premium to LINK's share price of
$44.25 on September 11,1996.
(b) This represents a 35.6% premium to LINK's share price of
$44.25 on September 11,1996.
(c) As of June 30,1996.
(d) As of December 31,1995.
(e) Includes cash of $14.4 million from the exercise of stock
options.
<PAGE>
HENKEL CORPORATION
Project LINK - Periodic Review of Strategic Options
(Current Intentions Remain Unchanged)
Full Takeover of LINK for Cash - 3M Dilution
and Balance Sheet Impact
(in $ millions) Price (a): $55.00 Price (b): $60.00
1996e 1997e 1996e 1997e
3M pretax income (c) 2,472.3 2,768.5 2,472.3 2,768.5
LINK operating income (d) 134.1 152.2 134.1 152.2
New pre-tax interest (e) (159.1) (159.1) (172.5) (172.5)
Synergies 100.0 100.0 100.0 100.0
------- ------- ------- -------
3M new pretax income 2,547.2 2,861.6 2,533.8 2,848.2
Tax rate (f) 35.9% 36.0% 35.9% 36.0%
Taxes (914.5) (1,029.6) (909.6) (1,024.8)
Minority interest (c) (72.8) (78.0) (72.8) (78.0)
LINK amortization (80.3) (80.3) (88.7) (88.7)
------- -------- ------- --------
Net income 1,479.7 1,673.6 1,462.7 1,656.7
======= ======== ======= ========
Average shares
outstanding (c) 417.9 414.5 417.9 414.5
Projected 3M eps (c) $3.59 $4.06 $3.59 $4.06
New 3M eps $3.54 $4.04 $3.50 $4.00
Accretion/(dilution) -1.3% -0.4% -2.4% -1.4%
Synergies required for
no dilution 130.0 112.0 158.0 138.0
Purchase price required
for no dilution (g) $49.20 $52.75 $49.20 $52.75
Current net debt/total
capitalization 13.9% 13.9%
New net debt/total
capitalization 32.8% 34.0%
(a) This represents a 24.3% premium to LINK's share price of
$44.25 on September 11,1996.
(b) This represents a 35.6% premium to LINK's share price of
$44.25 on September 11,1996.
(c) Projections are an average of CS First Boston, Merrill
Lynch, Morgan Stanley and Prudential estimates.
(d) Based on Value Line projections. The Value Line growth rate
is the lowest growth rate among analysts based on
projections of operating income over the next two years.
(e) Assumes the LINK purchase is financed entirely with debt at
a rate of 8.0% per annum.
(f) Based on a blended rate with LINK.
(g) Assumes $100 million of synergies.
<PAGE>
HENKEL CORPORATION
Project LINK - Periodic Review of Strategic Options
(Current Intentions Remain Unchanged)
Full Takeover of LINK for Cash - Elf Dilution
and Balance Sheet Impact
(in $ millions) Price (a): $55.00 Price (b): $60.00
$1.00=FFr5.08 1996e 1997e 1996e 1997e
Elf pretax income (c) 3,285.0 3,693.6 3,285.0 3,693.6
LINK operating income (d) 134.1 152.2 134.1 152.2
New pre-tax interest (e) (159.1) (159.1) (172.5) (172.5)
Synergies 100.0 100.0 100.0 100.0
------- ------- ------- -------
Elf new pretax income 3,359.9 3,786.7 3,346.5 3,773.3
Tax rate (f) 50.2% 49.7% 50.2% 49.7%
Taxes (1,686.2) (1,882.8) (1,679.4) (1,876.2)
Minorities (c) (265.7) (290.4) (265.7) (290.4)
LINK amortization (80.3) (80.3) (88.7) (88.7)
-------- -------- -------- --------
Net income 1,327.7 1,533.1 1,312.7 1,518.0
======== ======== ======== ========
Average shares
outstanding (c) 271.6 271.6 271.6 271.6
Projected Elf eps (c) $4.94 $5.64 $4.94 $5.64
New Elf eps $4.89 $5.64 $4.83 $5.59
Accretion/(dilution) -1.1% 0.0% -2.2% -1.0%
Synergies required for
no dilution 129.0 100.0 160.0 130.0
Purchase price required
for no dilution (g) $50.25 $55.00 $50.25 $55.00
Current net debt/total
capitalization 32.1% 32.1%
New net debt/total
capitalization 37.4% 37.8%
(a) This represents a 24.3% premium to LINK's share price of
$44.25 on September 11,1996.
(b) This represents a 35.6% premium to LINK's share price of
$44.25 on September 11,1996.
(c) Projections are an average of CS First Boston, Daiwa and
Merrill Lynch estimates.
(d) Based on Value Line projections. The Value Line growth rate
is the lowest growth rate among analysts based on
projections of operating income over the next two years.
(e) Assumes the LINK purchase is financed entirely with debt at
a rate of 8.0% per annum.
(f) Based on a blended rate with LINK.
(g) Assumes $100 million of synergies.
<PAGE>
HENKEL CORPORATION
Project LINK - Periodic Review of Strategic Options
(Current Intentions Remain Unchanged)
Full Takeover of LINK for Cash - TOTAL Dilution
and Balance Sheet Impact
(in $ millions) Price (a): $55.00 Price (b): $60.00
$1.00=FFr5.08 1996e 1997e 1996e 1997e
TOTAL pretax income (c) 1,668.0 1,921.8 1,668.0 1,921.8
LINK operating income (d) 134.1 152.2 134.1 152.2
New pre-tax interest (e) (159.1) (159.1) (172.5) (172.5)
Synergies 100.0 100.0 100.0 100.0
------- ------- ------- -------
TOTAL new pretax income 1,743.0 2,014.9 1,729.6 2,001.5
Tax rate (f) 31.6% 32.3% 31.6% 32.3%
Taxes (550.4) (650.1) (546.2) (645.8)
Associates (c) 4.2 5.5 4.2 5.5
Minorities (c) (45.6) (50.5) (45.6) (50.5)
Existing amortization (c) (106.4) (104.6) (106.4) (104.6)
LINK amortization (80.3) (80.3) (88.7) (88.7)
------- ------- ------- -------
Net income 964.4 1,134.9 946.9 1,117.4
Non-recurring items (c) 8.9 2.4 8.9 2.4
------- ------- ------- -------
Adjusted net income 973.3 1,137.2 955.8 1,119.8
======= ======= ======= =======
Average shares
outstanding (c) 236.1 237.1 236.1 237.1
Projected TOTAL
adjusted eps (c) $4.18 $4.84 $4.18 $4.84
New TOTAL adjusted eps $4.12 $4.80 $4.05 $4.72
Accretion/(dilution) -1.4% -0.8% -3.1% -2.3%
Synergies required for
no dilution 120.0 114.0 146.0 140.0
Purchase price required
for no dilution (g) $51.10 $52.25 $51.10 $52.25
Current net debt/total
capitalization 15.0% 15.0%
New net debt/total
capitalization 26.9% 27.8%
(a) This represents a 24.3% premium to LINK's share price of
$44.25 on September 11,1996.
(b) This represents a 35.6% premium to LINK's share price of
$44.25 on September 11,1996.
(c) Projections are an average of Kleinwort Benson, Merrill
Lynch and Morgan Stanley estimates.
(d) Based on Value Line projections. The Value Line growth rate
is the lowest growth rate among analysts based on
projections of operating income over the next two years.
(e) Assumes the LINK purchase is financed entirely with debt at
a rate of 8.0% per annum.
(f) Based on a blended rate with LINK.
(g) Assumes $100 million of synergies.
<PAGE>
HENKEL CORPORATION
Project LINK - Periodic Review of Strategic Options
(Current Intentions Remain Unchanged)
Full Takeover of LINK for Cash - Five-Year IRR Calculations
The IRR calculations assume that LINK is purchased using 50%
equity and 50% debt. The cash flows used to calculate the IRRs
are based on the equity value invested in LINK and are defined as
follows:
(Net income + depreciation + goodwill amortization - less
increase in working capital - capital expenditures - amortization
of debt)
All excess cash flow is used to retire debt, hence the rate of
return is driven by the equity value of LINK in year five. At the
end of year five a terminal value is determined for LINK based on
multiplying year five EBITDA times an appropriate multiple. This
terminal value is discounted back to today at a rate which
discounts the terminal value such that it equals the initial
equity investment in LINK. The rate used to terminal value is the
internal rate of return or IRR.
We have examined two scenarios for calculating the LINK IRRs, a
high case and a base case. The high and probably unrealistic case
assumes that in year five LINK's value will be based on the same
multiple of EBITDA (earnings before interest, taxes, depreciation
and interest) at which LINK was originally purchased by the
acquiror (at $55 per share this multiple is 11.7 x and at $60 per
share this multiple is 12.7x. Note: LINK currently trades at a
1996e EBITDA multiple of 9.4x) and the EBITDA margin increases
from 20.5% currently to 23.0%. The base case assumes that in year
five LINK's value will be based on a 25% discount to the multiple
of EBITDA at which LINK was originally purchased by the acquiror
(at $55 per share this multiple is 8.8x and at $60 per share this
multiple is 9.5x) and the EBITDA margin remains the same.
For each scenario, the cash flows and terminal values are as
follows:
<PAGE>
HENKEL CORPORATION
Project LINK - Periodic Review of Strategic Options
(Current Intentions Remain Unchanged)
Full Takeover of LINK for Cash - Five-Year
IRR Calculations (continued)
High Cases at $55 Per Share
(in $ millions) (Year 1) (Year 2) (Year 3) (Year 4) (Year 5)
With $100 million
of synergies 1997 1998 1999 2000 2001
Cash flows 0 0 0 0 0
EBITDA 404.3
EBITDA Multiple 11.7
---- ---- ---- ---- -------
Terminal value 4,730.3
Less: remaining debt (225.3)
Total cash to be
discounted 0 0 0 0 4,505.0
==== ==== ==== ==== =======
LINK purchase price
@ $55 per share 2,053.9
Equity portion of purchase
price 1,027.0
IRR 34.4%
=======
(in $ millions) (Year 1) (Year 2) (Year 3) (Year 4)(Year 5)
Without synergies 1997 1998 1999 2000 2001
Cash flows 0 0 0 0 0
EBITDA 304.3
EBITDA Multiple 11.7
---- ---- ---- ---- -------
Terminal value 3,560.3
Less: remaining debt (653.4)
Total cash to be
discounted 0 0 0 0 2,906.9
==== ==== ==== ==== =======
LINK purchase price
@ $55 per share 2,053.9
Equity portion of purchase
price 1,027.0
IRR 23.1%
=======
<PAGE>
HENKEL CORPORATION
Project LINK - Periodic Review of Strategic Options
(Current Intentions Remain Unchanged)
Full Takeover of LINK for Cash - Five-Year
IRR Calculations (continued)
Base Cases at $55 Per Share
(in $ millions) (Year 1) (Year 2) (Year 3)(Year 4)(Year 5)
With $100 million
of synergies 1997 1998 1999 2000 2001
Cash flows 0 0 0 0 0
EBITDA 371.2
EBITDA Multiple 8.8
---- ---- ---- ---- -------
Terminal value 3,266.6
Less: remaining debt (301.3)
Total cash to be
discounted 0 0 0 0 2,965.3
==== ==== ==== ==== =======
LINK purchase price
@ $55 per share 2,053.9
Equity portion of purchase
price 1,027.0
IRR 23.6%
=======
(in $ millions) (Year 1) (Year 2) (Year 3) (Year 4)(Year 5)
Without synergies 1997 1998 1999 2000 2001
Cash flows 0 0 0 0 0
EBITDA 271.2
EBITDA Multiple 8.8
---- ---- ---- ---- -------
Terminal value 2,386.6
Less: remaining debt (729.4)
Total cash to be
discounted 0 0 0 0 1,657.2
==== ==== ==== ==== =======
LINK purchase price
@ $55 per share 2,053.9
Equity portion of purchase
price 1,027.0
IRR 10.0%
=======
<PAGE>
HENKEL CORPORATION
Project LINK - Periodic Review of Strategic Options
(Current Intentions Remain Unchanged)
Full Takeover of LINK for Cash - Five-Year
IRR Calculations (continued)
High Cases at $60 Per Share
(in $ millions) (Year 1) (Year 2) (Year 3) (Year 4) (Year 5)
With $100 million
of synergies 1997 1998 1999 2000 2001
Cash flows 0 0 0 0 0
EBITDA 404.3
EBITDA Multiple 12.7
---- ---- ---- ---- -------
Terminal value 5,134.6
Less: remaining debt (339.8)
Total cash to be
discounted 0 0 0 0 4,794.8
==== ==== ==== ==== =======
LINK purchase price
@ $60 per share 2,221.4
Equity portion of purchase
price 1,110.7
IRR 34.0%
=======
(in $ millions) (Year 1) (Year 2) (Year 3) (Year 4)(Year 5)
Without synergies 1997 1998 1999 2000 2001
Cash flows 0 0 0 0 0
EBITDA 304.3
EBITDA Multiple 12.7
---- ---- ---- ---- -------
Terminal value 3,864.6
Less: remaining debt (780.7)
Total cash to be
discounted 0 0 0 0 3,083.9
==== ==== ==== ==== =======
LINK purchase price
@ $60 per share 2,221.4
Equity portion of purchase
price 1,110.7
IRR 22.7%
=======
<PAGE>
HENKEL CORPORATION
Project LINK - Periodic Review of Strategic Options
(Current Intentions Remain Unchanged)
Full Takeover of LINK for Cash - Five-Year
IRR Calculations (continued)
Base Cases at $60 Per Share
(in $ millions) (Year 1) (Year 2) (Year 3) (Year 4)(Year 5)
With $100 million
of synergies 1997 1998 1999 2000 2001
Cash flows 0 0 0 0 0
EBITDA 371.2
EBITDA Multiple 9.5
---- ---- ---- ---- -------
Terminal value 3,526.4
Less: remaining debt (415.8)
Total cash to be
discounted 0 0 0 0 3,110.6
==== ==== ==== ==== =======
LINK purchase price
@ $60 per share 2,221.4
Equity portion of purchase
price 1,110.7
IRR 22.9%
=======
(in $ millions) (Year 1) (Year 2) (Year 3) (Year 4) (Year 5)
Without synergies 1997 1998 1999 2000 2001
Cash flows 0 0 0 0 0
EBITDA 271.2
EBITDA Multiple 9.5
---- ---- ---- ---- -------
Terminal value 2,576.4
Less: remaining debt (856.7)
Total cash to be
discounted 0 0 0 0 1,719.7
==== ==== ==== ==== =======
LINK purchase price
@ $60 per share 2,221.4
Equity portion of purchase
price 1,110.7
IRR 9.1%
=======
<PAGE>
HENKEL CORPORATION
Project LINK - Periodic Review of Strategic Options
(Current Intentions Remain Unchanged)
Full Takeover of LINK for Cash - LINK Buyback of Shares
LINK could offer to repurchase a significant portion of its
outstanding shares at a premium to market, say through a Dutch
auction mechanism. The impact on LINK would be as follows:
Target share buyback price $47.00 $47.00
Target EBIT/Interest Coverage 3.0 3.5
Percent of company repurchased 37.5% 32.1%
Assumed interest rate 8.5% 8.5%
($ millions)
Projected 1997 LINK operating
profit (Value Line) 152.2 152.2
Less existing interest and other (8.4) (8.4)
----- -----
Operating profit before new debt 143.8 143.8
New interest based on target coverage 47.9 41.1
New debt based on assumed interest rate 563.9 483.4
Shares repurchased 12.0 10.3
LINK shares outstanding 32.0 32.0
Dilution
Operating profit before new debt 143.8 143.8
New interest based on target coverage (47.9) (41.1)
----- -----
Pre-tax profit 95.9 102.7
Taxes @ 27.0% (25.9) (27.7)
----- -----
Net profit 70.0 75.0
Existing shares outstanding 33.0 33.0
New shares outstanding 21.0 22.7
Projected eps $3.30 $3.30
New eps $3.33 $3.30
Accretion/(dilution) 1.0% 0.0%
Purchase price required for no dilution (a) $47.80 $47.00
Current net debt/total capitalization 31.8% 31.8%
New net debt/total capitalization 68.2% 65.6%
(a) At the target interest coverage.
<PAGE>
HENKEL CORPORATION
Project LINK - Periodic Review of Strategic Options
(Current Intentions Remain Unchanged)
Full Takeover of LINK for Cash - LINK Buyback of Shares
LINK could offer to repurchase a significant portion of its
outstanding shares at a premium to market, say through a Dutch
auction mechanism. The impact on LINK would be as follows:
Target share buyback price $55.00 $55.00
Target EBIT/Interest Coverage 3.0 3.5
Percent of company repurchased 32.0% 27.4%
Assumed interest rate 8.5% 8.5%
($ millions)
Projected 1997 LINK operating
profit (Value Line) 152.2 152.2
Less existing interest and other (8.4) (8.4)
----- -----
Operating profit before new debt 143.8 143.8
New interest based on target coverage 47.9 41.1
New debt based on assumed interest rate 563.9 483.4
Shares repurchased 10.3 8.8
LINK shares outstanding 32.0 32.0
Dilution
Operating profit before new debt 143.8 143.8
New interest based on target coverage (47.9) (41.1)
----- -----
Pre-tax profit 95.9 102.7
Taxes @ 27.0% (25.9) (27.7)
----- -----
Net profit 70.0 75.0
Existing shares outstanding 33.0 33.0
New shares outstanding 22.7 24.2
Projected eps $3.30 $3.30
New eps $3.08 $3.10
Accretion/(dilution) -6.8% -6.2%
Purchase price required for no dilution (a) $47.80 $47.00
Current net debt/total capitalization 31.8% 31.8%
New net debt/total capitalization 68.2% 65.6%
(a) At the target interest coverage.
<PAGE>
SENSITIVITY ANALYSIS: LINK
To Be Financed Shares Shares
To be Already
Bought Bought
------- -------
# Shares (million)........32.5 ..... 0.0
Price Paid per Share.....$47.25 ..... $0.00
1536.6 0.0
Total Price to Shareholders >>>> 1536.6 <<<<
Exisiting Debt to be Repaid...... 211.6 (Net of any converts)
Existing Debt Assumed.............. 0.0
Tax on Recapture................... 0.0
Transaction Expenses.............. 46.1
---------------
$1,794.3 million
===============
Financing Structure Interim Recap.
-----------------------
Existing Debt Assumed..............* 0.0
Options Proceeds/Pension Reversion.* 0.0
Excess Cash .......................* 40.0
Proceeds from Sale of Segment(s)...* 0.0
Issue of Acquiror's Stock..........* 0.0
Net Proceeds from Sale for Leaseback* 0.0
New Short-term Debt................* 0.0
New Senior Debt..................897.1 600.0 33.4%
New Subordinated Debt..............* 550.0 30.7%
New Convertible Subordinated Debt..* 0.0
New Preferred Stock................* 0.0
New Equity.......................897.1 604.3 33.7%
----------------------
$1,794.3 $1,794.3 million
======================
- -------------------------------------------------------------------
Issue of Acquiror's Stock (if applicable)
% of Price to Shareholders in Stock...................0.0%
Current Market Price of Acquiror....................$0.00
# Shares to be Issued (million).......................N/A
- -------------------------------------------------------------------
Indicators:
5-Year Return on Equity...........29.2%
5-Year Return on Conv Sub......... NA Balance Sheet
Check:
Interest Coverage in Year 1.......... 1.3x 100%
Snr. Debt Repaid end Year 8.......100.0%
- -------------------------------------------------------------------
Rothschild Inc.
DRAFT MODEL
FOR DISCUSSION PURPOSES ONLY
10-Sep. 1996
TIME: 10:32AM
RUN #: 2969
------------------------------------------------------------------
Index: Page
FINANCING STRUCTURE........................1
PRINCIPAL ASSUMPTIONS......................2
SUMMARY BALANCE SHEETS.....................3
SUMMARY INCOME STATEMENTS AND CASH FLOWS...4
OPERATING SEGMENT BREAKDOWN................5-7
BALANCE SHEET ADJUSTMENTS..................8-9
DEPRECIATION SCHEDULES....................10 OVERRIDE
TAX CALCULATIONS..........................11
ESTIMATED RETURN ON EQUITY................12
RETURN ON CV. SUB., DISCOUNTED
PRESENT VALUES............................13
- ------------------------------------------------
Notes:
0 SEGMENT(S) ASSUMED SOLD
------------------------------------------------------------------
Any estimates or projections contained herein have been
provided to assist in your evaluation but should not be relied
upon as an accurate representation of future results. Any price
or financing structure contained herein is for sensitivity
purposes only and does not necessarily represent a view as to the
fairness or feasibility of such price or structure. Rothschild
Inc. makes no representation or warranty as to the accuracy or
completeness of the information contained herein.
- -------------------------------------------------------------------
PRINCIPAL ASSUMPTIONS LINK
Interest Rates 1997 1998 1999 2000 2001
==============
====================================
Interest on Short-term Debt...............8.50%..8.50%...8.50%..8.50%...8.50%.
Interest on Existing Long-term Debt.......0.00%..0.00%...0.00%..0.00%...0.00%.
Interest on New Senior L-term Debt........8.50%..8.50%...8.50%..8.50%...8.50%.
Interest on Subordinated Debt............12.00%.12.00%..12.00%.12.00%..12.00%.
Interest on Convertible Subordinated Debt.8.00%..8.00%...8.00%..8.00%...8.00%.
Interest on Cash Balances.................4.00%..4.00%...4.00%..4.00%...4.00%.
Preferred Dividend........................0.00%..0.00%...0.00%..0.00%...0.00%.
Interest Rates 2002 2003 2004 2005 2006
============== ===================================
Interest on Short-term Debt................8.50%..8.50%...8.50% 8.50% 8.50%
Interest on Existing Long-term Debt........0.00%..0.00% 0.00% 0.00% 0.00%
Interest on New Senior L-term Debt.........8.50%..8.50%.. 8.50% 8.50% 8.50%
Interest on Subordinated Debt............ 12.00%.12.00% 12.00% 12.00% 12.00%
Interest on Convertible Subordinated Debt..8.00%..8.00% 8.00% 8.00% 8.00%
Interest on Cash Balances..................4.00%..4.00%...4.00%..4.00%...4.00%
Preferred Dividend.........................0.00%..0.00%...0.00%..0.00%...0.00%.
Working Capital
Variables as % of Sales 1996 1997 1998 1999 2000 2001 2002
======================== =================================================
Receivables.................19.9%..19.9%..19.9%...19.9%..19.9%...19.9%..19.9%
Inventory...................11.9%..11.9%..11.9%...11.9%..11.9%...11.9%..11.9%
Accounts Payable.............4.6%...4.6%...4.6%....4.6%...4.6%....4.6%. 4.6%
Accrued Liabilities..........9.8%...9.8%...9.8%....9.8%...9.8%....9.8%. 9.8%
Working Capital
Variables as % of Sales 2003 2004 2005 2006
======================== ============================
Receivables.................19.9% 19.9% 19.9% 19.9%
Inventory...................11.9% 11.9% 11.9% 11.9%
Accounts Payable............ 4.6% 4.6% 4.6% 4.6%
Accrued Liabilities......... 9.8% 9.8% 9.8% 9.8%
Projection Periods
Base Year Labelled: 1996 represents year to 31-Dec 1996
Debt Conversion Rights
Convertible Sub. Debt with right to 0.0% of Equity
This debt is assumed not to be repaid for
cash flow purposes, except for
return calculation.
Fixed Asset Sale
Net Assets Sold Outright or for Leaseback $0.0 million
Net Sale Proceeds (for Leaseback, if app.) $0.0 million
If Sale for Leaseback, Base Year Lease Payt. $0.0 million
Reflected in Cost of Goods Sold for Retained Operations
Lease Payments Grow in Proportion to Cost of Goods
Asset Write-up
Amount of Asset Write-up $0.0 million
Tax on Recapture (if any is assumed) appears above
Segment Sales and Descriptions
Retain ??? SEG1 SEG2 SEG3 SEG4 SEG5 SEG6
----------------------------------------------------
(1=YES;0=NO) 1 1 1 1 1 1
Sale Price (m) $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
SEG1: SEG4:
SEG2: SEG5:
SEG3: SEG6:
Depreciation & Amortization
Reporting Depreciation Period 10.0 years
Goodwill Amortization 40.0 years
Taxes
ITC Rate 0.0%
Tax Rate 27.0%
Base Year Ending NOL Carryforward $0.0 million
Base Year Ending ITC Carryforward $0.0 million
Debt
Existing Long- & Short-term Debt, other than that sold with
operations as well as convertibles and IRBs, is assumed to be
refinanced.
Converted: $0.0 million
Assumed: $0.0 million
Transaction Expenses
Transaction Expenses as % of Price to Shareholders 3.0%
Capital Expenditures
Capital Expenditures grow in proportion to individual revenues
of retained operations
Collateral Advance Ratios
=========================
Accounts Receivable 80%
Inventories 60%
Net Fixed Assets 40%
SUMMARY BALANCE SHEETS ($ Millions) LINK
31 - Dec 1996 31 - Dec
ASSETS OLDCO Adj. NEWCO 1997 1998 1999 2000
========================= ==========================
Cash and Investments......55.1 (40.0) 15.1 15.1 15.1 15.1 15.1
Receivables..............162.2 0.0 162.2 179.1 197.9 218.6 243.7
Inventory.................96.6 0.0 96.6 106.7 117.9 130.2 145.2
Prepaids & Other..........57.1 0.0 57.1 57.1 57.1 57.1 57.1
---------------------- ----------------------------
Total Current Assets.....371.0 (40.0) 331.0 358.0 388.0 421.1 461.1
---------------------- ----------------------------
Gross Fixed Assets.......368.8 0.0 368.8 413.2 460.7 511.6 569.5
(less) Accum. Deprec....(163.6) 0.0 (163.6) (205.3)(248.1) (292.2)(338.4)
---------------------- ------------------------------
Net Fixed Assets.........205.2 0.0 205.2 207.9 212.6 219.3 231.1
---------------------- ------------------------------
Deferred Charges.0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other Assets....31.1 0.0 31.1 31.1 31.1 31.1 31.1
Goodwill........96.2 1,246.6 1,342 1309.3 1,275.7 1242.2 1208.6
---------------------- -----------------------------
Total Assets..$703.6 $1,206.6 $1,910.2 $1,906.2 $1,907.4 $1,913.7 $1,913.9
====================================================
2001 2002 2003 2004 2005 2006
ASSETS ===========================================
Cash and Investments.......... 15.1 15.1 15.1 15.1 15.1 15.1
Receivables................... 263.2 284.3 307.0 331.6 358.1 386.8
Inventory..................... 156.8 169.3 182.9 197.5 213.3 230.4
Prepaids & Other.............. 57.1 57.1 57.1 57.1 57.1 57.1
-------------------------------------------
Total Current Assets.......... 492.3 525.9 562.1 601.3 643.7 689.4
-------------------------------------------
Gross Fixed Assets............ 630.8 695.9 764.9 837.9 915.4 997.6
(less) Accum. Deprec.......... (387.0) (438.4)(492.9) (551.0)(613.1)(679.7)
-------------------------------------------
Net Fixed Assets............. 243.8 257.5 271.9 286.9 302.3 317.8
-------------------------------------------
Deferred Charges.... 0.0 0.0 0.0 0.0 0.0 0.0
Other Assets........ 31.1 31.1 31.1 31.1 31.1 31.1
Goodwill............ 1,175.0 1,141.4 1,107.9 1,074.3 1,040.7 1,007.1
-------------------------------------------
Total Assets........ $1,947.2 $1,955.9 $1,973.1 $1,993.7 $2,017.8 $2,045.4
===========================================
LIABILITIES & EQUITY 31 -Dec 1996 31 - Dec
OLDCO Adj. NEWCO 1997 1998 1999 2000
================================================
Accounts Payable.............37.1.....0.0...37.1 41.0... 45.3....50.1. 55.8
Accrued Liabilities..........80.1.....0.0...80.1 88.4... 97.7...108.0..120.4
Short-term Debt.............132.9..(132.9)...0.0 0.0... 0.0.....0.0 0.0
Other Current Liabilities.....9.6.....0.0....9.6 9.6... 9.6.... 9.6 9.6
--------------------------------------------------
Total Current Liabilities...259.8..(132.9).126.8 139.1 152.7 167.7 185.8
Deferred Taxes.................0.0.....0.0....0.0.. 0.0.... 0.0 0.0 0.0
Existing Long-term Debt.......78.6...(78.6)...0.0.. 0.0.... 0.0 0.0 0.0
New Senior Long-term Debt......0.0...600.0..600.0 596.1.. 574.2 538.7 479.7
New Subordinated Debt..........0.0...550.0..550.0 550.0.. 550.0 550.0 550.0
New Convertible
Subordinated Debt..........0.0....0.0.....0.0... 0.0.... 0.0 0.0 0.0
Other Non-curr.
Liabilities...............29.1....0.0....29.1... 29.1... 29.1 29.1 29.1
------------------------------------------------
Total Liabilities.. .....367.5 938.4 1,305.9 1,314.2 1,306.0 1,285.4 1,244.5
Preferred Stock...0.0 0.0 0.0 0.0 0.0 0.0 0.0
Equity..........336.1 268.2 604.3 592.0 601.5 628.3 687.3
-------------------- ---------------------------
Total
Liabilities
and Equity.....$703.6 $1,206.6 $1,910.2 $1,906.2 $1.907.4 $1,913.7 $1,931.9
==========================================
LIABILITIES & EQUITY 2001 2002 2003 2004 2005 2006
===========================================
Accounts Payable............ 60.3 65.1 70.3 75.9 82.0 88.6
Accrued Liabilities......... 130.0 140.4 151.6 163.8 176.9 191.0
Short-term Debt............. 0.0 0.0 0.0 0.0 0.0 0.0
Other Current Liabilities... 9.6 9.6 9.6 9.6 9.6 9.6
----------------------------------------
Total Current Liabilities... 199.9 215.1 231.6 249.3 268.5 289.2
Deferred Taxes.............. 0.0 0.0 0.0 0.0 0.0 0.0
Existing Long-term Debt..... 0.0 0.0 0.0 0.0 0.0 0.0
New Senior Long-term Debt... 397.8 286.0 151.0 0.0 0.0 0.0
New Subordinated Debt....... 550.0 550.0 550.0 539.8 346.7 115.1
New Convertible
Subordinated Debt........... 0.0 0.0 0.0 0.0 0.0 0.0
Other Non-curr. Liabilities. 29.1 29.1 29.1 29.1 29.1 29.1
-----------------------------------------
Total Liabilities........ 1,176.7 1,080.1 961.6 818.2 644.3 433.3
Preferred Stock........ 0.0 0.0 0.0 0.0 0.0 0.0
Equity................. 765.5 875.8 1,011.5 1,175.5 1,373.5 1,612.1
--------------------------------------------
Total Liabilities
and Equity............$1,942.2 $1,955.9 $1,973.1 $1993.7 $2,017.8 $2,045.4
31-Dec 1996 31-Dec
OLDCO Adj. NEWCO 1997 1998 1999 2000 2001
COLLATERAL AVAILABLE ====================================================
PER ASSUMPTIONS 290.4 314.1 340.8 374.5 402.2
TOTAL SENIOR DEBT 596.1 574.2 538.7 479.7 397.8
CURRENT RATIO (x) 1.4 2.6 2.6 2.5 2.5 2.5 2.5
SR. DEBT/SUB. DEBT
+ EQUITY (x) 0.6 0.5 0.5 0.5 0.5 0.4 0.3
TOT. LIAB./EQUITY (x) 1.1 2.2 2.2 2.2 2.0 1.8 1.5
TOT. LIAB./TOT.
ASSETS (x) 0.5 0.7 0.7 0.7 0.7 0.6 0.6
TOT. LIAB./EQ. -
GOODWILL (x) 1.5 (1.8) (1.8) (1.9) (2.1) (2.4) (2.9)
NEW SR. DEBT PAID DOWN 0.0% 0.7% 4.3% 10.2% 20.1% 33.7%
ESTIMATED INTERNAL RATE
OF RETURN ON INITIAL EQUITY 29.6% 35.4% 31.6% 32.6% 29.2%
2002 2003 2004 2005 2006
COLLATERAL AVAILABLE ===================================
PER ASSUMPTIONS 432.0 464.1 498.6 535.4 574.8
TOTAL SENIOR DEBT 286.0 151.0 0.0 0.0 0.0
CURRENT RATIO (x) 2.4 2.4 2.4 2.4 2.4
SR. DEBT/SUB. DEBT
+ EQUITY (x) 0.2 0.1 0.0 0.0 0.0
TOT. LIAB./EQUITY(x) 1.2 1.0 0.7 0.5 0.3
TOT. LIAB./TOT.
ASSETS (x) 0.6 0.5 0.4 0.3 0.2
TOT. LIAB./EQ. -
GOODWILL (x) (4.1) (10.0) 8.1 1.9 0.7
NEW SR. DEBT PAID DOWN 52.3% 74.8% 100.0% 100.0% 100.0%
ESTIMATED INTERNAL RATE
OF RETURN ON INITIAL EQUITY 28.2% 26.3% 24.8% 23.7% 22.7%
<PAGE>
SUMMARY INCOME STATEMENTS AND CASH FLOWS ($ Millions) LINK
1996 1997 1998 1999 2000
=======================================
Revenues.................................815.0...900.0...994.5..1,098.9 1,225.0
(Cost of Goods Sold)...................(309.7).(342.0).(372.9)..(412.1).(453.3)
(Selling, General & Administrative)....(338.2).(370.8).(404.8)..(447.3).(490.0)
(Corporate Expense).......................0.0.....0.0.....0.0......0.0.....0.0.
------ -------------------------------
Earnings Before Depreciation, Interest
& Taxes "EBDIT"..........................167.1....187.2...216.8....239.6..281.8.
(Depreciation)..........................(33.0)...(41.8)..(42.8)...(44.1).(46.2)
------- ------------------------------
Earnings Before Interest & Taxes
"EBIT" (A).............................134.1....145.4...174.0....195.4..235.6.
Interest (Expense)/
Income (B).....................................(116.2).(115.1)..(112.7)(108.7)
---------------------------------
Pre-tax Income....................................29.2....58.9.....82.7..126.9.
(Income Taxes after ITC).........................(7.9)..(15.9)...(22.3).(34.3)
---------------------------------
Net Income before Goodwill........................21.3....43.0.....60.4...92.6..
(Goodwill Amort.)...............................(33.6)..(33.6)...(33.6).(33.6)
---------------------------------
Net Income.......................................(12.2)....9.4.....26.8...59.1..
plus: Depreciation...............................41.8....42.8.....44.1...46.2..
plus: Goodwill...................................33.6....33.6.....33.6...33.6..
---------------------------------
Operating Cash Flow...............................63.1....85.8....104.5..138.8..
(Working Capital Increase)......................(14.8)..(16.4)...(18.1).(21.9).
(Capital Expenditures)..................(40.2)..(44.4)..(47.5)...(50.8).(57.9).
plus: Increase in Deferred Taxes..................0.0.....0.0......0.0....0.0..
--------------------------------
Cash Available Before Debt
Amortization.......................................3.9....21.8.....35.6...59.0..
(Existing Long-term Debt Amortizn.)...............0.0.....0.0......0.0....0.0..
(Preferred Dividends).............................0.0.....0.0......0.0....0.0..
(Preferred Amortization)..........................0.0.....0.0......0.0....0.0..
--------------------------------
Cash Available before New Senior Debt
Amortization.......................................3.9....21.8.....35.6...59.0..
New Senior Debt (Amortization)/Increase..........(3.9)..(21.8)...(35.6).(59.0).
(Subordinated Amortization).......................0.0.....0.0......0.0....0.0
(Short-term Debt Amortization)....................0.0.....0.0......0.0....0.0..
------------------------------
Net Increase in Cash A/C...........................0.0.....0.0......0.0....0.0..
===============================
EBIT INTEREST COVERAGE (NA if negative) (A/I)......1.3.....1.5......1.7....2.2..
2001 2002 2003 2004 2005 2006
================================================
Revenues...................1,323.0 1,428.8 1,543.1 1,666.6 1,799.9 1,943.9
(Cost of Goods Sold)........(489.5).(521.5) (563.2) (608.3) (657.0) (709.5)
(Selling, General &
Administrative)... (529.2) (564.4) (609.5) (658.3) (711.0) (767.8)
(Corporate Expense)......... 0.0 0.0 0.0 0.0 0.0 0.0
-------------------------------------------------
Earnings Before
Depreciation, Interest
& Taxes "EBDIT"...............304.3 342.9 370.4 400.0 432.0 466.5
(Depreciation)...............(48.6)..(51.4)...(54.5) (58.1) (62.1) (66.6)
-------------------------------------------------
Earnings Before Interest
& Taxes
"EBIT" (A)..................255.7...291.6 315.8 341.9 369.9 399.9
Interest (Expense)/
Income (B).................(102.7)..(94.5)...(84.0)..(71.2)..(52.6)...(27.1)
----------------------------------------------
Pre-tax Income................153.0...197.1....231.9...270.7...317.3....372.8
(Income Taxes after ITC).....(41.3)..(53.2)...(62.6)..(73.1)..(85.7) (100.7)
----------------------------------------------
Net Income before Goodwill....111.7...143.9....169.3...197.6.. 231.6 272.2
(Goodwill Amort.)............(33.6)..(33.6)...(33.6)..(33.6)..(33.6)...(33.6)
----------------------------------------------
Net Income.....................78.1...110.3....135.7...164.0...198.0....238.6
plus: Depreciation............48.6....51.4.....54.5....58.1....62.1.....66.6
plus: Goodwill................33.6....33.6.....33.6....33.6....33.6.....33.6
----------------------------------------------
Operating Cash Flow...........160.3...195.3....223.8...255.7...293.7....338.8
(Working Capital Increase)...(17.0)..(18.4)...(19.9)..(21.4)..(23.2)...(25.0)
(Capital Expenditures).......(61.4)..(65.1)...(69.0)..(73.1) (77.5) (82.1)
plus: Increase
in Deferred Taxes..............0.0.....0.0......0.0.....0.0.....0.0 0.0
-------------------------------------------------
Cash Available Before Debt
Amortization...................81.9...111.8....135.0...161.2...193.1 231.6
(Existing Long-term
Debt Amortizn.)...............0.0.....0.0......0.0.....0.0.. 0.0 0.0
(Preferred Dividends)..........0.0.....0.0......0.0.....0.0.....0.0 0.0
(Preferred Amortization).......0.0.....0.0......0.0.....0.0.....0.0 0.0
-------------------------------------------------
Cash Available before
New Senior Debt
Amortization...................81.9...111.8....135.0 161.2 193.1 231.6
New Senior Debt
(Amortization)/Increase.......(81.9).(111.8)..(135.0).(151.0)....0.0... 0.0
(Subordinated Amortization)....0.0.....0.0......0.0...(10.2).(193.1) (231.6)
(Short-term Debt
Amortization)...................0.0.....0.0......0.0.....0.0 0.0 0.0
-------------------------------------------------
Net Increase
in Cash A/C.....................0.0.....0.0......0.0.....0.0.....0.0.. 0.0
=================================================
EBIT INTEREST
COVERAGE
(NA if negative)(A/I)...........2.5.....3.1......3.8.....4.8.....7.0 14.8
- --------------------------------------------------------------------------------
BASE YEAR DATA AND PROJECTIONS HAVE BEEN RESTATED TO REFLECT
CONTINUING OPERATIONS ONLY AFTER THE SALE OF 0 SEGMENTS
- --------------------------------------------------------------------------------
INTEREST EXPENSE AVG RATE 10 YRS 1997 1998 1999 2000
================ ===============
---------------------------------
Interest on Short-term Debt 8.50% 0.0 0.0 0.0 0.0
Interest on Existing
Long-term Debt 0.00% 0.0 0.0 0.0 0.0
Interest on New Senior
Long-term Debt 8.50% 50.8 49.7 47.3 43.3
Interest on Subordinated Debt 12.00% 66.0 66.0 66.0 66.0
Interest on Convertible
Subordinated Debt 8.00% 0.0 0.0 0.0 0.0
Interest (Earnings) on
Cash Deficit (Surplus) 4.00% (0.6) (0.6) (0.6) (0.6)
----------------------------------
TOTAL INTEREST EXPENSE/(INCOME) 116.2 115.1 112.7 108.7
==================================
INTEREST EXPENSE 2001 2002 2003 2004 2005 2006
================
--------------------------------------------------
Interest on Short-term Debt 0.0 0.0 0.0 0.0 0.0 0.0
Interest on Existing
Long-term Debt 0.0 0.0 0.0 0.0 0.0 0.0
Interest on New Senior
Long-term Debt 37.3 29.1 18.6 6.4 0.0 0.0
Interest on Subordinated Debt 66.0 66.0 66.0 65.4 53.2 27.7
Interest on Convertible
Subordinated Debt 0.0 0.0 0.0 0.0 0.0 0.0
Interest (Earnings) on
Cash Deficit (Surplus) (0.6) (0.6) (0.6) (0.6) (0.6) (0.6)
---------------------------------------------------
TOTAL INTEREST EXPENSE/(INCOME) 102.7 94.5 84.0 71.2 52.6 27.1
===================================================
<PAGE>
OPERATING SEGMENT BREAKDOWN LINK
1993 1994 1995 1996 1997 1998 1999
==============================================================
RETAINED
OPERATIONS Revenues 815.0 900.0 994.5 1,098.9
==========
(Cost of Goods Sold) (309.7) (342.0) (372.9) (412.1)
(Sale/Leaseback Payments) 0.0 0.0 0.0 0.0
(Selling, General &
Administrative) (338.2) (370.8) (404.8) (447.3)
EBDIT 167.1 187.2 216.8 239.6
(Depreciation) 1996 Only (33.0)
EBIT 1996 Only 134.1
Revenues' Growth Rate 10.4% 10.5% 10.5%
Cost of Goods Sold as %
of Revenues 38.0% 37.5% 37.5%
Sell., Gen. & Adm. as %
of Revenues 41.2% 40.7% 40.7%
EBDIT MARGIN 20.8% 21.8% 21.8%
EBDIT GROWTH 12.0% 15.8% 10.5%
CAPITAL 42.1 53.7 32.5 40.2 44.4 47.5 50.8
EXPENDITURES 27.5% -39.5% 23.8% 10.4% 7.0% 7.0%
DIVESTED
OPERATIONS Revenues 0.0 0.0 0.0 0.0
==========
(Cost of Goods Sold) 0.0 0.0 0.0 0.0
(Selling, General &
Administrative) 0.0 0.0 0.0 0.0
EBDIT 0.0 0.0 0.0 0.0
0 (Depreciation) 1996 Only 0.0
Segments EBIT 1996 Only 0.0
Aggregate Revenues' Growth Rate N/A N/A N/A
Sale Price Cost of Goods Sold as % of Revenues N/A N/A N/A
0.0m Sell., Gen. & Adm. as % of Revenues N/A N/A N/A
EBDIT MARGIN N/A N/A N/A
EBDIT GROWTH N/A N/A N/A
CAPITAL 0.0 0.0 0.0 0.0 0.0 0.0 0.0
EXPENDITURES N/A N/A N/A N/A N/A N/A
TOTAL
EXISTING Revenues 815.0 900.0 994.5 1,098.9
OPERATIONS (Cost of Goods Sold &
==========
S/LB Payts) (309.7) (342.0) (372.9) (412.1)
(Selling, General &
Administrative) (338.2) (370.8) (404.8) (447.3)
EBDIT (167.1) 187.2 216.8 239.6
(Depreciation)
1996 Only (33.0)
EBIT
1996 Only 134.1
Revenues' Growth Rate 10.4% 10.5% 10.5%
Cost of Goods Sold incl.
S/LB as % of Revenues 38.0% 37.5% 37.5%
Sell., Gen. & Adm. as % of Revenues 41.2% 40.7% 40.7%
EBDIT MARGIN 20.8% 21.8% 21.8%
EBDIT GROWTH 12.0% 15.8% 10.5%
CAPITAL 42.1 53.7 32.5 40.2 44.4 47.5 50.8
EXPENDITURES 27.5% -39.5% 23.8% 10.4% 7.0% 7.0%
2000 2001 2002 2003 2004 2005 2006
==========================================
RETAINED
OPERATIONS
Revenues 1,225.0 1,323.0 1,428.8 1,543.1 1,666.6 1,799.9 1,943.9
(Cost of Goods Sold) (453.3) (489.5) (521.5) (563.2) (608.3)(657.0)(709.5)
(Sale/Leaseback Payments) 0.0 0.0 0.0 0.0 0.0 0.0 0.0
(Selling, General &
Administrative) (490.0)(529.2) (564.4)(609.5) (658.3)(711.0)(767.8)
EBDIT 281.8 304.3 342.9 370.4 400.0 432.0 466.5
(Depreciation) 1996 Only
EBIT 1996 Only
Revenues' Growth Rate 11.5% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0%
Cost of Goods Sold as %
of Revenues 37.0% 37.0% 36.5% 36.5% 36.5% 36.5% 36.5%
Sell., Gen. & Adm. as %
of Revenues 40.0% 40.0% 39.5% 39.5% 39.5% 39.5% 39.5%
EBDIT MARGIN 23.0% 23.0% 24.0% 24.0% 24.0% 24.0% 24.0%
EBDIT GROWTH 17.6% 8.0% 12.7% 8.0% 8.0% 8.0% 8.0%
CAPITAL 57.9 61.4 65.1 69.0 73.1 77.5 82.1
EXPENDITURES 13.9% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
DIVESTED
OPERATIONS
Revenues 0.0 0.0 0.0 0.0 0.0 0.0 0.0
(Cost of Goods Sold) 0.0 0.0 0.0 0.0 0.0 0.0 0.0
(Selling, General &
Administrative) 0.0 0.0 0.0 0.0 0.0 0.0 0.0
EBDIT 0.0 0.0 0.0 0.0 0.0 0.0 0.0
0 (Depreciation) 1996 Only
Segments EBIT 1996 Only
Aggregate Revenues'
Growth Rate N/A N/A N/A N/A N/A N/A N/A
Sale Price Cost
of Goods Sold
as % of Revenues N/A N/A N/A N/A N/A N/A N/A
0.0 m Sell., Gen. & Adm.
as % of Revenues N/A N/A N/A N/A N/A N/A N/A
EBDIT MARGIN N/A N/A N/A N/A N/A N/A N/A
EBDIT GROWTH N/A N/A N/A N/A N/A N/A N/A
CAPITAL 0.0 0.0 0.0 0.0 0.0 0.0 0.0
EXPENDITURES N/A N/A N/A N/A N/A N/A N/A
TOTAL
EXISTING
OPERATIONS
Revenues 1,225.0 1323.0 1,428.8 1,543.1 1,666.6 1,799.9 1,943.9
(Cost of Goods Sold &
S/LB Payts) (453.3) (489.5) (521.5) (563.2) (608.3) (657.0)(709.5)
(Selling, General &
Administrative) (490.0) (529.2) (564.4)(609.5) (658.3) (711.0)(767.8)
EBDIT 281.8 304.3 342.9 370.4 400.0 432.0 466.5
(Depreciation) 1996 Only
EBIT 1996 Only
Revenues' Growth Rate 11.5% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0%
Cost of Goods Sold incl.
S/LB as % of Revenues 37.0% 37.0% 36.5% 36.5% 36.5% 36.5% 36.5%
Sell., Gen. & Adm. as %
of Revenues 40.0% 40.0% 39.5% 39.5% 39.5% 39.5% 39.5%
EBDIT MARGIN 23.0% 23.0% 24.0% 24.0% 24.0% 24.0% 24.0%
EBDIT GROWTH 17.6% 8.0% 12.7% 8.0% 8.0% 8.0% 8.0%
CAPITAL 57.9 61.4 65.1 69.0 73.1 77.5 82.1
EXPENDITURES 13.9% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
<PAGE>
OPERATING SEGMENT BREAKDOWN (Contd) LINK
1993 1994 1995 1996 1997 1998 1999
=========================================================
* * * * * * * * Revenues 815.0 900.0 994.5 1,098.9
SEG1: (Cost of Goods Sold) (309.7) (342.0)(372.9) (412.1)
(Selling, General &
Administrative) (338.2) (370.8)(404.8) (447.3)
* * * * * * * * EBDIT 167.1 187.2 216.8 239.6
(Depreciation) 1996 Only (33.0)
KEEP EBIT 1996 Only 134.1
Revenues' Growth Rate - 10.4% 10.5% 10.5%
Cost of Goods Sold as %
of Revenues 38.0% 38.0% 37.5% 37.5%
Sell., Gen. & Adm. as % of
Revenues 41.5% 41.2% 40.7% 40.7%
EBDIT MARGIN 20.5% 20.8% 21.8% 21.8%
EBDIT GROWTH - 12.0% 15.8% 10.5%
CAPITAL 42.1 53.7 32.5 40.2 44.4 47.5 50.8
EXPENDITURES 27.5% -39.5% 23.8% 10.4% 7.0% 7.0%
* * * * * * * * Revenues 0.0 0.0 0.0 0.0
SEG2: (Cost of Goods Sold) 0.0 0.0 0.0 0.0
(Selling, General &
Administrative) 0.0 0.0 0.0 0.0
* * * * * * * * EBDIT 0.0 0.0 0.0 0.0
(Depreciation) 1996 Only 0.0
KEEP EBIT 1996 Only 0.0
Revenues' Growth Rate - 0.0% 0.0% 0.0%
Cost of Goods Sold as %
of Revenues N/A 0.0% 0.0% 0.0%
Sell., Gen. & Adm. as %
of Revenues N/A 0.0% 0.0% 0.0%
EBDIT MARGIN N/A N/A N/A N/A
EBDIT GROWTH - N/A N/A N/A
CAPITAL 0.0 0.0 0.0 0.0 0.0 0.0 0.0
EXPENDITURES N/A N/A N/A 0.0% 0.0% 0.0%
* * * * * * * * Revenues 0.0 0.0 0.0 0.0
SEG3: (Cost of Goods Sold) 0.0 0.0 0.0 0.0
(Selling, General &
Administrative) 0.0 0.0 0.0 0.0
* * * * * * * * EBDIT 0.0 0.0 0.0 0.0
(Depreciation) 1996 Only 0.0
KEEP EBIT 1996 Only 0.0
Revenues' Growth Rate - 0.0% 0.0% 0.0%
Cost of Goods Sold as % of
Revenues N/A 0.0% 0.0% 0.0%
Sell., Gen. & Adm. as % of
Revenues N/A 0.0% 0.0% 0.0%
EBDIT MARGIN N/A N/A N/A N/A
EBDIT GROWTH - N/A N/A N/A
CAPITAL 0.0 0.0 0.0 0.0 0.0 0.0 0.0
EXPENDITURES N/A N/A N/A 0.0% 0.0% 0.0%
2000 2001 2002 2003 2004 2005 2006
=============================================
Revenues 1,225.0 1,323.0 1,428.8 1,543.1 1666.6 1,799.9 1,943.9
(Cost of
Goods Sold) (453.3) (489.5) (521.5) (563.2)(608.3) (657.0) (709.5)
(Selling, General &
Administrative) (490.0) (529.2) (564.4)(609.5) (658.3)(711.0) (767.8)
EBDIT 281.8 304.3 342.9 370.4 400.0 432.0 466.5
(Depreciation) 1996 Only
EBIT 1996 Only
Revenues' Growth Rate 11.5% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0%
Cost of Goods Sold as %
of Revenues 37.0% 37.0% 36.5% 36.5% 36.5% 36.5% 36.5%
Sell., Gen. & Adm.
as % of Revenues 40.0% 40.0% 39.5% 39.5% 39.5% 39.5% 39.5%
EBDIT MARGIN 23.0% 23.0% 24.0% 24.0% 24.0% 24.0% 24.0%
EBDIT GROWTH 17.6% 8.0% 12.7% 8.0% 8.0% 8.0% 8.0%
CAPITAL 57.9 61.4 65.1 69.0 73.1 77.5 82.1
EXPENDITURES 13.9% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
Revenues 0.0 0.0 0.0 0.0 0.0 0.0 0.0
(Cost of Goods Sold) 0.0 0.0 0.0 0.0 0.0 0.0 0.0
(Selling, General &
Administrative) 0.0 0.0 0.0 0.0 0.0 0.0 0.0
EBDIT 0.0 0.0 0.0 0.0 0.0 0.0 0.0
(Depreciation) 1996 Only
EBIT 1996 Only
Revenues' Growth Rate 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Cost of Goods Sold as %
of Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Sell., Gen. & Adm. as %
of Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
EBDIT MARGIN N/A N/A N/A N/A N/A N/A N/A
EBDIT GROWTH N/A N/A N/A N/A N/A N/A N/A
CAPITAL 0.0 0.0 0.0 0.0 0.0 0.0 0.0
EXPENDITURES 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Revenues 0.0 0.0 0.0 0.0 0.0 0.0 0.0
(Cost of Goods Sold) 0.0 0.0 0.0 0.0 0.0 0.0 0.0
(Selling, General &
Administrative) 0.0 0.0 0.0 0.0 0.0 0.0 0.0
EBDIT 0.0 0.0 0.0 0.0 0.0 0.0 0.0
(Depreciation)1996 Only
1996 Only
Revenues' Growth Rate 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Cost of Goods Sold
as % of Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Sell., Gen. & Adm. as
% of Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
EBDIT MARGIN N/A N/A N/A N/A N/A N/A N/A
EBDIT GROWTH N/A N/A N/A N/A N/A N/A N/A
CAPITAL 0.0 0.0 0.0 0.0 0.0 0.0 0.0
EXPENDITURES 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
<PAGE>
OPERATING SEGMENT BREAKDOWN (Contd) LINK
1993 1994 1995 1996 1997 1998 1999
============================== =======================
* * * * * * * * Revenues 0.0 0.0 0.0 0.0
SEG4: (Cost of Goods Sold) 0.0 0.0 0.0 0.0
(Selling, General &
Administrative) 0.0 0.0 0.0 0.0
* * * * * * * * EBDIT 0.0 0.0 0.0 0.0
(Depreciation) 1996 Only 0.0
KEEP EBIT 1996 Only 0.0
Revenues' Growth Rate - 0.0% 0.0% 0.0%
Cost of Goods Sold as %
of Revenue N/A 0.0% 0.0% 0.0%
Sell., Gen. & Adm. as %
of Revenue N/A 0.0% 0.0% 0.0%
EBDIT MARGIN N/A N/A N/A N/A
EBDIT GROWTH - N/A N/A N/A
CAPITAL 0.0 0.0 0.0 0.0 0.0 0.0 0.0
EXPENDITURES N/A N/A N/A 0.0% 0.0% 0.0%
* * * * * * * * Revenues 0.0 0.0 0.0 0.0
SEG5: (Cost of Goods Sold) 0.0 0.0 0.0 0.0
(Selling, General &
Administrative) 0.0 0.0 0.0 0.0
* * * * * * * * EBDIT 0.0 0.0 0.0 0.0
(Depreciation) 1996 Only 0.0
KEEP EBIT 1996 Only 0.0
Revenues' Growth Rate - 0.0% 0.0% 0.0%
Cost of Goods Sold as
% of Revenues N/A 0.0% 0.0% 0.0%
Sell., Gen. & Adm. as
% of Revenues N/A 0.0% 0.0% 0.0%
EBDIT MARGIN N/A N/A N/A N/A
EBDIT GROWTH - N/A N/A N/A
CAPITAL 0.0 0.0 0.0 0.0 0.0 0.0 0.0
EXPENDITURES N/A N/A N/A 0.0% 0.0% 0.0%
* * * * * * * * Revenues 0.0 0.0 0.0 0.0
SEG6: (Cost of Goods Sold) 0.0 0.0 0.0 0.0
(Selling, General
& Administrative) 0.0 0.0 0.0 0.0
* * * * * * * * EBDIT 0.0 0.0 0.0 0.0
(Depreciation) 1996 Only 0.0
KEEP EBIT 1996 Only 0.0
Revenues' Growth Rate - 0.0% 0.0% 0.0%
Cost of Goods Sold as
% of Revenues N/A 0.0% 0.0% 0.0%
Sell., Gen. & Adm. as
% of Revenues N/A 0.0% 0.0% 0.0%
EBDIT MARGIN N/A N/A N/A N/A
EBDIT GROWTH - N/A N/A N/A
CAPITAL 0.0 0.0 0.0 0.0 0.0 0.0 0.0
EXPENDITURES N/A N/A N/A 0.0% 0.0% 0.0%
2000 2001 2002 2003 2004 2005 200
===============================================
Revenues 0.0 0.0 0.0 0.0 0.0 0.0 0.0
(Cost of Goods Sold) 0.0 0.0 0.0 0.0 0.0 0.0 0.0
(Selling, General &
Administrative) 0.0 0.0 0.0 0.0 0.0 0.0 0.0
EBDIT 0.0 0.0 0.0 0.0 0.0 0.0 0.0
(Depreciation) 1996 Only
EBIT 1996 Only
Revenues' Growth Rate 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Cost of Goods Sold as %
of Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Sell., Gen. & Adm. as %
of Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
EBDIT MARGIN N/A N/A N/A N/A N/A N/A N/A
EBDIT GROWTH N/A N/A N/A N/A N/A N/A N/A
CAPITAL 0.0 0.0 0.0 0.0 0.0 0.0 0.0
EXPENDITURES 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Revenues 0.0 0.0 0.0 0.0 0.0 0.0 0.0
(Cost of Goods Sold) 0.0 0.0 0.0 0.0 0.0 0.0 0.0
(Selling, General &
Administrative) 0.0 0.0 0.0 0.0 0.0 0.0 0.0
EBDIT 0.0 0.0 0.0 0.0 0.0 0.0 0.0
(Depreciation) 1996 Only
EBIT 1996 Only
Revenues' Growth Rate 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Cost of Goods Sold as
% of Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Sell., Gen. & Adm. as
% of Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
EBDIT MARGIN N/A N/A N/A N/A N/A N/A N/A
EBDIT GROWTH N/A N/A N/A N/A N/A N/A N/A
CAPITAL 0.0 0.0 0.0 0.0 0.0 0.0 0.0
EXPENDITURES 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Revenues 0.0 0.0 0.0 0.0 0.0 0.0 0.0
(Cost of Goods Sold) 0.0 0.0 0.0 0.0 0.0 0.0 0.0
(Selling, General
& Administrative 0.0 0.0 0.0 0.0 0.0 0.0 0.0
EBDIT 0.0 0.0 0.0 0.0 0.0 0.0 0.0
(Depreciation) 1996 Only
EBIT 1996 Only
Revenues' Growth Rate 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Cost of Goods Sold as
% of Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Sell., Gen. & Adm. as
% of Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
EBDIT MARGIN N/A N/A N/A N/A N/A N/A N/A
EBDIT GROWTH N/A N/A N/A N/A N/A N/A N/A
CAPITAL 0.0 0.0 0.0 0.0 0.0 0.0 0.0
EXPENDITURES 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
<PAGE>
BALANCE SHEET ADJUSTMENTS ($ Millions) LINK
-------------------------
TENDER
-------------------------
OLDCO Adj. MIDCO
--------------------------------
ASSETS
Cash and Investments.............55.1.....0.0...55.1..
Receivables.....................162.2.....0.0..162.2..
Inventory........................96.6.....0.0...96.6..
Prepaids & Other.................57.1.....0.0...57.1..
---------------------------
Total Current Assets............371.0.....0.0..371.0..
---------------------------
Gross Fixed Assets..............368.8.....0.0..368.8..
(less) Accum. Deprec...........(163.6)....0.0.(163.6).
---------------------------
Net Fixed Assets................205.2.....0.0..205.2..
---------------------------
Deferred Charges................0.0......0.0......0.0
Other Assets...................31.1......0.0.....31.1
Goodwill.......................96.2 1,458.2 1,554.4
---------------------------
Total Assets................ $703.6 $1,458.2 $2,161.7
===========================
LIABILITIES & EQUITY
Accounts Payable.................37.1.....0.0...37.1..
Accrued Liabilities..............80.1.....0.0...80.1..
Short-term Debt.................132.9.....0.0..132.9..
Other Current Liabilities.........9.6.....0.0....9.6..
---------------------------
Total Current Liabilities.......259.8.....0.0..259.8..
Deferred Taxes....................0.0.....0.0....0.0..
Existing Long-term Debt..........78.6.....0.0...78.6..
New Senior Long-term Debt.........0.0...897.1..897.1..
New Subordinated Debt.............0.0.....0.0....0.0..
New Convertible Subordinated
Debt..............................0.0.....0.0....0.0..
Other Non-curr. Liabilities......29.1.....0.0...29.1..
---------------------------
Total Liabilities.............367.5..897.1 1,246.6
Preferred Stock.................0.0....0.0.......0.0
Equity........................336.1...561.0....897.1
---------------------------
Total Liabilities
and Equity...................$703.6.$1,458.2 $2,161.7
=========================
^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^
Interim Financing Structure
only applicable if tender
---------------------------------------------------------
SALE(S) OF OPERATIONS
SEG1 SEG2 SEG3 SEG4 SEG5 SEG6 Leaseback TOTAL
---------------------------------------------------------
Adj. Adj. Adj. Adj. Adj. Adj. Adj. ADJ.
---------------------------------------------------------
ASSETS
Cash and Investments..0.0.....0.0....0.0. 0.0 0.0 0.0 0.0 0.0
Receivables...........0.0.....0.0.. 0.0 0.0 0.0 0.0 0.0 0.0
Inventory.............0.0.....0.0....0.0.....0.0 0.0 0.0 0.0 0.0
Prepaids & Other......0.0.....0.0....0.0... 0.0 0.0 0.0 0.0 0.0
--------------------------------------------------------
Total Current Assets..0.0.....0.0....0.0... 0.0 0.0 0.0 0.0 0.0
--------------------------------------------------------
Gross Fixed Assets....0.0.....0.0....0.0 0.0 0.0 0.0 0.0 0.0
(less) Accum. Deprec..0.0.....0.0....0.0.....0.0 0.0 0.0 0.0 0.0
------------------------------------------------------
Net Fixed Assets......0.0.....0.0....0.0... 0.0 0.0 0.0 0.0 0.0
------------------------------------------------------
Deferred Charges......0.0.....0.0....0.0.. 0.0 0.0 0.0 0.0 0.0
Other Assets..........0.0.....0.0....0.0.....0.0. 0.0 0.0 0.0 0.0
Goodwill..............0.0.....0.0....0.0 0.0 0.0 0.0 0.0 0.0
--------------------------------------------------------
Total Assets.........$0.0....$0.0...$0.0 $0.0 $0.0 $0.0 $0.0 $0.0
========================================================
LIABILITIES & EQUITY
Accounts Payable......0.0.....0.0....0.0.....0.0. 0.0 0.0 0.0 0.0
Accrued Liabilities...0.0.....0.0....0.0.....0.0....0.0 0.0 0.0 0.0
Short-term Debt.......0.0.....0.0....0.0.....0.0 0.0 0.0 0.0 0.0
Other Current
Liabilities...........0.0.....0.0....0.0.... 0.0 0.0 0.0 0.0 0.0
-----------------------------------------------------
Total Current
Liabilities...........0.0.....0.0....0.0... 0.0 0.0 0.0 0.0 0.0
Deferred Taxes........0.0.....0.0....0.0 0.0 0.0 0.0 0.0 0.0
Existing
Long-term Debt........0.0.....0.0....0.0 0.0 0.0 0.0 0.0 0.0
New Senior
Long-term Debt........0.0.....0.0....0.0 0.0 0.0 0.0 0.0 0.0
New Subordinated
Debt.................0.0.....0.0... 0.0 0.0 0.0 0.0 0.0 0.0
New Convertible
Subordinated Debt.....0.0.....0.0....0.0 0.0 0.0 0.0 0.0 0.0
Other Non-curr.
Liabilities.......... 0.0.....0.0....0.0 0.0 0.0 0.0 0.0 0.0
-------------------------------------------------------
Total Liabilities.... 0.0.....0.0....0.0.....0.0 0.0 0.0 0.0 0.0
Preferred Stock...... 0.0.....0.0....0.0.....0.0 0.0 0.0 0.0 0.0
Equity............... 0.0.....0.0....0.0... 0.0 0.0 0.0 0.0 0.0
-------------------------------------------------------
Total Liabilities
and Equity...........$0.0....$0.0.. $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
=======================================================
^ ^ ^ ^ ^ ^
Outright asset sale
or for leaseback
---------------------
RECAP
MIDCO Adj. NEWCO
---------------------
ASSETS
Cash and Investments. 55.1 (40.0) 15.1
Receivables.......... 162.2 0.0 162.2
Inventory............ 96.6 0.0 96.6
Prepaids & Other..... 57.1 0.0 57.1
-------------------
Total Current Assets. 371.0 (40.0) 331.0
-------------------
Gross Fixed Assets... 368.8 0.0 368.8
(less) Accum. Deprec. (163.6) 0.0 (163.6)
-------------------
Net Fixed Assets..... 205.2 0.0 205.2
-------------------
Deferred Charges..... 0.0 0.0 0.0
Other Assets......... 31.1 0.0 31.1
Goodwill............. 1,554.5 (211.6) 1,342.1
-------------------
Total Assets......... $2,161.7($251.6) $1,910.2
===================
LIABILITIES & EQUITY
Accounts Payable..... 37.1 0.0 37.1
Accrued Liabilities.. 80.1 0.0 80.1
Short-term Debt...... 132.9 (132.9) 0.0
Other Current
Liabilities.......... 9.6 0.0 9.6
-------------------
Total Current
Liabilities.......... 259.8 (132.9) 126.8
Deferred Taxes....... 0.0 0.0 0.0
Existing
Long-term Debt....... 78.6 (78.6) 0.0
New Senior
Long-term Debt....... 897.1 (297.1) 600.0
New Subordinated
Debt................ 0.0 550.0 550.0
New Convertible
Subordinated Debt.... 0.0 0.0 0.0
Other Non-curr.
Liabilities.......... 29.1 0.0 29.1
------------------
Total Liabilities.... 1,264.6 41.3 1,305.9
Preferred Stock...... 0.0 0.0 0.0
Equity............... 897.1 (292.9) 604.3
------------------
Total Liabilities
and Equity........... $2,161.7 ($251.6) $1,910.2
====================
^ ^ ^ ^ ^ ^
Includes asset
write-up, if any
<PAGE>
BALANCE SHEET ADJUSTMENTS ($ Millions) LINK
Estimated Allocation of Assets, Liabilities and Equity
Assets TOTAL Corporate SEGMENTS SEG1
--------------------------------------
Short-term 371.0 0.0 371.0 371.0
Long-term 332.6 0.0 332.6 332.6
----------------------- -----------
Total 703.6 0.0 703.6 703.6
======================= ===========
% Allocation
Short-term
(in proportion to sales) 100.0% 100.0%
Long-term
(in proportion to
depreciation) 100.0% 100.0%
Total 100.0% 100.0%
Liabilities & Equity
Current Liabilities 259.8 0.0 259.8 259.8
Long-term Debt 78.6 78.6 0.0 0.0
Deferred Tax 0.0 0.0 0.0 0.0
Other 29.1 29.1 0.0 0.0
----------------------- -----------
Total Liabilities 367.5 107.7 259.8 259.8
Equity 336.1 (107.7) 443.8 443.8
----------------------- -----------
Total 703.6 0.0 703.6 703.6
======================= ===========
% Allocation
Current
(in proportion to sales) 100.0% 100.0%
Assets SEG2 SEG3 SEG4 SEG5 SEG6
---------------------------------
Short-term 0.0 0.0 0.0 0.0 0.0
Long-term 0.0 0.0 0.0 0.0 0.0
---------------------------------
Total 0.0 0.0 0.0 0.0 0.0
=================================
% Allocation
Short-term
(in proportion to sales) 0.0% 0.0% 0.0% 0.0% 0.0%
Long-term
(in proportion to
depreciation) 0.0% 0.0% 0.0% 0.0% 0.0%
Total 0.0% 0.0% 0.0% 0.0% 0.0%
Liabilities & Equity
Current Liabilities 0.0 0.0 0.0 0.0 0.0 0
Long-term Debt 0.0 0.0 0.0 0.0 0.0 0
Deferred Tax 0.0 0.0 0.0 0.0 0.0 0
Other 0.0 0.0 0.0 0.0 0.0 0
---------------------------------
Total Liabilities 0.0 0.0 0.0 0.0 0.0
Equity 0.0 0.0 0.0 0.0 0.0
---------------------------------
Total 0.0 0.0 0.0 0.0 0.0
=================================
% Allocation
Current
(in proportion to sales) 0.0% 0.0% 0.0% 0.0% 0.0%
<PAGE>
DEPRECIATION SCHEDULE FOR REPORTED EARNINGS ($ Millions)
1997 1998 1999 2000 2001
==========================================
DEPRECIABLE ASSET
BASE ON ACQUISITION (*): 205.2 37.3 33.6 29.9 26.1 22.4
ACQUISITIONS IN 1997 44.4 4.4 4.4 4.4 4.4 4.4
ACQUISITIONS IN 1998 47.5 * 4.8 4.8 4.8 4.8
ACQUISITIONS IN 1999 50.8 * * 5.1 5.1 5.1
ACQUISITIONS IN 2000 57.9 * * * 5.8 5.8
ACQUISITIONS IN 2001 61.4 * * * * 6.1
ACQUISITIONS IN 2002 65.1 * * * * *
ACQUISITIONS IN 2003 69.0 * * * * *
ACQUISITIONS IN 2004 73.1 * * * * *
ACQUISITIONS IN 2005 77.5 * * * * *
ACQUISITIONS IN 2006 82.1 * * * * *
------------------------------------------
TOTAL 41.8 42.8 44.1 46.2 48.6
==========================================
(*) Depreciated on declining
basis (if no asset write-up);
straight-line (if asset write-up): 18.2% 16.4% 14.5% 12.7% 10.9%
Declining rate: 18.2% 16.4% 14.5% 12.7% 10.9%
Straight-line rate: 10.0% 10.0% 10.0% 10.0% 10.0%
2002 2003 2004 2005 2006
================================
DEPRECIABLE ASSET
BASE ON ACQUISITION (*): 18.7 14.9 11.2 7.5 3.7
ACQUISITIONS IN 1997 4.4 4.4 4.4 4.4 4.4
ACQUISITIONS IN 1998 4.8 4.8 4.8 4.8 4.8
ACQUISITIONS IN 1999 5.1 5.1 5.1 5.1 5.1
ACQUISITIONS IN 2000 5.8 5.8 5.8 5.8 5.8
ACQUISITIONS IN 2001 6.1 6.1 6.1 6.1 6.1
ACQUISITIONS IN 2002 6.5 6.5 6.5 6.5 6.5
ACQUISITIONS IN 2003 * 6.9 6.9 6.9 6.9
ACQUISITIONS IN 2004 * * 7.3 7.3 7.3
ACQUISITIONS IN 2005 * * * 7.7 7.7
ACQUISITIONS IN 2006 * * * * 8.2
--------------------------------
TOTAL 51.4 54.5 58.1 62.1 66.6
================================
(*) Depreciated on declining
basis (if no asset write-up);
straight-line
(if asset write-up): 9.1% 7.3% 5.5% 3.6% 1.8%
Declining rate: 9.1% 7.3% 5.5% 3.6% 1.8%
Straight-line rate: 10.0% 10.0% 10.0% 10.0% 10.0%
ACRS DEPRECIATION SCHEDULE FOR TAXABLE EARNINGS
============================================================
($ Millions)
1997 1998 1999 2000
==================================
DEPRECIABLE ASSET
BASE ON ACQUISITION (SEE BELOW) 35.8 26.6 15.3 8.4
ACQUISITIONS IN 1997
PLUS WRITE-UP (IF ANY) 44.4 6.7 9.8 9.3 9.3
ACQUISITIONS IN 1998 47.5 * 7.1 10.5 10.0
ACQUISITIONS IN 1999 50.8 * * 7.6 11.2
ACQUISITIONS IN 2000 57.9 * * * 8.7
ACQUISITIONS IN 2001 61.4 * * * *
ACQUISITIONS IN 2002 65.1 * * * *
ACQUISITIONS IN 2003 69.0 * * * *
ACQUISITIONS IN 2004 73.1 * * * *
ACQUISITIONS IN 2005 77.5 * * * *
ACQUISITIONS IN 2006 82.1 * * * *
----------------------------------
TOTAL THIS LINE HAS BEEN
CHANGED TO
EQUAL BOOK DEPRECIATION 41.8 42.8 44.1 46.2
==================================
** OVERRIDE !!! **
2001 2002 2003 2004 2005 2006
========================================
DEPRECIABLE ASSET
BASE ON ACQUISITION (SEE BELOW) * * * * * *
ACQUISITIONS IN 1997
PLUS WRITE-UP (IF ANY) 9.3 * * * * *
ACQUISITIONS IN 1998 10.0 10.0 * * * *
ACQUISITIONS IN 1999 10.7 10.7 10.7 * * *
ACQUISITIONS IN 2000 12.7 12.2 12.2 12.2 * *
ACQUISITIONS IN 2001 9.2 13.5 12.9 12.9 12.9 *
ACQUISITIONS IN 2002 * 9.8 14.3 13.7 13.7 13.7
ACQUISITIONS IN 2003 * * 10.3 15.2 14.5 14.5
ACQUISITIONS IN 2004 * * * 11.0 16.1 15.4
ACQUISITIONS IN 2005 * * * * 11.6 17.0
ACQUISITIONS IN 2006 * * * * * 12.3
----------------------------------------
TOTAL THIS LINE HAS BEEN
CHANGED TO
EQUAL BOOK DEPRECIATION 48.6 51.4 54.5 58.1 62.1 66.6
========================================
** OVERRIDE !!! **
ACRS DEPRECIATION SCHEDULE USED FOR ASSET BASE ON ACQUISITION
($Millions)
1997 1998 1999 2000 2001
========================================
ACQUISITIONS IN 1993 42.1 8.9 * * * *
ACQUISITIONS IN 1994 53.7 11.3 11.3 * * *
ACQUISITIONS IN 1995 32.5 6.8 6.8 6.8 * *
ACQUISITIONS IN 1996 40.2 8.8 8.4 8.4 8.4 *
^^^^^^^^^
Retained Operations Only
----------------------------------------
TOTAL 35.8 26.6 15.3 8.4 0.0
========================================
<PAGE>
2002 2003 2004 2005 2006
==================================
ACQUISITIONS IN 1993 * * * * *
ACQUISITIONS IN 1994 * * * * *
ACQUISITIONS IN 1995 * * * * *
ACQUISITIONS IN 1996 * * * * *
----------------------------------
TOTAL 0.0 0.0 0.0 0.0 0.0
==================================
TAX CALCULATIONS ($ Millions)
(A) FOR REPORTING PURPOSES 1996 1997 1998 1999 2000 2001
===============================================
REPORTED PRE-TAX PROFIT/(LOSS) 29.2 58.9 82.7 126.9 153.0
-----------------------------------------
(LESS) TAX CHARGE (7.9) (15.9) (22.3) (34.3) (41.3)
PLUS: APPLICATION OF NOL 0.0 0.0 0.0 0.0 0.0
PLUS: APPLICATION OF ITC 0.0 0.0 0.0 0.0 0.0
-----------------------------------------
NET TAX CHARGE (7.9) (15.9) (22.3) (34.3) (41.3)
-----------------------------------------
NET PROFIT/(LOSS) 21.3 43.0 60.4 92.6 111.7
=========================================
CURRENT NOL 0.0 0.0 0.0 0.0 0.0
CUMULATIVE NOL
BEFORE APPLICATION 0.0 0.0 0.0 0.0 0.0
CUMULATIVE NOL AFTER
APPLICATION 0.0 0.0 0.0 0.0 0.0 0.0
CURRENT ITC 0.0 0.0 0.0 0.0 0.0
CUMULATIVE ITC BEFORE APPLICATION 0.0 0.0 0.0 0.0 0.0
CUMULATIVE ITC AFTER APPLICATION 0.0 0.0 0.0 0.0 0.0 0.0
B) FOR TAX PURPOSES 1996 1997 1998 1999 2000 2001
==============================================
REPORTED PRE-TAX PROFIT/(LOSS) 29.2 58.9 82.7 126.9 153.0
PLUS: REPORTED DEPRECIATION 41.8 42.8 44.1 46.2 48.6
(LESS) TAX DEPRECIATION (41.8) (42.8) (44.1) (46.2) (48.6)
-----------------------------------------
PRE-TAX PROFIT/(LOSS) 29.2 58.9 82.7 126.9 153.0
-----------------------------------------
(LESS) TAX CHARGE (7.9) (15.9) (22.3) (34.3) (41.3)
PLUS: APPLICATION OF NOL 0.0 0.0 0.0 0.0 0.0
PLUS: APPLICATION OF ITC 0.0 0.0 0.0 0.0 0.0
-----------------------------------------
NET TAX CHARGE (7.9) (15.9) (22.3) (34.3) (41.3)
-----------------------------------------
NET PROFIT/(LOSS) 21.3 43.0 60.4 92.6 111.7
=========================================
CURRENT NOL 0.0 0.0 0.0 0.0 0.0
CUMULATIVE NOL BEFORE APPLICATION 0.0 0.0 0.0 0.0 0.0
CUMULATIVE NOL AFTER APPLICATION 0.0 0.0 0.0 0.0 0.0 0.0
CURRENT ITC 0.0 0.0 0.0 0.0 0.0
CUMULATIVE ITC BEFORE APPLICATION 0.0 0.0 0.0 0.0 0.0
CUMULATIVE ITC AFTER APPLICATION 0.0 0.0 0.0 0.0 0.0 0.0
C) DEFERRED TAXES 1996 1997 1998 1999 2000 2001
=============================================
CURRENT DEFERRED TAX 0.0 0.0 0.0 0.0 0.0
CUMULATIVE DEFERRED TAX 0.0 0.0 0.0 0.0 0.0 0.0
A) FOR REPORTING PURPOSES 2002 2003 2004 2005 2006
=================================
REPORTED PRE-TAX PROFIT/(LOSS) 197.1 231.9 270.7 317.3 372.8
---------------------------------
(LESS) TAX CHARGE (53.2) (62.6) (73.1) (85.7)(100.7)
PLUS: APPLICATION OF NOL 0.0 0.0 0.0 0.0 0.0
PLUS: APPLICATION OF ITC 0.0 0.0 0.0 0.0 0.0
---------------------------------
NET TAX CHARGE (53.2) (62.6) (73.1) (85.7)(100.7)
---------------------------------
NET PROFIT/(LOSS) 143.9 169.3 197.6 231.6 272.2
CURRENT NOL 0.0 0.0 0.0 0.0 0.0
CUMULATIVE NOL
BEFORE APPLICATION 0.0 0.0 0.0 0.0 0.0
CUMULATIVE NOL AFTER
APPLICATION 0.0 0.0 0.0 0.0 0.0
CURRENT ITC 0.0 0.0 0.0 0.0 0.0
CUMULATIVE ITC BEFORE APPLICATION 0.0 0.0 0.0 0.0 0.0
CUMULATIVE ITC AFTER APPLICATION 0.0 0.0 0.0 0.0 0.0
B) FOR TAX PURPOSES 2002 2003 2004 2005 2006
===================================
REPORTED PRE-TAX PROFIT/(LOSS) 197.1 231.9 270.7 317.3 372.8
PLUS: REPORTED DEPRECIATION 51.4 54.5 58.1 62.1 66.6
(LESS) TAX DEPRECIATION (51.4) (54.5) (58.1) (62.1) (66.6)
---------------------------------
PRE-TAX PROFIT/(LOSS) 197.1 231.9 270.7 317.3 372.8
---------------------------------
(LESS) TAX CHARGE (53.2) (62.6) (73.1) (85.7)(100.7)
PLUS: APPLICATION OF NOL 0.0 0.0 0.0 0.0 0.0
PLUS: APPLICATION OF ITC 0.0 0.0 0.0 0.0 0.0
---------------------------------
NET TAX CHARGE (53.2) (62.6) (73.1) (85.7)(100.7)
---------------------------------
NET PROFIT/(LOSS) 143.9 169.3 197.6 231.6 272.2
CURRENT NOL 0.0 0.0 0.0 0.0 0.0
CUMULATIVE NOL BEFORE APPLICATION 0.0 0.0 0.0 0.0 0.0
CUMULATIVE NOL AFTER APPLICATION 0.0 0.0 0.0 0.0 0.0
CURRENT ITC 0.0 0.0 0.0 0.0 0.0
CUMULATIVE ITC BEFORE APPLICATION 0.0 0.0 0.0 0.0 0.0
CUMULATIVE ITC AFTER APPLICATION 0.0 0.0 0.0 0.0 0.0
C) DEFERRED TAXES 2002 2003 2004 2005 2006
====================================
CURRENT DEFERRED TAX 0.0 0.0 0.0 0.0 0.0
CUMULATIVE DEFERRED TAX 0.0 0.0 0.0 0.0 0.0
<PAGE>
ESTIMATED RETURN ON EQUITY
1996 1997 1998 1999 2000 2001
===========================================
(1) ACQUISITION
Acquisition Cost to be Financed
(excluding fees) 1748.2
Excess Cash Used in Financing (40.0) AFTER 1996 THESE
FIGURES REPRESENT 100.0% OF EBDIT
-------
Total Cost to Investors 1,708.2 ^ ^ ^ ^ ^
=======
EBDIT (Total Existing Operations,
Before L/back Adj.) 167.1 187.2 216.8 239.6 281.8 304.3
=======
Purchase P/EBDIT 10.2
=======
2) SALE
100.0 OF (CASH less SHORT-TERM
& LONG-TERM DEBT OUTSTANDING
INCL. SUB. DEBT & PFD BUT
NOT $0.0m OF CONVERTIBLE) (1,131.0)(1,109.1)(1.073.6)
SALE AT PURCHASE P/EBDIT: 10.2
=======
Cash Flow for Sale in 1997 (604.3) 783.0 * *
Cash Flow for Sale in 1998 (604.3) 0.0 1,107.5 *
Cash Flow for Sale in 1999 (604.3) 0.0 0.0 1.375.8
Cash Flow for Sale in 2000 (604.3) 0.0 0.0 0.0
Cash Flow for Sale in 2001 (604.3) 0.0 0.0 0.0
Cash Flow for Sale in 2002 (604.3) 0.0 0.0 0.0
Cash Flow for Sale in 2003 (604.3) 0.0 0.0 0.0
Cash Flow for Sale in 2004 (604.3) 0.0 0.0 0.0
Cash Flow for Sale in 2005 (604.3) 0.0 0.0 0.0
Cash Flow for Sale in 2006 (604.3) 0.0 0.0 0.0
SALE AT 25% PREMIUM OVER PURCHASE P/EBDIT: 12.8
=======
Cash Flow for Sale in 1997 (604.3) 1,261.5 * *
Cash Flow for Sale in 1998 (604.3) 0.0 1,661.5 *
Cash Flow for Sale in 1999 (604.3) 0.0 0.0 1,988.1
Cash Flow for Sale in 2000 (604.3) 0.0 0.0 0.0
Cash Flow for Sale in 2001 (604.3) 0.0 0.0 0.0
Cash Flow for Sale in 2002 (604.3) 0.0 0.0 0.0
Cash Flow for Sale in 2003 (604.3) 0.0 0.0 0.0
Cash Flow for Sale in 2004 (604.3) 0.0 0.0 0.0
Cash Flow for Sale in 2005 (604.3) 0.0 0.0 0.0
Cash Flow for Sale in 2006 (604.3) 0.0 0.0 0.0
SALE AT 25% DISCOUNT FROM PURCHASE P/EBDIT: 7.7
=======
Cash Flow for Sale in 1997 (604.3) 304.5 * *
Cash Flow for Sale in 1998 (604.3) 0.0 553.3 *
Cash Flow for Sale in 1999 (604.3) 0.0 0.0 763.4
Cash Flow for Sale in 2000 (604.3) 0.0 0.0 0.0
Cash Flow for Sale in 2001 (604.3) 0.0 0.0 0.0
Cash Flow for Sale in 2002 (604.3) 0.0 0.0 0.0
Cash Flow for Sale in 2003 (604.3) 0.0 0.0 0.0
Cash Flow for Sale in 2004 (604.3) 0.0 0.0 0.0
Cash Flow for Sale in 2005 (604.3) 0.0 0.0 0.0
Cash Flow for Sale in 2006 (604.3) 0.0 0.0 0.0
2002 2003 2004 2005 2006
======================================
AFTER 1996 THESE
(1) ACQUISITION FIGURES REPRESENT 100.0% OF EBDIT
Acquisition Cost to be Financed
(excluding fees)
Excess Cash Used in Financing
Total Cost to Investors
EBDIT (Total Existing Operations,
Before L/back Adj.) 342.9 370.4 400.0 432.0 466.5
Purchase P/EBDIT
2) SALE
100.0 OF (CASH less SHORT-TERM
& LONG-TERM DEBT OUTSTANDING
INCL. SUB. DEBT & PFD BUT
NOT $0.0m OF CONVERTIBLE) (932.7)(820.8) (685.9)(524.7) (331.6)(100.0)
SALE AT PURCHASE P/EBDIT IRR
=======
Cash Flow for
Sale in 1997 * * * * * * 29.6%
Cash Flow for
Sale in 1998 * * * * * * 35.4%
Cash Flow for
Sale in 1999 * * * * * * 31.6%
Cash Flow for
Sale in 2000 * * * * * * 32.6%
Cash Flow for
Sale in 2001 2,178.4 * * * * * 29.2%
Cash Flow for
Sale in 2002 0.0 2,658.2 * * * * 28.2%
Cash Flow for
Sale in 2003 0.0 0.0 3,100.7 * * * 26.3%
Cash Flow for
Sale in 2004 0.0 0.0 0.0 3,564.8 * * 24.8%
Cash Flow for
Sale in 2005 0.0 0.0 0.0 0.0 4,085.0 * 23.7%
Cash Flow for
Sale in 2006 0.0 0.0 0.0 0.0 0.0 4,670.0 22.7%
SALE AT 25% PREMIUM OVER
PURCHASE P/EBDIT: IRR
=======
Cash Flow for
Sale in 1997 * * * * * * 108.8%
Cash Flow for
Sale in 1998 * * * * * * 65.8%
Cash Flow for
Sale in 1999 * * * * * * 48.7%
Cash Flow for
Sale in 2000 * * * * * * 43.8%
Cash Flow for
Sale in 2001 2,956.2 * * * * * 37.4%
Cash Flow for
Sale in 2002 0.0 3,561.7 * * * * 34.4%
Cash Flow for
Sale in 2003 0.0 0.0 4,047.3 * * * 31.2%
Cash Flow for
Sale in 2004 0.0 0.0 0.0 4,587.1 * * 28.8%
Cash Flow for
Sale in 2005 0.0 0.0 0.0 0.0 5,189.2 * 27.0%
Cash Flow for
Sale in 2006 0.0 0.0 0.0 0.0 0.0 5,862.5 25.5%
SALE AT 25% DISCOUNT FROM PURCHASE
P/EBDIT: IRR
=======
Cash Flow
for Sale in 1997 * * * * * * -49.6%
Cash Flow for
Sale in 1998 * * * * * * -4.3%
Cash Flow for
Sale in 1999 * * * * * * 8.1%
Cash Flow for
Sale in 2000 * * * * * * 17.3%
Cash Flow for
Sale in 2001 1400.7 * * * * * 18.3%
Cash Flow for
Sale in 2002 0.0 1,808.7 * * * * 20.0%
Cash Flow for
Sale in 2003 0.0 0.0 2,154.0 * * * 19.9%
Cash Flow for
Sale in 2004 0.0 0.0 0.0 2,542.4 * * 19.7%
Cash Flow for
Sale in 2005 0.0 0.0 0.0 0.0 2,980.9 * 19.4%
Cash Flow for
Sale in 2006 0.0 0.0 0.0 0.0 0.0 3,477.5 19.1%
<PAGE>
RETURN ON CONVERTIBLE SUBORDINATED DEBT
1996 1997 1998 1999 2000 2001 IRR
============================================ =======
SUB DEBT COUPON $0.0 $0.0 $0.0 $0.0 $0.0
CASH FLOW FOR SALE IN YEAR 5 0.0 0.0 0.0 0.0 0.0
-------------------------------------
CASH FLOW FOR INVESTMENT $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 N/A
===================================== =======
DISCOUNTED PRESENT VALUES
DISCOUNTED PRESENT VALUES
-------- TERMINAL VALUE MULTIPLES --------
8.0 10.0 12.0 14.0 16.0
---------------------------------------
D 12.0% $1,071.8 $1,225.4 $1,379.1 $1,532.7 $1,686.3
I
S 14.0% $919.8 $1,048.6 $1,177.3 $1,306.0 $1,434.7
C
O R 16.0% $792.8 $900.9 $1,009.1 $1,177.3 $1,225.4
U A
N T 18.0% $686.0 $777.2 $868.4 $959.6 $1,050.7
T E
S 20.0% $596.1 $673.2 $750.2 $827.3 $904.4
CASH FLOW TO
BE
DISCOUNTED(*)1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
=====================================================================
TERMINAL
VALUE
MULTIPLES
8.x 3.9 21.8 35.6 59.0 81.9 111.8 135.0 161.2 193.1 2,140.4
10.x 3.9 21.8 35.6 59.0 81.9 111.8 135.0 161.2 193.1 2,617.6
12.x 3.9 21.8 35.6 59.0 81.9 111.8 135.0 161.2 193.1 3,094.8
14.x 3.9 21.8 35.6 59.0 81.9 111.8 135.0 161.2 193.1 3,572.0
16.x 3.9 21.8 35.6 59.0 81.9 111.8 135.0 161.2 193.1 4,049.1
(*) Cash Available Before Debt Amortization
plus Terminal Value Multiple Applied to Year 10 Net Income
Exhibit (g)(3)
Rothschild Inc.
Richard A. Beberman
Senior Vice President
October 4, 1996
Via Federal Express
Dr. Simone Siebeke
General Secretariat - Project Coordinator
Henkel KGaA
Henkelstrasse 67
D-40191 Dusseldorf
Germany
Dear Dr. Siebeke:
As part of our effort to review various strategic alternatives
regarding H's stake in LINK we have performed five-year
discounted cash flow analyses with respect to LINK. The analyses
present equity valuation ranges for LINK on an aggregate and a
per share basis based upon three different projection scenarios.
The first and second, 6% and 9% growth scenarios, are designed to
reflect your own assumptions as to realistic growth projections
for LINK. The third, a 12% growth scenario, is designed to
approximate the 12.5% earnings growth that is the consensus for
the Wall Street analysts who follow LINK's stock. We have
examined each growth scenario two ways - (i) with the terminal
value as a multiple of EBITDA and (ii) with the terminal value
assuming perpetual growth of unlevered free cash flow.
Seven exhibits are attached. The first exhibit summarizes the
assumptions for each scenario. The next three exhibits summarize,
for each of the three scenarios, per share valuation ranges and
terminal values as a percentage of enterprise value at given
discount rates employing the two terminal value methodologies
discussed above. The remaining three exhibits are the projections
and present value calculations.
Please note that 75-80% of the total value in each of the
scenarios is based on terminal value at exit. Also note, we have
not assumed any synergies in these models. Obviously, as the Wall
Street sales growth estimates are higher than the other models,
the per share estimates of value are higher under the Wall Street
model than the other two models.
We hope this is helpful in your continuing evaluation of LINK
alternatives. As always, if you have any questions, feel free to
discuss them with us.
Sincerely,
Rick Beberman
cc: Yves-Andre Istel
David T. Lender
1261 Avenue of the Americas
New York, N.Y. 10020
Telephone: (212) 403-3590
Telex: 422 811
Fax: (212) 403-3608
Exhibit I
Primary Operating Assumptions
Six Percent Growth Model
1. LINK sales grow at six percent from 1997 to 2001.
2. The EBIDTA margin remains at 20.9% (Wall Street's estimate
of LINK's EBITDA margin in 1997) from 1997 to 2001.
3. Working capital growth is at the same rate as sales growth
from 1998 to 2001 (1997 working capital growth is a
Donaldson, Lufkin & Jenrette estimate.)
4. Capital expenditures as a percent of sales remains constant
from 1998 to 2001 (1997 and 1998 capital expenditures are
LINK estimates).
Nine Percent Growth Model
1. LINK sales grow at nine percent from 1997 to 2001.
2. The EBITDA margin remains at 20.9% (Wall Street's estimate
of LINK's EBITDA margin in 1997) from 1997 to 2001.
3. Working capital growth is at the same rate as sales growth
from 1998 to 2001 (1997 working capital growth is a
Donaldson, Lufkin & Jenrette estimate).
4. Capital expenditure as a percent of sales remains constant
from 1998 to 2001 (1997 and 1998 capital expenditures are
LINK estimates).
Wall Street Estimate Model
1. LINK sales grow at 8.9% in 1997. This growth rate is an
average of the Wall Street estimates for LINK sales in 1997.
The revenue growth rate from 1997 to 2001 is 12%, a rate
which creates yearly net income growth of approximately
12.5%, consistent with Wall Street estimates.
2. The EBITDA margin is for 1997 is an average of Wall Street
estimates. After 1997, the EBITDA margin is assumed to
remain constant at 20.9%.
3. Working capital growth is at the same rate as sales growth
from 1998 to 2001 (1997 working capital growth is a
Donaldson, Lufkin & Jenrette estimate).
4. Capital expenditures as a percent of sales remains constant
from 1998 to 2001 (1997 and 1998 capital expenditures are
LINK estimates).
<PAGE>
Exhibit II
Six Percent Growth Model
Terminal Value as a Multiple of EBITDA
Per Share Prices
Terminal Value EBITDA Multiple
------------------------------
9.0 10.0 11.0
Discount Rates
11.0% $43.90 $48.04 $52.17
12.0% 41.98 45.94 49.90
13.0% 40.16 43.95 47.73
14.0% 38.43 42.05 45.68
15.0% 36.79 40.26 43.72
Terminal Value as a % of Enterprise Value
Terminal Value EBITDA Multiple
------------------------------------------
9.0 10.0 11.0
Discount Rates
11.0% 77.2% 79.0% 80.5%
12.0% 76.8% 78.6% 80.2%
13.0% 76.5% 78.3% 79.9%
14.0% 76.1% 78.0% 79.6%
15.0% 75.8% 77.7% 79.3%
Terminal Value Assuming Perpetual Growth
Per Share Prices
Perpetual Growth Rate
---------------------
4.0% 5.0% 6.0%
Discount Rates
11.0% $35.40 $40.19 $46.89
12.0% 33.85 38.43 44.85
13.0% 32.39 36.77 42.90
14.0% 30.99 35.19 41.05
15.0% 29.67 33.68 39.30
Terminal Value as a % of Enterprise Value
Perpetual Growth Rate
-----------------------------------------
4.0% 5.0% 6.0%
Discount Rates
11.0% 72.3% 75.3% 78.5%
12.0% 71.9% 74.9% 78.2%
13.0% 71.5% 74.5% 77.9%
14.0% 71.1% 74.2% 77.5%
15.0% 70.7% 73.8% 77.2%
<PAGE>
Exhibit III
Nine Percent Growth Model
Terminal Value as a Multiple of EBITDA
--------------------------------------
Per Share Prices
Terminal Value EBITDA Multiple
------------------------------
9.0 10.0 11.0
Discount Rates
11.0% $50.70 $55.46 $60.21
12.0% 48.50 53.05 57.60
13.0% 46.41 50.76 55.11
14.0% 44.43 48.59 52.75
15.0% 42.54 46.53 50.51
Terminal Value as a % of Enterprise Value
Terminal Value EBITDA Multiple
-----------------------------------------
9.0 10.0 11.0
Discount Rates
11.0% 77.8% 79.5% 81.0%
12.0% 77.4% 79.2% 80.8%
13.0% 77.1% 78.9% 80.5%
14.0% 76.8% 78.6% 80.2%
15.0% 76.5% 78.3% 79.9%
Terminal Value Assuming Perpetual Growth
Per Share Prices
Perpetual Growth Rate
---------------------
4.0% 5.0% 6.0%
Discount Rates
11.0% $41.77 $47.42 $55.33
12.0% 39.96 45.36 52.93
13.0% 38.25 43.41 50.65
14.0% 36.61 41.56 48.48
15.0% 35.06 39.79 46.42
Terminal Value as a % of Enterprise Value
Perpetual Growth Rate
-----------------------------------------
4.0% 5.0% 6.0%
Discount Rates
11.0% 73.5% 76.4% 79.5%
12.0% 73.1% 76.0% 79.2%
13.0% 72.7% 75.7% 78.9%
14.0% 72.4% 75.3% 78.6%
15.0% 72.0% 75.0% 78.3%
<PAGE>
Exhibit IV
Wall Street Estimates Model
Terminal Value as a Multiple of EBITDA
--------------------------------------
Per Share Prices
Terminal Value EBITDA Multiple
------------------------------
9.0 10.0 11.0
Discount Rates
11.0% $56.27 $61.57 $66.87
12.0% 53.83 58.90 63.96
13.0% 51.52 56.36 61.21
14.0% 49.32 53.96 58.59
15.0% 47.23 51.67 56.11
Terminal Value as a % of Enterprise Value
Terminal Value EBITDA Multiple
-----------------------------------------
9.0 10.0 11.0
Discount Rates
11.0% 78.6% 80.3% 81.8%
12.0% 78.3% 80.0% 81.5%
13.0% 78.0% 79.8% 81.3%
14.0% 77.7% 79.5% 81.0%
15.0% 77.4% 79.2% 80.7%
Terminal Value Assuming Perpetual Growth
Per Share Prices
Perpetual Growth Rate
---------------------
4.0% 5.0% 6.0%
Discount Rates
11.0% $46.72 $53.08 $61.97
12.0% 44.71 50.78 59.29
13.0% 42.79 48.60 56.73
14.0% 40.96 46.53 54.31
15.0% 39.23 44.55 52.01
Terminal Value as a % of Enterprise Value
Perpetual Growth Rate
-----------------------------------------
4.0% 5.0% 6.0%
Discount Rates
11.0% 74.6% 77.4% 80.4%
12.0% 74.3% 77.1% 80.2%
13.0% 73.9% 76.8% 79.9%
14.0% 73.6% 76.5% 79.6%
15.0% 73.2% 76.2% 79.3%
<PAGE>
Rothschild Oct. 96
Exhibit V
LINKED DISCOUNTED CASH FLOW ANALYSIS - TERMINAL VALUE AS A
MULTIPLE OF EBITDA
(Six Percent Growth Estimates)
-----------------------------------------------------------------
(in $ millions)
Year Ending December 31,
------------------------------------------------------------
Estimated Projected
--------- ------------------------------------------------
1996 1997 1998 1999 2000 2001
-------- ----- ----- ----- ------- -------
Undiscounted Values
Sales 810.8(a) 859.5 911.0 965.7 1,023.6 1,085.1
EBITA 138.1(a) 145.6 159.5 169.0 179.2 189.9
Taxes @ 27.0% (37.3) (39.3) (43.1) (45.6) (48.4) (51.3)
Amortization (4.8) (4.8) (4.8) (4.8) (4.8) (4.8)
----- ----- ----- ----- ------- -----
Net Income
(unlevered) 96.0 101.5 111.6 118.6 126.0 133.8
===== ===== ===== ===== ======= =====
EBIT 133.3 145.6 154.7 164.2 174.4 185.1
Amortization 4.8 4.8 4.8 4.8 4.8 4.8
Depreciation 28.0 29.2 31.0 32.8 34.8 36.9
EBITDA ----- ----- ----- ----- ----- -----
166.1 179.6 190.4 201.8 213.9 226.8
Taxes (37.3) (39.3) (43.1) (45.6) (48.4) (51.3)
Change in
Working Capital (13.0)(b) (13.0)(b) (13.8) (14.6) (15.5) (16.4)
Capital
Expenditures (41.0)(c) (41.0)(c) (41.0)(c) (43.5) (46.1) (48.8)
--------- --------- --------- ------ ----- -----
74.8 86.3 92.6 98.1 104.0 110.3
========= ========= ========= ====== ===== =====
Major Assumptions
Sales Growth 3.8% 6.0% 6.0% 6.0% 6.0% 6.0%
EBITDA Margin 20.5% 20.9% 20.9% 20.9% 20.9% 20.9%
Net Income Margin 11.8% 11.8% 12.2% 12.3% 12.3% 12.3%
Depreciation/Sales 3.5% 3.4% 3.4% 3.4% 3.4% 3.4%
Working Capital
Growth 58.0% 0.0% 6.0% 6.0% 6.0% 6.0%
Capital
Expenditures/Sales 5.1% 4.8% 4.5% 4.5% 4.5% 4.5%
A + B - C =
Terminal Value at a Multiple of
Present Discounted 2001 EBITDA 6/30/96
Value Unlevered -------------------------------
Discount Rates Cash Flows 9.0x 10.0x 11.0x Net Debt
- -------------- ---------- -------- -------- -------- --------
11.0% $358.6 $1,211.2 $1,345.8 $1,480.4 $142.2
12.0% $349.4 $1,158.1 $1,286.8 $1,415.5 $142.2
13.0% $340.5 $1,107.8 $1,230.9 $1,353.9 $142.2
14.0% $332.0 $1,060.0 $1,177.8 $1,295.6 $142.2
15.0% $323.9 $1,014.7 $1,127.5 $1,240.2 $142.2
D
Equity Value at a Multiple of
2001 EBITDA
------------------------------
9.0x 10.0x 11.0x
-------- -------- --------
$1,427.6 $1,562.2 $1,696.8
1,365.3 1,494.0 1,622.7
1,306.1 1,429.2 1,552.3
1,249.9 1,367.6 1,485.4
1,196.4 1,309.2 1,421.9
Analysis Terminal Value As An Imputed
Multiple of 2001
-----------------------------------------
9.0x 10.0x 11.0x
------ ------ ------
Sales 1.88x 2.09x 2.30x
EBIT 11.0x 12.3x 13.5x
Net Income 15.2x 16.9x 18.6x
Equity Value Per Share
At a Multiple of 2001 EBITDA
9.0x 10.0x 11.0x
- ---- ------ ------
$43.90 $48.04 $52.17
$41.98 $45.94 $49.90
$40.16 $43.95 $47.73
$38.43 $42.05 $45.68
$36.79 $40.26 $43.72
Terminal Value as a Percentage of Enterprise Value B/(A + B)
9.0x 10.0x 11.0x
- ----- ----- -----
77.2% 79.0% 80.5%
76.8% 78.6% 80.2%
76.5% 78.3% 79.9%
76.1% 78.0% 79.6%
75.8% 77.7% 79.3%
<PAGE>
Rothschild Oct. 96
Exhibit V
LINK DISCOUNTED CASH FLOW ANALYSIS - PERPETUAL GROWTH MODEL
(Six Percent Growth Estimates)
-----------------------------------------------------------------
(in $ millions)
Year Ending December 31,
------------------------------------------------------------
Estimated Projected
--------- -------------------------------------------------
Undiscounted 1996 1997 1998 1999 2000 2001
Values -------- ----- ----- ----- ------- -------
Sales 810.8(a) 859.5 911.0 965.7 1,023.6 1,085.1
EBITA 138.1(a) 145.6 159.5 169.0 179.2 189.9
Taxes@ 27.0% (37.3) (39.3) (43.1) (45.6) (48.4) (51.3)
Amortization (4.8) (4.8) (4.8) (4.8) (4.8) (4.8)
----- ----- ----- ----- ------- -----
Net income
(unlevered) 96.0 101.5 111.6 118.6 126.0 133.8
===== ===== ===== ===== ======= =====
EBIT 133.3 145.6 154.7 164.2 174.4 185.1
Amortization 4.8 4.8 4.8 4.8 4.8 4.8
Depreciation 28.0 29.2 31.0 32.8 34.8 36.9
----- ----- ----- ----- ----- -----
EBITDA 166.1 179.6 190.4 201.8 213.9 226.8
Taxes (37.3) (39.3) (43.1) (45.6) (48.4) (51.3)
Change in (13.0)(b) (13.0)(b) (13.8) (14.6) (15.5) (16.4)
Working Capital
Capital
Expenditures (41.0)(c) (41.0)(c) (41.0)(c) (43.5) (46.1) (48.8)
-------- -------- -------- ----- ----- -----
Tot. Unlevered
Free Cash Flow 74.8 86.3 92.6 98.1 104.0 110.3
======== ======== ======== ===== ===== =====
Major Assumptions 1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----
Sales Growth 3.8% 6.0% 6.0% 6.0% 6.0% 6.0%
EBITDA Margin 20.5% 20.9% 20.9% 20.9% 20.9% 20.9%
Net Income Margin 11.8% 11.8% 12.2% 12.3% 12.3% 12.3%
Depreciation/Sales 3.5% 3.4% 3.4% 3.4% 3.4% 3.4%
Working Capital Growth 58.0% 0.0% 6.0% 6.0% 6.0% 6.0%
Capital Expenditures/
Sales 5.1% 4.8% 4.5% 4.5% 4.5% 4.5%
A +
Present Value Discounted
Unlevered
Discount Rates Cash Flows
-------------- ----------
11.0% $358.6
12.0% $349.4
13.0% $340.5
14.0% $332.0
15.0% $323.9
B - C =
Terminal Value at a Perpetual
Growth Rate of 2001 Free Cash Flow 6/30/96
- -------------------------------
4.0% 5.0% 6.0% Net Debt
- ------ -------- -------- --------
$934.8 $1,090.6 $1,308.7 $142.2
$893.8 $1,042.8 $1,251.3 $142.2
$854.9 $997.4 $1,196.9 $142.2
$818.1 $954.4 $1,145.3 $142.2
$783.1 $913.7 $1,096.4 $142.2
D
Equity Value at a Perpetual Growth Rate
of 2001 Free Cash Flow
- -----------------------------
4.0% 5.0% 6.0%
- -------- -------- --------
$1,151.2 $1,307.0 $1,525.1
1,101.0 1,249.9 1,458.5
1,053.3 1,195.8 1,359.2
1,007.9 1,144.3 1,335.2
964.8 1,095.3 1,278.1
Analysis Terminal Value (based on a discount rate
of 13%) As An Imputed Multiple of 2001
----------------------------------------
4.0% 5.0% 6.0%
----- ------ ------
Sales 1.13x 1.27x 1.45x
EBITDA 5.4x 6.1x 6.9x
EBIT 6.6x 7.4x 8.5x
Net Income 9.2x 10.3x 11.8x
Equity Value Per Share
At a Growth Rate of 2001 Free Cash Flow
4.0% 5.0% 6.0%
- ------ ------ ------
$35.40 $40.19 $46.89
$33.85 $38.43 $44.85
$32.39 $36.77 $42.90
$30.99 $35.19 $41.05
$29.67 $33.68 $39.30
Terminal Value as a Percentage of Enterprise Value B/(A + B)
4.0% 5.0% 6.0%
- ----- ----- -----
72.3% 75.3% 78.5%
71.9% 74.9% 78.2%
71.5% 74.5% 77.9%
71.1% 74.2% 77.5%
70.7% 73.8% 77.2%
<PAGE>
Rothschild Oct. 96
Exhibit VI
LINKED DISCOUNTED CASH FLOW ANALYSIS - TERMINAL VALUE AS A
MULTIPLE OF EBITDA
(Nine Percent Growth Estimates)
- -----------------------------------------------------------------
(in $ millions)
Year Ending December 31,
------------------------------------------------------------
Estimated Projected
--------- ------------------------------------------------
Undiscounted 1996 1997 1998 1999 2000 2001
Values -------- ----- ----- ------- ------- -------
Sales 810.8(a) 883.8 963.3 1,050.0 1,144.5 1,247.5
EBITA 138.1(a) 150.7 169.5 184.8 201.4 219.5
Taxes @ 27.0% (37.3) (40.7) (45.8) (49.9) (54.4) (59.3)
Amortization (4.8) (4.8) (4.8) (4.8) (4.8) (4.8)
----- ----- ----- ----- ----- -----
Net income
(unlevered) 96.0 105.2 118.9 130.1 142.2 155.4
===== ===== ===== ===== ===== =====
EBIT 133.3 150.7 164.7 180.0 196.6 214.7
Amortization 4.8 4.8 4.8 4.8 4.8 4.8
Depreciation 28.0 29.2 31.8 34.7 37.8 41.2
----- ----- ----- ----- ----- -----
EBITDA 166.1 184.7 201.3 219.5 239.2 260.7
Taxes (37.3) (40.7) (45.8) (49.9) (54.4) (59.3)
Change in
Working Capital(13.0)(b) (13.0)(b) (14.2) (15.4) (16.8) (18.4)
Capital
Expenditures (41.0)(c) (41.0)(c) (41.0)(c) (44.7) (48.7) (53.1)
-------- -------- -------- ----- ----- -----
Tot. Unlevered
Free Cash Flow 74.8 90.0 100.4 109.4 119.3 130.0
======== ======== ======== ===== ===== =====
Major Assumptions
1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----
Sales Growth 3.8% 9.0% 9.0% 9.0% 9.0% 9.0%
EBITDA Margin 20.5% 20.9% 20.9% 20.9% 20.9% 20.9%
Net Income Margin 11.8% 11.9% 12.3% 12.4% 12.4% 12.5%
Depreciation/Sales 3.5% 3.3% 3.3% 3.3% 3.3% 3.3%
Working Capital
Growth 58.0% 0.0% 9.0% 9.0% 9.0% 9.0%
Capital
Expenditures/Sales 5.1% 4.6% 4.3% 4.3% 4.3% 4.3%
A +
Present Value Discounted
Unlevered
Discount Rates Cash Flows
-------------- ----------
11.0% $398.3
12.0% $387.9
13.0% $377.9
14.0% $368.2
15.0% $359.0
B - C =
Terminal Value at a Multiple of
2001 EBITDA 6/30/96
- -------------------------------
9.0x 10.0x 11.0x Net Debt
- -------- -------- -------- --------
$1,392.6 $1,547.3 $1,702.1 $142.2
$1,331.5 $1,479.5 $1,627.4 $142.2
$1,273.7 $1,415.2 $1,556.7 $142.2
$1,218.8 $1,354.2 $1,489.6 $142.2
$1,166.7 $1,296.3 $1,426.0 $142.2
D
Equity Value at a Multiple of
2001 EBITDA
- -----------------------------
9.0x 10.0x 11.0x
- -------- -------- --------
$1,648.8 $1,803.5 $1,958.2
1,577.2 1,725.2 1,873.1
1,509.3 1,650.8 1,792.4
1,444.8 1,580.2 1,715.6
1,383.5 1,513.1 1,642.8
Analysis Terminal Value As An Imputed Multiple
of 2001
--------------------------------------
9.0x 10.0x 11.0x
------ ------ ------
Sales 1.88x 2.09x 2.30x
EBIT 10.9x 12.1x 13.4x
Net Income 15.1x 16.8x 18.5x
Equity Value Per Share
At a Multiple of 2001 EBITDA
9.0x 10.0x 11.0x
- ------ ------ ------
$50.70 $55.46 $60.21
$48.50 $53.05 $57.60
$46.41 $50.76 $55.11
$44.43 $48.59 $52.75
$42.54 $46.53 $50.51
Terminal Value as a Percentage of Enterprise Value B/(A + B)
9.0x 10.0x 11.0x
- ----- ----- -----
77.8% 79.5% 81.0%
77.4% 79.2% 80.8%
77.1% 78.9% 80.5%
76.8% 78.6% 80.2%
76.5% 78.3% 79.9%
<PAGE>
Rothschild Oct. 96
Exhibit VI
LINK DISCOUNTED CASH FLOW ANALYSIS - PERPETUAL GROWTH MODEL
(Nine Percent Growth Estimates)
-----------------------------------------------------------------
(in $ millions)
Year Ending December 31,
------------------------------------------------------------
Estimated Projected
--------- -------------------------------------------------
Undiscounted 1996 1997 1998 1999 2000 2001
Values -------- ----- ----- ------- ------- -------
Sales 810.8(a) 883.8 963.3 1,050.0 1,144.5 1,247.5
EBITA 138.1(a) 150.7 169.5 184.8 201.4 219.5
Taxes@ 27.0% (37.3) (40.7) (45.8) (49.9) (54.4) (59.3)
Amortization (4.8) (4.8) (4.8) (4.8) (4.8) (4.8)
----- ----- ----- ----- ----- -----
Net income
(unlevered) 96.0 105.2 118.9 130.1 142.2 155.4
===== ===== ===== ===== ===== =====
EBIT 133.3 150.7 164.7 180.0 196.6 214.7
Amortization 4.8 4.8 4.8 4.8 4.8 4.8
Depreciation 28.0 29.2 31.8 34.7 37.8 41.2
----- ----- ----- ----- ----- -----
EBITDA 166.1 184.7 201.3 219.5 239.2 260.7
Taxes (37.3) (40.7) (45.8) (49.9) (54.4) (59.3)
Change in
Working Capital(13.0)(b) (13.0)(b) (14.2) (15.4) (16.8) (18.4)
Capital
Expenditures (41.0)(c) (41.0)(c) (41.0)(c) (44.7) (48.7) (53.1)
-------- --------- --------- ----- ----- -----
Tot. Unlevered
Free Cash Flow 74.8 90.0 100.4 109.4 119.3 130.0
======== ========= ========= ===== ===== =====
Major Assumptions
1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----
Sales Growth 3.8% 9.0 9.0% 9.0% 9.0% 9.0%
EBITDA Margin 20.5% 20.9% 20.9% 20.9% 20.9% 20.9%
Net Income Margin 11.8% 11.9% 12.3% 12.4% 12.4% 12.5%
Depreciation/Sales 3.5% 3.3% 3.3% 3.3% 3.3% 3.3%
Working Capital Growth 58.0% 0.0% 9.0% 9.0% 9.0% 9.0%
Capital Expenditures/Sales 5.1% 4.6% 4.3% 4.3% 4.3% 4.3%
A +
Present Value Discounted
Unlevered
Discount Rates Cash Flows
-------------- ----------
11.0% $398.3
12.0% $387.9
13.0% $377.9
14.0% $368.2
15.0% $359.0
B - C =
Terminal Value at a Perpetual Growth
Rate of 2001 Free Cash Flow 6/30/96
- -------------------------------
4.0% 5.0% 6.0% Net Debt
- -------- -------- -------- --------
$1,102.3 $1,286.0 $1,543.2 $142.2
$1,054.0 $1,229.6 $1,475.5 $142.2
$1,008.1 $1,176.2 $1,411.4 $142.2
$ 964.7 $1,125.5 $1,350.6 $142.2
$ 923.5 $1,077.4 $1,292.9 $142.2
D
Equity Value at a Perpetual Growth
Rate of 2001 Free Cash Flow
- -----------------------------
4.0% 5.0% 6.0%
- -------- -------- --------
$1,358.4 $1,542.2 $1,799.4
1,299.7 1,475.3 1,721.2
1,243.8 1,411.8 1,647.1
1,190.7 1,351.5 1,576.6
1,140.3 1,294.2 1,509.7
Analysis Terminal Value (based on a discount
rate of 13%) As An Imputed Multiple
of 2001
-------------------------------------
4.0% 5.0% 6.0%
----- ------ ------
Sales 1.16x 1.30x 1.49x
EBITDA 5.5x 6.2x 7.1x
EBIT 6.7x 7.6x 8.7x
Net Income 9.3x 10.5x 11.9x
Equity Value Per Share
At a Growth Rate of 2001 Free Cash Flow
4.0% 5.0% 6.0
- ------ ------ ------
$41.77 $47.42 $55.33
$39.96 $45.36 $52.93
$38.25 $43.41 $50.65
$36.61 $41.56 $48.48
$35.06 $39.79 $46.42
Terminal Value as a Percentage of Enterprise Value B/(A + B)
4.0% 5.0% 6.0%
- ----- ----- -----
73.5% 76.4% 79.5%
73.1% 76.0% 79.2%
72.7% 75.7% 78.9%
72.4% 75.3% 78.6%
72.0% 75.0% 78.3%
<PAGE>
Rothschild
Exhibit VII Oct. 96
LINK DISCOUNTED CASH FLOW ANALYSIS -
TERMINAL VALUE AS A MULTIPLE OF EBITDA
(Wall Street Estimates)
-----------------------------------------------------------------
(in $ millions)
Year Ending December 31,
------------------------------------------------------------
Estimated Projected
--------- -------------------------------------------------
Undiscounted 1996 1997 1998 1999 2000 2001
Values -------- ----- ----- ----- ------- -------
Sales 810.8 882.6 988.6 1,107.2 1,240.1 1,388.9
EBITA 138.1(a) 155.0(a) 173.6 194.8 218.1 244.3
Taxes@ 27.0% (37.3) (41.8) (46.9) (52.6) (58.9) (66.0)
Amortization (4.8) (4.8) (4.8) (4.8) (4.8) (4.8)
----- ----- ----- ----- ----- -----
Net income
(unlevered) 96.0 108.3 121.9 137.4 154.4 173.6
===== ===== ===== ===== ===== =====
EBIT 133.3 150.2 168.8 190.0 213.3 239.5
Amortization 4.8 4.8 4.8 4.8 4.8 4.8
Depreciation 28.0 29.2 32.7 36.6 41.0 45.9
----- ----- ----- ----- ----- -----
EBITDA 166.1 184.2 206.3 231.4 259.2 290.3
Taxes (37.3) (41.8) (46.9) (52.6) (58.9) (66.0)
Change in
Working Capital(13.0)(b) (13.0)(b) (14.6) (16.3) (18.3) (20.5)
Capital
Expenditures (41.0)(c) (41.0)(c) (41.0)(c) (45.9) (51.4) (57.6)
-------- -------- -------- ----- ----- -----
Tot. Unlevered
Free Cash Flow 74.8 88.3 103.8 116.6 130.6 146.2
======== ======== ======== ===== ===== =====
Major Assumptions
1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----
Sales Growth 3.8% 8.9% 12.0% 12.0% 12.0% 12.0%
EBITDA Margin 20.5% 20.9% 20.9% 20.9% 20.9% 20.9%
Net Income Margin 11.8% 12.3% 12.3% 12.4% 12.5% 12.5%
Depreciation/Sales 3.5% 3.3% 3.3% 3.3% 3.3% 3.3%
Working Capital Growth 58.0% 0.0% 12.0% 12.0% 12.0% 12.0%
Capital Expenditures/Sales 5.1% 4.6% 4.1% 4.1% 4.1% 4.1%
A +
Present Value Discounted
Unlevered
Discount Rates Cash Flows
-------------- ----------
11.0% $421.9
12.0% $410.6
13.0% $399.7
14.0% $389.3
15.0% $379.3
B - C =
Terminal Value at a Multiple of
2001 EBITDA 6/30/96
- -------------------------------
9.0x 10.0x 11.0x Net Debt
- -------- -------- -------- --------
$1,550.4 $1,722.6 $1,894.9 $142.2
$1,482.4 $1,647.1 $1,811.8 $142.2
$1,417.9 $1,575.5 $1,733.0 $142.2
$1,356.8 $1,507.6 $1,658.3 $142.2
$1,298.8 $1,443.2 $1,587.5 $142.2
D
Equity Value at a Multiple of
2001 EBITDA
- -----------------------------
9.0x 10.0x 11.0x
- -------- -------- --------
$1,830.1 $2,002.3 $2,174.6
1,750.8 1,915.5 2,080.2
1,675.5 1,833.0 1,990.6
1,604.0 1,754.7 1,905.5
1,536.0 1,680.3 1,824.6
Analysis Terminal Value As An Imputed Multiple
of 2001
-------------------------------------
9.0x 10.0x 11.0x
------ ------ ------
Sales 1.88x 2.09x 2.30x
EBIT 10.9x 12.1x 13.3x
Net Income 15.1x 16.7x 18.4x
Equity Value Per Share
At a Multiple of 2001 EBITDA
9.0x 10.0x 11.0x
- ------ ------ ------
$56.27 $61.57 $66.87
$53.83 $58.90 $63.96
$51.52 $56.36 $61.21
$49.32 $53.96 $58.59
$47.23 $51.67 $56.11
Terminal Value as a Percentage of Enterprise Value B/(A + B)
9.0x 10.0x 11.0x
- ----- ----- -----
78.6% 80.3% 81.8%
78.3% 80.0% 81.5%
78.0% 79.8% 81.3%
77.7% 79.5% 81.0%
77.4% 79.2% 80.7%
<PAGE>
Rothschild Oct. 96
Exhibit VII
LINK DISCOUNTED CASH FLOW ANALYSIS - PERPETUAL GROWTH MODEL
(Wall Street Estimates)
-----------------------------------------------------------------
(in $ millions)
Year Ending December 31,
------------------------------------------------------------
Estimated Projected
--------- -------------------------------------------------
1996 1997 1998 1999 2000 2001
-------- -------- ----- ------- ------- -------
Sales(a) 810.8 882.6 988.6 1,107.2 1,240.1 1,388.9
EBITA 138.1(a) 155.0(a) 173.6 194.8 218.1 244.3
Taxes@ 27.0% (37.3) (41.8) (46.9) (52.6) (58.9) (66.0)
Amortization (4.8) (4.8) (4.8) (4.8) (4.8) (4.8)
----- ----- ----- ----- ----- -----
Net income
(unlevered) 96.0 108.3 121.9 137.4 154.4 173.6
===== ===== ===== ===== ===== =====
EBIT 133.3 150.2 168.8 190.0 213.3 239.5
Amortization 4.8 4.8 4.8 4.8 4.8 4.8
Depreciation 28.0 29.2 32.7 36.6 41.0 45.9
----- ----- ----- ----- ----- -----
EBITDA 166.1 184.2 206.3 231.4 259.2 290.3
Taxes (37.3) (41.8) (46.9) (52.6) (58.9) (66.0)
Change in
Working Capital(13.0)(b) (13.0)(b) (14.6) (16.3) (18.3) (20.5)
Capital
Expenditures (41.0)(c) (41.0)(c) (41.0)(c) (45.9) (51.4) (57.6)
-------- -------- -------- ----- ----- -----
Tot. Unlevered
Free Cash Flow 74.8 88.3 103.8 116.6 130.6 146.2
======== ======== ======== ===== ===== =====
Major Assumptions
1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----
Sales Growth 3.8% 8.9% 12.0% 12.0% 12.0% 12.0%
EBITDA Margin 20.5% 20.9% 20.9% 20.9% 20.9% 20.9%
Net Income Margin 11.8% 12.3% 12.3% 12.4% 12.5% 12.5%
Depreciation/Sales 3.5% 3.3% 3.3% 3.3% 3.3% 3.3%
Working Capital Growth 58.0% 0.0% 12.0% 12.0% 12.0% 12.0%
Capital Expenditures/
Sales 5.1% 4.6 4.1% 4.1% 4.1% 4.1%
A +
Present Value Discounted
Unlevered
Discount Rates Cash Flows
-------------- ----------
11.0% $421.9
12.0% $410.6
13.0% $399.7
14.0% $389.3
15.0% $379.3
B - C =
Terminal Value at a Perpetual Growth
Rate of 2001 Free Cash Flow 6/30/96
- -------------------------------
4.0% 5.0% 6.0% Net Debt
- -------- -------- -------- --------
$1,239.9 $1,446.5 $1,735.8 $142.2
$1,185.5 $1,383.1 $1,659.7 $142.2
$1,134.0 $1,322.9 $1,587.5 $142.2
$1,085.1 $1,265.9 $1,519.1 $142.2
$1,038.7 $1,211.8 $1,454.2 $142.2
D
Equity Value at a Perpetual Growth
Rate of 2001 Free Cash Flow
- -----------------------------
4.0% 5.0% 6.0%
- -------- -------- --------
$1,519.6 $1,726.2 $2,015.5
1,453.9 1,651.5 1,928.1
1,391.5 1,580.5 1,845.1
1,332.2 1,513.1 1,766.3
1,275.9 1,449.0 1,691.4
Analysis Terminal Value (based on a discount
rate of 13%) As An Imputed Multiple
of 2001 Free Cash Flow
--------------------------------------
4.0% 5.0% 6.0%
----- ------ ------
Sales 1.17x 1.32x 1.50x
EBITDA 5.6x 6.3x 7.2x
EBIT 6.8x 7.6x 8.7x
Net Income 9.4x 10.5x 12.0x
Equity Value Per Share
At a Growth Rate of 2001 Free Cash Flow
4.0% 5.0% 6.0%
- ------ ------ ------
$46.27 $53.08 $61.97
$44.71 $50.78 $59.29
$42.79 $48.60 $56.73
$40.96 $46.53 $54.31
$39.23 $44.55 $52.01
Terminal Value as a Percentage of Enterprise Value B/(A + B)
4.0% 5.0% 6.0%
- ----- ----- -----
74.6% 77.4% 80.4%
74.3% 77.1% 80.2%
73.9% 76.8% 79.9%
73.6% 76.5% 79.6%
73.2% 76.2% 79.3%
<PAGE>
Notes - Six and Nine Percent Growth Estimates:
- ---------------------------------------------
(a) An average of Merrill Lynch, Value Line, William Blair and Donaldson,
Lufkin & Jenrette estimates.
(b) Donaldson, Lufkin & Jenrette estimate.
(c) Company estimates.
Notes - Wall Street Estimates:
- -----------------------------
(a) In 1996 and 1997, an average of Merrill Lynch, Value Line,
William Blair and Donaldson, Lufkin & Jenrette estimates.
After 1997, the revenue growth rate is 12%, a rate which
creates yearly net income growth of approximately 12.5%,
consistent with Wall Street estimates.
(b) Donaldson, Lufkin & Jenrette estimate.
(c) Company estimates.
<PAGE>
