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Previous: IL FORNAIO AMERICA CORP, SC 13E3, EX-99.(B)(2), 2001-01-10 |
Next: IL FORNAIO AMERICA CORP, SC 13E3, EX-99.(D)(2), 2001-01-10 |
<PAGE> 1
EXHIBIT (c)(2)
PROJECT BAKER
PRESENTATION TO THE SPECIAL COMMITTEE
OF THE BOARD OF DIRECTORS
NOVEMBER 14, 2000
<PAGE> 2
PROJECT BAKER PRELIMINARY DRAFT - CONFIDENTIAL
-------------------------------------------------------------------------------
TABLE OF CONTENTS
Section I Transaction Overview
Section II Overview of Il Fornaio Valuation
Section III Fairness Opinion Letter
1
<PAGE> 3
SECTION I: TRANSACTION OVERVIEW
2
<PAGE> 4
PROJECT BAKER PRELIMINARY DRAFT - CONFIDENTIAL
--------------------------------------------------------------------------------
OVERVIEW OF THE TRANSACTION
<TABLE>
<S> <C> <C>
Scope of Assignment: Evercore Group Inc. ("Evercore") has been asked by the Special Committee of
the Board of Directors of Il Fornaio (America) Corporation ("Il Fornaio" or
the "Company") whether, in Evercore's opinion, the Merger Consideration to
be paid pursuant to the Merger is fair, from a financial point of view as
of the date hereof, to the holders of the Shares.
Summary of Key Merger Terms:
Background: Il Fornaio intends to enter into an Agreement and Plan of Merger
("Merger Agreement") with an affiliate of Bruckmann, Rosser,
Sherrill & Co., L.P. ("BRS" or the "Investor"). Pursuant to the
Merger Agreement, an affiliate of the Investor will be merged
with and into the Company (the "Merger").
Transaction Consideration: Each outstanding share of Common Stock of the Company, other than
the shares rolled-over into the surviving company, (the
"Shares"), will be converted into the right to receive $14.00 per
share payable in cash (the "Merger Consideration").
Structure: Recapitalization
Transaction Size: Equity Purchase Price: $92.0
Plus: Net Debt as of 10/31/00 (2.8)
----
Total $89.2
Financing Sources and Uses: Sources Uses
------- ----
Senior Bank Debt $38.2 Equity Purchase Price $92.0
Subordinated Bank Debt 15.0 Fees and Expenses 4.5
Equity 40.0 -----
Cash From Company 3.3 Total $96.5
-----
Total $96.5
</TABLE>
3
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OVERVIEW OF THE TRANSACTION
Summary of Key Merger Terms (con't):
Transaction Multiples: 7.9 x 2000 Est. EBITDA
5.7 x 2001 Est. EBITDA
24.1 x 2000 Est. EPS
17.3 x 2001 Est. EPS
<TABLE>
<S> <C>
Summary of Rollover Provisions: Selected existing shareholders will roll
over a portion of their existing stock
and options in the Company into the
surviving company following the
Transaction
</TABLE>
<TABLE>
<CAPTION>
Amount As a % of
Rolled Over Total Holding
----------- -------------
<S> <C> <C>
Laurence B. Mindel $2.0 million 20%
Michael J. Hislop 2.9 43%
F. Warren Hellman 1.9 100%
Dean Cortopassi 1.7 100%
Other directors/managements/
select equity holders 0.8 NA
Total Rollover Amount $9.3 million
</TABLE>
4
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<TABLE>
<S> <C>
Summary of Fiduciary Out Provision: The Board of Directors (acting on the recommendation of the
Special Committee) may terminate the Merger Agreement with BRS in
the event that the Company receives a superior offer from another
party.
</TABLE>
5
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OVERVIEW OF THE TRANSACTION
<TABLE>
<S> <C>
Summary of Key Merger Terms (con't):
Closing Conditions: -- Shareholder vote
-- No Material Adverse Change
-- Valid Representations and
Warranties
-- Lease and Liquor consents
obtained
-- Completion of Denver, CO
restaurant and bakery
-- Proceeds of debt financing
received (debt financing
commitments subject to
satisfactory review of
confirmatory legal and
accounting due diligence)
-- Minimum cash at closing of $4.4
million
-- Customary approvals (Hart-Scott-Rodino,
etc.)
Termination Fee: Termination fee under certain circumstances of $2.7 million plus
reimbursement of BRS's expenses.
</TABLE>
6
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OVERVIEW OF THE TRANSACTION
- In connection with rendering our opinion, Evercore has, among other things:
(i) Analyzed certain publicly available financial statements and
other information relating to Il Fornaio;
(ii) Analyzed certain internal financial statements and other
financial and operating data concerning Il Fornaio prepared by
and furnished to us by the management of Il Fornaio;
(iii) Analyzed certain financial projections concerning Il Fornaio
prepared by and furnished to us by the management of Il Fornaio;
(iv) Discussed the past and current operation and financial condition
and the prospects of Il Fornaio with the management of Il
Fornaio;
(v) Reviewed the reported prices and trading activity of the Common
Stock of Il Fornaio;
(vi) Compared the financial performance of Il Fornaio and the prices
and trading activity of the Common Stock of Il Fornaio with that
of certain other comparable publicly-traded companies and their
securities;
(vii) Reviewed the financial terms to the extent available of certain
comparable transactions;
(viii) Participated in discussions and negotiations among
representatives of Il Fornaio, BRS and their advisors;
(ix) Reviewed the Agreements, and the related exhibits and schedules
in substantially final form and have assumed that the final form
of such Agreements, exhibits and schedules will not vary in any
respect material to our analysis; and
(x) Performed such other analyses and examinations and considered
such other factors as we have in our sole judgment deemed
appropriate.
- For purposes of our analysis and opinion, we have not assumed any
responsibility for independently verifying the accuracy and completeness of
the information reviewed by us or reviewed for us.
7
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OVERVIEW OF THE TRANSACTION
VALUATION MATRIX
<TABLE>
<CAPTION>
Price/ Earnings Enterprise Value/EBITDA
------------------------------ ------------------------------
Share Price LTM 2000 2001 LTM 2000 2001
----------- ----- ----- ------ --- ---- -----
<S> <C> <C> <C> <C> <C> <C>
$12.00 24.0x 20.7x 14.8x 6.8x 6.6x 4.7x
$12.25 24.5 21.1 15.1 6.9 6.7 4.9
$12.50 25.0 21.6 15.4 7.1 6.9 5.0
$12.75 25.5 22.0 15.7 7.3 7.1 5.1
$13.00 26.0 22.4 16.0 7.4 7.2 5.2
$13.25 26.5 22.8 16.4 7.6 7.4 5.3
$13.50 27.0 23.3 16.7 7.8 7.6 5.4
$13.75 27.5 23.7 17.0 7.9 7.7 5.6
------ ---- ---- ---- --- --- ---
$14.00 28.0 24.1 17.3 8.1 7.9 5.7
------ ---- ---- ---- --- --- ---
</TABLE>
8
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PROJECT BAKER PRELIMINARY DRAFT - CONFIDENTIAL
--------------------------------------------------------------------------------
OVERVIEW OF THE TRANSACTION
Overview of Bruckmann, Rosser, Sherrill & Co.
- Private equity firm formed in 1995 by former senior officers of Citicorp
Venture Capital, Ltd
- $1.2 billion of committed capital currently under management
- Currently investing second fund which has $770 million of committed capital
- Current portfolio of seventeen companies:
<TABLE>
<S> <C> <C>
Jitney-Jungle Stores of America, Inc. Doane Pet Care Company Town Sports International, Inc
Restaurant Associates Corp B&G Foods, Inc Anvil Knitwear, Inc.
California Pizza Kitchen, Inc. HealthPlus Corporation American Paper Group, Inc.
Alliance Laundry Systems LLC Mediq Incorporated Acapulco Restaurants, Inc.
Panhall International, Inc Au Bon Pain ICM Equipment Company
Head & Engquist O'Sullivan Industries
</TABLE>
9
<PAGE> 11
SECTION II: OVERVIEW OF IL FORNAIO VALUATION
10
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IL FORNAIO VALUATION SUMMARY ($ in millions)
-- Based on its recent stock price, the Company's valuation is as follows:
<TABLE>
<CAPTION>
Price/Earnings Enterprise Value/EBITDA
Stock -------------------------------- ----------------------------
Measurement Period Price LTM 2000E 2001E LTM 2000E 2001E
--------------------------------------- ----- ----- ----- ----- --- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Il Fornaio closing price as of 11/09/00 $9.69 19.4x 16.7x 12.0x 5.2x 5.1x 3.6x
Il Fornaio 30-Day Average $8.99 18.0x 15.5x 11.1x 4.7x 4.6x 3.3x
</TABLE>
-- The Company's valuation based on the consideration to be paid under the
Transaction ("Transaction Value") is as follows:
<TABLE>
<CAPTION>
Market Value of Equity/Net Income Enterprise Value/EBITDA
Offer Value --------------------------------- ----------------------------------
Per Share LTM 2000E 2001E LTM 2000E 2001E
---------- ---- ----- ----- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Il Fornaio Transaction Value $14.00 28.0x 24.1x 17.3x 8.1x 7.9x 5.7x
</TABLE>
-- We compared the Transaction Value multiples from above to the market
valuation multiples for a selected group of publicly traded companies that
we deemed comparable.
<TABLE>
<CAPTION>
Price/Earnings Enterprise Value/EBITDA
-------------------------------------------------- ------------------------------------------------
LTM 2000E 2001E LTM 2000E 2001E
------------ ---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Group Median 16.7x 15.2x 13.2x 7.2x 6.9x 6.1x
Group Range 9.8x-66.5x 9.2x-57.0x 8.1x-45.7x 5.3x-26.9x 4.5x-24.4x 3.9x-19.5x
</TABLE>
-- We also compared the Transaction Value multiples to the valuation multiples
from a selection of recent transactions that we viewed as comparable.
<TABLE>
<CAPTION>
Enterprise Value / LTM
EBITDA
----------------------
<S> <C>
Group Median 7.3x
Group Range 4.7x-10.5x
</TABLE>
11
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IL FORNAIO VALUATION SUMMARY
-- We compared the premium of (i) the offer value per share to the Company's
recent stock price to (ii) premiums paid from a selection of recent
transactions involving publicly traded companies in the restaurant industry
that we viewed as comparable.
<TABLE>
<CAPTION>
Premium Paid Over
------------------------------------------------
Stock Price 1 Day 30-Day Average Stock Price
Prior to Disclosure Prior to Disclosure
------------------- --------------------------
<S> <C> <C>
Il Fornaio (based on closing Price as of 11/09/00) 44.5% 55.7%
Group Median 34.2% 35.0%
Group Range 10% - 132% 11% - 183%
</TABLE>
-- We performed a discounted cash flow analysis that resulted in a valuation
range of $12.98 - $16.88 per share.
-- We also analyzed an illustrative leveraged buyout transaction for the
Company. This analysis resulted in a valuation range of $12.10 - $14.02 per
share.
-- We also projected forward the Company's EPS, applied an assumed future P/E
multiple based on valuation multiples for comparable companies, and
discounted the estimated future stock price to the present time period
based on a range of estimates for the Company's equity cost of capital.
This analysis resulted in a valuation range of $10.76-$15.00
12
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HISTORICAL AND PROJECTED FINANCIAL OVERVIEW ($ in millions)
<TABLE>
<CAPTION>
Income Statement 1995 1996 1997 1998 1999 2000E 2001E 2002E 2003E
-------------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Revenues $ 54.1 $ 60.7 $ 72.1 $ 83.1 $ 100.4 $ 122.7 $ 132.7 $ 143.4 $ 157.1
EBITDA 5.3 6.1 7.7 9.1 9.8 11.3 14.1 15.5 18.3
EBIT 2.0 2.2 3.8 4.9 4.5 5.4 7.7 8.6 10.7
Net Income 1.2 1.4 2.5 3.5 3.1 3.5 5.0 5.9 7.5
Number of Restaurants 11 12 15 17 21 25 26 29 33
Growth Rates
------------
Revenues 8.9% 12.2% 18.8% 15.3% 20.9% 22.2% 8.1% 8.1% 9.5%
EBITDA (3.6%) 15.1% 26.2% 18.2% 7.8% 15.2% 24.7% 10.1% 17.8%
EBIT (13.0%) 10.0% 72.7% 28.9% (7.3%) 19.2% 42.6% 11.8% 24.4%
Net Income (7.7%) 16.7% 78.6% 40.0% (12.6%) 14.3% 44.3% 16.2% 28.5%
Margins
-------
EBITDA 9.8% 10.0% 10.7% 11.0% 9.8% 9.2% 10.6% 10.8% 11.6%
EBIT 3.7% 3.6% 5.3% 5.9% 4.5% 4.4% 5.8% 6.0% 6.8%
Net Income 2.2% 2.3% 3.5% 4.2% 3.0% 2.8% 3.8% 4.1% 4.8%
</TABLE>
----------
Source for projections: Management estimates
13
<PAGE> 15
PROJECT BAKER PRELIMINARY DRAFT - CONFIDENTIAL
--------------------------------------------------------------------------------
IL FORNAIO VS. S&P 500 SMALL-CAP RESTAURANT INDEX SINCE IPO (9/19/97-- PRESENT)
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
Price Price
Date Volume Il Fornaio S&P Small-Cap Restaurant Index
------------ --------- ---------- -----
<S> <C> <C> <C>
19-Sep-1997 1,888,100 $14.50 14.50
14-Nov-1997 74,000 $14.50 13.44
14-Jan-1998 9,000 $14.75 12.69
13-Mar-1998 2,000 $13.00 15.38
11-May-1998 12,000 $12.88 14.79
08-Jul-1998 44,700 $13.13 15.55
02-Sep-1998 16,500 $10.13 12.07
29-Oct-1998 115,200 $7.88 12.12
28-Dec-1998 19,900 $7.38 13.90
25-Feb-1999 28,500 $8.25 13.60
*16-Mar-1999 672,600 $10.00 13.79
23-Apr-1999 4,400 $9.88 13.86
21-Jun-1999 10,100 $13.00 14.14
17-Aug-1999 39,500 $11.94 13.45
**18-Aug-1999 20,800 $11.50 13.53
13-Oct-1999 1,000 $9.25 13.04
09-Dec-1999 23,600 $7.25 11.15
07-Feb-2000 12,600 $8.00 11.50
04-Apr-2000 11,000 $8.75 11.99
01-Jun-2000 3,800 $8.50 12.24
28-Jul-2000 1,200 $7.75 12.35
25-Sep-2000 700 $8.38 12.82
</TABLE>
9/17/99: Initial Public Offering. ILFO closes at $14.50 per share, up
$3.50 from IPO offering price of $11.00.
* 3/16/99: Il Fornaio announces that it will explore strategic
alternatives to enhance shareholder value.
** 8/18/99: Il Fornaio decides to continue as an independent, publicly
traded company.
S&P Small-Cap Restaurant Index consists of APPB, CEC, CAKE, COP, IHP, JBX, LNY,
LUB, PNRA, RI, RYAN, SONC, TACO.
14
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PROJECT BAKER PRELIMINARY DRAFT - CONFIDENTIAL
--------------------------------------------------------------------------------
IL FORNAIO STOCK PRICE HISTOGRAM SINCE IPO (9/19/97 -- PRESENT)
[BAR GRAPH]
<TABLE>
<S> <C>
_______________________________
Share Price Frequency (Days)
_______________________________
<$1.0 0
<$2.0 0
<$3.0 0
<$4.0 0
<$5.0 0
<$6.0 10
<$7.0 30
<$8.0 120
<$9.0 151
<$10.0 118
<$11.0 62
<$12.0 37
<$13.0 52
<$14.0 71
<$15.0 115
<$16.0 23
<$17.0 5
<$18.0 0
<$19.0 0
<$20.0 0
More 0
_______________________________
</TABLE>
15
<PAGE> 17
PROJECT BAKER PRELIMINARY DRAFT - CONFIDENTIAL
--------------------------------------------------------------------------------
IL FORNAIO TRADING VALUATION
<TABLE>
<CAPTION>
Current Share 1 month Average Based on $14.00
Price (11/09/00) Share Price Offer Price
---------------- --------------- ---------------
<S> <C> <C> <C>
Stock Price $9.69 $8.99 $14.00
Fully Diluted Shares (1) 6.2 6.1 6.6
------ ------ ------
Market Value of Equity 60.0 54.8 92.0
Plus: Net Debt (2.8) (2.8) (2.8)
------ ------ ------
Enterprise Value $57.2 $52.0 $ 89.2
</TABLE>
<TABLE>
<CAPTION>
Median
Price to: Statistic Comparables
--------- -----------
<S> <C> <C> <C> <C> <C>
LTM Earnings $ 0.50 19.4x 18.0x 28.0x 16.7x
2000E Earnings 0.58 16.7 15.5 24.1 15.2
2001E Earnings 0.81 12.0 11.1 17.3 13.2
Enterprise Value to:
LTM EBITDA $ 11.0 5.2x 4.7x 8.1x 7.2x
2000E EBITDA 11.3 5.1 4.6 7.9 6.9
2001E EBITDA 15.7 3.6 3.3 5.7 6.1
LTM Sales 117.4 0.5 0.4 0.8
</TABLE>
----------
2000E and 2001E based on management projections.
(1) Based on treasury method. Assumes $7.40 average exercise price for options.
16
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--------------------------------------------------------------------------------
SUMMARY TRADING MULTIPLES
<TABLE>
<CAPTION>
Median Multiples of Comparable Companies
----------------------------------------
Lower Growth High Growth Il Fornaio at
Restaurants Restaurants Combined Offer Price
----------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Long-Term Growth Rate 16.0% 30.9% 18.5% 20.0%
LTM EBITDA Margin 12.8% 12.0% 12.3% 9.4%
Price /
LTM Earnings 14.9x 59.6x 16.7x 28.0x
2000E Earnings 13.8 49.3 15.2 24.1
2001E Earnings 12.0 37.9 13.2 17.3
Enterprise Value /
LTM EBITDA 6.9x 24.5x 7.2x 8.1x
2000 Calendar EBITDA 6.3 20.5 6.9 7.9
2001 Calendar EBITDA 5.5 15.5 6.1 5.7
</TABLE>
17
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PROJECT BAKER PRELIMINARY DRAFT - CONFIDENTIAL
--------------------------------------------------------------------------------
SUMMARY TRADING ANALYSIS
Selected Lower Growth Restaurant Companies
<TABLE>
<CAPTION>
Applebee's Brinker Cracker Consolid. Darden
Intl Intl Barrel Products Restaurants
--------- --------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Stock Price (11/09/00) $ 31.63 $ 39.63 $ 17.81 $ 8.00 $ 22.75
Market Value of Equity $ 849 $ 2,705 $ 1,019 $ 233 $ 2,798
Enterprise Value $ 931 $ 2,818 $ 1,297 $ 270 $ 3,222
Long Term I/B/E/S Growth Rate 15.0% 15.0% 15.0% 17.0% 12.0%
LTM EBITDA Margin 21.1% 11.4% 10.4% 12.3% 11.6%
Price to:
LTM Earnings 14.1x 22.6x 17.5x 11.0x 16.0x
2000E Earnings 13.4 20.8 15.1 10.5 15.4
2001E Earnings 11.8 18.0 12.9 9.0 13.5
Enterprise Value to:
LTM EBITDA 6.7x 9.8x 7.0x 5.3x 7.3x
2000 Calendar EBITDA 6.3 9.2 6.7 4.5 7.1
2001 Calendar EBITDA 5.6 8.1 5.7 3.9 6.5
</TABLE>
<TABLE>
<CAPTION>
Mortons Outback At Offer
Restaurant O'Charley's Steakhouse Average Median Il Fornaio
---------- ----------- ---------- ------- ------ ----------
<S> <C> <C> <C>
Stock Price (11/09/00) $ 19.31 $ 14.34 $ 26.50
Market Value of Equity $ 87 $ 240 $ 2,075
Enterprise Value $ 165 $ 351 $ 1,981
Long Term I/B/E/S Growth Rate 20.0% 20.0% 17.0% 16.4% 16.0% 20.0%
LTM EBITDA Margin 13.3% 14.6% 16.9% 13.9% 12.8% 9.4%
Price to:
LTM Earnings 9.8x 13.2x 15.6x 15.0x 14.9x 28.0x
2000E Earnings 9.2 12.4 14.2 13.9 13.8 24.1
2001E Earnings 8.1 10.6 12.2 12.0 12.0 17.3
Enterprise Value to:
LTM EBITDA 5.5x 7.1x 6.6x 6.9x 6.9x 8.1x
2000 Calendar EBITDA 5.1 6.4 6.1 6.4 6.3 7.9x
2001 Calendar EBITDA 4.5 5.4 5.3 5.6 5.5 5.7x
</TABLE>
Selected High Growth Restaurant Companies
<TABLE>
<CAPTION>
California
Cheesecake Buca Pizza At Offer
Factory Inc. P.F. Changs Kitchen Average Median Il Fornaio
---------- --------- ----------- ---------- ------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Stock Price (11/09/00) $ 45.25 $ 15.69 $ 41.50 $ 34.75
Market Value of Equity $ 1,421 $ 225.6 $ 457.3 $ 641.1
Enterprise Value $ 1,375 $ 212.9 $ 466.6 $ 630.9
Long Term I/B/E/S Growth Rate 26.7% 35.6% 35.0% 25.0% 30.6% 30.9% 20.0%
LTM EBITDA Margin 13.1% 9.8% 11.7% 12.3% 11.7% 12.0% 9.4%
Price to:
LTM Earnings 66.5x 50.6x 56.1x 63.2x 59.1x 59.6x 28.0x
2000E Earnings 49.2 30.2 49.4 57.0 46.4x 49.3x 24.1x
2001E Earnings 40.0 20.9 35.8 45.7 35.6x 37.9x 17.3x
Enterprise Value to:
LTM EBITDA 26.9x 22.2x 20.5x 26.7x 24.1x 24.5x 8.1x
2000 Calendar EBITDA 23.9 12.5 17.1 24.4 19.5 20.5x 7.9x
2001 Calendar EBITDA 18.9 8.3 12.1 19.5 14.7 15.5x 5.7x
</TABLE>
----------
Financial statistics based on 10K, 10Q, and Wall Street Research estimates.
18
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COMPARABLE TRANSACTIONS
<TABLE>
<CAPTION>
Multiple of
Date Offer for LTM
Announced Acquirer Target Enterprise EBITDA
--------- ------------------------------------ ---------------------------------- ---------- ----------
<S> <C> <C> <C> <C>
10/6/2000 Carrols Corp Taco Cabana $152 6.0x
6/5/2000 Caxton-Iseman Capital Buffets Inc. 550 4.7
11/9/1999 American Securitas Capital Partners El Pollo Loco 128 5.6
1/27/1999 RB Capital Inc. Rock Bottom Restaurants 104 5.5
12/11/1998 Cracker Barrel Logan's Roadhouse 179 10.5
9/28/1998 Bain Capital Domino's 1,021 7.8
9/18/1998 Consolidated Restaurant Cos. Spaghetti Warehouse 60 9.9
8/14/1998 Bruckman, Rosser, Sherrill, & Co Au Bon Pain Bakeries 73 7.9
6/4/1998 Carrols Corp. Pollo Tropical Inc. 89 7.3
4/3/1998 N.E. Restaurant Co. Bertucci's Inc. 123 7.9
8/4/1997 Restaurant Co. Perkins Family Restaurants L.P. 257 7.1
9/5/1997 DavCo Acquisition Holding DavCo Restaurants Inc. 196 7.4
10/21/1997 Berkshire Hathaway International Dairy Queen 537 8.8
9/23/1997 Cracken Harkey Street & Co. El Chico Restaurants 65 6.4
7/7/1997 Port Royal Holdings Inc. Krystal Co. 138 6.7
Average 7.3x
Median 7.3x
Bruckman, Rosser, Sherrill, & Co Il Fornaio 8.1x
</TABLE>
19
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--------------------------------------------------------------------------------
PREMIUMS PAID ANALYSIS
<TABLE>
<CAPTION>
Premium Paid(1)
Date -------------------------
Announced Acquirer Target 1 Day 1 Month
---------- ---------------------------- ------------------------------- ------- --------
<S> <C> <C> <C> <C>
10/6/2000 Carrols Corp Taco Cabana 115.9% 100.9%
6/5/2000 Caxton-Iseman Capital Buffets Inc. 14.2% 23.1%
1/27/1999 RB Capital Inc. Rock Bottom Restaurants 48.1% 73.9%
12/11/1998 Cracker Barrel Logan's Roadhouse 13.9% 33.3%
9/18/1998 Consolidated Restaurant Cos. Spaghetti Warehouse 36.2% 12.3%
6/4/1998 Carrols Corp. Pollo Tropical Inc. 10.0% 18.5%
4/3/1998 N.E. Restaurant Co. Bertucci's Inc. 32.3% 36.6%
8/4/1997 Restaurant Co. Perkins Family Restaurants L.P. 28.7% 33.3%
9/5/1997 DavCo Acquisition Holding DavCo Restaurants Inc. 49.5% 49.5%
10/21/1997 Berkshire Hathaway International Dairy Queen 11.9% 10.5%
9/23/1997 Cracken Harkey Street & Co. El Chico Restaurants 102.0% 78.9%
7/7/1997 Port Royal Holdings Inc. Krystal Co. 132.0% 182.9%
Average 49.6% 54.5%
Median 34.2% 35.0%
Bruckman, Rosser, Sherrill, & Co Il Fornaio 44.5% 55.7%
</TABLE>
--------------------------------------------------------------------------------
Premiums based on prices prior to any market news of a possible transaction.
20
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--------------------------------------------------------------------------------
DISCOUNTED CASH FLOW ANALYSIS
<TABLE>
<CAPTION>
PROJECTED PRO FORMA FISCAL YEAR ENDED DECEMBER 31,
--------------------------------------------------------
2000E 2001 2002 2003 2004 2005
----- --------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
EBITDA $11.3 $14.1 $15.5 $18.3 $19.2 $20.2
% Growth 24.5% 10.1% 17.8% 5.2% 5.2%
Less: Depreciation (6.4) (6.9) (7.5) (7.9) (8.3)
--------------------------------------------------------
EBIT 7.7 8.6 10.7 11.3 11.9
Less: Taxes 38.5% (3.0) (3.3) (4.1) (4.4) (4.6)
--------------------------------------------------------
Tax-effected EBIT $ 4.7 $ 5.3 $ 6.6 $ 7.0 $ 7.3
Plus: Depreciation 6.4 6.9 7.5 7.9 8.3
Less: Capital Expenditures (4.0) (8.1) (10.8) (11.3) (11.9)
Plus: Changes in Working Capital 1.0 1.8 2.0 1.6 1.2
--------------------------------------------------------
Free Cash Flow $ 8.1 $ 5.9 $ 5.4 $ 5.1 $ 5.0
</TABLE>
<TABLE>
<CAPTION>
% of Total
----------
<S> <C> <C> <C> <C>
Discount Rate 13.0% NPV of Cash Flows $21.4 22.0%
NPV of Terminal Value (6.5x EBITDA) 71.3 73.3%
Plus: Net Cash as of 12/31/00 4.6 4.7%
------ -----
Total Equity Value $97.3 100.0%
Value Per Share $14.80
</TABLE>
--------------------------------------------------------------------------------
Total Enterprise Value Sensitivity
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Terminal EBITDA Multiple
----------------------------
6.0x 6.5x 7.0x
----------------------------
<S> <C> <C> <C> <C>
Discount 11.0% $15.05 $15.96 $16.88
Rate 13.0% 13.96 14.80 15.63
15.0% 12.98 13.75 14.51
</TABLE>
--------------------------------------------------------------------------------
Source for projections: Management estimates through 2003, and Evercore
estimates in 2004 and 2005.
21
<PAGE> 23
PROJECT BAKER PRELIMINARY DRAFT - CONFIDENTIAL
--------------------------------------------------------------------------------
LEVERAGED BUYOUT ANALYSIS ($ in millions)
<TABLE>
<CAPTION>
Base Case Assumptions Sources of Funds
--------------------- ----------------
<S> <C> <C> <C>
Offer Price $14.00 Bank Revolver (3.25x 2000E EBITDA) $36.8
Shares Acquired 6.6 Sub. Debt (1.25x 2000E EBITDA) (3) 14.1
------ New Equity 42.6
Equity Purchase Price $92.0 -----
Plus: Fees and Expenses 4.5 Total Sources of Funds $93.5
Less: Excess Cash (3.0)
------
External Funds Required $93.5
</TABLE>
New Investors IRRs based on Management Projections
<TABLE>
<CAPTION>
2005 (Year 5) Exit EBITDA Multiple
-------------------------------------
6.5x 7.0x 7.5x
-------------------------------------
<S> <C> <C> <C>
2005 EBITDA(2) $20.9 $20.9 $20.9
Enterprise Value $135.8 $146.2 $156.7
Less: Debt (31.8) (31.8) (31.8)
Plus: Cash 1.6 1.6 1.6
Plus: Options Proceeds 2.2 2.2 2.2
------ ------ ------
Total Equity Value $107.8 $118.3 $128.7
Investor Equity Value(1) $97.0 $106.4 $115.8
IRR 17.9% 20.1% 22.1%
</TABLE>
Sensitivity Analysis
<TABLE>
<CAPTION>
Exit Multiple of 7.0x EBITDA
Required ----------------------------
5 - Year IRR Maximum Offer Price
------------ ----------------------------
<S> <C>
20.0% $14.02
25.0% $12.94
30.0% $12.10
</TABLE>
--------------------------------------------------------------------------------
Source for financial projections: Management estimates through 2003, and
Evercore estimates in 2004 and 2005.
(1) Assumes 5.0% of fully diluted equity granted to management in options and
5% given to sub. debt holders in warrants.
(2) Excludes approximately $700K in annual expenses that would not exist in a
private company format.
(3) Assumes total returns with warrants to subordinated debt holders of
18%-19%.
22
<PAGE> 24
PROJECT BAKER PRELIMINARY DRAFT - CONFIDENTIAL
--------------------------------------------------------------------------------
ANALYSIS OF THE PRESENT VALUE OF BAKER'S STOCK PRICE
ASSUMPTIONS
<TABLE>
<S> <C>
2000E EPS $0.58
Assumed Future P/E Multiple 15.0x
Assumed Discount Rate 13.0%
I/B/E/S Long Term Growth Rate 20.0%
</TABLE>
PV OF FUTURE STOCK PRICE BASED ON I/B/E/S LONG TERM GROWTH RATE
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004 2005
----- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Est. EPS $0.58 $0.70 $0.84 $1.00 $1.20 $ 1.44
Future P/E Multiple 15.0x
-------
Future Stock Price $21.65
PV of Future Stock Price $11.75
</TABLE>
PV OF FUTURE STOCK PRICE BASED ON MANAGEMENT ESTIMATES THROUGH 2003 AND I/B/E/S
LONG TERM GROWTH ESTIMATES THEREAFTER
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004 2005
---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Est. EPS $0.58 $0.81 $0.93 $1.17 $1.40 $ 1.68
Future P/E Multiple 15.0x
-------
Future Stock Price $ 25.27
PV of Future Stock Price $13.72
</TABLE>
SENSITIVITY ANALYSIS: PV OF FUTURE STOCK PRICE
<TABLE>
<CAPTION>
PV of Future Stock Price
---------------------------------
I/B/E/S Mgmt. and I/B/E/S
---------------------------------
<S> <C> <C> <C>
11.0% $12.85 $15.00
Discount 13.0% 11.75 13.72
Rate 15.0% 10.76 12.56
</TABLE>
23
<PAGE> 25
PROJECT BAKER PRELIMINARY DRAFT - CONFIDENTIAL
--------------------------------------------------------------------------------
OVERVIEW OF SHAREHOLDERS
<TABLE>
<CAPTION>
Major Institutional Holdings Shares % of Total
---------------------------- --------- ----------
<S> <C> <C>
Eastbourne Capital Management 1,391,600 24.1%
Bank of America Corp. 719,200 12.5%
TCW Group, Inc. 308,300 5.3%
Green River Fund I LP 295,000 5.1%
Whitney Holdings LLC 295,000 5.1%
Taunus Corporation 194,359 3.4%
--------- -----
Total 3,203,459 55.5%
</TABLE>
<TABLE>
<CAPTION>
Insider Holdings
----------------
<S> <C> <C>
Laurence Mindel 730,019 12.6%
Michael Hislop 486,234 8.4%
W. Howard Lester 191,201 3.3%
F. Warren Hellman 133,854 2.3%
Dean Cortopassi 125,294 2.2%
Paul Kelley 76,332 1.3%
Michael J. Beatrice 53,419 0.9%
W. Scott Hedrick 17,879 0.3%
Peter Hausback 7,846 0.1%
Lawrence Levy 3,810 0.1%
--------- ------
Total 1,825,888 31.6%
Other 742,105 12.9%
Total 5,771,452 100.0%
</TABLE>
--------------------------------------------------------------------------------
Source: Proxy statement, Shareworld, and Company information
24
<PAGE> 26
SECTION III: FAIRNESS OPINION LETTER
[See Exhibit (c)(1) to Schedule 13E-3]
25
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