SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------------------------------
Schedule TO/A
Tender Offer Statement under Section
14(d)(1) or 13(e)(1) of the Securities Exchange Act of 1934
(Amendment No.1)
Conning Corporation
----------------------------------------------------------
(Name of Subject Company)
CC Merger Sub Inc.
Metropolitan Life Insurance Company
----------------------------------------------------------
(Name of Filing Persons - Offeror)
Common Stock, Par Value $0.01 Per Share
----------------------------------------------------------
(Title of Class of Securities)
208215 10 3
----------------------------------------------------------
(CUSIP Number of Class of Securities)
Jane Weinberg, Esq.
Metropolitan Life Insurance Company
One Madison Avenue
New York, New York 10010
Telephone: (212) 578-2211
----------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications on Behalf
of Filing Persons)
Copy to:
Adam O. Emmerich, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telephone: (212) 403-1234
----------------------------------------------------------
<PAGE>
CALCULATION OF FILING FEE
--------------------------------------------------------------------
====================================================================
TRANSACTION VALUATION* AMOUNT OF FILING FEE
--------------------------------------------------------------------
$95,425.962.50 $19,026
====================================================================
* Estimated for purposes of calculating the amount of filing fee only. The
amount assumes the purchase of 7,634,077 shares of common stock, par value $0.01
per share (the "Shares"), at a price per Share of $12.50 in cash. Such number of
Shares represents the fully diluted number of Shares outstanding as of March 20,
2000, less the number of Shares already beneficially owned by Metropolitan Life
Insurance Company.
[X] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
Amount Previously Paid: $19,026.
Form or Registration No.: Schedule TO.
Filing Party: Metropolitan Life Insurance Company.
Date Filed: March 20, 2000.
[ ] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
Check the appropriate boxes below to designate any transactions to which the
statement relates:
[X] third-party tender offer subject to Rule 14d-1.
[X] issuer tender offer subject to Rule 13e-4.
[X] going-private transaction subject to Rule 13e-3.
[X] amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing is a final amendment reporting the results
of the tender offer: [ ]
Page 1 of 9 Pages
Exhibit Index is on Page 9
<PAGE>
This Amendment No. 1 (this "Amendment") amends and supplements the
Tender Offer Statement on Schedule TO filed by Metropolitan Life Insurance
Company, a New York life insurance company ("MetLife"), and CC Merger Sub Inc.,
a Missouri corporation and a wholly owned subsidiary of MetLife ("Purchaser"),
on March 20, 2000 (the "Schedule TO"), relating to the offer by Purchaser to
purchase all outstanding shares of Common Stock, par value $0.01 per share (the
"Shares"), of Conning Corporation, a Missouri corporation ("Conning"), at a
purchase price of $12.50 per Share, net to the seller in cash, upon the terms
and subject to the conditions set forth in the offer to purchase (the "Offer to
Purchase") and in the related letter of transmittal, copies of which are
attached as Exhibits (a)(1) and (a)(2) to the Schedule TO. Capitalized terms
used but defined herein shall have the meanings assigned to such terms in the
Offer to Purchase and the Schedule TO.
This Amendment and the Schedule TO amend and supplement the
Statement on Schedule 13D with respect to Conning filed by MetLife and Purchaser
with the Securities and Exchange Commission on March 10, 2000.
ITEMS 1 THROUGH 9 AND 11 THROUGH 13.
Items 1 through 9 and 11 through 13 of the Schedule TO, which
incorporate by reference the information contained in the Offer to Purchase, are
hereby amended as follows:
(1) Exhibit (c)(4) to the Schedule TO, "Presentation of Credit
Suisse First Boston Corporation," is added.
(2) Item 13(a)(1) of the Schedule TO is amended to read in its
entirety as follows:
"Conning's Annual Report on Form 10-K for the year ended
December 31, 1999 (pages 29-57) is incorporated herein by
reference."
(3) Exhibit (c)(5) to the Schedule TO, "January 27, 2000
presentation of Salmon Smith Barney Inc.," is added.
(4) The following language is added after the third sentence of the
third-to-last paragraph on page 3 of the Offer to Purchase:
"In its preliminary valuation analysis, Salomon Smith Barney
compared the $10.50 offer price with valuation ranges implied for
the Conning shares using management projections (which were prepared
in October 1999) both with and without taking into account the
assumption by MetLife of investment management responsibility over
most of the general account assets of General American Life
Insurance and its insurance subsidiaries (other than RGA(as defined
below)). Specifically, relying on those management projections,
Salomon Smith Barney derived implied valuation ranges for the
Conning shares by:
* Applying ranges of multiples of share price to year 2000
estimated net income derived from Conning's different
business lines. This analysis resulted in
valuation ranges of approximately $7.50 - $9.25
and $9.00 - $11.00 per Conning
Page 2 of 9 Pages
<PAGE>
share with and without taking into account the
potential assumption of investment management
responsibility by MetLife, respectively.
* Comparing Conning's management projections of
certain financial data with corresponding financial
data for comparable publicly traded asset management
companies and applying a range of price-to-earnings
multiples for these comparable companies to the
corresponding financial data for Conning. This
analysis resulted in valuation ranges of
approximately $7.25 - $9.25 and $8.75 - $11.25 per
Conning share with and without taking into account the
potential assumption of investment management
responsibility by MetLife, respectively.
* Applying a range of multiples of price paid to
assets under management and latest twelve months
revenue and earnings before interest, taxes,
depreciation and amortization for selected precedent
transactions in the asset management industry
to the comparable financial data for Conning.
This analysis resulted in valuation ranges of
approximately $10.75 - $11.50 and $13.00 -
$14.50 per Conning share with and without
taking into account the potential assumption of
investment management responsibility by
MetLife, respectively.
* Using ranges of premium-to-share price both one
day and one month prior to announcement for 95
going private transactions from January 1, 1995
to January 25, 2000. This analysis resulted in
valuation ranges of approximately $12.25 - $13.00
and $9.50 - $10.25 per Conning share, without
taking into account the potential assumption of
investment management responsibility by
MetLife, based on one-day and one-month
premiums, respectively.
* Performing a five-year discounted cash flow analysis
assuming discount rates ranging from 10.0% to
16.0% and net income growth rates ranging from 6.0%
to 18%. This analysis resulted in valuation ranges
of approximately $12.75 to $16.25 and $15.00 to
$18.75 per Conning share with and without
taking into account the potential assumption of
investment management responsibility by
MetLife, respectively.
Salomon Smith Barney did not comment on the adequacy of the
MetLife proposal and, without reaching a conclusion about the
adequacy of that proposal,
Page 3 of 9 Pages
<PAGE>
the special committee concluded that better terms, including a
higher price per share, should be sought from MetLife."
(5) The following language is added at the end of the second
paragraph on page 4 of the Offer to Purchase:
"Alternative valuation methodologies discussed by Salomon
Smith Barney and Credit Suisse First Boston included analysis of
Conning's expected future operating performance taking into account
(a) the assumption by MetLife of investment management
responsibility over most of the general account assets of General
American Life Insurance and its insurance subsidiaries (other than
RGA); (b) the potential loss of other business derived from
Conning's relationship with General American Life Insurance and its
insurance subsidiaries. Salomon Smith Barney and Credit Suisse First
Boston also discussed financial projections for Conning given the
different values that were placed by Conning management and MetLife
management on the decreases in revenues and expenses in connection
with Conning's loss of investment management responsibility over
most of the general account assets of General American Life
Insurance and its insurance subsidiaries (other than RGA). For more
detail on these projections and the different values placed on the
decreases in revenue and expenses, see Section 7."
(6) The last bullet in Section III of the Offer to Purchase is
amended to read in its entirety as follows:
"MetLife's internal financial analysis, which included a
development of projections (as described on pages 29 and 30) and a
review of Credit Suisse First Boston's analysis (as described on
pages 13 through 16) of comparable current market prices and
historical comparable transaction prices of Conning's peer group, as
well as a discounted cash flow analysis to determine the value of
Conning shares (MetLife views the quantitative conclusions on pages
13 through 16 as supporting the fairness of the tender offer and the
merger to stockholders that are unaffiliated with MetLife, even
though Credit Suisse First Boston's opinion was directed only to the
fairness of the consideration from a financial point of view to
MetLife and expresses no opinion on this matter, as indicated on
page 13)."
(7) The first paragraph in Section III of the Offer to Purchase is
amended to read in its entirety as follows:
"MetLife and Purchaser believe that the tender offer and the
merger are fair (both in terms of price and procedure) to the
Conning stockholders that are unaffiliated with MetLife. MetLife and
Purchaser base their belief on the following:"
Page 4 of 9 Pages
<PAGE>
(8) The fourth-, fifth- and sixth-to-last sentences of the
carry-over paragraph of the top of page 12 of the Offer to Purchase are amended
to read in their entirety as follows:
"Analyses based upon forecasts of future results are not
necessarily indicative of actual future results, which may be
significantly more or less favorable than suggested by such
analyses. Estimates of values of companies do not purport to be
appraisals or necessarily to reflect the prices at which companies
may actually be sold. Because such analyses are inherently subject
to uncertainty, being based on numerous factors or events beyond the
control of the parties or their respective advisors, Salomon Smith
Barney does not assume any responsibility if future results are
materially different from those forecast."
(9) The third-to-last sentence of the third paragraph on page 29 of
the Offer to Purchase is amended to read in its entirety as follows:
"Neither we nor Conning, nor either or our respective
financial advisors nor the Dealer Manager can be certain that future
results or actual values will not differ materially from the
estimates."
(10) The first paragraph on page 30 of the Offer to Purchase is
deleted and replaced with the following:
"In October 1999, Conning management also prepared projections
of Conning's operating performance as part of its annual budgeting
and planning process. Conning management provided us with a copy of
these projections during the course of our discussions with Conning.
These projections, which were prepared in October 1999, estimated
total revenue for 2000, 2001 and 2002 to be $102 million, $112
million and $124 million, respectively; net income for 2000, 2001
and 2002 to be $15 million, $18 million and $21 million,
respectively; and earnings per share for 2000, 2001 and 2002 to be
$1.06, $1.24 and $1.45, respectively. During the course of our
negotiations, we also received the Management Projections (as
defined on page 9).
Conning's October 1999 management projections were based on
assumptions relating to each of Conning's operating business
segments. The principal assumptions were that in the year 2000,
there would be: (a) an increase of 10% in assets under management
from 1999 levels; (b) the closing of funding commitments totaling
$400 million for a newly formed private equity fund, Fund VI (as
defined below); (c) an increase of 16% in revenues from the research
services business compared to 1999; (d) an increase of 10% in
mortgage servicing revenue compared to 1999; (e) commercial mortgage
originations of $900 million in the aggregate; and (f) an increase
in expenses of 12% compared to 1999 relating primarily to the
planned expansion of the employee base by approximately 8% and
anticipated increases in other operating expenses. In addition, the
combined expected business plan for 2000 compared to 1999 assumed an
increase in total revenues of approximately 12%, an increase in
total expenses of approximately 12%, and an increase in earnings per
share of 11%.
Page 5 of 9 Pages
<PAGE>
Conning's business plans for 2001 and 2002 assumed annual revenue
increases of 10% from the 2000 plan and annual expense increases of
7% from the 2000 plan. Conning's projections for 2001 and 2002 were
prepared on an aggregate basis and did not include assumptions for
individual business segments.
The assumptions used in the Management Projections are
consistent with the projections used in Conning's October 1999
management projections, except that the Management Projections
assume a reduction in Conning's assets under management due to the
transfer of the investment management responsibilities for most of
the general account assets of General American Life Insurance and
its subsidiaries, excluding RGA. See Section 8. The Management
Projections assume that this reduction in assets under management
causes an approximately $6.9 million decrease in revenues and an
approximately $4 million decrease in expenses.
The assumptions used in MetLife's Projections are also
consistent with the projections included in Conning's October 1999
management projections, except that MetLife: (a) assumed a reduction
in Conning's assets under management due to the transfer of the
investment management responsibilities for most of the general
account assets of General American Life Insurance and its
subsidiaries, excluding RGA, which reduction causes an approximately
$7.9 million decrease in revenues and an approximately $1.9 million
decrease in expenses (see Section 8); (b) assumed closing of funding
commitments totaling $200 million in the aggregate during 2000 for
Fund VI, which commitments would give rise to approximately $1.7
million in additional revenue; (c) did not make assumptions on the
operating business level; and (d) except for the impact of Fund VI
in each of the years 2000, 2001 and 2002, assumed 0% growth in net
earnings in 2000 and 10% growth in net earnings in 2001 and 2002.
Conning did not prepare the October 1999 projections with a
view to public disclosure or compliance with published guidelines of
the SEC or the guidelines established by the American Institute of
Certified Public Accountants regarding projections. The projections
are included in this offer to purchase only because Conning provided
them to us. Neither we nor Conning, nor either of our respective
financial advisors nor the Dealer Manager can be certain that
Conning's projections are accurate. Although presented with
numerical specificity, Conning's projections are based upon a
variety of assumptions relating to the businesses of Conning which
may not be realized and are subject to significant uncertainties and
contingencies, many of which are beyond the control of us and
Conning. There can be no assurance that Conning's projections will
be realized, and actual results may vary materially from those
shown."
(11) The first paragraph of Section 12 of the Offer to Purchase is
amended to read in its entirety as follows:
"Notwithstanding any other provision of the tender offer,
Purchaser is not required to accept for payment or (subject to any
applicable rules and regulations
Page 6 of 9 Pages
<PAGE>
of the SEC, including Rule 14e-1(c) promulgated under the Securities
and Exchange Act, which relates to Purchaser's obligation to pay for
or return tendered Shares promptly after termination or withdrawal
of the Offer), pay for, and may delay the acceptance of payment of,
any tendered Conning shares and may terminate or, subject to the
terms of the merger agreement, amend the tender offer, unless (a)
the Minimum Condition shall have been satisfied, and (b) at any time
on or after the execution of the merger agreement and on or before
the Expiration Date, none of the following conditions exists or has
occurred and remains in effect."
(12) The following sentence is added at the end of the last
paragraph in Section IV of the Offer to Purchase:
"CSFB has consented to the filing of its written opinion as an
exhibit to the Schedule TO."
Page 7 of 9 Pages
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: April 10, 2000
CC MERGER SUB INC.
By /s/ Gary A. Beller
-------------------------------------
Name: Gary A. Beller
Title: President and
Chairman of the Board
METROPOLITAN LIFE INSURANCE COMPANY
By /s/ Gary A. Beller
-------------------------------------
Name: Gary A. Beller
Title: Senior Executive Vice-President
and General Counsel
Page 8 of 9 Pages
<PAGE>
EXHIBIT INDEX
(c)(4) Presentation of Credit Suisse First Boston Corporation.
(c)(5) January 27, 2000 presentation of Salomon Smith Barney Inc.
Page 9 of 9 Pages
Exhibit (c)(4)
CONFIDENTIAL
Presentation regarding:
PROJECT SPIRIT
UPDATED VALUATION ANALYSIS
January 27, 2000
<PAGE>
PROJECT SPIRIT
TABLE OF CONTENTS
1 EQUITY MARKET REACTION AND UPDATE
2 C CO. VALUATION ANALYSIS
3 ADDITIONAL VALUATION CONSIDERATIONS
APPENDIX
A. Projected Financial Statements
B. Public Comparable Asset Management Companies
C. Public Comparable Mortgage Companies
D. Weighted Average Cost of Capital and Trading History
<PAGE>
PROJECT SPIRIT
1 EQUITY MARKET REACTION AND UPDATE
<PAGE>
PROJECT SPIRIT
C CO. RELATIVE PRICE PERFORMANCE
PRICE PERFORMANCE
DAILY DATA: JANUARY 1, 1999 THROUGH JANUARY 25, 2000
[GRAPHIC OMITTED]
(a) 07/29/99: A Co. announces a loss of $179 million.
(b) 08/09/99: Parent is downgraded by Moody's from A3 to Ba1 and then to B1 on
8/12/99.
(c) 08/26/99: M Co. acquires Parent for $1.2 billion in cash.
(d) 10/07/99: C Co. warns that 3rd quarter earnings may be up to 43% below
consensus estimates.
(e) 01/18/00: M Co. offers to purchase outstanding C Co. shares for $10.50 per
share.
C CO.'S STOCK PRICE UNDER-PERFORMED ITS PEERS IN 1999, IN LARGE PART DUE TO
UNCERTAINTY AROUND THE PARENT SITUATION BEGINNING IN THE THIRD QUARTER.
<PAGE>
PROJECT SPIRIT
C CO. TRADING HISTORY
PRICE PERFORMANCE
DAILY DATA: JULY 29, 1999 THROUGH JANUARY 25, 2000
[GRAPHIC OMITTED]
(a) 07/29/99: A Co. announces a loss of $179 million.
(b) 08/09/99: Parent is downgraded by Moody's from A3 to Ba1 and then to B1 on
8/12/99.
(c) 08/26/99: M Co. acquires Parent for $1.2 billion in cash.
(d) 10/07/99: C Co. warns that 3rd quarter earnings may be up to 43% below
consensus estimates.
(e) 01/18/00: M Co. offers to purchase outstanding C Co. shares for $10.50 per
share.
ALTHOUGH THE PARENT'S SITUATION WAS SUCCESSFULLY RESOLVED IN AUGUST, C CO.'S
STOCK PRICE HAS NOT YET RECOVERED TO PRE-ANNOUNCEMENT LEVELS.
<PAGE>
PROJECT SPIRIT
C CO. TRADING HISTORY
PRICE PERFORMANCE
DAILY DATA: JANUARY 1, 2000 THROUGH JANUARY 25, 2000
[GRAPHIC OMITTED]
(a) 01/18/00: M Co. offers to purchase outstanding C Co. shares for $10.50 per
share.
C CO.'S STOCK PRICE WAS AT $9.5625 PER SHARE WHEN THE $10.50 PER SHARE OFFER WAS
ANNOUNCED.
<PAGE>
PROJECT SPIRIT
C CO. RELATIVE PRICE/EARNINGS PERFORMANCE
PRICE/EARNINGS PERFORMANCE
DAILY DATA: JANUARY 1, 1999 THROUGH JANUARY 25, 2000
[GRAPHIC OMITTED]
(a) 07/29/99: A Co. announces a loss of $179 million.
(b) 08/09/99: Parent is downgraded by Moody's from A3 to Ba1 and then to B1 on
8/12/99.
(c) 08/26/99: M Co. acquires Parent for $1.2 billion in cash.
(d) 10/07/99: C Co. warns that 3rd quarter earnings may be up to 43% below
consensus estimates.
(e) 01/18/00: M Co. offers to acquire outstanding C Co. shares for $10.50 per
share.
Source: IBES consensus estimates, C Co. Earnings Estimates, Salomon Smith
Barney.
ALTHOUGH C CO.'S P/E CLOSELY TRACKED THE PEER INDEX THROUGH AUGUST, C CO.'S P/E
CURRENTLY REPRESENTS A 30% DISCOUNT TO THE PEER INDEX.
<PAGE>
PROJECT SPIRIT
C CO. EARNINGS ESTIMATES
FIRST CALL ESTIMATES FOR THE ROLLING 12 MONTHS FORWARD
[GRAPHIC OMITTED]
(a) 07/29/99: A Co. announces a loss of $179 million.
(b) 08/09/99: Parent is downgraded by Moody's from A3 to Ba1 and then to B1 on
8/12/99.
(c) 08/26/99: M Co. acquires Parent for $1.2 billion in cash.
(d) 10/07/99: C Co. warns that 3rd quarter earnings may be up to 43% below
consensus estimates.
(e) 01/18/00: M Co. offers to acquire outstanding C Co. shares for $10.50 per
share.
Source: First Call consensus estimates.
C CO.'S MEDIAN 2000 EARNINGS ESTIMATE OF $1.10 HAS DECLINED APPROXIMATELY 20%
FROM ITS JULY HIGH OF $1.35.
<PAGE>
PROJECT SPIRIT
C CO. RESEARCH COVERAGE
CURRENT IBES RESEARCH COVERAGE
<TABLE>
<CAPTION>
2000E
--------------------- Last
Firm Opinion Current Previous Estimate Date
---- ------- ------- -------- -------------
<S> <C> <C> <C> <C>
A.G. Edwards Maintain Position $ 1.10 $ 1.10 12/20/99
Donaldson Lufkin & Jenrette Market Perform 1.10 1.10 10/13/99
Putnam, Lovell, de Guardiola Hold 1.15 1.15 9/2/99
- --------------------------------------------------------------------------------------------------
Median $ 1.10 $ 1.10
- --------------------------------------------------------------------------------------------------
IBES Mean Estimates $ 1.12 $ 1.12
- --------------------------------------------------------------------------------------------------
Management Estimates $ 1.06 $ 1.06
- --------------------------------------------------------------------------------------------------
</TABLE>
Source: Bloomberg.
<PAGE>
PROJECT SPIRIT
INVESTOR COMMUNITY REACTION TO RECENT EVENTS
PRICE/EARNINGS IMPACT
<TABLE>
<CAPTION>
DAY PRIOR TO DAY PRIOR TO
PARENT M CO.
ANNOUNCEMENT ANNOUNCEMENT
(8/9/99) (1/14/00)
-------- ---------
<S> <C> <C>
Share Price $16.13 $ 9.56
2000E EPS (a) 1.41 1.06
Price / 2000E EPS for C Co. 11.5 x 9.0 x
Price / 2000E EPS for Unaffiliated AUM (b) 11.5 x 11.5 x
Unaffiliated EPS (c) $ 1.20 $ 0.89
------ ------
Contribution $13.81 $10.18
Price / 2000E EPS for Affiliated AUM 11.5 x (3.7) x
Affiliated EPS (c) $ 0.20 $ 0.17
------ ------
Contribution $ 2.32 ($0.62)
------ ------
TOTAL $16.13 $ 9.56
------ ------
</TABLE>
Source: Company documents
(a) Reflects IBES estimates as of August 9, 1999, and current management
estimates.
(b) Assumes that the market's valuation of the earnings from the unaffiliated
AUM is unchanged at 11.5x.
(c) Reflects annualized weighted-average profitability for the six months
ended June 30, 1999, and current management estimates.
PRIOR TO THE OFFER, THE MARKET HAD BEEN APPLYING VERY LITTLE VALUE TO C CO.'S
AFFILIATED BUSINESSES.
<PAGE>
PROJECT SPIRIT
C CO. PUBLIC OWNERSHIP
(Shares in thousands)
<TABLE>
<CAPTION>
SHARES HELD % OF TOTAL % OF NON WEIGHTED AVERAGE
TOP 13F INSTITUTIONAL HOLDERS (000S) HELD PARENT SHARES PURCHASE PRICE (a)
<S> <C> <C> <C> <C> <C>
1 David L. Babson & Co. Inc. 686 5.0% 12.9% $18.32
2 MFS Investment Management 516 3.8 9.7 17.33
3 Dimensional FD Advisors, Inc. 264 1.9 5.0 13.78
4 Sterling Capital Management Co. 216 1.6 4.1 16.08
5 Wellington Management Co. LLP 186 1.4 3.5 15.20
6 PaineWebber Group Inc. 180 1.3 3.4 19.07
7 AXA Financial, Inc. 175 1.3 3.3 16.52
8 Barclays Bank plc 68 0.5 1.3 17.99
9 John A. Levin & Company, Inc. 65 0.5 1.2 13.78
10 State Street Bank & Trust Co. Boston 60 0.4 1.1 19.77
11 Mellon Private Asset Management 56 0.4 1.0 19.11
12 Fleet Boston Corporation 55 0.4 1.0 17.50
13 College Retire Equities 52 0.4 1.0 18.26
14 Hartford Investment Mgmt Co. Inc. 45 0.3 0.8 14.08
15 Frank Russell Co. 31 0.2 0.6 15.60
16 Bankers Trust NY Corp. 31 0.2 0.6 13.33
17 First Source Bank 30 0.2 0.6 13.78
18 Wilmington Trust Company 24 0.2 0.4 16.55
19 Westcap Investors, LLC 21 0.2 0.4 16.43
20 Northern Trust Company 16 0.1 0.3 18.26
21 Citigroup Investments Inc. 15 0.1 0.3 18.65
22 Firstar Investment Research & Mgmt Co. 14 0.1 0.3 15.84
23 World Asset Management 4 0.0 0.1 17.85
-------------------------------------- ------ ------ ------ ------
TOTAL TOP 13F INSTITUTIONAL HOLDERS 2,810 20.6% 52.9% $16.94
INSIDERS/MANAGEMENT 654 4.8 12.3
PARENT 8,305 61.0 --
IMPLIED RETAIL 1,844 13.5 34.7
-------------------------------------- ------ ------ ------
TOTAL SHARES OUTSTANDING 13,613 100.0% 100.0%
====================================== ====== ===== =====
</TABLE>
Source: CDA Spectrum. Holdings as of September 30, 1999.
(a) Estimate of holder's basis in C Co. shares; applies a FIFO inventory to
shares sold.
Note: The following institutions have sold their entire holdings in C Co. since
the 6/30/99 report: American General Corporation, Bank One Corporation,
Chase Manhattan Corp., Credit Suisse First Boston Corp., Morgan Stanley
Dean Witter Advisors, and Prospector Partners, LLC.
THE WEIGHTED AVERAGE BASIS OF THE POSITIONS OF ALL CURRENT SHAREHOLDERS IS
$16.94.
<PAGE>
PROJECT SPIRIT
SHAREHOLDER ANALYSIS
(Shares in thousands)
<TABLE>
<CAPTION>
HOLDINGS (000'S) AS OF: (a)
-----------------------------------------------------------------
TOP 13F INSTITUTIONAL HOLDERS CHANGE 12-31-97 CHANGE 12-31-98 CHANGE 3-31-99
----------------------------- ------ -------- ------ -------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
1 David L. Babson & Co. Inc. -- -- 546 546 10 556
2 MFS Investment Management -- -- 313 313 7 319
3 Dimensional FD Advisors, Inc. -- -- -- -- -- --
4 Sterling Capital Management Co. 54 54 86 141 64 204
5 Wellington Management Co. LLP -- -- 81 81 168 249
6 PaineWebber Group Inc. -- -- 225 225 -- 225
7 AXA Financial, Inc. -- -- -- -- 14 14
8 Barclays Bank plc -- -- 49 49 10 59
9 John A. Levin & Company, Inc. -- -- -- -- -- --
10 State Street Bank & Trust Co. Boston -- -- 52 52 1 53
11 Mellon Private Asset Management -- -- 50 50 (3) 47
12 Fleet Boston Corporation -- -- 35 35 -- 35
13 College Retire Equities -- -- 53 53 -- 53
14 Hartford Investment Mgmt Co. Inc. -- -- 32 32 -- 32
15 Frank Russell Co. 17 17 6 23 20 43
16 Bankers Trust NY Corp. -- -- 37 37 5 42
17 First Source Bank 19 19 (19) -- -- --
18 Wilmington Trust Company -- -- -- -- -- --
19 Westcap Investors, LLC -- -- -- -- -- --
20 Northern Trust Company -- -- 12 12 -- 12
21 Citigroup Investments Inc. -- -- 52 52 (4) 48
22 Firstar Investment Research & Mgmt Co. -- -- 90 90 9 98
23 World Asset Management 1 1 2 3 -- 3
-----------------------------------------------------------------------------------------------------------------------------
TOTAL TOP 13F INSTITUTIONAL HOLDERS 91 91 1,700 1,792 300 2,091
Top 13F Institutional Holders as a % of Total 0.7 % 13.8 % 15.6 %
TOTAL 13F INSTITUTIONAL HOLDERS 713 2,552 2,769
13F Institutions as a % of Total 5.5 % 19.7 % 20.7 %
TOTAL SHARES OUTSTANDING 12,875 12,939 13,375
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
HOLDINGS (000'S) AS OF: (a)
----------------------------------------
TOP 13F INSTITUTIONAL HOLDERS CHANGE 6-30-99 CHANGE 9-30-99
----------------------------- ------ ------- ------ -------
<S> <C> <C> <C> <C>
1 David L. Babson & Co. Inc. 22 577 109 686
2 MFS Investment Management 8 327 189 516
3 Dimensional FD Advisors, Inc. -- -- 264 264
4 Sterling Capital Management Co. 4 208 7 216
5 Wellington Management Co. LLP 55 304 (118) 186
6 PaineWebber Group Inc. -- 225 (45) 180
7 AXA Financial, Inc. 310 323 (149) 175
8 Barclays Bank plc 1 60 9 68
9 John A. Levin & Company, Inc. -- -- 65 65
10 State Street Bank & Trust Co. Boston (1) 53 8 60
11 Mellon Private Asset Management 1 48 8 56
12 Fleet Boston Corporation -- 35 20 55
13 College Retire Equities (4) 50 3 52
14 Hartford Investment Mgmt Co. Inc. 13 45 -- 45
15 Frank Russell Co. -- 43 (12) 31
16 Bankers Trust NY Corp. (3) 39 (8) 31
17 First Source Bank -- -- 30 30
18 Wilmington Trust Company 24 24 -- 24
19 Westcap Investors, LLC 21 21 -- 21
20 Northern Trust Company -- 12 5 16
21 Citigroup Investments Inc. (33) 15 -- 15
22 Firstar Investment Research & Mgmt Co. -- 98 (84) 14
23 World Asset Management -- 3 1 4
---------------------------------------------------------------------------------------------------------
TOTAL TOP 13F INSTITUTIONAL HOLDERS 417 2,509 301 2,810
Top 13F Institutional Holders as a % of Total 18.5 % 100.0 %
TOTAL 13F INSTITUTIONAL HOLDERS 2,874 2,810
13F Institutions as a % of Total 21.2 % 20.6 %
TOTAL SHARES OUTSTANDING 13,534 13,613
---------------------------------------------------------------------------------------------------------
</TABLE>
Source: CDA Spectrum. Holdings as of September 30, 1999.
(a) 13F Institutions excludes Parent's majority stake in C Co.
<PAGE>
PROJECT SPIRIT
2 C CO. VALUATION ANALYSIS
<PAGE>
PROJECT SPIRIT
VALUATION SUMMARY (BASE CASE)
<TABLE>
<CAPTION>
M CO. CURRENT C CO.
OFFER PRICE: MARKET PRICE:
$10.50 $11.06
VALUATION METHODOLOGY $ 6.00 $ 7.50 $ 9.00 $ 10.50 $ 12.00
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
WHOLE COMPANY
Summary Component Valuation [ $9.00-11.00 ]
Public Market Comparables (a) [ $8.75-11.25 ]
Precedent Transaction Analysis
Squeeze Out Analysis (1 Day Prior)
Squeeze Out Analysis (1 Month Prior) [$ 9.50- ]
[ 10.25 ]
DCF Analysis
UNAFFILIATED OPERATIONS
Summary Component Valuation [ $7.50-9.25 ]
Public Market Comparables (a) [ $7.25-9.25 ]
Precedent Transaction Analysis [ $10.75- ]
[ 11.50 ]
DCF Analysis
<CAPTION>
C CO. PRICE:
CUMULATIVE WTD. AVG
$14.17 (G)
VALUATION METHODOLOGY $ 13.50 $ 15.00 $ 16.50 $ 18.00 $ 19.50
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
WHOLE COMPANY
Summary Component Valuation
Public Market Comparables (a)
Precedent Transaction Analysis [ $13.00-14.50 ]
Squeeze Out Analysis (1 Day Prior) [$ 12.25-]
[ 13.00 ]
Squeeze Out Analysis (1 Month Prior)
DCF Analysis [ $15.00-18.75 ]
UNAFFILIATED OPERATIONS
Summary Component Valuation
Public Market Comparables (a)
Precedent Transaction Analysis
DCF Analysis [ $12.75-16.25 ]
</TABLE>
<TABLE>
<CAPTION>
VALUATION MULTIPLES $ 6.00 $ 7.50 $ 9.00 $ 10.50 $ 12.00
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Premium / Market Price (January 25, 2000) (b) (45.8)% (32.2)% (18.6)% (5.1)% 8.5%
Premium / Market Price (January 19, 2000) (c) (44.8) (31.0) (17.2) (3.4) 10.3
Premium / Market Price (December 27, 1999) (d) (26.7) (8.4) 9.9 28.2 46.6
Premium / Market Price (August 9, 1999) (e) (62.8) (53.5) (44.2) (34.9) (25.6)
Firm Value / Total Assets Under Mgmt. (%) 0.04 0.10 0.16 0.22 0.29
Firm Value / Unaffiliated Assets Under Mgmt. (%) 0.06 0.15 0.25 0.34 0.44
Firm Value / LTM Revenues 0.1 x 0.4 x 0.6 x 0.8 x 1.1 x
Firm Value / LTM EBITDA 0.5 1.3 2.1 3.0 3.8
Price / LTM Net Income 6.3 7.9 9.5 11.0 12.6
Price / 1999E Earnings (f) 6.3 7.9 9.5 11.0 12.6
Price / 2000E Earnings (f) 5.7 7.1 8.5 10.0 11.4
<CAPTION>
VALUATION MULTIPLES $ 13.50 $ 15.00 $ 16.50 $ 18.00 $ 19.50
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Premium / Market Price (January 25, 2000) (b) 22.0% 35.6% 49.2% 62.7% 76.3%
Premium / Market Price (January 19, 2000) (c) 24.1 37.9 51.7 65.5 79.3
Premium / Market Price (December 27, 1999) (d) 64.9 83.2 101.5 119.8 138.2
Premium / Market Price (August 9, 1999) (e) (16.3) (7.0) 2.3 11.6 20.9
Firm Value / Total Assets Under Mgmt. (%) 0.35 0.41 0.69 0.76 0.82
Firm Value / Unaffiliated Assets Under Mgmt. (%) 0.54 0.63 1.06 1.16 1.26
Firm Value / LTM Revenues 1.3 x 1.5 x 2.5 x 2.8 x 3.0 x
Firm Value / LTM EBITDA 4.6 5.5 9.2 10.0 10.8
Price / LTM Net Income 14.2 15.8 17.3 18.9 20.5
Price / 1999E Earnings (f) 14.2 15.8 17.3 18.9 20.5
Price / 2000E Earnings (f) 12.8 14.2 15.6 17.1 18.5
</TABLE>
(a) Public market comparables consist of Federated Investors, John Nuveen,
Eaton Vance Corp., BlackRock Inc., Neuberger Berman and Gabelli Asset
Mgmt.
(b) Price as of close (1/25/00): $11.0625
(c) Price as of close (1/19/00): $10.875
(d) Price as of close (12/27/99): $8.1875
(e) Price prior to Parent ratings downgrade announcement (8/9/99): $16.125
(f) Based on management forecasts of $0.95 and $1.06 for 1999 and 2000,
respectively, and 13.97 million shares outstanding.
(g) Cumulative weighted average price from 12/16/97 to 1/25/00.
<PAGE>
PROJECT SPIRIT
VALUATION SUMMARY (OPTIMAL CASE)
<TABLE>
<CAPTION>
M CO. CURRENT C CO. C CO. PRICE:
OFFER PRICE: MARKET PRICE: CUMULATIVE WTD. AVG
$10.50 $11.06 $14.17 (g)
VALUATION METHODOLOGY $ 9.00 $ 10.50 $ 12.00 $ 13.50 $ 15.00 $ 16.50
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
WHOLE COMPANY
Summary Component Valuation [ $12.75-15.75 ]
Public Market Comparables (a) [ $11.25-16.75 ]
Precedent Transaction Analysis
Squeeze Out Analysis (1 Day Prior) [ $13.00-14.50 ]
Squeeze Out Analysis (1 Month Prior) [$10.25-11.50]
DCF Analysis [$16.00-20.25
UNAFFILIATED OPERATIONS
Summary Component Valuation [ $10.50-13.00 ]
Public Market Comparables (a) [ $9.25-13.75 ]
Precedent Transaction Analysis [ $14.50-18.50
DCF Analysis [ $13.75-17.50
<CAPTION>
VALUATION METHODOLOGY $ 18.00 $ 19.50 $ 21.00 $ 22.50
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
WHOLE COMPANY
Summary Component Valuation
Public Market Comparables (a)
Precedent Transaction Analysis [ $18.00-22.50 ]
Squeeze Out Analysis (1 Day Prior)
Squeeze Out Analysis (1 Month Prior)
DCF Analysis $16.00-20.25 ]
UNAFFILIATED OPERATIONS
Summary Component Valuation
Public Market Comparables (a)
Precedent Transaction Analysis $14.50-18.50]
DCF Analysis $13.75-18.50]
</TABLE>
<TABLE>
<CAPTION>
VALUATION MULTIPLES $ 9.00 $ 10.50 $ 12.00 $ 13.50 $ 15.00 $ 16.50
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Premium / Market Price (January 25, 2000) (b) (18.6)% (5.1)% 8.5% 22.0% 35.6% 49.2%
Premium / Market Price (January 19, 2000) (c) (17.2) (3.4) 10.3 24.1 37.9 51.7
Premium / Market Price (December 27, 1999) (d) 9.9 28.2 46.6 64.9 83.2 101.5
Premium / Market Price (August 9, 1999) (e) (44.2) (34.9) (25.6) (16.3) (7.0) 2.3
Firm Value / Total Assets Under Mgmt. (%) 0.16 0.22 0.29 0.35 0.41 0.48
Firm Value / Unaffiliated Assets Under Mgmt. (%) 0.25 0.34 0.44 0.54 0.63 0.73
Firm Value / LTM Revenues 0.6 x 0.8 x 1.1 x 1.3 x 1.5 x 1.7 x
Firm Value / LTM EBITDA 2.1 3.0 3.8 4.6 5.5 6.3
Price / LTM Net Income 9.5 11.0 12.6 14.2 15.8 17.3
Price / 1999E Earnings (f) 9.5 11.0 12.6 14.2 15.8 17.3
Price / 2000E Earnings (f) 8.5 10.0 11.4 12.8 14.2 15.6
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
VALUATION MULTIPLES $ 18.00 $ 19.50 $ 21.00 $ 22.50
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Premium / Market Price (January 25, 2000) (b) 62.7% 76.3% 89.8% 103.4%
Premium / Market Price (January 19, 2000) (c) 65.5 79.3 93.1 106.9
Premium / Market Price (December 27, 1999) (d) 119.8 138.2 156.5 174.8
Premium / Market Price (August 9, 1999) (e) 11.6 20.9 30.2 39.5
Firm Value / Total Assets Under Mgmt. (%) 0.54 0.82 0.88 0.94
Firm Value / Unaffiliated Assets Under Mgmt. (%) 0.83 1.26 1.35 1.45
Firm Value / LTM Revenues 2.0 x 3.0 x 3.2 x 3.5 x
Firm Value / LTM EBITDA 7.2 10.8 11.7 12.5
Price / LTM Net Income 18.9 20.5 22.1 23.6
Price / 1999E Earnings (f) 18.9 20.5 22.1 23.6
Price / 2000E Earnings (f) 17.1 18.5 19.9 21.3
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Public market comparables consist of Federated Investors, John Nuveen,
Eaton Vance Corp., BlackRock Inc., Neuberger Berman and Gabelli Asset
Mgmt.
(b) Price as of close (1/25/00): $11.0625
(c) Price as of close (1/19/00): $10.875
(d) Price as of close (12/27/99): $8.1875
(e) Price prior to Parent ratings downgrade announcement (8/9/99): $16.125
(f) Based on management forecasts of $0.95 and $1.06 for 1999 and 2000,
respectively, and 13.97 million shares outstanding.
(g) Cumulative weighted average price from 12/16/97 to 1/25/00.
<PAGE>
PROJECT SPIRIT
SUMMARY COMPONENT VALUATION
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
2000E P/2000E MULTIPLE IMPLIED
BUSINESS LINE NET INCOME MEDIAN VALUATION VALUATION RANGE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL
Unaffiliated AUM (a) $ 7.8 9.1 x -- 11.1 x $ 70.7 -- $ 86.5
Affiliated AUM (a) 2.4 9.1 -- 11.1 21.6 -- 26.3
Mortgage (b) 4.7 7.3 -- 8.9 34.0 -- 41.5
------- ------------------ ----------------------
Total C. Co. $ 14.8 8.5 x -- 10.4 x $ 126.3 -- $ 154.3
PER SHARE - TOTAL
Unaffiliated AUM (a) $ 0.55 9.1 x -- 11.1 x $ 5.05 -- $ 6.18
Affiliated AUM (a) 0.17 9.1 -- 11.1 1.54 -- 1.88
Mortgage (b) 0.33 7.3 -- 8.9 2.43 -- 2.97
------- ------------------ ----------------------
- ---------------------------------------------------------------------------------------------------------
Total C. Co. $ 1.06 8.5 x -- 10.4 x $ 9.02 -- $ 11.02
- ---------------------------------------------------------------------------------------------------------
Premium / (Discount) to Market (18.5%) (0.4%)
- ---------------------------------------------------------------------------------------------------------
PER SHARE - UNAFFILIATED BUSINESSES
Unaffiliated AUM (a) $ 0.55 9.1 x -- 11.1 x $ 5.05 -- $ 6.18
Mortgage (b) 0.33 7.3 -- 8.9 2.43 -- 2.97
------- ------------------ ----------------------
Total C. Co. $ 0.89 8.4 x -- 10.3 x $ 7.48 -- $ 9.14
------- ------------------ ----------------------
- ---------------------------------------------------------------------------------------------------------
Premium / (Discount) to Market (32.4%) (17.4%)
- ---------------------------------------------------------------------------------------------------------
</TABLE>
NB Financial information for 2000 provided by management.
(a) Represents median of P/2000E estimates for an index of comparable asset
management companies (JNC, FII, EV, NEU, BLK, GBL).
(b) Represents median of P/2000E estimates for an index of comparable mortgage
companies (CCR, IRWN, RBMG).
<PAGE>
PROJECT SPIRIT
PUBLIC MARKET VALUATION
FINANCIAL INFORMATION FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1999 UNLESS
OTHERWISE NOTED.
(Dollars in millions, except per share data)
<TABLE>
<CAPTION>
52 WEEKFIRM FIRM VALUE
MKT. ------------------ AS % OF
CAP. PRICE (c) HIGH LOW AUM AUM (d)
---- --------- ---- --- --- -------
<S> <C> <C> <C> <C> <C> <C>
C Co. (Whole Company)(a) $ 155 $11.06 $18.75 $ 6.75 $ 33,300 0.2%
C Co. (Unaffiliated Operations)(a) $ 155 $11.06 $18.75 $ 6.75 $ 21,700 0.4%
SELECTED C-CORPORATIONS
Federated Investors, Inc. $1,641 $19.81 $21.19 $15.31 $115,213 1.3%
Eaton Vance Corporation (b) 1,489 41.50 45.00 18.69 40,900 3.5
Neuberger Berman Inc. 1,260 25.19 32.25 23.63 51,456 2.4
BlackRock Inc. 1,102 17.25 19.38 12.50 148,100 0.8
John Nuveen 1,077 34.56 43.69 34.31 58,252 1.7
Gabelli Asset Management Inc. 493 16.56 18.75 13.06 18,629 2.4
<CAPTION>
----------------------------------------
<S> <C> <C>
High $148,100 3.5%
Median 54,854 2.1
Low 18,629 0.8
----------------------------------------
<CAPTION>
---------------------------------------------------------------
Implied Price Per Share: (Whole Company)
<S> <C> <C>
High -- $84.09
Median -- 49.07
Low -- 19.93
---------------------------------------------------------------
<CAPTION>
---------------------------------------------------------------
Implied Price Per Share: (Unaffiliated Operations)
<S> <C> <C>
High -- $54.80
Median -- 31.98
Low -- 12.99
---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FIRM VALUE MARKET CAP.
AS A MULTIPLE OF: AS A MULTIPLE OF: IBES IBES
----------------- --------------------------------- 99-00 L-T
LTM LTM LTM CALENDAR: GROWTH GROWTH
REV. EBITDA NET.INC. 99EE (e) 00EE (e) RATE RATE
---- ------ -------- -------- -------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
C Co. (Whole Company)(a) 0.9 x 3.3 x 11.6 x 11.6 x 10.5 x 10.9% 18.0%
C Co. (Unaffiliated Operations)(a) 1.1 x 4.1 x 14.1 x 14.1 x 12.5 x NA NA
SELECTED C-CORPORATIONS
Federated Investors, Inc. 2.6 x 5.7 x 14.5 x 12.4 x 10.3 x 20.0 x 15.5 x
Eaton Vance Corporation (b) 4.0 6.4 16.0 14.4 12.0 20.4 20.0
Neuberger Berman Inc. 1.7 3.9 7.2 9.1 8.2 11.6 NA
BlackRock Inc. 2.9 10.1 23.5 17.5 14.6 20.1 NA
John Nuveen 3.0 5.4 9.7 11.0 9.9 10.3 10.0
Gabelli Asset Management Inc. 2.7 5.9 12.0 11.0 9.9 11.0 15.0
<CAPTION>
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
4.0 x 10.1 x 23.5 x 17.5 x 14.6 x 20.4 x 20.0 x
2.8 5.8 13.2 11.7 10.1 15.8 15.3
1.7 3.9 7.2 9.1 8.2 10.3 10.0
-------------------------------------------------------------------------------
<CAPTION>
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$26.08 $18.07 $22.37 $16.66 $15.39
18.47 10.45 12.59 11.14 10.69
11.38 7.06 6.89 8.65 8.60
-------------------------------------------------------------------------------
<CAPTION>
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$21.39 $14.43 $18.39 $13.70 $12.95
15.15 8.35 10.35 9.16 9.00
9.33 5.64 5.66 7.11 7.24
-------------------------------------------------------------------------------
</TABLE>
N.B. Financial data excludes all non-recurring and extraordinary items.
(a) C Co. data for the twelve months ended December 31, 1999.
(b) Eaton Vance data for the twelve months ended October 31, 1999.
(c) Share prices as of 1/25/2000.
(d) Firm value represents market capitalization plus debt and minority
interest less cash.
(e) Earnings estimates from IBES as of 1/25/2000.
<PAGE>
PROJECT SPIRIT
PUBLIC MARKET VALUATION
OPERATING STATISTICS FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1999 UNLESS
OTHERWISE NOTED.
<TABLE>
<CAPTION>
LTM PROFITABILITY STATISTICS
-----------------------------------------------------------
COMP. MARGIN (%): AS % OF AUM:
ADV./ EXP./ ----------------- --------------
TOTAL TOTAL NET TOTAL ADV.
REV. REV. EBITDA INC. REV. REV.
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
C Co. (a) 81.8% 47.8% 27.6% 14.6% 0.3% 0.2%
SELECTED C-CORPORATIONS
Federated Investors, Inc. 95.1% 26.0% 43.8% 19.7% 0.5% 0.5%
Eaton Vance Corporation (b) 55.2 19.0 62.3 25.9 0.9 0.5
Neuberger Berman Inc. 64.6 38.9 44.5 24.2 1.4 0.9
John Nuveen 87.4 28.0 50.7 27.7 0.6 0.5
BlackRock Inc. 92.3 38.4 30.8 14.1 0.3 0.3
Gabelli Asset Management Inc. 91.2 44.9 46.6 25.5 0.9 0.8
- ---------------------------------------------------------------------------------------------------
HIGH 95.1% 44.9% 62.3% 27.7% 1.4% 0.9%
MEDIAN 89.3 33.2 45.6 24.9 0.7 0.5
LOW 55.2 19.0 30.8 14.1 0.3 0.3
- ---------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ASSETS UNDER MANAGEMENT
-------------------------------------------------------------
CLIENT TYPE ASSET TYPE REGION
----------------- ---------------- ----------------
RETAIL INST'L EQUITY FI DOM. INT'L
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
C Co. (a) -- 100.0% 8.8% 91.2% 100.0% --
SELECTED C-CORPORATIONS
Federated Investors, Inc. 88.0% 12.0% 15.0% 85.0% 98.0% 2.0%
Eaton Vance Corporation (b) 77.0 23.0 39.0 61.0 100.0 --
Neuberger Berman Inc. 37.0 63.0 76.0 24.0 99.6 0.4
John Nuveen 66.7 33.3 25.1 74.9 100.0 --
BlackRock Inc. 39.9 60.1 10.3 89.7 98.0 2.0
Gabelli Asset Management Inc. 50.3 49.7 88.0 12.0 100.0 --
- -----------------------------------------------------------------------------------------------
HIGH 88.0% 63.0% 88.0% 89.7% 100.0% 2.0%
MEDIAN 58.5 41.5 32.0 68.0 99.8 0.2
LOW 37.0 12.0 10.3 12.0 98.0 --
- -----------------------------------------------------------------------------------------------
</TABLE>
N.B. Financial data excludes all non-recurring and extraordinary items.
(a) C Co. data for the twelve months ended December 31, 1999.
(b) Eaton Vance data for the twelve months ended October 31, 1999.
<PAGE>
PROJECT SPIRIT
PRECEDENT TRANSACTIONS
($ in millions)
<TABLE>
<CAPTION>
ASSETS
DATE TRANSACTION UNDER
ANNOUNCED ACQUIROR TARGET VALUE MGMT
- ---------- -------- ------ ----------- -----
<S> <C> <C> <C> <C>
1999
11/05/99 Allianz AG PIMCO Advisors $3,220.0 $256,000
05/13/99 Wachovia Offitbank 200.0 10,800
1998
10/06/98 First Republic Trainer Wortham $29.1 $2,500
05/08/98 Robeco Group Weiss Peck & Greer 509.0 16,000
04/29/98 Nationwide Financial Morley Financial 32.1 9,400
1997
06/01/97 Chevy Chase Bank ASB Capital Management $31.1 4,500
02/27/97 Phoenix Duff and Phelps GMG/Seneca 54.0 4,000
01/16/97 Lincoln National Corporation Voyageur Fund Managers 69.0 2,800
1996
07/16/96 John Nuveen Company Flagship Resources $70.0 $4,400
06/24/96 Morgan Stanley Van Kampen/American Capital 1,175.0 47,000
04/15/96 New England Investment Cos. VNSM 19.8 1,580
04/01/96 Robeco Group Smith Graham & Co. 13.0 1,719
1995
10/17/95 Oppenheimer Management Rochester Funds $100.3 $2,900
07/05/95 MassMutual David L. Babson 85.0 5,743
06/29/95 Morgan Stanley Miller Anderson & Sherrard 350.0 33,000
03/27/95 Nicholas Applegate Criterion Capital 58.0 10,000
1994
06/17/94 PNC Bank BlackRock Financial Management $240.0 $23,400
</TABLE>
<TABLE>
<CAPTION>
PRICE/ PRICE/
DATE PRICE/ LTM LTM
ANNOUNCED AUM REVENUES EBITDA COMMENT
- ---------- ----- -------- ------ -------
<S> <C> <C> <C> <C>
1999
11/05/99 1.3 % 4.9 x 15.2 x 83% institutional, 67% fixed-income assets
05/13/99 1.9 4.6 21.1 75% high net worth, 100% fixed-income assets
1998
10/06/98 1.2 % 3.2 x 8.0 x 98% separate account
05/08/98 3.2 NA NA 92% institutional, 58% fixed-income assets
04/29/98 0.3 2.5 NA Primarily fixed-income assets (exact data N/A)
1997
06/01/97 0.7 % 2.1 x 11.8 x Primarily institutional (exact data N/A)
02/27/97 1.4 3.4 11.0 99% institutional, 60% fixed-income assets
01/16/97 2.5 3.6 8.8 98% fixed-income assets
1996
07/16/96 1.6 % 3.3 x 8.1 x Primarily fixed-income assets (exact data N/A)
06/24/96 2.5 3.8 10.0 64% fixed-income assets
04/15/96 1.3 3.2 NA 100% separate account, 77% fixed-income assets
04/01/96 0.8 3.5 NA 98% institutional, 100% fixed-income assets
1995
10/17/95 3.5 % 5.2 x NA 100% fixed-income assets
07/05/95 1.5 3.6 NA 90% institutional, 51% fixed-income assets
06/29/95 1.1 3.5 NA 80% institutional, 60% fixed-income assets
03/27/95 0.6 2.0 NA 100% institutional, 100% fixed-income assets
1994
06/17/94 1.0 % 4.3 x 8.2 x 65% institutional, 100% fixed-income assets
-------------------------------------
HIGH 3.5 % 5.2 x 21.1 x
MEDIAN 1.3 3.5 10.0
LOW 0.3 2.0 8.0
======================================
IMPLIED C CO. PRICE PER SHARE (a):
Reference Data for Whole Company
$33,300 $90.9 $25.1
HIGH $82.44 $33.90 $37.93
MEDIAN 29.98 22.61 18.05
LOW 8.14 13.01 14.36
=====================================
IMPLIED C CO. PRICE PER SHARE (a):
Reference Data for Unaffiliated Operations
$21,700 $74.6 $20.1
HIGH $53.72 $27.80 $30.30
MEDIAN 19.54 18.54 14.42
LOW 5.30 10.67 11.47
---------------------------------------
</TABLE>
(a) Based on 13.97 million diluted shares outstanding as of December 31, 1999.
NA - Not Available.
<PAGE>
PROJECT SPIRIT
PREMIUM ANALYSIS: GOING PRIVATE TRANSACTIONS
PREMIUMS PAID TO NON-CONTROL PUBLIC INTEREST IN A GOING PRIVATE TRANSACTION,
1995 TO JANUARY 25, 2000
<TABLE>
<CAPTION>
1-MONTH MARKET PREMIUM 1-DAY MARKET PREMIUM
---------------------- ----------------------
NUMBER OF IMPLIED C CO. IMPLIED C CO.
TRANSACTIONS MEDIAN PRICE (a) MEDIAN PRICE (b)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CASH CONSIDERATION 77 25.0% $10.23 19.7% $13.17
STOCK CONSIDERATION 14 16.0 9.50 4.6 11.51
MIXED CONSIDERATION 4 18.0 9.66 17.2 12.89
- ---------------------------------------------------------------------------------------------------------------------
MEDIAN 24.2 10.17 18.9 13.07
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
ALL GOING PRIVATE TRANSACTIONS, 1995 TO JANUARY 25, 2000
<TABLE>
<CAPTION>
1-MONTH PRIOR 1-DAY PRIOR
------------------------ ------------------------
NUMBER OF MEDIAN IMPLIED C CO. MEDIAN IMPLIED C CO.
TRANSACTIONS PREMIUM PRICE (a) PREMIUM PRICE (b)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TRANSACTION VALUE (greater than) $500 MILLION 10 20.7% $ 9.89 21.8% $13.39
TRANSACTION VALUE $100-499 MILLION 42 24.9 10.23 17.2 12.89
TRANSACTION VALUE (less than) $99 MILLION 43 25.0 10.23 19.0 13.09
- ---------------------------------------------------------------------------------------------------------------------
MEDIAN 24.2 10.17 18.9 13.07
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1-MONTH PRIOR 1-DAY PRIOR
----------------------- -----------------------
MEDIAN IMPLIED C CO. MEDIAN IMPLIED C CO.
PREMIUM PRICE (a) PREMIUM PRICE (b)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
25TH PERCENTILE 16.0% $ 9.50 11.1% $12.23
50TH PERCENTILE 24.2 10.17 18.9 13.07
75TH PERCENTILE 40.2 11.48 31.7 14.49
- -----------------------------------------------------------------------------------
</TABLE>
Source: Securities Data Corp.
(a) Based on closing price of $8.188 on 12/27/99.
(b) Based on closing price of $11.000 on 1/24/00.
<PAGE>
PROJECT SPIRIT
DISCOUNTED CASH FLOW ANALYSIS
($ in millions)
<TABLE>
<S> <C>
Discount Rate 12.0 %
Terminal Value Multiple 9.0 x
</TABLE>
<TABLE>
<CAPTION>
MANAGEMENT PROJECTED
--------------------------------- ---------------
CAGR
1999 2000 2001 2002 2003 2004 00-04
<S> <C> <C> <C> <C> <C> <C> <C>
Net Income $ 13.3 $14.8 $17.6 $20.9 $24.6 $ 28.7 18.1 %
Plus: Amortization 2.6 2.7 2.9 3.1 3.3 3.5 6.3
Less: Working Capital Needs 2.0 2.0 2.4 2.8 3.4 4.0 18.1
------ ----- ----- ----- ----- ------ ------
Interim Cash Flows 13.9 15.5 18.2 21.2 24.5 28.2 16.1 %
Terminal Value (a) 0.0 0.0 0.0 0.0 0.0 296.0 NA
------ ----- ----- ----- ----- ------ ------
Total Cash Flows $ 13.9 $15.5 $18.2 $21.2 $24.5 $324.2 NA
====== ===== ===== ===== ===== ====== ======
NET PRESENT VALUE (AT 1/1/00) $242.9
PER SHARE (b): 17.39
</TABLE>
<TABLE>
<CAPTION>
MULTIPLE OF 2005 EARNINGS (b)
----------------------------------------------
7.0 x 8.0 x 9.0 x 10.0 x 11.0 x
----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10.0% $15.90 $17.37 $18.83 $20.29 $21.75
DISCOUNT 12.0 14.72 16.05 17.39 18.72 20.06
RATE 14.0 13.64 14.86 16.09 17.31 18.53
16.0 12.67 13.79 14.91 16.03 17.15
</TABLE>
<TABLE>
<CAPTION>
MULTIPLE OF 2005 EARNINGS (b)
----------------------------------------------
7.0 x 8.0 x 9.0 x 10.0 x 11.0 x
----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
6.0% $ 9.65 $10.41 $11.17 $11.93 $12.69
NET INCOME 10.0 11.11 12.03 12.96 13.88 14.81
GROWTH RATE 14.0 12.77 13.88 15.00 16.11 17.23
18.0 14.71 16.05 17.39 18.73 20.07
</TABLE>
N.B. Based on management projections for 1999-2002. Salomon Smith Barney
projections for 2003-2004.
(a) Based on a 9.0 x multiple on 2005 earnings. Assumes a growth rate of 16.1%
for 2004-2005.
(b) Assumes 14.0 million diluted shares.
<PAGE>
PROJECT SPIRIT
DISCOUNTED CASH FLOW ANALYSIS
($ in millions)
AFFILIATED BUSINESSES
<TABLE>
<CAPTION>
MANAGEMENT PROJECTED
----------------------- --------------
2000 2001 2002 2003 2004
<S> <C> <C> <C> <C> <C>
Interim Cash Flows $ 2.1 $ 2.4 $ 2.9 $ 3.4 $ 3.9
Terminal Value (a) 0.0 0.0 0.0 0.0 41.1
----- ----- ----- ----- -----
Total Cash Flows $ 2.1 $ 2.4 $ 2.9 $ 3.4 $45.0
----- ----- ----- ----- -----
</TABLE>
<TABLE>
<CAPTION>
MULTIPLE OF 2005 EARNINGS (b)
------------------------------------------------------
7.0 x 8.0 x 9.0 x 10.0 x 11.0 x
------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10.0% $ 2.19 $ 2.39 $ 2.60 $ 2.80 $ 3.00
DISCOUNT 12.0 2.03 2.21 2.40 2.58 2.77
RATE 14.0 1.88 2.05 2.22 2.39 2.56
16.0 1.74 1.90 2.05 2.21 2.36
</TABLE>
UNAFFILIATED BUSINESSES
<TABLE>
<CAPTION>
MANAGEMENT PROJECTED
---------- ------------------------------------
2000 2001 2002 2003 2004
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Interim Cash Flows $ 8.1 $ 9.5 $ 11.1 $ 13.4 $ 16.0
Terminal Value (a) 0.0 0.0 0.0 0.0 171.0
----- ----- ------ ------ -------
Total Cash Flows $ 8.1 $ 9.5 $ 11.1 $ 13.4 $ 187.0
----- ----- ------ ------ -------
</TABLE>
<TABLE>
<CAPTION>
MULTIPLE OF 2005 EARNINGS (b)
-------------------------------------------------
7.0 x 8.0 x 9.0 x 10.0 x 11.0 x
-------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10.0% $8.96 $9.80 $10.65 $11.49 $12.33
DISCOUNT 12.0 8.28 9.05 9.82 10.59 11.37
RATE 14.0 7.67 8.38 9.08 9.79 10.49
16.0 7.12 7.76 8.41 9.06 9.71
</TABLE>
MORTGAGE OPERATIONS
<TABLE>
<CAPTION>
MANAGEMENT PROJECTED
---------- ------------------------------------
2000 2001 2002 2003 2004
<S> <C> <C> <C> <C> <C>
Interim Cash Flows $ 5.4 $ 6.3 $ 7.2 $ 7.8 $ 8.3
Terminal Value (a) 0.0 0.0 0.0 0.0 83.9
------ ------ ------ ------ ------
Total Cash Flows $ 5.4 $ 6.3 $ 7.2 $ 7.8 $ 92.3
------ ------ ------ ------ ------
</TABLE>
<TABLE>
<CAPTION>
MULTIPLE OF 2005 EARNINGS (b)
--------------------------------------------------
7.0 x 8.0 x 9.0 x 10.0 x 11.0 x
--------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10.0% $ 4.76 $ 5.17 $ 5.59 $ 6.00 $ 6.42
DISCOUNT 12.0 4.41 4.79 5.17 5.55 5.93
RATE 14.0 4.10 4.44 4.79 5.14 5.48
16.0 3.81 4.13 4.45 4.76 5.08
</TABLE>
<PAGE>
PROJECT SPIRIT
3 ADDITIONAL VALUATION CONSIDERATIONS
<PAGE>
PROJECT SPIRIT
VALUATION CONSIDERATIONS
In determining the appropriate valuation for C Co. within the ranges generated
by the preceding analyses, a number of distinguishing factors may help C Co. to
realize an optimal valuation
- - Full Value Recognition for All Retained Assets Under Management
- In particular, RGA's assets may not be pulled
- Opportunity for cost savings associated with affiliate assets not retained
- Also eliminates portion of these same costs currently allocated to
unaffiliated segment
- - Excess capacity
- - Opportunities for Further Growth on Mortgages
- - Proven Track Record
- - Experienced Management
- - Unrealized value of Balance Sheet
- Excess Cash estimated at $25 million
- No debt
- - Hidden Assets in Private Equity Carried Interest Yet to be Accrued
- $60 million Capital Committed Fund III to realize $2-3 million in interest
income through 2003
- $225 million Capital Committed Fund V to realize $8-10 million in interest
income beginning 2003
<PAGE>
PROJECT SPIRIT
VALUATION CONSIDERATIONS
PUBLIC MARKET TRADING MULTIPLE ANALYSIS
Valuation should be comparable to or higher than the following public firms due
to:
FEDERATED (FII)
- - Largely a money market fund manager; C Co.'s fixed income orientation commands
higher management fees
- - Federated total weighted average management fee = 21.2 bps
- Average Managed Assets Breakdown ($ in billions)
- Money Market $71.9
- Fixed Income $15.9
- Equity Funds $18.3
- - C Co.'s sub-advised assets are not as vulnerable to flight due to acquisitions
- Bank Trust: $58.9 billion or 52.8% of total managed assets (as of most
recent data from the 12/31/1998 10K)
<TABLE>
<S> <C>
FIRM VALUE/
AUM: 1.3%
LTM REV: 2.6X
LTM EBITDA: 5.7X
MARKET CAP/
LTM NET INC.: 14.5X
99E: 12.4X
00E: 10.3X
</TABLE>
EATON VANCE (EV)
- - For most of 1999, valuation levels were reduced due to confusion over recent
special charges and accounting changes; according to EV, these items are a
thing of the past and will not cloud future earnings
- The market has valued EV based on these artificially reduced earnings
- These accounting changes resulted in an expense of $101.3 million in
non-recurring sales commission expenses, from the 4th quarter of 1998
through the fiscal year ended October 31, 1999
- The market currently applies a more favorable valuation which has resulted
in multiple expansion
<TABLE>
<S> <C>
FIRM VALUE/
AUM: 3.5%
LTM REV: 4.0X
LTM EBITDA: 6.4X
MARKET CAP/
LTM NET INC.: 16.0X
99E: 14.4X
00E: 12.0X
</TABLE>
<PAGE>
PROJECT SPIRIT
PREMIUM ITEMS FOR CONSIDERATION
PUBLIC MARKET TRADING MULTIPLE ANALYSIS
NEUBERGER BERMAN (NEU)
- - Unlike NEU, C Co. has positive asset growth momentum ($ in billions)
<TABLE>
<CAPTION>
NEU's C Co.'s
Net Flows Net Flows
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C>
($1.2) ($3.5) $4.1 $3.7 (despite $4.6 loss from GA)
</TABLE>
<TABLE>
<S> <C>
FIRM VALUE/
AUM: 2.4%
LTM REV: 1.7X
LTM EBITDA: 3.9X
MARKET CAP/
LTM NET INC.: 7.2X
99E: 9.1X
00E: 8.2X
</TABLE>
JOHN NUVEEN (JNC)
- - $40.2 billion or 69% of JNC's total assets under management are focused on the
muni sector, a very out of favor asset class ($ in billions)
<TABLE>
<CAPTION>
National Muni C Co.'s Total
Net Flows Net Flows
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C>
$7.7 ($3.5) $4.1 $3.7
</TABLE>
<TABLE>
<S> <C>
FIRM VALUE/
AUM: 1.7%
LTM REV: 3.0X
LTM EBITDA: 5.4X
MARKET CAP/
LTM NET INC.: 9.7X
99E: 11.0X
00E: 9.9X
</TABLE>
<PAGE>
PROJECT SPIRIT
PREMIUM ITEMS FOR CONSIDERATION
PUBLIC MARKET TRADING MULTIPLE ANALYSIS
BLACKROCK (BLK)
- - BlackRock is an ideal comparable for C Co.'s perspective and would
represent a favorable valuation
- Sophisticated institutional fixed income management
- Historically had positive net flows
- ($0.4) in 1999 (as of November 30th)
- $8.4 in 1998
- $1.9 in 1997
<TABLE>
FIRM VALUE/
<S> <C>
AUM: 0.8%
LTM REV: 2.9X
LTM EBITDA: 10.1X
MARKET CAP/
LTM NET INC.: 23.5X
99E: 17.5X
00E: 14.6X
</TABLE>
<PAGE>
PROJECT SPIRIT
PREMIUM ITEMS FOR CONSIDERATION
PUBLIC MARKET TRADING MULTIPLE ANALYSIS
GABELLI ASSET MANAGEMENT (GBL)
- - C Co. is not as reliant on a single individual (Mario), i.e. less event
risk
- - Business is more diversified (more income contributing segments, i.e.
mortgages, research and private equity)
<TABLE>
% of Total Revenues
-------------------
<S> <C>
- Asset Management 44.0%
- Private Equity 9.7%
- Mortgage 28.0%
- Research 16.5%
- Other 1.8%
</TABLE>
- - Whereas Gabelli only has two businesses
<TABLE>
% of Total Revenues
-------------------
<S> <C>
- Asset Management 84.2%
- Broker/Dealer 6.3%
- Other 9.5%
</TABLE>
<TABLE>
FIRM VALUE/
<S> <C>
AUM: 2.4%
LTM REV: 2.7X
LTM EBITDA: 5.9X
MARKET CAP/
LTM NET INC.: 12.0X
99E: 11.0X
00E: 9.9X
</TABLE>
<PAGE>
PROJECT SPIRIT
VALUATION CONSIDERATIONS
PRECEDENT TRANSACTION ANALYSIS
ALLIANZ ACQUISITION OF PIMCO (11/1/99)
COMPARABLE TO C CO. :
- - Primarily fixed-income assets (66% of $256 billion)
- - Strong AUM growth (26% 5-year CAGR) of fixed-income affiliate Pacific
Investments ($181 billion)
- - Both institutional ($88.6 billion total) and retail ($120.2 billion)
segments have had net inflows each year since 1995
- - Strong performance
- - 92.6% of retail assets rated 4 or 5 stars by Morningstar
- - 70.0% of institutional assets in top 2 quintiles by Investworks
C CO. SHOULD BE VALUED AT LEAST AS HIGH BECAUSE:
- - Fixed-income AUM growth driven by increase in market share in the
slow-growing defined benefit market
- - Largest equity affiliate (Oppenheimer Capital -- $56 billion) has
historically poor performance
<TABLE>
TRANSACTION MULTIPLES:
FIRM VALUE /
<S> <C>
EBITDA: 15.2X
REVENUES: 4.9X
AUM: 1.3%
</TABLE>
IMPLIED C CO.
VALUATION RANGE:
$382-446MM
<PAGE>
PROJECT SPIRIT
VALUATION CONSIDERATIONS
PRECEDENT TRANSACTION ANALYSIS
WACHOVIA ACQUISITION OF OFFITBANK (5/13/99)
COMPARABLE TO C CO.:
- - Medium-sized ($10.8 billion AUM) fixed income manager
- - Focused on separate account management with focused niche
- - Large average account size (95% of assets for accounts $5 million or
greater)
C CO. SHOULD BE VALUED AT LEAST AS HIGH BECAUSE:
- - Arguably faces more competition within market niche than C Co.
<TABLE>
TRANSACTION MULTIPLES:
FIRM VALUE/
<S> <C>
EBITDA: 21.1X
REVENUES: 4.6X
AUM: 1.9%
</TABLE>
IMPLIED C CO.
VALUATION RANGE:
$419-633MM
WEST LB ACQUISITION OF CRITERION CAPITAL (4/27/99)
C CO. SHOULD BE VALUED AT LEAST AS HIGH BECAUSE:
- - No AUM growth since acquisition
<TABLE>
TRANSACTION
MULTIPLES*:
FIRM VALUE/
<S> <C>
EBITDA: N/A
REVENUES: 2.0X
AUM: 0.6%
</TABLE>
IMPLIED C CO.
VALUATION RANGE:
$181-200MM
* Based on Nicholas-Applegate acquisition of Criterion in 1995
<PAGE>
PROJECT SPIRIT
VALUATION CONSIDERATIONS
PRECEDENT TRANSACTION ANALYSIS
PHOENIX ACQUISITION OF GMG/SENECA (2/27/97)
COMPARABLE TO C CO.:
- - Fixed income orientation
- - Primarily separate account management
- - Manage assets for insurance parent's (PHL) general account
C CO. SHOULD BE VALUED AT LEAST AS HIGH BECAUSE:
- - Small size ($4 billion at acquisition)
<TABLE>
TRANSACTION MULTIPLES:
FIRM VALUE/
<S> <C>
EBITDA: 11.0X
REVENUES: 3.4X
AUM: 1.4%
</TABLE>
IMPLIED C CO.
VALUATION RANGE:
$276-466MM
LINCOLN NATIONAL ACQUISITION OF VOYAGEUR (1/16/97)
COMPARABLE TO C CO.:
- - Fixed Income orientation (98% of $2.6 billion)
C CO. SHOULD BE VALUED AT LEAST AS HIGH BECAUSE:
- - Small size: only $2.6 billion AUM
- - Muni focus: $1.9 billion (73%) in muni funds, an out-of-favor sector
- - AUM divided across 30 funds, very few actually profitable
<TABLE>
TRANSACTION MULTIPLES:
FIRM VALUE/
<S> <C>
EBITDA: 8.8X
REVENUES: 3.6X
AUM: 2.5%
</TABLE>
IMPLIED C CO.
VALUATION RANGE:
$221-833MM
<PAGE>
PROJECT SPIRIT
VALUATION CONSIDERATIONS
PRECEDENT TRANSACTION ANALYSIS
JOHN NUVEEN ACQUISITION OF FLAGSHIP (7/16/96)
COMPARABLE TO C CO.:
- - Fixed Income orientation (90% of $4.5 billion)
C CO. SHOULD BE VALUED AT LEAST AS HIGH BECAUSE:
- - Small size -- Flagship AUM totaled only $4.5 billion, $4.0 billion of
which was tax-exempt fixed income MFs, an out-of-favor sector
- - Despite Flagship's reputation, only a small HNW presence (approximately
$0.25 billion under management) at the time of the acquisition:
- Only 4% of its $19.3 million of 1995 total revenue, as a result of
its low fees charged (37 bps of average AUM for HNW clients)
- - Overall management fees charged were quite low compared to industry
averages:
- Fixed-income portfolio management fees: 19.7 bps
- - Experienced negative net flows before acquisition (-$36 million in 1995)
<TABLE>
TRANSACTION MULTIPLES:
FIRM VALUE/
<S> <C>
EBITDA: 8.1X
REVENUES: 3.3X
AUM: 1.6%
</TABLE>
IMPLIED C CO.
VALUATION RANGE:
$203-533MM
<PAGE>
PROJECT SPIRIT
VALUATION CONSIDERATIONS
PRECEDENT TRANSACTION ANALYSIS
MORGAN STANLEY ACQUISITION OF VKAC (6/24/96)
COMPARABLE TO C CO.:
- - Van Kampen historically known a retail fixed-income manager
- VKAC had 73% fixed-income (37% tax exempt. 36% taxable)
- - Comparable size ($55.1 billion AUM, or $42.4 billion, excluding Unit
Investment Trusts)
TRANSACTION MULTIPLES:
FIRM VALUE/
<TABLE>
<S> <C>
EBITDA: 10.0X
REVENUES: 3.8X
AUM: 2.5%
</TABLE>
IMPLIED C CO.
VALUATION RANGE:
$251-833MM
C CO. SHOULD BE VALUED AT LEAST AS HIGH BECAUSE:
- - Poor performance: 43% of VKAC's AUM in funds rated 2 stars by Morningstar, and
34% in funds rated 3 stars
- - 59% of VKAC's AUM were broker-sold mutual funds; while providing higher
management fees, also exposed it to swings in assets if performance issues
arose
- - 23% were unit investment trusts, which are low fee maintenance assets
<PAGE>
PROJECT SPIRIT
VALUATION CONSIDERATIONS
PRECEDENT TRANSACTION ANALYSIS
NEW ENGLAND ACQUISITION OF VNSM (4/15/96)
COMPARABLE TO C CO.:
- - Primarily fixed income ($1.08 billion of total - 68%)
C CO. SHOULD BE VALUED AT LEAST AS HIGH BECAUSE:
- - Small AUM ($1.58 billion)
- - Despite more favorable asset mix, low fees for client base
- Fees range from 30-50 bps (disclosed clients average 37.5 bps)
TRANSACTION MULTIPLES:
FIRM VALUE/
<TABLE>
<S> <C>
EBITDA: N/A
REVENUES: 3.2X
AUM: 1.3%
</TABLE>
IMPLIED C CO.
VALUATION RANGE:
$291-433MM
<PAGE>
PROJECT SPIRIT
VALUATION CONSIDERATIONS
DISCOUNTED CASH FLOW ANALYSIS
- - COMPANY PROJECTIONS ARE VERY CONSERVATIVE
- C Co. presented modest projections to M Co. at the time of the merger
- Ample capacity to expand business with existing infrastructure
- - DISCOUNT RATE OF 12% IS HIGH
- C Co. has no leverage, which makes betas of many comparables too high
- C Co.'s investment style is less volatile than equity products of higher
beta firms
- Multiple business segments diversify C Co. revenue stream, less dependent on
pure asset management
- - TERMINAL MULTIPLE OF 9.0x IS LOW
- Selected comparables currently trading at 9.4x operating cash flow (net
income plus depreciation and amortization), which does not incorporate any
control premium
- Universe of public asset managers currently trading at 12.2x operating cash
flow
<PAGE>
PROJECT SPIRIT
APPENDIX
<PAGE>
PROJECT SPIRIT
A. PROJECTED FINANCIAL STATEMENTS
<PAGE>
HISTORICAL AUM AND REVENUE BREAKDOWN Project Spirit
AFFILIATED VS. UNAFFILIATED BUSINESSES
($ in millions)
<TABLE>
<CAPTION>
As of December 31,
--------------------------------------------------------
1996 1997 1998 1999 CAGR (a)
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
Affiliated Assets Under Management $10,600 $14,200 $ 17,200 $11,600 3.1%
Unaffiliated Assets Under Management 10,100 11,800 12,400 21,700 29.0
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS UNDER MANAGEMENT $20,700 $26,000 $ 29,600 $33,300 17.2%
- ---------------------------------------------------------------------------------------------------------------------------
Affiliated Revenues $14.3 $ 17.2 $20.3 N/A N/A
Unaffiliated Revenues 38.3 47.8 59.3 N/A N/A
Other Revenues 1.1 1.6 2.6 N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES $53.7 $ 66.6 $82.2 $90.9 19.2%
- ---------------------------------------------------------------------------------------------------------------------------
Affiliated Pre-Tax Income $5.7 $ 8.3 $13.2 N/A N/A
Unaffiliated Pre-Tax Income 5.4 6.9 9.5 N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL PRE-TAX INCOME $11.1 $ 15.1 $22.7 $22.2 26.2%
- ---------------------------------------------------------------------------------------------------------------------------
Affiliated
Pre-Tax Income/Revenues 39.6% 48.0% 65.0% N/A N/A
Pre-Tax Income/Average AUM 1.5 bp 1.7 bp 2.1 bp N/A N/A
Unaffiliated
Pre-Tax Income/Revenues 14.1% 14.4% 16.1% N/A N/A
Pre-Tax Income/Average AUM 1.4 bp 1.6 bp 2.0 bp N/A N/A
</TABLE>
(a) Represents a CAGR from 1996-1999.
<PAGE>
PROJECT SPIRIT
PROJECTED INCOME STATEMENT - COMBINED OPERATIONS
($ in millions)
<TABLE>
<CAPTION>
Historical Management
------------------------------- -----------------------------
1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ----
REVENUES
<S> <C> <C> <C> <C> <C> <C>
Asset Mgmt. and Related Fees $33.4 $40.3 $39.8 $42.4 $46.6 $51.3
Mortgage Loans 16.1 22.4 25.6 23.7 26.7 29.8
Research Service 15.5 16.9 14.8 16.9 18.6 20.5
Other Income 1.6 2.6 10.7 18.7 20.0 21.6
----- ----- ----- ------ ------ ------
TOTAL REVENUES $66.6 $82.2 $90.9 $101.7 $111.9 $123.1
EXPENSES
Employee Compensation and Benefits 33.6 38.2 43.0 48.0 51.4 55.0
Amortization of Goodwill 3.0 2.6 2.6 2.7 2.9 3.1
Other Expenses (a) 14.6 18.4 22.8 25.8 27.6 29.5
----- ----- ----- ------ ------ ------
TOTAL EXPENSES $51.2 $59.2 $68.4 $76.5 $81.8 $87.6
OPERATING INCOME $15.4 $23.0 $22.5 $25.2 $30.1 $35.5
Operating Margin 23.2% 28.0% 24.7% 24.8% 26.9% 28.9%
Interest Expense 0.3 0.3 0.2 0.2 0.2 0.1
----- ----- ----- ------ ------ ------
PRE-TAX INCOME $15.1 $22.7 $22.2 $25.0 $29.9 $35.4
Taxes 6.2 9.6 8.9 10.2 12.3 14.5
----- ----- ----- ------ ------ ------
NET INCOME $ 8.9 $13.1 $13.3 $14.8 $17.6 $20.9
===== ===== ===== ===== ===== =====
Diluted EPS (b) $0.80 $0.93 $0.95 $1.06 $1.26 $1.49
Employee Comp./Total Revenues 50.5% 46.5% 47.3% 47.2% 45.9% 44.7%
Tax Rate 41.1 42.4 40.2 40.9 41.0 41.0
Assets Under Management $26,000 $29,600 $33,300 $38,335 $42,169 $46,385
Total Revenues as a % of Average AUM 0.26% 0.28% 0.29% 0.28% 0.28% 0.28%
</TABLE>
<TABLE>
<CAPTION>
Projected
------------------ CAGR
2003 2004 00-04
---- ---- -----
REVENUES
<S> <C> <C> <C>
Asset Mgmt. and Related Fees $56.4 $62.0 10.0%
Mortgage Loans 31.9 34.0 9.4
Research Service 22.5 24.8 10.0
Other Income 24.6 28.2 10.8
------ ------ ----
TOTAL REVENUES $135.4 $149.0 10.0%
EXPENSES
Employee Compensation and Benefits 60.5 66.5 8.5%
Amortization of Goodwill 3.3 3.5 6.3
Other Expenses (a) 29.9 30.3 4.1
------ ------ ----
TOTAL EXPENSES $93.7 $100.3 7.0%
OPERATING INCOME $41.7 $ 48.7 17.9%
Operating Margin 30.8% 32.7% 7.2
Interest Expense 0.1 0.1 (30.2)
------ ------ ----
PRE-TAX INCOME $41.6 $ 48.6 18.1%
Taxes 17.1 19.9 18.2
------ ------ ----
NET INCOME $24.6 $ 28.7 18.1%
===== ====== ====
Diluted EPS (b) $1.75 $ 2.05 18.1%
Employee Comp./Total Revenues 44.7% 44.7% ---
TAX RATE 41.0 41.0 ---
Assets Under Management $51,024 $56,126 10.0%
Total Revenues as a % of Average AUM 0.28% 0.28% ---
</TABLE>
N.B. Based on management projections for 2000-2002. Salomon Smith Barney
projections for 2003-2004.
(a) Includes occupancy and equipment costs, marketing and production costs and
professional services.
(b) Based on 13.97 million diluted shares outstanding.
<PAGE>
PROJECT SPIRIT
PROJECTED INCOME STATEMENT - AFFILIATED OPERATIONS
($in millions)
<TABLE>
<CAPTION>
Pro Forma Management
---------------------------------- ---------------------------------
1997 1998 1999 (a) 2000 2001 2002
---- ---- -------- ---- ---- ----
REVENUES
<S> <C> <C> <C> <C> <C> <C>
Asset Mgmt. and Related Fees $ 11.4 $ 14.5 $ 16.3 $ 15.1 $ 16.6 $ 18.3
Mortgage Loans 0.0 0.0 0.0 0.0 0.0 0.0
Research Service 0.0 0.5 0.0 0.0 0.0 0.0
Other Income 0.7 1.0 0.0 0.0 0.0 0.0
---------- ---------- ---------- ---------- ---------- ----------
TOTAL REVENUES $ 12.1 $ 16.1 $ 16.3 $ 15.1 $ 16.6 $ 18.3
EXPENSES
Employee Compensation and Benefits $ 4.8 $ 6.4 $ 6.5 $ 6.0 $ 6.7 $ 7.3
Amortization of Goodwill (b) 1.8 1.6 0.9 0.0 0.0 0.0
Other Expenses (c) 2.7 3.8 4.8 5.1 5.2 5.4
---------- ---------- ---------- ---------- ---------- ----------
TOTAL EXPENSES $ 9.3 $ 11.8 $ 12.2 $ 11.1 $ 11.9 $ 12.7
OPERATING INCOME $ 2.8 $ 4.3 $ 4.1 $ 4.0 $ 4.7 $ 5.6
Operating Margin 23.1 % 26.5 % 25.2 % 26.2 % 28.4 % 30.4 %
Interest Expense (b) 0.2 0.2 0.1 0.0 0.0 0.0
---------- ---------- ---------- ---------- ---------- ----------
PRE-TAX INCOME $ 2.6 $ 4.1 $ 4.0 $ 4.0 $ 4.7 $ 5.6
Taxes 1.1 1.7 1.6 1.6 1.9 2.3
---------- ---------- ---------- ---------- ---------- ----------
NET INCOME $ 1.5 $ 2.4 $ 2.4 $ 2.3 $ 2.8 $ 3.3
========== ========== ========== ========== ========== ==========
Diluted EPS (d) $ 0.14 $ 0.17 $ 0.17 $ 0.17 $ 0.20 $ 0.23
Employee Comp./Total Revenues 40.0 % 40.0 % 40.0 % 40.0 % 40.0 % 40.0 %
Tax Rate 41.1 42.3 40.7 40.9 41.0 41.0
Assets Under Management $ 14,200 $ 17,200 $ 11,600 $ 12,357 $ 13,011 $ 13,714
Total Revenues as a % of Average AUM 0.09 % 0.09 % 0.11 % 0.13 % 0.14 % 0.15 %
</TABLE>
<TABLE>
<CAPTION>
Projected CAGR
------------------------ -----
2003 2004 00-04
REVENUES
<S> <C> <C> <C>
Asset Mgmt. and Related Fees $ 20.1 $ 22.1 10.1 %
Mortgage Loans 0.0 0.0 NA
Research Service 0.0 0.0 NA
Other Income 0.0 0.0 NA
---------- ---------- ----
TOTAL REVENUES $ 20.1 $ 22.1 10.1 %
EXPENSES
Employee Compensation and Benefits $ 8.1 $ 8.9 10.1 %
Amortization of Goodwill (b) 0.0 0.0 NA
Other Expenses (c) 5.6 5.7 3.0
---------- ---------- ----
TOTAL EXPENSES $ 13.6 $ 14.6 7.0 %
Operating Income $ 6.5 $ 7.6 17.6 %
OPERATING MARGIN 32.3 % 34.1 % 6.8
Interest Expense (b) 0.0 0.0 NA
---------- ---------- ----
PRE-TAX INCOME $ 6.5 $ 7.6 17.6 %
Taxes 2.7 3.1 17.7
---------- ---------- ----
NET INCOME $ 3.8 $ 4.5 17.5 %
========== ========== ====
Diluted EPS (d) $ 0.27 $ 0.32 17.5 %
Employee Comp./Total Revenues 40.0 % 40.0 % --
Tax Rate 41.0 41.0 --
Assets Under Management $ 14,469 $ 15,281 5.5 %
Total Revenues as a % of Average AUM 0.17 % 0.18 % --
</TABLE>
N.B. Based on management assumptions.
(a) Annualized for the nine months ended September 30, 1999.
(b) Affiliated businesses assumed to have 0% of annual goodwill
amortization and interest expense beginning in 2000.
(c) Includes occupancy and equipment costs, marketing and production costs
and professional services.
(d) Based on 13.97 million diluted shares outstanding.
<PAGE>
PROJECT SPIRIT
PROJECTED INCOME STATEMENT - UNAFFILIATED OPERATIONS
($ in millions)
<TABLE>
<CAPTION>
PRO FORMA MGMT. PROJECTED
-------------------------- ---- -------------------------------------
1997 1998 1999 2000 2001 2002 2003 2004
---- ---- ---- ---- ---- ---- ---- ----
REVENUES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Mgmt. and Related Fees $ 22.0 $25.8 $23.4 $27.3 $30.0 $33.0 $36.3 $39.9
Mortgage Loans 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Research Service 15.5 16.4 14.8 16.9 18.6 20.5 22.5 24.8
Other Income 1.0 1.5 10.7 18.7 20.0 21.6 24.6 28.2
------- ----- ----- ----- ----- ----- ----- -----
TOTAL REVENUES $ 38.4 $43.7 $48.9 $62.9 $68.6 $75.0 $83.4 $92.8
EXPENSES
Employee Compensation and Benefits $ 20.6 $21.8 $24.3 $32.4 $33.9 $35.6 $39.5 $43.9
Amortization of Goodwill (a) 0.5 0.4 0.6 1.6 1.8 2.0 2.2 2.4
Other Expenses (b) 8.3 9.8 11.9 15.5 17.0 18.6 18.8 18.8
------- ----- ----- ----- ----- ----- ----- -----
TOTAL EXPENSES $ 29.4 $31.9 $36.9 $49.6 $52.8 $56.3 $60.5 $65.1
OPERATING INCOME $ 9.0 $11.8 $12.1 $13.3 $15.8 $18.7 $22.9 $27.8
Operating Margin 23.5 % 27.0 % 24.7 % 21.2 % 23.1 % 25.0 % 27.5 % 29.9 %
Interest Expense (a) 0.1 0.1 0.1 0.2 0.2 0.1 0.1 0.1
------- ----- ----- ----- ----- ----- ----- -----
PRE-TAX INCOME $ 8.9 $11.7 $12.0 $13.1 $15.6 $18.6 $22.8 $27.7
Taxes 3.7 5.0 4.8 5.4 6.4 7.6 9.4 11.4
------- ----- ----- ----- ----- ----- ----- -----
NET INCOME $ 5.3 $6.7 $7.2 $7.8 $9.2 $11.0 $13.5 $16.3
======= ==== ==== ==== ==== ===== ===== =====
Diluted EPS (c) $ 0.47 $0.48 $0.51 $0.55 $0.66 $0.78 $0.96 $1.17
Employee Comp./Total Revenues 53.6 % 49.8 % 49.6 % 51.5 % 49.5 % 47.5 % 47.4 % 47.3 %
Tax Rate 41.1 42.4 40.1 40.9 41.0 41.0 41.0 41.0
Assets Under Management $11,800 $12,400 $21,700 $25,978 $29,157 $32,672 $36,555 $40,846
Total Revenues as a % of Average AUM 0.33 % 0.35 % 0.29 % 0.26 % 0.25 % 0.24 % 0.24 % 0.24 %
</TABLE>
<TABLE>
<CAPTION>
CAGR
----
00-04
-----
<S> <C>
REVENUES
Asset Mgmt. and Related Fees 10.0 %
Mortgage Loans NA
Research Service 10.0
Other Income 10.8
-----
TOTAL REVENUES 10.2 %
EXPENSES
Employee Compensation and Benefits 7.9 %
Amortization of Goodwill (a) 10.0
Other Expenses (b) 4.9
-----
TOTAL EXPENSES 7.1 %
OPERATING INCOME 20.1 %
Operating Margin 9.0
Interest Expense (a) (30.2)
-----
PRE-TAX INCOME 20.5 %
Taxes 20.6
-----
NET INCOME 20.5 %
=====
Diluted EPS (c) 20.5 %
Employee Comp./Total Revenues --
Tax Rate --
Assets Under Management 12.0 %
Total Revenues as a % of Average AUM --
</TABLE>
(a) Unaffiliated businesses assumed to have 100% of interest expense
beginning in 2000, as well as all goodwill amortization not directly
assignable to the mortgage operations.
(b) Includes occupancy and equipment costs, marketing and production costs
and professional services.
(c) Based on 13.97 million diluted shares outstanding.
<PAGE>
PROJECT SPIRIT
PROJECTED INCOME STATEMENT - MORTGAGE OPERATIONS
($ in millions)
<TABLE>
<CAPTION>
Pro Forma Mgmt. Projected
---------------------------------- ----- ---------
1997 1998 1999 2000 2001
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
MORTGAGE REVENUES
Origination Revenues $ 6.8 $ 9.7 $ 10.7 $ 10.0 $ 11.0
Servicing Revenues 7.3 8.5 10.8 11.5 13.2
Other Revenues 2.1 4.2 4.2 2.2 2.5
------- ------ ------ ------- -------
TOTAL MORTGAGE REVENUES $ 16.1 $ 22.4 $ 25.6 $ 23.7 $ 26.7
EXPENSES
Employee Compensation and Benefits (a) $ 8.2 $ 10.0 $ 12.2 $ 9.6 $ 10.8
Amortization of Goodwill (a) 0.7 0.7 1.1 1.1 1.1
Other Expenses (a) 3.6 4.8 6.1 5.1 5.3
------- ------ ------ ------- -------
TOTAL EXPENSES $ 12.5 $ 15.5 $ 19.4 $ 15.8 $ 17.2
OPERATING INCOME $ 3.6 $ 7.0 $ 6.2 $ 7.9 $ 9.5
Operating Margin (b) 22.4 % 31.0 % 24.4 % 33.4 % 35.7%
Interest Expense 0.0 0.0 0.0 0.0 0.0
------- ------ ------ ------- -------
PRE-TAX INCOME $ 3.6 $ 7.0 $ 6.2 $ 7.9 $ 9.5
Taxes (a) 1.5 2.9 2.5 3.2 3.9
------- ------ ------ ------- -------
NET INCOME $ 2.1 $ 4.0 $ 3.7 $ 4.7 $ 5.6
======= ====== ====== ======= =======
Diluted EPS (c) $ 0.19 $ 0.29 $ 0.27 $ 0.33 $ 0.40
Origination Revenues/Originations 1.00 % 1.00 % 1.19 % 1.00 % 1.00%
Servicing Portfolio Revenues/Servicing Portfolio 0.25 0.25 0.25 0.25 0.25
Other Revenues/Originations 0.06 0.10 0.08 0.04 0.04
Tax Rate 41.1 42.4 40.2 40.9 41.0
Originations (d) $ 680 $ 970 $ 900 $ 1,000 $ 1,100
Servicing Portfolio (d) 2,900 3,400 4,300 4,600 5,260
</TABLE>
<TABLE>
<CAPTION>
Projected CAGR
--------------------------------- ----
2002 2003 2004 00-04
---- ---- ---- -----
<S> <C> <C> <C> <C>
MORTGAGE REVENUES
Origination Revenues $ 12.0 $ 12.0 $ 12.0 4.7 %
Servicing Revenues 15.0 16.8 18.6 12.7
Other Revenues 2.9 3.1 3.4 11.4
-------- ------- ------- ---
TOTAL MORTGAGE REVENUES $ 29.8 $ 31.9 $ 34.0 9.4 %
EXPENSES
Employee Compensation and Benefits (a) $ 12.0 $ 12.9 $ 13.7 9.4 %
Amortization of Goodwill (a) 1.1 1.1 1.1 0.0 %
Other Expenses (a) 5.4 5.6 5.8 3.0
-------- ------- ------- ---
TOTAL EXPENSES $ 18.6 $ 19.6 $ 20.6 6.8 %
OPERATING INCOME $ 11.2 $ 12.3 $ 13.4 14.0 %
Operating Margin (b) 37.7 % 38.6 % 39.4 % --
Interest Expense 0.0 0.0 0.0 NA
-------- ------- ------- ---
PRE-TAX INCOME $ 11.2 $ 12.3 $ 13.4 14.0 %
Taxes (a) 4.6 5.0 5.5 14.1
NET INCOME $ 6.6 $ 7.3 $ 7.9 14.0 %
======== ======= ======= ===
Diluted EPS (c) $ 0.47 $ 0.52 $ 0.56 14.0 %
Origination Revenues/Originations 1.00 % 1.00 % 1.00 % --
Servicing Portfolio Revenues/Servicing Portfolio 0.25 0.25 0.25 --
Other Revenues/Originations 0.04 0.04 0.04 --
Tax Rate 41.0 41.0 41.0 --
Originations (d) $ 1,200 $ 1,200 $ 1,200 4.7 %
Servicing Portfolio (d) 5,980 6,700 7,420 12.7 %
</TABLE>
N.B. Based on management projections for 2000. Salomon Smith Barney projections
for 2001-2004.
(a) Expenses and taxes are allocated on a pro-rata basis based on the total
expenses.
(b) Operating margin is based on 2000 Company projections.
(c) Based on 13.97 million diluted shares outstanding.
(d) Based on management estimates.
<PAGE>
PROJECT SPIRIT
DISCOUNT CASH FLOW - AFFILIATED OPERATIONS
($ in millions)
<TABLE>
<S> <C>
Discount Rate 12.0 %
Terminal Value Multiple 9.0
</TABLE>
<TABLE>
<CAPTION>
Management Projected CAGR
-------------------------------------------- ------------------- ----
1999 (a) 2000 2001 2002 2003 2004 00-04
-------- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Net Income $2.4 $2.3 $2.8 $3.3 $3.8 $ 4.5 17.5 %
Plus Amortization (b) 0.9 0.0 0.0 0.0 0.0 0.0 NA
Less: Working Capital Needs 0.3 0.3 0.4 0.4 0.5 0.6 17.5
--- --- --- --- --- --- ----
Interim Cash Flows $3.0 $2.0 $2.4 $2.9 $3.3 $ 3.9 17.5 %
Terminal Value (c) 0.0 0.0 0.0 0.0 0.0 41.1 NA
--- --- --- --- --- ---- --
Total Cash Flows $3.0 $2.0 $2.4 $2.9 $3.3 $45.0 NA
==== ==== ==== ==== ==== ===== ==
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
NET PRESENT VALUE (AT 1/1/00) $33.5
PER SHARE (d) : 2.40
</TABLE>
<TABLE>
<CAPTION>
MULTIPLE OF 2005 EARNINGS (b)
7.0 x 8.0 x 9.0 x 10.0 x 11.0 x
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C>
10.0 % $2.19 $2.39 $2.59 $2.80 $3.00
Discount 12.0 2.02 2.21 2.40 2.58 2.77
Rate 14.0 1.88 2.05 2.22 2.39 2.56
16.0 1.74 1.90 2.05 2.21 2.36
</TABLE>
(a) Annualized for the nine months ended September 30, 1999.
(b) Affiliated businesses assumed to have 0% of annual goodwill
amortization and interest expense beginning in 2000.
(c) Terminal value multiple of 2005 net income assumed to be 17.5% higher
than 2004.
(d) Assumes 13.97 million diluted shares outstanding.
<PAGE>
PROJECT SPIRIT
DISCOUNTED CASH FLOW - UNAFFILIATED OPERATIONS
($ in millions)
<TABLE>
<S> <C>
Discount Rate 12.0 %
Terminal Value Multiple 9.0 x
</TABLE>
<TABLE>
<CAPTION>
MANAGEMENT PROJECTED
--------------- -------------------------------
CAGR
----
1999 2000 2001 2002 2003 2004 00-04
---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Net Income $7.2 $7.8 $9.2 $11.0 $13.5 $ 16.3 20.5 %
Plus Amortization 0.6 1.6 1.8 2.0 2.2 2.4 10.0
Less: Working Capital Needs 1.3 1.3 1.6 1.9 2.3 2.7 20.5
---- ---- ---- ----- ----- ------ ----
Interim Cash Flows $6.5 $8.1 $9.5 $11.1 $13.4 $ 16.0 18.6 %
Terminal Value (a) 0.0 0.0 0.0 0.0 0.0 171.0 NA
---- ---- ---- ----- ----- ------ ----
Total Cash Flows $6.5 $8.1 $9.5 $11.1 $13.4 $187.0 NA
==== ==== ==== ===== ===== ====== ====
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Net Present Value (at 1/1/00): $137.2
Per Share (b): 9.82
</TABLE>
<TABLE>
<CAPTION>
MULTIPLE OF 2005 EARNINGS (b)
-----------------------------
7.0 x 8.0 x 9.0 x 10.0 x 11.0 x
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C>
10.0 % $8.96 $9.80 $10.65 $11.49 $12.33
DISCOUNT 12.0 8.28 9.05 9.82 10.59 11.37
RATE 14.0 7.67 8.38 9.08 9.79 10.49
16.0 7.12 7.76 8.41 9.06 9.71
</TABLE>
(a) Terminal value multiple of 2005 net income assumed to be 18.6% higher
than 2004.
(b) Assumes 13.97 diluted shares outstanding.
<PAGE>
PROJECT SPIRIT
DISCOUNTED CASH FLOW - MORTGAGE OPERATIONS
($in millions)
<TABLE>
<S> <C>
Discount Rate 12.0 %
Terminal Value Multiple 9.0 x
</TABLE>
<TABLE>
<CAPTION>
Management Projected
------------------- ----------------------------
CAGR
----
1999 2000 2001 2002 2003 2004 00-04
---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Net Income $3.7 $4.7 $5.6 $6.6 $7.3 $7.9 14.0 %
Plus Amortization 1.1 1.1 1.1 1.1 1.1 1.1 0.0
Less: Working Capital Needs 0.4 0.4 0.5 0.5 0.6 0.7 14.0
--- --- --- --- --- --- ----
Interim Cash Flows $4.4 $5.4 $6.3 $7.2 $7.8 $8.3 11.5 %
Terminal Value (a) 0.0 0.0 0.0 0.0 0.0 83.9 NA
--- --- --- --- --- ---- ----
Total Cash Flows $4.4 $5.4 $6.3 $7.2 $7.8 $92.3 NA
==== ==== ==== ==== ==== ===== ===
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Net Present Value (at 1/1/00) $72.2
Per Share (b): 5.17
</TABLE>
<TABLE>
<CAPTION>
MULTIPLE OF 2005 EARNINGS (b)
7.0 x 8.0 x 9.0 x 10.0 x 11.0 x
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C>
10.0 % $4.76 $5.17 $5.59 $6.00 $6.42
Discount 12.0 4.41 4.79 5.17 5.55 5.93
Rate 14.0 4.10 4.44 4.79 5.14 5.48
16.0 3.81 4.13 4.45 4.76 5.08
</TABLE>
N.B. Based on management projections for 1999-2000. Salomon Smith Barney
projections for 2001-2004.
(a) Terminal value multiple of 2005 net income assumed to be 11.5% higher
than 2004.
(b) Assumes 13.97 million diluted shares outstanding.
<PAGE>
PROJECT SPIRIT
B. PUBLIC COMPARABLE ASSET MANAGEMENT COMPANIES
<PAGE>
PROJECT SPIRIT
PUBLIC MARKET VALUATION
FINANCIAL INFORMATION FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1999 UNLESS
OTHERWISE NOTED.
(Dollars in millions, except per share data)
<TABLE>
<CAPTION>
Firm Value Market Cap.
Firm Value as a Multiple of: as a Multiple of:
Mkt. 52 Week as % of LTM LTM LTM Calendar:
Cap. Price(d) High Low AUM AUM (e) Rev. EBITDA Net.Inc. 99EE(f)
---- -------- ---- --- --- ------- ---- ------ -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
C Co. (Whole Company)(a) $ 155 $11.06 $18.75 $ 6.75 $ 33,300 0.2% 0.9x 3.3x 11.6x 11.6x
C Co. (Unaffiliated
Operations)(a) $ 155 $11.06 $18.75 $ 6.75 $ 21,700 0.4% 1.1x 4.1x 14.1x 14.1x
SELECTED C-CORPORATIONS
Franklin Resources, Inc. $9,707 $38.50 $45.00 $27.13 $218,100 4.3% 4.0x 11.9x 20.6x 17.2x
AMVESCAP PLC 7,275 56.94 63.50 36.00 291,600 2.9 7.3 16.0 30.3 24.4
T. Rowe Price Associates, Inc. 5,070 42.38 43.25 25.88 157,400 3.0 4.8 11.7 23.7 24.2
Waddell & Reed Financial Inc. 1,679 29.00 29.81 18.56 30,743 5.3 4.9 10.4 18.5 18.5
Federated Investors, Inc. 1,641 19.81 21.19 15.31 115,213 1.3 2.6 5.7 14.5 12.4
Eaton Vance Corporation (b) 1,489 41.50 45.00 18.69 40,900 3.5 4.0 6.4 16.0 14.4
U. S. Trust Corporation (c) 1,461 78.25 95.50 71.13 77,400 1.7 2.6 9.1 19.9 21.4
Neuberger Berman Inc. 1,260 25.19 32.25 23.63 51,456 2.4 1.7 3.9 7.2 9.1
BlackRock Inc. 1,102 17.25 19.38 12.50 148,100 0.8 2.9 10.1 23.5 17.5
John Nuveen 1,077 34.56 43.69 34.31 58,252 1.7 3.0 5.4 9.7 11.0
United Asset Management Corp. 986 16.81 24.38 16.50 193,600 0.9 2.0 5.8 15.8 16.0
Affiliated Managers Group, Inc. 771 35.69 40.88 22.00 69,900 1.4 3.0 9.7 20.9 20.3
Gabelli Asset Management Inc. 493 16.56 18.75 13.06 18,629 2.4 2.7 5.9 12.0 11.0
Phoenix Investment Partners 301 6.88 10.25 6.56 58,045 1.0 2.2 5.9 10.4 11.9
High $291,600 5.3% 7.3x 16.0x 30.3x 24.4x
Median 73,650 2.1 3.0 7.8 17.2 16.6
Low 18,629 0.8 1.7 3.9 7.2 9.1
IMPLIED PRICE PER SHARE: (WHOLE COMPANY)
High -- 125.67 $ 47.65 $28.75 $28.80 $23.20
Median -- 49.07 19.25 13.97 16.41 15.82
Low -- 19.93 11.38 7.06 6.89 8.65
IMPLIED PRICE PER SHARE: (UNAFFILIATED OPERATIONS)
High -- $81.89 $39.08 $22.97 $23.68 $19.07
Median -- 31.98 15.79 11.16 13.49 13.01
Low -- 12.99 9.33 5.64 5.66 7.11
IBES IBES
99-00 L-T
Calendar: Growth Growth
00EE(f) Rate Rate
------- ---- ----
<S> <C> <C> <C>
C Co. (Whole Company)(a) 10.5x 10.9% 18.0%
C Co. (Unaffiliated
Operations)(a) 12.5x NA NA
SELECTED C-CORPORATIONS
Franklin Resources, Inc. 15.2x 13.6x 14.0x
AMVESCAP PLC 20.4 19.3 19.0
T. Rowe Price Associates, Inc. 21.5 12.9 15.0
Waddell & Reed Financial Inc. 15.4 19.7 14.0
Federated Investors, Inc. 10.3 20.0 15.5
Eaton Vance Corporation (b) 12.0 20.4 20.0
U. S. Trust Corporation (c) NA 14.0 17.5
Neuberger Berman Inc. 8.2 11.6 NA
BlackRock Inc. 14.6 20.1 NA
John Nuveen 9.9 10.3 10.0
United Asset Management Corp. 14.6 9.5 10.5
Affiliated Managers Group, Inc. 15.3 33.3 22.5
Gabelli Asset Management Inc. 9.9 11.0 15.0
Phoenix Investment Partners 9.8 20.7 12.5
High 21.5x 33.3x 22.5x
Median 14.6 16.6 15.0
Low 8.2 9.5 10.0
IMPLIED PRICE PER SHARE: (WHOLE COMPANY)
High $22.64
Median 15.39
Low 8.60
IMPLIED PRICE PER SHARE: (UNAFFILIATED OPERATIONS)
High $19.06
Median 12.95
Low 7.24
</TABLE>
N.B. Financial data excludes all non-recurring and extraordinary items.
(a) C Co. data for the twelve months ended December 31, 1999.
(b) Eaton Vance data for the twelve months ended October 31, 1999.
(c) U.S. Trust's share price reflects the average of the twenty trading
days before the announcement of the proposed acquisition by Charles
Schwab.
(d) Share prices as of 1/25/2000.
(e) Firm value represents market capitalization plus debt and minority
interest less cash.
(f) Earnings estimates from IBES as of 1/25/2000.
<PAGE>
PROJECT SPIRIT
OPERATING STATISTICS FOR PUBLIC MARKET COMPARABLES
OPERATING STATISTICS FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1999 UNLESS
OTHERWISE NOTED.
<TABLE>
<CAPTION>
LTM Profitability Statistics
------------------------------------------------------
Comp.
Adv./ Exp./ Margin (%): As % of AUM:
----- ----- ----------- ------------
Total Total Net Total Adv.
----- ----- --- ----- ----
Rev. Rev. EBITDA Inc. Rev. Rev.
---- ---- ------ ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
C Co. (a) 81.8% 47.8% 27.6% 14.6% 0.3% 0.2%
SELECTED C-CORPORATIONS
Franklin Resources, Inc. 57.8% 22.2% 33.9% 20.3% 1.1% 0.6%
AMVESCAP PLC 98.9 na 32.7 10.0 0.6 0.6
T. Rowe Price Associates, Inc. 77.1 33.2 40.5 21.7 0.6 0.5
Waddell & Reed Financial Inc. 48.2 11.0 47.1 27.4 1.1 0.5
Federated Investors, Inc. 95.1 26.0 43.8 19.7 0.5 0.5
Eaton Vance Corporation (b) 55.2 19.0 62.3 25.9 0.9 0.5
U. S. Trust Corporation 77.7 48.7 27.7 14.3 0.7 0.5
Neuberger Berman Inc. 64.6 38.9 44.5 24.2 1.4 0.9
John Nuveen 87.4 28.0 50.7 27.7 0.6 0.5
BlackRock Inc. 92.3 38.4 30.8 14.1 0.3 0.3
United Asset Management Corp. 100.0 50.3 31.7 7.0 0.5 0.5
Affiliated Managers Group, Inc. 98.9 36.0 47.2 11.7 0.5 0.4
Gabelli Asset Management Inc. 91.2 44.9 46.6 25.5 0.9 0.8
Phoenix Investment Partners 85.2 39.9 36.8 8.5 0.5 0.4
HIGH 100.0% 50.3% 62.3% 27.7% 1.4% 0.9%
MEDIAN 86.3 36.0 42.2 20.0 0.6 0.5
LOW 48.2 11.0 27.7 7.0 0.3 0.3
</TABLE>
<TABLE>
<CAPTION>
Assets Under Management
----------------------------------------------------------------
Client Type Asset Type Region
------------------- ---------- ------
Retail Inst'l Equity FI Dom. Int'l
------ ------ ------ -- ---- -----
<S> <C> <C> <C> <C> <C> <C>
C Co. (a) -- 100.0% 8.8% 91.2% 100.0% --
SELECTED C-CORPORATIONS
Franklin Resources, Inc. 79.0% 21.0% 64.0% 36.0% 53.8% 46.2%
AMVESCAP PLC 61.0 39.0 66.0 34.0 61.0 39.0
T. Rowe Price Associates, Inc. 64.0 36.0 75.0 25.0 77.8 22.2
Waddell & Reed Financial Inc. 88.8 11.2 73.5 26.5 100.0 --
Federated Investors, Inc. 88.0 12.0 15.0 85.0 98.0 2.0
Eaton Vance Corporation (b) 77.0 23.0 39.0 61.0 100.0 --
U. S. Trust Corporation 12.6 87.4 54.0 46.0 99.0 1.0
Neuberger Berman Inc. 37.0 63.0 76.0 24.0 99.6 0.4
John Nuveen 66.7 33.3 25.1 74.9 100.0 --
BlackRock Inc. 39.9 60.1 10.3 89.7 98.0 2.0
United Asset Management Corp. 4.0 96.0 87.0 13.0 86.0 14.0
Affiliated Managers Group, Inc. 7.0 93.0 67.0 33.0 64.0 36.0
Gabelli Asset Management Inc. 50.3 49.7 88.0 12.0 100.0 --
Phoenix Investment Partners 42.1 57.9 52.4 47.6 99.0 1.0
HIGH 88.8% 96.0% 88.0% 89.7% 100.0% 46.2%
MEDIAN 55.6 44.4 65.0 35.0 98.5 1.5
LOW 4.0 11.2 10.3 12.0 53.8 --
FN:
N.B. Financial data excludes all non-recurring and extraordinary items.
(a) C Co. data for the twelve months ended December 31, 1999.
(b) Eaton Vance data for the twelve months ended October 31, 1999.
</TABLE>
<PAGE>
PROJECT SPIRIT
C. PUBLIC COMPARABLE MORTGAGE COMPANIES
<PAGE>
PROJECT SPIRIT
MORTGAGE UNIT VALUATION ANALYSIS
FINANCIAL INFORMATION AS OF SEPTEMBER 30, 1999 UNLESS OTHERWISE NOTED.
(Dollars in millions, except per share data)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRICE AS A MULTIPLE OF:(v)
PRICE 52 WEEK ---------------------------- EPS GROWTH
MARKET AS OF -------------- 1999E 2000E BOOK ----------------
CAP. 01/25/2000 HIGH LOW EARNINGS EARNINGS VALUE(d) '99-'00 5 YEAR
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
C Co. (a) $ 155 $11.06 $18.75 $ 6.75 11.5x 9.7x 4.92x 18.2% 18.0%
MORTGAGE BANKS
Countrywide Credit Industries, Inc. (b) $2,723 $24.06 $48.50 $24.00 7.2x 6.7x 0.94x 6.7% 14.0%
Irwin Financial Corporation 383 17.69 25.88 16.63 12.4 11.1 2.41 11.7 15.6
Resource Bancshares Mortgage Group, Inc. 94 4.44 15.00 4.25 8.7 8.1 0.41 7.8 10.0
HIGH 12.4X 11.1X 2.41X 11.7% 15.6%
MEDIAN 8.7 8.1 0.94 7.8 14.0
LOW 7.2 6.7 0.41 6.7 10.0
IMPLIED PRICE PER SHARE:
HIGH $3.27 $3.04 $5.42
MEDIAN 2.30 2.21 2.12
LOW 1.89 1.84 0.93
</TABLE>
(a) C Co. financial information as of December 30, 1999.
(b) CCR financial information as of November 30, 1999.
(c) CCR, IRWN and RBMG data based on IBES estimates as of January 25, 2000.
C Co. data based on company projections.
(d) C Co.'s mortgage unit book value computed pro rata based on pre-tax income
contribution.
<PAGE>
PROJECT SPIRIT
MORTGAGE MARKET VALUATION
($ in millions, except per share data)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRICE AS A MULTIPLE OF:
PRICE 52-WEEK RANGE CURRENT AS --------------------------
MARKET AS OF -------------- A % OF 1999E 2000E BOOK
NAME CAP. 01/25/2000 HIGH LOW 52-WK HIGH EPS(b) EPS(b) VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
C Co. (a) $155 $11.06 $18.75 $ 6.75 59.0% 11.7x 9.9x 4.92x
RESIDENTIAL MORTGAGE REITS
Annaly Mortgage Management, Inc. $112 $ 8.38 $11.56 $ 8.06 72.4% 6.2x 5.5x 0.99x
Apex Mortgage Capital $ 55 9.63 14.00 9.25 68.8 5.5 5.4 0.92
American Residential Investment Trust $ 42 5.25 8.75 5.25 60.0 5.0 NA 0.41
Capstead Mortgage Corp. $245 4.31 6.19 3.69 69.7 7.1 6.4 0.40
Hanover Capital Mortgage Holdings $ 20 3.50 6.00 3.13 58.3 17.5 4.4 0.41
Impac Mortgage Holdings, Inc. $ 84 3.88 6.19 3.44 62.6 4.3 3.4 4.43
NovaStar Financial, Inc. $ 26 3.44 7.06 2.63 48.7 18.1 3.4 0.23
Thornburg Mortgage Asset Corp. $192 8.94 11.38 7.56 78.6 10.0 NA 0.59
HIGH 78.6% 18.1x 6.4x 4.4x
MEDIAN 65.7 6.6 4.9 0.5
LOW 48.7 4.3 3.4 0.2
IMPLIED C CO. MORTGAGE BUSINESS VALUATION (PER SHARE)
HIGH $4.79 $2.14 $9.60(c)
MEDIAN 1.76 1.63 1.08
LOW 1.13 1.13 0.50
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
EPS GROWTH
DIV. ----------------
NAME YIELD(c) '99-'00 5-YEAR
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
C Co. (a) 1.8% 18.2% 18.0%
RESIDENTIAL MORTGAGE REITS
Annaly Mortgage Management, Inc. 16.7% 12.6% 8.0%
Apex Mortgage Capital 17.9 3.2 4.0
American Residential Investment Trust 19.4 NA 5.0
Capstead Mortgage Corp. 11.1 10.7 5.0
Hanover Capital Mortgage Holdings 14.3 300.0 NA
Impac Mortgage Holdings, Inc. 13.4 26.4 6.0
NovaStar Financial, Inc. 0.0 426.3 NA
Thornburg Mortgage Asset Corp. 10.3 NA 5.5
HIGH 19.4% 426.3% 8.0%
MEDIAN 13.9 19.5 5.3
LOW 0.0 3.2 4.0
</TABLE>
(a) C Co. data for the twelve months ended December 31, 1999.
(b) Earnings estimates based on median IBES estimates as of January 25, 2000.
(c) Based on estimated dividends.
(d) C Co.'s mortgage operation book value computed pro rata based on pre-tax
income contribution.
<PAGE>
PROJECT SPIRIT
MORTGAGE UNIT VALUATION ANALYSIS
<TABLE>
<CAPTION>
($ in millions, except per share data)
Market 52-Week Range Current as
Market Price -------------- a % of
Name Cap. 01/25/2000 High Low 52-Wk High
- ---- ---- ---------- ---- --- ----------
<S> <C> <C> <C> <C> <C>
C Co. (a) $155 $11.06 $18.75 $6.75 59.0 %
RESIDENTIAL AND COMMERCIAL
MORTGAGE REITS
Anthracite Capital, Inc. $144.1 $6.88 $7.88 $6.00 87.3 %
Dynex Capital, Inc. 94.4 8.25 21.25 5.25 38.8
Indymac Mortgage Holdings, Inc. 929.0 12.13 17.44 9.88 69.5
LASER Mortgage Management, Inc. 56.7 3.81 5.63 3.13 67.8
Redwood Trust, Inc. 117.4 13.38 17.88 11.25 74.8
Resource Asset Inv. Trust 64.5 10.44 13.44 9.94 77.7
High 87.3%
Median 72.2
Low 38.8
($ in millions, except per share data)
Price as a Multiple of:
------------------------- EPS Growth
1999E 2000E Book Div. ---------------
Name EPS (b) EPS (b) Value Yield (c) '99-'00 5-Year
- ---- ----- ---- ----- --------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
C Co. (a) 11.7x 9.9 x 4.92 x 1.8 % 18.2 % 18.0 %
RESIDENTIAL AND COMMERCIAL
MORTGAGE REITS
Anthracite Capital, Inc. 5.8 x 5.7 x 0.82 x 16.9 % 3.0 % 12.0 %
Dynex Capital, Inc. NA 21.7 0.22 0.0 NA 5.0
Indymac Mortgage Holdings, Inc. 8.3 9.3 1.08 19.8 (11.0) 13.5
LASER Mortgage Management, Inc. 5.5 NA 0.77 0.0 NA 8.0
Redwood Trust, Inc. 26.8 7.0 0.53 7.5 280.0 N/A
Resource Asset Inv. Trust NA NA 0.76 19.5 NA N/A
High 26.8x 21.7x 1.1x 19.8% 280.0% 13.5%
Median 7.1 8.2 0.8 12.2 3.0 10.0
Low 5.5 5.7 0.2 0.0 (11.0) 5.0
Implied C Co. Mortgage Business Valuation (per share)
High $7.08 $7.27 $2.35(d)
Median 1.87 2.74 1.65
Low 1.47 1.89 0.48
</TABLE>
(a) C Co. data for the twelve months ended December 31, 1999.
(b) Earnings estimates based on median IBES estimates as of January 25, 2000.
(c) Based on estimated dividends.
(d) C Co.'s mortgage operation book value computed pro rata based on pre-tax
income contribution.
<PAGE>
PROJECT SPIRIT
D. WEIGHTED AVERAGE COST OF CAPITAL AND TRADING HISTORY
<PAGE>
PROJECT SPIRIT
BETA CALCULATION
<TABLE>
<CAPTION>
Reported Betas
----------------------------------------------------------------------------------------
Selected Comparable C-Corporations Bloomberg (a) IDD (a) S&P Historical Barra Projected Barra Median
- ---------------------------------- ------------- ------- --- ---------------- --------------- ------
<S> <C> <C> <C> <C> <C> <C>
Federated Investors, Inc. 0.80 N/A 0.91 1.29 1.13 0.91
John Nuveen 0.60 0.57 0.45 0.37 0.73 0.45
Eaton Vance Corporation 0.97 0.87 0.61 0.57 1.05 0.81
Gabelli Asset Management, Inc. 0.56 N/A N/A N/A 1.05 0.56
Neuberger Berman 1.03 N/A N/A N/A 1.30 1.17
BlackRock, Inc. 1.29 N/A N/A N/A 1.16 1.23
High 1.29 0.87 0.91 1.29 1.30 1.23
Median 0.89 0.72 0.61 0.57 1.09 0.86
Low 0.56 0.57 0.45 0.37 0.73 0.45
Median Discount Rate --
Selected Comparable C-Corporations (b) 11.33%
Other Asset Management C-Corporations
Affiliated Managers Group, Inc. 1.35 1.23 N/A 2.57 1.36 1.35
AMVESCAP PLC 1.34 1.16 N/A 1.21 1.12 1.19
Franklin Resources, Inc. 1.48 1.45 1.75 1.75 1.24 1.48
Phoenix Investment Partners 0.64 0.73 1.23 1.07 1.00 0.73
T. Rowe Price Associates, Inc. 1.51 1.56 1.24 1.26 1.22 1.26
United Asset Management Corp. 0.87 0.86 0.99 1.02 1.05 0.87
Waddell & Reed Financial Inc. 0.98 N/A N/A 1.64 1.09 1.03
High 1.51 1.56 1.75 2.57 1.36 1.48
Median 0.97 1.02 0.99 1.23 1.09 1.03
Low 0.56 0.57 0.45 0.37 0.73 0.45
Median Discount Rate --
All Asset Management C-Corporations (b) 12.29%
</TABLE>
(a) Based on adjusted Beta calculations for the two years ended January 25,
2000.
(b) Discount rate calculated using an equity risk premium of 5.5% and a 30-year
risk free rate of 6.61% as of January 25, 2000. Equity risk premium based on
Salomon Smith Barney Research.
<PAGE>
PROJECT SPIRIT
C CO. TRADING HISTORY
<TABLE>
<CAPTION>
Cumulative
Time Volume Weighted Weighted
Period Traded (mm) Average Price Average Price (a)
- ------ ----------- ------------- -----------------
<S> <C> <C> <C>
12/16/1997 2.1 $14.75 $14.75
12/17 - 12/31/97 1.4 14.89 14.81
1Q98 2.1 19.62 16.57
2Q98 1.2 20.77 17.33
3Q98 1.5 13.08 16.56
4Q98 1.7 20.40 17.22
1Q99 1.1 14.68 16.98
2Q99 1.5 15.96 16.86
3Q99 3.7 12.83 15.95
4Q99 4.2 7.91 14.31
1/3 - 1/25/00 0.8 10.63 14.17
</TABLE>
C Co.'s cumulative weighted average price of $14.17 per share significantly
exceeds the current closing price of $11.0625 on January 25th.
Source: Bloomberg
(a) Cumulative weighted average price for the period beginning December 16,
1997, reflecting the volume of C Co. stock at each traded price.
Exhibit (c)(5)
Metropolitan Life Insurance Company
TRANSACTION OVERVIEW
TRANSACTION SUMMARY
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
- -------------------------------------------------------------------
- -------------------------------------------------------------------
Price Per Share $ 12.50
Aggregate Value of Outstanding Shares 170.1
Value of Publicly Held Shares (1) $ 66.3
- -------------------------------------------------------------------
(1) MetLife owns 8.3 million out of 13.6 million
shares outstanding.
PREMIUM/VALUATION ANALYSIS
- -------------------------------------------------------------------
- -------------------------------------------------------------------
Premium to:
One Day Prior (1/14/2000) 31%
One Week Prior (1/7/2000) 43
LTM High (33)
LTM Low 85
IPO Price (12/15/1997) (7)
Multiple of:
1999 Net Income 13.2x
1999 EBITDA 6.8
MetLife Adj. 1999 EBITDA(1)(2) 10.5
- -------------------------------------------------------------------
(1) Adjusted to reflect loss of $7.9MM of revenue and $1.9MM expense
savings from repatriation of general account assets.
(2) Fourth quarter 1999 annualized.
[LINE GRAPH OF PRICE PERFORMANCE, IPO TO PRESENT; CHART DEPICTS PRICE
OF CONNING SHARES AND ASSET MANAGEMENT INDEX]
- - 12/16/97: IPO @ $13.50
- - 8/9/99: $16.1
Moody's downgrades GenAmerica and subsidiaries to Ba1
8/10/99: $16.3
GenAmerica placed under regulator supervision
- - 8/26/99: $12.0
MetLife announces acquisition of GenAmerica
- - 1/18/00: $10.81
MetLife announces offer at $10.50 per Conning
<PAGE>
Metropolitan Life Insurance Company
CONNING ACQUISITION CONSEQUENCES
Key Assumptions
- - Run rate EBITDA of $22.7MM (4Q 1999 annualized)
- - Net pre-tax reduction of earnings from repatriation $(6.0)MM
- - 0% growth in 2000, 10% growth thereafter
- - $200MM private equity fund in 2000, 0% growth thereafter; zero value
for carried interest
Inc/(Dec) In Net Income
(Dollars in Millions)
================================================================================
2000 2001 2002
- --------------------------------------------------------------------------------
Impact of Buy-out of Public $ (1.3) $ (0.5) $ (0.3)
MetLife Share of Repatriation $ (2.2) $ (2.3) $ (2.4)
Gross Benefit of Repatriation 4.5 4.7 4.9
MetLife Internal Costs due to (0.9) (0.9) (1.0)
Repatriation (1) ---------- ---------- ---------
Net Incremental Income Impact $ 0.1 $ 1.0 $ 1.3
- --------------------------------------------------------------------------------
(1) Cost of repatriation assumed to be 20% of Gross Impact of Repatriation.
