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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------
SCHEDULE 13E-3
Rule 13e-3 Transaction Statement
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
FAULDING INC.
(Name of Issuer)
Faulding Inc.
Faulding Holdings Inc.
F H Faulding & Co Limited
(Name of Person(s) Filing Statement)
Common Stock, Par Value $.01 Per Share
(Title of Class of Securities)
---------------------------------
312024 10 2
(CUSIP Numbers of Class of Securities)
Richard F. Moldin Josephine M. Dundon
President and Chief Executive Officer Vice President, Corporate Services
Faulding Inc. F H Faulding & Co Limited
200 Elmora Avenue 115 Sherriff Street
Elizabeth, New Jersey 07207 Underdale, South Australia 5032
(908) 527-9100 Australia
(61-8) 8205-6500
(Name, Address and Telephone Number of Persons Authorized
to Receive Notices and Communications on Behalf of Person(s) Filing Statement)
---------------------------------
with a copy to:
William F. Wynne, Jr., Esq. William R. Griffith, Esq.
White & Case Parker Duryee Rosoff & Haft
1155 Avenue of the Americas 529 Fifth Avenue
New York, New York 10036 New York, New York 10017
(212) 819-8200 (212) 599-0500
This statement is filed in connection with (check the appropriate box):
(a)[X] The filing of solicitation materials or an information
statement subject to Regulation 14A, Regulation 14C or Rule
13e-3(c) under the Securities Exchange Act of 1934.
(b)[ ] The filing of a registration statement under the Securities Act of 1933.
(c)[ ] A tender offer.
(d)[ ] None of the above.
Check the following box if soliciting materials or information statement
referred to in checking box (a) are preliminary copies: [X]
CALCULATION OF FILING FEE
================================================================================
Transaction Amount of
valuation* Filing Fee**
- --------------------------------------------------------------------------------
$84,284,260 $16,857
- --------------------------------------------------------------------------------
* For purposes of calculating the filing fee only. This calculation assumes
the purchase of [5,843,368] shares of Common Stock, par value $.01 per
share, of Faulding Inc. at $13.50 net per share in cash.
** The amount of the filing fee, calculated in accordance with Rule 0-11(c) of
the Securities Exchange Act of 1934, as amended, equals 1/50th of one
percent of the aggregate value of cash offered for such number of shares.
[X] Check box if any part of the fee is offset 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: $16,857 Filing Parties: Faulding Inc.
Form or Registration No.: Schedule 14A Date Filed: October 10, 1997
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INTRODUCTION
This Rule 13e-3 Transaction Statement on Schedule 13E-3 (the
"Statement") is being filed jointly by Faulding Inc., a Delaware corporation
(the "Company"), Faulding Holdings Inc., a Delaware corporation ("Holdings"),
and F H Faulding & Co Limited, an Australian corporation ("Parent"). Holdings is
a wholly-owned subsidiary of Parent. The Statement relates to the filing by the
Company of a preliminary Proxy Statement (including all schedules and annexes
thereto, the "Preliminary Proxy Statement") in connection with, inter alia, an
amendment to the Company's Certificate of Incorporation providing for the
recapitalization of the Company (the "Recapitalization"), pursuant to which the
Company will effect a reverse stock split (the "Reverse Stock Split") whereby
each 7,924,385 issued shares of the Company's Common Stock, par value $.01 per
share (the "Common Stock") will be combined into one validly issued share of new
common stock of the Company (the "New Common Shares"), and each stockholder who
or which immediately prior to the effective time of the Recapitalization was a
holder of less than 7,924,385 shares of Common Stock will be entitled to receive
$13.50 per share of Common Stock in cash (the "Recapitalization Amendment"),
upon the terms and conditions set forth in the Agreement and Plan of
Recapitalization by and among the Company, Holdings and Parent dated as of
September 29, 1997 (the "Recapitalization Agreement"). The Reverse Stock Split
will cause the Common Stock, which is registered with the Securities and
Exchange Commission (the "Commission") pursuant to Section 12(g) of the
Securities Exchange Act of 1934, as amended, to be held of record by less than
300 persons.
Concurrently with the filing of this Statement, the Company is filing
with the Commission the Preliminary Proxy Statement, a copy of which is
incorporated herein by reference in its entirety, including all schedules and
annexes thereto. Capitalized terms used and not defined herein shall have the
meanings ascribed to such terms in the Preliminary Proxy Statement.
The cross-reference sheet below is being supplied pursuant to General
Instruction F to Schedule 13E-3 and shows the location in the Company's
Preliminary Proxy Statement of the information required to be included in
response to the items of this Statement. The responses to each item in this
Statement are qualified in their entirety by the information contained in the
Preliminary Proxy Statement.
2
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CROSS-REFERENCE SHEET
Item in Schedule 13E-3 Preliminary Proxy Statement
- ---------------------- ---------------------------
Item 1(a) Front Cover Page of the Proxy Statement;
CERTAIN INFORMATION CONCERNING THE COMPANY --
The Company
Item 1(b) INTRODUCTION
Item 1(c) MARKET PRICES AND DIVIDENDS -- Market Prices
Item 1(d) MARKET PRICES AND DIVIDENDS -- Dividends
Item 1(e) *
Item 1(f) *
Item 2(a)-(d); (g) INTRODUCTION; CERTAIN INFORMATION CONCERNING
THE COMPANY; CERTAIN INFORMATION CONCERNING
PARENT AND HOLDINGS; CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
Item 2(e)-(f) *
Item 3(a)(1) SPECIAL FACTORS -- Interests of Certain Persons
in The Recapitalization; CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS
Item 3(a)(2), (b) SPECIAL FACTORS -- Background of the
Recapitalization; The Recapitalization
Agreement; CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS; Annex A
Item 4 INTRODUCTION; SUMMARY; THE SPECIAL MEETING;
SPECIAL FACTORS -- Certain Effects of the
Recapitalization ; -- Interests of Certain
Persons in the Recapitalization; SOURCE AND
AMOUNT OF FUNDS; THE RECAPITALIZATION
AGREEMENT; SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT; Annex A
Item 5 SPECIAL FACTORS -- Purpose and Structure of the
Recapitalization; -- Certain Effects of the
3
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Recapitalization; -- Plans for the Company
After the Recapitalization;
Item 6(a), (b) SOURCE AND AMOUNT OF FUNDS; FEES AND EXPENSES
Item 6(c), (d) *
Item 7(a)-(c) SPECIAL FACTORS -- Background of the
Recapitalization; -- Determinations of the
Special Committee; Fairness of the
Recapitalization; -- Purpose and Structure
of The Recapitalization; -- Plans for the
Company After the Recapitalization
Item 7(d) SPECIAL FACTORS -- Purpose and Structure of the
Recapitalization; -- Certain Effects Of The
Recapitalization; -- Certain Federal Income Tax
Consequences To Stockholders; -- Plans For The
Company After The Recapitalization; --
Interests Of Certain Persons In The
Recapitalization; --Accounting Treatment Of The
Recapitalization; The Recapitalization
Agreement; Annex A
Item 8(a)-(e) INTRODUCTION; THE SPECIAL MEETING; SPECIAL
FACTORS -- Background Of The Recapitalization;
-- Determinations Of The Special Committee;
Fairness Of The Recapitalization; -- Financial
Advisor; Fairness Opinion; -- Position Of
Parent And Holdings; -- Purpose And Structure
Of The Recapitalization; The Recapitalization
Agreement -- Conditions To Consummation Of
The Recapitalization; Annex A; Annex B
Item 8(f) *
Item 9 INTRODUCTION; SPECIAL FACTORS -- Background Of
The Recapitalization; -- Determinations Of The
Special Committee; Fairness Of The
Recapitalization; -- Financial Advisor;
Fairness Opinion; Annex B
Item 10 INTRODUCTION; SPECIAL FACTORS -- Interests Of
Certain Persons In The Recapitalization; The
Recapitalization Agreement -- Payments
4
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Under Stock Options; SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Item 11 INTRODUCTION; SPECIAL FACTORS -- Interests Of
Certain Persons In The Recapitalization; THE
RECAPITALIZATION AGREEMENT; Annex A
Item 12 INTRODUCTION; SPECIAL FACTORS -- Background Of
The Recapitalization; -- Determinations Of The
Special Committee; Fairness Of The
Recapitalization; -- Position Of Parent And
Holdings; THE RECAPITALIZATION AGREEMENT;
Annex A
Item 13(a) *
Item 13(b), (c) *
Item 14(a) SUMMARY -- Selected Consolidated Financial Data
Item 14(b) *
Item 15(a) SPECIAL FACTORS -- Purpose And Structure Of The
Recapitalization; -- Plans For The Company
After The Recapitalization; -- Interests Of
Certain Persons In The Recapitalization; SOURCE
AND AMOUNT OF FUNDS; FEES AND EXPENSES
Item 15(b) THE SPECIAL MEETING -- Proxies; Revocation Of
Proxies
Item 16 Additional information concerning the
Recapitalization is set forth in the
Preliminary Proxy Statement which information
is incorporated herein by reference in its
entirety
Item 17 Separately included herewith
*Omitted because the answer is negative or the Item is not applicable.
5
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ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE
TRANSACTION.
(a) The information set forth on the first page of the Proxy Statement and
under "CERTAIN INFORMATION CONCERNING THE COMPANY -- The Company" in the
Proxy Statement is incorporated herein by reference.
(b) The information set forth under "INTRODUCTION" in the Proxy Statement is
incorporated herein by reference.
(c) The information set forth under "MARKET PRICES AND DIVIDENDS -- Market
Prices" in the Proxy Statement is incorporated herein by reference.
(d) The information set forth under "MARKET PRICES AND DIVIDENDS -- Dividends"
in the Proxy Statement is incorporated herein by reference.
(e) Not applicable.
(f) Not applicable.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d); (g) This Statement is being filed jointly by the Company
(which is the issuer of the class of equity securities that is the subject of
the Rule 13e-3 transaction), Parent and Holdings. The information set forth
under "INTRODUCTION," "CERTAIN INFORMATION CONCERNING THE COMPANY," "CERTAIN
INFORMATION CONCERNING PARENT AND HOLDINGS" and "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS" in the Proxy Statement is incorporated herein by
reference.
(e)-(f) During the last five years, none of the Company, Parent,
Holdings, nor, to the best of their knowledge, any of their directors or
executive officers (i) has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors), or (ii) has been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was or is subject to a judgment, decree or final
order enjoining further violations of, or prohibiting activities subject to,
federal or state securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a)(1) The information set forth under "SPECIAL FACTORS -- Interests of
Certain Persons in the Recapitalization" and "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS" in the Proxy Statement is incorporated herein by reference.
(a)(2), (b) The information set forth under "SPECIAL FACTORS --
Background of the Recapitalization," "THE RECAPITALIZATION AGREEMENT" and
"CERTAIN RELATIONSHIPS AND
6
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Related Transactions" in the Proxy Statement and Annex A thereto is incorporated
herein by reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a)-(b) The information set forth under "INTRODUCTION," "SUMMARY,"
"SPECIAL FACTORS -- Certain Effects of the Recapitalization," "-- Interests of
Certain Persons in the Recapitalization," "SOURCE AND AMOUNT OF FUNDS," "THE
RECAPITALIZATION AGREEMENT" and "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT" in the Proxy Statement and Annex A thereto is incorporated
herein by reference.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a)-(g) The information set forth under "SPECIAL FACTORS -- Purpose and
Structure of the Recapitalization," "-- Certain Effects of the
Recapitalization," and "-- Plans for the Company after the Recapitalization" in
the Proxy Statement is incorporated herein by reference.
ITEM 6. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION.
(a), (b) The information set forth under "SOURCE AND AMOUNT OF FUNDS"
and "FEES AND EXPENSES" in the Proxy Statement is incorporated herein by
reference.
(c), (d) Not applicable.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a)-(c) The information set forth under "SPECIAL FACTORS -- Background
of the Recapitalization," "-- Determinations of the Special Committee;
Fairness of the Recapitalization," "-- Purpose and Structure of the
Recapitalization" and "--Plans for the Company after the Recapitalization" in
the Proxy Statement is incorporated herein by reference.
(d) The information set forth under "SPECIAL FACTORS -- Purpose and
Structure of the Recapitalization," "-- Certain Effects of the
Recapitalization," "-- Certain Federal Income Tax Consequences to
Stockholders,""-- Plans for the Company after the Recapitalization," "--
Interests of Certain Persons in the Recapitalization," "-- Accounting Treatment
of the Recapitalization" and "THE RECAPITALIZATION AGREEMENT" in the Proxy
Statement and Annex A thereto is incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a)-(e) The information set forth under "INTRODUCTION," "THE SPECIAL
MEETING" "SPECIAL FACTORS -- Background of the Recapitalization," "--
Determinations of the Special Committee; Fairness of the Recapitalization,"
"-- Financial Advisor; Fairness Opinion," "-- Position of Parent and Holdings"
and "-- Purpose and Structure of the
7
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Recapitalization" in the Proxy Statement and Annex B thereto is incorporated
herein by reference.
(f) Not applicable.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a)-(c) The information set forth under "INTRODUCTION," "SPECIAL
FACTORS -- Background of the Recapitalization," "-- Determinations of the
Special Committee; Fairness of the Recapitalization" and "--Financial Advisor;
Fairness Opinions" in the Proxy Statement and Annex B thereto is incorporated
herein by reference.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a)-(b) The information set forth under "INTRODUCTION," "SPECIAL
FACTORS -- Interests of Certain Persons in the Recapitalization," "THE
RECAPITALIZATION AGREEMENT -- Payments under Stock Options" and "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" in the Proxy Statement is
incorporated herein by reference.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH
RESPECT TO THE ISSUER'S SECURITIES.
The information set forth under "INTRODUCTION," "SPECIAL FACTORS --
Interests of Certain Persons in the Recapitalization," and "THE RECAPITALIZATION
AGREEMENT" in the Proxy Statement and Annex A thereto is incorporated herein by
reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD
TO THE TRANSACTION.
(a)-(b) The information set forth under "INTRODUCTION," "SPECIAL
FACTORS --Background of the Recapitalization," "-- Determinations of the Special
Committee; Fairness of the Recapitalization", "-- Position of Parent and
Holdings" and "THE RECAPITALIZATION AGREEMENT" in the Proxy Statement and
Annex A thereto is incorporated herein by reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a)-(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION.
(a) The information set forth under "SUMMARY -- Selected Consolidated
Financial Data" in the Proxy Statement and the information set forth on pages 21
through 51 of the Faulding Annual Report on Form 10-K for the year ended June
30, 1997, filed as exhibit (g) hereto, are incorporated herein by reference.
Exhibit (g) is expressly incorporated herein by
8
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reference pursuant to General Instruction D to Schedule 13E-3.
(b) Not applicable.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) The information set forth under "SPECIAL FACTORS -- Purpose and
Structure of the Recapitalization," "-- Plans for the Company After the
Recapitalization," "-- Interests of Certain Persons in the Recapitalization,"
"SOURCE AND AMOUNT OF FUNDS," and "FEES AND EXPENSES" in the Proxy Statement is
incorporated herein by reference.
(b) The information set forth under "THE SPECIAL MEETING -- Proxies;
Revocation of Proxies" in the Proxy Statement and Annex A thereto is
incorporated by reference herein.
ITEM 16. ADDITIONAL INFORMATION.
The information contained in the Proxy Statement is incorporated herein
by reference in its entirety.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(a) Not applicable.
(b)(1) Opinion of Oppenheimer & Co., Inc. (included as Annex B to the
Proxy Statement filed on October 10, 1997 and which is incorporated by
reference).
(b)(2) Board Presentation of Oppenheimer & Co., Inc. dated September
28, 1997.
(b)(3) Presentation of SBC Warburg Dillon Read, Inc. dated June 2,
1997.
(c)(1) Agreement and Plan of Recapitalization (included as Annex A to
the Proxy Statement filed on October 10, 1997 and which is incorporated by
reference).
(d)(1) Proxy Statement and related Letter to Stockholders filed on
October 10, 1997 and which is incorporated by reference in its entirety.
(e) Not Applicable.
(f) Not Applicable.
9
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this Statement is true,
complete and correct.
Dated: October 10, 1997 FAULDING INC.
By: /s/ Richard F. Moldin
--------------------------------
Name: Richard F. Moldin
Title: President and Chief Executive Officer
10
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this Statement is true,
complete and correct.
Dated: October 10, 1997 FAULDING HOLDINGS INC.
By: /s/ Edward D. Tweddell
------------------------------------
Name: Dr. Edward D. Tweddell
Title: Director
11
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this Statement is true,
complete and correct.
Dated: October 10, 1997 F H FAULDING & CO LIMITED
By: /s/ Edward D. Tweddell
------------------------------------
Name: Dr. Edward D. Tweddell
Title: Group Managing Director and
Chief Executive Officer
12
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EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
(a) Not applicable
(b)(1) Opinion of Oppenheimer & Co., Inc. (included as Annex B to the Proxy
Statement filed on October 10, 1997 and which is incorporated by
reference).
(b)(2) Board Presentation of Oppenheimer & Co., Inc. dated September 28,
1997
(b)(3) Presentation of Dillon, Read & Co., Inc. dated June 2, 1997
(c)(1) Agreement and Plan of Recapitalization (included as Annex A to the
Proxy Statement filed on October 10, 1997 and which is incorporated
by reference).
(d)(1) Proxy Statement and related Letter to Stockholders filed on
October 10, 1997 and which is incorporated by reference in its
entirety.
(e) Not Applicable
(f) Not Applicable
13
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Presentation to Special Committee of Faulding Inc.
Prepared by
Oppenheimer & Co., Inc.
September 28, 1997
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Faulding Inc.
Table of Contents
1. Summary of the Transaction
2. Historical and Projected Income Statements
3. Summary Valuation Methodologies
4. Analysis of Selected Publicly Traded Generic Drug Companies
5. Discounted Cash Flow Analyses
6. Analysis of Selected Mergers and Acquisitions in the Generic Drug Industry
7. Premiums Paid on Selected Comparable Minority Interest Transactions
Oppenheimer & Co., Inc. Health Care Investment Banking
<PAGE>
<PAGE>
1. Summary of the Transaction
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Faulding Inc.
SUMMARY OF TRANSACTION BETWEEN FAULDING INC. AND F.H. FAULDING & CO. LIMITED
Structure:
On June 3, 1997, F.H. Faulding & Co. Limited ("FHF") initially proposed to
purchase all of the Faulding Inc. common shares that it does not own for
$12.00 per share in cash.
As of June 3, 1997, FHF owned approximately 43% of the approximately 15
million common shares of Faulding Inc. and approximately 73% of such common
shares on a fully diluted basis reflecting the conversion of the Class A and
Class B preferred stock held by FHF.
On June 30, 1997, FHF converted all of its Class A preferred stock to 5.0
million shares of common stock.
On September 23, 1997 FHF raised its proposed purchase price to $13.50 in
cash.
The $13.50 per share offer represents the following premiums to Faulding
Inc.'s market price prior to the offer date of June 3, 1997:
<TABLE>
<CAPTION>
Average Close Over Period Close On Day
------------------------- ------------
$ Premium $ Premium
-- ------- -- -------
<S> <C> <C> <C> <C>
1 day $10.75 25.6% $10.75 25.6%
1 week $10.65 26.8% $11.00 22.7%
4 weeks $11.03 22.4% $ 9.25 45.9%
8 weeks $ 9.88 36.7% $ 8.63 56.5%
12 weeks $ 9.45 42.8% $ 8.75 54.3%
</TABLE>
Oppenheimer & Co., Inc. Health Care Investment Banking
<PAGE>
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Faulding Inc.
KEY ASSUMPTIONS UNDERLYING OPPENHEIMER'S ANALYSIS
Based on discussions with Faulding Inc.'s management, Oppenheimer made the
following assumptions with Faulding Inc.'s consent in its analysis:
All material assets and liabilities of Faulding Inc. are as set forth in its
financial statements
The current financial forecasts prepared by Faulding Inc. were reasonably
prepared on bases reflecting the best available estimates and good faith
judgments of senior management of Faulding Inc. as to future performance of
Faulding Inc.
All information provided by or on behalf of Faulding Inc. and FHF or publicly
available sources was accurate and complete
The transaction will be consummated in accordance with the terms of the
Agreement and Plan of Recapitalization provided to Oppenheimer on the date
hereof without any amendment thereto and without waiver by Faulding Inc. or
FHF of any condition to their respective obligations
Oppenheimer & Co., Inc. Health Care Investment Banking
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<PAGE>
2. Historical and Projected Income Statements
<PAGE>
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Faulding Inc.
<TABLE>
<CAPTION>
Fiscal Year Ended June 30 Actual
(audited) Forecast(1)
-------------------------------- --------------------------------------------------------
(In thousands of $US except
per share data) 1995 1996 1997 1998 1999 2000 2001 2002
- ----------------------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $64,905 $75,784 $102,127 $144,500 $158,600 $197,600 $243,800 $280,400
Cost of Sales 49,287 58,397 68,484 95,100 104,600 122,900 137,700 150,400
-------- ------- ------- ------- ------- ------- ------- --------
Gross Profit 15,618 17,387 33,643 49,400 54,000 74,700 106,000 130,000
SG&A 10,191 11,864 15,090(3) 18,600 19,900 21,500 22,500 23,400
Research and Development 7,729 10,361 10,752 14,700 14,900 17,700 21,400 25,200
Acquisition Expenses -- 1,043 -- -- -- -- -- --
Restructuring Costs -- 842 -- -- -- -- -- --
Total Expenses 17,920 24,110 25,842 33,300 34,800 39,200 43,900 48,600
-------- ------- ------- ------- ------- ------- ------- --------
Income (loss) From Operations (2,302) (6,723) 7,801 16,100 19,100 35,500 62,100 81,400
Other Income (Expense), Net (390) 1,021 (276) (300) (300) (300) (300) (300)
-------- ------- ------- ------- ------- ------- ------- --------
Income (Loss) Before Income Taxes (2,692) (5,702) 7,525 15,800 18,800 35,200 61,800 81,100
Provision (Benefit) for lncome Taxes (1,074) (701) 2,649 5,800 6,900 12,900 22,600 29,700
Income Before Preferred Stock
Dividends (1,618) (5,001) 4,876 10,000 11,900 22,300 39,200 51,400
Preferred Stock Dividends 2,080 2,307 2,755 0(2) 0 0 0 0
-------- ------- ------- ------- ------- ------- ------- --------
Net Income (Loss) Available for
Common Stock $(3.698) $(7,308) $2,121 10,000 11,900 22,300 39,200 51,400
Net Income Per Common Share (EPS) $(.25) $(.49) $.14(4) $.46 $.54 $1.01 $1.77 $2.33
Weighted Average Number
of Common Shares Outstanding 14,977 15,039 15,087 21,884(2) 21,979 22,042 22,085 22,085
</TABLE>
(1) Based on management forecast of 6/30/97 adjusted to reflect current market
conditions.
(2) Assumes the conversion of all convertible preferred as of 6/30/97.
(3) Includes non-recurring charge of $1.2 million for write-down of
Foxmeyer receivables.
(4) If all preferred stock were converted at 6/30/96 and excluding Foxmeyer
write-down FY1996: EPS = $0.26.
Oppenheimer & Co., Inc. Health Care Investment Banking
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Faulding Inc.
The forecasted financials used for valuation purposes incorporate the Faulding
Inc. June 30, 1997 forecast presented to the Special Committee on July 1, 1997.
These financials were updated based upon a July 25, 1997 discussion of
market conditions by the management of Faulding Inc. with the Special
Committee. The changes in the forecasts as provided by management were as
follows:
An expected delay in the launch of three pending generic products and the
accelerated launch of one product.
A reduction in sales and gross profit for pentoxyfilline expected in FY
1998 and FY 1999 due to an increase in competitive entrants with
FDA-approved generic products.
An increase to 100% in the launch probability of those products
successfully launched since the management forecast was first prepared.
A decrease in contribution from other specified products experiencing
increased market competition or poorer than anticipated demand.
Oppenheimer & Co., Inc. Health Care Investment Banking
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3. Summary Valuation Methodologies
<PAGE>
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Faulding Inc.
Summary of Valuation Methodologies
Analysis of Selected Publicly Traded Generics Companies
Discounted Cash Flow Analyses
Analysis of Mergers and Acquisitions of Selected Generics Companies
Premiums Paid on Selected Comparable Minority Interest Transactions
Oppenheimer & Co., Inc. Health Care Investment Banking
<PAGE>
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4. Analysis of Selected Publicly Traded Generic Drug Companies
<PAGE>
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Faulding Inc.
Comparable Public Company Analysis
Identified a group of generic drug companies with operations comparable to
Faulding Inc.
Below we have outlined the relevant multiples for Faulding Inc. (assuming
the $13.50 per share offer from FHF) and for selected publicly traded
comparable companies.
<TABLE>
<CAPTION>
Comparable Public Generic Companies (1)
Faulding Inc. (2) Low Median High
---------------- --- ------ ----
<S> <C> <C> <C> <C>
Multiples of: @$13.50/share
------------
LTM Revenue (4) 2.9x 1.4x 3.3x 8.2x
LTM EBITDA (4) 23.2x 9.4x 16.5x 25.1x
LTM EBIT (4) 33.0x 16.1x 21.0x 30.2x
LTM EPS (3) 51.6x 23.4x 35.1x 45.3x
CY 1997 EPS (3) (4) 37.5x 23.9x 29.7x 34.4x
CY 1998 EPS (3) (4) 27.0x 13.5x 20.6x 22.4x
</TABLE>
(1) Based on share price as of September 26, 1997. Consists of: Alpharma, Inc.;
Barr Laboratories; IVAX Corporation; Mylan Laboratories; Taro Pharmaceutical
Industries; Teva Pharmaceuticals; and Watson Pharmaceuticals.
(2) LTM based on Faulding Inc. June 30, 1997 results adjusted to include $1.2
million receivable write-off and to reflect conversion of all preferred
stock.
(3) CY1997 and CY1998 Faulding Inc. EPS are based on the management forecast
of 6/30/97 adjusted to reflect market conditions.
(4) EBIT = Earnings Before Interest and Taxes; EBITDA = Earnings Before
Interest, Taxes, Depreciation, and Amortization; LTM = Last Twelve Months;
CY = Calender year ended December 31.
Oppenheimer & Co., Inc. Health Care Investment Banking
<PAGE>
<PAGE>
Faulding Inc.
Comparable Public Company Analysis
Faulding Inc.'s implied value derived from applying selected comparable
generic company multiples to Faulding Inc.'s applicable financial data:
<TABLE>
<CAPTION>
Implied Multiple Range Implied Per Share Range
---------------------- -----------------------
Multiples of: Low Median High Low Median High
-------------- --- ------ ---- --- ------ ----
<S> <C> <C> <C> <C> <C> <C>
LTM Revenue 1.4x 3.3x 8.2x $6.33 $15.28 $38.40
LTM EBITDA 9.4x 16.5x 25.1x $5.37 $9.56 $14.64
LTM EBIT 16.1x 21.0x 30.2x $6.47 $8.51 $12.37
LTM EPS (1) 23.4x 35.1x 45.3x $6.13 $9.19 $11.84
CY 1997 EPS (1)(2) 23.9x 29.7x 34.4x $8.85 $11.01 $12.71
CY 1998 EPS (1)(2) 13.5x 20.6x 22.4x $6.73 $10.29 $11.22
</TABLE>
(1) Pro forma for conversion of all convertible preferred stock.
(2) CY1997 and CY1998 Faulding Inc. EPS are based on the management
forecast of 6/30/97 adjusted to reflect market conditions.
Oppenheimer & Co., Inc. Health Care Investment Banking
<PAGE>
<PAGE>
5. Discounted Cash Flow Analyses
<PAGE>
<PAGE>
Faulding Inc.
Discounted Cash Flow Analysis:
Faulding Inc.'s implied value per share derived from discounting projected
cash flows and terminal values
Terminal Implied Per Share Valuation
-------- ---------------------------
Discount Rate EBIT Multiple 3 Year 5 Year
------------- ------------- ------ ------
15.0% 8.0x $9.43 $17.55
12.0x $13.68 $24.96
16.0x $17.92 $32.36
17.5% 8.0x $8.86 $15.83
12.0x $12.84 $22.48
16.0x $16.82 $29.13
20.0% 8.0x $8.33 $14.32
12.0x $12.07 $20.30
16.0x $15.80 $26.29
Oppenheimer & Co., Inc. Health Care Investment Banking
<PAGE>
<PAGE>
Faulding Inc.
The discounted cash flow analysis reflects the forecasts presented by Faulding
Inc. management to the Special Committee on July 1, 1997, adjusted to reflect
market conditions discussed by Faulding Inc. management with the Special
Committee on July 25, 1997.
The discounted cash flow analysis calculates the cash flows and terminal
values for three and five years.
While the Company management's forecasts extend for five years to fiscal year
ended June 30, 2002, the different valuation ranges resulting from the three
and five year discounted cash flow calculations were considered in light of:
The highly uncertain nature of the launch success, competitive
environment and profitability of the generic industry generally
The fact that the Company has not yet commenced significant development
work on several of the generic products that are expected to contribute
to Faulding Inc.'s cash flows in years four and five pursuant to the
forecasts prepared by Faulding Inc.'s management.
Oppenheimer & Co., Inc. Health Care Investment Banking
<PAGE>
<PAGE>
6. Analysis of Selected Mergers and Acquisitions in the Generic Drug Industry
<PAGE>
<PAGE>
FAULDING INC.
COMPARABLE MERGERS AND ACQUISITIONS ANALYSIS
Below we have outlined the relevant multiples for Faulding Inc. and for
selected comparable completed merger and acquisition transactions in the
generic drug industry since January 1996.
<TABLE>
<CAPTION>
Comparable Mergers and
Acquisitions Transactions (2)
------------------------------
Faulding Inc. (1) Low Median High
---------------- --- ------ ----
Multiples of: @ $13.50/share
- --------------
<S> <C> <C> <C> <C>
LTM Revenue 2.9x 2.5x 3.9x 4.5x
LTM EBITDA 23.2x 78.9x 78.9x 78.9x
LTM EBIT 33.0x NA NA NA
LTM EPS 51.6x 73.1x 73.1x 73.1x
CY 1997 EPS (3) 37.5x 78.2x 78.2x 78.2x
CY 1998 EPS (3) 27.0x 25.0x 37.5x 44.4x
LTM Tang.Book Value 3.4x 3.3x 6.0x 6.1x
Premiums Paid (4):
-----------------
1 Day 25.6% 1.0% 27.0% 53.0%
1 Week 22.7% 19.9% 37.5% 55.1%
4 Weeks 45.9% 32.7% 40.3% 47.8%
</TABLE>
(1) LTM based on Faulding Inc. June 30, 1997 results adjusted to exclude $1.2
million receivable write-off and to reflect conversion of all preferred
stock.
(2) Transactions consist of Royce Laboratories/Watson Pharmaceuticals, Oclassen
Pharmaceuticals/Watson Pharmaceuticals, and Biocraft Laboratories/Teva
Pharmaceuticals.
(3) CY1997 and CY1998 Faulding Inc. EPS are based on the management forecast of
6/30/97 adjusted for market conditions.
(4) Versus closing price prior to initial bid date
Oppenheimer & Co., Inc. Health Care Investment Banking
<PAGE>
<PAGE>
Faulding Inc.
COMPARABLE MERGERS AND ACQUISITIONS ANALYSIS
Faulding Inc.'s implied value derived from applying selected comparable
mergers and acquisitions multiples to Faulding Inc.'s applicable financial
data:
<TABLE>
<CAPTION>
Implied Multiple Range Implied Per Share Price
---------------------- -----------------------
Multiples of: Low Median High Low Median High
- -------------- --- ------ ---- --- ------ ----
<S> <C> <C> <C> <C> <C> <C>
LTM Revenue 2.5x 3.9x 4.5x $11.54 $18.12 $20.94
LTM EBITDA 78.9x 78.9x 78.9x $46.47 $46.47 $46.47
LTM EBIT NA NA NA NA NA NA
LTM EPS 73.1x 73.1x 73.1x $19.12 $19.12 $19.12
CY 1997 EPS 78.2x 78.2x 78.2x $28.93 $28.93 $28.93
CY 1998 EPS 25.0x 37.5x 44.4x $12.50 $18.75 $22.20
LTM Tangible Book Value 3.3x 6.0x 6.1x $12.98 $23.61 $24.00
Premium Paid
- -------------
1 Day 1.0% 27.0% 53.0% $10.85 $13.65 $16.45
1 Week 19.9% 37.5% 55.1% $13.18 $15.12 $17.06
4 Weeks 32.7% 40.3% 47.8% $12.27 $12.98 $13.68
</TABLE>
Oppenheimer & Co., Inc. Health Care Investment Banking
<PAGE>
<PAGE>
Faulding Inc.
The multiples paid in completed merger and acquisition transactions in the
generics industry were considered in the valuation of the shares of Faulding
Inc. in light of the fact that there has been negative pressure in valuations
of mid to smaller sized multi-source generic companies, evidenced by the
pending purchase of the Rugby Group Inc. unit of Hoechst Marion Roussel by
Watson Pharmaceuticals Inc.
Oppenheimer & Co., Inc. Health Care Investment Banking
<PAGE>
<PAGE>
7. Premiums Paid on Comparable Minority Interest Transactions
<PAGE>
<PAGE>
Faulding Inc.
Premium Paid for Minority Interest
We have also analyzed selected completed transactions in which a majority
investor (50%+) purchased the remaining outstanding publicly-held shares to
achieve 100% ownership
<TABLE>
<CAPTION>
Premium Paid (1)(2) Faulding (3)
------------------ -----------
@$13.50/share
<S> <C> <C> <C> <C>
Market Price Prior To Offer Date Low Median High
- -------------------------------- --- ------ ----
1 Day 1.8% 19.2% 62.0% 25.6%
1 Week -2.6% 24.4% 69.6% 22.7%
4 Weeks 0.0% 25.0% 77.8% 45.9%
</TABLE>
(1) Comprised of a universe since March 1995 of Ropak Corp/LinPac Mouldings Ltd.
Terra Nitrogen Co LP/Terra Industries Inc., Total Containment Inc./Danaher
Corp, Grand Gaming Corp./Grand Casinos Inc., REN Corp.-USA/COBE Laboratories
Inc., Syms Corp./lnvestor Group, SCOR US Corp./Societe Commerciale de Reass,
NPC International Inc./lnvestor Group, Pratt Hotel Corp./Hollywood Casino
Corp., Systemix Inc./Novartis AG, Roto-Rooter Inc./Chemed Corp., General
Physics Corp./National Patient Development, LXE Inc./Electromagnetic
Sciences Inc., WCI Steel/Renco Group, Union Switch & Signal Inc./Ansaldo
Transporti SpA, Toy Biz Inc./Andrews Group Inc., Central Tractor Farm &
Country/JW Childs Equity Partners LP, MaxServ Inc./Sears Roebuck & Co.,
Allmerica Property & Casualty/Allmerica Financial Corp., Mafco Consolidated
Grp/Matco Holdings Inc. Calgene Inc./Monsanto Co., Contour Medical Inc./Sun
Healthcare Group Inc., NHP Inc./Apartment Investment & Management,
Steck-Vaughn Pub. Corp./Harcourt General Inc., Riviera Holdings
Corp./lnvestor, Chaparral Steel Co./Texas Industries Inc., Acordia
Inc/Anthem Inc.
(2) Versus closing price prior to initial bid date.
(3) Premiums of $13.50 final offer price over stock closing prices prior to
initial bid date of 6/3/97.
Oppenheimer & Co., Inc. Health Care Investment Banking
<PAGE>
<PAGE>
Faulding Inc.
Faulding Inc.'s implied acquisition price derived from applying premiums
paid in comparable minority interest transactions
<TABLE>
<CAPTION>
Faulding Inc. Implied
Market Price Prior To Offer Date Premium Paid (1) Per Share Price (1)
- -------------------------------- --------------- -------------------
Low Median High Low Median High
--- ------ ---- --- ------ ----
<S> <C> <C> <C> <C> <C> <C>
1 Day 1.8% 19.2% 62.0% $10.94 $12.81 $17.42
1 Week -2.6% 24.4% 69.6% $10.71 $13.68 $14.26
4 Weeks 0.0% 25.0% 77.8% $9.25 $11.56 $16.45
</TABLE>
(1) Premiums applied to Faulding Inc. stock closing prices prior to initial
offer date of 6/3/97.
Oppenheimer & Co., Inc. Health Care Investment Banking
<PAGE>
<PAGE>
C O N F I D E N T I A L
Project WINSTON
PRELIMINARY VALUATION MATERIALS
DILLON, READ & CO. INC.
JUNE 2, 1997
<PAGE>
<PAGE>
CONFIDENTIAL DRAFT - All numbers are preliminary and subject to change
Project WINSTON
================================================================================
The accompanying material was compiled on a confidential basis for use by the
Board of Directors of WINSTON (the "Company") in evaluating the material
described herein and not with a view to public disclosures or filing thereof
under the Securities Act of 1933 or the Securities Exchange Act of 1934 (the
"Federal Securities Laws"). This material was prepared for the Company for the
specific use by specific persons and was not prepared to conform with any
disclosure standards under the Federal Securities Laws. Neither the Company nor
Dillon, Read & Co. affiliates, advisors, agents or representatives warrants the
accuracy or completeness of any of the material set forth herein. Nothing
contained in the accompanying material is, or shall be relied upon as, a promise
or representation as to the past or the future.
It should be understood that any estimates, valuations and/or projections
contained in the accompanying material were prepared or derived from information
supplied by the Company without any independent verification thereof by Dillon
Read. Accordingly, no representation or warranty can be or is made by Dillon
Read as to the accuracy or achievability of any such valuations, estimates
and/or projections.
DILLON READ
<PAGE>
<PAGE>
CONFIDENTIAL DRAFT - All numbers are preliminary and subject to change
Project WINSTON
================================================================================
TABLE OF CONTENTS
PAGE
----
OVERVIEW OF DILLION READ ROLE AND PROCESS.................... 1
REVIEW OF SUB'S BUSINESS PLAN................................ 3
HISTORICAL STOCK PRICE PERFORMANCE........................... 7
COMPARABLE COMPANY ANALYSIS.................................. 8
DISCOUNTED CASH FLOW ANALYSIS................................11
PREMIUMS PAID IN MINORITY SQUEEZE-OUTS.......................13
DILLON READ
<PAGE>
<PAGE>
CONFIDENTIAL DRAFT - All numbers are preliminary and subject to change
Project WINSTON/1
================================================================================
OVERVIEW OF DILLON READ ROLE AND PROCESS
Dillon Read has been retained by WINSTON to evaluate the potential of
acquiring the minority stake of its publicly held U.S. subsidiary
("SUB")
This presentation reviews Dillon Read's preliminary valuation analysis
of SUB
As part of its valuation review Dillon Read has:
- Met with management of SUB to preliminary review SUB's
business plan
- Preliminary identified certain issues regarding the
projections which are outlined on the following pages
This is a preliminary valuation and as such does not represent Dillon
Read's final thoughts on SUB's valuation
DILLON READ
<PAGE>
<PAGE>
CONFIDENTIAL DRAFT - All numbers are preliminary and subject to change
Project WINSTON/2
================================================================================
OVERVIEW OF DILLON READ ROLE AND PROCESS
DILLON READ UTILIZED THE FOLLOWING VALUATION METHODOLOGIES TO
PRELIMINARILY VALUE SUB:
- Historical Stock Price Performance
- Comparable Company Analysis
- Discounted Cash Flow Analysis
- Premiums Paid in Minority Squeeze-Outs
AN ADDITIONAL VALUATION METHODOLOGY OFTEN EMPLOYED IS A PRO FORMA
ACCRETION (DILUTION) ANALYSIS WHICH MEASURES THE IMPACT OF THE
ACQUISITION ON THE ACQUIROR'S EARNINGS
- Dillon Read understands that WINSTON has performed such an
analysis
- For obvious reason, boards are often cautious about
acquisitions that may result in significant earnings dilution
- However, boards may determine, and the "market" has accepted,
dilution from an acquisition, provided the acquisition makes
strategic sense and can reasonably be expected to produce
accretion to earnings in the near term
DILLON READ
<PAGE>
<PAGE>
CONFIDENTIAL DRAFT - All numbers are preliminary and subject to change
Project WINSTON/3
================================================================================
REVIEW OF SUB'S BUSINESS PLAN
- --------------------------------------------------------------------------------
CONSOLIDATED INCOME STATEMENT(1)
(dollars in millions, except per share)
<TABLE>
<CAPTION>
Historical YE 6/30 Projected Fiscal Year Ending June 30,
-------------------- --------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $64.9 $75.8 $99.4 $161.7 $178.8 $207.9 $251.6 $286.7
% Growth NA 16.8% 31.1% 62.6% 10.6% 16.3% 21.0% 14.0%
Gross Profit $15.6 $17.4 $36.2 $ 58.2 $ 60.3 $ 70.0 $ 95.3 $114.3
% Margin 24.1% 22.9% 36.4% 36.0% 33.7% 33.7% 37.9% 39.9%
Trading Expenses $10.2 $13.7(2) $17.7 $ 18.9 $ 20.5 $ 21.5 $ 22.5 $ 23.3
R&D 7.7 10.4 9.7 14.4 15.7 18.2 21.7 25.4
----- ----- ----- ------ ------ ------ ------ ------
EBIT $(2.3) $(6.7) $ 8.8 $ 24.9 $ 24.1 $ 30.3 $ 51.1 $ 65.5
% Margin (3.5)% (8.9)% 8.8% 15.4% 13.5% 14.6% 20.3% 22.9%
Net Income(3) $(3.7) $(7.3) $ 2.3 $ 12.7 $ 12.3 $ 16.3 $ 29.4 $ 38.6
Primary EPS(4) $(0.25) $(0.49) $ 0.15 $ 0.84 $ 0.82 $ 1.08 $ 1.95 $ 2.56
Fully-diluted EPS(4) -- -- $ 0.23 $ 0.71 $ 0.70 $ 0.88 $ 1.49 $ 1.91
% Growth NA NM NM 204.5% (2.4)% 26.2% 69.2% 28.4%
</TABLE>
================================================================================
Note 1: Business Plan was developed by SUB Inc. management.
Note 2: Trading expenses for 1996 includes approximately $1.9 million of
acquisition and restructuring expenses.
Note 3: Assumes convertible preferred stock dividend of $2.8 million paid
annually throughout forecast period.
Note 4: Assumes conversion of convertible preferred stock into approximately 6.6
million shares of common stock.
PHARMACEUTICALS REPRESENT APPROXIMATELY 75% OF REVENUES AND NEARLY ALL OF SUB'S
OPERATING INCOME (EBIT)
DILLON READ
<PAGE>
<PAGE>
CONFIDENTIAL DRAFT - All numbers are preliminary and subject to change
Project WINSTON/4
================================================================================
REVIEW OF SUB'S BUSINESS PLAN
- --------------------------------------------------------------------------------
PHARMACEUTICALS INCOME STATEMENT(1)
(dollars in millions)
<TABLE>
<CAPTION>
Comparable
Historical Ye Company
6/30 Fiscal Year Ending June 30, Statistics
-------------- --------------------------------------------------- ----------------
1995 1996 1997 1998 1999 2000 2001 2002 1-YEAR 3-YEAR
---- ---- ---- ---- ---- ---- ---- ---- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $61.1 $63.8 $84.6 $119.1 $131.0 $149.6 $174.4 $214.5
% Growth N/A 4.4% 32.6% 40.8% 10.0% 14.1% 16.6% 22.8% 2.8% 17.8%
Gross Profit $14.7 $16.7 $35.6 $ 48.9 $ 48.9 $ 54.5 $ 71.2 $ 93.0
% Margin 24.0% 26.2% 42.1% 41.1% 37.3% 36.4% 40.8% 43.4% 37.9% 42.4%
Trading Expenses $ 9.8 $10.9(2) $13.9 $ 13.2 $ 13.6 $ 14.0 $ 14.5 $ 14.9
R&D 6.7 9.1 8.5 11.9 13.1 15.0 17.4 21.4
----- ----- ----- ------ ------ ------ ------ ------
EBIT $(1.9) $(3.2) $13.3 $23.8 $22.2 $25.6 $39.3 $56.7
% Margin (3.1)% (5.1)% 15.7% 19.9% 17.0% 17.1% 22.5% 26.5% 4.3% 11.4%
</TABLE>
================================================================================
Note 1: Business plan was developed by SUB Inc. management.
Note 2: Trading expenses for 1996 include approximately $1.9 million of
acquisition and restructuring expenses.
Issues
Underlying assumption of future competitive landscape
Product-by-product pricing and market share assumptions
1997 to 1998 growth; sustain growth from 1998 base
Important near-term products: Clonazepam, Diclofenac and Pentoxyfilline
Infrastructure capable of growth (i.e., operations and trading expenses
assumptions)
DILLON READ
<PAGE>
<PAGE>
CONFIDENTIAL DRAFT - All numbers are preliminary and subject to change
Project WINSTON/5
================================================================================
REVIEW OF SUB'S BUSINESS PLAN
- --------------------------------------------------------------------------------
INJECTIBLES INCOME STATEMENT(1)
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
Fiscal Year Ending June 30,
------------------------------------------------------
1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues $14.0 $ 30.8 $30.5 $38.4 $54.0 $50.5
%Growth NA 114.7% (1.0)% 26.0% 40.7% (6.5)%
Gross Profit $ 6.0 $ 11.3 $11.0 $13.6 $20.8 $18.9
% Margin 43.0% 36.7% 36.2% 36.0% 36.5% 37.4%
Operations $ 5.4 $ 5.6 $ 5.6 $ 5.8 $ 6.1 $ 6.3
Trading Expenses 3.0 3.9 4.0 4.2 4.5 4.7
R&D 1.0 1.7 1.8 2.3 3.2 3.0
----- ------ ----- ----- ----- -----
EBIT $(3.4) $ 0.2 $(0.4) $ 1.4 $ 7.1 $ 4.9
% Margin (24.3)% 0.6% (1.4)% 3.8% 13.1% 9.6%
</TABLE>
- --------------------------------------------------------------------------------
Note 1: Business plan was developed by SUB Inc. management.
ISSUES
- Shell Glass Vial ("SGV") sales
- Variability of profits
- 2000 to 2001 sales growth
DILLON READ
<PAGE>
<PAGE>
CONFIDENTIAL DRAFT - All numbers are preliminary and subject to change
Project WINSTON/6
================================================================================
REVIEW OF SUB'S BUSINESS PLAN
- --------------------------------------------------------------------------------
DEVICES INCOME STATEMENT(1)
(dollars in millions)
<TABLE>
<CAPTION>
Fiscal Year Ending June 30,
--------------------------------------------------------------------------------------
1997 1998 1999 2000 2001 2002
------ ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 0.8 $11.8 $17.9 $19.9 $23.2 $22.0
% Growth NA NM 47.2% 15.1% 16.4% (5.0)%
Gross Profit $ 0.4 $ 4.0 $ 6.5 $ 8.2 $10.0 $ 9.5
% Margin 53.1% 33.9% 37.6% 41.0% 43.3% 43.3%
Operations $ 0.5 $ 0.4 $ 0.6 $ 0.7 $ 0.8 $ 0.8
Trading Expenses 0.8 1.9 2.8 3.2 3.5 3.7
0.3 0.8 0.8 0.9 1.0 1.0
----- ----- ----- ----- ----- -----
EBIT $(1.2) $ 0.9 $ 2.3 $ 3.3 $ 4.7 $ 4.0
% Margin NA 7.9% 13.2% 16.7% 20.2% 16.1%
</TABLE>
- --------------------------------------------------------------------------------
Note 1: Business plan was developed by SUB Inc. management.
ISSUES
- "Start-up" nature of business
- Safe-Connect sales
- R&D
- Margin expansion
DILLON READ
<PAGE>
<PAGE>
CONFIDENTIAL DRAFT - All numbers are preliminary and subject to change
Project WINSTON/7
================================================================================
HISTORICAL STOCK PRICE PERFORMANCE
- --------------------------------------------------------------------------------
LATEST TWELVE MONTHS STOCK PRICE GRAPH
$14
High: $12.88
$12 Low: $ 4.00
Average: $ 6.96
5/27/97 Close: $11.00
$10
$8
$6
$4
- --------------------------------------------------------------------------------
5/28/96 6/21/96 7/17/96 8/12/96 9/5/96 10/1/96 11/20/96 12/16/96
1/9/97 2/4/97 2/28/97 3/26/97 4/21/97 5/15/97
DILLON READ
<PAGE>
<PAGE>
CONFIDENTIAL DRAFT - All numbers are preliminary and subject to change
Project WINSTON/8
================================================================================
COMPARABLE COMPANY ANALYSIS
- --------------------------------------------------------------------------------
MARGIN AND GROWTH RATE ANALYSIS
<TABLE>
<CAPTION>
LTM Margins 3 Year Margins 1-Year Growth Rates 3-Year Growth Rates
------------------------------ ------------------------------ ---------------------- ------------------
Company Gross EBITDA EBIT Gross EBITDA EBIT Revenues EPS Revenues EPS
- ------- ----- ------ ---- ----- ------ ---- -------- --------- -------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALPHARMA 38.1% 6.6% 0.0% 40.7% 12.5% 6.5% (6.7)% (162.8)% 1.8% NM %
Barr 23.4 13.3 11.5 22.4 7.3 4.8 16.3 (3.0) 45.9 64.0
IVAX 30.3 (6.9) (12.0) 38.9 10.5 6.2 (8.6) (174.6) 0.7 NM
Mylan 42.1 18.3(1) 14.1(1) 52.3 31.1(1) 27.4(1) (0.8) (15.7) 24.9 17.8
Taro 55.6 11.3 8.1 57.6 15.2 11.8 14.0 8.9 15.8 (21.3)
Teva 38.9 19.3 14.6 39.3 18.7 14.8 17.4 18.4 27.4 4.1
Watson 55.2 30.9(1) 27.7(1) 56.1 27.2(1) 23.6(1) 27.1 20.5 37.7 44.1
- ------------------------------------------------------------------------------------------------------------------------------------
Mean 37.9% 8.5% 4.3% 42.4% 15.3% 11.4% 2.8% (69.4)% 17.8% 20.1%
Median 38.9 13.3 11.5 40.7 15.2 11.8 14.0 (3.0) 24.9 4.1
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------
Note 1: Mylan and Watson EBITDA and EBIT margins adjusted to factor out effect
of JV equity earnings and royalty income.
DILLON READ
<PAGE>
<PAGE>
CONFIDENTIAL DRAFT - All numbers are preliminary and subject to change
Project WINSTON/9
================================================================================
COMPARABLE COMPANY ANALYSIS
- --------------------------------------------------------------------------------
MULTIPLES ANALYSIS
($IN MILLIONS, EXCEPT PER SHARE VALUE)
<TABLE>
<CAPTION>
Equity Value to: Enterprise Value to LTM:
Current Equity Enterprise LTM --------------------------------------- --------------------------
Company Price Value(1) Value(2) Revenues LTMEPS 1997E EPS 1998E EPS 1999E EPS Revenues EBITDA EBIT
- ------- ----- -------- -------- -------- ------ --------- --------- --------- -------- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALPHARMA $17,000 $ 370.3 $ 648.3 $ 479.8 NMx 30.9x 19.1x 17.0x 1.4x NMx NMx
Barr 26,500 561.8 530.0 276.8 NM 22.1 17.3 13.3 1.9 NM NM
IVAX 9,688 1,176.9 1,541.2 1,101.8 NM NM 17.0 14.7 1.4 NM NM
Mylan 14,625 1,784.3 1.688.0 416.1 26.4 24.2 21.4 14.5 NM(3) 16.7(4) 20.2(4)
Taro 6,625 71.6 95.7 56.5 34.3 16.6 NA NA 1.7 15.0 21.0
Teva 59,344 3,696.2 4,065.3 1,001.3 36.7 24.2 17.2 13.0 4.1 21.1 27.7
Watson 39,875 1,726.0 1,483.5 252.0 20.1 17.3 14.5 11.6 NM(3) 12.8(4) 13.6(4)
--------------------------------------------------------------------------------
Mean 29.4x 22.5x 17.7x 14.0x 2.1x 16.4x 20.6x
Median 30.4 23.1 17.3 13.9 1.7 15.9 20.6
--------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Note 1: Equity Value equals shares outstanding multiplied by stock price.
Note 2: Enterprise Value equals Equity Value plus debt less cash and
equivalents.
Note 3: Mylan and Watson revenue multiples were excluded because revenues of JV
are not recorded.
Note 4: Mylan and Watson EBITDA and EBIT multiples include JV equity earnings.
DILLON READ
<PAGE>
<PAGE>
CONFIDENTIAL DRAFT - All numbers are preliminary and subject to change
Project WINSTON/10
================================================================================
COMPARABLE COMPANY ANALYSIS
- --------------------------------------------------------------------------------
IMPLIED MULTIPLES AT VARIOUS PRICES
($in millions, except per share values)
<TABLE>
<CAPTION>
Current Assumed Prices per Share Comparable Companies
SUB ---------------------------------------------- -------------------------
Statistic Value $9,000 $10,500 $12,000 $13,000 $15,000 High Mean Low
- ------------------------------- ----- ------ ------- ------- ------- ------- ---- ---- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Implied SUB Equity Value(1) $224.8 $195.0 $227.5 $260.0 $292.5 $325.0
Implied SUB Enterprise Value(1) 228.0 198.2 230.7 263.2 295.7 328.2
Latest Twelve Months EPS $(0.07) NMx NMx NMx NMx NMx 36.7x 29.4x 20.1x
Street Estimates(1)
- -------------------
Forecast CY 1997 EPS $ 0.32 28.6x 33.3x 38.1x 42.9x 47.6x 30.9x 22.5x 16.6x
Forecast CY 1998 EPS 0.58 15.6 18.2 20.8 23.4 26.0 21.4 17.7 14.5
Internal Estimates(1)
- ---------------------
Forecast Cy 1997 EPS $ 0.47 19.1x 22.3x 25.5x 28.7 31.9x 30.9x 22.5x 16.6x
Forecast CY 1996 EPS 0.69 13.0 15.1 17.3 19.4 21.6 21.4 17.7 14.5
Forecast CY 1999 EPS 0.78 11.6 13.5 15.4 17.4 19.3 17.0 14.0 11.6
LTM Revenues $ 89.6 2.2x 2.6x 2.9x 3.3 3.7x 4.1x 2.1x 1.4x
LTM EBITDA 7.3 27.3 31.7 36.2 40.7 45.1 21.1 16.4 12.8
LTM EBIT 3.9 NM NM NM NM NM 27.7 20.6 13.6
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note 1: Assumes conversion of Class A and Class B preferred stock.
DILLON READ
<PAGE>
<PAGE>
CONFIDENTIAL DRAFT - All numbers are preliminary and subject to change
Project WINSTON/11
================================================================================
PRELIMINARY DISCOUNTED CASH FLOW ANALYSIS
<TABLE>
<CAPTION>
Projected For The Year Ended June 30,
---------------------------------------------
Free Cash Flow Calculation 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Operating income 8.8 24.9 24.1 30.3 51.1 65.5
Taxes @ 36.6% 3.2 9.1 8.8 11.1 18.7 24.0
Tax effected operating income 5.6 15.6 15.3 19.2 32.4 41.5
Plus: depreciation & amortization 0.0 4.4 5.0 5.7 6.4 7.2
Less: changes in net working capital 0.0 10.3 3.0 (0.2) 10.5 8.8
Less: capital expenditures 0.0 15.9 9.4 7.8 5.8 4.9
---- ---- ---- ---- ---- ----
Free cash flow 5.6 (6.1) 8.0 17.3 22.5 35.1
</TABLE>
DILLON READ
<PAGE>
<PAGE>
CONFIDENTIAL DRAFT - All numbers are preliminary and subject to change
Project WINSTON/12
================================================================================
PRELIMINARY DISCOUNTED CASH FLOW ANALYSIS
(Dollars in Millions, Except Per Share Data)
<TABLE>
<CAPTION>
Projected for the Year Ended June 30,
TERMINAL YEAR -- 2002 AGGREGATE ------------------------------------------------
PERPETUAL GROWTH ANALYSIS(1) FCF 1998 1999 2000 2001 2002
--------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Free cash flow ($6.1) $8.0 $17.3 $22.5 $35.1
Free cash flow discounted at:
16.00% $40.9 ($5.3) $5.9 $11.1 $12.4 $16.7
17.25% 39.1 (5.2) 5.8 10.8 11.9 15.8
18.50% 37.4 (5.2) 5.7 10.4 11.4 15.0
19.75% 35.7 (5.1) 5.5 10.1 11.0 14.2
21.00% 34.2 (5.1) 5.4 9.8 10.5 13.5
</TABLE>
<TABLE>
<CAPTION>
Perpetual Growth Rates
-------------------------------------------------
6.0% 7.0% 8.0% 9.0% 10.0%
------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Year 2002 terminal value -- perpetual growth at discount rates of:
16.00% $177.0 $198.5 $225.4 $260.0 $306.1
17.25% 149.1 165.2 184.8 209.1 240.1
18.50% 127.3 139.7 154.4 172.2 194.2
19.75% 109.8 119.5 130.9 144.4 160.7
21.00% 95.6 103.3 112.3 122.8 135.2
Enterprise value at discount rates of:
16.00% $217.9 $239.4 $266.3 $300.9 $347.0
17.25% 188.2 204.3 223.9 248.2 279.2
18.50% 164.6 177.0 191.7 209.6 231.6
19.75% 145.5 155.3 166.6 180.2 196.4
21.00% 129.6 137.5 146.5 157.0 169.4
Implied equity value per share at discount rates of:(1)
16.00% $ 9.91 $ 10.90 $ 12.14 $ 13.74 $ 15.87
17.25% 8.54 9.28 10.18 11.31 12.74
18.50% 7.45 8.02 8.70 9.52 10.54
19.75% 6.57 7.02 7.54 8.17 8.92
21.00% 5.84 6.20 6.61 7.10 7.67
</TABLE>
(1) Assumes net debt of $3.3 mm and shares outstanding of 21 mm as of March 31,
1997.
DILLON READ
<PAGE>
<PAGE>
CONFIDENTIAL DRAFT - All numbers are preliminary and subject to change
Project WINSTON/13
================================================================================
PREMIUMS PAID IN MINORITY SQUEEZE-OUTS
- --------------------------------------------------------------------------------
Premiums Paid in Buy-Ins
($ in millions, except per share)
<TABLE>
<CAPTION>
% OWNED
DATE PRICE PER VALUE OF % SHARES POST ONE DAY FOUR WEEK
ANNOUNCED TARGET ACQUIROR SHARE TRANSACTION ACQUIRED TRANSACTION PREMIUM PREMIUM
- --------- -------------------------- --------------------------- --------- ----------- -------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12/06/96 MaxServ Inc Sears Roebuck & Co. $7.75 $39.9 42.3% 100.0% 19.2% 55.0%
10/10/96 WCI Stoel Inc Renco Group Inc. 10.00 50.5 15.5 100.0 17.5 77.6
09/26/96 General Physics Corp National Patent Development 5.10 26.1 48.0 100.0 15.6 36.0
08/08/96 Roto-Rooter Inc. Chemad Corp 41.00 93.6 45.1 94.5 12.3 11.2
09/26/95 SCOR US Corp SCOR 15.25 55.4 20.0 100.0 37.1 36.6
08/25/95 GEICO Corp Berkshire Hathaway Inc. 70.00 2,347.0 49.0 100.0 25.5 25.3
07/14/95 REN Corp USA COBE Laboratories 20.00 177.7 47.0 100.0 27.0 26.0
09/26/95 Grand Gaming Corp Grand Casinos Inc. 5.06 38.5 22.2 100.0 34.8 55.7
05/19/95 BIC Corp BIC SA 10.50 212.6 22.0 100.0 13.3 28.6
04/07/95 LIH Bdcstg McCaw Cellular Common 129.90 3,323.4 48.0 100.0 18.2 19.7
04/05/95 Club Med Inc Club Mediterranean SA 32.00 153.4 33.0 100.0 41.4 44.5
11/02/94 Pacific Telecom PacificCorp 30.00 159.0 13.4 100.0 23.7 23.7
09/08/94 Coniel Cellular Inc OTE Corp 25.50 254.3 10.0 100.0 43.7 36.0
08/21/94 Castle & Cocks Homes Inc. Dole Food Co Inc. 15.75 61.5 17.8 100.0 35.5 55.6
07/28/94 Chemical Waste
Management Inc WMX Technologies Inc 8.85 397.4 21.4 100.0 19.5 1.1
06/06/94 Ogden Projects Inc Ogden Corp 18.36 110.3 15.3 100.0 5.8 20.5
05/05/94 General Cable Wassall PLC 6.00 35.9 46.3 95.7 17.1 11.6
03/01/94 FoxMayer Corp National Intergroup Inc 14.48 79.7 19.5 100.0 7.1 11.2
06/17/93 Hudson Energy Resources
Corp Apache Corp 15.00 30.3 33.5 100.0 26.3 25.0
04/25/93 Southernslam Public
Service Co DWG Corp 25.60 96.1 29.0 100.0 65.2 86.2
11/13/92 Brand Cos Inc Rust International Inc 10.75 185.0 44.0 100.0 4.9 4.9
08/17/92 PHLCORP Inc Leucadia National Corp 25.70 139.9 36.9 100.0 12.1 28.9
03/02/92 Grace Energy Corp WR Grace & Co 19.00 77.3 10.6 100.0 24.6 7.8
02/06/92 Spelling Entertainment
Inc Charter Co 7.25 43.0 19.0 100.0 52.6 45.0
---------------------------------------------
Mean 24.7% 32.3%
Median 21.6 27.3
High 65.2 86.2
Low 4.9 1.1
---------------------------------------------
</TABLE>
DILLON READ
