<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)
VWR Scientific Products Corporation
(Name of the Issuer)
EM Subsidiary, Inc.
EM Laboratories, Incorporated
Merck KGaA, Darmstadt, Germany
(Name of Persons Filing Statement)
Common Shares, par value $1.00 per share
(Title of Class of Securities)
918435108 - Common Shares
(CUSIP Number of Class of Securities)
Stephen J. Kunst
Vice President and Secretary
EM Subsidiary, Inc.
c/o EM Laboratories, Incorporated
7 Skyline Drive
Hawthorne, New York 10532
Telephone: (914) 592-4660
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of Person(s) Filing Statement)
with a copy to:
Klaus H. Jander, Esq.
Richard T. McDermott, Esq.
Rogers & Wells LLP
200 Park Avenue
New York, New York 10166-0153
Telephone: (212) 878-8000
This statement is filed in connection with (check the appropriate box):
a. |_| 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
Exchange Act of 1933.
c. |X| A tender offer.
d. |_| None of the above.
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies. |_|
Calculation of Filing Fee
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
Transaction Value - $637,761,832.00 Filing Fee - $127,552.00
- -------------------------------------------------------------------------------
</TABLE>
|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.
<TABLE>
<S> <C> <C> <C>
Amount previously paid: $127,552.00 Filing parties: EM Subsidiary, Inc.
EM Laboratories, Incorporated
Merck KGaA, Darmstadt, Germany
Form or registration no.: Schedule 14D-1 Date filed: June 14, 1999
</TABLE>
- -------------
1 Transaction Value based upon the tender of the 17,236,806 shares of VWR
Scientific Products Corporation Common Shares not owned by the Bidders at
$37.00 per share.
<PAGE> 2
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) The issuer of the class of equity security that is the subject of
the Rule 13e-3 transaction is VWR Scientific Products Corporation, a
Pennsylvania corporation (the "Company"). The address of the Company's principal
executive offices is 1310 Goshen Parkway, West Chester, Pennsylvania 19380.
(b) The title of the securities that are the subject of the Rule 13e-3
transaction is the Company's common shares, par value $1.00 per share ("Common
Shares"). The number of Common Shares outstanding as of May 31, 1999 is
28,968,627. The number of Common Shares not owned by Bidders being sought for
tender is 17,236,806. The approximate number of holders of record of the Common
Shares as of March 31, 1999 is 1500.
(c) The principal market in which the Common Shares is traded is the
Nasdaq National Market. The information in Section 7 ("Price Range of Shares;
Dividends") of the Offer to Purchase, which is Exhibit (d)(1) of this Statement
(the "Offer to Purchase"), is incorporated by reference.
(d) Insofar as EM Subsidiary, Inc. ("Purchaser"), EM Laboratories,
Incorporated ("Parent") and Merck KGaA are aware, the Company has not paid any
dividends during the past two years with respect to its Common Shares. The
Company's existing credit facility limits the payment of dividends by the
Company to its shareholders and there are also restrictions on the ability of
the Company's subsidiaries to pay dividends to the Company. The Plan and
Agreement of Merger, dated as of June 8, 1999, among Parent, Purchaser and the
Company (the "Merger Agreement"), prohibits the Company from paying any
dividends, without the consent of Parent, prior to the merger of Purchaser and
the Company contemplated by the Merger Agreement (the "Merger").
(e) Pursuant to a prospectus dated November 18, 1997, the Company made
an underwritten public offering of 3,025,000 Common Shares at an offering price
of $22.75 per share, resulting in aggregate proceeds to the Company of
$65,037,500.
(f) In conjunction with the Company's public offering in 1997, Parent
and an affiliate purchased 3,011,719 Common Shares in a private placement
concurrent with the Company's public offering in November of 1997 at the
offering price of $22.75 per share for an aggregate cash purchase price of
approximately $68.5 million. In addition, Parent and on affiliate purchased
52,163 Common Shares in 1997, at prices ranging from $7.79 to $13.25. In 1998,
Parent and an affiliate purchased 239,599 Common Shares at prices ranging from
$7.79 to $18.75. The Company's Common Shares referenced in this Item 1(f) were
purchased by Parent and an affiliate during the following quarters of 1997 and
1998. During the fourth quarter of 1997, Parent and an affiliate purchased
Common Shares at an average purchase price of $22.57. During the first quarter
of 1998, Parent and an affiliate purchased Common Shares at an average purchase
price of $12.29. During the fourth quarter of 1998, Parent and an affiliate
purchased Common Shares at an average purchase price of $14.15.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d); (g) This Statement is being filed by Purchaser, Parent and
Merck KGaA. The information set forth in Section 9 ("Certain Information
Concerning Purchaser, Parent, Merck KGaA and Certain Related Parties") of the
Offer to Purchase and Schedule I to it is incorporated by reference.
(e)-(f) During the last five years, none of Purchaser, Parent or Merck
KGaA, or to the best of the knowledge of Purchaser, Parent or Merck KGaA, any
persons controlling Purchaser, or any of the persons listed on Schedule I to the
Offer to Purchase, (i) has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or (ii) was a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction as a
result of which any such person was or is subject to a judgment, decree or final
order enjoining future 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.
<PAGE> 3
(a)-(b) The information set forth in Section 11 ("Background of the
Offer; Contacts with the Company"), Section 12 ("Purpose of the Offer and the
Proposed Merger; Plans for the Company") and Section 15 ("The Merger") of the
Offer to Purchase is incorporated by reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a) The information set forth in Section 12 ("Purpose of the Offer and
the Proposed Merger; Plans for the Company"), Section 1 ("Terms of the Offer"),
Section 2 ("Acceptance for Payment and Payment for Shares"), Section 4
("Withdrawal Rights"), Section 14 ("Conditions of the Offer") and Section 15
("The Merger") of the Offer to Purchase are incorporated by reference.
(b) The information set forth in Section 9 ("Certain Information
Concerning Purchaser, Parent, Merck KGaA and Certain Related Parties") and in
Section 15 ("The Merger") of the Offer to Purchase is incorporated by reference.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a)-(e) The information set forth in Section 12 ("Purpose of the Offer
and the Proposed Merger; Plans for the Company") and Section 15 ("The Merger")
of the Offer to Purchase is incorporated by reference.
(f)-(g) The information set forth in Section 13 ("Certain Effects of
the Transaction") of the Offer to Purchase is incorporated by reference.
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in Section 10 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated by reference.
(b) The information set forth in Section 18 ("Fees and Expenses") is
incorporated by reference.
(c)-(d) The information set forth in Section 10 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated by reference.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a)-(d) The information set forth in Section 11 ("Background of the
Offer; Contacts with the Company"), Section 12 ("Purpose of the Offer and the
Proposed Merger; Plans for the Company"), Section 5 ("Certain Federal Income Tax
Consequences"), Section 13 ("Certain Effects of the Transaction") and Section 6
("Fairness of the Transaction") of the Offer to Purchase is incorporated by
reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a)-(e) The information set forth in Section 6 ("Fairness of the
Transaction") of the Offer to Purchase is incorporated by reference.
(f) None of Purchaser, Parent, Merck KGaA or, to the best of
Purchaser's, Parent's or Merck KGaA's knowledge, the Company, has received
during the preceding 18 months a firm offer from an unaffiliated person for (i)
the merger or consolidation of the Company into or with such person or of such
person into or with the Company, (ii) the sale or other transfer of all or any
substantial part of the assets of the Company, or (iii) securities of the
Company that would enable the holder thereof to exercise control of the Company.
<PAGE> 4
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a)-(c) The information set forth in Section 6 ("Fairness of the
Transaction") of the Offer to Purchase is incorporated by reference.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a)-(b) The information set forth in Section 11 ("Background of the
Offer; Contacts with the Company"), Section 12 ("Purpose of the Offer and the
Proposed Merger; Plans for the Company") and Section 9 ("Certain Information
Concerning Purchaser, Parent, Merck KGaA and Certain Related Parties") of the
Offer to Purchase is incorporated by reference.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.
The information set forth in Section 11 ("Background of the Offer;
Contacts with the Company"), Section 12 ("Purpose of the Offer and Proposed
Merger; Plans for the Company") and Section 15 ("The Merger") of the Offer to
Purchase is incorporated by reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION.
(a)-(b) The information set forth in Section 15 ("The Merger") of the
Offer to Purchase is incorporated by reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth in Section 15 ("The Merger") of the Offer
to Purchase is incorporated by reference.
(b) No provision has been made by Parent, Purchaser or Merck KGaA, and
insofar as Parent, Purchaser or Merck KGaA are aware, no provision has been made
by the Company in connection with the Offer or the Merger to allow unaffiliated
securityholders to obtain access to the corporate files of the Company or of
Parent, Purchaser or Merck KGaA or to obtain counsel or appraisal services at
the expense of the Company or Parent, Purchaser or Merck KGaA.
(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION.
(a) The financial information contained in the Company's Annual Report
on Form 10-K for the years ended December 31, 1998 and December 31, 1997 and its
Quarterly Report on Form 10-Q for the period ended March 31, 1999 and the
information set forth in Section 8 ("Certain Information Concerning the
Company") of the Offer to Purchase is incorporated by reference.
(b) Parent, Purchaser and Merck KGaA do not believe pro forma data is
material with regard to the Offer or the Merger.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) No officer, employee, class of employees or corporate asset of the
Company has been or is proposed to be employed, availed or utilized by Parent,
Purchaser or Merck KGaA in connection with the Offer or the Merger, except to
the extent that, in order to comply with requirements of the Securities Exchange
Act of 1934, officers and employees of the Company have been required to prepare
a filing on Schedule 14D-9 with regard to the Offer and amendments to that
filing, and except to the extent that
<PAGE> 5
officers or employees of the Company may participate in preparation of a proxy
statement or information statement relating to the Merger, if one is required.
(b) The information set forth in Section 18 ("Fees and Expenses") of
the Offer to Purchase is incorporated by reference.
ITEM 16. ADDITIONAL INFORMATION.
Purchaser, Parent and Merck KGaA do not believe any additional
information is necessary to make the statements made above in light of the
circumstances under which they are made, not materially misleading.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(a) Not applicable.
(b) (1) Opinion of BT Alex. Brown Incorporated, dated June 8,
1999.1
(2) Presentation of BT Alex. Brown Incorporated to the Board
of Directors and Special Committee of the Company in
connection with its Opinion dated June 8, 1999.
(3) Opinion of Warburg Dillon Read LLC, dated June 8, 1999.1
(4) Presentation of Warburg Dillon Read LLC to the Board of
Directors and Special Committee of the Company in
connection with its Opinion dated June 8, 1999.
(c) (1) Agreement and Plan of Merger, dated June 8, 1999.2
(2) Shareholder Agreement, dated June 8, 1999. 2
(3) Standstill Agreement, dated February 27, 1995. 2
(4) Amendment Number One to the Standstill Agreement, dated
September 15, 1995. 2
(5) Common Share and Warrant Purchase Agreement, dated
February 27, 1995.1
(6) Common Share and Debenture Purchase Agreement, dated
May 24, 1995.1
(7) Subordinated Debenture, dated September 15, 1995.1
(d) (1) Offer to Purchase, dated June 14, 1999.2
(2) Letter of Transmittal.2
(3) Notice of Guaranteed Delivery.2
(4) Form of letter, dated June 14, 1999, to brokers, dealers,
commercial banks, trust companies and other nominees. 2
(5) Form of letter to be used by brokers, dealers, commercial
banks, trust companies and nominees to their clients. 2
(6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9. 2
(7) Summary Advertisement as published on June 14, 1999.2
(8) Press Release, dated June 9, 1999 (in German with English
translation).2
- --------
1 Incorporated by reference to the Schedule 14D-9 filed by the Company on June
14, 1999.
2 Incorporated by reference to the Schedule 14D-1 filed by Purchaser, Parent and
Merck KGaA on June 14, 1999.
<PAGE> 6
(e) Description of Appraisal Rights (set forth in Section 15
("The Merger") once Schedule IV to
the Offer to Purchase). 2
(f) None.
<PAGE> 7
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.
June 14, 1999
EM SUBSIDIARY, INC.
By: /s/ Dieter Janssen
Name: Dieter Janssen
Title: President
EM LABORATORIES, INCORPORATED
By: /s/ Stephen J. Kunst
Name: Stephen J. Kunst
Title: Vice-President & Secretary
MERCK KGaA, DARMSTADT, GERMANY
By: /s/ Klaus-Peter Brandis
Name: Klaus-Peter Brandis
Title: Departmental Director (Abteilungsdirektor)
<PAGE> 8
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
(b)(2) Presentation of BT Alex. Brown Incorporated to
the Board of Directors and Special Committee of
the Company in connection with its Opinion dated
June 8, 1999.
(b)(4) Presentation of Warburg Dillon Read LLC to the
Board of Directors and Special Committee of the
Company in connection with its Opinion dated
June 8, 1999.
<PAGE> 1
EXHIBITS IN SUPPORT OF FAIRNESS OPINION FOR
PROJECT VINTAGE
[DEUTSCHE BANC ALEX. BROWN LOGO]
June 8, 1999
<PAGE> 2
The information contained in this document was obtained from the management of
VIN and other sources.
This document has been prepared for the use of the Special Committee of the
Board of Directors and the Board of Directors of VIN only. It is confidential
and may not be disclosed or provided to any third parties without the written
permission of BT Alex. Brown Incorporated.
This document is prepared as of June 8, 1999 and reflects information made
available to us prior to such date. It does not include information regarding
all of the assessments made by BT Alex. Brown Incorporated in arriving at its
conclusions.
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
<PAGE> 3
TABLE OF CONTENTS
I. Summary of the Proposed Transaction
II. Overview of VIN
III. Valuation Based on Selected Public Companies
IV. Valuation Based on Comparable M&A Transactions
V. Premiums Paid Analysis
VI. VIN Discounted Cash Flow Analysis
VII. Appendix
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
<PAGE> 4
SUMMARY OF THE PROPOSED TRANSACTION
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 1 -
<PAGE> 5
SUMMARY OF THE PROPOSED TRANSACTION
- --------------------------------------------------------------------------------
Transaction: Cash tender offer by MERLOT for the remaining
50.1% of the outstanding common stock of VIN
Purchase Price per Share: $37.00 per outstanding VIN share
Accounting Treatment: Purchase accounting
Termination Fee: Up to $8.0 million payable to MERLOT to reimburse
expenses
Key Conditions to Closing: Hart-Scott-Rodino approval
Successful tender of a majority of the currently
outstanding VIN shares, excluding shares currently
held by MERLOT and its affiliates
Termination Date: December 31, 1999
- --------------------------------------------------------------------------------
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 2 -
<PAGE> 6
SUMMARY OF THE PROPOSED TRANSACTION
<TABLE>
<CAPTION>
<S> <C>
Purchase Price Per Share $ 37.00
VIN Shares
Common Shares Outstanding 28,962,527
Common Stock Equivalents 2,393,184
--------------
Total Shares 31,355,711
Aggregate Equity Value $1,160,161,307
Less: Proceeds from Common Stock Equivalents $ 55,019,300
Equity Purchase Price $1,105,142,007
Less: Cash (a) $ 0
Plus: Debt (a) $ 354,213,000
Adjusted Purchase Price $1,459,355,007
</TABLE>
(a) As of March 31, 1999
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 3 -
<PAGE> 7
SUMMARY OF THE PROPOSED TRANSACTION
(dollars in millions, except per share data)
<TABLE>
<CAPTION>
PURCHASE PRICE
ANALYSIS OF PURCHASE PRICE VIN MULTIPLES
-------------------------- --- ---------
<S> <C> <C>
LTM EBITDA (a) $ 112.8 12.9x
LTM EBIT (a) $ 85.8 17.0x
LTM Net Income (a) $ 34.3 32.2x
CY 1999 Net Income (Street) $ 41.0 27.0x
CY 2000 Net Income (Street) $ 48.3 22.9x
CY 1999 Net Income (Company) $ 49.1 22.5x
CY 2000 Net Income (Company) $ 68.3 16.2x
Premium to One Day Prior Price (06/04/99) $ 28.00 32.1%
Premium to One Month Prior Price (05/04/99) $ 26.25 41.0%
Premium to Three Months Prior Price (03/04/99) $ 23.56 57.0%
</TABLE>
(a) LTM as of March 31, 1999.
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 4 -
<PAGE> 8
OVERVIEW OF VIN
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 5 -
<PAGE> 9
VIN ANNOTATED STOCK PRICE HISTORY
January 1, 1998 - Present
[LINE CHART]
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 6 -
<PAGE> 10
RELATIVE STOCK PRICE PERFORMANCE
January 1, 1998 - Present
[LINE CHART]
Note: Distribution Index includes: Arrow Electronics, Corporate Express, Henry
Schein, Owens & Minor, Patterson Dental, PSS World Medical and W.W. Grainger.
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 7 -
<PAGE> 11
VIN VOLUME AT PRICES
January 1, 1998 - Present
[BAR CHART]
<TABLE>
<CAPTION>
At This (b) Percentage of Shares Traded
<S> <C>
$17 10.4%
$18 5.5%
$19 3.5%
$20 2.4%
$21 4.5%
$22 3.9%
$23 7.0%
$24 8.8%
$25 6.9%
$26 7.0%
$27 5.8%
$28 7.7%
$29 3.3%
$30 7.3%
$31 3.0%
$32 2.3%
$33 5.2%
$34 3.6%
$35 0.6%
$36 1.3%
Total Volume: 37.1 million
Turnover (% of Float (a)): 292.9%
</TABLE>
(a) Source: Bloomberg as of 6/04/99.
(b) Refers to specified price or any decimal value of that price.
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 8 -
<PAGE> 12
SUMMARY OF ANALYSTS' ESTIMATES AND COMMENTS
<TABLE>
<CAPTION>
Review Target CY99 CY00 Long-Term
Financial Institution (Analyst) Date Recommendation Price Estimate Estimate Growth Rate
------------------------------- ---- -------------- ----- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
BT Alex. Brown (Ryan) 6/4/99 Market Perform $32.00 $ 1.36 $ 1.55 15.0%
C.L. King & Associates (Roeder) 6/4/99 Strong Buy -- $ 1.40 $ 1.68 --
Janney Montgomery (Crooks) 6/2/99 Accumulate -- $ 1.36 $ 1.62 15.0%
Legg Mason Wood Walker (Reed) 6/3/99 Outperform $34.00 $ 1.41 $ 1.72 20.0%
Warburg Dillon Read (Khanna) 4/22/99 Buy $26.00 $ 1.40 $ 1.60 15.0%
I/B/E/S $ 1.39 $ 1.64 16.7%
- ------- ------ ------ -----
</TABLE>
- - BT Alex. Brown (5/3/99) -- Trends in both the microelectronics and the
pharma/biotech segments began to improve in Q1 and VIN benefited from four
major accounts that were won in Q4 1998 including: 3M, Eastman Chemicals,
Millennium Pharmaceuticals and additional business with P&G. The
pharmaceutical segment was stronger than anticipated, with sales trends in
the high single digits to low double digits, which we think will continue
for the balance of the year. As expected, microelectronics sales were down
about 4% in Q1, against difficult comparisons, although this segment has
started to improve sequentially for VIN. In addition, the chemical segment
was down 3-5%, a trend we also expect to persist through 1999. While we
remain optimistic about the Company's business, and its longer-term growth
prospects, we expect that the P/E multiple may be capped at about 18-20x
until EPS begin to consistently meet, or beat, expectations over time.
- - Warburg Dillon Read (4/22/99) -- VIN reported better than expected Q1 1999
earnings per share of $0.25, which was ahead of our forecast of $0.24.
Strength in sales to the pharmaceutical and semiconductor manufacturers
helped drive this upside. While sales strength from these two customer
segments has continued in the current quarter, management is signalling
that we lower our estimate in Q2 1999 by $0.02 per share due to timing of
revenue contribution from a recent acquisition. As such, we are lowering
Q2 1999 EPS to $0.32 and raising Q3 1999 to $0.48 leaving the full year
unchanged. In addition, VIN management provided an update on its MERLOT
relationship and stated that it expects resolution by the end of June.
- - Legg Mason Wood Walker (8/24/98) -- Results in VIN's core lab supply
business are positive, reflecting stable market demand trends, VIN's
strong competitive position, and the growth opportunities available
through expansion of VIN's product and service portfolio. Recent weakness
in sales growth of clean-room products to semiconductor manufacturers has
had some negative impact on VIN's reported top line and profitability
growth in 1998. Two recent acquisitions of critical environment
distributors should help counteract this weakness as well as continue
building VIN's presence in this market. The recent purchase of the Science
Kit Group of Companies solidifies VIN's position as the leading
distributor of lab supplies to the secondary school and college market, a
lucrative, specialized niche in the market.
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 9 -
<PAGE> 13
VIN FINANCIAL PLAN ACCORDING TO STREET PROJECTIONS
(in millions, except per share data)
<TABLE>
<CAPTION>
For the Year Ending December 31,
---------------------------------------------------------------------
1998A 1999E 2000E 2001E 2002E 2003E
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sales $ 1,349.9 $ 1,515.3 $ 1,620.0 $ 1,728.6 $ 1,841.0 $ 1,960.6
Cost of Goods Sold 1,037.8 1,153.1 1,229.7 1,310.3 1,391.8 1,476.4
--------- --------- --------- --------- --------- ---------
Gross Profit 312.2 362.2 390.3 418.3 449.2 484.3
Sales, General and Administrative 201.5 234.7 241.0 257.2 273.9 291.7
--------- --------- --------- --------- --------- ---------
EBITDA 110.7 127.5 149.3 161.2 175.3 192.6
Depreciation & Amortization 25.3 29.9 38.0 40.0 42.0 44.0
--------- --------- --------- --------- --------- ---------
EBIT 85.4 97.6 111.3 121.2 133.3 148.6
Interest Income (Expense) and Other (27.9) (29.2) (30.5) (25.5) (18.0) (8.0)
--------- --------- --------- --------- --------- ---------
Pre-Tax Income 57.5 68.3 80.8 95.7 115.3 140.6
Tax Expense 22.6 27.3 32.5 38.3 46.1 56.2
--------- --------- --------- --------- --------- ---------
Net Income $ 34.9 $ 41.0 $ 48.3 $ 57.4 $ 69.2 $ 84.4
========= ========= ========= ========= ========= =========
Earnings Per Share $ 1.18 $ 1.36 $ 1.55 $ 1.79 $ 2.15 $ 2.60
========= ========= ========= ========= ========= =========
FD Average Shares Outstanding 29.6 30.1 31.2 32.0 32.2 32.4
- ---------------------------------------------------------------------------------------------------------------
Growth Rates:
Sales - 12.2% 6.9% 6.7% 6.5% 6.5%
EBITDA - 15.2% 17.1% 7.9% 8.8% 9.9%
EBIT - 14.2% 14.1% 8.9% 10.0% 11.5%
Net Income - 17.3% 17.9% 18.8% 20.5% 21.9%
Earnings Per Share - 15.3% 13.7% 15.8% 19.8% 21.2%
Margins:
Gross Profit 23.1% 23.9% 24.1% 24.2% 24.4% 24.7%
SG&A 14.9% 15.5% 14.9% 14.9% 14.9% 14.9%
EBITDA 8.2% 8.4% 9.2% 9.3% 9.5% 9.8%
EBIT 6.3% 6.4% 6.9% 7.0% 7.2% 7.6%
Net Income 2.6% 2.7% 3.0% 3.3% 3.8% 4.3%
</TABLE>
Source: Based on BT Alex. Brown research estimates.
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 10 -
<PAGE> 14
VIN FINANCIAL PLAN ACCORDING TO COMPANY PROJECTIONS
(in millions, except per share data)
<TABLE>
<CAPTION>
For the Year Ending December 31,
---------------------------------------------------------------------
1998A 1999E 2000E 2001E 2002E 2003E
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sales $ 1,349.9 $ 1,447.4 $ 1,583.5 $ 1,716.2 $ 1,811.3 $ 1,907.1
Cost of Goods Sold 1,037.8 1,086.2 1,177.9 1,273.1 1,341.4 1,409.9
--------- --------- --------- --------- --------- ---------
Gross Profit 312.2 361.2 405.5 443.1 469.9 497.2
Sales, General and Administrative 201.5 225.5 243.6 261.3 271.2 282.2
--------- --------- --------- --------- --------- ---------
EBITDA 110.7 135.7 161.9 181.8 198.7 215.0
Depreciation & Amortization 25.3 30.0 30.0 30.0 30.0 30.0
--------- --------- --------- --------- --------- ---------
EBIT 85.4 105.7 131.9 151.8 168.7 185.0
Interest Income (Expense) and Other (27.9) (25.0) (20.9) (19.9) (9.9) (6.9)
--------- --------- --------- --------- --------- ---------
Pre-Tax Income 57.5 80.7 111.0 132.0 158.8 178.2
Tax Expense 22.6 31.6 42.7 49.3 59.9 67.6
--------- --------- --------- --------- --------- ---------
Net Income $ 34.9 $ 49.1 $ 68.3 $ 82.7 $ 98.9 $ 110.5
========= ========= ========= ========= ========= =========
Earnings Per Share $ 1.18 $ 1.66 $ 2.31 $ 2.79 $ 3.34 $ 3.73
========= ========= ========= ========= ========= =========
Average Shares Outstanding 29.6 29.6 29.6 29.6 29.6 29.6
- ---------------------------------------------------------------------------------------------------------------
Growth Rates:
Sales - 7.2% 9.4% 8.4% 5.5% 5.3%
EBITDA - 22.6% 19.3% 12.3% 9.3% 8.2%
EBIT - 23.7% 24.8% 15.1% 11.1% 9.7%
Net Income - 40.5% 39.2% 21.0% 19.7% 11.7%
Earnings Per Share - 40.5% 39.1% 21.0% 19.7% 11.7%
Margins:
Gross Profit 23.1% 25.0% 25.6% 25.8% 25.9% 26.1%
SG&A 14.9% 15.6% 15.4% 15.2% 15.0% 14.8%
EBITDA 8.2% 9.4% 10.2% 10.6% 11.0% 11.3%
EBIT 6.3% 7.3% 8.3% 8.8% 9.3% 9.7%
Net Income 2.6% 3.4% 4.3% 4.8% 5.5% 5.8%
</TABLE>
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 11 -
<PAGE> 15
VALUATION BASED ON SELECTED PUBLIC
COMPANIES
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 12 -
<PAGE> 16
VIN VALUATION BASED ON SELECTED PUBLIC COMPANIES
Range of Implied Price per Share (a) (b)
[BAR GRAPH]
Note: White bar indicates mean.
(a) LTM as of 3/31/99.
(b) Implied valuation based on EBITDA and EBIT are adjusted by subtracting net
debt of $354.2 million.
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 13 -
<PAGE> 17
VIN VALUATION BASED ON SELECTED PUBLIC COMPANIES
(dollars in millions, except per share data)
<TABLE>
<CAPTION>
Implied Price Per Share
Based on Multiples of
Selected Distribution Companies
VIN --------------------------------------
Statistics Mean Range
---------- ------- -------------------
<S> <C> <C> <C>
Valuation Based on Latest Twelve Months
Statistics (a) (b)
LTM EBITDA $ 112.8 $ 26.53 $ 18.68 - $ 40.13
LTM EBIT $ 85.8 $ 23.74 $ 15.87 - $ 32.21
LTM Net Income $ 34.3 $ 21.68 $ 15.58 - $ 29.20
Valuation Based on Projected Statistics
Cal. 1999 Net Income (Street) $ 41.0 $ 22.65 $ 17.05 - $ 29.73
Cal. 2000 Net Income (Street) $ 48.3 $ 21.86 $ 15.96 - $ 31.30
Cal. 1999 Net Income (Company) $ 49.1 $ 26.80 $ 20.42 - $ 35.25
Cal. 2000 Net Income (Company) $ 68.3 $ 30.32 $ 22.58 - $ 43.55
</TABLE>
(a) LTM as of 3/31/99.
(b) Implied valuation based on EBITDA and EBIT are adjusted by subtracting net
debt of $354.2.
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 14 -
<PAGE> 18
VIN VALUATION BASED ON SELECTED PUBLIC COMPANIES
(dollars in millions)
<TABLE>
<CAPTION>
VIN Selected Distribution
------------------------- Company Multiples
Transaction ---------------------------------
Statistics Multiples Mean Range
---------- ----------- ------- ----------------------
<S> <C> <C> <C> <C>
Valuation Based on Latest Twelve Months
Statistics (a) (b)
LTM EBITDA $ 112.8 12.9 x 10.0 x 7.9 x - 13.8 x
LTM EBIT $ 85.8 17.0 x 12.2 x 9.5 x - 15.3 x
LTM Net Income $ 34.3 32.2 x 18.3 x 13.2 x - 25.1 x
Valuation Based on Projected Statistics
Cal. 1999 Net Income (Street) $ 41.0 27.0 x 16.0 x 12.0 x - 21.4 x
Cal. 2000 Net Income (Street) $ 48.3 22.9 x 13.1 x 9.6 x - 19.2 x
Cal. 1999 Net Income (Company) $ 49.1 22.5 x 16.0 x 12.0 x - 21.4 x
Cal. 2000 Net Income (Company) $ 68.3 16.2 x 13.1 x 9.6 x - 19.2 x
</TABLE>
(a) LTM as of 3/31/99.
(b) Implied valuation based on EBITDA and EBIT are adjusted by subtracting net
debt of $354.2.
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 15 -
<PAGE> 19
VALUATION BASED ON COMPARABLE
M&A TRANSACTIONS
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 16 -
<PAGE> 20
VIN VALUATION BASED ON COMPARABLE M&A TRANSACTIONS
Range of Implied Price per Share (a) (b)
[BAR GRAPH]
(a) LTM as of 3/31/99.
(b) Implied valuation based on EBITDA and EBIT are adjusted by subtracting net
debt of $354.2 million.
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 17 -
<PAGE> 21
VIN VALUATION BASED ON COMPARABLE M&A TRANSACTIONS
(dollars in million, except per share data)
<TABLE>
<CAPTION>
Implied Price Per Share
Based on Recent Transactions
---------------------------------------------------
VIN TH Lee /
Statistics Fisher Scientific Mean Range
---------- ----------------- ------- -------------------
<S> <C> <C> <C> <C>
Valuation Based on Latest Twelve
Months (a) (b)
LTM EBITDA $ 112.8 $ 22.54 $ 36.08 $ 22.54 - $ 57.73
LTM EBIT $ 85.8 $ 25.37 $ 35.59 $ 16.63 - $ 56.21
LTM Net Income $ 34.3 $ 27.35 $ 36.20 $ 19.68 - $ 50.15
Valuation Based on Projected Statistics
Forward Net Income (Street) $ 44.1 $ 25.91 $ 35.09 $ 23.48 - $ 53.71
Forward Net Income (Company) $ 57.3 $ 33.12 $ 45.03 $ 29.96 - $ 69.21
</TABLE>
(a) LTM as of 3/31/99.
(b) Implied valuation based on EBITDA and EBIT are adjusted by subtracting net
debt of $354.2.
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 18 -
<PAGE> 22
VIN VALUATION BASED ON COMPARABLE M&A TRANSACTIONS
(dollars in millions)
<TABLE>
<CAPTION>
Recent Distribution
Mergers and Acquisitions
------------------------------------------------------
VIN Transaction TH Lee /
Statistics Multiples Fisher Scientific Mean Range
---------- ----------- ----------------- ------- ----------------------
<S> <C> <C> <C> <C> <C>
Valuation Based on Latest Twelve
Months (a) (b)
LTM EBITDA $ 112.8 12.9 x 8.9 x 12.7 x 8.9 x - 18.7 x
LTM EBIT $ 85.8 17.0 x 12.8 x 16.5 x 9.7 x - 24.0 x
LTM Net Income $ 34.3 32.2 x 23.4 x 31.5 x 16.6 x - 44.2 x
Valuation Based on Projected
Statistics
Forward Net Income (Street) $ 44.1 25.1 x 17.2 x 23.7 x 15.4 x - 36.9 x
Forward Net Income (Company) $ 57.3 19.3 x 17.2 x 23.7 x 15.4 x - 36.9 x
</TABLE>
(a) LTM as of 3/31/99.
(b) Implied valuation based on EBITDA and EBIT are adjusted by subtracting net
debt of $354.2.
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 19 -
<PAGE> 23
COMPARABLE M&A TRANSACTIONS
(dollars in thousands)
<TABLE>
<CAPTION>
Equity Purchase Price
Enterprise Purchase Price as a Multiple of:
Equity Enterprise as a Multiple of LTM: ----------------------
Date Target Purchase Purchase ------------------------- Trailing Forward
Ann. Acquiror Price Price (a) EBITDA EBIT Net Income Net Income
- -------- ----------------------------- ---------- ---------- ------ ------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
05/25/99 Unisource Worldwide, Inc. $ 842,795 $1,245,897 9.7 x 17.4 x 36.2 x 15.4 x
Georgia-Pacific Corporation
10/09/98 Allegiance Corporation $4,728,574 $5,582,374 15.7 x 24.0 x 44.2 x 36.9 x
Cardinal Health, Inc.
04/24/98 WESCO Distribution, Inc. $ 653,500 $1,122,528 12.2 x 14.3 x 35.6 x NA
MBO & Cypress Group
12/17/97 Suburban Ostomy Supply Co. $ 135,000 $ 136,437 14.1 x 15.8 x 29.4 x NA
Invacare, Inc.
08/04/97 Sullivan Dental Products, Inc. $ 318,000 $ 314,300 18.7 x 21.8 x 34.9 x 25.2 x
Henry Schein, Inc.
06/05/97 Fisher Scientific International, Inc. (b) $1,041,004 $1,339,804 8.9 x 12.8 x 23.4 x 17.2 x
Thomas H. Lee Co.
01/28/97 General Medical, Inc. $ 347,000 $ 762,900 12.7 x 16.1 x NA NA
McKesson Corporation
09/15/95 Baxter Industrial (c) $ 428,662 $ 428,662 9.4 x 9.7 x 16.6 x NA
VWR Scientific Products Corporation
Mean: 12.7 x 16.5 x 31.5 x 23.7 x
Median: 12.5 x 16.0 x 34.9 x 21.2 x
Low: 8.9 x 9.7 x 16.6 x 15.4 x
High: 18.7 x 24.0 x 44.2 x 36.9 x
</TABLE>
<TABLE>
<CAPTION>
Equity Purchase Price
as a Multiple of: Premium to Market
--------------------- -------------------
Date Target Book Day Month 3 Months
Ann. Acquiror Value Prior Prior Prior Accounting
- -------- ----------------------------- --------------------- ----- ----- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
05/25/99 Unisource Worldwide, Inc. 1.2 x 11.6% 47.7% 84.6% Purchase
Georgia-Pacific Corporation
10/09/98 Allegiance Corporation 5.1 x 67.2% 24.1% -28.3% Pooling
Cardinal Health, Inc.
04/24/98 WESCO Distribution, Inc. NM NA NA NA Purchase
MBO & Cypress Group
12/17/97 Suburban Ostomy Supply Co. 4.0 x 8.0% 13.3% 22.1% Pooling
Invacare, Inc.
08/04/97 Sullivan Dental Products, Inc. 3.8 x 28.9% 66.2% 79.2% Pooling
Henry Schein, Inc.
06/05/97 Fisher Scientific International, Inc. (b) 2.6 x 27.4% 30.8% 5.8% Purchase
Thomas H. Lee Co.
01/28/97 General Medical, Inc. NA NA NA NA Purchase
McKesson Corporation
09/15/95 Baxter Industrial (c) 3.8 x NA NA NA Purchase
VWR Scientific Products Corporation
Mean: 3.4 x 28.6% 36.4% 32.7%
Median: 3.8 x 27.4% 30.8% 22.1%
Low: 1.2 x 8.0% 13.3% -28.3%
High: 5.1 x 67.2% 66.2% 84.6%
</TABLE>
(a) Defined as Equity Purchase Price plus debt less cash and cash equivalents.
(b) Prior to the announcement of the Bass Group bid for the Company on June 5,
1997.
(c) Annualized numbers based on the six months ended June 30, 1995.
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 20 -
<PAGE> 24
PREMIUMS PAID ANALYSIS
PROJECT VINTAGE [DEUTSCHE BANK ALEX. BROWN LOGO]
-21-
<PAGE> 25
VIN VALUATION BASED ON PREMIUMS PAID
Range of Implied Price per Share
Dark blue lines indicate the implied price per share based on the premiums paid
in the Fisher Scientific transaction
[CHART]
Note: White lines indicate means.
(a) Source: SDC as of June 2, 1999. Includes all completed deals since January
1, 1995 in which the acquiror had between a 20% and 50% ownership in the
target prior to the deal, and then raised its ownership to 90% or greater
following the transaction.
(b) SDC, January 1, 1994 to present. Includes completed M&A transactions
(excluding financial services companies) between $1.0 and $1.5 billion.
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 22 -
<PAGE> 26
VALUATION BASED ON PREMIUMS PAID
Comparable M&A Transactions (8)
<TABLE>
<CAPTION>
Premium Implied Price Per Share
VIN ------------------------------ ------------------------------
Price Mean Range Mean Range
----- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C>
One Day Prior (6/4/99) $28.00 28.6% 8.0% - 67.2% $36.02 $30.25 - $46.83
One Month Prior (5/4/99) $26.25 36.4% 13.3% - 66.2% $35.81 $29.73 - $43.63
Three Months Prior (3/4/99) $23.56 32.7% -28.3% - 84.6% $31.26 $16.90 - $43.50
</TABLE>
Selected Shareholder Transactions (24) (a)
<TABLE>
<CAPTION>
Premium Implied Price Per Share
VIN ----------------------------- ------------------------------
Price Mean Range Mean Range
----- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C>
One Day Prior (6/4/99) $28.00 30.8% 3.2% - 118.6% $ 36.62 $ 28.90 - $ 61.20
One Month Prior (5/4/99) $26.25 32.4% 4.2% - 104.0% $ 34.76 $ 27.36 - $ 53.55
Three Months Prior (3/4/99) $23.56 42.6% -9.7% - 201.9% $ 33.60 $ 21.28 - $ 71.13
</TABLE>
Similarly-sized M&A Transactions (64) (b)
<TABLE>
<CAPTION>
Premium Implied Price Per Share
VIN ----------------------------- ------------------------------
Price Mean Range Mean Range
----- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C>
One Day Prior (6/4/99) $28.00 29.5% -13.9% - 118.5% $36.26 $24.12 - $61.17
One Month Prior (5/4/99) $26.25 41.2% -9.7% - 130.7% $37.05 $23.71 - $60.56
Three Months Prior (3/4/99) $23.56 46.1% -27.7% - 164.9% $34.41 $17.04 - $62.41
</TABLE>
Fisher Scientific Transaction (c)
<TABLE>
<CAPTION>
VIN Implied Price
Price Premium Per Share
----- ------- ---------
<S> <C> <C> <C>
One Day Prior (6/4/99) $28.00 27.4% $35.67
One Month Prior (5/4/99) $26.25 30.8% $34.35
Three Months Prior (3/4/99) $23.56 5.8% $24.92
</TABLE>
(a) Source: SDC as of June 2, 1999. Includes all completed deals since January
1, 1995 in which the acquiror had between a 20% and 50% ownership in the
target prior to the deal, and then raised its ownership to 90% or greater
following the transaction.
(b) SDC, January 1, 1994 to present. Includes completed M&A transactions
(excluding financial services companies) between $1.0 and $1.5 billion.
(c) Premiums are to one day, one month and three months prior to the Bass Group
bid for the Company on June 5, 1997.
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 23 -
<PAGE> 27
PREMIUMS PAID IN SELECTED SHAREHOLDER TRANSACTIONS
<TABLE>
<CAPTION>
Premium / (Discount) Paid
Date Enterprise --------------------------
Announced Acquiror Target Value($mil) 1 Day 1 Month 3 Months
--------- -------- ------ ----------- ----- ------- --------
<S> <C> <C> <C> <C> <C> <C>
02/16/99 Delta Air Lines Inc ASA Holdings Inc $940.2 6.5% 4.2% 2.1%
01/06/99 Marriott International Inc ExecuStay Corp 138.9 3.2% 9.8% 75.0%
12/02/98 Pinault-Printemps Redoute Brylane Inc 804.2 45.2% 44.1% (9.7%)
05/11/98 Monsanto Co DeKalb Genetics Corp 3,275.7 29.9% 42.5% 201.9%
03/31/98 Thermedics(Thermo Electron) Thermo Voltek Corp 90.5 45.5% 40.0% 33.3%
12/11/97 MascoTech Inc TriMas Corp 1,384.0 12.7% 19.0% 13.6%
11/17/97 Intermedia Communications Inc Shared Technologies Fairchild 585.4 25.7% 22.4% 38.7%
10/20/97 HSN Inc Ticketmaster Group Inc 845.3 32.0% 56.3% 68.5%
08/04/97 Restaurant Co Perkins Family Restaurant LP 215.0 28.7% 31.8% 5.7%
07/30/97 Fujitsu Ltd Amdahl Corp 1,563.1 5.0% 25.6% 37.8%
02/13/97 British Aerospace Holdings Reflectone Inc 98.0 20.0% 25.5% 28.0%
01/30/97 Samsung Electronics Co Ltd AST Research Inc 558.1 16.8% 20.0% 23.4%
10/30/96 Safeway Inc Vons Cos Inc 3,093.0 26.8% 25.7% 33.0%
10/28/96 Henkel KGaA Loctite Corp 2,118.3 31.9% 34.8% 41.9%
06/03/96 Pakhoed Holding NV Univar Corp 605.3 57.2% 58.8% 80.9%
04/08/96 AirTouch Communications Cellular Communications Inc 2,910.4 7.4% 6.3% 8.6%
10/26/95 Hyundai Electronics Industries Maxtor Corp 408.4 42.9% 44.9% 53.1%
10/18/95 Rhone-Poulenc Rorer Inc Applied Immune Sciences Inc 114.2 67.9% 38.2% 77.4%
07/20/95 Greenfield Industries Inc Rule Industries Inc 80.6 118.6% 104.0% 56.9%
04/24/95 Chiron Corp Viagene Inc 137.3 67.4% 38.5% 100.0%
03/15/95 LinPac Mouldings Ltd Ropak Corp 81.7 6.0% 4.8% 3.5%
03/07/95 Intelligent Electronics Inc Future Now Inc 130.4 10.5% 26.0% 6.2%
02/22/95 People's Choice TV Corp Preferred Entertainment Inc 65.9 14.3% 29.2% 29.2%
01/18/95 Arcadian Corp Arcadian Partners LP 1,664.5 17.2% 26.1% 13.7%
Mean 30.8% 32.4% 42.6%
Median 26.2% 27.6% 33.1%
Low 3.2% 4.2% (9.7%)
High 118.6% 104.0% 201.9%
</TABLE>
Source: SDC as of June 2, 1999. Includes all completed deals since January
1, 1995 in which the acquiror had between a 20% and 50% ownership in the
target prior to the deal, and then raised its ownership to 90% or greater
following the transaction.
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 24 -
<PAGE> 28
VIN DISCOUNTED CASH FLOW ANALYSIS
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 25 -
<PAGE> 29
DISCOUNTED CASH FLOW ANALYSIS
Street Projections
------------------
<TABLE>
<CAPTION>
MERLOT Offer: $37.00
14.0% 13.0% 12.0%
Disc. Rate Disc. Rate Disc. Rate
---------- ---------- ----------
<S> <C> <C> <C>
8.0x $24.75 $26.03 $27.37
9.0x $28.15 $29.57 $31.06
10.0x $31.56 $33.11 $34.75
</TABLE>
Company Projections
-------------------
<TABLE>
<CAPTION>
MERLOT Offer: $37.00
14.0% 13.0% 12.0%
Disc. Rate Disc. Rate Disc. Rate
---------- ---------- ----------
<S> <C> <C> <C>
8.0x $28.72 $30.16 $31.67
9.0x $32.52 $34.12 $35.79
10.0x $36.32 $38.07 $39.90
</TABLE>
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 26 -
<PAGE> 30
DISCOUNTED CASH FLOW ANALYSIS - STREET PROJECTIONS
(dollars in millions, except per share data)
<TABLE>
<CAPTION>
FOR THE YEAR ENDING DECEMBER 31,
-----------------------------------------------------------------
FREE CASH FLOW CALCULATION: 1999 2000 2001 2002 2003
- --------------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
EBIT $97.6 $111.3 $121.1 $133.3 $148.6
Adjusted Tax Expense 39.0 44.5 48.4 53.3 59.4
----- ------ ------ ------ ------
EBIT (after tax) 58.6 66.8 72.7 80.0 89.2
Plus: Depreciation & Amortization 29.9 38.0 40.0 42.0 44.0
Less: Changes in Working Capital 31.7 19.6 20.2 21.2 22.8
Less: Capital Expenditures 25.0 20.0 20.0 20.0 20.0
----- ------ ------ ------ ------
Free Cash Flow $31.8 $65.2 $72.5 $80.9 $90.4
===== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
PV OF TERMINAL VALUE AS OF 06/30/99
PV OF CASH MULTIPLE OF 2003 EBITDA ($192.6 MILLION) IMPLIED EQUITY VALUATION
DISCOUNT FLOWS AS OF ---------------------------------------- LESS ----------------------------------
RATE 06/30/99 8.0X 9.0X 10.0X DEBT (a) 8.0X 9.0X 10.0X
---- -------- ---- ---- ----- -------- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12.0% $233.0 $924.6 $1,040.1 $1,155.7 ($354.2) $803.3 $918.9 $1,034.4
13.0% $227.2 $888.3 $999.3 $1,110.3 ($354.2) $761.2 $872.2 $983.3
14.0% $221.6 $853.7 $960.4 $1,067.1 ($354.2) $721.0 $827.7 $934.5
</TABLE>
<TABLE>
<CAPTION> Implied Equity Valuation per Share(b)
Discount -------------------------------------
Rate 8.0x 9.0x 10.0x
---- ---- ---- -----
<S> <C> <C> <C>
12.0% $27.37 $31.06 $34.75
13.0% $26.03 $29.57 $33.11
14.0% $24.75 $28.15 $31.56
</TABLE>
Source: Based on BT Alex. Brown research estimates.
(a) Debt balance as of March 31, 1999.
(b) Based on 29.0 million shares outstanding.
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 27 -
<PAGE> 31
DISCOUNTED CASH FLOW ANALYSIS - COMPANY PROJECTIONS
(dollars in millions, except per share data)
<TABLE>
<CAPTION>
For the Year Ending December 31,
----------------------------------------------------------------
FREE CASH FLOW CALCULATION: 1999 2000 2001 2002 2003
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
EBIT $105.7 $131.9 $151.8 $168.7 $185.0
Adjusted Tax Expense 42.3 52.8 60.7 67.5 74.0
------ ------ ------ ------ ------
EBIT (after tax) 63.4 79.1 91.1 101.2 111.0
Plus: Depreciation & Amortization 30.0 30.0 30.0 30.0 30.0
Less: Changes in Working Capital 16.6 0.4 11.6 5.1 13.4
Less: Capital Expenditures 51.2 36.0 50.4 15.0 15.0
------ ------ ------ ------ ------
Free Cash Flow $25.6 $72.7 $59.2 $111.1 $112.6
===== ===== ===== ====== ======
</TABLE>
<TABLE>
<CAPTION>
PV of Terminal Value as of 06/30/99
Discount Multiple of 2003 EBITDA ($215.0 million) Implied Equity Valuation
PV of Cash ---------------------------------------- -----------------------------------
Flows as of Less
Rate 06/30/99 8.0x 9.0x 10.0x Debt (a) 8.0x 9.0x 10.0x
---- -------- ---- ---- ----- -------- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12.0% $260.1 $1,032.2 $1,161.2 $1,290.2 ($354.2) $938.1 $1,067.1 $1,196.1
13.0% $253.3 $991.6 $1,115.6 $1,239.5 ($354.2) $890.7 $1,014.7 $1,138.6
14.0% $246.8 $953.0 $1,072.2 $1,191.3 ($354.2) $845.6 $964.7 $1,083.9
</TABLE>
<TABLE>
<CAPTION>
Implied Equity Valuation per Share (b)
Discount --------------------------------------
Rate 8.0x 9.0x 10.0x
---- ---- ---- -----
<S> <C> <C> <C> <C>
12.0% $31.67 $35.79 $39.90
13.0% $30.16 $34.12 $38.07
14.0% $28.72 $32.52 $36.32
</TABLE>
Source: Based on VIN Management projections.
(a) Debt balance as of March 31, 1999.
(b) Based on 29.0 million shares outstanding.
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 28 -
<PAGE> 32
APPENDIX
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 29 -
<PAGE> 33
OWNERSHIP ANALYSIS
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 30 -
<PAGE> 34
OWNERSHIP ANALYSIS
<TABLE>
<CAPTION>
Percent of
Institutional Holdings (a) Shares Held Outstanding
- -------------------------- ----------- -----------
<S> <C> <C>
Fidelity Management & Research Co. 1,872,630 6.5%
Warburg Pincus Asset Mgmt. Inc. 830,200 2.9%
Dimensional Fund Advisors, Inc. 472,700 1.6%
Palisade Capital Management LLC 425,900 1.5%
Fiduciary Management, Inc. 420,320 1.5%
J. & W. Seligman & Co., Inc. 341,740 1.2%
Loomis, Sayles & Company, L.P. 334,600 1.2%
First Union Corporation 331,212 1.1%
Buchanan Parker Asset 319,500 1.1%
Brookside Capital Investors 293,300 1.0%
Friess Associates, Inc. 293,100 1.0%
Barclays Bank Plc 264,192 0.9%
T. Rowe Price Associates, Inc. 253,600 0.9%
UBS Brinson Inc. 200,000 0.7%
Bankers Trust N Y Corp. 199,850 0.7%
Brinson Partners, Inc. 170,000 0.6%
Welch Capital Prtnrs LLC 161,010 0.6%
State Of WI Investment Board 100,000 0.3%
The Vanguard Group 98,600 0.3%
First Empire State Corp. 98,354 0.3%
Chase Manhattan Corp. 91,600 0.3%
College Retire Equities 90,543 0.3%
Mellon Bank Corporation 84,855 0.3%
Crestone Capital Mgmt. Inc. 78,955 0.3%
M & T Bank 78,838 0.3%
Others 942,351 3.3%
--------- -----
Total 8,847,950 30.5%
</TABLE>
<TABLE>
<CAPTION>
Percent of Options
Insider Holdings (b) Shares Held (c) Outstanding(c) Held (d)
- -------------------- ----------------- ------------- --------
<S> <C> <C> <C>
Jerrold B. Harris (President and CEO) 243,784 0.8% 150,000
N. Stewart Rogers (Director) 336,031 1.2% 0
Richard E. Engerbrecht (Director) 95,640 0.3% 0
James W. Bernard (Director) 90,718 0.3% 0
Paul Nowak (Executive VP) 9,367 0.0% 68,000
Hal G. Nichter (Senior VP) 10,423 0.0% 37,000
David S. Barth (Senior VP) 3,211 0.0% 40,000
David M. Bronson (Senior VP Finance, CFO) 4,657 0.0% 47,000
Donald Nielson (Director) 23,158 0.1% 0
Edward A. McGrath, Jr. (Director) 6,078 0.0% 0
------- ---- -------
Total 823,067 2.8% 342,000
MERLOT (e) 14,449,405 49.9%
Institutional Holdings 8,847,950 30.5%
Insider Holdings 823,067 2.8%
Retail and Other Holdings 4,842,105 16.7%
--------- -----
TOTAL SHARES OUTSTANDING (f) 28,962,527 100.0%
========== =====
</TABLE>
(a) Source: CDA Spectrum as of June 2, 1999.
(b) Source: Company Proxy dated April 6, 1999.
(c) Excludes oustanding options exercisable within 60 days after January 31,
1999.
(d) Options exercisable within sixty days after January 31, 1999.
(e) Excludes 988,869 shares which may be purchased by MERLOT, pursuant to the
Standstill Agreement, to maintain a 49.89% equity interest in the event
that VIN issues additional shares.
(f) Source: Company 10-Q dated March 31, 1999.
PROJECT VINTAGE [DEUTSCHE BANX ALEX. BROWN LOGO]
-31-
<PAGE> 35
SELECTED PUBLIC COMPANY ANALYSIS
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 32 -
<PAGE> 36
COMPARABLE COMPANY ANALYSIS
(dollars in millions)
<TABLE>
<CAPTION>
Equity Value LTM EBITDA
<S> <C> <C> <C>
W.W. Grainger $5,269.0 W.W. Grainger $485.4
Arrow $1,724.5 Arrow $397.2
Henry Schein $1,200.7 Corp. Express $222.0
Patterson Dental $1,200.6 Henry Schein $129.0
VIN $1,105.1 VIN $112.8
PSS World Medical $ 796.1 PSS World Medical $105.1
Corp. Express $ 625.5 Patterson Dental $ 84.6
Owens & Minor $ 367.7 Owens & Minor $ 81.7
</TABLE>
<TABLE>
<CAPTION>
Enterprise Value LTM EBIT
<S> <C> <C> <C>
W.W. Grainger $5,533.5 W.W. Grainger $404.4
Arrow $3,225.6 Arrow $335.4
Corp. Express $1,906.9 Corp. Express $156.9
Henry Schein $1,562.3 Henry Schein $106.1
VIN $1,459.4 PSS World Medical $ 91.3
Patterson Dental $1,168.7 VIN $ 85.8
PSS World Medical $ 866.0 Patterson Dental $ 76.6
Owens & Minor $ 649.0 Owens & Minor $ 63.5
</TABLE>
<TABLE>
<CAPTION>
Total Assets LTM Net Income
<S> <C> <C> <C>
Arrow $4,127.3 W.W. Grainger $237.6
Corp. Express $2,415.6 Arrow $132.2
W.W. Grainger $2,202.1 Henry Schein $ 60.1
Henry Schein $1,140.0 PSS World Medical $ 54.3
VIN $ 923.5 Patterson Dental $ 47.4
Owens & Minor $ 754.9 Corp. Express $ 36.7
PSS World Medical $ 714.1 VIN $ 34.3
Patterson Dental $ 343.9 Owens & Minor $ 29.0
</TABLE>
Note: VIN data based on transaction purchase price of $37.00 per share.
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 33 -
<PAGE> 37
COMPARABLE COMPANY ANALYSIS
<TABLE>
<CAPTION>
EBITDA Margin EBITDA Multiple
<S> <C> <C> <C>
W.W. Grainger 11.1% Patterson Dental 13.8 x
Patterson Dental 9.9% VIN 12.9 x
VIN 8.1% Henry Schein 12.1 x
PSS World Medical 7.2% W.W. Grainger 11.4 x
Henry Schein 6.4% Corp. Express 8.6 x
Corp. Express 5.9% PSS World Medical 8.2 x
Arrow 4.7% Arrow 8.1 x
Owens & Minor 2.7% Owens & Minor 7.9 x
MEAN 6.8% MEAN 10.0 x
</TABLE>
<TABLE>
<CAPTION>
EBIT Margin EBIT Multiple
<S> <C> <C> <C>
W.W. Grainger 9.2% VIN 17.0 x
Patterson Dental 9.0% Patterson Dental 15.3 x
PSS World Medical 6.3% Henry Schein 14.7 x
VIN 6.2% W.W. Grainger 13.7 x
Henry Schein 5.3% Corp. Express 12.2 x
Corp. Express 4.2% Owens & Minor 10.2 x
Arrow 3.9% Arrow 9.6 x
Owens & Minor 2.1% PSS World Medical 9.5 x
MEAN 5.7% MEAN 12.2 x
</TABLE>
<TABLE>
<CAPTION>
Net Income Margin Trailing P/E
<S> <C> <C> <C>
Patterson Dental 5.6% VIN 32.2 x
W.W. Grainger 5.4% Patterson Dental 25.1 x
PSS World Medical 3.7% W.W. Grainger 22.6 x
Henry Schein 3.0% Henry Schein 20.3 x
VIN 2.5% Corp. Express 18.9 x
Arrow 1.6% PSS World Medical 14.8 x
Corp. Express 1.0% Arrow 13.3 x
Owens & Minor 1.0% Owens & Minor 13.2 x
MEAN 3.0% MEAN 18.3 x
</TABLE>
Note: VIN data based on transaction purchase price of $37.00 per share.
VIN excluded from mean.
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 34 -
<PAGE> 38
COMPARABLE COMPANY ANALYSIS
<TABLE>
<CAPTION>
Calendar 1999 P/E I/B/E/S Growth Rate
<S> <C> <C> <C>
VIN 27.0 x Henry Schein 23.3%
W.W. Grainger 21.4 x PSS World Medical 22.5%
Patterson Dental 21.0 x Patterson Dental 19.7%
Henry Schein 16.0 x Corp. Express 16.7%
Corp. Express 15.4 x VIN 16.7%
Owens & Minor 13.4 x Owens & Minor 15.0%
PSS World Medical 12.7 x Arrow 13.6%
Arrow 12.0 x W.W. Grainger 10.6%
MEAN 16.0 x MEAN 17.3%
</TABLE>
<TABLE>
<CAPTION>
Calendar 2000 P/E Cal. 1999 P/E to Growth
<S> <C> <C> <C>
VIN 22.9 x W.W. Grainger 201.8%
W.W. Grainger 19.2 x VIN 115.9%
Patterson Dental 17.6 x Patterson Dental 106.8%
Henry Schein 12.5 x Corp. Express 92.3%
Corp. Express 11.2 x Owens & Minor 89.3%
Owens & Minor 11.1 x Arrow 88.6%
PSS World Medical 10.6 x Henry Schein 68.6%
Arrow 9.6 x PSS World Medical 56.5%
MEAN 13.1 x MEAN 100.6%
</TABLE>
Note: VIN data based on transaction purchase price of $37.00 per share.
VIN excluded from mean.
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 35 -
<PAGE> 39
PREMIUMS PAID IN SELECTED
SIMILARLY-SIZED TRANSACTIONS
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 36 -
<PAGE> 40
PREMIUMS PAID IN SELECTED SIMILARLY-SIZED TRANSACTIONS
<TABLE>
<CAPTION>
Date Enterprise Premium / (Discount) Paid
Announced Acquiror Target Value ($mil) 1 Day 1 Month 3 Months
- --------- -------- ------ ------------ ----- ------- --------
<S> <C> <C> <C> <C> <C> <C>
01/11/99 Bergen Brunswig Corp PharMerica Inc $1,350.3 37.5% 130.7% 164.9%
12/15/98 EMAP PLC Petersen Companies Inc 1,431.0 8.6% 39.8% 15.5%
12/14/98 Hughes Electronics Corp US Satellite Broadcasting Inc 1,238.7 50.0% 122.2% 102.7%
12/13/98 Placer Dome Inc Getchell Gold Corp 1,094.1 114.3% 90.7% 143.4%
10/22/98 Superior Telecom Inc Essex International 1,299.8 38.0% 69.5% 21.9%
10/09/98 InaCom Corp Vanstar Corp 1,035.4 28.5% 24.8% -27.7%
10/05/98 AT&T Corp Vanguard Cellular Systems Inc 1,394.6 15.7% 20.3% 17.2%
09/28/98 HBO & Co Access Health Inc 1,071.5 39.2% 81.7% 70.6%
08/17/98 Waste Management Inc Eastern Environmental Services 1,214.8 5.5% -1.8% 33.0%
08/10/98 Allied Waste Industries Inc American Disposal Services Inc 1,116.7 16.3% -4.3% 10.8%
06/29/98 Hilton Hotels Corp Grand Casinos Inc 1,350.9 1.4% 9.5% 10.3%
06/18/98 NOVA Corp PMT Services Inc 1,238.7 22.0% 32.0% 53.6%
06/16/98 United Rentals Inc US Rentals Inc 1,310.2 6.4% 1.8% 23.5%
04/30/98 Dow AgroSciences (Dow Chemical) Mycogen Corp (Dow AgroSciences) 1,052.3 41.8% 52.4% 35.8%
04/27/98 Lucent Technologies Inc Yurie Systems Inc 1,034.9 11.1% 49.7% 62.6%
04/21/98 General Electric Co PLC Tracor Inc 1,359.8 10.0% 25.0% 33.9%
04/13/98 Paragon Health Network Inc Mariner Health Group Inc 1,216.5 6.0% 29.0% 27.4%
03/18/98 Southdown Inc Medusa Corp 1,084.1 17.2% 35.3% 53.3%
03/09/98 American Cellular Corp PriCellular Corp 1,070.5 7.7% 16.1% 23.8%
12/23/97 Ocean Energy Inc United Meridian Corp 1,279.5 -13.9% -9.7% -21.7%
12/11/97 MascoTech Inc TriMas Corp 1,384.0 12.7% 19.0% 13.6%
11/19/97 Total Renal Care Holdings Inc Renal Treatment Centers Inc 1,457.0 8.6% 26.9% 16.6%
11/05/97 Consolidated Stores Corp Mac Frugal's Bargains 1,040.9 2.9% 23.5% 33.3%
10/20/97 Kinder Morgan Energy Partners Santa Fe Pacific Pipeline 1,352.1 31.8% 38.6% 34.3%
10/13/97 McAfee Associates Inc Network General Corp 1,113.3 19.7% 42.7% 83.3%
10/10/97 Kennametal Inc Greenfield Industries Inc 1,062.2 19.7% 44.1% 34.2%
10/06/97 Loral Space & Communications Orion Network Systems Inc 1,265.1 20.2% 32.6% 68.2%
</TABLE>
Source: SDC, January 1, 1994 to present. Includes completed M&A transactions
(excluding financial services companies) between $1.0 and $1.5 billion.
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 37 -
<PAGE> 41
PREMIUMS PAID IN SELECTED SIMILARLY-SIZED TRANSACTIONS
<TABLE>
<CAPTION>
Date Enterprise Premium / (Discount) Paid
Announced Acquiror Target Value ($mil) 1 Day 1 Month 3 Months
- --------- -------- ------ ------------- ----- ------- --------
<S> <C> <C> <C> <C> <C> <C>
09/22/97 BF Goodrich Co Rohr Inc $1,237.3 5.1% 14.2% 47.6%
09/08/97 WorldCom Inc CompuServe Inc (H&R Block) 1,052.2 -5.2% 11.9% 16.4%
09/04/97 Tyson Foods Inc Hudson Foods Inc 1,021.9 23.5% 28.7% 25.8%
08/18/97 Texaco Inc Monterey Resources Inc 1,320.9 39.4% 54.1% 30.2%
07/28/97 IMC Global Inc Freeport-McMoRan Inc 1,233.5 14.4% 5.2% 5.2%
06/30/97 JP Foodservice Inc Rykoff-Sexton Inc 1,172.9 24.4% 27.6% 38.5%
06/16/97 Genesis Eldercare Multicare Cos Inc 1,316.5 9.3% 34.9% 55.6%
06/09/97 Atlas Copco North America Inc Prime Service Inc 1,110.5 28.6% 31.3% 60.0%
06/06/97 Excel Communications Inc Telco Communications Group Inc 1,017.6 32.9% 26.4% 61.3%
05/20/97 Tyco International Ltd Keystone International Inc 1,426.8 84.2% 102.5% 92.3%
04/23/97 Hewlett-Packard Co VeriFone Inc 1,142.3 67.6% 43.8% 34.7%
04/14/97 Neptune Orient Lines Ltd APL Ltd 1,482.2 55.8% 42.6% 40.3%
03/17/97 News Corp Ltd Heritage Media Corp 1,348.4 69.1% 69.1% 45.1%
02/18/97 Evergreen Media Corp Chancellor Broadcasting Co 1,033.3 6.6% -0.8% -3.2%
02/18/97 NGC Corp Destec Energy Inc 1,235.1 11.0% 27.4% 37.5%
01/20/97 Boston Scientific Corp Target Therapeutics Inc 1,183.4 63.7% 93.7% 76.9%
01/14/97 KLA Instruments Corp Tencor Instruments Inc 1,268.0 33.1% 70.2% 113.3%
01/07/97 MedTrans Inc (Laidlaw Inc) American Medical Response Inc 1,054.1 21.2% 36.8% 31.1%
11/18/96 Mattel Inc Tyco Toys Inc 1,073.1 73.7% 94.6% 131.6%
10/07/96 Computer Associates Intl Inc Cheyenne Software Inc 1,199.6 36.3% 60.5% 74.3%
09/02/96 Potash Corp of Saskatchewan Arcadian Corp 1,424.5 16.9% 23.2% 30.2%
08/28/96 Doubletree Corp Red Lions Hotels (Red Lion Inn) 1,129.0 28.6% 31.4% 40.5%
08/26/96 Silver King Communications Inc Home Shopping Network (Liberty) 1,069.5 17.3% 33.7% -6.5%
07/01/96 Tribune Co Renaissance Commun Corp 1,118.7 11.6% 20.5% 44.7%
05/01/96 Crompton & Knowles Corp Uniroyal Chemical Co 1,326.2 27.7% 55.8% 64.4%
02/20/96 CUC International Inc Davidson & Associates Inc 1,141.5 72.3% 67.8% 30.1%
11/13/95 IMC Global Inc Vigoro Corp 1,476.8 31.9% 34.2% 42.1%
</TABLE>
Source: SDC, January 1, 1994 to present. Includes completed M&A transactions
(excluding financial services companies) between $1.0 and $1.5 billion.
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 38 -
<PAGE> 42
PREMIUMS PAID IN SELECTED SIMILARLY-SIZED TRANSACTIONS
<TABLE>
<CAPTION>
Date Enterprise Premium / (Discount) Paid
Announced Acquiror Target Value ($mil) 1 Day 1 Month 3 Months
- --------- -------- ------ ------------- ----- ------- --------
<S> <C> <C> <C> <C> <C> <C>
10/18/95 Puget Sound Power & Light Co Washington Energy Co $1,074.9 20.2% 20.2% 23.8%
10/10/95 HealthSouth Corp Surgical Care Affiliates Inc 1,489.4 59.3% 59.3% 86.7%
09/20/95 Seagate Technology Inc Conner Peripherals Inc 1,305.5 23.7% 56.1% 70.4%
08/14/95 Union Electric Co CIPSCO Inc 1,332.7 23.0% 24.6% 24.1%
03/02/95 Homedco Group Inc Abbey Healthcare Group Inc 1,008.4 118.5% 118.5% 156.4%
03/02/95 Luxottica Group SpA US Shoe Corp (Luxottica Group) 1,318.8 48.3% 38.3% 69.7%
01/26/95 Vencor Inc Hillhaven Corp 1,459.8 41.0% 57.3% 46.6%
09/19/94 California Energy Co Inc Magma Power Co 1,107.5 38.1% 38.1% 36.8%
07/14/94 Tyco International Ltd Kendall International Inc 1,365.4 20.3% 22.1% 48.3%
07/05/94 Wellfleet Communications SynOptics Communications Inc 1,028.2 16.3% 16.3% -13.8%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
MEAN 29.5% 41.2% 46.1%
MEDIAN 22.5% 33.9% 37.2%
LOW -13.9% -9.7% -27.7%
HIGH 118.5% 130.7% 164.9%
</TABLE>
Source: SDC, January 1, 1994 to present. Includes completed M&A transactions
(excluding financial services companies) between $1.0 and $1.5 billion.
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 39 -
<PAGE> 43
OVERVIEW OF MERLOT
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 40 -
<PAGE> 44
MERLOT PROFILE
BUSINESS DESCRIPTION
- - MERLOT operates three primary business segments: pharmaceuticals,
laboratory supplies and specialty chemicals. Its approximately 29,000
employees are a part of 171 companies in 48 countries.
- - Since going public in the fall of 1995, practically all operational
activities have been united under MERLOT KGaA, in which E. MERLOT is a
74% owner. These two companies are collectively referred to as MERLOT
Darmstadt.
- - The pharmaceutical products manufactured by MERLOT include ethical,
generic and over-the-counter drugs. Most products are considered
standard pharmacy stock not only in Germany, but also elsewhere in
Europe and in many other countries around the world.
- - The Special and Fine Chemicals Division consists of three business
units: electronic chemicals, pharmaceutical and food industry and
technical industry.
- - MERLOT's laboratory product offering consists of chemicals, consumable
materials, instruments/systems, small-scale implements and laboratory
equipment.
- - MERLOT markets almost all of its own laboratory products and reagents.
- - MERLOT distributes laboratory supplies through a network operating
throughout 11 European countries, and maintains an online catalog with
information on over 11,000 products.
FINANCIAL PROFILE (in millions, except per share data)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Market Data: Latest Twelve Months (12/31/98): Enterprise Value Multiples:
Stock Price (06/04/99) $ 34.83 Revenues $ 4,275.0 LTM Revenues 1.8 x
Equity Value $ 5,990.3 EBITDA $ 812.9 LTM EBITDA 9.4 x
Enterprise Value $ 7,618.1 EBIT $ 541.0 LTM EBIT 14.1 x
Fully Diluted Shares 172.0 Net Income $ 334.5
Balance Sheet: Projected EPS: Equity Value Multiples:
Cash and Equivalents $ 393.5 1999 EPS $ 1.85 LTM Net Income 17.9 x
Total Debt $ 2,021.3 2000 EPS $ 2.16 1999 EPS 18.8 x
Book Value $ 1,764.8 2000 EPS 16.1 x
</TABLE>
Source: MERLOT 1998 Annual Report and BT Alex. Brown research dated
October 14, 1998.
PROJECT VINTAGE [DEUTSCHE BANC ALEX. BROWN LOGO]
- 41 -
<PAGE> 1
June 1999 Strictly private & confidential
PROJECT VINTAGE
- --------------------------------------------------------------------------------
FAIRNESS OPINION MATERIALS
[WARURG DILLON READ LOGO]
<PAGE> 2
The accompanying material was compiled on a confidential basis for use solely by
The Special Committee and the Board of Directors of the company code named in
this document as "VIN" (the "Company") in evaluating the proposal described
herein. This material was prepared for a specific use by specific persons and
was not prepared to conform with any disclosure standards under applicable
federal securities laws or otherwise. Neither the Company nor Warburg Dillon
Read LLC ("WDR") nor any of their respective officers, directors, employees,
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 WDR.
Accordingly, no representation or warranty can be or is made by WDR as to the
accuracy or achievability of any such valuations, estimates and/or projections.
WARBURG DILLON READ
<PAGE> 3
SUMMARY OF MERLOT PROPOSAL
CONSIDERATION:
- $37.00 per VIN share
CONDITIONS:
- Approval of VIN Board and the tender of a majority of the currently
outstanding VIN shares on a fully diluted basis, excluding the
shares held by Merlot and its affiliates (Merlot currently owns
49.9%)
- HSR approval
WARBURG DILLON READ
<PAGE> 4
VALUATION ASSESSMENT: OPERATING ASSUMPTIONS
VIN FINANCIAL ASSUMPTIONS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
($ in millions,
except per share) 1996 1997 1998 LTM(3) 1999P 2000E 2001E 2002E 2003E
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MANAGEMENT CASE(1)
Sales $ 1,117 $ 1,245 $ 1,350 $ 1,390 $ 1,447 $ 1,584 $ 1,716 $ 1,811 $ 1,907
% Growth 55.5% 11.4% 8.4% -- 7.2% 9.4% 8.4% 5.5% 5.3%
EBITDA 74.5 99.5 110.7 112.8 135.7 161.9 181.8 198.7 215.0
% Margin 6.7% 8.0% 8.2% 8.1% 9.4% 10.2% 10.6% 11.0% 11.3%
EBIT 53.8 77.3 85.4 85.8 105.7 131.9 151.8 168.7 185.0
% Margin 4.8% 6.2% 6.3% 6.2% 7.3% 8.3% 8.8% 9.3% 9.7%
EPS $ 0.46 $ 1.05 $ 1.18 $ 1.16 $ 1.66 $ 2.31 $ 2.79 $ 3.34 $ 3.73
% Growth 58.6% 128.3% 12.4% -- 40.5% 39.1% 21.0% 19.7% 11.7%
Wall Street
Estimated EPS(2) -- -- -- -- $ 1.36 $ 1.55 $ 1.79 $ 2.15 $ 2.60
% Growth -- -- -- -- 15.3% 14.0% 15.5% 20.1% 20.9%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
(1) Source: The Company.
(2) Source: BT Alex. Brown research estimates.
(3) LTM = Latest annual period and latest quarterly period - corresponding
quarterly period for the previous year.
WARBURG DILLON READ
<PAGE> 5
MARKET OVERVIEW OF SELECTED COMPARABLE COMPANIES FOR VIN
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
($ in millions, except per share) ARROW CORPORATE HENRY FISHER OWENS &
ELECTRONICS EXPRESS(4) SCHEIN(5) SCIENTIFIC(6) MINOR(7)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STOCK PRICE (6/4/99) $ 18.19 $ 6.00 $ 29.25 $19.50 $ 11.25
% of 52 Week High 68% 46% 57% 89% 65%
EQUITY VALUE $ 1,724 $ 624 $ 1,200 $ 818 $ 368
ENTERPRISE VALUE(1) 3,211 1,885 1,556 1,833 517
LTM(2) OPERATING RESULTS:
Sales $ 8,521 $ 3,753 $2,008 $ 2,304 $ 3,025
EBITDA Margin 4.6% 5.7% 6.4% 8.7% 2.9%
EBIT Margin 3.9% 4.0% 5.2% 6.3% 2.3%
5 YR. ESTIMATED EPS CAGR(3) 13.0% 20.0% 25.0% NA 16.0%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
($ in millions, except per share) PATTERSON PSS WORLD W.W VIN(4)
DENTAL MEDICAL(8) GRAINGER MEDIAN $37.00
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STOCK PRICE (6/4/99) $ 35.63 $ 11.25 $ 55.63 -- --
% of 52 Week High 77% 47% 98% -- 115%
EQUITY VALUE $ 1,203 $ 797 $ 5,268 -- $ 1,105
ENTERPRISE VALUE(1) 1,171 867 5,533 -- 1,456
LTM(2) OPERATING RESULTS:
Sales $ 855 $ 1,453 $ 4,375 $ 1,390
EBITDA Margin 9.8% 7.9% 11.3% 7.1% 8.1%
EBIT Margin 8.8% 6.9% 9.3% 5.8% 6.2%
5 YR. ESTIMATED EPS CAGR(3) 20.0% 20.0% 12.0% 20.0% 17.6%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: Public Filings
Notes:
(1) Enterprise Value = Equity Value + Debt - Cash.
(2) LTM = Latest annual period and latest quarterly period - corresponding
quarterly period for the previous year.
(3) Based on First Call estimates for all companies except VIN which is based
on the BT Alex. Brown research estimates.
(4) FY 1998 excludes restructuring related inventory provision of $3,130,000;
restructuring, merger and other nonrecurring charges of $54,805,000 both
were tax-affected at 40%. Loss from discontinued operations of $69,652,000
(net of tax) and a loss on early extinguishment of debt of $5,581,000 (net
of tax).
(5) FY 1998 excludes $56,666,000 in merger and integration costs, tax-affected
@ 40%. 1Q99 excludes $2,203,000 in merger and integration costs,
tax-affected @ 40%. 1Q98 excludes $3,864,000 in merger and integration
costs, tax-affected @ 40% and includes pro-forma tax adjustments of
$76,000.
(6) FY 1998 excludes $71,000,000 of transaction costs, $23,600,000 of
restructuring costs and a $15,100,000 loss from discontinued operations
1Q99 excludes a loss from discontinued operations of $8,700,000 1Q98
excludes a loss from discontinued operations of $2,500,000 and transaction
costs of $71,000,000
(7) FY 1998 excludes nonrecurring restructuring expenses of $11,200,000
tax-affected @ 40%.
(8) FY 1998 excludes $39,233,000 in merger and other nonrecurring costs and
expenses, tax-affected @ 40%.
WARBURG DILLON READ
<PAGE> 6
MARKET MULTIPLES OF SELECTED COMPARABLE COMPANIES FOR VIN
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
($ in millions, except per share) ARROW CORPORATE HENRY FISHER OWENS &
ELECTRONICS EXPRESS(3) SCHEIN(4) SCIENTIFIC(5) MINOR(6)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ENTERPRISE VALUE MULTIPLES:
LTM(1) Sales 0.38x 0.50x 0.78x 0.80x 0.17x
LTM(1) EBITDA 8.1 8.7 12.2 9.2 6.0
LTM(1) EBIT 9.6 12.5 14.8 12.6 7.6
1999 P/E MULTIPLE(2) 12.0x 15.8x 15.9x NA 13.2x
1999 P/E TO 5 YR. EST. EPS
CAGR(2) 0.93x 0.79x 0.64x NA 0.83x
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PATTERSON PSS WORLD W.W VIN
DENTAL MEDICAL(7) GRAINGER MEDIAN $37.00
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ENTERPRISE VALUE MULTIPLES:
LTM(1) Sales 1.37x 0.60x 1.26x 0.69x 1.05x
LTM(1) EBITDA 14.0 7.6 11.2 9.0 12.9x
LTM(1) EBIT 15.5 8.6 13.6 12.6 17.0x
1999 P/E MULTIPLE(2) 21.0x 12.9x 21.5x 15.8x 27.2x
1999 P/E TO 5 YR. EST. EPS
CAGR(2) 1.05x 0.64x 1.79x 0.83x 1.41x
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
(1) LTM = Latest annual period and latest quarterly period - corresponding
quarterly period for the previous year.
(2) Based on 1999 Consensus EPS estimates from First Call for all companies
except VIN which is based on BT Alex . Brown research estimates.
(3) FY 1998 excludes restructuring related inventory provision of $3,130,000;
restructuring, merger and other nonrecurring charges of $54,805,000 both
were tax-affected at 40%. Loss from discontinued operations of $69,652,000
(net of tax) and a loss on early extinguishment of debt of $5,581,000 (net
of tax).
(4) FY 1998 excludes $56,666,000 in merger and integration costs, tax-affected
@ 40%. 1Q99 excludes $2,203,000 in merger and integration costs,
tax-affected @ 40%. 1Q98 excludes $3,864,000 in merger and integration
costs, tax-affected @ 40% and includes pro-forma tax adjustments of
$76,000.
(5) FY 1998 excludes $71,000,000 of transaction costs, $23,600,000 of
restructuring costs and a $15,100,000 loss from discontinued operations
1Q99 excludes a loss from discontinued operations of $8,700,000 1Q98
excludes a loss from discontinued operations of $2,500,000 and transaction
costs of $71,000,000
(6) FY 1998 excludes nonrecurring restructuring expenses of $11,200,000
tax-affected @ 40%.
(7) FY 1998 excludes $39,233,000 in merger and other nonrecurring costs and
expenses, tax-affected @ 40%.
WARBURG DILLON READ
<PAGE> 7
PRECEDENT TRANSACTIONS MULTIPLES ANALYSTS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
($ in ENTERPRISE VALUE TO LTM(3)
millions) EQUITY(1) ENTERPRISE(2) ---------------------------------------
ANN. DATE ACQUIROR / TARGET VALUE VALUE SALES EBITDA EBIT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10/9/98 Cardinal Health / Allegiance $4,425 $5,226 1.16x 14.1x 21.2x
4/24/98 MBO / WESCO Distribution 654 1,123 0.43 11.6 13.1
12/17/97 Invacare / Suburban Ostomy Supply 131 129 1.36 13.5 15.1
12/15/97 Physician Sales & Services / Gulf South 661 612 2.43 25.0 26.4
Medical Supply
8/4/97 Henry Schein / Sullivan Dental Products 288 287 1.12 15.6 18.1
6/5/97 Thomas H. Lee / Fisher Scientific 1,098 1,411 0.65 9.6 13.8
1/28/97 McKesson / General Medical 174 775 0.50 11.1 14.3
5/24/97 VWR Scientific Products / Baxter Industrial 400 400 0.81 8.8 9.1
Business
LOW 0.43x 8.8x 9.1x
MEAN 1.07 13.7 16.4
MEDIAN 0.96 12.5 14.7
HIGH 2.43 25.0 26.4
6/8/99 Merlot/VIN(4) 1,105 1,456 1.05x 12.9x 17.0x
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
($ in EQUITY VALUE TO
millions)
ANN. DATE ACQUIROR / TARGET LTM EPS BOOK VALUE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
10/9/98 Cardinal Health / Allegiance 37.9x 4.8x
4/24/98 MBO / WESCO Distribution 16.9 NM
12/17/97 Invacare / Suburban Ostomy Supply 27.0 3.9
12/15/97 Physician Sales & Services / Gulf South 41.6 4.2
Medical Supply
8/4/97 Henry Schein / Sullivan Dental Products 28.6 3.4
6/5/97 Thomas H. Lee / Fisher Scientific 25.4 2.8
1/28/97 McKesson / General Medical NM NM
5/24/97 VWR Scientific Products / Baxter Industrial 15.5 3.5
Business
LOW 15.5x 2.8x
MEAN 27.5 3.8
MEDIAN 27.0 3.7
HIGH 41.6 4.8
6/8/99 Merlot/VIN(4) 31.9x 2.8x
- -----------------------------------------------------------------------------------------------
</TABLE>
Source: Except where noted, company filings and press releases
Notes:
(1) (100%) Equity Value = Fully diluted shares outstanding x per share price.
(2) Enterprise Value Equity Value + Debt - Cash.
(3) LTM = Latest annual period + latest quarterly period - corresponding
quarterly period for the previous year.
(4) Based on VIN acquisition price of $37.00/share.
WARBURG DILLON READ
<PAGE> 8
PREMIUMS ANALYSIS (CLOSING PRICES)(1)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
($ in millions)
TRANSACTION(2)
ANN. DATE ACQUIROR / TARGET TARGET % ACQUIRED VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1/6/99 Marriott International ExecuStay 57% $64.8
5/11/908 Monsanto DeKalb Genetics 63 2,262.7
6/4/98 Nationwide Mutual Insurance Allied Life Financial 66 89.9
3/2/98 Texas Utilities Energy Group 78 10,947.0
11/19/97 Investor Group Telemundo Group 66 521.4
3/5/98 Clear Channel Communications More Group 69 775.5
10/20/97 HSN Ticketmaster Group 55 413.2
3/9/98 CGE Havas 70 4,771.9
2/26/98 Ferrovial Aparcamientos Estacionamientos Subterraneous 71 86.3
2/19/98 Banco de Santander Banesto 49 3,849.8
11/17/97 Intermedia Communications Shared Technologies Fairchild 77 503.6
9/12/97 American General Western National 55 1,215.0
12/11/97 MascoTech TriMas 63 911.7
8/4/97 Restaurant Perkins Family Restaurant 52 76.3
7/30/97 Fujitsu Amdahl 58 924.8
1/30/97 Samsung Electronics AST Research 51 495.8
10/30/96 Safeway Vons Cos 66 2,251.6
10/28/96 Henkel Loctite 65 1,289.1
5/10/96 PXRE Transnational Re 78 133.1
6/3/96 Pakhoed Holding Univar 72 331.8
1/26/96 NationsBank Charter Bancshares 58 94.7
7/24/95 Norwest AMFED Financial 79 156.9
10/26/95 Hyundai Electronics Industries Maxtor 63 228.2
7/20/95 Greenfield Industries Rule Industries 78 73.6
10/18/95 Rhone-Poulenc Rorer Applied Immune Sciences 53 84.6
2/22/95 People's Choice TV Preferred Entertainment 77 56.3
2/27/95 Conseco CCP Insurance 52 273.7
1/18/95 Arcadian Arcadian Partners 55 428.4
3/10/95 Union Pacific Chicago and North Western Tran 73 2,255.6
LOW
MEAN
MEDIAN
HIGH
6/8/99 Merlot / VIN(4) 1,456
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
($ in millions) PREMIUM / (DISCOUNT PAID)(3)
----------------------------------------------------
ANN. DATE ACQUIROR / TARGET TARGET 1 DAY 1 WEEK 1 MONTH 3 MONTHS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1/6/99 Marriott International ExecuStay 3% 7% 10% 65%
5/11/908 Monsanto DeKalb Genetics 30 40 42 85
6/4/98 Nationwide Mutual Insurance Allied Life Financial 4 14 26 38
3/2/98 Texas Utilities Energy Group 7 8 11 29
11/19/97 Investor Group Telemundo Group 20 29 25 41
3/5/98 Clear Channel Communications More Group 33 44 53 48
10/20/97 HSN Ticketmaster Group 32 28 56 67
3/9/98 CGE Havas 9 16 25 30
2/26/98 Ferrovial Aparcamientos Estacionamientos Subterraneous 29 38 36 59
2/19/98 Banco de Santander Banesto 14 13 14 35
11/17/97 Intermedia Communications Shared Technologies Fairchild 26 30 22 38
9/12/97 American General Western National 10 7 14 13
12/11/97 MascoTech TriMas 13 10 19 21
8/4/97 Restaurant Perkins Family Restaurant 29 27 32 6
7/30/97 Fujitsu Amdahl 5 22 26 45
1/30/97 Samsung Electronics AST Research 17 8 20 20
10/30/96 Safeway Vons Cos 27 22 26 42
10/28/96 Henkel Loctite 32 37 35 39
5/10/96 PXRE Transnational Re 12 17 9 1
6/3/96 Pakhoed Holding Univar 57 54 59 85
1/26/96 NationsBank Charter Bancshares 1 16 27 41
7/24/95 Norwest AMFED Financial 24 27 33 40
10/26/95 Hyundai Electronics Industries Maxtor 43 65 45 58
7/20/95 Greenfield Industries Rule Industries 119 104 104 57
10/18/95 Rhone-Poulenc Rorer Applied Immune Sciences 68 52 38 59
2/22/95 People's Choice TV Preferred Entertainment 14 9 29 20
2/27/95 Conseco CCP Insurance 20 30 23 65
1/18/95 Arcadian Arcadian Partners 17 21 26 13
3/10/95 Union Pacific Chicago and North Western Tran 34 39 56 88
LOW 1% 7% 9% 1%
MEAN 26 29 35 43
MEDIAN 20 27 30 41
HIGH 119 104 104 88
6/8/99 Merlot / VIN(4) 29% 29% 41% 57%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: Except where noted, company filings, press releases and FactSet
Notes:
(1) Premium of the acquisition price per share over the target share price
prior to the announcement, based on the closing price at the start of the
period indicated.
(2) Transaction Value = Equity Value + Debt - Cash.
(3) Time periods as defined by Factset 1 week = 7 actual days. 1 month = 1
actual month. 3 months = 3 actual months.
(4) Based on VIN acquisition price of $37.00/share;VIN share price as of
6/4/99.
WARBURG DILLON READ
<PAGE> 9
<TABLE>
<CAPTION>
PREMIUMS ANALYSIS (AVERAGE PRICES)(1)
- --------------------------------------------------------------------------------------------------------------------------
($ in millions) TRANSACTION(2)
ANN. DATE ACQUIROR / TARGET TARGET % ACQUIRED VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1/6/99 Marriott International ExecuStay 57% $64.8
5/11/98 Monsanto DeKalb Genetics 63 2,262.7
6/4/98 Nationwide Mutual Allied Life Financial 66 89.9
Insurance
3/2/98 Texas Utilities Energy Group 78 10,947.0
11/19/97 Investor Group Telemundo Group 66 521.4
3/5/98 Clear Channel More Group 69 775.5
Communications
10/20/97 HSN Ticketmaster Group 55 413.2
3/9/98 CGE Havas 70 4,771.9
2/26/98 Ferrovial Aparcamientos Estacionamientos 71 86.3
Subterraneous
2/19/98 Banco de Santander Banesto 49 3,849.8
11/17/97 Intermedia Shared Technologies Fairchild 77 503.6
Communications
9/12/97 American General Western National 55 1,215.0
12/11/97 MascoTech TriMas 63 911.7
8/4/97 Restaurant Perkins Family Restaurant 52 76.3
7/30/97 Fujitsu Amdahl 58 924.8
1/30/97 Samsung Electronics AST Research 51 495.8
10/30/96 Safeway Vons Cos 66 2,251.6
10/28/96 Henkel Loctite 65 1,289.1
5/10/96 PXRE Transnational Re 78 133.1
6/3/96 Pakhoed Holding Univar 72 331.8
1/26/96 NationsBank Charter Bancshares 58 94.7
7/24/95 Norwest AMFED Financial 79 156.9
10/26/95 Hyundai Electronics Maxtor 63 228.2
Industries
7/20/95 Greenfield Industries Rule Industries 78 73.6
10/18/95 Rhone-Poulenc Rorer Applied Immune Sciences 53 84.6
2/22/95 People's Choice TV Preferred Entertainment 77 56.3
2/27/95 Conseco CCP Insurance 52 273.7
1/18/95 Arcadian Arcadian Partners 55 428.4
3/10/95 Union Pacific Chicago and North Western 73 2,255.6
Tran
LOW
MEAN
MEDIAN
HIGH
6/8/99 Merlot / VIN(4) 1,456
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
($ in millions) AVERAGE PREMIUM / (DISCOUNT) (3):
--------------------------------------------------
ANN. DATE ACQUIROR / TARGET TARGET 1 DAY 1 WEEK 1 MONTH 3 MONTHS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1/6/99 Marriott International ExecuStay 3% 5% 13% 30%
5/11/98 Monsanto DeKalb Genetics 30 30 40 45
6/4/98 Nationwide Mutual Allied Life Financial 4 10 17 27
Insurance
3/2/98 Texas Utilities Energy Group 7 6 8 18
11/19/97 Investor Group Telemundo Group 20 23 29 28
3/5/98 Clear Channel More Group 33 33 42 46
Communications
10/20/97 HSN Ticketmaster Group 32 30 35 60
3/9/98 CGE Havas 9 12 19 25
2/26/98 Ferrovial Aparcamientos Estacionamientos 29 31 34 45
Subterraneous
2/19/98 Banco de Santander Banesto 14 14 14 24
11/17/97 Intermedia Shared Technologies Fairchild 26 26 27 29
Communications
9/12/97 American General Western National 10 8 12 12
12/11/97 MascoTech TriMas 13 9 13 14
8/4/97 Restaurant Perkins Family Restaurant 29 24 29 19
7/30/97 Fujitsu Amdahl 5 16 23 30
1/30/97 Samsung Electronics AST Research 17 14 13 14
10/30/96 Safeway Vons Cos 27 19 25 29
10/28/96 Henkel Loctite 32 28 32 36
5/10/96 PXRE Transnational Re 12 10 11 10
6/3/96 Pakhoed Holding Univar 57 43 54 66
1/26/96 NationsBank Charter Bancshares 1 7 19 27
7/24/95 Norwest AMFED Financial 24 23 29 33
10/26/95 Hyundai Electronics Maxtor 43 52 55 43
Industries
7/20/95 Greenfield Industries Rule Industries 119 105 106 87
10/18/95 Rhone-Poulenc Rorer Applied Immune Sciences 68 44 49 46
2/22/95 People's Choice TV Preferred Entertainment 14 17 24 27
2/27/95 Conseco CCP Insurance 20 23 22 27
1/18/95 Arcadian Arcadian Partners 17 19 23 24
3/10/95 Union Pacific Chicago and North Western 34 29 41 58
Tran
LOW 1% 5% 8% 10%
MEAN 26 24 30 34
MEDIAN 20 23 25 29
HIGH 119 105 106 87
6/8/99 Merlot / VIN(4) 29% 30% 33% 49%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: Except where noted, company filings, press releases and FactSet
Notes:
(1) Premium of the acquisition price per share over the target share price
prior to the announcement, based on the average closing price during the
period indicated.
(2) Transaction Value = Equity Value + Debt - Cash.
(3) Time periods as defined by Factset 1 week = 7 actual days. 1 month = 1
actual month. 3 months = 3 actual months.
(4) Based on VIN acquisition price of $37.00/share; VIN share price as of
6/4/99.
WARBURG DILLON READ
<PAGE> 10
DISCOUNTED CASH FLOW ANALYSIS
EQUITY VALUE PER SHARE - MANAGEMENT PLAN
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
($ in millions) 2003 EBITDA EXIT MULTIPLE
DISCOUNT RATE 8.0X 9.0X 10.0X
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
10.5% $32.31 $36.70 $41.09
11.0 31.39 35.68 39.97
11.5 30.49 34.68 38.88
12.0 29.61 33.71 37.82
12.5 28.76 32.77 36.78
- ------------------------------------------------------------------------------------------------------
</TABLE>
Based on estimates provided by the Company
EQUITY VALUE PER SHARE - WALL ST. ESTIMATES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
($ in millions) 2003 EBITDA EXIT MULTIPLE
DISCOUNT RATE 8.0X 9.0X 10.0X
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
10.5% $27.94 $31.88 $35.81
11.0 27.12 30.96 34.81
11.5 26.32 30.08 33.84
12.0 25.54 29.21 32.89
12.5 24.78 28.37 31.97
- ------------------------------------------------------------------------------------------------------
</TABLE>
Based on BT Alex. Brown research estimates.
WARBURG DILLON READ
<PAGE> 11
MARKET OVERVIEW OF SELECTED COMPARABLE COMPANIES FOR CHEMDEX
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
ENTERPRISE VALUE TO:
--------------------------------------------------------------
EQUITY ENTERPRISE LTM LQA 1999E 2000E
COMPANY VALUE(6) VALUE(7) REVENUE(8) REVENUE(9) REVENUE(10) REVENUE(10)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Amazon.com, Inc.(1) $21,132,276 $21,230,354 26.0x 18.1x 15.1x 10.0x
CD Now, Inc.(2) 332,652 286,184 5.1 3.4 1.8 1.1
Cyberian Outpost, Inc. 230,323 176,039 2.1 1.3 1.1 0.7
CyberShop International, Inc. 58,307 47,633 8.7 NM 2.4 1.0
Onsale, Inc.(3) 321,446 277,432 1.2 1.0 0.8 0.6
Low 1.2x 1.0x 0.8x 0.6x
Mean 8.6 6.0 4.2 2.7
Median 5.1 2.4 1.8 1.0
High 26.0 18.1 15.1 10.0
</TABLE>
<TABLE>
<CAPTION>
ENTERPRISE
VALUE TO PRO
FORMA
REVENUE(11)
-----------
<S> <C> <C> <C>
Implied Chemdex valuation at $2 per VIN share(4) $ 567.3 $ 568.3 6.7x
Equivalent VIN dividend valuation(5) 945.5 946.5 11.1x
Implied Chemdex valuation at $4 per VIN share(4) $1,134.6 $1,135.6 13.3x
Equivalent VIN dividend valuation(5) 1,891.0 1,892.0 22.2x
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
(1) 1Q99 excludes merger and acquisition related costs, including amortization
of goodwill and other purchased intangibles of $25,309,000. FY1998
excludes merger and acquisition related costs including amortization of
goodwill and other purchased intangibles of $51,172,000
(2) FY1998 excludes accretion of preferred stock to redemption of $115,542,000
(3) 1Q98 excludes $789,000 in accounting reserves
(4) Implied valuation of Chemdex based on receiving $2/$4/$6 per VIN share,
assuming 29,783,731 fully diluted VIN shares outstanding and a 10.5%
ownership stake in Chemdex
(5) Equivalent pre-tax valuation of Chemdex required to equal Implied Chemdex
valuation at $2/$4/$6 and off-set by the tax consequences to VIN of
dividending the Chemdex stake to VIN shareholders assuming a 40% VIN
marginal tax rate
(6) (100%) Equity Value = Fully diluted shares outstanding x per share price
(7) Enterprise Value Equity Value + Debt - Cash
(8) LTM = Latest annual period + latest quarterly period - corresponding
quarterly period for the previous year
(9) LQA = Latest quarters revenue x four
(10) Forward revenue estimates taken from research dated 5/7/99 from Prudential
for Amazon, 3/19/99 from BT Alex. Brown for CDNow, 3/31/99 from BT Alex.
Brown for Cyberian, 7/13/98 from Needham & Company for CyberShop and
4/16/99 from BT Alex. Brown for Onsale
(11) Pro forma for VIN Third-Party business transaction assuming sales of
$85,000,000
WARBURG DILLON READ
