To: From: Date: R:
Greg Ledford Anna (Suan) Lin Lin May 1, 2014 !idding for "ert#: Le$eraged !uyout
"ert# i% a $ery attra&ti$e in$e%tment under t'e &urrent idding and%&a*e+ ur $auation of -14+. -1 4+. iion earn an e%timated return of 2/ in fi$e year% for *artner%, *artner%, offer Ford it' a 'ig'er $auation t'an it oud re&ei$e from an 3, and %trengt'en our *o%ition in tran%*ortation and automoie indu%try+ Gi$en our &om*etiti$e ad$antage% in A!S det finan&ing, it oud e diffi&ut for t'e ri$a idding grou* to outid u%+ Valuation LBO Model
T'e &urrent $auation i% a%ed on an 5!TDA of /+6 time% (A**endi7 1), a *remium muti*e &om*ared to t'e 8+97 deri$ed de ri$ed from t'e tota $aue of RA and "R %egment%+ "ert# i% one of t'e to* t'ree mar;et eader% in renta &ar indu%try it' %trong yet %tae re$enue fo%+ ar renta i% a fairy %tae u%ine%%, e%*e&iay "ert# 'a% een fo&u%ed on u%ine%% &u%tomer% for de&ade%+ e&tion of 8 AGR, our *artner% i earn 2?=60 RR+ n a a%e %&enario of 4 AGR re$enue grot', t'e ottom=ine i% 1. in 2010+ 2 010+ Sin&e Ford 'a% eft "ert# a% an or*'an, e &oud add great $aue to "ert# y &o%t & o%t %a$ing%+ n fi$e year%, e &oud *otentiay in&rea%e !TDA margin to 1/, 600 a%i% *oint% in&rea%e+ o%t %a$ing o**ortunitie% in&ude: Redu&e dire&t o*erating &o%t @ SG @ M from 80 to ?? Staii#e &a*ita e7*enditure *timi#e internationa o*eration% to a &om*arae e$e of +S • • •
$era, "ert# %eem% a great L! &andidate gi$en it% *redi&tae &a%' fo, &o%t redu&tion *otentia, good &or*orate image, and &a*ae management+ n addition, "ert#B% %trong rand re&ognition ma;e% it an idea e7it &andidate &and idate in any &oming year%, %in&e itB% aready a ready=to= 3 &or*oration+ n t'e ne7t fi$e year%, a *otentia 3 of "ert# &oud offer our *artner% u* to 6/ RR+ n t'e ot'er 'and, Ford oudnBt re&ei$e t'e %ame 'ig' $auation gi$en "ert#B% &urrent o !TDA margin+ IPO Option
t oud not e idea for Ford to aun&' an 3 at t'i% *oint+ "ert# &urrenty 'a% a o !TDA margin &om*ared to A$i%, A$i%, it% arge%t &om*etitor+ A% a re%ut, it oud e &'aenging for Ford to otain a 'ig' 3 $auation gi$en g i$en it% o*eration+ f Ford &'o%e to fie an 3, t'e !TDA muti*e i% a**ro7imate 8+67 C 8+.7, gi$ing "ert# a tota $auation of -14 iion (A**endi7 6)+ t i% oer t'an our &urrent offering of /+67 !TDA it' -14+. iion+ n addition, it oud ta;e Ford management %ignifi&ant amount of time and re%our&e to *re*are for t'i% 3+ Management at Ford i%nBt ;non for dedi&ating to im*ro$ing "ert# grot', 'i&' ma;e% an 3 initiated y Ford unattra&ti$e+
"oe$er, "ert# doe% 'a$e t'e *otentia to e a great 3 &andidate+ T'e &om*any &oud e7*erien&e a %ignifi&ant !TDA oo%t t'roug' &o%t redu&tion in a fairy %'ort amount of time+ f e a%%ume t'e %ame re$enue grot' in t'e L! &a%e, "ert# %'oud e $aued around -20 iion it'in a year (A**endi7 4)+ T'u%, if y any &'an&e t'at grot' *ro>e&tion &'ange%, our firm &oud otain a ui&; e7it t'oug' 3 efore "ert# fa&e% it% ottene&; in grot'+ At'oug' a ui&; 3 e7it may rai%e *ui& %u%*e&t of 'o our firm &oud add $aue in %u&' a %'ort amount of time, an indu%try=a$erage .7 !TDA muti*e &oud ring u* to 60 RR it'in a year+ t may argey de*end on t'e mar;et en$ironment, ut e &an aay% ;ee* t'i% o*tion in mind+ Outbid the rival bidding group
ur arrangement in A!S finan&ing gi$e% u% a di%tin&t ad$antage+ T'e fe7iiity of A!S arrangement aoed u% to in&rea%e or de&rea%e det it' feet %i#e, 'i&' %ignifi&anty oer% t'e ri%; of t'i% in$e%tment+ n addition, A!S det &arried a o intere%t rate for L!=ty*e finan&ing (4+?) (A**endi7 ?), enae% "ert# to %a$e &a%' on 'and for u%ine%% de$eo*ment+ T'i% feature 'a% een one of our ;ey dri$er% of L! mode+ t i% uni;ey t'at our &om*etitor idding grou* oud otain a more &om*etiti$e det %tru&ture+ n t'e grot' *er%*e&ti$e, renta &ar indu%try 'a% e7*erien&ed %tae if not de&ining %ae%+ "ert# a% a u%ine%% i% a%o in it% mature %tage+ A 3GR re$enue grot' rate of o$er 8 oud e &on%idered too aggre%%i$e+ A% a re%ut, an;% oud i;ey e reu&tant to finan&e t'i% dea+ Next Step
ur &urrent $auation, /+67 !TDA it' a tota enter*ri%e $aue of -14+. iion i% a $ery rea%onae offer+ Ford management i% not i;ey to re&ei$e any 'ig'er id t'an t'i% one+ n addition, 3 i not gi$e Ford etter *ayout %in&e t'ey 'a$e aandoned t'e o**ortunity to oo%t "ert#B% o*eration% for a ong time+ ur &om*etiti$e finan&ing %&'edue 'e*% u% &reate a &om*etiti$e edge again%t t'e ot'er idding grou*+ Mo%t im*ortanty, "ert# i% a $ery good &andidate for our *artner%, a% it &oud yied o$er 2? it'in fi$e year% at a $ery affordae e$e of ri%;+
A**endi7: 1+ urrent Tran%a&tion
2+ RR Anay%i%
6+ 3 auation Ford
4+ 3 3 a%e
?+ Det S&'edue