ACG Cup

Topics: Cash flow, Stock market, Stock Pages: 7 (434 words) Published: March 26, 2014
Best Bank In Town
Since 1872

Khakis ‘R Us
Valuation
MBA Investment Bankers LLC

January, 2014

Executive Summary

• Evaluation of NYC Capital Offer
— Comparable Companies Analysis
$24.64-$32.90
— Precedent Transaction Analysis
$21.99-$30.43
— Discounted Cash Flow Analysis
$25.03-$33.74

• Recommendations
— Counteroffer
$20/share + Earnout of 75% EBITDA over 3 years
$25.18-$30.03
— Defensive Strategy
Shareholder Rights Plan + Buyback
— One Year From Now
About Boots, Valuation Range

Khakis ‘R Us & MBA Investment Bankers LLC Confidential

2

Comparable Company Analysis



Comparables determined by Revenue, EBITDA, and EBIT figures.



Narrowed down group to Companies 3 & 8.



We chose the companies where the ranges fell within 50% above or below Khaki ‘R Us figures.



We used the median EBIT multiplier for the calculation for the low range figure and median EBITDA multiplier for the calculation for the high range figure.

Range: $24.64 – $32.90

Khakis ‘R Us & MBA Investment Bankers LLC Confidential

3

Precedent Transactions Analysis


For Precedent Transactions, the selection criteria was Revenue and EBITDA.



Selected comparable transactions for companies were within 50% of Khakis ‘R Us EBITDA and Revenue.



Narrowed the selection to transactions 7, 8, 12, & 18.



We used the Median figures of Revenue and EBITDA as our range.

Range: $21.99 – $30.43

Khakis ‘R Us & MBA Investment Bankers LLC Confidential

4

Discounted Cash Flow (DCF) Analysis

 Beta of 2.235 used by identifying comparable companies based on similar EBITDA and Revenue.
 WACC of 13.97%
 Revenue CAGR of 5.4%

Range: $25.03 – $33.74

Khakis ‘R Us & MBA Investment Bankers LLC Confidential

5

Total Valuation

$200M

$20.00

<

$250.3M - $304.3M

$25.03 – $30.43

Executive Summary

• Evaluation of NYC Capital Offer
— Comparable Companies Analysis
$24.64-$32.90
— Precedent Transaction Analysis
$21.99-$30.43
— Discounted Cash Flow Analysis
$25.03-$33.74

• Recommendations
— Counteroffer
$20/share + Earnout of 75% EBITDA over 3 years
$25.18-$30.03
— Defensive Strategy
Shareholder Rights Plan + Buyback
— One Year From Now
About Boots, Valuation Range

Khakis ‘R Us & MBA Investment Bankers LLC Confidential

7

Earnout

• $20/Share + 75% EBITDA over the next 3 years: $25.18-$30.03 EBITDA Earnout

Dollars Earned Per Year

4.5
4
3.5
3
2.5

Conservative

2

Projected

1.5
1
0.5
0
2014

2015

2016

Year
8

Defensive Strategy
• Implement Shareholders Rights Plan
— Enable trigger to sell discounted shares if any one party acquires a large percentage of outstanding shares
— Forces board approval for acquisition

• Stock Buyback
— Use cash to buyback stock
— Allows for re-issue for Shareholders Rights Plans
— Limits shareholder controlling potential
— Excellent investment given valuation and current price

9

One Year from Now

• NYC Capital Acceptance of Offer
— Projected
$20.00 + 75% ($35M) = $22.63 Paid + 2 years remaining
— Conservative Estimate
$20.00 + 75%($17.5M) = $21.31 Paid + 2 years remaining

• Remain Independent
— EBITDA Multiple Valuation
$23.22 - $31.56
— About Boots
Investigate Financials

10

Thank you

Khakis ‘R Us & MBA Investment Bankers LLC Confidential

11

Supplemental Information

• Income Statement
• Balance Sheet
• Comparable Companies
• Precedent Transactions
• Discounted Cash Flow

Khakis ‘R Us & MBA Investment Bankers LLC Confidential

12

Khakis ‘R Us Income Statement

Khakis ‘R Us Balance Sheet

Comparable Analysis

Precedent Analysis

DCF Based on Current Projections

DCF Cash Flow Based on Current Projections

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