acg mergers & acqusitions 2015

Investment Opportunities 2015

Version 1.0 | Tampa, March 24, 2015 | Cunningham, Doherty, Fielitz, Ford

Presentation to the Board of Directors of ParentCo

Executive Summary

Acquiring FashionCo for up to 182mUSD is the strongest alternative for ParentCo to increase shareholder

value.

Rationale

Valuation of

FashionCo

Bid Strategy

Concerns and

Risks

Strategic

Alternatives and

Considerations

FashionCo is a buying opportunity with upward potential

Additional growth without loosing the diversification benefits of MediaCo

Potential to create significant cost synergies; sales synergies likely in the future

FashionCo has a bid valuation range of 144 – 182 mUSD, reflecting a 28.7% control

premium

100% cash offer

Earnout provision: 30/70 goal for SG&A reduction and sales growth realization

above target range; compensation in stocks

Initial price indication of FashionCo at 250 mUSD (+37% of upper end)

Market reaction to the decision

Synergies realization and integration of businesses and cultures

A share buyback plan returns value to shareholders and demonstrates confidence

Re-create synergies between MediaCo and ApparelCo

Further market screening for complementary Media acquisitions

| 2

Table of Contents

Deal Rationale

Valuation of FashionCo

Bid Strategy

Strategic Alternatives and Considerations

Next Steps

Appendix

MBA Investment Bankers - The best trusted choice for your business.

| 3

FashionCo is

an attractive

target and

strategic fit for

ParentCo.

Why Acquire FashionCo?

Acquiring FashionCo allows ParentCo to improve its competitive market position, further diversify the

revenue streams, and extract significant value through realization of synergies.

Broad target market

Access to retail stores

Fast growth and wide

acceptance

Market share

Cost synergies:

reduction of total SG&A

Revenue synergies:

selling more product

Synergies

Shareholders expect

value-adding actions

Inexpensive debt

Timing

Increase product range

Less exposure to

cyclical business

Diverse customer base

Diversification

Intrinsic value: 112.4 mUSD

Expected revenue CAGR of 7.3%

through 2017

Gross margins expected to increase

by 1.1%

Positive organic growth projections

Summary Financials

| 4

Valuation Summary, FashionCo

FashionCo has a bid valuation range of 144 – 182 mUSD.

Valuation Measure Enterprise Value (mUSD)2019 EV/EBITDA

Downside | Base | Upside

Precedents

FashionCo

DCF Valuation

Comparables

Bid Valuation

Downside case: 25th percentile; Base: Median; Upside case: 75th percentile; Control premium: Weighted average of industry-specific control premiums paid since 2012; Synergies shown

are based on the upside potential to the 75th percentile of a merger

Market Valuation

Multiples

Control premium:

~28.7%

134

83

91

94

120 182

188

Minimum Bid: 144

213

168

Synergies

206

EV

Base

153

112

154

154

144

10.9x09.9x08.7x

13.8x10.0x05.4x

11.8x09.3x07.8x

13.4x10.2x05.9x

09.1x07.3x06.1x

| 5

Funding Considerations

FashionCo can be acquired with an optimal combination of cash and debt, providing appealing returns to

stakeholders.

5/6 Debt1/6 Cash

120 mUSD

loan

30 mUSD

subordinated

debt

30 mUSD

cash

Valuation of FashionCo at 144 mUSD

Maximum bid at 28.7% premium

Using approximately 84% debt

Internal Rate of Return 37%

Return Multiple 3.9x

The success of the deal largely depends on this optimized deal structure

| 6

Bidding Strategy

We propose a 1/6 cash and 5/6 debt deal with a contingency plan if the bid is denied. This comprehensive

strategy will ensure success for ParentCo in both scenarios.

ProposalFashionCo

DecisionRecommendation Alternative

Earnout arrangement

Provision requiring growth

(70%) and SG&A (30%)

targets over the next 5 years

Compensation in stocks

Move forward with acquisition

Due diligence process

Acquisition of FashionCo

through cash payment

| 7

Share buyback

initiative

Valuation Summary and Strategic Alternatives

Fundamental valuations of the individual entities and combined conglomerates indicate the whole is greater

than the sum of its parts.

ParentCo

330240

480

10890

134

11294

141

249205

322

576461

773

854757

983

7.0% 8.0% 10.9%

7.7%

9.3%

7.3%

Legend

Median

DCF

value25th

percentile

75th

percentile

WACC

| 8

Strategic Alternatives

A share buyback program returns value to shareholders and demonstrates confidence in the current and

future success of the company and its operations.

Stock buyback and financial restructuring

Up to $180 mUSD value with low cost of debt

Tax exemptions/ benefits (deferred tax gain interest on the amount)

Value for shareholders stock price + premium and optimization of return on equity

Average FCF of MediaCo = $31 mUSD

Average FCF ApparelCo = $6.5 mUSD

ROE = $37.5m/550m = 6.81%

Before After

Take on $168m in debt $381m equity

Average FCF = $29.9mUSD

ROE = 7.8%

| 9

In any case

Re-create synergies between MediaCo and ApparelCo through sales of MediaCo branded

apparel products and a joint marketing strategy

Further market screening for complementary Media acquisitions

M&A Support Services

At MBA Investment Bankers we are client-centric and commit to providing a full spectrum of M&A execution

activities to fit your needs.

Valuation modeling:

• Public comparables

valuation

• Multiples valuation

• Precedent

transactions

valuation

• DCF modeling

Capital structure

analysis

Prospectus drafting

support

Send letter of intent

on behalf of

ParentCo

Due diligence

Analysis of new

regulations + impact

IPOs + new issues

analysis

Deal structure,

negotiation, and

contracts

Anti-trust procedures

Closing preparation

Integration

preparation and

support

Legal implementation

Synergy realization

advisory

Post transaction

investor relation

strategy

| 10

The best choice for your business.

Our group of trusted advisors at MBA Investment Bankers are looking forward to leveraging your full

potential built on mutual trust, excellence, and a joint vision for your future.

Appointed Chief Investment Officer in August 2013

Over 5 years experience in Investment Banking

Area of specialty: Information Technology

Mr. Christian Fielitz

Chief Investment Officer

[email protected]

Ms. Heather

Cunningham

Managing Director

[email protected]

Appointed February 2014

Over 3 years experience in senior management positions

Area of specialty: Consumer Discretionary

Ms. Seonag Doherty

Managing Director

[email protected]

Joined MBA Investment Bankers in January 2013

Formerly chief economist in the Investment Management division

Area of specialty: Income valuation methods

Mr. Robert Ford

Managing Director

[email protected]

Joined MBA Investment Bankers in July 2013

Formerly Vice President in the Portfolio Management division

Area of specialty: Market valuation methods

| 11

Appendix

Company Overview

Valuation Summary

Trading Statistics

Company Overview

| 13

ParentCo has strong revenue and organic growth performance. The projected decline in gross margin could

be offset by a strategic move to lower costs and create synergies between operating units.

| 14

848824806793790763727

+2%+3%

2014 2015E 2017E2016E20132011 2012

Net sales (in mUSD)

2,9

2,2

1,6

3,6

2016E2015E2014

0,3

2012

4,9

2017E2013

Organic growth (YoY, in %)

28,2

727

71,8

763100%

2011

MediaCo

2016E

848

61,6

824806

2014

ApparelCo38,4

793

+5,8%

32,5

67,5

2015E2013

790

2012 2017E

Sales structure (in %; total in mUSD)Margin comparison (in %)

2017E

34,5

2016E2015E2013

10,9

33,8

35,1

EBITDA Margin

10,5

Gross Margin

32,6

9,7

10,711,311,1

10,0

-3,6%32,9

33,8

2012 20142011

32,3

Key Financial Metrics: ParentCo, 2011-2017E

MediaCo’s projected decline in net sales and negative organic growth further support the recommendation

for ParentCo to diversify by acquiring FashionCo.

523522528535552541522

2015E2012 2013 20142011

-0.8%+0.8%

2017E2016E

-1,4

-3,0

20142012

3,5

2015E

-1,0

2016E

2,1

2013 2017E

0,1

EBITDA Margin

11,9

+1,2%

2017E

Gross Margin

41,5

2016E

40,4

10,7

40,6

11,1

2015E

12,0

2014

41,0

12,4

2012

42,1

2013

40,5

2011

12,011,6

41,1

| 15

Key Financial Metrics: MediaCo, 2011-2017E

Net sales (in mUSD) Organic growth (YoY, in %)

Margin comparison (in %)

ApparelCo has exceptional projections in terms of net sales and organic growth. Synergies created with

FashionCo could result in higher gross margin realization.

325302

278258

239222205

20122011 2013 2014

+8.0%

+8.1%

2017E2016E2015E 2015E

8,1

2017E

7,8

2012

8,57,8

2016E20142013

7,3

8,7

18,3

8,7

2014

18,9

2011 2017E

9,0

18,4

7,9

2013 2015E

-3,2%18,3

8,7

2012

Gross Margin

18,318,1

7,9EBITDA Margin

8,4

2016E

8,1

17,0

| 16

Key Financial Metrics: ApparelCo, 2011-2017E



Key Financial Metrics: FashionCo, 2011-2017E

FashionCo has strong net sales and organic growth projections. Synergies with ApparelCo could result in

lower SG&A and therefore higher gross margins.

| 17

240224

209195

182169160

2017E

+7.3%

20142013 2016E2012

+6.8%

2015E2011

7,57,2

2012 2017E

7,2

2016E2015E2014

6,9

2013

7,5

6,1

EBITDA Margin

8.7

18.718.9

Gross Margin

18.6

8.78.9

19.1

9.3

2014

-11.2%

2013 2015E 2017E

8.1

2011

7.9

19.0

2016E

18.4

2012

18.6

9.8



Valuation Summary

| 18

Valuation Summary, ApparelCo

ApparelCo’s sell valuation ranges between 116 and 175 mUSD, reflecting a 28.7% premium on the DCF

valuation. It is significantly undervalued compared to precedents.



Precedents

ApparelCo

DCF Valuation

Comparables

Sell Valuation

Downside case: 25th percentile; Base: Median; Upside case: 75th percentile; Control premium: Weighted average of industry-specific control premiums paid since 2012

Market Valuation

Multiples

Control premium:

~28.7%

178

111

92

90

116

223

Minimum sell value: 116

175

134

244

285

EV

Base

203

108

164

205

144

10.9x09.9x08.7x

13.9x010.0x05.4x

09.0x07.3x05.7x

11.9x8.0x04.5x

06.5x05.2x04.4x

| 19

Valuation Summary, MediaCo

The DCF valuation of MediaCo is within the valuation of precedents. It is currently valued at 330 mUSD. The

sell valuation, including a 14.6% premium ranges between 275 and 378 mUSD.



Precedents

MediaCo

DCF Valuation

Comparables

Sell Valuation

Downside case: 25th percentile; Base: Median; Upside case: 75th percentile; Control premium: Weighted average of industry-specific control premiums paid since 2012

Market Valuation

Multiples

Control premium:

~14.6%

417

417

423

240

275 555

603

455

480

609


EV

Base

558

330

443

430

378

09.5x06.5x

07.1x06.7x06.5x

08.6x05.9x04.3x

06.9x06.6x

07.5x05.2x03.7x

| 20

08.7x

09.4x

Valuation Summary, ParentCo

ParentCo is currently undervalued by at least 26 mUSD (0.87 USD/Share), with a significant upward

potential.



Precedents

ParentCo

DCF Valuation

Comparables

Sell Valuation

Market Valuation

Multiples

Control premium:

~22.7%

381

516

461

565

618

773


953

770

846

1,024

EV

Base

593

576

685

601

706

12.1x7.0x

10.0x7.1x06.1x

11.2x08.3x06.7x

09.1x8.1x

09.1x06.8x05.4x

| 21

04.5x

07.3x

Downside case: 25th percentile; Base: Median; Upside case: 75th percentile; Control premium: Weighted average of control premiums paid since 2012

Valuation Summary, ParentCo and FashionCo

The combined businesses of PartenCo and FashionCo are valued between 651 and 818 mUSD.



Precedents

ParentCo and

FashionCo

DCF Valuation

Comparables

Sell Valuation

Market Valuation

Multiples

Control premium:

~22.7%

530

599

701

757

929

983

1,272

983


1,058

1,200

EV

Base

727

854

840

754

883

12.0x7.3x5.3x

10.6x7.5x6.0x

10.5x09.1x08.1x

09.8x08.4x7.0x

08.5x07.4x06.6x

| 22Downside case: 25th percentile; Base: Median; Upside case: 75th percentile; Control premium: Weighted average of control premiums paid since 2012

Valuation Summary, ApparelCo and FashionCo

ApparelCo and FashionCo are valued between 205 and 322 mUSD. The comparison with precedents

suggests upward potential.



Precedents

ApparelCo and

FashionCo

DCF Valuation

Comparables

Sell Valuation

Market Valuation

Multiples

Control premium:

~28.7%

312

194

183

205

264


322

452

499

420

391

EV

Base

355

249

320

363

351

10.9x9.9x8.7x

13.9x10.1x5.4x

11.5x08.8x07.3x

12.6x9.0x5.1x

09.0x06.9x05.7x

| 23Downside case: 25th percentile; Base: Median; Upside case: 75th percentile; Control premium: Weighted average of industry-specific control premiums paid since 2012

Trading Statistics

| 24

Trading Statistics of Comparable Companies

Trading statistics of comparable companies provide a relevant benchmark for comparison.

En

terp

ris

e

Va

lue

(in

mU

SD

)

Re

ve

nu

e

(FY

14

, m

US

D)

2-Y

ea

r

Re

ve

nu

e C

AG

R

EB

ITD

A,

Ma

rgin

(FY

14

, m

US

D)

30,764

12,868

4211,1111,8261223,5131,8131,644998

9,846

0

20,000

40,000

GIIIEVKNYT PERY PVHGCI VFCMNI TIME OXMLEE

11,993

8,251

8999521,932122

3,3521,5881,215657

5,675

0

5,000

10,000

15,000


618

-3

9

23

39

-3-6-2

4

-20

0

20

40


1715

4

1386

151521

2422

0

10

20

30


| 25

acg mergers & acqusitions 2015

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