Exhibit (c)(3)
CONFIDENTIAL
Banc of America Securities provides investment banking and securities
products domestically and, on a limited basis, offshore. Other products and
services, including products and services that may be referenced in the
accompanying materials, may be provided through affiliates of Banc of
America Securities. Copyright 2002 Banc of America Securities LLC. Banc
of America Securities LLC, member NYSE/NASD/SIPC, is a subsidiary of
Bank of America Corporation.
Materials Prepared for the Evaluation Committee of the Board of Directors
December 22, 2002
These materials are intended for the benefit and use of the Evaluation Committee of Board of Directors of CoorsTek, Inc. (“CoorsTek”) in its consideration of the proposed transaction discussed herein and may not be reproduced, disseminated, quoted or referred to, in whole or in part, or used for any other purpose, without the prior written consent of Banc of America Securities LLC (“BAS”). These materials are based solely on information contained in publicly available documents and certain other information provided by the management of CoorsTek. BAS has had discussions with certain senior officers of CoorsTek, but does not assume responsibility for the accuracy, completeness or reasonableness of information provided to BAS in such discussions or otherwise and has not attempted independently to investigate or verify such publicly available information, projections, or other information provided to BAS and included herein or otherwise used. The projections included herein are based on CoorsTek management projections and Wall Street research. BAS, with your consent, has relied, without independent investigation, upon the accuracy, completeness and reasonableness of such information with respect to such projections and other information provided to BAS. Projections involve elements of subjective judgment and analysis, and there can be no assurance that such projections will be attained. BAS expresses no opinion as to such projections or the assumptions underlying them. These materials are being furnished and should be considered only in connection with the advice being provided by BAS in connection herewith. The preparation of these materials was completed on December 20, 2002.
1
Table of Contents
I. |
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II. |
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III. |
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IV. |
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| B. |
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| C. |
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2
3
Transaction Overview
Summary
Term |
| Comments |
Buyer |
| Keystone Holdings LLC (controls approximately 29% of CoorsTek stock) |
Purchase Price |
| Public stockholders of CoorsTek to receive $26.00 in cash for each CoorsTek share |
Transaction Structure |
| Reverse subsidiary merger of an acquisition subsidiary of Keystone Holdings, LLC into CoorsTek, Inc. |
Possible Timetable |
| Evaluation Committee of CoorsTek Board and Keystone approve agreement: expected December 22, 2002 |
Representations and Warranties |
| Standard representations and warranties |
Standstill Agreement |
| Keystone and affiliates subject to broad standstill |
Acquisition Proposals |
| CoorsTek can initiate, solicit, encourage, or facilitate proposals from third parties |
Conditions to Closing |
| Approval by holders of not less than 66-2/3% of the outstanding CoorsTek common stock not owned by Keystone or its affiliates |
Financing |
| Financing commitment received from Wells Fargo |
Termination |
| Standard termination provisions; breakup fee $9.0 million |
4
Transaction Overview
Implied Multiples of Proposed Transaction
($ in millions)
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| CoorsTek |
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| CoorsTek |
| Keystone |
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| Adjusted (a) |
| Offer |
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Stock Price |
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| $ | 16.23 |
| $ | 26.00 |
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Diluted Shares Outstanding (b) |
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| 11.737 |
| 11.806 |
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Total Equity Value |
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| $ | 190.5 |
| $ | 307.0 |
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Plus: Total Debt (c) |
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| 104.3 |
| 104.3 |
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Less: Cash & Equivalents (c) |
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| 53.7 |
| 53.7 |
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Total Enterprise Value |
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| $ | 241.1 |
| $ | 357.6 |
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Total Enterprise Value as a Multiple of: |
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| Statistic (d) |
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Revenue |
| LTM |
| $ | 334.4 |
| 0.72 | x | 1.07 | x | ||
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| CY02 |
| 347.0 |
| 0.69 | x | 1.03 | x | |||
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| CY03 |
| 366.0 |
| 0.66 | x | 0.98 | x | |||
CY03 Street Consensus |
| 391.4 |
| 0.62 | x | 0.91 | x | |||||
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EBITDA |
| LTM |
| $ | (6.6 | ) | NM |
| NM |
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| CY02 |
| 14.1 |
| 17.2 | x | 25.4 | x | |||
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| CY03 |
| 30.4 |
| 7.9 | x | 11.8 | x | |||
CY03 Street Consensus |
| 38.2 |
| 6.3 | x | 9.4 | x | |||||
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Stock Price as a Multiple of: |
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Cash EPS |
| LTM |
| $ | (2.31 | ) | NM |
| NM |
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| CY02 |
| (0.95 | ) | NM |
| NM |
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| CY03 |
| (0.18 | ) | NM |
| NM |
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CY03 Street Consensus |
| 0.21 |
| 76.2 | x | 122.1 | x | |||||
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Book Value Mutiple |
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| $ | 178.1 |
| 1.07 | x | 1.72 | x |
(a) Based on change in SOX from 11/11/02 to 12/20/02 of 5.2%.
(b) Based on 11.7 million shares and 1.4 million options outstanding with weighted average exercise prices ranging from $19.75 to $48.11.
(c) Based on CoorsTek’s Form 10- Q dated 9/30/02.
(d) Historical data based on CoorsTek’s Form 10-Q dated 9/30/02 and Form 10-K dated 12/31/01. Estimates based on management projections.
5
Transaction Overview
Implied Premiums of Proposed Transaction
($ in millions, except per share data)
Proposed Keystone Offer |
| $ | 26.00 |
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Premium / (Discount) to Stock Prices — As of 11/11/02 |
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Price on 11/11/02 — Pre Initial Offer ($15.42) |
| 68.6 | % | |
Last 1 Month Average ($15.42) |
| 68.6 | % | |
Last 3 Months Average ($17.74) |
| 46.6 | % | |
Last 6 Months Average ($23.55) |
| 10.4 | % | |
Last Year Average ($28.25) |
| (8.0% | ) | |
Average Since Spin-Off ($31.02) |
| (16.2% | ) | |
Premium Discount to 52 Week High ($42.09) |
| (38.2% | ) | |
Premium Discount to 52 Week Low ($12.69) |
| 104.9 | % | |
12/20/02 Adjusted Stock Price ($16.23) (a) |
| 60.2 | % | |
1 Month Average Adjusted Stock Price as of 12/20/02 ($18.33) |
| 41.8 | % |
(a) Based on change in SOX from 11/11/02 to 12/20/02 of 5.2%.
6
Transaction Overview
Potential Risks Surrounding Transaction
• Shareholder litigation following signing and announcement of transaction
• Potential adverse market impact if the transaction is not completed
• Change in shareholder base since announcement of initial offer
• Investor confidence in management
• Unwillingness of trusts to provide additional funding
7
Transaction Overview
BAS Mandate
BAS has been retained to advise the Evaluation Committee of the Board of Directors of CoorsTek with respect to the proposal received from Keystone, for the purchase of all the outstanding shares of CoorsTek common stock (excluding the shares controlled, directly or indirectly, by Keystone)
In connection with its evaluation, BAS has, among other things:
• Reviewed certain publicly available financial statements and other business and financial information of CoorsTek
• Reviewed certain internal financial statements and other financial and operating data concerning CoorsTek
• Analyzed certain financial forecasts relating to the Company prepared by management of CoorsTek
• Discussed the past and current operations, financial condition and prospects of CoorsTek with senior executives of CoorsTek
• Reviewed the reported prices and trading activity for CoorsTek common stock
• Compared the financial performance of CoorsTek and the prices and trading activity of CoorsTek common stock with that of certain other publicly traded companies BAS deemed relevant
• Compared certain financial terms of the merger to financial terms, to the extent publicly available, of certain other business combination transactions BAS deemed relevant
• Participated in discussions and negotiations among representatives of CoorsTek and Keystone and their financial and legal advisors
8
Transaction Overview
BAS Mandate
• Reviewed the December 21, 2002 draft of the merger agreement and certain related documents
• Performed such other analyses and considered such other factors as deemed appropriate
• Assumed and relied upon, without independent verification, the accuracy and completeness of the financial and other information reviewed
• With respect to the financial forecasts, assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the future financial performance of CoorsTek
• Not made any independent valuation or appraisal of the assets or liabilities of CoorsTek, nor was BAS furnished with any such appraisals
• Assumed that the final executed agreement will be identical in all material respects to the latest draft of the agreement reviewed, and that the merger will be consummated as provided in such draft agreement, with full satisfaction of all covenants and conditions and without any waivers thereof
9
II. Market and Industry Overview
10
Semiconductor End Market Overview
The semiconductor industry is looking for an end to the protracted downturn
• A significant decline in end market demand has created a scenario where demand is lower following an inventory correction, the first time in the 40 year history of the industry
• End markets remain weak for device manufacturers and expectations call for a slow, protracted recovery
• The Semiconductor Industry Association recently lowered the expected growth rate for 2003 to 19.8% from 23%
• BAS and IDC both predict that the growth rate for 2003 will be approximately 9%
• Consumer and corporate demand will ultimately be the drivers for both the end markets and the semiconductor industry
Longer Term Issues:
• While analysts are expecting a cyclical recovery over the next two years, they have begun to question if the sector is transitioning to a cyclical industry rather than a cyclical growth industry
• “We believe that compound annual growth rates in the range of 8-10% will be the norm going forward over the longer term.”
Jerry Sanders, Chairman of AMD, 11/6/02
Source: BAS research.
11
Semiconductor End Market Overview
Decelerating growth rates
• Over the last 26 years, the semiconductor device industry has exhibited a compound annual growth rate (CAGR) of 15%
• The 1995-2000 peak-to-peak comparison demonstrates evidence of slowing growth with a 5-year CAGR of 7%
• As long-term growth rates slow, the semiconductor industry will likely experience P/E multiple compression
Peak - Peak |
| Revenue |
|
1959 - 2000 (41 Years) |
| 17 | % |
1974 - 2000 (26 Years) |
| 15 | % |
1984 - 2000 (16 Years) |
| 14 | % |
1995 - 2000 (5 Years) |
| 7 | % |
1996 - 2001(a) (5 Years) |
| 1 | % |
2000 - 2005 (5 Years) |
| 1 | % |
($ in billions)
GROWTH RATES OF MAJOR SEMI PRODUCT GROUPS
Major Product Groups |
| 1995 |
| 2000 |
| 2005E |
| 5 Year CAGR 1995 - 2000 |
| 5 Year CAGR 2000 - 2005E |
| 10 Year CAGR 1995 - 2005E |
| |||
Discrete and Optoelectronics |
| $ | 18.3 |
| $ | 27.4 |
| $ | 29.1 |
| 8.4 | % | 1.2 | % | 4.7 | % |
Analog | �� | 16.6 |
| 30.5 |
| 38.5 |
| 12.9 | % | 4.8 | % | 8.8 | % | |||
MPU |
| 14.3 |
| 31.8 |
| 33.9 |
| 17.3 | % | 1.3 | % | 9.0 | % | |||
MCU |
| 10.7 |
| 12.2 |
| 13.9 |
| 2.7 | % | 2.6 | % | 2.7 | % | |||
DSP |
| NA |
| 6.1 |
| 9.1 |
| NA |
| NA |
| NA |
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Standard Cell/Gate Array |
| 8.5 |
| 12.1 |
| 11.0 |
| 7.3 | % | (1.9 | )% | 2.6 | % | |||
FPLD |
| 1.6 |
| 5.5 |
| 4.6 |
| 28.0 | % | (3.5 | )% | 11.1 | % | |||
DRAM |
| 40.8 |
| 28.9 |
| 21.9 |
| (6.7 | )% | (5.4 | )% | (6.0 | )% | |||
SRAM |
| 6.1 |
| 6.5 |
| 4.7 |
| 1.3 | % | (6.3 | )% | (2.6 | )% | |||
Flash EEPROM |
| 1.9 |
| 10.6 |
| 12.2 |
| 41.0 | % | 2.9 | % | 20.4 | % | |||
Total Semiconductor |
| $ | 118.8 |
| $ | 171.6 |
| $ | 178.9 |
| 12.5 | % | (0.5 | )% | 5.6 | % |
Source: BAS estimates and SIA information.
(a) Trough - Trough.
12
Semiconductor Capital Spending
Capital spending will remain under pressure until the semiconductor sector rebounds
• The explosive growth of profitability in the chip business during the 1990s enabled accelerated investment in next generation manufacturing technology, peaking in 2000
• Recent capital spending cuts by semiconductor companies may be indicative of an expected decrease in their growth rates going forward
RATIO OF CAPITAL SPENDING TO SEMICONDUCTOR REVENUES
($ in billions)
• Several research analysts have pointed to overly aggressive capital spending levels as a cause for a “depreciation overhang” for semiconductor companies that has eroded their gross margins
• If semiconductor companies choose to “rightsize” this overhang, semiconductor capital equipment companies may face a pushout in the spending recovery
SEMICONDUCTOR DEPRECIATION AS A PERCENTAGE OF REVENUES (a)
(a) Companies included: ADI, AMD, ATML, CY, IDTI, Hynix, IFX, INTC, LSI, MCHP, MU, NSM, PHG, Samsung, STM, TSM, TXN, UMC.
Source: BAS estimates, Wall Street research.
13
Semiconductor Capital Equipment Overview
Duration and severity of current downturn still unclear
• Though it is clear that spending in the semiconductor capital equipment sector is cyclically down, the duration and severity of the downturn is still unclear
• Manufacturing overcapacity combined with a lack of demand have caused an extended downturn
• Capital equipment spending cycles have become more volatile in recent years
• There are still no clear signs as to when the semiconductor capital equipment space will begin to recover from this most recent cyclical downturn
SEMI CAPITAL EQUIPMENT SPENDING PERCENTAGE CHANGE
($ in billions)
SEMI-CAP EQUIPMENT SPENDING GROWTH - ROLLING 5 YEAR CAGR
Source: BAS estimates, SIA.
14
Contract Manufacturing Overview
Semiconductor equipment outsourcing may mimic EMS growth trends
• The EMS industry has evolved from a small group of niche suppliers into a market with over $120 billion in revenues
• The semiconductor capital equipment market is in a position similar to that of electronics manufacturers in the early 1990s, where capital-intensive operations are being targeted for outsourcing
• These trends are favorable for CoorsTek as a number of the largest players in the semiconductor capital equipment sector have moved towards outsourcing more of their component manufacturing and assembly processes
• Constrained capital markets and cost-cutting initiatives at capital equipment companies may accelerate these outsourcing initiatives and drive growth rates similar to those of the EMS sector in the early to mid 1990s
• Despite slowing end market growth, EMS companies have increased their share of OEM COGS, a trend that could provide growth for CoorsTek in the semiconductor equipment sector
($ in billions)
CONTRACT MANUFACTURING INDUSTRY REVENUES
($ in billions)
CONTRACT MANUFACTURERS SHARE OF WORLDWIDE ELECTRONICS MARKET
Source: BAS estimates, Technology Forecasters.
15
Analyst Commentary of Semi-Cap Equipment Industry
• “End market strength is still the key to sustaining the recovery in capital equipment spending. The recovery in overall utilization rates has slowed, especially in the foundry industry. We are concerned that follow on investments from Taiwan will not materialize in the second half of 2002. Taiwan has accounted for 35% of the industry business in the first half of the year.”
— Mark Fitzgerald, Banc of America Securities
• “Reiterate our view that 2003 will be a recovery year but do not recommend trading around the backward looking book- to-bill data. We reiterate our belief that industry fundamentals have bottomed and that 2003 will be a recovery year for the industry and the stocks. We believe that the November book-to-bill ratio should begin to reflect a stabilization in industry fundamentals, but as always, we do not recommend that investors trade around the release.”
— James Covello, Goldman Sachs
• “While we continue to believe fundamentals will bottom in 4Q02, the ultimate trajectory of the cyclical recovery remains unclear. We can only look to our 2003 worldwide semiconductor capital spending database for a hint of what lies ahead. Our current bottom-up survey stands at approximately 2% growth year-over-year which suggests that while a recovery is coming, the vector is likely to be fairly muted. Furthermore, in taking a closer look at the shape of the next upturn, we do not believe the peak of the next cycle can exceed the cyclical peak levels achieved in 2000 based on a combination of slower growth, technology saturation and a lack of killer applications.”
— Steven Pelayo, Morgan Stanley
• “We checked with a number of chipmakers to determine the typical usable lifetime for equipment. From this we get an estimate of what the usable capital base looks like… while it is back down to 1998 levels, it is still a full 10% higher than any time in the early 1990s - the time where it could be argued that demand trends most closely resembled today’s...We believe that it is too early to make a bullish call...”
— Timothy Arcuri, Deutsche Bank Securities
16
CoorsTek’s Competitive Position
Scale and increased market share position CoorsTek well for the next ramp
Advanced Materials
• Largest U. S. supplier to the technical ceramics market
• Diverse applications for ceramics and plastics provides entrée into new business opportunities for other business segments
• Strong cash flow characteristics and diverse customer base act as a damper to the volatile cyclicality of the semiconductor businesses, but overall market growth tends to track GDP
Semiconductor Components & Assembly
• The outsourcing trend by semiconductor equipment companies represents a growth opportunity
• The current market environment should accelerate the trend
• Companies have reduced their manufacturing capabilities and will increasingly be using outsourced manufacturing for the next business ramp
• Provides OEM’s with a lean manufacturing model and faster time to market
• CoorsTek’s vertically integrated manufacturing approach encompasses all phases of product development and manufacturing
• Provide customers reduced time to market and additional manufacturing efficiencies
• Strong worldwide manufacturing network to support diverse customer base
• CoorsTek possesses key qualities that OEM’s look for in a manufacturing partner
• Critical mass, breadth of materials and breadth of services
• Emerging as the partner of choice for leading suppliers; proven traction with key customers
• Fragmented market which is expected to consolidate and become more competitive
17
III. CoorsTek—Market Performance
18
CoorsTek Stock Price Performance
Since spin-off from ACX Technologies (as of 11/11/02)
Source: FactSet Research Systems, Inc. as of November 11, 2002.
19
CoorsTek Stock Price Performance
Since Date of Initial Offer (November 11, 2002)
PRICE VOLUME GRAPH SINCE INITIAL OFFER (11/11/02)
INDEXED PERFORMANCE SINCE INITIAL OFFER (11/11/02)
VARIOUS OFFER PRICES SINCE 11/11/02
Source: FactSet Research Systems, Inc. as of December 20, 2002.
20
Relative Stock Performance
CoorsTek stock has performed in line with the SOX and its peers
Source: Factset Research Systems, Inc. as of November 11, 2002.
(a) Advanced Material Peers include CRDN, Kyocera, MG Technologies, Morgan Crucible, Saint Gobain.
(b) Semi-Cap Equipment Peers include AEIS, ASYT, BRKS, ENTG, HELX, MKSI, MYK.
(c) EMS Peers include BHE, CLS, FLEX, JBL, MERX, MSV, PMTR, SANM, SLR, TTMI.
21
Analysis of CoorsTek Shares Traded
Between 11/1/01 and 11/11/02
Volume Traded at Various Prices
Cumulative Volume Traded
Source: Factset Research Systems, Inc. as of November 11, 2002.
The Histogram report is based on the average high and low prices for current day, not the closing price.
22
CoorsTek Ownership Analysis
Institutional Ownership |
| Shares |
| % Own. |
|
Delaware Investment Advisers |
| 1,084,424 |
| 9.2 | % |
David J. Greene & Company, L.L.C. |
| 911,103 |
| 7.8 | % |
State Street Research & Management Co. |
| 669,600 |
| 5.7 | % |
Kern Capital Management LLC |
| 586,800 |
| 5.0 | % |
Dimensional Fund Advisors Inc. |
| 423,421 |
| 3.6 | % |
Royce & Associates, L.L.C. |
| 415,750 |
| 3.5 | % |
WEDGE Capital Management, L.L.P. |
| 347,900 |
| 3.0 | % |
Suffolk Capital Management, Inc. |
| 327,604 |
| 2.8 | % |
TCW Asset Management Company |
| 292,310 |
| 2.5 | % |
Mazama Capital Management, L.L.C. |
| 253,850 |
| 2.2 | % |
Wall Street Associates |
| 239,000 |
| 2.0 | % |
Frank Russell Investment Management Co. |
| 237,249 |
| 2.0 | % |
Barclays Global Investors |
| 199,333 |
| 1.7 | % |
Peregrine Capital Management, Inc. |
| 186,100 |
| 1.6 | % |
Arnhold & S. Bleichroeder Advisers, Inc. |
| 156,500 |
| 1.3 | % |
Frontier Capital Management Company, LLC |
| 141,000 |
| 1.2 | % |
U.S. Bancorp Asset Management, Inc. (MN) |
| 120,647 |
| 1.0 | % |
State Street Global Advisors |
| 111,505 |
| 1.0 | % |
Van Wagoner Capital Management, Inc. |
| 100,500 |
| 0.9 | % |
Needham Investment Management, L.L.C. |
| 100,000 |
| 0.9 | % |
Wellington Management Company, LLP |
| 100,000 |
| 0.9 | % |
Vanguard Group, Inc. |
| 92,011 |
| 0.8 | % |
Goldman Sachs Asset Management |
| 75,610 |
| 0.6 | % |
Rice, Hall, James & Associates |
| 53,550 |
| 0.5 | % |
Numeric Investors L.P. |
| 52,900 |
| 0.5 | % |
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Total of Top 25 Institutions |
| 7,278,667.0 |
| 62.0 | % |
Total of All Institutions |
| 8,113,288.0 |
| 69.1 | % |
Significant Holders /Insiders (a) |
| Shares |
| % Own. |
|
Joseph Coors, Jr. |
| 919,184 |
| 7.8 | % |
Adolph Coors, Jr. Trust |
| 700,000 |
| 6.0 | % |
Grover Coors Trust |
| 681,753 |
| 5.8 | % |
John Coors |
| 597,879 |
| 5.1 | % |
Derek Johnson |
| 63,561 |
| 0.5 | % |
Joseph Warren, Jr. |
| 37,941 |
| 0.3 | % |
John Glancy |
| 9,663 |
| 0.1 | % |
Robert Smialek |
| 9,663 |
| 0.1 | % |
John Markle, III |
| 6,663 |
| 0.1 | % |
Kimberly Patmore |
| 6,663 |
| 0.1 | % |
W.J. Kitchen |
| 6,362 |
| 0.1 | % |
Donald Miller |
| 6,269 |
| 0.1 | % |
|
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|
|
Total Significant Holders /Insiders |
| 3,045,601 |
| 25.9 | % |
|
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Other Owners (b) |
| 577,871 |
| 4.9 | % |
|
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Total Fully Diluted Shares Outstanding (b)/(c)/(d) |
| 11,736,760 |
| 100.0 | % |
(a) Insiders from most recent proxy, prospectus, and news.
(b) Includes domestic mutual funds and retail float.
(c) As per Proxy dated March 25, 2002.
(d) Calculated based on the treasury stock method.
Ownership by Major Classification
SOURCE: GEO, as of December 20, 2002.
23
Analyst Commentary Prior to Proposal
($ in millions except per share values)
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| Revenue |
| EPS |
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Last Update |
| Price @ Date of Report |
| Firm |
| Rating |
| Target Price |
| CY 02P |
| CY 03P |
| CY 02P |
| CY 03P |
| ||||||
10/30/02 |
| $ | 14.40 |
| CIBC World Markets |
| Sector Performer |
| $ | 30.00 |
| $ | 351.5 |
| $ | 364.4 |
| $ | (0.69 | ) | $ | (0.11 | ) |
10/30/02 |
| 14.40 |
| Friedman, Billings, Ramsey |
| Market Perform |
| NA |
| 353.9 |
| 381.0 |
| (0.73 | ) | (0.30 | ) | ||||||
10/30/02 |
| 14.40 |
| Investec |
| Buy |
| NA |
| 352.0 |
| 420.0 |
| (0.72 | ) | 0.55 |
| ||||||
10/30/02 |
| 14.40 |
| Needham |
| Hold |
| NA |
| 350.3 |
| 355.0 |
| (0.76 | ) | (0.46 | ) | ||||||
10/30/02 |
| 14.40 |
| Wells Fargo |
| Sell |
| NA |
| 351.5 |
| 460.0 |
| (0.75 | ) | 0.91 |
| ||||||
10/29/02 |
| 14.46 |
| Banc of America Securities |
| Buy |
| 25.00 |
| 352.0 |
| 359.0 |
| (0.81 | ) | (0.15 | ) | ||||||
10/29/02 |
| 14.46 |
| Bear Stearns |
| Peer Perform |
| NA |
| 351.5 |
| 400.6 |
| (0.74 | ) | 1.05 |
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| First Call Consensus |
|
|
| $ | 351.8 |
| $ | 391.4 |
| $ | (0.74 | ) | $ | 0.21 |
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Report Date |
| Firm |
| Recent Research Commentary |
|
10/30/02 |
| CIBC World Markets |
| “CoorsTek’s sequential revenue growth of 10% and return to profitability, clearly outperformed its peer component vendors during 3Q, demonstrating the superior growth and leverage in its semiconductor sub-assembly and component business, and further strength from its advanced materials business—in which its contract with InVision Systems (airport bomb detection equipment) has provided a nice buffer to overhead absorption. Generally speaking we believe that while CoorsTek’s outsourcer business model is lower margin franchise than most others in our universe, it also benefits from superior long-term growth fundamentals which together with diversification of end-markets (advanced materials sales) have allowed the company to exhibit less top-line volatility and outperform broader semiconductor cap-ex.” |
|
10/30/02 |
| Needham |
| “We are maintaining our Hold rating on CoorsTek.The company expects the semiconductor business to trend down in the fourth quarter by 20% to 25%. This is in the range that we have seen for major subsystems suppliers. While CoorsTek is not primarily a subsystems supplier it has, in our view, a similar exposure in terms of customers and revenue mechanism. While we believe that CoorsTek may not have some of the inventory issues as the subsystems suppliers its should have some of the same SAB 101 related revenue effects. CoorsTek is seeing that the semiconductor components business is holding up a bit better than the semiconductor assembly business because of spares pull through at the end user level.” |
|
10/29/02 |
| Banc of America Securities |
| “We maintain our Buy recommendation. We have a 12-month target price of $25 assuming roughly 2x tangible book value, now $13.47. We remain optimistic about the potential of the assembly business. It is clearly getting more competitive. Solectron won the Asyst Technology outsourcing contract this quarter. But, CoorsTek is chasing 39 programs, an increase from the 36 in the last quarter. Our strategy is to only model these as the company wins the contracts.” |
|
10/29/02 |
| Bear Stearns |
| “We believe that the company is well positioned to leverage the upcycle as the industry returns to growth. CoorsTek also plays into the telecommunications, electronics, automotive, medical and other markets which help diminish the industry’s typical cyclical patterns. The semiconductor equipment industry also provides a large potential for growth as the industry recovers from the downturn and we think that the trend towards outsourcing will be stronger than that of the overall equipment recovery. The fast lead-times necessary during an upturn will likely work to CoorsTek’s advantage as the company has the infrastructure in place to potentially double its run rates.” |
|
As of November 11, 2002.
24
NTM Revenue and EBITDA Multiples from Selected Research
STOCK PRICE
NTM REVENUE MULTIPLE (a)
NTM EBITDA MULTIPLE (a)
AVERAGE MULTIPLES (a)
|
| Aggregate Value / |
| Aggregate Value / |
|
3 Months |
| 0.60 | x | 7.6 | x |
6 Months |
| 0.77 |
| 9.2 |
|
9 Months |
| 0.93 |
| 11.0 |
|
12 Months |
| 1.03 |
| 12.1 |
|
18 Months |
| 1.07 |
| 13.3 |
|
(a) NTM Revenue and EBITDA based on average of estimates from BAS, CIBC and Robertson Stephens (through July 2002).
25
Multiples Analysis
NTM REVENUE MULTIPLE
PRICE TO BOOK MULTIPLE
LTM REVENUE MULTIPLE
LTM EBITDA MULTIPLE
(a) CoorsTek average multiples excludes data after 11/11/02—date of proposal.
26
Trading Statistics
($ in millions)
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| CoorsTek |
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Stock Price |
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| CoorsTek 11/11/02 |
| CoorsTek Adjusted (a) |
| Keystone Offer |
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| $15.42 |
| $16.23 |
| $26.00 |
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Premium /(Discount) to: |
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Stock Price (11/11/02) ($15.42) |
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| 0.0 | % | 5.2 | % | 68.6 | % |
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Adjusted Stock Price ($16.23) |
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| (5.0 | )% | 0.0 | % | 60.2 | % |
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52-Week High ($42.09) |
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| (63.4 | )% | (61.4 | )% | (38.2 | ) |
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52-Week Low ($12.69) |
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| 21.5 | % | 27.9 | % | 104.9 | % |
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1 Month Average ($15.42) |
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| (0.0) | % | 5.2 | % | 68.6 | % |
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3 Months Average ($17.74) |
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| (13.1) | % | (8.5 | )% | 46.6 | % |
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6 Months Average ($23.55) |
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| (34.5 | )% | (31.1 | )% | 10.4 | % |
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Diluted Shares Outstanding (b) |
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| 11.737 |
| 11.737 |
| 11.806 |
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Total Equity Value |
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| $ | 181.0 |
| $ | 190.5 |
| $ | 307.0 |
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Plus: | Total Debt (c) |
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| 104.3 |
| 104.3 |
| 104.3 |
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Less: | Cash & Equivalents (c) |
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| 53.7 |
| 53.7 |
| 53.7 |
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Total Enterprise Value |
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| $ | 231.6 |
| $ | 241.1 |
| $ | 357.6 |
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| CoorsTek Multiple Over Last Twelve Months |
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Total Enterprise Value as a Multiple of: |
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| Low |
| High |
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| Statistic (d) |
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Revenue | LTM |
| $ | 334.4 |
| 0.69 | x | 0.72 | x | 1.07 | x | 0.60 | x | 1.65 | x | ||||||||
| CY02 |
| 347.0 |
| 0.67 | x | 0.69 | x | 1.03 | x | 0.60 | x | 1.65 | x | |||||||||
| CY03 |
| 366.0 |
| 0.63 | x | 0.66 | x | 0.98 | x | 0.42 | x | 1.42 | x | |||||||||
CY03 Street Consensus |
| 391.4 |
| 0.59 | x | 0.62 | x | 0.91 | x | 0.42 | x | 1.42 | x | ||||||||||
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EBITDA | LTM |
| $ | (6.6 | ) | NM |
| NM |
| NM |
| 8.9 | x | NM |
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| CY02 |
| 14.1 |
| 16.5 | x | 17.2 | x | 25.4 | x | 8.9 | x | NM |
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| CY03 |
| 30.4 |
| 7.6 | x | 7.9 | x | 11.8 | x | 5.5 | x | NM |
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CY03 Street Consensus |
| 38.2 |
| 6.1 | x | 6.3 | x | 9.4 | x | 5.5 | x | NM |
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Stock Price as a Multiple of: |
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Cash EPS | LTM |
| $ | (2.31 | ) | NM |
| NM |
| NM |
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| CY02 |
| (0.95 | ) | NM |
| NM |
| NM |
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| CY03 |
| (0.18 | ) | NM |
| NM |
| NM |
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CY03 Street Consensus |
| 0.21 |
| 72.4 | x | 76.2 | x | 122.1 | x |
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Book Value Multiple |
| $ | 178.1 |
| 1.02 | x | 1.07 | x | 1.72 | x | 0.84 | x | 2.81 | x | |||||||||
(a) Based on change in SOX from 11/11/02 to 12/20/02 of 5.2%.
(b) Based on 11.7 million shares and 1.4 million options outstanding with weighted average exercise prices ranging from $19.75 to $48.11.
(c) Based on CoorsTek’s Form 10-Q dated 9/30/02.
(d) Historical data based on CoorsTek’s Form 10-Q dated 9/30/02 and Form 10-K dated 12/31/01. Estimates based on management projections.
27
Analyst Commentary Following Proposal
Date |
| Firm / Analyst |
| Recent Research Commentary |
11/25/02 |
| CIBC World Markets |
| “We applaud the board of directors for taking all shareholders into consideration, and believe the rejection of the buyout offer reflected both honor and restraint in light of current market conditions, and confirms the value of CRTK shares at 1.5x book value and 1.4x CY03 sales. We are maintaining our price target at $30, 2x book value of $15.17 per share, but believe there is room for appreciation beyond this level based on both fundamentals with profitability in the second half of 2003 and multiple expansion into inflection. We recommend accumulation at current levels.” |
11/13/02 |
| Investec |
| “We estimate fair value for CRTK under our current industry scenario, which assumes a traditional industry recovery beginning in 2003, to be in about the $25–$30 range by 4Q03. This assumes the stock is fairly valued in the price/sales multiple range of 0.70x to 1.00x and a price to book value range of 2.0x. Based on this analysis the current bid appears a bit low. We think it unlikely that the potential acquirers put their best deal on the table immediately and may wait to see what decision the board of directors makes to shareholders before possibly revising the term. We have heard that select EMS companies would like to buy their way into the semiconductor equipment assembly market and this announcement could spur a bid for CRTK by one of them. ” |
11/13/02 |
| Wells Fargo Securities |
| “We recommend that holders tender CoorsTek shares at a price equal to or higher than the proposed $21 per share because this represents a capitalization exceeding what the public equity market should, in our opinion, assign the company. We view the buyout offer as credible, and so we are raising our rating from Sell to Hold, as we do not recommend selling the shares short. We believe that CoorsTek is the type of industrial company that is better suited to being privately owned. The cyclicality of its business, particularly in the semiconductor equipment and telecommunications areas, prevent the steady predictable earnings growth that the public equity market rewards. What is attractive about the business are its cash flow levels. We speculate that the Coors family perhaps did not intend for CoorsTek to remain publicly owned long-term. Its public spinout nearly three years ago and subsequent secondary offerings capitalized on the comparatively high valuations then assigned to technology-related companies. Its return to private ownership would lock in a profit. ” |
11/12/02 |
| Bear Stearns |
| “In our view, $21 is a low valuation based on typical trough valuations in a highly cyclical industry. The 52 week range is $12.40 to $43.89. CoorsTek has the potential to get back to $3.00 in earnings at some time in the future. The list of other potential rival buyers of the company is relatively short and complicated by the fact of the conglomerate nature of CoorsTek’s business… CoorsTek also did a follow on offering of stock back in May at $33 per share so investors may question a management led buyout at roughly two thirds of that price six months later.” |
11/12/02 |
| Friedman Billings Ramsey |
| “We believe the Coors family is attempting to take advantage of the neutral attitude issued by the Street and to buy the company back on the cheap in the hopes of benefitting from the high degree of operating leverage when the semi-cap market eventually rebounds. The $21 offer, which offers 36% upside from recent share price, still equates to 1.6x CRTK’s tangible book per share, roughly a 20% discount to the blended peer group... The inherent discount in the offer bakes in the lack of liquidity and net debt on the balance sheet; however, with the company effectively being put into play, the possibility exists for other bids and we think there is room for the current bid to move slightly higher. Given the company’s business mix, we believe the possibility for competing bids is low... We think a better offer for the company is $23–$24.” |
28
29
A. Financial Performance—Historical and Projected
30
CoorsTek Financial Summary—Annual
|
| Fiscal Year Ending December 31, |
|
|
| CAGR |
|
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|
|
| FY 2004E |
| ||||||||||||||||||
|
| 1999 |
| 2000 |
| 2001 |
| LTM |
| 1999-2001 |
| FY 2002E |
| FY 2003E |
| A |
| B |
| ||||||||||||
Semiconductor Revenue (a) |
| NA |
| $ | 188.3 |
| $ | 128.9 |
| NA |
|
|
| $ | 103.5 |
| $ | 109.2 |
| $ | 105.8 |
| $ | 134.7 |
| ||||||
% Growth |
| NA |
| NA |
| (31.5 | )) | NA |
|
|
| (19.7 | )% | 5.5 | % | (3.1) | % | 23.3 | % | ||||||||||||
Ceramics Revenue (a) |
| NA |
| 351.3 |
| 271.5 |
| NA |
|
|
| 243.5 |
| 256.8 |
| 272.3 |
| 292.2 |
| ||||||||||||
% Growth |
| NA |
| NA |
| (22.7 | )% | NA |
|
|
| (10.3 | )% | 5.5 | % | 6.0 | % | 13.8 | % | ||||||||||||
Total Revenue |
| 365.1 |
| 539.7 |
| 400.4 |
| 334.4 |
| 4.7 | % | 347.0 |
| 366.0 |
| 378.1 |
| 426.9 |
| ||||||||||||
% Growth |
| 23.1 | % | 47.8 | % | (25.8 | )% |
|
|
|
| (13.3 | )% | 5.5 | % | 3.3 | % | 16.6 | % | ||||||||||||
Semiconductor Gross Profit |
| NA |
| 40.2 |
| (3.6 | ) | NA |
|
|
| 8.6 |
| 2.3 |
| (1.9 | ) | 12.0 |
| ||||||||||||
% of Revenue |
| NA |
| 21.4 | % | NM |
| NA |
|
|
| 8.3 | % | 2.1 | % | NM |
| 8.9 | % | ||||||||||||
Ceramics Gross Profit |
| NA |
| 84.2 |
| 48.5 |
| NA |
|
|
| 38.6 |
| 58.1 |
| 63.8 |
| 68.6 |
| ||||||||||||
% of Revenue |
| NA |
| 24.0 | % | 17.8 | % | NA |
|
|
| 15.8 | % | 22.6 | % | 23.4 | % | 23.5 | % | ||||||||||||
Total Gross Profit |
| $ | 90.7 |
| $ | 124.4 |
| $ | 44.9 |
| $ | 24.7 |
| (29.6) | % | $ | 47.2 |
| $ | 60.4 |
| $ | 61.8 |
| $ | 80.7 |
| ||||
% of Revenue |
| 24.8 | % | 23.1 | % | 11.2 | % | 7.4 | % |
|
| 13.6 | % | 16.5 | % | 16.3 | % | 18.9 | % | ||||||||||||
|
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| ||||||||||||
R&D |
| — |
| — |
| 4.9 |
| 9.7 |
| NA |
| 10.1 |
| 9.2 |
| 9.2 |
| 12.5 |
| ||||||||||||
% of Revenue |
| NA |
| NA |
| 1.2 | % | 2.9 | % |
|
| 2.9 | % | 2.5 | % | 2.4 | % | 2.9 | % | ||||||||||||
SG&A |
| 53.2 |
| 66.4 |
| 59.7 |
| 45.2 |
| 5.9 | % | 45.9 |
| 46.8 |
| 46.0 |
| 49.0 |
| ||||||||||||
% of Revenue |
| 14.6 | % | 12.3 | % | 14.9 | % | 13.5 | % |
|
| 13.2 | % | 12.8 | % | 12.2 | % | 11.5 | % | ||||||||||||
Total Operating Expenses |
| $ | 53.2 |
| $ | 66.4 |
| $ | 64.6 |
| $ | 54.9 |
| 10.2 | % |
$56.0 |
| $ | 56.0 |
| $ | 55.2 |
| $ | 61.5 |
| |||||
% of Revenue |
| 14.6 | % | 12.3 | % | 16.1 | % | 16.4 | % |
|
| 16.1 | % | 15.3 | % | 14.6 | % | 14.4 | % | ||||||||||||
Operating Income |
| $ | 37.5 |
| 58.0 |
| (19.7) |
| $ | (30.2 | ) | NA |
| (8.8 | ) | 4.4 |
| $ | 6.6 |
| $ | 19.2 |
| ||||||||
% of Revenue |
| 10.3 | % | 10.7 | % | NM |
| NM |
|
|
| NM |
| 1.2 | % | 1.7 | % | 4.5 | % | ||||||||||||
Net Income (a) |
| $ | 20.1 |
| $ | 27.2 |
| $ | (18.7 | ) | $ | (24.7 | ) | NA |
| $ | (10.8 | ) | $ | (2.1 | ) | $ | (0.7 | ) | $ | 7.3 |
| ||||
% of Revenue |
| 5.5 | % | 5.0 | % | NM |
| NM |
|
|
| NM |
| NM |
| NM |
| 1.7 | % | ||||||||||||
EPS (a) |
| $ | 2.77 |
| $ | 3.06 |
| $ | (1.76 | ) | $ | (2.31 | ) | NA |
| $ | (0.95 | ) | $ | (0.18 | ) | $ | (0.06 | ) | $ | 0.60 |
| ||||
% Growth |
| 52.9 | % | 10.7 | % | NM |
| NM |
|
|
| NM |
| NM |
| NM |
| NM |
| ||||||||||||
D&A |
| $ | 22.7 |
| $ | 24.2 |
| $ | 25.0 |
| $ | 23.6 |
| 4.9 | % |
$22.9 |
| $ | 26.0 |
| $ | 26.0 |
| $ | 26.0 |
| |||||
of Revenue |
| 6.2 | % | 4.5 | % | 6.2 | % | 7.1 | % |
|
| 6.6 | % | 7.1 | % | 6.9 | % | 6.1 | % | ||||||||||||
EBITDA |
| $ | 60.2 |
| $ | 82.2 |
| $ | 5.3 |
| $ | (6.6 | ) | (70.3 | %) | $ | 14.1 |
| $ | 30.4 |
| $ | 32.6 |
| $ | 45.2 |
| ||||
% of Revenue |
| 16.5 | % | 15.2 | % | 1.3 | % | NM |
|
|
| 4.1 | % | 8.3 | % | 8.6 | % | 10.6 | % | ||||||||||||
Balance Sheet Data |
| 9/30/02 |
| |
Cash & Cash Equivalents |
| $ | 53.7 |
|
Total Debt |
| 104.3 |
| |
Common Shareholders’ Equity |
| 178.1 |
| |
Leverage Statistics |
| LTM |
|
Debt / Total Capitalization |
| 36.9 | % |
Debt / Mkt. Cap. |
| 57.6 | % |
Debt / EBITDA |
| NM |
|
EBITDA / Net. Interest Expense |
| NM |
|
Source: Public company filings and company forecasts.
(a) Semiconductor revenue differs from reported segments - includes InVision revenue, includes Metal and Assembly, excludes semiconductor-related ceramics.
31
CoorsTek Financial Summary—Quarterly
($ in millions, except per share data)
|
| 2002E |
| ||||||||||||||||
|
| Q1A |
| Q2A |
| Q3A |
| Initial Q4E |
| Revised Q4E |
| Revised FY |
| ||||||
Revenue |
| $ | 74.5 |
| $ | 90.2 |
| $ | 99.6 |
| $ | 87.7 |
| $ | 82.7 |
| $ | 347.0 |
|
% Growth |
| 6.3 | % | 21.1 | % | 10.4 | % | (11.9 | )% | (16.9 | )% | (13.3 | )% | ||||||
Gross Profit |
| $ | 7.3 |
| $ | 13.7 |
| $ | 16.7 |
| $ | 12.4 |
| $ | 9.5 |
| $ | 47.2 |
|
% of Revenue |
| 9.7 | % | 15.1 | % | 16.8 | % | 14.2 | % | 11.5 | % | 13.6 | % | ||||||
R&D |
| 2.3 |
| 2.7 |
| 2.8 |
| 2.2 |
| 2.2 |
| 10.1 |
| ||||||
% of Revenue |
| 3.2 | % | 3.0 | % | 2.8 | % | 2.6 | % | 2.7 | % | 2.9 | % | ||||||
SG&A |
| 10.4 |
| 12.1 |
| 11.3 |
| 12.0 |
| 12.0 |
| 45.9 |
| ||||||
% of Revenue |
| 14.0 | % | 13.4 | % | 11.3 | % | 13.7 | % | 14.6 | % | 13.2 | % | ||||||
Total Operating Expenses |
| $ | 12.8 |
| $ | 14.9 |
| $ | 14.0 |
| $ | 14.3 |
| $ | 14.3 |
| $ | 56.0 |
|
% of Revenue |
| 17.1 | % | 16.5 | % | 14.1 | % | 16.3 | % | 17.3 | % | 16.1 | % | ||||||
Operating Income |
| $ | (5.5 | ) | $ | (1.2 | ) | $ | 2.7 |
| $ | (1.8 | ) | $ | (4.8 | ) | $ | (8.8 | ) |
% of Revenue |
| NM |
| NM |
| 2.7 | % | NM |
| NM |
| NM |
| ||||||
Net Income |
| $ | (4.8 | ) | $ | (2.3 | ) | $ | 0.4 |
| $ | (2.3 | ) | $ | (4.2 | ) | $ | (10.8 | ) |
% of Revenue |
| NM |
| NM |
| 0.4 | % | NM |
| NM |
| NM |
| ||||||
EPS |
| $ | (0.45 | ) | $ | (0.20 | ) | $ | 0.04 |
| $ | (0.18 | ) | $ | (0.35 | ) | $ | (0.95 | ) |
% Growth |
| NA |
| NA |
| NA |
| NA |
| NA |
| NM |
| ||||||
Depreciation & Amortization |
| $ | 5.4 |
| $ | 5.3 |
| $ | 6.2 |
| $ | 6.0 |
| $ | 6.0 |
| $ | 22.9 |
|
% of Revenue |
| 7.2 | % | 5.8 | % | 6.2 | % | 6.8 | % | 7.3 | % | 6.6 | % | ||||||
EBITDA |
| $ | (0.1 | ) | $ | 4.1 |
| $ | 8.9 |
| $ | 4.2 |
| $ | 1.2 |
| $ | 14.1 |
|
% of Revenue |
| NM |
| 4.5 | % | 8.9 | % | 4.7 | % | 1.5 | % | 4.1 | % |
Source: Public company filings and management forecasts.
32
CoorsTek Financial Summary—Street Consensus
Q4 2002E
($ in millions)
|
| BAS |
| Bear Stearns 10/29/02 |
| CIBC 10/30/02 |
| FBR 10/30/02 |
| Investec 10/30/02 |
| Needham 10/30/02 |
| Wells Fargo 10/30/02 |
| Street Consensus |
| Management Projection |
| |||||||||||||
Revenues |
| $ | 87.7 |
| $ | 87.1 |
| $ | 87.2 |
| $ | 89.6 |
| $ | 87.7 |
| $ | 86.0 |
| $ | 87.1 |
| $ | 87.5 |
| $ | 82.7 |
| ||||
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Gross Profit |
| 12.5 |
| 13.1 |
| 14.8 |
| 13.7 |
| NA |
| NA |
| NA |
| 13.5 |
| 9.5 |
| |||||||||||||
Operating Income |
| (1.3 | ) | (0.7 | ) | 0.9 |
| (0.2 | ) | NA |
| NA |
| NA |
| (0.3 | ) | (4.8 | ) | |||||||||||||
Net Income |
| $ | (2.3 | ) | (1.7 | ) | $ | (0.8 | ) | (1.4 | ) | NA |
| NA |
| NA |
| $ | (1.6 | ) | $ | (4.2 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
EPS |
| $ | (0.19 | ) | $ | (0.14 | ) | $ | (0.07 | ) | $ | (0.12 | ) | $ | (0.13 | ) | $ | (0.16 | ) | $ | (0.13 | ) | $ | (0.13 | ) | $ | (0.35 | ) | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
EBITDA |
| $ | 4.9 |
| NA |
| $ | 7.4 |
| $ | 6.0 |
| NA |
| NA |
| NA |
| $ | 6.1 |
| $ | 1.2 |
| ||||||||
FY 2003E
($ in millions)
|
| BAS 10/29/02 |
| Bear Stearns 10/29/02 |
| CIBC 10/30/02 |
| FBR 10/30/02 |
| Investec 10/30/02 |
| Needham 10/30/02 |
| Wells Fargo 10/30/02 |
| Street Consensus |
| Management Projection |
| |||||||||
Revenues |
| $ | 359.0 |
| $ | 400.6 |
| $ | 364.4 |
| $ | 381.0 |
| $ | 420.0 |
| $ | 355.0 |
| $ | 460.0 |
| $ | 391.4 |
| $ | 366.0 |
|
Gross Profit |
| 59.6 |
| 84.7 |
| 62.1 |
| NA |
| NA |
| NA |
| 84.8 |
| 72.8 |
| 60.4 |
| |||||||||
Operating Income |
| 5.1 |
| 28.2 |
| 5.9 |
| NA |
| NA |
| NA |
| 27.8 |
| 16.8 |
| 4.4 |
| |||||||||
Net Income (a) |
| $ | (1.9 | ) | 12.8 |
| $ | (1.4 | ) | NA |
| NA |
| NA |
| $ | 11.4 |
| $ | 5.2 |
| $ | (2.1 | ) | ||||
EPS |
| $ | (0.15 | ) | $ | 1.05 |
| $ | (0.11 | ) | $ | (0.30 | ) | $ | 0.55 |
| $ | (0.46 | ) | $ | 0.91 |
| $ | 0.21 |
| $ | (0.18 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
EBITDA |
| $ | 30.0 |
| NA |
| $ | 31.9 |
| NA |
| NA |
| NA |
| $ | 52.7 |
| $ | 38.2 |
| $ | 30.4 |
| ||||
Gross Margin |
| 16.6 | % | 21.1 | % | 17.0 | % | NA |
| NA |
| NA |
| 18.4 | % | 18. | % | 16.5 | % | |||||||||
Operating Margin |
| 1.4 | % | 7.0 | % | 1.6 | % | NA |
| NA |
| NA |
| 6.1 | % | 4.3 | % | 1.2 | % |
Source: Wall Street research.
(a) Excludes extraordinary and one-time charges.
33
34
Illustrative Reference Range Summary
(a) As of 11/11/02.
(b) As of 12/20/02.
35
Selected Reference Range Valuation Parameters
($ in millions, except per share data)
|
| CoorsTek |
| Relevant Multiple Range |
| Aggregate |
|
|
|
|
|
| ||||||||||
|
| Statistics (a) |
| Low |
| High |
| Value Range |
|
| Implied Share Price (b) |
| ||||||||||
Analysis of Selected Publicly Traded Companies |
|
|
|
|
|
|
|
|
|
| ||||||||||||
LTM Revenues |
| $ | 334.4 |
| 0.60x | - | 1.10x |
|
|
| $ | 200.6 | - | $ | 367.8 |
| $ | 12.78 | - | $ | 27.03 |
|
CY02 Revenues |
| 347.0 |
| 0.60x | - | 1.10x |
|
|
| 208.2 | - | 381.7 |
| 13.43 | - | 28.21 |
| |||||
CY03 Revenues |
| 366.0 |
| 0.60x | - | 1.00x |
|
|
| 219.6 | - | 366.0 |
| 14.40 | - | 26.87 |
| |||||
CY03 Revenues Growth Case(c) |
| 387.3 |
| 0.60x | - | 1.00x |
|
|
| 232.4 | - | 387.3 |
| 15.49 | - | 28.68 |
| |||||
CY02 EBITDA |
| $ | 14.1 |
| 9.00x | - | 16.00x |
|
|
| $ | 126.5 | - | $ | 224.9 |
| $ | 6.46 | - | $ | 14.85 |
|
CY03 EBITDA |
| 30.4 |
| 8.00x | - |
|
| 14.00x |
| 243.4 | - | 426.0 |
| 16.42 |
| 31.98 |
| |||||
CY03 EBITDA Growth Case (c) (d) |
| 32.2 |
| 8.00x | - | 14.00x |
|
|
| 257.6 |
| 450.7 |
| 17.63 | - | 34.09 |
| |||||
Book Value |
| 178.1 |
| 1.10x | - | 2.00x |
|
|
| $ | 246.5 | - | $ | 406.8 |
| $ | 16.69 | - | $ | 30.34 |
| |
Preliminary Reference Range |
|
|
|
|
|
|
|
| $ | 15.00 |
| $ | 30.00 |
| ||||||||
Analysis of Selected Precedent Transactions |
|
|
|
|
|
|
|
|
|
| ||||||||||||
LTM Revenues |
| $ | 334.4 |
| 0.90x | - | 1.00x |
|
|
| $ | 301.0 | - | $ | 334.4 |
| $ | 21.33 | - | $ | 24.18 |
|
CY02 Revenues |
| 347.0 |
| 0.90x | - | 1.00x |
|
|
| 312.3 | - | 347.0 |
| 22.30 | - | 25.25 |
| |||||
CY03 Revenues |
| 366.0 |
| 0.60x | - | 1.05x |
|
|
| 219.6 | - | 384.3 |
| 14.40 | - | 28.43 |
| |||||
CY03 Revenues Growth Case (c) |
| 387.3 |
| 0.60x | - | 1.05x |
|
|
| 232.4 | - | 406.6 |
| 15.49 | - | 30.33 |
| |||||
Preliminary Reference Range |
|
|
|
|
|
|
|
| $ | 17.00 | - | $ | 29.00 |
| ||||||||
Premium Paid Analysis |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
CoorsTek Adjusted Stock Price (e) |
| $ | 16.23 |
| 30.0% | - | 80.0 | % |
|
|
|
|
|
| $ | 21.10 | - | $ | 29.21 |
| ||
Last 1 Month (f) |
| 15.42 |
| 30.0 % | - | 80.0 | % |
|
|
|
|
|
| 20.05 | - | 27.76 |
| |||||
Last 3 Months (f) |
| 17.74 |
| 30.0 % | - | 80.0 | % |
|
|
|
|
|
| 23.06 | - | 31.93 |
| |||||
Preliminary Reference Range |
|
|
|
|
|
|
|
| $ | 21.00 | - | $ | 30.00 |
| ||||||||
Discounted Equity Value Analysis |
|
|
|
|
|
|
|
| $ | 23.00 | - | $ | 29.00 |
| ||||||||
Discounted Cash Flow Analysis |
|
|
|
|
|
|
|
| $ | 20.00 | - | $ | 30.00 |
| ||||||||
Sum of Parts Analysis |
|
|
|
|
|
|
|
|
|
| $ | 17.00 | - | $ | 27.00 |
|
(a) As per CoorsTek management estimates.
(b) Adjusted for $50.6 million of net debt per Form 10-Q dated 9/30/02.
(c) Assumes 25% growth in the Semiconductor segment in 2003 and no growth in Advanced Materials, yielding an 11.6% aggregate growth.
(d) Based on EBITDA margin projected by management for CY03.
(e) Adjusted for 5.2% increase in SOX from 11/11/02 to current.
(f) As of 11/11/02.
36
37
Discounted Equity Value Analysis
($in millions, except per share data) |
|
|
| |
|
|
|
| |
Target CoorsTek Revenues |
| $ | 500.0 |
|
|
|
|
| |
Normalized CoorsTek LTM Revenue Multiple (a) |
| 0.80x |
| |
|
|
|
| |
Implied Target Enterprise Value |
| $ | 400.0 |
|
|
|
|
| |
Plus: Cash (c) |
| $ | 53.7 |
|
Less: Debt (c) |
| $ | (104.3 | ) |
|
|
|
| |
Implied Equity Value |
| $ | 349.4 |
|
|
|
|
| |
Current Fully Diluted Shares Outstanding (c) |
| 11.737 |
| |
|
|
|
| |
Implied Value per Share |
| $ | 29.77 |
|
CoorsTek Historical |
| |||
And Projected Revenues (b) |
| |||
|
|
|
| |
CY00 |
| $ | 539.7 |
|
CY01 |
| 400.4 |
| |
CY02 |
| 347.0 |
| |
CY03 |
| 366.0 |
| |
CY04 | (A) | 378.1 |
| |
CY04 | (B) | 426.9 |
| |
Illustrative Discount Rate |
| 14.5 % |
| ||||||||||
Years to Achieve Target Revenues |
| 2 Years |
| 3 Years |
| 4 Years |
| 5 Years |
| ||||
Implied Revenue CAGR (from 2002) |
| 20.0 | % | 12.9 | % | 9.6 | % | 7.6 | % | ||||
Implied Current Share Price |
| $ | 22.71 |
| $ | 19.83 |
| $ | 17.32 |
| $ | 15.13 |
|
(a) Based on last one year average LTM revenue multiple for CoorsTek.
(b) Historical revenues per CoorsTek’s SEC filings. Projections based on management estimates.
(c) Per Form 10-Q dated 9/30/02.
38
Discounted Equity Value Analysis
Analysis at various revenue targets—14.5% discount rate
39
Discounted Equity Value Analysis
Analysis at various revenue targets—14.5% discount rate
40
Discounted Equity Value Analysis
Value at various revenue targets and timing expectations
REVENUE TARGET: $500 MILLION
REVENUE TARGET: $600 MILLION
REVENUE TARGET: $550 MILLION
REVENUE TARGET: $650 MILLION
Note: Analysis performed at a 13.5% and 15.5% discount rate in each scenario.
CAGR calculated based on growth from 2002 revenue of $347.0 million and 2003 revenue of $366.0.
41
Multiple Selection—Revenue
|
| Analysis of Selected |
| Analysis of Selected Precedent Transactions |
| ||||||
|
| LTM |
| CY02 |
| CY03 |
| LTM |
| NTM |
|
Revenue Multiples |
|
|
|
|
|
|
|
|
|
|
|
Advanced Materials Companies (a) |
| 0.60x |
| 0.60x |
| 0.59 |
| 0.91x |
| 0.61x |
|
Semiconductor Capital Equipment Companies (b) |
| 1.81x |
| 1.96x |
| 2.00x |
| 2.20x |
| 2.59x |
|
Normalized-Estimated 60% Discount |
| 0.73x |
| 0.78x |
| 0.80x |
| 0.88x |
| 1.04x |
|
EMS Companies (c) |
| 0.40x |
| 0.38x |
| 0.36x |
| 0.95x |
| 0.73x |
|
Normalized-Estimated 35% Premium |
| 0.55x |
| 0.51x |
| 0.48x |
| 1.28x |
| 0.99x |
|
|
|
|
|
|
|
|
|
|
|
|
|
CoorsTek Average Multiple |
| LTM |
|
|
| NTM |
|
|
|
|
|
3 Months |
| 0.68x |
|
|
| 0.52x |
|
|
|
|
|
9 Months |
| 1.13x |
|
|
| 0.87x |
|
|
|
|
|
18 Months |
| 1.00x |
|
|
| 1.03x |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Range—LTM |
|
|
| 0.60x | - | 1.10x |
| 0.90x | - | 1.00x |
|
Selected Range—CY02 |
|
|
| 0.60x | - | 1.10x |
| 0.90x | - | 1.00x |
|
Selected Range—CY03 |
|
|
| 0.60x | - | 1.00x |
| 0.60x | - | 1.05x |
|
(a) Based on median for comparable advanced material companies.
(b) Based on median for comparable semiconductor capital equipment companies.
(c) Based on the average of the medians for comparable large-cap and mid-cap EMS companies (excludes Sanmina-SCI).
42
Multiple Selection—EBITDA
|
| Analysis of Selected |
| ||||
|
| Publicly Traded Companies |
| ||||
|
| LTM |
| CY02 |
| CY03 |
|
EBITDA Multiples |
|
|
|
|
|
|
|
Advanced Materials Companies (a) |
| 4.2x |
| 2.8x |
| 2.7x |
|
Semiconductor Capital Equipment Companies (b) |
| 19.7x |
| 39.4x |
| 36.6x |
|
Estimated 60% Discount |
| 7.9x |
| 15.8x |
| 14.6x |
|
EMS Companies (c) |
| 7.8x |
| 8.1x |
| 7.1x |
|
CoorsTek Average Multiple |
| LTM |
|
|
| NTM |
|
3 Months |
| NM |
|
|
| 7.6x |
|
9 Months |
| 9.3x |
|
|
| 11.0x |
|
18 Months |
| 8.1x |
|
|
| 13.3x |
|
|
|
|
|
|
|
|
|
BAS Selected Range—LTM (d) |
|
|
| NM | - | NM |
|
BAS Selected Range—CY02 |
|
|
| 9.0x | - | 16.0x |
|
BAS Selected Range—CY03 |
|
|
| 8.0x | - | 14.0x |
|
|
|
|
|
|
|
|
|
(a) Based on median for comparable advanced material companies.
(b) Based on median for comparable semiconductor capital equipment companies.
(c) Based on the average of the medians for comparable large-cap and mid-cap EMS companies (excludes Sanmina-SCI).
(d) Not meaningful given CoorsTek's negative LTM EBITDA.
43
Multiple Selection—Book Value
Book Value Multiples |
|
|
|
|
|
|
|
Advanced Materials Companies (a) |
|
|
|
|
| 0.86x |
|
Semiconductor Capital Equipment Companies (b) |
|
|
|
|
| 1.91x |
|
Estimated 20.0% Discount |
|
|
|
|
| 1.53x |
|
EMS Companies (c) |
|
|
|
|
| 0.95x |
|
Estimated 20.0% Premium |
|
|
|
|
| 1.14x |
|
CoorsTek Average Multiple |
|
|
|
|
|
|
|
3 Months |
|
|
|
|
| 0.98x |
|
9 Months |
|
|
|
|
| 1.79x |
|
18 Months |
|
|
|
|
| 1.73x |
|
|
|
|
|
|
|
|
|
BAS Selected Range |
| 1.10x |
| - |
| 2.00x |
|
(a) Based on median for comparable advanced material companies.
(b) Based on median for comparable semiconductor capital equipment companies.
(c) Based on the average of the medians for comparable large-cap and mid-cap EMS companies (excludes Sanmina-SCI).
44
Summary Publicly Traded Company Comparables
|
| Agg. Value / Rev. |
| Agg. Value / EBITDA |
| P/E |
| Price / |
| ||||||||||||||||||||
Company |
| LTM |
| CY’02E |
| CY’03E |
| LTM |
| CY’02E |
| CY’03E |
| LTM |
| CY’02E |
| CY’03E |
| Book |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Advanced Materials Companies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
High |
| 1.23 | x | 1.15 | x | 1.11 | x | 10.5 | x | 8.6 | x | 8.1 | x | 37.6 | x | 29.7 | x | 25.1 | x | 1.55 | x | ||||||||
Average |
| 0.64 |
| 0.62 |
| 0.58 |
| 5.1 |
| 3.8 |
| 3.6 |
| 21.8 |
| 13.2 |
| 12.0 |
| 0.91 |
| ||||||||
Median |
| 0.60 |
| 0.60 |
| 0.59 |
| 4.2 |
| 2.8 |
| 2.7 |
| 23.7 |
| 7.9 |
| 9.3 |
| 0.86 |
| ||||||||
Low |
| 0.09 |
| 0.09 |
| 0.09 |
| 1.0 |
| 0.9 |
| 0.9 |
| 1.9 |
| 3.0 |
| 5.0 |
| 0.26 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Semi-Cap Equipment Companies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
High |
| 2.75 | x | 2.75 | x | 2.65 | x | 19.7 | x | 59.1 | x | 84.7 | x | NM |
| 78.1 | x | 69.5 | x | 2.88 | x | ||||||||
Average |
| 1.81 |
| 1.80 |
| 1.80 |
| 19.7 |
| 39.4 |
| 39.1 |
| NM |
| 78.1 |
| 69.5 |
| 1.83 |
| ||||||||
Median |
| 1.81 |
| 1.96 |
| 2.00 |
| 19.7 |
| 39.4 |
| 36.6 |
| NM |
| 78.1 |
| 69.5 |
| 1.91 |
| ||||||||
Low |
| 1.06 |
| 0.99 |
| 0.85 |
| 19.7 |
| 19.7 |
| 9.8 |
| NM |
| 78.1 |
| 69.5 |
| 1.26 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Large Cap EMS Companies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
High |
| 0.98 | x | 0.98 | x | 0.71 | x | 16.5 | x | 16.5 | x | 9.2 | x | 50.6 | x | 57.9 | x | 33.8 | x | 2.44 | x | ||||||||
Average |
| 0.46 |
| 0.47 |
| 0.42 |
| 9.8 |
| 10.0 |
| 7.3 |
| 29.5 |
| 33.4 |
| 22.3 |
| 1.09 |
| ||||||||
Median |
| 0.36 |
| 0.36 |
| 0.35 |
| 8.3 |
| 8.3 |
| 7.2 |
| 27.3 |
| 30.0 |
| 21.1 |
| 0.87 |
| ||||||||
Low |
| 0.27 |
| 0.30 |
| 0.32 |
| 4.5 |
| 5.5 |
| 5.6 |
| 13.0 |
| 16.0 |
| 15.9 |
| 0.55 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Mid Cap EMS Companies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
High |
| 1.11 | x | 1.11 | x | 0.95 | x | 12.9 | x | 11.7 | x | 6.1 | x | 85.3 | x | 53.4 | x | 37.1 | x | 1.60 | x | ||||||||
Average |
| 0.60 |
| 0.61 |
| 0.53 |
| 6.8 |
| 6.9 |
| 4.9 |
| 43.3 |
| 30.7 |
| 23.9 |
| 1.09 |
| ||||||||
Median |
| 0.44 |
| 0.39 |
| 0.35 |
| 5.7 |
| 6.2 |
| 5.2 |
| 37.8 |
| 21.0 |
| 19.9 |
| 0.97 |
| ||||||||
Low |
| 0.16 |
| 0.17 |
| 0.16 |
| 3.0 |
| 3.3 |
| 3.1 |
| 12.2 |
| 17.9 |
| 18.5 |
| 0.62 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
CoorsTek ($15.42 as of 11/11/02) |
| 0.69 | x | 0.67 | x | 0.63 | x | NM |
| 16.5 | x | 7.6 | x | NM |
| NM |
| NM |
| 1.02 | x | ||||||||
CoorsTek Adjusted ($16.23) |
| 0.72 | x | 0.69 | x | 0.66 | x | NM |
| 17.2 | x | 7.9 | x | NM |
| NM |
| NM |
| 1.07 | x | ||||||||
CoorsTek ($26.00 Offer Price) |
| 1.07 | x | 1.03 | x | 0.98 | x | NM |
| 25.4 | x | 11.8 | x | NM |
| NM |
| NM |
| 1.72 | x | ||||||||
Source: Projections are from Wall Street research. Historicals are from company SEC filings.
45
Summary Precedent Transaction Analysis
|
| Agg. Value / Rev. |
| Agg. Value / EBITDA |
| P/E |
| ||||||
Company |
| LTM |
| NTM |
| LTM |
| NTM |
| LTM |
| NTM |
|
Advanced Materials |
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
| 2.59 | x | 0.71 | x | 11.4 | x | 7.4 | x | NA |
| NA |
|
Average |
| 1.05 |
| 0.53 |
| 7.8 |
| 7.4 |
| NA |
| NA |
|
Median |
| 0.91 |
| 0.61 |
| 7.1 |
| 7.4 |
| NA |
| NA |
|
Low |
| 0.46 |
| 0.27 |
| 5.3 |
| 7.4 |
| NA |
| NA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Semiconductor Capital Equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
| 11.00 | x | 10.91 | x | 11.9 | x | 13.6 | x | 26.0 | x | 35.9 | x |
Average |
| 3.24 |
| 4.04 |
| 9.7 |
| 13.6 |
| 20.8 |
| 34.1 |
|
Median |
| 1.96 |
| 1.82 |
| 4.6 |
| 13.6 |
| 20.1 |
| 34.1 |
|
Low |
| 0.72 |
| 1.73 |
| 8.1 |
| 13.6 |
| 16.4 |
| 32.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMS |
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
| 1.89 | x | 1.41 | x | 19.9 | x | 24.0 | x | 35.7 | x | 27.1 | x |
Average |
| 0.99 |
| 0.75 |
| 12.2 |
| 16.9 |
| 22.3 |
| 19.6 |
|
Median |
| 0.95 |
| 0.73 |
| 11.4 |
| 15.2 |
| 20.0 |
| 19.9 |
|
Low |
| 0.25 |
| 0.33 |
| 7.4 |
| 11.5 |
| 8.4 |
| 11.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CoorsTek ($15.42 as of 11/11/02) |
| 0.69 | x | 0.63 | x | NM |
| 7.6 | x | NM |
| NM |
|
CoorsTek Adjusted ($16.23) |
| 0.72 |
| 0.66 |
| NM |
| 7.9 | x | NM |
| NM |
|
CoorsTek ($26.00 Offer Price) |
| 1.07 |
| 0.98 |
| NM |
| 11.8 | x | NM |
| NM |
|
NOTE: CoorsTek NTM multiples are based on CY03 multiples.
46
Summary Premiums Paid Analysis
ALL TRANSACTIONS |
| Premium to Average Stock Price |
| ||||||
|
| 1 Day |
| 1 Week |
| 1 Month |
| 3 Months |
|
|
| Average |
| ||||||
Technology Deals—$50MM - $1,000MM |
|
|
|
|
|
|
|
|
|
2002 to Current (25 Deals) |
|
|
|
|
|
|
|
|
|
Mean |
| 47.2 | % | 48.7 | % | 50.9 | % | 58.5 | % |
Median |
| 31.9 | % | 38.4 | % | 37.7 | % | 40.1 | % |
2001 to Current (60 Deals) |
|
|
|
|
|
|
|
|
|
Mean |
| 45.2 | % | 47.9 | % | 52.8 | % | 55.5 | % |
Median |
| 38.6 | % | 39.2 | % | 50.6 | % | 46.7 | % |
Technology Deals—$200MM - $500MM |
|
|
|
|
|
|
|
|
|
2002 to Current (8 Deals) |
|
|
|
|
|
|
|
|
|
Mean |
| 31.6 | % | 34.8 | % | 36.3 | % | 35.5 | % |
Median |
| 16.6 | % | 21.6 | % | 27.4 | % | 26.6 | % |
2001 to Current (13 Deals) |
|
|
|
|
|
|
|
|
|
Mean |
| 37.9 | % | 41.3 | % | 46.0 | % | 45.1 | % |
Median |
| 37.3 | % | 35.1 | % | 50.5 | % | 38.7 | % |
|
|
|
|
|
|
|
|
|
|
100% CASH TRANSACTIONS |
| Premium to Average Stock Price |
| ||||||
|
| Prior to Announcement |
| ||||||
|
| 1 Day |
| 1 Week |
| 1 Month |
| 3 Months |
|
|
| Average |
| ||||||
Technology Deals—$50MM - $1,000MM |
|
|
|
|
|
|
|
|
|
2002 to Current (9 Deals) |
|
|
|
|
|
|
|
|
|
Mean |
| 78.7 | % | 81.5 | % | 80.1 | % | 86.2 | % |
Median |
| 61.2 | % | 67.0 | % | 66.5 | % | 62.0 | % |
2001 to Current (12 Deals) |
|
|
|
|
|
|
|
|
|
Mean |
| 52.8 | % | 57.1 | % | 65.2 | % | 65.9 | % |
Median |
| 38.6 | % | 42.5 | % | 58.7 | % | 62.0 | % |
Technology Deals—$200MM - $500MM |
|
|
|
|
|
|
|
|
|
2002 to Current (1 Deal) |
|
|
|
|
|
|
|
|
|
Mean |
| 75.1 | % | 86.0 | % | 81.9 | % | 81.5 | % |
Median |
| 75.1 | % | 86.0 | % | 81.9 | % | 81.5 | % |
2001 to Current (6 Deals) |
|
|
|
|
|
|
|
|
|
Mean |
| 43.1 | % | 47.3 | % | 59.7 | % | 55.5 | % |
Median |
| 41.8 | % | 46.9 | % | 58.3 | % | 58.1 | % |
47
Discounted Cash Flow Sensitivity Analysis
IMPLIED PRICE PER SHARE (a)
|
|
|
| Discount Rates |
|
| |||||||||||
|
|
|
| 10.0% |
|
|
| 11.0 | % |
|
| 12.0 |
|
| |||
Scenario A |
|
|
| $ | 18.47 |
|
|
| $ | 14.55 |
|
|
| $ | 11.75 |
|
|
Scenario B |
|
|
| 32.45 |
|
|
| 25.88 |
|
|
| 21.21 |
|
| |||
Scenario C |
|
|
| 40.05 |
|
|
| 31.92 |
|
|
| 26.15 |
|
| |||
Note: Projections based on sum of Ceramics and Semiconductor businesses.
For Ceramics, assumes EBITDA margin of 16% from 2004 onwards. Depreciation kept constant. Capital expenditures based on a constant percentage of capital expenditures / sales. Change in net working investment calculated as 18% of change in revenue.
For Semiconductor business, EBITDA margin as provided by CoorsTek management. Depreciation kept constant. Capital expenditures based on a constant percentage of capital expenditures / sales. Change in net working investment calculated as 15% of change in revenue. Scenario A assumes liquidation of semiconductor business in 2007.
(a) Assumes a normalized level of unlevered free cash flows taking into account equalized depreciation and capital expenditures. Terminal value based on perpetuity growth of 5%.
48
Sum of Parts Valuation Summary
($ in millions)
|
|
|
| Multiple Range |
| Implied Aggregate Value | |||||||
|
| Statistics (a) |
| Low |
| High |
| Low |
| High | |||
SEMICONDUCTORS |
|
|
|
|
|
|
|
|
|
| |||
Analysis of Selected Publicly Traded Companies |
|
|
|
|
|
|
| ||||||
CY02 Revenues |
| $ | 103.5 |
| 0.80x | - | 1.20x |
| $ | 82.8 | - | $ | 124.2 |
CY03 Revenues |
| 109.2 |
| 0.80x | - | 1.20x |
| 87.4 | - | 131.0 | |||
CY03 Revenues @ 25.0% Annual Growth |
| 129.3 |
| 0.80x | - | 1.20x |
| 103.5 | - | 155.2 | |||
Analysis of Selected Precedent Transactions |
|
|
|
|
|
|
|
|
|
| |||
CY02 Revenues |
| $ | 103.5 |
| 0.90x | - | 1.10 | x | $ | 93.1 | - | $ | 113.8 |
CY03 Revenues |
| 109.2 |
| 0.90x | - | 1.10 | x | 98.3 | - | 120.1 | |||
CY03 Revenues @ 25.0% Annual Growth |
| 129.3 |
| 0.90x | - | 1.10 | x | 116.4 | - | 142.3 | |||
Discounted Cash Flow Analysis |
|
|
|
|
|
|
| $ | 50.0 | - | $ | 100.0 | |
Average |
|
|
|
|
|
|
| $ | 90.2 | - | $ | 126.7 | |
Implied Aggregate Value Per Share |
|
|
|
|
|
|
| $ | 7.68 | - | $ | 10.79 | |
CERAMICS |
|
|
|
|
|
|
|
|
|
| |||
Analysis of Selected Publicly Traded Companies |
|
|
|
|
|
|
|
|
|
| |||
CY02 Revenues |
| $ | 243.5 |
| 0.60x | - | 1.00x |
| $ | 146.1 | - | $ | 243.5 |
CY03 Revenues |
| 256.8 |
| 0.55x | - | 1.00x |
| 141.2 | - | 256.8 | |||
CY02 EBITDA |
| 27.6 |
| 4.00x | - | 6.00x |
| 110.6 | - | 165.8 | |||
CY03 EBITDA |
| 37.7 |
| 4.00x | - | 6.00x |
| 150.7 | - | 226.0 | |||
|
|
|
|
|
|
|
|
|
|
| |||
Analysis of Selected Precedent Transactions |
|
|
|
|
|
|
|
|
|
| |||
CY02 Revenues |
| $ | 243.5 |
| 0.80x | - | 1.00x |
| $ | 194.8 | - | $ | 243.5 |
CY03 Revenues |
| 256.8 |
| 0.50x | - | 0.70x |
| $ | 128.4 | - | $ | 179.8 | |
|
|
|
|
|
|
|
|
|
|
| |||
Discounted Cash Flow Analysis |
|
|
|
|
|
|
| $ | 250.0 |
| $ | 350.0 | |
|
|
|
|
|
|
|
|
|
|
| |||
Average |
|
|
|
|
|
|
| $ | 160.3 |
| $ | 237.9 | |
Implied Aggregate Value Per Share |
|
|
|
|
|
|
| $ | 13.65 |
| $ | 20.27 |
SUMMARY
|
| Low |
| High |
| ||
Aggregate Value—Semiconductors |
| $ | 90.2 | - | $ | 126.7 |
|
Aggregate Value—Ceramics |
| 160.3 | - | 237.9 |
| ||
Total Aggregate Value |
| $ | 250.5 | - | $ | 364.6 |
|
Add: Cash |
| 53.7 | - | 53.7 |
| ||
Less: Debt |
| (104.3 | )- | (104.3 | ) | ||
Implied Equity Value |
| $ | 199.9 | - | $ | 314.0 |
|
Fully Diluted Shares |
| 11.737 | - | 11.737 |
| ||
Implied Equity Value Per Share |
| $ | 17.03 | - | $ | 26.75 |
|
Net Debt Per Share |
| $ | 4.31 | - | $ | 4.31 |
|
Aggregate Value Per Share |
| $ | 21.34 | - | $ | 31.06 |
|
Agg. Value Per Share—Semiconductors |
| $ | 7.68 | - | $ | 10.79 |
|
Agg. Value Per Share—Ceramics |
| $ | 13.65 | - | $ | 20.27 |
|
(a) Based on management projections.
49
After Tax Proceeds on Sale
($ in millions)
|
| Semiconductor |
| Ceramics |
| ||||||||||
|
| Low |
|
| High |
| Low |
|
| High |
| ||||
Taxes on Sales |
|
|
|
|
|
|
|
|
|
|
| ||||
Estimated Sale Price |
| $ | 90.2 |
| - | $ | 126.7 |
| $ | 160.3 |
| - | $ | 237.9 |
|
Less: Transaction Costs (a) |
| (0.9 | ) | - | (1.3 | ) | (1.6 | ) | - | (2.4 | ) | ||||
Less: Tax Basis (b) |
| (15.7 | ) | - | (15.7 | ) | (74.3 | ) | - | (74.3 | ) | ||||
Taxable Amount |
| $ | 73.6 |
| - | $ | 109.6 |
| $ | 84.3 |
| - | $ | 161.2 |
|
Taxes @ 40.0% |
| $ | 29.4 |
| - | $ | 43.9 |
| $ | 33.7 |
| - | $ | 64.5 |
|
After-Tax Proceeds |
|
|
| - |
|
|
|
| - |
|
| ||||
Estimated Sale Price |
| $ | 90.2 |
| - | $ | 126.7 |
| $ | 160.3 |
| - | $ | 237.9 |
|
Less: Transaction Costs (a) |
| (0.9 | ) | - | (1.3 | ) | (1.6 | ) | - | (2.4 | ) | ||||
Less: Taxes |
| (29.4 | ) | - | (43.9 | ) | (33.7 | ) | - | (64.5 | ) | ||||
After-Tax Proceeds |
| $ | 59.9 |
| - | $ | 81.5 |
| $ | 124.9 |
| - | $ | 171.0 |
|
Value of Residual Entity |
|
|
| - |
|
|
|
| - |
|
| ||||
Assumed Value |
| $ | 160.3 |
| - | $ | 237.9 |
| $ | 90.2 |
| - | $ | 126.7 |
|
Total Value to Shareholders |
| $ | 220.1 |
| - | $ | 319.4 |
| $ | 215.1 |
| - | $ | 297.7 |
|
Add: Cash |
| 53.7 |
| - | 53.7 |
| 53.7 |
| - | 53.7 |
| ||||
Less: Debt |
| (104.3 | ) | - | (104.3 | ) | (104.3 | ) | - | (104.3 | ) | ||||
Implied Equity Value |
| $ | 169.5 |
| - | $ | 268.8 |
| $ | 164.5 |
| - | $ | 247.1 |
|
Fully Diluted Shares |
| 11.737 |
| - | 11.737 |
| 11.737 |
| - | 11.737 |
| ||||
Implied Value per Share |
| $ | 14.44 |
| - | $ | 22.91 |
| $ | 14.02 |
| - | $ | 21.05 |
|
(a) Assumed to be 1% of estimated sale price.
(b) As per CoorsTek management.
50
Discounted Cash Flow Sensitivity Analysis
CERAMICS
|
|
| CAGR |
| |||||||||||||||
|
| 2003 |
| 2004 |
| 2005 |
| 2006 |
| 2007 |
| 2002-07 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Scenario A |
| 5.5 | % | 6.0 | % | 7.5 | % | 7.5 | % | 7.5 | % | 6.8 | % | ||||||
|
| $ | 256.8 |
| $ | 272.3 |
| $ | 292.7 |
| $ | 314.7 |
| $ | 338.3 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Scenario B |
| 5.5 | % | 13.8 | % | 15.0 | % | 10.0 | % | 10.0 | % | 10.8 | % | ||||||
|
| $ | 256.8 |
| $ | 292.2 |
| $ | 336.0 |
| $ | 369.6 |
| $ | 406.6 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Scenario C |
| 10.0 | % | 15.0 | % | 15.0 | % | 10.0 | % | 10.0 | % | 12.0 | % | ||||||
|
| $ | 267.9 |
| $ | 308.1 |
| $ | 354.3 |
| $ | 389.7 |
| $ | 428.7 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
IMPLIED AGGREGATE VALUE (a) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| Discount Rates |
|
|
| ||||||||||||||
|
| 9.0 | % |
|
| 10.0 | % |
|
| 11.0 | % |
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Scenario A |
| $ | 311.5 |
|
|
| $ | 262.4 |
|
|
| $ | 227.3 |
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Scenario B |
| 368.7 |
|
|
| 307.2 |
|
|
| 263.3 |
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Scenario C |
| 396.5 |
|
|
| 329.7 |
|
|
| 282.1 |
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
IMPLIED AGGREGATE VALUE PER SHARE (a) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| Discount Rates |
|
|
| ||||||||||||||
|
| 9.0 | % |
|
| 10.0 | % |
|
| 11.0 | % |
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Scenario A |
| $ | 26.54 |
|
|
| $ | 22.36 |
|
|
| $ | 19.37 |
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Scenario B |
| 31.41 |
|
|
| 26.17 |
|
|
| 22.43 |
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Scenario C |
| 33.78 |
|
|
| 28.09 |
|
|
| 24.04 |
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
SEMICONDUCTORS |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| Revenue Growth Rate |
| CAGR |
| ||||||||||||||
|
| 2003 |
| 2004 |
| 2005 |
| 2006 |
| 2007 |
| 2002-07 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Scenario A |
| 5.5 | % | (3.1 | )% | 15.0 | % | 15.0 | % | 15.0 | % | 9.2 | % | ||||||
|
| $ | 109.2 |
| $ | 105.8 |
| $ | 121.7 |
| $ | 139.9 |
| $ | 160.9 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Scenario B |
| 5.5 | % | 23.3 | % | 40.0 | % | 20.0 | % | 20.0 | % | 21.3 | % | ||||||
|
| $ | 109.2 |
| $ | 134.7 |
| $ | 188.6 |
| $ | 226.3 |
| $ | 271.5 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Scenario C |
| 10.0 | % | 40.0 | % | 40.0 | % | 25.0 | % | 25.0 | % | 27.5 | % | ||||||
|
| $ | 113.8 |
| $ | 159.3 |
| $ | 223.1 |
| $ | 278.8 |
| $ | 348.5 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
IMPLIED AGGREGATE VALUE (b) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| Discount Rates |
|
|
| ||||||||||||||
|
| 11.0 | % |
|
| 12.0 | % |
|
| 13.0 | % |
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Scenario A |
| $ | (48.4 | ) |
|
| $ | (47.2 | ) |
|
| $ | (46.1 | ) |
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Scenario B |
| 70.6 |
|
|
| 53.4 |
|
|
| 41.3 |
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Scenario C |
| 130.5 |
|
|
| 100.6 |
|
|
| 79.5 |
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
IMPLIED AGGREGATE VALUE PER SHARE (b) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| Discount Rates |
|
|
| ||||||||||||||
|
| 11.0 | % |
|
| 12.0 | % |
|
| 13.0 | % |
|
| ||||||
Scenario A |
| $ | (4.12 | ) |
|
| $ | (4.02 | ) |
|
| $ | (3.92 | ) |
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Scenario B |
| 6.02 |
|
|
| 4.55 |
|
|
| 3.52 |
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Scenario C |
| 11.12 |
|
|
| 8.57 |
|
|
| 6.77 |
|
|
| ||||||
(a) Assumes EBITDA margin of 16% from 2004 onwards. Depreciation kept constant. Capital expenditures based on a constant percentage of capital expenditures/ sales. Change in net working investment calculated as 18% of change in revenue. Assumes a normalized level of unlevered free cash flows taking into account equalized depreciation and capital expenditures. Terminal value based on perpetuity growth of 4%.
(b) EBITDA margin as provided by CoorsTek management. Depreciation kept constant. Capital expenditures based on a constant percentage of capital expenditures / sales. Scenario A assumes liquidation of semiconductor business in 2007. Change in net working investment calculated as 15% of change in revenue. Assumes a normalized level of unlevered free cash flows taking into account equalized depreciation and capital expenditures. Terminal value based on perpetuity growth of 6%. Assumes liquidation in 2007 for Scenario A.
51
WACC Analysis
Company |
| Leveraged Equity Beta (a) |
| Debt |
| Market Value of Preferred Equity |
| Market Value of Common Equity (b) |
| Debt/ Enterprise Value |
| Debt/ Equity |
| Unlevered Equity Beta |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CoorsTek |
| 1.42 |
| 104.31 |
| — |
| 180.98 |
| 36.6 | % | 57.6 | % | 1.04 |
|
Cost of Common Equity Calculation: | (calculated using the Capital Asset Pricing Model (CAPM) |
| |||||||||||
|
| Risk Free Rate, 10-Year T-Bond |
|
|
| 3.95% (c) |
| ||||||
|
| Equity Market Risk Premium |
|
|
| 7.40% (d) |
| ||||||
|
| Risk Free Rate + |
| (Levered Beta |
| X |
| Market Risk Premium) |
| = Cost of Equity |
| ||
|
| 3.95% |
| 1.42 |
|
|
| 7.40% |
| 14.46 | % | ||
|
|
|
|
|
|
|
|
|
|
|
| ||
Cost of Debt Calculation: | (based on estimated cost in today’s market) |
|
|
|
| ||||||||
|
| Risk Free Rate, 10-Year T-Bond |
|
|
| 3.95 | % | ||||||
|
| Effective Spread |
|
|
| 3.55 | % (e) | ||||||
|
| Current Cost of Debt for CoorsTek |
|
|
| 7.50 | % | ||||||
|
| Effective Tax Rate |
|
|
|
| 36.00 | % | |||||
|
| Effective After-Tax Cost of Debt for CoorsTek |
|
|
| 4.80 | % | ||||||
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Cost of Debt |
| Debt/ | + | Cost of Equity | x | Equity/ | = | WACC |
| ||
|
| 4.80% x |
| 36.56% |
| 14.46% |
| 63.44% |
| 10.93% |
| ||
(a) Source: Bloomberg; Adjusted beta calculated for the two year period prior to 11/11/02 announcement of acquisition offer.
(b) Market value based on $15.42 stock price prior to announcement of acquisition offer.
(c) Treasury Rates as of 12/20/02.
(d) Source: Ibbotson Associates.
(e) Based on interest rate of CoorsTek’s $100mm of notes outstanding.
52