Exhibit c-2
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AirMedia Group Inc. September 29, 2015
Fairness Analysis Presented to the Special Committee of Independent Directors
The information contained herein is of a confidential nature and is intended for the use of the persons or firm to whom it is furnished by us. Reproduction, publication, or dissemination of portions hereof may not be made without prior approval of Duff & Phelps, LLC and its affiliates.
Duff & Phelps Disclaimer
The following pages contain materials that are being provided by Duff & Phelps, LLC (“Duff & Phelps”) to the special committee of independent directors (the “Special Committee”) of the board of directors (the “Board of Directors”) of AirMedia Group Inc. (“AirMedia” or the “Company”) in the context of a meeting of the Special Committee held to consider the Proposed Transaction (as defined herein).
The accompanying materials are, and any Opinion (as defined herein) will be, compiled and presented on a confidential basis, solely for the use and benefit of the Special Committee in connection with their evaluation of the Proposed Transaction and may not be distributed to any other party, publicly disclosed, or relied upon for any other purpose without the prior written consent of Duff & Phelps.
Because these materials were prepared for use in the context of an oral presentation to the Special Committee, whose members are familiar with the business and affairs of the Company, neither Duff & Phelps, nor any of their respective legal or other advisors, take any responsibility for the accuracy or completeness of any of the materials if used by persons other than the Special Committee.
These materials are not intended to represent an Opinion but rather to serve as discussion materials for the Special Committee and as a summary of the basis upon which Duff & Phelps may render an Opinion. The Special Committee should assess Duff & Phelps’ presentation together with such Opinion.
The accompanying material does not, and any Opinion provided by Duff & Phelps would not: (i) address the merits of the underlying business decision of the Special Committee, the Board of Directors or the Company or any other party to the Proposed Transaction to enter into the Proposed Transaction versus any alternative strategy or transaction; (ii) constitute a recommendation to the Special Committee, the Board of Directors, the Company or any other person including security holders of the Company as to how such person should vote or as to any other specific action that should be taken in connection with the Proposed Transaction, or whether to proceed with the Proposed Transaction or any related transaction; or (iii) create any fiduciary duty on Duff & Phelps’ part to any party.
The information utilized in preparing this presentation was obtained from the Company and from public sources. Any estimates and forecasts contained herein have been prepared by or are based on discussions with the senior management of the Company and involve numerous and significant subjective determinations, which may or may not prove to be correct. No representation or warranty, expressed or implied, is made as to the accuracy or completeness of such information and nothing contained herein is, or shall be relied upon as, a representation, whether as to the past or the future of the Company’s business. Duff & Phelps did not independently verify such information used in the context of this presentation.
No selected company or selected transaction used in our analysis is directly comparable to the Company or the Proposed Transaction.
Duff & Phelps’ affiliate, Duff & Phelps Securities, LLC (“DPS”), has acted as financial advisor to the Special Committee providing such financial and market related advice and assistance as requested by the Special Committee in connection with the Proposed Transaction, and will receive a fee for certain investment banking services if requested by the Special Committee.
CONFIDENTIAL 2
Table of Contents
1. Introduction and Transaction Overview
2. Valuation Analysis
– Discounted Cash Flow Analysis
– Selected Public Companies Analysis
Appendix
1. Assumptions, Qualifications, and Limiting Conditions
2. Selected M&A Transactions Analysis
3. Summary of Premiums Paid – Supplemental
CONFIDENTIAL 3
Section 01 Introduction and Transaction Overview
Introduction and Transaction Overview
The Engagement
Duff & Phelps was retained by the Special Committee and the Company to serve as independent financial advisor to the Special Committee (solely in its capacity as such).
Specifically, Duff & Phelps has been asked to provide an opinion (the “Opinion”) to the Special Committee as to the fairness, from a financial point of view, to (i) the holders of ordinary shares, par value US$0.001 per share, of the Company (each, a “Share” and collectively, the “Shares”), other than the Excluded Shares (as defined below), and (ii) the holders of American Depositary Shares of the Company, each representing two Shares (each, an “ADS” and collectively, “ADSs”), other than the ADSs representing the Excluded Shares, of the Merger Consideration (as defined below) to be received by such holders in the Proposed Transaction (as defined below) (without giving effect to any impact of the Proposed Transaction on any particular holder of the Shares or ADSs other than in their capacity as holders of Shares or ADSs).
The Proposed Transaction
It is Duff & Phelps’ understanding that the Company, AirMedia Holdings Ltd., an exempted company with limited liability incorporated under the laws of the Cayman Islands (“Parent”), and AirMedia Merger Co. Ltd., an exempted company with limited liability incorporated under the laws of the Cayman Islands and a wholly owned subsidiary of Parent (“Merger Sub”), propose to enter into an Agreement and Plan of Merger (the “Merger Agreement”), dated as of the date hereof, the latest draft of which Duff & Phelps has reviewed is dated September 28, 2015. Pursuant to the Merger Agreement, among other things, Merger Sub will merge with and into the Company, whereupon the separate existence of Merger Sub will cease and the Company will be the surviving company, and in connection with such merger each issued and outstanding Share (other than the Excluded Shares) will be cancelled in exchange for the right to receive US $3.00 in cash per Share without interest (the “Per Share Merger Consideration”) and each issued and outstanding ADS (other than ADSs representing the Excluded Shares) will be cancelled in exchange for the right to receive US $6.00 in cash per ADS without interest (the “Per ADS Merger Consideration”, and together with the Per Share Merger Consideration, the “Merger Consideration”) (collectively, the “Proposed Transaction”). The terms and conditions of the Proposed Transaction are more fully set forth in the Merger Agreement.
For the purposes of this presentation, “Excluded Shares” shall mean, collectively, (a) the Rollover Shares (as defined in the Merger Agreement), (b) Shares (including ADSs corresponding to such Shares) held by Parent, Merger Sub, the Company or any of their respective Subsidiaries (as defined in the Merger Agreement), and (c) Shares (including ADSs corresponding to such Shares) held by the Depositary (as defined in the Merger Agreement) and reserved for issuance and allocation (but not yet allocated) pursuant to the Share Incentive Plans (as defined in the Merger Agreement).
CONFIDENTIAL 5
Introduction and Transaction Overview
Scope of Analysis
Duff & Phelps has made such reviews, analyses and inquiries as it has deemed necessary and appropriate under the circumstances. Duff & Phelps also took into account its assessment of general economic, market and financial conditions, as well as its experience in securities and business valuation, in general, and with respect to similar transactions, in particular. Duff & Phelps’ procedures, investigations, and financial analysis with respect to the preparation of its analysis included, but were not limited to, the items summarized below:
1. Reviewed the following documents:
- The Company’s annual reports and audited financial statements on Form 20-F filed with the Securities and Exchange Commission (“SEC”) for the years ended December 31, 2013 and December 31, 2014 and the Company’s unaudited interim financial statements for the six months ended June 30, 2014 and June 30, 2015 included in the Company’s Form 6-K filed with the SEC;
- A detailed financial projection model for the years ending December 31, 2015 through 2024, prepared and provided to Duff & Phelps by management of the Company, upon which Duff & Phelps has relied, with your consent, in performing its analysis (the “Management Projections”);
- Other internal documents relating to the history, past and current operations, financial conditions, and probable future outlook of the Company, provided to Duff & Phelps by management of the Company;
- A letter dated September 25, 2015 from the management of the Company, which made certain representations as to the Management Projections and the underlying assumptions for the Company (the “Management Representation Letter”); and
- Documents related to the Proposed Transaction, including the Merger Agreement;
2. Discussed the information referred to above and the background and other elements of the Proposed Transaction with the management of the Company;
3. Discussed with Company management its plans and intentions with respect to the management and operation of the business;
4. Reviewed the historical trading price and trading volume of the ADSs and the publicly traded securities of certain other companies that Duff & Phelps deemed relevant;
5. Performed certain valuation and comparative analyses using generally accepted valuation and analytical techniques including a discounted cash flow analysis, an analysis of selected public companies that Duff & Phelps deemed relevant, an analysis of selected transactions that Duff & Phelps deemed relevant, and a review of premiums paid in selected transactions that Duff & Phelps deemed relevant; and
6. Conducted such other analyses and considered such other factors as Duff & Phelps deemed necessary or appropriate.
CONFIDENTIAL 6
Introduction and Transaction Overview
Ownership Summary AirMedia Group Inc.—Ownership
% of Fully Diluted Public & Other Current Shareholders ADSs Ownership
Shareholders
32.6% Buyer Consortium
Herman Guo (Chairman and CEO) (1) 19,045,097 28.7%
Institutional
Qing Xu (Director and Executive President) (2) 1,000,000 1.5%
Investors
12.8% Buyer Consortium 20,045,097 30.2% Other Management / Director
Peixin Xu (Director) 8,020,000 12.1% James Feng (Director and President) 1,748,405 2.6%
Other Management / Director 9,768,405 14.7%
Other Institutional Investors
Management / Options CDH Investments 2,854,933 4.3% Director 9.7% Top Ace Asset Management Ltd 2,419,918 3.6%
14.7%
China Asset Management Co., Ltd. 1,676,300 2.5% Susquehanna International Group 273,658 0.4% California Public Employees’ Retirement System 233,400 0.4% EJF Capital LLC 200,000 0.3% Group One Trading LP 171,314 0.3% Buyer E Fund Management Co., Ltd. 150,000 0.2% Consortium Goldman Sachs Group 78,844 0.1%
30.2%
Invesco PowerShares Capital Management LLC 75,206 0.1%
Source: Company filings, Capital IQ, Company provided. Merrill Lynch & Co. Inc 50,500 0.1%
BlueCrest Capital Management Limited 50,000 0.1%
(1) Includes 16,105,980 Shares beneficially owned by Wealthy Citadel LLC 44,421 0.1% Environment, a British Virgin Islands company solely owned Jane Street Group, LLC, Asset Management Arm 43,925 0.1% and controlled by Mr. Herman Guo; 700,000 ADSs, Morgan Stanley 41,622 0.1% representing 1,400,000 Shares beneficially owned by Nomura Asset Management Co., Ltd. 40,200 0.1% Wealthy Environment; 20,000,000 Shares beneficially owned Nine Chapters Capital Management, LLC 34,500 0.1% by Global Earning, a British Virgin Islands company solely Caxton Associates LP 31,528 0.0% owned and controlled by Ms. Dan Shao; 292,107 ADSs, Peak6 Investment LP, Asset Management Arm 28,233 0.0% representing 584,214 Shares beneficially owned by Ms. Dan Tower Research Capital LLC 6,100 0.0% Shao. Mr. Herman Guo is married to Ms. Dan Shao. Mr. Citigroup Inc 3,977 0.0% Herman Guo disclaims beneficial ownership of the ordinary Institutional Investors 8,508,579 12.8% shares held by Ms. Dan Shao or Global Earning, per 13-D dated September 18, 2015. Public & Other Shareholders 21,649,126 32.6%
(2) Includes 2,000,000 Shares directly held by Mambo Fiesta, a British Virgin Islands company solely owned and controlled
Total ADSs Outstanding (3) 59,971,207 90.3% by Mr. Qing Xu, per 13-D dated September 18, 2015.
(3) 119,942,413 Ordinary Shares outstanding as of March 31, Options In-the-Money at Offer Price 6,410,003 9.7% 2015, per 20-F filed with the U.S. Securities and Exchange Commission on April 24, 2015. Fully Diluted ADSs Outstanding at Offer Price 66,381,210 100.0%
CONFIDENTIAL 7
Introduction and Transaction Overview
Trading Analysis
AirMedia Group Inc.—Trading History
September 25, 2014 to September 25, 2015
Offer Price Premium Relative to:
Current (9/25/15) $4.98 20.5% April 7, 2015 June 15, 2015 $8.00 Airmedia entered into a 25,000.0 One Day Prior $3.52 70.5% Airmedia reached definitive share transfer agreement to 30- Day VWAP (1) $5.41 10.8% sell 5% equity interest of its agreement with Beijing Longde $7.00 advertising business to Wenchuang Fund to sell 75% 60- Day VWAP (1) $4.61 30.2% Shenzhen Liantronics for equity interest of its advertising 90- Day VWAP (1) $4.57 31.3% business for RMB 2.1 billion. 20,000.0 RMB 150 million. $6.00
$5.00 November 17, 2014 March 9, 2015
Airmedia reported Q3 ’14 Airmedia reported CY14
15,000.0 earnings results. The earnings results. The Volume Price Company reported net Company reported net $4.00 revenue of $62.2 million revenue of $252.5 ADS and loss of $0.10 per million and loss of $0.43 June 19, 2015 ADS. per ADS. May 18, 2015 Airmedia reported Q1 Airmedia received a non-binding 10,000.0 $3.00 proposal from its Chairman and (thousands) ’15 earnings results.
The Company CEO Mr. Herman Man Guo to $2.00 reported net revenue acquire remaining shares of of $60.3 million and Airmedia for $6.00 per ADS. loss of $0.10 per ADS. 5,000.0 $1.00
$0.00 0.0
Volume Price 30-day Trailing VWAP 60-day Trailing VWAP 90-day Trailing VWAP Offer
(1) Trailing Volume Weighted Average Price (VWAP) at Offer
AirMedia Group Inc. Historical Trading Metrics
(in thousands, except per Share)
During one year prior to Offer Post offer
Average Closing Price $2.80 Average Closing Price $4.71 High $7.34 High $5.13 Low $1.68 Low $3.72 Average Volume 708.8 Average Volume 1,371.8 % of Shares Issued and Outstanding 1.2% % of Shares Issued and Outstanding 2.3% % of Float 2.4% % of Float 4.6%
Source: Capital IQ
CONFIDENTIAL 8
Introduction and Transaction Overview
Proposed Transaction
AirMedia Group Inc.—Offer Premium AirMedia Group Inc.—Implied Multiples
(USD in millions, except per ADS data)
ADS Implied Offer Price Premium $6.00 ADS price of 9/25/15 $4.98 20.5% Fully Diluted ADSs Issued and Outstanding (millions) 66.4 66.38 One-week prior to Offer (6/12/15) $7.26 (17.4%) 1.00 Implied Aggregate Equity Value & Options Proceeds $398.3 30-days trailing VWAP at Offer $5.41 10.8% Plus: Business Held for Sale (1) $6.3 6.3 60-days trailing VWAP at Offer $4.61 30.2% Plus: Minority Interest (2) $24.6 24.6 Plus: Income Tax Payable $0.6 0.6 90-days trailing VWAP at Offer $4.57 31.3% Less: Proceeds from Exercise of Options ($14.8) (14.8) One-year prior to Offer (6/19/14) $2.48 141.9% Less: Remaining Ownership of Beijing Shengshi Lianhe (3) ($42.4) (42.4) Less: Long-Term Investment (4) ($13.9) (13.9) Initial Public Offering (11/6/2007) $15.00 (60.0%) Less: Amount Due from Related Party (5) ($2.0) (2.0) Offer Price $6.00 Less: Proceeds to Be Received from Longde Wenchuang (6) ($263.0) (263.0) Less: Cash ($20.3) (20.3)
Implied Enterprise Value $73.4 Implied Offer Multiples:
EV / 2017 EBITDA $19.4 3.6x EV / 2015 Revenue $19.0 3.85x EV / 2016 Revenue $99.1 0.72x EV / 2017 Revenue $155.5 0.45x
Note: Balance sheet data as of June 30, 2015. Financial performance metrics presented are adjusted to exclude public company costs, non-recurring income (expenses) and business held for sale.
(1) Reflects the expected sale proceeds of certain non-core business to be sold (subject to 10% withholding tax) , net of negative cash flow for the second half 2015, as projected by Company management.
(2) Estimated fair market value of non-controlling interest, based on Management Projections.
(3) Implied value of estimated 10%-15% remaining ownership interest after earnout adjustments, based on RMB 2.1 billion deal value. Subject to 10% withholding tax. (4) Includes investments in privately held companies. Subject to 10% withholding tax.
(5) Amount due from Beijing AirMedia Jinsheng Advertising Co., Ltd Subject to 10% withholding tax.
(6) Net-after-tax proceeds to be received from sale of 75% of Beijing Shengshi Lianhe Advertising Co., Ltd Subject to a 10% withholding tax discount on excess cash (net of income tax payable and negative free cash flow).
CONFIDENTIAL 9
Introduction and Transaction Overview
Valuation Summary
Valuation Range Conclusions
(RMB in thousands, except per ADS values or otherwise noted)
Low High Enterprise Value Range ?327,200—?545,600
Plus: Proceeds from Exercise of Options ?94,484—?94,484 Plus: Remaining Ownership of Beijing Shengshi Lianhe (1) 210,000—333,529 Plus: Long-Term Investment (2) 88,660—88,660 Plus: Amount Due from Related Party (3) 12,945—12,945 Plus: Proceeds to Be Received from Longde Wenchuang (4) 1,676,186—1,676,186 Less: Business Held for Sale (5) (40,000)—(40,000) Less: Minority Interest (6) (104,946)—(201,245) Less: Income Tax Payable (3,540)—(3,540)
Value Attributable to Fully Diluted ADSs (Excluding Cash) ?2,260,990—?2,506,621
Fully Diluted ADSs Issued and Outstanding 66,381,210—66,381,210 Value Per ADS (RMB) ?34.06—?37.76 RMB to USD FX rate (as of 9/25/2015) 6.37—6.37
Note: Balance sheet data as of June 30, 2015. Financial Value Per ADS Range (Excluding Excess Cash) $5.34—$5.92 performance metrics presented are adjusted to exclude public company costs, non-recurring income (expenses) and business
Excess Cash 129,169 129,169 held for sale. Cash Value Per Fully Diluted ADSs Issued and Outstanding (RMB) ?1.95—?1.95 and Outstanding (USD) $—$0.31 (1) Implied value of estimated 10%-15% remaining ownership Cash Value Per Fully Diluted ADSs Issued 0.31 Offer Price interest after earnout adjustments, based on RMB 2.1 Value Per ADS Range $5.65—$6.23 $6.00 billion deal value. Subject to 10% withholding tax.
(2) Includes investments in privately held companies. Subject
Implied Valuation Multiples to 10% withholding tax.
(3) Amount due from Beijing AirMedia Jinsheng Advertising EV / 2017 EBITDA ?130,584 2.5x—4.2x 3.6x Co., Ltd Subject to 10% withholding tax.
(4) Net-after-tax proceeds to be received from sale of 75% of EV / 2015 Revenue ?121,582 2.69x—4.49x 3.85x Beijing Shengshi Lianhe Advertising Co., Ltd Subject to a EV / 2016 Revenue ?649,373 0.50x—0.84x 0.72x 10% withholding tax discount on excess cash (net of EV / 2017 Revenue ?1,044,560 0.31x—0.52x 0.45x income tax payable and negative free cash flow).
(5) Reflects the expected sale proceeds of certain non-core business to be sold (subject to 10% withholding tax) , net of negative cash flow for the second half 2015, as projected by Company management.
(6) Estimated fair market value of non-controlling interest, based on Management Projections.
CONFIDENTIAL 10
Section 02 Valuation Analysis
Valuation Analysis
Financial Performance
Historical and Projected Financial Performance
(RMB in thousands)
YTD Management Projections
6/30/2015 2015P 2016P 2017P 2018P 2019P 2020P 2021P 2022P 2023P 2024P
Railway Wi-Fi ?2,162 ?5,700 ?238,083 ?370,714 ?430,671 ?584,339 ?637,068 ?645,350 ?649,080 ?658,074 ?662,587 Growth NA NA NM 55.7% 16.2% 35.7% 9.0% 1.3% 0.6% 1.4% 0.7%
Bus Wi-Fi ?0 ?5,353 ?237,655 ?406,077 ?550,972 ?625,352 ?653,666 ?671,630 ?727,523 ?741,176 ?745,148 Growth NA NA NM 70.9% 35.7% 13.5% 4.5% 2.7% 8.3% 1.9% 0.5%
Flight Wi-Fi ?5,159 ?14,159 ?66,586 ?154,650 ?253,193 ?349,431 ?506,672 ?594,611 ?597,595 ?600,877 ?604,488 Growth NA NA 370.3% 132.3% 63.7% 38.0% 45.0% 17.4% 0.5% 0.5% 0.6%
Gas Station Media ?26,550 ?75,550 ?83,105 ?87,260 ?89,005 ?89,895 ?90,794 ?0 ?0 ?0 ?0 Growth NA NA 10.0% 5.0% 2.0% 1.0% 1.0% (100.0%) NA NA NA
Film Distribution ?6,363 ?20,820 ?23,943 ?25,859 ?27,927 ?29,324 ?29,910 ?30,508 ?30,813 ?31,122 ?31,122 Growth NA NA 15.0% 8.0% 8.0% 5.0% 2.0% 2.0% 1.0% 1.0% 0.0%
Net Revenue ?40,234 ?121,582 ?649,373 ?1,044,560 ?1,351,769 ?1,678,341 ?1,918,110 ?1,942,099 ?2,005,011 ?2,031,249 ?2,043,344 Growth NA NA 434.1% 60.9% 29.4% 24.2% 14.3% 1.3% 3.2% 1.3% 0.6%
Gross Profit -?59,409 -?204,517 ?47,979 ?274,264 ?439,409 ?642,320 ?781,069 ?852,936 ?904,003 ?921,500 ?922,690 Margin % (147.7%) (168.2%) 7.4% 26.3% 32.5% 38.3% 40.7% 43.9% 45.1% 45.4% 45.2%
EBITDA -?80,125 -?263,019 -?67,957 ?130,584 ?265,376 ?446,276 ?564,140 ?674,770 ?714,723 ?723,532 ?716,565 Margin % (199.1%) (216.3%) (10.5%) 12.5% 19.6% 26.6% 29.4% 34.7% 35.6% 35.6% 35.1% Growth NM NM NM NM 103.2% 68.2% 26.4% 19.6% 5.9% 1.2% (1.0%)
EBIT -?99,825 -?328,637 -?236,483 -?96,970 -?11,008 ?141,629 ?260,557 ?424,400 ?496,894 ?525,237 ?551,508 Margin % (248.1%) (270.3%) (36.4%) (9.3%) (0.8%) 8.4% 13.6% 21.9% 24.8% 25.9% 27.0% Growth NM NM NM NM NM NM 84.0% 62.9% 17.1% 5.7% 5.0%
Capital Expenditures ?5,659 ?69,971 ?380,855 ?286,451 ?246,161 ?233,358 ?235,687 ?261,024 ?121,129 ?88,884 ?65,707 % of Net Revenue 14.1% 57.6% 58.6% 27.4% 18.2% 13.9% 12.3% 13.4% 6.0% 4.4% 3.2% % of EBITDA NM NM NM 219.4% 92.8% 52.3% 41.8% 38.7% 16.9% 12.3% 9.2%
Note: Financial performance metrics presented are adjusted to exclude public company costs, non-recurring income (expenses) and business held for sale. Source: Company filings, Company management
CONFIDENTIAL 12
Valuation Analysis
Discounted Cash Flow Analysis – Methodology and Key Assumptions
Discounted Cash Flow Methodology
Duff & Phelps performed a discounted cash flow analysis of the projected unlevered free cash flows.
Unlevered free cash flow is defined as cash generated by the business that is available to either reinvest or to distribute to security holders.
Projected free cash flows are discounted to the present using a discount rate which reflects their relative risk.
The discount rate is equivalent to the rate of return that security holders could expect to realize on alternative investment opportunities with similar risk profiles.
Discounted Cash Flow Key Assumptions
Duff & Phelps utilized and relied upon the Management Projections for the fiscal years ending December 31, 2015-2024 (excluding public company expenses, as provided by Company management) as well as discussions with Company management, a review of the Company’s historical performance and other factors to develop the DCF analysis.
Beyond the projection period, Duff & Phelps estimated the “terminal value” using a perpetuity formula.
Duff & Phelps discounted the resulting free cash flows and terminal value using a weighted average cost of capital range of 17.00% to 19.00%, derived from the Capital Asset Pricing Model.
The following is a summary of the Management Projections utilized in the discounted cash flow analysis:
- The Company’s net revenue increases at a compound annual growth rate (“CAGR”) of 15.4% over the eight-year period from 2016 to 2024.
- The Company’s EBITDA margin averages 28.7% from 2017 to 2024.
- Capital expenditures average 12.4% of revenue from 2017 to 2024.
CONFIDENTIAL 13
Valuation Analysis
DCF Analysis Summary
Discounted Cash Flow Analysis
(RMB in thousands)
Terminal 2015P 2016P 2017P 2018P 2019P 2020P 2021P 2022P 2023P 2024P Year
Net Revenue ?121,582 ?649,373 ?1,044,560 ?1,351,769 ?1,678,341 ?1,918,110 ?1,942,099 ?2,005,011 ?2,031,249 ?2,043,344 ?2,043,344
Growth NA 434.1% 60.9% 29.4% 24.2% 14.3% 1.3% 3.2% 1.3% 0.6%
EBITDA ?-263,019 ?-67,957 ?130,584 ?265,376 ?446,276 ?564,140 ?674,770 ?714,723 ?723,532 ?716,565 ?716,565
Margin (216.3%) (10.5%) 12.5% 19.6% 26.6% 29.4% 34.7% 35.6% 35.6% 35.1% 35.1% Growth NA NM NM 103.2% 68.2% 26.4% 19.6% 5.9% 1.2% (1.0%)
Q3-Q4 2015
Earnings Before Interest and Taxes ?-228,811 ?-236,483 ?-96,970 ?-11,008 ?141,629 ?260,557 ?424,400 ?496,894 ?525,237 ?551,508 ?522,447
Pro Forma Taxes @ 15.0% 0 0 0 0 0 0 (50,073) (80,549) (84,879) (88,856) (84,497) Net Operating Profit After Tax (228,811) (236,483) (96,970) (11,008) 141,629 260,557 374,327 416,345 440,358 462,652 437,950 Depreciation 45,917 168,526 227,554 276,385 304,647 303,583 250,370 217,828 198,295 165,057 194,118 Capital Expenditures (64,313) (380,855) (286,451) (246,161) (233,358) (235,687) (261,024) (121,129) (88,884) (65,707) (204,334) (Increase) / Decrease in Working Capital 39,716 (36,082) (45,993) (32,960) (41,012) (27,799) (2,913) (20,922) (9,445) (8,583) (8,583) Free Cash Flow (1) ?-207,490 ?-484,894 ?-201,861 ?-13,745 ?171,905 ?300,654 ?360,760 ?492,122 ?540,324 ?553,418 ?419,150
Enterprise Value Range Low High
Terminal Growth Rate 3.25% 3.25% Weighted Average Cost of Capital 19.00% 17.00%
Concluded Enterprise Value ?327,200 ?545,600
Implied Per ADS Range (USD) $5.65 $6.23
(1) Prior to application of a 10% dividend withholding tax, which is calculated Implied Valuation Multiples based on levered cash flows and discounted separately at the cost of equity derived in the WACC calculation and included in the concluded enterprise
EV / 2017 EBITDA ?130,584 2.5x 4.2x value range.
EV / 2015 Revenue ?121,582 2.69x 4.49x Note: Balance sheet data as of June 30, 2015. Financial performance metrics EV / 2016 Revenue ?649,373 0.50x 0.84x presented are adjusted to exclude public company costs, non-recurring income EV / 2017 Revenue ?1,044,560 0.31x 0.52x (expenses) and business held for sale.
CONFIDENTIAL 14
Valuation Analysis
Selected Public Companies / M&A Transactions Analysis Methodology
Selected Public Companies Analysis
Duff & Phelps selected nine publicly traded companies in the Wi-Fi and outdoor advertising industry that were deemed relevant to its analysis.
Duff & Phelps analyzed the financial performance of each of the publicly traded companies. Duff & Phelps then analyzed the selected public companies’ trading multiples of enterprise value to revenue, enterprise value to EBITDA, and enterprise value to EBIT.
Due to the limited comparability of the selected public companies’ financial metrics relative to those of the Company and negative projected EBITDA and free cash flow for the Company, rather than applying a range of selected multiples from a review of the public companies, Duff & Phelps reviewed various valuation multiples for the Company implied by the valuation range determined from the DCF analysis in the context of the Company’s relative size, forecasted growth in revenue and profits, profit margins, capital spending, revenue mix, and other characteristics that we deemed relevant.
Selected M&A Transactions Analysis
Duff & Phelps selected precedent transactions within the outdoor advertising and online advertising industry that it determined to be relevant to its analysis. Duff & Phelps computed the LTM revenue and EBITDA for each of the target companies (where publicly disclosed). Duff & Phelps then calculated the implied enterprise value to revenue and enterprise value to EBITDA multiples for each transaction.
The Company is not directly comparable to the target companies in the Selected M&A Transactions Analysis given certain characteristics of the transactions and the target companies, including business and industry comparability and lack of recent relevant transactions. Therefore, although reviewed, Duff & Phelps did not select valuation multiples for the Company based on the Selected M&A Transactions Analysis. Details of the Selected M&A Transactions Analysis are included in Appendix 2.
None of the companies utilized for comparative purposes in the following analysis are directly comparable to the Company, and none of the transactions utilized for comparative purposes in the following analysis are directly comparable to the Proposed Transaction. Duff & Phelps does not have access to non-public information of any of the companies used for comparative purposes. Accordingly, a complete valuation analysis of the Company and the Proposed Transaction cannot rely solely upon a quantitative review of the selected companies and selected transactions, and involves complex considerations and judgments concerning differences in financial and operating characteristics of such companies and targets, as well as other factors that could affect their value relative to that of the Company. Therefore, the Selected Public Companies / Selected M&A Transactions Analysis is subject to limitations.
CONFIDENTIAL 15
Valuation Analysis
Selected Public Companies Analysis – Financial Metrics
Selected Public Companies Analysis
($ in millions, except per share data)
COMPANY INFORMATION REVENUE GROWTH EBITDA GROWTH EBITDA MARGIN
3-YR 3-YR 3-YR
Company Name HQ Exchange LTM 2015 2016 2017 LTM 2015 2016 2017 LTM 2015 2016 2017 CAGR CAGR AVG
Wi-Fi Companies
ViaSat Inc. United States NasdaqGS 17.0% 4.3% 5.6% 7.7% 9.2% 32.0% 63.7% 13.2% 12.7% 15.3% 15.0% 21.0% 20.0% 20.9% 22.1% Gogo Inc. United States NasdaqGS 36.6 20.6 20.3 23.2 20.5 NM 89.3 81.4 156.0 96.4 3.6 5.5 5.1 10.6 17.2 Global Eagle Entertainment Inc. United States NasdaqCM NM 20.0 9.6 13.1 13.0 NM NM 192.9 40.4 49.0 -12.2 7.3 11.8 14.7 19.3 Boingo Wireless, Inc. United States NasdaqGS 8.1 14.2 17.5 16.4 16.0 -15.6 -8.7 35.6 76.0 28.1 19.5 12.3 14.6 22.1 24.4
Group Median 17.0% 17.1% 13.6% 14.8% 14.5% 8.2% 63.7% 58.5% 58.2% 38.6% 9.3% 9.8% 13.2% 17.8% 20.7%
China Outdoor Advertising Companies
Clear Media Ltd. Hong Kong SEHK 5.8% 6.4% NA NA NA 8.3% 7.6% NA NA NA 40.9% 41.7% NA NA NA Asiaray Media Group Limited Hong Kong SEHK 22.6 6.5 23.4 14.5 NA 173.1 -28.5 17.6 18.5 NA 17.8 14.0 20.6 21.3 NA VisionChina Media Inc. China NasdaqGS -16.9 -20.9 NA NA NA NM NM NA NA NA -30.2 -30.3 NA NA NA Dahe Media Co. Ltd. China SEHK -0.6 -6.3 NA NA NA 5.4 19.8 NA NA NA 16.9 21.2 NA NA NA SinoMedia Holding Ltd. China SEHK 0.3 -18.5 -0.8 1.9 2.0 3.4 -54.7 12.9 -0.2 -0.3 26.8 16.4 27.6 27.0 26.4
Group Median 0.3% -6.3% 11.3% 8.2% 2.0% 6.9% -10.5% 15.2% 9.1% -0.3% 17.8% 16.4% 24.1% 24.2% 26.4%
Aggregate Mean 9.1% 2.9% 12.6% 12.8% 12.2% 34.4% 12.6% 58.9% 50.6% 37.7% 10.9% 12.1% 16.6% 19.4% 21.9% Aggregate Median 6.9% 6.4% 13.6% 13.8% 13.0% 6.9% 7.6% 26.6% 29.4% 28.1% 16.9% 14.0% 17.3% 21.1% 22.1%
AirMedia Group Inc. (Management Projections)(1) NA NA NA 434.1% 60.9% NA NA NA NM NM NA NA -216.3% -10.5% 12.5%
(1) The Company’s financial performance metrics presented are adjusted to exclude public company costs, non-recurring income (expenses) and business held for sale. LTM = Latest Twelve Months CAGR = Compounded Annual Growth Rate EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization Source: Bloomberg, Capital IQ, SEC filings
CONFIDENTIAL 16
Valuation Analysis
Selected Public Companies Analysis – Valuation Multiples
Selected Public Companies Analysis
($ in millions, except per share data)
COMPANY INFORMATION MARKET DATA ENTERPRISE VALUE AS MULTIPLE OF
Stock Price % of 52- Enterprise LTM 2015 2016 2017 LTM 2015 2016 2017 LTM 2015 2016 2017 Company Name HQ Exchange on 9/25/15 Wk High Value EBITDA EBITDA EBITDA EBITDA EBIT EBIT EBIT EBIT Revenue Revenue Revenue Revenue
Wi-Fi Companies
ViaSat Inc. United States NasdaqGS $64.34 95.2% $4,074 13.8x 14.2x 12.6x 10.9x 43.5x 45.8x 31.8x 21.6x 2.89x 2.83x 2.63x 2.41x Gogo Inc. United States NasdaqGS 14.64 63.2 1,442 NM NM 22.5 11.5 NM NM NM 27.7 3.20 2.93 2.38 1.98 Global Eagle Entertainment Inc. United States NasdaqCM 11.36 72.2 667 NM 13.3 9.5 6.3 NM NM 30.2 11.3 1.64 1.57 1.39 1.23 Boingo Wireless, Inc. United States NasdaqGS 8.40 82.0 332 21.1 16.2 9.2 7.2 NM NM NM NM 2.59 2.37 2.03 1.75
Group Median 17.4x 14.2x 11.0x 9.0x 43.5x 45.8x 31.0x 21.6x 2.74x 2.60x 2.21x 1.86x
China Outdoor Advertising Companies
Clear Media Ltd. Hong Kong SEHK $1.05 80.7% $516 5.3x NA NA NA 10.0x NA NA NA 2.22x NA NA NA Asiaray Media Group Limited Hong Kong SEHK 0.39 39.2 97 4.0 2.2 1.9 NA 4.8 2.5 2.1 NA 0.56 0.46 0.40 NA VisionChina Media Inc. China NasdaqGS 7.92 44.6 96 NM NA NA NA NM NA NA NA 1.07 NA NA NA Dahe Media Co. Ltd. China SEHK 0.07 37.4 94 7.3 NA NA NA 10.4 NA NA NA 1.54 NA NA NA SinoMedia Holding Ltd. China SEHK 0.33 42.7 64 1.7 0.9 0.9 0.9 2.0 1.2 1.3 1.3 0.29 0.25 0.25 0.24
Group Median 4.6x 1.6x 1.4x 0.9x 7.4x 1.9x 1.7x 1.3x 1.07x 0.35x 0.32x 0.24x
Aggregate Mean 8.9x 9.4x 9.4x 7.4x 14.1x 16.5x 16.3x 15.5x 1.78x 1.74x 1.51x 1.52x Aggregate Median 6.3x 13.3x 9.3x 7.2x 10.0x 2.5x 16.1x 16.4x 1.64x 1.97x 1.71x 1.75x
Enterprise Value = (Market Capitalization) + (Debt + Preferred Stock + Non-Controlling Interest) – (Cash & Equivalents) – (Net Non-Operating Assets) EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization EPS = Earnings per share (or ADS) Source: Bloomberg, Capital IQ, SEC filings
CONFIDENTIAL 17
Valuation Analysis
Selected Public Companies Analysis – Implied Multiples Summary
The table below summarizes various valuation multiples for the selected public companies, as well as the valuation multiples for the Company implied by the valuation range determined from the DCF analysis.
Implied Valuation Multiples Summary
(RMB in thousands)
Public Company Public Company Company
Metric Implied Valuation Multiples Range Median Performance
DCF Enterprise Value
?327,200—?545,600
EV / LTM Revenue (1) 0.29x—3.20x 1.64x ?80,467 4.07x—6.78x EV / 2015 Revenue 0.25x—2.93x 1.97x ?121,582 2.69x—4.49x EV / 2016 Revenue 0.25x—2.63x 1.71x ?649,373 0.50x—0.84x EV / 2017 Revenue 0.24x—2.41x 1.75x ?1,044,560 0.31x—0.52x
(1) LTM revenue for the Company reflects annualized year-to-date revenue through June 30, 2015.
CONFIDENTIAL 18
Appendix 01 Assumptions, Qualifications, and Limiting Conditions
Assumptions, Qualifications, and Limiting Conditions
If issued, our Opinion letter will include assumptions, qualifications and limiting conditions similar to the following. This is not meant to be a complete list of the assumptions, qualifications and limiting conditions which will be included in our Opinion letter, if rendered.
Assumptions and Reliance – In performing its analyses with respect to the Proposed Transaction, Duff & Phelps, with the Company’s and the Special Committee’s consent and without further enquiry:
Relied upon the accuracy, completeness, and fair presentation of all information, data, advice, opinions and representations obtained from public sources or provided to it from private sources, including Company management, and did not independently verify such information (or assume any responsibility or liability for independently verifying such information);
Relied upon the fact that the Special Committee, the Board of Directors and the Company have been advised by counsel as to all legal matters with respect to the Proposed Transaction, including whether all procedures required by law to be taken in connection with the Proposed Transaction have been duly, validly and timely taken;
Assumed that any estimates, evaluations, forecasts and projections including, without limitation, the Management Projections, furnished to Duff & Phelps were reasonably prepared and based upon the best currently available information and good faith judgment of the person furnishing the same, and Duff & Phelps expresses no view or opinion with respect to such estimates, evaluations, forecasts or projections or their underlying assumptions;
Assumed that the information relating to the Company and the Proposed Transaction supplied by the Company to Duff & Phelps and the representations made by Company management regarding the Company and the Proposed Transaction in the Management Representation Letter are accurate in all material respects, did not and does not omit to state a material fact in respect of the Company and the Proposed Transaction necessary to make the information not misleading in light of the circumstances under which the information was provided;
Assumed that the representations and warranties made by all parties in the Merger Agreement and in the Management Representation Letter are true and correct and that each party to the Merger Agreement will fully and duly perform all covenants, undertakings and obligations required to be performed by such party;
Assumed that the final versions of all documents reviewed by Duff & Phelps in draft form, including the Merger Agreement, conform in all material respects to the drafts reviewed;
Assumed that there has been no material change in the assets, liabilities, financial condition, results of operations, business, or prospects of the Company since the date of the most recent financial statements and other information made available to Duff & Phelps, and that there is no information or facts withheld from Duff & Phelps which would make the information reviewed by Duff & Phelps incomplete or misleading;
Assumed that all of the conditions required to implement the Proposed Transaction will be satisfied and that the Proposed Transaction will be completed in accordance with the Merger Agreement without any amendments thereto or any waivers of any terms or conditions thereof, and in a manner that complies in all material respects with all applicable laws; and
Assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the Proposed Transaction will be obtained without any undue delay, limitation, restriction or condition that would have a material effect on the Company or the contemplated benefits expected to be derived in the Proposed Transaction.
To the extent that any of the foregoing assumptions or any of the facts on which the Opinion is based prove to be untrue in any material respect, the Opinion cannot and should not be relied upon for any purpose. Furthermore, in Duff & Phelps’ analysis and in connection with the preparation of the Opinion, Duff & Phelps has made numerous assumptions with respect to industry performance, general business, market and economic conditions and other matters, many of which are beyond the control of any party involved in the Proposed Transaction and as to which Duff & Phelps does not express any view or opinion in the Opinion, including as to the reasonableness of such assumptions.
CONFIDENTIAL 20
Assumptions, Qualifications, and Limiting Conditions
Qualifications – If issued, our Opinion will be qualified by the following:
Duff & Phelps has prepared the Opinion effective as of the date thereof. The Opinion is necessarily based upon market, economic, financial and other conditions as they exist and can be evaluated as of the date thereof, and Duff & Phelps disclaims any undertaking or obligation to (i) advise any person of any change in any fact or matter affecting the Opinion which may come or be brought to the attention of Duff & Phelps after the date thereof or (ii) update, revise or reaffirm the Opinion after the date thereof.
Duff & Phelps did not evaluate the Company’s solvency or conduct an independent appraisal or physical inspection of any specific assets or liabilities (contingent or otherwise) of the Company.
Duff & Phelps has not been requested to, and did not, (i) initiate any discussions with, or solicit any indications of interest from, third parties with respect to the Proposed Transaction, the assets, businesses or operations of the Company, or any alternatives to the Proposed Transaction, (ii) negotiate the terms of the Proposed Transaction, and therefore, Duff & Phelps has assumed that such terms are the most beneficial terms, from the Company’s perspective, that could, under the circumstances, reasonably be negotiated among the parties to the Merger Agreement and the Proposed Transaction, or (iii) advise the Special Committee or any other party with respect to alternatives to the Proposed Transaction.
Duff & Phelps is not expressing any opinion as to the market price or value of the Shares or ADSs (or anything else) after the announcement or the consummation of the Proposed Transaction (or any other time). The Opinion should not be construed as a valuation opinion, credit rating, solvency opinion, an analysis of the Company’s credit worthiness, as tax advice, or as accounting advice. Duff & Phelps has not made, and assumes no responsibility to make, any representation or warranty (express or implied), or render any opinion, as to any legal or regulatory or tax or accounting matter. Duff & Phelps expressly disclaims any responsibility or liability in this regard.
In rendering the Opinion, Duff & Phelps is not expressing any opinion with respect to the amount or nature of any compensation payable to or to be received by the Company’s officers, directors, or employees, or any class of such persons, relative to the Merger Consideration, or with respect to the fairness of any such compensation.
CONFIDENTIAL 21
Assumptions, Qualifications, and Limiting Conditions
Limiting Conditions – If issued, the use of our Opinion will be strictly limited and will state:
The Opinion is furnished solely for the use and benefit of the Special Committee in connection with its consideration of the Proposed Transaction and is not intended to, and does not, confer any rights or remedies upon any other person, and is not intended to be used, and may not be used, by any other person or for any other purpose, without Duff & Phelps’ written consent.
The Opinion (i) does not address the merits of the underlying business decision to enter into the Proposed Transaction versus any alternative strategy or transaction; (ii) does not address any transaction related to the Proposed Transaction; (iii) is not a recommendation as to how the Special Committee or any stockholder should vote or act with respect to any matters relating to the Proposed Transaction, or whether to proceed with the Proposed Transaction or any related transaction, and (iv) does not indicate that the Merger Consideration is the best possibly attainable under any circumstances; instead, it merely states whether the Merger Consideration is within a range suggested by certain financial analyses. The decision as to whether to proceed with the Proposed Transaction or any related transaction may depend on an assessment of factors unrelated to the financial analysis on which the Opinion is based.
The Opinion should not be construed as creating any fiduciary duty on the part of Duff & Phelps to any party.
The Opinion is solely that of Duff & Phelps, and Duff & Phelps’ liability in connection with the Opinion shall be limited in accordance with the terms set forth in the engagement letter among Duff & Phelps, DPS, the Company, and the Special Committee dated July 2, 2015 (the “Engagement Letter”).
The Opinion is confidential, and its use and disclosure is strictly limited in accordance with the terms set forth in the Engagement Letter.
CONFIDENTIAL 22
Appendix 02 Selected M&A Transactions Analysis
Selected M&A Transactions Analysis
Selected M&A Transactions Analysis
($ in millions)
Enterprise LTM LTM EBITDA EV / EV / Announced Status Target Name Target Business Description Acquirer Name Value Revenue EBITDA Margin EBITDA Revenue
7/1/2015 Pending Shanghai Shunwei Advertising Co., Ltd. Provides Internet marketing services Shenzhen Sea Star Technology Co., Ltd. $50.4 $33.3 NA NA NA 1.51x
6/9/2015 Closed Domob Network Technology (Beijing) Co., Offers mobile internet advertising services BlueFocus (Shanghai) Investment Management Co., $114.9 $72.4 NA NA NA 1.59x Ltd. Ltd.
6/1/2015 Pending Cinderella Media Group Limited Provides advertising services primarily in China ER2 Holdings Limited; City Apex Limited $77.3 $61.5 $5.8 9.5% 13.2x 1.26x (SEHK:550)
3/10/2015 Effective Post-up Stand Inc. Specializes in retractable banner stands, trade show displays, and TAKKT America Holding, Inc. $30.0 $16.0 NA NA NA 1.88x mobile presentation solutions in the United States and Canada
12/23/2014 Closed Signal AG Offers road marking, signage, and other services INTEGRA Holding AG $40.5 $50.7 NA NA NA 0.80x
8/18/2014 Closed Beijing adSage Technology Co., Ltd. Operates as a digital advertising agency for clients’ marketing Shanghai Oriental Pearl Media Co., Ltd. $79.9 $40.3 NA NA NA 1.98x campaigns globally (SHSE:600637)
8/8/2014 Closed Beijing Jin Yuan Interactive Technology Offers mobile advertising services MIG Technology INC (SZSE:300242) $66.6 $7.0 NA NA NA 9.57x Co., Ltd.
6/4/2014 Closed Shenyang Dakesi Advertising Co., Ltd. Provides advertising services and operates outdoor LED large screen Shanghai New Culture Media Group Co., Ltd. $48.0 $6.3 NA NA NA 7.58x media in Northeast China (SZSE:300336)
5/16/2014 Closed PubliGroupe AG Engages in the sale of advertising space in Switzerland, rest of Europe, Swisscom AG (SWX:SCMN) $508.0 $299.4 $10.9 3.6% 46.6x 1.70x Hong Kong, India, Canada, and the United States
12/16/2013 Closed Time Share Advertising & Communication Offers advertising services using outdoor billboard space Shenzhen Liantronics Co., Ltd. (SZSE:300269) $141.6 $64.4 NA NA NA 2.20x Co., Ltd.
8/12/2012 Closed Focus Media Holding Ltd. Operates liquid crystal display (LCD) network using audiovisual digital The Carlyle Group LP (NasdaqGS:CG); China $3,152.7 $938.4 $304.7 32.5% 10.3x 3.36x displays in China Everbright Ltd. (SEHK:165); CITIC Capital Partners; CDH Investments; Fosun International Limited (SEHK:656); FountainVest Partners
6/26/2012 Closed Adverline S.A. Engages in the provision of Internet advertising services in France Financière Adverline SAS $64.9 $31.5 $3.4 10.9% 18.9x 2.06x
Mean 22.3x 2.96x Median 16.1x 1.93x
Source: Capital IQ, company filings, press releases
CONFIDENTIAL 24
Appendix 03 Summary of Premiums Paid
Summary of Premiums Paid
Premiums Paid Analysis—Going Private Transactions
Transactions announced, closed, or effective from January 2012—September 2015
Premium as a % of
One-Day One-Week One-Month
One-Day Number of Prior to Prior to Prior to Prior as a % of Deals Announcement Announcement Announcement 52-Week High Date Date Date
Overall Mean 378 35.1 36.2 40.6 71.8 Overall Median 23.4 26.4 27.2 79.3
Chinese Companies Mean 80 35.5 36.4 40.9 66.5 Chinese Companies Median 22.3 25.6 28.2 68.5
US-Listed Chinese Companies Mean 71 36.6 37.4 42.0 65.9 US-Listed Chinese Companies Median 22.3 26.3 28.2 68.1
AirMedia Group Inc. 70.5 (17.4) (1.2) 45.7
Premiums Paid Analysis—Advertising Change of Control Transactions
Transactions announced, closed, or effective from January 2012—September 2015
Premium as a % of
One-Day One-Week One-Month
One-Day Number of Prior to Prior to Prior to Prior as a % of Deals Announcement Announcement Announcement 52-Week High Date Date Date
Overall Industry Mean 30 45.0 36.6 63.3 52.7 Overall Industry Median 18.1 30.5 37.7 64.9
Chinese Companies Mean 3 17.6 30.5 41.1 39.8 Chinese Companies Median 17.6 30.5 41.1 39.8
AirMedia Group Inc. 70.5 (17.4) (1.2) 45.7
Note: Excludes negative premiums. Source: Capital IQ
CONFIDENTIAL 26