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Acquisition of Symbion Health
October 2007
Strictly Private and Confidential
Table of Contents
1. Executive Summary 1
2. Deal Rationale 3
3. Regulatory Concerns 7
4. Valuation of Symbion 9
5. Bid Strategy 12
6. Risks 15
7. Next Steps 17
8. Appendix
I Industry Themes 20
II Overview of Symbion 24
III Valuation 28
IV Sensitivities and Funding 34
V MergeCo Metrics 37
1. Executive Summary
1
Executive Summary
Primary should wait for the ATO’s ruling in relation to Healthscope’s Revised Offer before pursuing Symbion.
Deal Rationale
Symbion remains one of the last major buying opportunities
Potential to gain significant market share
Create a market leading integrated healthcare network
Valuation of Symbion Symbion has an indicative valuation range of $3.60 – $4.50
Regulatory Concerns It is unlikely that Healthscope’s Revised Offer will proceed if the ATO refuses to grant scrip-for-scrip and de-merger relief
Bid Strategy
Wait for ATO ruling
If relief is not granted for Healthscope’s Revised Offer, pursue a Scheme of Arrangement offering $4.20 per share
If relief is granted for Healthscope’s Revised Offer, pursue a bear hug offering $4.50 per share
Risks
ACCC concerns over merged entity’s market share
Divesting Symbion’s pharmacy and consumer businesses
Synergy realisation and integration of businesses
2
2. Deal Rationale
3
Why Symbion Health?
Acquiring Symbion allows Primary to increase its market share, create an integrated healthcare network and extract significant value through synergy realisation.
4
Gain market share
Integrated network
Synergies
Symbion is an attractive target and strategic fit for
Primary
Create one of Australia’s largest integrated provider of healthcare services
Cross-referrals between businesses
Complementary businesses suggest efficient integration
Realisation of c$95m per annum in synergies
Symbion is an industry leader in each of its divisions
Opportunity for Primary to capture influential market share
Timing
Symbion remains one of the last major buying opportunities
Investors are losing confidence in Healthscope
Positive industry outlook
Symbion Summary Financials (A$m) 2007A 2008F 2009F 2010FRevenue 3,779.2 4,164.4 4,489.8 4,753.6EBITDA 253.0 317.4 344.8 366.7EPS (cents) 10.6 19.3 22.4 25.3
EBITDA Margin % 6.7% 7.6% 7.7% 7.7%EV/EBITDA 12.8x 10.2x 9.4x 8.9xP/E 26.1x 22.4x 19.9x 17.6x
Synergies
Cost synergies are estimated at c$95m and are fully realised by MergeCo’s second year of operation.
5
Estimated cost synergies
Source Details Value
Pathology
Consolidate laboratory operations and functions
Consolidate collection centres and redeploy licences
$35m
Medical Centres
Amalgamate a limited number of practices
Purchasing and procurement savings
$30m
Imaging and Technology
Improve resource utilisation
Integrate Primary’s superior IT infrastructure
$18m
Corporate Rationalise corporate functions $12m
Total $95m
Timeline for synergy realisation
MergeCo 2008F EBITDA plus business line synergies(1)
One-off implementation cost of $20m
(1) Excluding implementation costs
0
50
100
150
200
250
300
350
400
Pathology & Medical Centres
Imaging and Technology
Corporate
EB
ITD
A (
A$m
)Synergies
2008F EBITDA
Divestment of Pharmacy and Consumer
The divestment of P&C for c$1.1bn will allow Primary to focus on its core healthcare operations.
6
Buyer Rationale CommentsStrategic
Fit
Fits with current portfolio of assets
Willingness to commit shown by a bid of $1,043m
May buy Symbion’s P&C business if ATO grants scrip-for-scrip and de-merger relief
14 June 2007 offer of $1,085m for P&C
Potential to realise synergies
Potential ACCC competition restrictions
Sigma would have combined pharmaceutical market share of >50%
Leading PE firm with significant holdings in major healthcare companies around the world
FIRB approval required as Symbion owns significant market share
High performing pharmaceutical distributor and health product retail company
Potential for synergies
Potential ACCC competition restrictions
Resulting market share in pharmaceutical sector of >50%
Grocery wholesaler and distributor
Potential interest in distribution of P&C businesses
Will require an investing partner
Potential ACCC concern if JV with any key healthcare player
3. Regulatory Concerns
7
ATO Ruling and ACCC Concerns
It is unlikely that Healthscope’s Revised Offer will proceed if the ATO does not grant CGT relief.
8
ATO ruling on CGT roll-over and de-merger relief MergeCo competition analysis
Roll-over ReliefDe-merger Relief
Issue CGT scrip-for-scrip and de-merger relief is a
precondition to Healthscope’s Revised Offer
Purpose To enable Symbion
shareholders to defer their tax liability
To enable Symbion shareholders to obtain CGT relief in relation to the de-merger
Likely Ruling
Uncertain Uncertain
Effect on Primary
Failure to obtain CGT relief allows Primary to engage Symbion at a lower price
Business Segment
Market Analysis Response
Pathology
Total pathology market share of c40%
Concentration of market share in NSW
Divest some pathology collection centres as required
Medical Centres
Barriers to entry high but MergeCo market share minimal
No competition issues
No action necessary
Health Technology
No competition issues arising from merger
No action necessary
4. Valuation of Symbion
9
Valuation Summary
Symbion has an indicative valuation range of $3.60 - $4.50 per share.
10
(1)
(1) EV in relation to an implied price per share of $4.20(2) Premium to average analyst 12 month price target pre-29 Jan 07
(2)
Enterprise Value 2008F EV/EBITDA
Valuation Measure Price per Share (A$) Low High Low High
Market Valuation
52 Week Trading Range 2,732 3,229 8.8 x 10.4 x
Trading Comps - EV / 2008F EBITDA 3,165 3,481 10.2 x 11.2 x
Transaction Comps - EV / LTM EBITDA 3,255 3,520 10.5 x 11.3 x
Independent Expert's Report
DCF Valuation
Symbion 2,939 3,326 9.5 x 10.7 x
Indicative Bid Valuation
Analyst 12 Month Target + (20% Premium) 2,868 3,326 9.2 x 10.7 x
$4.05
$4.44
$4.50
$3.98
$4.94
$4.20
$3.28
$3.95
$4.09
$3.59
$3.60
$3.49
Analyst 12 Month Price Target $3.49
Minimum Bid Price $4.20
Synergies
MergeCo (Excl. P&C)
The transaction is expected to be EPS accretive from 2010 onwards.
11
(8%)
17%19%
(10.0%)
(5.0%)
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2009F 2010F 2011F
MergeCo EPS Accretion (1)
(1) Assumes offer price of $4.20 and funding structure comprising 40% debt, 30% rights issue and 30% scrip
EPS Accretion MergeCo (Excl. P&C) (cents) 2009F 2010F 2011FSymbion 22.4 25.3 28.6Primary 54.0 68.1 76.2MergeCo (Excl. P&C) 49.8 79.7 90.9Accretion / (Dilution) for Primary (8%) 17% 19%
Capital Structure (Excl. P&C) (A$m) 2008F 2009F 2010F 2011FDebt 1,295.32 1,159.88 969.67 722.12Equity 1,972.52 1,972.52 1,972.52 1,972.52Debt / Equity 65.7% 58.8% 49.2% 36.6%
MergeCo Trading Metrics (Excl. P&C) 2008F 2009F 2010F 2011FEV / EBITDA 8.7x 7.3x 5.9x 5.6xEV / EBIT 16.0x 11.7x 8.6x 8.2xP / E 24.5x 15.3x 9.6x 8.4x
Debt Metrics MergeCo (Excl. P&C) 2008F 2009F 2010F 2011FEBITDA Interest Coverage 4.5x 5.2x 8.0x 12.1xEBIT Interest Coverage 2.4x 3.2x 5.4x 8.2xNet Debt / EBITDA 3.2x 2.3x 1.5x 1.0x
5. Bid Strategy
12
Funding Considerations
A combination of cash and scrip is attractive to all stakeholders.
13
Rights Issue Debt Financing Scrip Offer
Advantages
Decreases dilution in voting rights for Primary shareholders caused by scrip portion
Cheaper than raising equity
Provides for the quick divestment of the P&C divisions
Helps facilitate a friendly transaction
Opportunity for Symbion shareholders to participate in the synergies
Attractive to retail investors
Enables CGT roll-over reliefCertainty of consideration
Disadvantages
Decrease in value of Primary shares
Risk of less than 100% subscription
Adds pressure to MergeCo’s debt capacity
Dilutes voting rights of existing Primary shareholders
Concession of ownership in the merged entity
Uncertainty of exchange ratio due to dependency on the current share price of PrimaryCGT payable
Scrip offerCash consideration
Cash Scrip
Recommended: 30% rights 40% debt 30% scrip
Ownership
77% 23%
Bidding Strategy
14
Response to Heathscope’s Revised Offer
ATO Ruling(1) Recommendation
Wait and See
Use 20% blocking stake to protect Symbion
Relief denied
Relief granted
Contingency
Scheme of Arrangement
Offer $4.20 per share
75% threshold easier to achieve than 90% for hostile bid
Thorough due diligence possible
Bear Hug
Offer $4.50 per share
SYB Board under duty to maximise shareholder value
Via Scheme of Arrangement if possible
Off-market Hostile
Publicise SYB Board’s unwillingness to engage at $4.20
Investors losing confidence in SYB Board
Healthscope most likely to walk away
(1) Whether scrip-for-scrip and de-merger relief is available to Symbion shareholders for the Healthscope Revised Offer
6. Risks
15
Acquisition Risks
There are a number of strategies that can be employed to mitigate acquisition risks.
16
ACCC Concerns
Concerns regarding high concentration of pathology market share
Divest pathology assets as required
ATO Grants Relief
Scrip-for-scrip and de-merger relief available to Symbion in relation to Healthscope’s Revised Offer
Implement bear hug at $4.50 and pursue a Scheme of Arrangement if possible
Symbion may have to pay Healthscope a break fee
Unable to Divest P&C Businesses
No cross-divisional synergies to be derived from P&C businesses
Use of scrip consideration reduces negative impact of additional debt funding
Sell off some pathology assets to pay down debt
Less Synergies Realised
Uncertainty in synergy realisation and business integration may impact negatively on EPS
Offer via Scheme of Arrangement allows thorough due diligence to be conducted
Situation Details Possible strategies Likelihood
7. Next Steps
17
Next Steps
Primary’s response should be framed around the ATO ruling.
18
Full integration of Symbion and realisation of synergies
If ATO refuses to grant relief for the Healthscope Revised Offer, pursue a Scheme of Arrangement at $4.20
If ATO grants relief for Healthscope’s Revised Offer, pursue an off-market hostile bid at $4.50
Symbion can be protected by Primary’s 20% stake
8. Appendix
19
Appendix I – Industry Themes
20
Industry Themes
A burgeoning healthcare industry has resulted in a strong trend towards consolidation in recent years.
Sector consolidation over the last 5 years
21
Pharmaceuticals
Retail Pharmacy
Pathology
Diagnostic Imaging
Medical Centres
Symbion API Sigma Arrow
Symbion API Sigma
Healthscope Gribbles Primary
Symbion Sonic MIA CVC (PE)
Symbion Sonic MIA DCA
Symbion Sonic Endeavour IPN Primary
Endeavour
Drivers of future growth
Consumer Demand
Greater public awareness of illness and the importance of a healthy lifestyle
Population Growth
Increasing pool of customers
Private Health Insurance
Memberships increasing Improves margins as most insurers bear
the costs of patients
Government Funding
Recognition of aging population PBS and Medicare schemes
Ageing Demographics
Increasing life expectancy ensures demand for health services
Scientific Progress
Advancements in providing treatment alternatives
Key Players(1)
Salient Features
Major customer bases are referring doctors and hospitals
Medicare rebates accounted for c93% of total industry revenue
Existing Medicare Agreement caps funding growth at 5%pa but estimated to increase
Top 3 private operators control c67% of market share
Significant growth potential due to aging population
Funding structure similar to pathology
Primary source of referrals
Private GPs comprise c70% of market with large, integrated healthcare providers comprising 30%
Projected 5-year CAGR of 2.7%
Government incentives to promote the consolidation of independent practices
Key Segments
Pathology, diagnostic imaging and medical centres are key growth segments in Australian healthcare.
22
Pathology Diagnostic Imaging Medical Centres
Sonic38%
Symbion35%
Healthscope10%
St John of God5%
Primary 5%
Other7%
DCA 35%
Sonic16%
Symbion16%
Other33%
IPN2%
Symbion2% Primary
3%
Other93%
(1) Based on revenues
Interloper Analysis
23
InterlopersMarket
Capitalisation (A$m)*
Enterprise Value (A$m)*
Rationale
1,293 1,847 May submit a revised offer in response to Primary
5.586 6,745
Operates in the imaging, pathology and medical centres space
Opportunity to derive synergies for its pathology and medical imaging business groups
N/A N/A
Leading PE firm with significant holdings in major healthcare companies around the world
Consortium of bidders to buy key divisions such as P&C
*Data as at 25 October 2007
Appendix II – Overview of Symbion
24
Symbion Share Price ChartSymbion’s share price has steadily risen since the beginning of 2007 due in part to speculation of a takeover.
25
3.00
3.20
3.40
3.60
3.80
4.00
4.20
4.40
4.60
Oct-06 Jan-07 Apr-07 Jul-07 Oct-07
Sha
re P
rice
(A$)
Adjusted Symbion Share Price 1 month VWAP 3 month VWAP 6 month VWAP
$4.12$4.15$4.18
$4.05
20%
20%60%
Estimated OwnershipRetail Primary Institutions
Share Register Overview
Holder Number of Shares
(m) % Ownership Comments
129.4 20.0% Strategic stake acquired in 2007
56.3 8.6% Long-term investor in Symbion
39.3 6.1% Became a substantial shareholder in August 2007
37.3 5.8% Became a substantial shareholder in September 2007
32.9 5.1% Became a substantial shareholder in August 2007
Substantial shareholders
26
Symbion Personnel
27
Mr Paul McClintock Chairman
Age: 58
Appointed Chairman in June 2005
Over 20 years experience in Investment Banking
Mr Robert CookeManaging Director & CEO
Age: 58
Appointed in November 2005
Over 26 years experience in senior management positions
Dr Ian BlackburneChair of Board’s Remuneration Committee
Age: 56
Appointed in September 2004
Formerly Managing Director of Caltex Australia
Appointed to the Boards of CSR, Suncorp Metaway and Teekay Corporation
Mr Jim HallChair of the Board’s Audit Committee
Age: 56
Joined the Board in June 2005
Has held senior financial management positions at BHP Billiton and Orica Limited
Dr Christine BennettDirector
Age: 51
Joined the Board in February 2007
Formerly CEO of Westmead Hospital, Partner of Health and Sciences, and has held senior positions in the NSW Department of Health
Appendix III – Valuation
28
Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14Cash FlowsEBIT 140.9 170.4 235.2 258.6 278.3 301.2 358.5 379.8 399.5Tax on EBIT (42.3) (51.1) (70.5) (77.6) (83.5) (90.4) (107.5) (113.9) (119.9)NOPAT 98.6 119.3 164.6 181.0 194.8 210.9 250.9 265.8 279.7Depn & Amort 82.1 82.6 82.3 86.3 88.4 90.5 84.4 85.2 60.6Capex (61.4) (47.7) (43.0) (46.2) (49.3) (52.4) (55.3) (58.0) (60.6)Change in Working Capital 0.0 (22.3) (25.4) (19.3) (15.6) (15.3) (14.4) (12.1) (10.0)Free Cash Flow to Firm 119.3 131.9 178.6 201.8 218.2 233.7 265.7 281.0 269.7Terminal Value 3,994.8Total Cash Flow 119.3 131.9 178.6 201.8 218.2 233.7 265.7 281.0 4,264.5
Discount Factor From Mid-year N/A 0.9830 0.8939 0.8130 0.7394 0.6724 0.6114 0.5561 0.5057Discounted Cash Flow N/A 129.6 159.6 164.0 161.3 157.1 162.4 156.2 2,156.6
Output Terminal ValueValuation Date 25 Oct 07 Terminal Growth 3.00%PV of Annual Cash Flows 960.8 30.8%PV of Terminal Value 2,156.6 69.2%NPV 3,117.4Net Debt 611.2Equity Value 2,506.1Number of Shares 645.5Implied Share Price 3.88Average Analyst Price Target Pre-29 Jan 07 3.49Premium to Analyst Price Target 11.2%
DCF Valuation
29
$3.88 2.50% 2.75% 3.00% 3.25% 3.50%9.45% $4.00 $4.13 $4.27 $4.42 $4.589.70% $3.82 $3.94 $4.07 $4.20 $4.359.95% $3.65 $3.76 $3.88 $4.00 $4.14
10.20% $3.50 $3.60 $3.70 $3.82 $3.9410.45% $3.35 $3.44 $3.54 $3.65 $3.76
Terminal Growth
WA
CC
Valuation Assumptions
Legislative
Medicare rebates capped at 5% growth affecting pathology and medical imaging
Rebates set to expire in FY09, but assumed to remain in place
Operating
Revenue Pathology – 11%
growth FY08 Diagnostic imaging –
5% growth FY08 Consumer – 10%
growth FY08 Pharmacy – 10%
growth FY08
Longer-term growth for radiology tied to Medicare rebate scheme
Longer-term growth for P&C tied to CPI
EBITDA Margin Slightly better than
FY07 numbers due to cost savings and higher operating leverage
Capex and D&A Maintenance capex D&A forecast as a
percentage of capex merging into 100% of capex in perpetuity
Financing 7.5% cost of debt
30
WACC calculation
DCF assumptionsRisk-free Rate 6.50%Market Risk Premium 6.00%Equity Beta 0.85Cost of Equity 11.6%
Cost of Debt 7.50%Margin -Tax Rate 30%Pre-tax Cost of Debt 7.50%Post-tax Cost of Debt 5.25%
Target Gearing (D/E) 35.0%E/V 74.1%D/V 25.9%
Post-tax WACC 9.95%
DCF assumptions
Trading Comparables
Valuation
List of comparables Graph
31
Trading Comparables EV / 2008F EBITDA
Healthscope 9.2x
Primary 9.9x
API 10.6x
Symbion 10.7x
Sonic Healthcare 10.7x
Sigma 11.8x
Median 10.7x
9.2x 9.9x 10.6x 10.7x 10.7x11.8x
Median 10.7x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
Healthscope Primary API Symbion Sonic Healthcare
Sigma
EV
/ 20
08F
EB
ITD
A
2008F Median multiple Value
Earnings Low High Low High
311 10.2x 11.2x Enterprise Value 3,168 3,479
Plus Associates 0 0
Less Net Debt & Minorities (615) (615)
Implied Equity Value 2553 2864
Shares Outstanding 645.5 645.5
Implied Value per Share $3.95 $4.44
Average Analyst Price Target Pre-29 Jan 07 $3.49 $3.49
Premium to Average Analyst Price Target 13% 27%
Transaction Comparables
Sum of the parts List of transactions
32
Valuation of pharmacy and consumer businesses
Pathology & Medical Centres
Target Company Date Acquiror Enterprise Value EV / LTM EBITDA
QML Jun-02 Mayne Group 268 9.9x
LabOne Aug-05 Quest 934 13.8x
Dynacare May-02 Lab Corp of America 672 14.0x
IPN Jun-04 Sonic Healthcare 105 15.3x
Median 13.9x
Imaging
Target Company Date Acquiror Enterprise Value EV / LTM EBITDA
MIA Jun-04 DCA 934 9.6x
Qld Diagnostic Imaging Feb-02 Mayne Group 87 10.1x
Unilabs SA Aug-07 Capio AB 681 13.9x
Median 10.1x
Pharmacy
Target Company Date Acquiror Enterprise Value EV / LTM EBITDA
Chronimed Aug-04 Mayne Group 115 9.4x
CCS Medical Oct-05 Sonic 630 10.5x
Accredo Feb-05 Medco Health Solutions 2,499 16.1x
Priority healthcare Jul-05 Quest 1,341 16.7x
Median 13.3x
Consumer
Target Company Date Acquiror Enterprise Value EV / LTM EBITDA
Roche Consumer Health Jul-04 Bayer 2,962 12.5x
Rexall Sundown May-00 Royal Numico 1,649 14.4x
Median 13.5x
Earnings
30-Jun-07 LTM Low High Low High
Divisional EBITDA
Pathology 115 13.4x 14.4x 1,541 1,656
Diagnostic Imaging 55 9.6x 10.6x 528 583
Consumer 39 13.4x 14.4x 523 562
Pharmacy 52 12.8x 13.8x 666 718
261
Enterprise Value 3,257 3,518
Plus Associates 0 0
Less Net Debt & Minorities (615) (615)
Implied Equity Value 2,642 2,903
Shares Outstanding 646 646
Implied Value per Share $4.09 $4.50
Average analyst price target pre 29 Jan 07 $3.49 $3.49
Premium Over Current 17.3% 28.9%
Implied EV / LTM EBITDA 12.5x 13.5x
Median multiple applied to LTM Value
Earnings
30-Jun-07 LTM Low High Low High Mean
Divisional EBITDA
Consumer 39 13.4x 14.4x 523 562 542
Pharmacy 52 12.8x 13.8x 666 718 692
91
Enterprise Value 1,188 1,279 1,234
Implied EV / LTM EBITDA 13.1x 14.1x 13.6x
Median multiple applied to LTM Value
9.6x 10.1x
13.9x
Median 10.1x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
MIA QLD Diagnostic Imaging
Unilabs SA
EV
/ LT
M E
BTI
DA
9.9x
13.8x 14.0x15.3x
Median 13.9x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
QML LabOne Dynacare IPN
EV
/ LT
M E
BIT
DA
Transaction Comparables (Cont.)
Pathology and medical centres Diagnostic imaging
Pharmacy Consumer
33
9.4x 10.5x16.1x 16.7x
Median 13.3x
0.0x
4.0x
8.0x
12.0x
16.0x
20.0x
EV
/ LT
M E
BIT
DA
12.5x14.4x
Median 13.5x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
Roche Consumer Health Rexall Sundown
EV
/ LT
M E
BIT
DA
Appendix IV – Sensitivities and Funding
34
Deal Summary and Sources and Uses of Funds
35
Sources and uses of fundsDeal summary
Deal SummaryPRY share price $11.98SYB share price $4.05Offer premium 3.6%Offer price $4.20Equity purchase price 2,166.7Acquisition EV 2,941.6
% cash financing 54.7%% debt financing 22.6%% stock financing 22.6%
Exchange ratio 0.12x
Value of scrip component per share $1.26Cash per share $2.94Total offer consideration $4.20
SourcesDebt 1,571.7Rights issue 650.0Equity (scrip) 650.0
2,871.7
UsesAcquisition price 2,166.7Carry on debt 623.6Transaction costs 81.4
2,871.7
Market CapitalisationsPRY 1,517.9Symbion (100%) 2,614.3Symbion at acquisition price (100%) 2,166.7
Share InformationNew shares issued to Symbion shareholders 59.7PRY shares outstanding pre-deal 126.7Primary's existing ownership of Symbion 20.0%Symbion shares being purchased 516.4Exchange ratio - new for old 0.12xRights issue shares issued 72.3PRY shares outstanding post-deal 258.7
% of MergeCo owned by PRY 76.9%% of MergeCo owned by SYB 23.1%
Sensitivities
36
Revenue and EBITDA sensitivity for pathology
Synergies sensitivities
Change in Synergies (A$m) -10.00 0.00 10.00EPS Accretion 2009F -13% -8% -3%EPS Accretion 2010F 13% 17% 21%EPS Accretion 2011F 15% 19% 23%
Change in Revenue-2.0% -1.0% 0.0% 1.0% 2.0%
-2.0% $3.39 $3.49 $3.61 $3.73 $3.85Change in EBITDA -1.0% $3.51 $3.62 $3.74 $3.87 $4.00
0.0% $3.62 $3.75 $3.88 $4.01 $4.151.0% $3.74 $3.87 $4.01 $4.15 $4.302.0% $3.86 $4.00 $4.14 $4.29 $4.45
DCF SensitivityFull Synergies (A$m) 75 85 95 105 115DCF with Synergies $4.32 $4.44 $4.57 $4.69 $4.81
DCF with synergies sensitivity
4.57 2.50% 2.75% 3.00% 3.25% 3.50%9.45% $4.71 $4.86 $5.02 $5.19 $5.389.70% $4.50 $4.64 $4.79 $4.94 $5.129.95% $4.31 $4.44 $4.57 $4.72 $4.87
10.20% $4.13 $4.25 $4.37 $4.50 $4.6510.45% $3.96 $4.07 $4.18 $4.31 $4.44
Terminal Growth
WA
CC
Appendix V – MergeCo Metrics
37
Unable to Divest P&C
38
(13%)
10%
12%
(15.0%)
(10.0%)
(5.0%)
0.0%
5.0%
10.0%
15.0%
2009F 2010F 2011F
MergeCo EPS Accretion (w/P&C)
Capital Structure MergeCo (A$m) 2008F 2009F 2010F 2011FDebt 2,295.32 2,288.42 2,229.00 2,159.09Equity 1,972.52 1,972.52 1,972.52 1,972.52Debt/Equity 116.4% 116.0% 113.0% 109.5%
EPS Accretion MergeCo (cents) 2009F 2010F 2011FSymbion 22.4 25.3 28.6Primary 54.0 68.1 76.2MergeCo 46.9 74.8 85.4Accretion / (Dilution) for Primary -13% 10% 12%
Debt Metrics MergeCo 2008F 2009F 2010F 2011FEBITDA Interest Cover 1.9x 2.3x 2.8x 3.1xEBIT Interest Cover 1.4x 1.9x 2.4x 2.7xNet Debt / EBITDA 6.1x 4.9x 3.9x 3.5x
MergeCo Trading Metrics 2009F 2010F 2011FEV / EBITDA 9.6x 7.7x 7.3xEV / EBIT 11.5x 9.0x 8.4xP / E 22.3x 14.0x 12.3x
(8%)
17%19%
(10.0%)
(5.0%)
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2009F 2010F 2011F
MergeCo EPS Accretion
EPS Analysis
39
Scheme of Arrangement (offer of $4.20) Bear hug (offer of $4.50)
Change in funding at $4.20 offer
(14%)
11%13%
(20.0%)
(15.0%)
(10.0%)
(5.0%)
0.0%
5.0%
10.0%
15.0%
2009F 2010F 2011F
MergeCo EPS Accretion
(16%)
17%
22%
(20.0%)
(15.0%)
(10.0%)
(5.0%)
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2009F 2010F 2011F
MergeCo EPS AccretionAll Cash Offer
60% Debt
40% Rights
ProposedFunding Mix
40% Debt
30% Rights
30% Scrip
ProposedFunding Mix
40% Debt
30% Rights
30% Scrip
Debt Metrics MergeCo (Excl. P&C) 2008F 2009F 2010F 2011FEBITDA Interest Cover 3.2x 3.6x 5.0x 6.4xEBIT Interest Cover 1.7x 2.2x 3.4x 4.4xNet Debt / EBITDA 4.4x 3.4x 2.4x 1.9x
Debt Metrics MergeCo 2008F 2009F 2010F 2011FEBITDA Interest Cover 3.2x 3.6x 5.0x 6.4xEBITDA Interest Cover 1.6x 1.9x 2.4x 2.6xEBIT Interest Cover 1.2x 1.6x 2.0x 2.2xNet Debt / EBITDA 7.3x 6.0x 4.7x 4.4x
Summary Metrics
40
Trading metrics Credit metrics
2007A 2008F 2009F 2010F 2011FPrimary
EV / EBITDA 14.7x 12.3x 10.7x 9.3x 8.9xEV / EBIT 20.8x 16.5x 12.1x 10.6x 10.0xP / E 31.5x 23.6x 22.2x 17.6x 15.7x
SymbionEV / EBITDA 12.8x 10.2x 9.4x 8.8x 8.2xEV / EBIT 13.7x 12.5x 11.6x 10.7x 9.9xP / E 26.0x 22.3x 19.8x 17.5x 15.5x
MergeCoEV / EBITDA 9.6x 7.7x 7.3xEV / EBIT 11.5x 9.0x 8.4xP / E 22.3x 14.0x 12.3x
MergeCo (Excl. P&C)EV / EBITDA 7.3x 5.9x 5.6xEV / EBIT 11.7x 8.6x 8.2xP / E 15.3x 9.6x 8.4x
2007A 2008F 2009F 2010F 2011FPrimary
EBITDA Interest Cover 9.4x 3.6x 2.7x 3.3x 3.7xEBIT Interest Cover 6.7x 2.7x 2.4x 2.9x 3.2xNet Debt / EBITDA 1.8x 4.7x 3.9x 3.2x 2.8x
SymbionEBITDA Interest Cover 3.8x 5.6x 6.7x 8.2x 10.6xEBIT Interest Cover 2.5x 4.1x 5.0x 6.2x 8.1xNet Debt / EBITDA 2.4x 1.7x 1.3x 1.0x 0.7x
MergeCoEBITDA Interest Cover 1.9x 2.3x 2.8x 3.1xEBIT Interest Cover 1.4x 1.9x 2.4x 2.7xNet Debt / EBITDA 6.1x 4.9x 3.9x 3.5x
MergeCo (Excl. P&C)EBITDA Interest Cover 4.5x 5.2x 8.0x 12.1xEBIT Interest Cover 2.4x 3.2x 5.4x 8.2xNet Debt / EBITDA 3.2x 2.3x 1.5x 1.0x
Summary Metrics (Cont.) and Acquisition EV
41
Operating metrics
(A$m) 2007A 2008F 2009F 2010F 2011FPrimary
EBITDA 114.3 137.2 157.4 180.3 189.5EBIT 80.8 102.1 138.8 159.0 167.6NPAT 48.2 64.2 68.4 86.2 96.6
SymbionEBITDA 253.0 317.4 344.8 366.7 391.8EBIT 235.2 258.6 278.3 301.2 327.4NPAT 124.3 144.6 163.2 184.6 208.7
MergeCoEBITDA 355.7 430.4 537.1 568.2EBIT 274.1 359.9 460.6 494.9NPAT 53.5 121.4 193.5 221.0
MergeCo (Excl. P&C)EBITDA 359.4 429.2 532.4 560.5EBIT 195.0 266.7 361.4 382.3NPAT 80.4 128.9 206.2 235.1
Acquisition EV calculation
Acquisition EV CalculationShare Price ($) $4.05Prima Facie Premium (%) 3.6%Acquisition price ($) $4.20Shares outstanding (m) 645.5Primary's Existing Stake (20%) (129.1)Non-Primary Shares Outstanding (m) 516.4Equity Acquisition Price ($) 2,166.7
Interest-bearing Liabilities (m) 691.2Cash (m) 80.0Net Debt (m) 611.2Minority Interest (m) 3.7
Enterprise Value (m) 2,781.6EV / EBITDA Multiple (Excl 20%) 11.0x
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