EX-99 7 nt10016784x3_ex99c10.htm EXHIBIT (C)(10)
Exhibit (c)(10)

 Project Titan | Discussion materials  October 12, 2020     
 
   Illustrative preliminary valuation summary                    $21.36  $30.00  $30.00  $12.60  $12.30  $19.00  $42.90  $29.10  $39.15  $45.00  $50.00  $42.10  $41.60  $37.40  $58.00  $41.40  $0  $10  $20  $30  $40  $60    Unaffected (01/30/20):$24.07  Discount rate: 9.5% – 10.5% TVGR:1.0% – 2.0%    Current $50  7.0x – 12.0x$594mm  Source: Management projections, FactSet as of 10/02/20, Balance sheet date as of 10/31/20; Valuation date of 10/31/201 NAV high since S&P 500 low on 03/23/2020 through the 09/10/20 unaffected date of the $43.00 offer; 2 Median value of analyst price targets as of each respective date; 3 Net debt of $1,833mm as of 10/31/20, preferred stock of $2mm, minority interest of $2mm, investment in affiliates of $30mm as per 2020 Q3 filing; Post tax underfunded pension and OPEB of $1,442mm (assumes tax rate of 21%, pre-tax underfunded pension of $1,468mm and pre-tax underfunded OPEB of $356mm as of 10/31/20); BV of FinCo equity of $347mm; 4 Net debt of $1,833mm as of 10/31/20, preferred stock of $2mm, minority interest of $2mm, investment in affiliates of $30mm as per 2020 Q3 filing; 5 Net debt of $1,833mm as of 10/31/20, preferred stock of $2mm, minority interest of $2mm, investment in affiliates of $30mm as per 2020 Q3 filing; Post-tax mid-point of litigation risk as per Navistar management; Post tax underfunded pension and OPEB of $1,442mm; PV of NOLs of $360mm; BV of FinCo equity of $347mm  (10/02/20):  $44.00        Trading multiples3      Management Case #1    Management Case #2  7.0x – 12.0x$590mm  2021E EBITDAPO 2021E EBITDAPO LTM 2020E EBITDA  10.0x – 15.0x$370mm  Discount rate: 9.5% – 10.5% TVGR:1.0% – 2.0%  DCF5      Management Case #1    Management Case #2  Traton  offer (09/10/20):$43.00  High: 03/01/2019 Low: 08/27/2019    For reference purposes only      52-week close as of 01/30/2020  Analyst price targets as of 01/30/2020  Analyst price targets as of 10/02/2020      High between 3/23/20 –9/10/20:$37.351  Median  $31.502  Median:  $40.002  Equity value per share ($/share), rounded to the nearest $0.10 (except 52-week high/low and analyst price targets)Transaction multiples4For reference only      2 
 
      Revenue CAGR 21E' - 25E' 10.2% 9.7% 9.2% 8.7% 8.2%21E' - 30E' 5.1% 4.6% 4.1% 3.6% 3.1%  Long term manufacturing EBITDA margin  12.0%  $48  $46  $43  $40  $38    11.5%  $46  $43  $40  $38  $35    11.0%  $43  $40  $38  $35  $33    10.5%  $40  $37  $35  $33  $30    10.0%  $37  $35  $32  $30  $28  Illustrative standalone discounted cash flow sensitivity analysis  Source: Management projections    High    Low    Mid-point  Discount rate: 10.50%; TVGR: 1.0%  Discount rate: 10.00%; TVGR: 1.5%  Discount rate: 9.50%; TVGR: 2.0%    Management Case #1     Revenue CAGR 21E' - 25E' 10.2% 9.7% 9.2% 8.7% 8.2%21E' - 30E' 5.1% 4.6% 4.1% 3.6% 3.1%  Long term manufacturing EBITDA margin  12.0%  $56  $53  $50  $47  $44    11.5%  $53  $50  $47  $44  $41    11.0%  $49  $47  $44  $41  $38    10.5%  $46  $43  $41  $38  $35    10.0%  $43  $40  $38  $35  $33     Revenue CAGR 21E' - 25E' 10.2% 9.7% 9.2% 8.7% 8.2%21E' - 30E' 5.1% 4.6% 4.1% 3.6% 3.1%  Long term manufacturing EBITDA margin  12.0%  $65  $62  $58  $55  $52    11.5%  $61  $58  $55  $52  $49    11.0%  $58  $55  $51  $48  $45    10.5%  $54  $51  $48  $45  $42    10.0%  $50  $47  $45  $42  $39     Revenue CAGR   21E' - 25E' 8.7%  8.2%  7.7%  7.2%  6.7%  21E' - 25E' 8.7%  8.2%  7.7%  7.2%  6.7%  21E' - 25E' 8.7%  8.2%  7.7%  7.2%  6.7%  21E' - 30E' 4.8%  4.3%  3.8%  3.3%  2.8%  21E' - 30E' 4.8%  4.3%  3.8%  3.3%  2.8%  21E' - 30E' 4.8%  4.3%  3.8%  3.3%  2.8%  Long term manufacturing EBITDA margin  11.5%  $39  $37  $34  $32  $29    11.0%  $37  $34  $32  $29  $27    10.5%  $34  $31  $29  $27  $25    10.0%  $31  $29  $27  $24  $22    9.5%  $29  $26  $24  $22  $20    High    Low    Mid-point  Discount rate: 10.50%; TVGR: 1.0%  Discount rate: 10.00%; TVGR: 1.5%  Discount rate: 9.50%; TVGR: 2.0%    Management Case #2     Revenue CAGR   Long term manufacturing EBITDA margin  11.5%  $46  $43  $40  $38  $35    11.0%  $43  $40  $37  $35  $32    10.5%  $40  $37  $35  $32  $30    10.0%  $37  $34  $32  $29  $27    9.5%  $34  $31  $29  $26  $24     Revenue CAGR   Long term manufacturing EBITDA margin  11.5%  $54  $51  $48  $45  $42    11.0%  $51  $48  $45  $42  $39    10.5%  $47  $44  $41  $39  $36    10.0%  $44  $41  $38  $35  $33    9.5%  $40  $38  $35  $32  $30      This analysis is illustrative of the impact of hypothetical trading at assumed multiples and should not be interpreted as a stock price prediction or opinion related thereto by J.P. Morgan and PJT Partners; No opinion is expressed to the price at which the common stock of Navistar will trade at any future time  3 
 
   Navistar stock price analysis based on peer and market trading  Company  Current share price  01/30 closing price (date before offer)  % performance since 01/30    $44.83  $24.07  86.2%    $20.56  $25.39  (19.0%)    $8.41  $9.85  (14.6%)    $223.32  $166.10  34.4%    $7.39  $9.27  (20.2%)    $9.24  $10.02  (7.7%)    $89.22  $76.06  17.3%    $20.54  $16.98  21.0%  S&P 500  $3,477.13  $3,283.66  5.9%  S&P 500 Industrials  $682.05  $700.16  (2.6%)                  Implied share price          Company  01/30 closing price (date before offer)  Index  Average performance  Implied current share price    $24.07  All peers  1.6%  $24.451      US peers  25.9%  $30.30      S&P 500  5.9%  $25.49      S&P 500 Industrials  (2.6%)  $23.45        Source: Factset as of 10/09/2020; Note: Traton submitted $35 offer after market close on 01/30 and $43 offer before market open on 9/101 NAV Implied share price excluding Traton is $25.28 per share  4  This analysis is illustrative of the impact of hypothetical trading at assumed multiples and should not be interpreted as a stock price prediction or opinion related thereto by J.P. Morgan and PJT Partners; No opinion is expressed to the price at which the common stock of Navistar will trade at any future time 
 
                       11.8x  11.1x  11.0x(2)  10.0x  8.2x  7.1x  6.7x  5.6x  6.1x3.4x  Illustrative Implied NAV Share Price at Various Multiples  Source: Company Filings, Navistar Management Projections, Wall Street Research, Capital IQ.Note: Share prices calculated based on 2020E net debt of $1,833mm and post tax underfunded pension and OPEB of $1,442mm (assumes tax rate of 21%, pre-tax underfunded pension of $1,468mm and pre-tax underfunded OPEB of $356mm) per management estimates; preferred stock of $2mm, minority interest of $2mm, investment in affiliates of $30mm, and book value of FinCo. $647mm as per 2020 Q3 filing; PV of NOLs of $360mm.Note: Market data as of 10/2/20. Navistar multiples represent unaffected share price as of 9/9/20 and balance sheet as of 7/31/20. Median trading multiple excludes Navistar multiples.Average NAV multiples as of 1/30/20.Adjusted TEV defined as market cap plus net debt, preferred stock, minority interest and tax-affected pension & OPEB less investments in affiliates and book value of FinCo Equity.      Preliminary draft for illustrative purposes only – All projections are WIP    Commercial Vehicle Trading Multiples: 2021E Adj. TEV / EBITDAPO(1)  Adj. TEV / 2021E Manufacturing EBITDAPO  7.0x  7.4x  8.0x  8.5x  9.0x  2021E Manufacturing EBITDAPO  Mgmt. Case #1 ($594mm)  $19.16  $21.54  $25.10  $28.06  $31.01    Mgmt. Case #2 ($590mm)  $18.90  $21.26  $24.80  $27.75  $30.67    Wall St. Consensus ($554mm)  $16.36  $18.57  $21.90  $24.67  $27.43              Implied NAV Share Price Sensitivity  NAV 20Y Avg.(1)      NAV 10Y Avg.(1)          (Consensus)                    Unaffected NAV TEV as of 9/9/20  (3) Based on Navistar Management Case #1 2021E Manufacturing EBITDAPO of $594mm.  5  (Management)  Median 2021E  Adj. TEV / EBITDAPO  (Excl. NAV)  NAV 5Y Avg.(1) 
 
   Illustrative Synergy Value Paid to Navistar at Various Offer Prices  Price @ 9.0x EBITDAPO⁽¹⁾  Cost Synergies⁽²⁾  Cost and Revenue Synergies⁽³⁾  Offer Price $31  $43  $45  $50  $55  Total $ Premium Paid Over Share –  1,218  1,422  1,932  2,443  Premium as a % of NPV of NAV –  45%  52%  71%  90%  Premium as a % of NPV of NAV –  33%  38%  52%  66%      Analysis based on Navistar’s implied share price assuming a 9.0x 2021E Manufacturing EBITDAPO, which represents a ~1.0x discount to PACCAR’s current multiple and a ~1.0x premium to Navistar’s 10 year average multiple    NAV Share Price @ 9.0x EBITDAPO  Source: Company Filings, Navistar Management Projections, Management synergy findings and forecast, third-party reports.Note: Post-tax NPV of synergies figures assume 8.2% discount rate based on TRATON WACC per company filings, and 0% perpetuity growth rate for all synergy categories. Includes phase-in period and cost to achieve synergies per Navistar management projections.Note: Share prices calculated based on 2020E net debt of $1,833mm and post tax underfunded pension and OPEB of $1,442mm (assumes tax rate of 21%, pre-tax underfunded pension of $1,468mm and pre- tax underfunded OPEB of $356mm) per management estimates; preferred stock of $2mm, minority interest of $2mm, and investment in affiliates of $30mm as per 2020 Q3 filing; PV of NOLs of $360mm; FinCo. book value of $347mm per 2020 Q3 filing.9.0x 2021E Manufacturing EBITDAPO represents a ~1.0x discount to PACCAR’s multiple and a ~1.0x premium to Navistar’s 10 year average multiple. Based on 2021E Manufacturing EBITDAPO of$594mm per Management Case #1 Projections.Based on the $2.7bn after-tax NPV of Navistar’s annual run-rate cost synergy estimate of $337mm.Based on the $3.7bn after-tax NPV of Navistar’s annual run-rate cost synergy estimate of $337mm and Navistar’s midpoint run-rate EBITDA impact from revenue synergy estimate of $180mm on midpoint run-rate revenue synergy estimate of $1,071mm.      6 
 
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