EX-99.(C)(II) 2 d930745dex99cii.htm EX-99.(C)(II) EX-99.(c)(ii)
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Exhibit (c)(ii)

STRICTLY PRIVATE AND CONFIDENTIAL

 

 

PROJECT ATHENA

Presentation to the Board of Directors

May 17, 2015

 

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PROJECT ATHENA

 

 

This presentation was prepared exclusively for the benefit and internal use of the J.P. Morgan client to whom it is directly addressed and delivered (including such client’s subsidiaries, the “Company”) in order to assist the Company in evaluating, on a preliminary basis, the feasibility of a possible transaction or transactions and does not carry any right of publication or disclosure, in whole or in part, to any other party. This presentation is for discussion purposes only and is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by J.P. Morgan. Neither this presentation nor any of its contents may be disclosed or used for any other purpose without the prior written consent of J.P. Morgan.

The information in this presentation is based upon any management forecasts supplied to us and reflects prevailing conditions and our views as of this date, all of which are accordingly subject to change. J.P. Morgan’s opinions and estimates constitute J.P. Morgan’s judgment and should be regarded as indicative, preliminary and for illustrative purposes only. In preparing this presentation, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was provided to us by or on behalf of the Company or which was otherwise reviewed by us. In addition, our analyses are not and do not purport to be appraisals of the assets, stock, or business of the Company or any other entity. J.P. Morgan makes no representations as to the actual value which may be received in connection with a transaction nor the legal, tax or accounting effects of consummating a transaction. Unless expressly contemplated hereby, the information in this presentation does not take into account the effects of a possible transaction or transactions involving an actual or potential change of control, which may have significant valuation and other effects.

Notwithstanding anything herein to the contrary, the Company and each of its employees, representatives or other agents may disclose to any and all persons, without limitation of any kind, the U.S. federal and state income tax treatment and the U.S. federal and state income tax structure of the transactions contemplated hereby and all materials of any kind (including opinions or other tax analyses) that are provided to the Company relating to such tax treatment and tax structure insofar as such treatment and/or structure relates to a U.S. federal or state income tax strategy provided to the Company by J.P. Morgan.

J.P. Morgan’s policies prohibit employees from offering, directly or indirectly, a favorable research rating or specific price target, or offering to change a rating or price target, to a subject company as consideration or inducement for the receipt of business or for compensation. J.P. Morgan also prohibits its research analysts from being compensated for involvement in investment banking transactions except to the extent that such participation is intended to benefit investors.

IRS Circular 230 Disclosure: JPMorgan Chase & Co. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters included herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone not affiliated with JPMorgan Chase & Co. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.

J.P. Morgan is the marketing name for the Corporate and Investment Banking activities of JPMorgan Chase Bank, N.A., JPMS (member, NYSE), J.P. Morgan PLC authorized by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority) and their investment banking affiliates.

 

PROJECT ATHENA

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Table of Contents

PROJECT ATHENA

 

 

Agenda

 

     Page  

Transaction overview

     1   

Valuation analysis

     6   

 

PROJECT ATHENA

  1  

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TRANSACTION OVERVIEW

 

 

Situation overview

 

    J.P. Morgan has been engaged by GrafTech International (the “Company”) to act as exclusive financial advisor on its potential sale to Brookfield Asset Management (“Brookfield”) for a cash consideration at a firm value of ~$1.2bn

 

    GrafTech is a publicly traded (NYSE: GTI), leading supplier of graphite solutions for a variety of end markets

 

    Brookfield is a Canadian asset management company that manages ~$200bn AUM across real estate, infrastructure, renewable power and private equity

 

    On March 19, 2015, the Company informed J.P. Morgan that it had received an approach from Brookfield

 

    The proposal, dated March 18, 2015, outlined that Brookfield was prepared to acquire all of the Company’s outstanding common stock at a price of $5.00 - $5.25 per share

 

    It also stated that Brookfield would offer the existing Company shareholders the opportunity to continue to hold their shares

 

    The Company allowed Brookfield to enter into a period of due diligence with the intention of receiving a revised offer

 

    On April 14th, Brookfield proposed the purchase of $150mm of 7.0% convertible preferred shares and a tender offer for up to 100% of the Company’s common stock at a price of $5.00 per share, subject to a minimum of 35% of the Company’s common stock on a fully diluted basis (including the preferred shares)

 

    The Company, its representatives and Brookfield negotiated the terms of the transaction over the following 2 weeks

 

    On April 29, 2015, after market close, the Company publicly announced that it had agreed to a letter of intent (“LOI”) with Brookfield for both the $150mm convertible preferred investment and tender offer at $5.05 per share, a premium of 16.6% based on the Company’s closing stock price as of April 29, 2015 and subject to a minimum of 30% of the Company’s common stock on a fully diluted basis (including the preferred shares)

 

    The signing of a definitive agreement for the convertible preferred investment was announced to the market on May 4th and is expected to close after receipt of regulatory approval, including CFIUS

 

    At the same time of the announcement of the LOI, the Company announced its 1Q 2015 results, lowered its 1H 2015 EBITDA guidance and announced the resignation of the Company CFO

 

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TRANSACTION OVERVIEW

 

 

Company announcements on April 29, 2015

 

Q1 earnings

•  Net sales of $207mm, decrease of 26% from Q1 2014

 

•  Adjusted EBITDA of $17mm, compared to $33mm in Q1 2014

 

•  Adjusted net loss of ($0.10)/sh, compared to $0.01/sh same in Q1 2014

Equity analyst estimates vs. actual ($mm, except EPS)

 

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Guidance

•  1H 2015 EBITDA target of $30mm – $40mm

 

•  Previous guidance: $45mm – $55mm

 

•  1H 2015 operating cash flow target of c.$30mm –$40mm

 

•  Previous guidance: $40mm –$50mm

Equity analyst EBITDA estimates ($mm)

 

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CFO Resignation

•  Announced Erick R. Asmussen’s decision to accept a Chief Financial Officer role at another company

 

•  Appointment of Quinn Coburn as interim Chief Financial Officer

Brookfield LOI

•  Announced Letters of Intent with Brookfield Asset Management for Preferred Equity investment and tender offer

 

•  Postponed the Company’s 2015 Annual Meeting to a later date in order to give stockholders adequate opportunity to consider their options presented by the tender offer

Source: Company press release, FactSet

 

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TRANSACTION OVERVIEW

 

 

Transaction snapshot

Key transaction metrics

 

     Pre-LOI and earnings ann1,6                 Brookfield offer          Current  
$mm, except per share amounts                       $4.33                  $5.05          $4.95  

Implied premium to current

   $ 4.95        (12.5 )%            2.0        0.0

Implied premium to LOI date (as of 04/29/15)

   $ 4.33 1      0.0           16.6        14.3

Implied premium to 30-day average (as of 04/29/15)1

   $ 4.09        5.9           23.5        21.0

Implied premium to 60-day average (as of 04/29/15)1

   $ 4.03        7.5           25.4        22.9

Implied premium to 52-week high

   $ 10.77        (59.8 )%            (53.1 )%         (54.0 )% 

Implied premium to 52-week low

   $ 3.58        20.9           41.1        38.3

Fully diluted shares outstanding (mm)

       138.6              168.9 2         138.9   

Equity value

     $ 600            $ 853         $ 688   

Plus: debt

       530              536 3         678 2 

Less: cash

       18              161 2         161 2 

Less: Expected cash proceeds from discontinued division4

       49              49           49   

Firm value

     $ 1,064            $ 1,180         $ 1,156   

Multiples – Management

   Metric                Metric                    

Q1 2015A LTM EBITDA

   $ 106        10.0x         $ 106         11.1x           10.9x   

FV/2015E EBITDA

     83        12.8x         $ 83         14.2x           13.9x   

FV/2016E EBITDA

     96        11.0x         $ 96         12.2x           12.0x   

Multiples – Street5

                                         

FV/2015E EBITDA

   $ 121        9.2x         $ 72         17.1x           16.8x   

FV/2016E EBITDA

     161        6.9x           110         11.2x           11.0x   

Source: Management, company filings, FactSet as of 05/15/15

1  LOI announced after market on 04/29/15
2  Pro forma for the $150mm convertible preferred with a conversion price of $5.00 (assume full conversion if stock price in excess of $5.00)
3  Includes $9mm of make whole on senior subordinated notes
4  AGM division expected to be discontinued; Value represents management’s estimation of impairment value
5  $49mm expected cash proceeds from discontinued division excluded from the calculation of firm value for the purposes of the street multiples
6  Shares outstanding, debt, and cash figures based on FY2014A and street estimates based on pre-LOI and earnings announcement

 

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TRANSACTION OVERVIEW

 

 

Overview of Brookfield Asset Management

 

Business overview

 

    Global company with ~$200bn AUM across real estate, infrastructure, renewable power and private equity

 

    Over $50bn invested over 20 years

 

    Publicly listed with over $50bn of permanent capital

 

    100 locations with ~700 investment professionals and ~28,000 operating employees

 

    Private equity arm has more than 100 investments and $10bn plus of capital deployed

 

    Specializes in recapitalization and asset investments

 

    Invests in real estate, financial, manufacturing, forest products, energy and power generation sectors

 

    Direct experience in steel and other industrial sectors

 

    Long track record of sponsoring management teams in the execution of turnaround plans

 

    Headquartered in Toronto, Canada

Investment strategy

 

    Invest in high quality businesses in niche markets with leading industry positions

 

    Private Equity & Finance Group targets investments of $100mm to >$1bn

 

    Common investment characteristics include business having:

 

    Low cost producers

 

    Benefitting from high barriers to entry

 

    Tangible underlying assets

 

    Out of favor sectors

 

    Post-acquisition, Brookfield deploys an active management approach focused on strategic, operational and/or financial improvements

 

    Brookfield generated a ~20% compound return for shareholders over the last 20 years

Precedent investments in steel and industrial sector

 

LOGO   

Invested in 2007, Manufacturer of kraft paper and containerboard

EBITDA improved from $41mm to a run-rate of ~$200mm

LOGO   

Invested in 2004, Manufacturer of flat rolled steel

Simplified excessively complex steel flow; improved product mix; increased production to record levels

LOGO   

Invested in 2006, Manufacturer of oriented strand board

Focused on operating fewer mills at higher capacity utilization; improved product mix

LOGO   

Invested in 2011, Natural gas producer in W. Canada

Completed 5 follow-on acquisitions over 4 years, increasing production base by 15x, generating significant cost savings & synergies

LOGO   

Invested in 2004, Manufacturer of non-woven airlaid materials

Rationalized unprofitable products and focused on high margin specialty products and customer relationships

Fund overview

 

Real Estate   Renew. Power   Infrastructure   Private Equity
LOGO   LOGO   LOGO   LOGO

$126bn AUM

 

>350mm sq. ft. of office, retail industrial and opportunistic investments

 

$22bn AUM

 

~200 hydro facilities 28 wind farms ~6,700 MW

 

$32bn AUM

 

Ports, rails, toll roads, natural gas pipelines, etc.

 

$21bn AUM

 

Investments across real asset industry verticals

 

 

Source: Company website, Capital IQ, Public filings, Brookfield presentation dated 03/19/15

 

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PROJECT ATHENA

 

 

Agenda

 

     Page  

Transaction overview

     1   

Valuation analysis

     6   

 

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VALUATION ANALYSIS

 

 

GrafTech summary financials

Management forecast ($mm)1

 

        

GrafTech forecasts and management guidance

 
         2014A     2015E     2016E     2017E     2018E     2019E     2020E     2021E     2022E     2023E     2024E  

1  

 

Revenue

   $ 1,085      $ 779      $ 806      $ 908      $ 1,032      $ 1,219        1,306      $ 1,348      $ 1,397      $ 1,458      $ 1,394   
 

% growth

     (7.0 %)      (28.3 %)      3.5     12.6     13.8     18.0     7.1     3.2     3.6     4.4     (4.4 %) 

2

 

EBITDA2

     121        83        96        166        208        289        304        315        328        354        314   
 

% margin

     11.2     10.7     12.0     18.3     20.1     23.7     23.3     23.4     23.5     24.3     22.5

3

 

D&A

     91        74        69        68        68        69        77        77        80        82        77   
 

% capex

     100.7     145.2     121.8     114.6     80.5     82.7     113.0     65.4     79.0     110.9     90.0

4

 

Capex

     90        51        56        59        85        84        69        118        101        74        86   
 

% sales

     8.3     6.6     7.0     6.5     8.2     6.9     5.2     8.8     7.3     5.0     6.1

 

1 Revenue as per business plan
    After 2019: business plans for Needle Coke, Graphite Electrodes, and Eliminations; Refactory grows at 0.5% revenue growth per annum, and ES division trends downward to 2.0% perpetuity growth
    EBITDA margins as per business plan
2 After 2019: business plans for Needle Coke, 24.6% EBITDA margin in 2024E; business plan for Graphite Electrodes, 20.8% EBITDA margin in 2024E; Refactory Systems revenue grows at 0.5% each year, COGS grow at 3.0% each year and SG&A grows at 5.0% each year; COGS, SG&A and R&D as % sales kept constant at 2019 levels for remaining businesses
3 D&A as per business plan
    D&A trends to 90% of capital expenditures by 2024E on a WholeCo basis
4 Capital expenditures as per business plan and guidance for any extrapolations
    After 2019: Needle Coke and Graphite Electrodes as per business plans (2024 Needle Coke capex includes an incremental $10mm capex for drum replacements); All other businesses capex as % of sales kept constant at 2019E levels, with exception of Advanced Materials (part of Engineered Solutions) where capex trends to 7.9% of sales.

Source: Management, Company filings

Note: Consolidated financials adjusted for corporate level items and intercompany eliminations

1  Excludes financial contribution of Advanced Graphite Materials division from 2015E onwards
2  Includes corporate allocation

 

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VALUATION ANALYSIS

 

 

GrafTech segment level financials

 

Graphite Electrodes ($mm)                                                        
    

GrafTech forecasts

    Mgmt guidance  
     2014A     2015E     2016E     2017E     2018E     2019E     2020E     2021E     2022E     2023E     2024E  

Revenue

     747        581        569        644        712        805        876        891        906        933        869   

% growth

       (22.2 )%      (2.2 )%      13.2     10.6     13.1     8.8     1.7     1.8     2.9     (6.9 )% 

EBITDA1

     66        36        49        110        143        201        226        232        239        256        181   

% margin

     8.8     6.1     8.6     17.2     20.1     25.0     25.9     26.1     26.4     27.4     20.8

Capex

     30        27        30        30        50        50        36        37        37        38        40   

% sales

     4.0     4.6     5.3     4.7     7.0     6.2     4.1     4.1     4.1     4.1     4.6

Needle Coke ($mm)

                      
    

GrafTech forecasts

    Mgmt guidance  
     2014A     2015E     2016E     2017E     2018E     2019E     2020E     2021E     2022E     2023E     2024E  

Revenue

     222        149        164        161        165        177        164        169        187        214        257   

% growth

       (32.8 )%      9.6     (1.4 )%      2.4     7.1     (7.0 )%      2.9     10.5     14.2     20.3

EBITDA1

     26        26        21        22        24        28        13        15        20        28        63   

% margin

     11.5     17.7     13.0     13.9     14.5     15.6     7.6     8.8     10.5     13.2     24.6

Capex

     23        14        15        18        12        13        10        58        40        11        21   

% sales

     10.5     9.1     9.3     11.2     7.3     7.2     6.2     34.2     21.2     5.1     8.2
Refactory Systems ($mm)                                                                   
    

GrafTech forecasts

   

Management guidance

 
     2014A     2015E     2016E     2017E     2018E     2019E     2020E     2021E     2022E     2023E     2024E  

Revenue

     30        27        37        40        43        44        45        45        45        45        45   

% growth

       (9.3 )%      35.9     9.3     7.5     3.3     0.5     0.5     0.5     0.5     0.5

EBITDA1

     4        4        6        8        9        10        9        8        6        5        4   

% margin

     13.0     13.2     17.8     19.2     20.7     22.2     19.6     17.0     14.3     11.6     8.7

Capex

     1        1        2        2        5        2        2        2        2        2        2   

% sales

     2.3     4.3     5.8     6.0     12.1     4.7     4.7     4.7     4.7     4.7     4.7
Engineered Solutions ($mm)2                                                                   
    

GrafTech forecasts

   

Management guidance

 
     2014A     2015E     2016E     2017E     2018E     2019E     2020E     2021E     2022E     2023E     2024E  

Revenue

     245        136        158        179        231        319        351        377        396        408        416   

% growth

       (44.5 )%      16.4     13.2     28.7     38.3     10.0     7.5     5.0     3.0     2.0

EBITDA1

     26        18        20        26        32        51        56        60        63        65        66   

% margin

     10.8     13.1     12.6     14.4     14.0     16.0     16.0     16.0     16.0     16.0     16.0

Capex

     25        4        7        7        15        17        19        20        20        20        20   

% sales

     10.0     2.9     4.7     4.0     6.7     5.5     5.3     5.2     5.1     5.0     4.9

Source: Management, company filings; Post 2024, management assumptions include terminal revenue growth rate of 2.0% and EBITDA margins of GE – 20.8%, NC – 24.6%, RS – 8.7%, ES – 16.0%

1  Includes corporate allocation; 2 Excludes financial contribution of Advanced Graphite Materials division from 2015E onwards

 

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VALUATION ANALYSIS

 

 

Overview of AGM impairment value

 

AGM impairment breakdown ($mm)                   
           Liquidation value  

$mm

   2014A     % recoverable     $mm recoverable  

Accounts receivable

     15        100     15   

Inventory

     58        80     46   

Net PP&E

     16        100     16   

Net intangible assets

     1        0     —     

Deferred tax assets

     2        0     —     

Other

     4        100     4   

Total assets

     96        85     82   

Accounts payable

     (7     100     (7

Pension liabilities

     (7     100     (7

Deferred tax liabilities

     (2     0     —     

Other

     (5     100     (5

Total liabilities

     (20     91     (18

Severance and decommissioning costs

         (15

AGM liquidation value

         49   

Source: Management

Note: Excludes any tax impact

 

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VALUATION ANALYSIS

 

 

Preliminary valuation summary

    Using management provided financials

$ per share (rounded to closest $0.05)

 

LOGO

Source: Management, company filings, equity research, FactSet

Note: Market data as of 05/15/15; equity analysts’ trading range included for reference purposes only

1  Net debt of $517mm as of 03/31/15; $150mm of convertible preferred with a conversion price of $5.00 (assume full conversion if stock price in excess of $5.00)
2  Assumes valuation date of 03/31/15; 1.50% - 2.50% LTG; 10.5% - 12.5% WACC
3  Excludes financial contribution of Advanced Graphite Materials division
4  Assumes Advanced Graphite Materials division has impairment value of $49mm
5  Net debt of $525mm including $9mm of make whole on senior subordinated notes; $150mm of convertible preferred with a conversion price of $5.00 (assume full conversion if stock price in excess of $5.00)

 

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VALUATION ANALYSIS

 

 

Trading multiples

Trading metrics ($mm, except per share data)

 

CYE — 12/31

   For reference only     Firm
value
                For reference only  
   Share
price
5/15/15
    % of
52-week
high
    Equity
value
      Firm value /     Price per share/      Debt/
LTM
EBITDA
 
           2015E
EBITDA
    2016E
EBITDA
    2015E
EPS
     2016E
EPS
    
                    

IBIDEN

   $ 19.32        98   $ 2,668      $ 2,457        4.0x        4.1x        18.7x         17.3x         1.3x   

Showa Denko

     1.35        88     2,027        4,840        7.1x        6.4x        15.4x         10.7x         5.9x   

SGL Carbon

     17.39        61     1,590        2,015        14.8x        11.2x        N/A         51.0x         7.9x   

Tokai Carbon

     2.91        91     654        870        8.1x        7.0x        26.0x         19.5x         3.0x   

Mersen

     28.39        95     590        849        6.8x        6.2x        13.0x         10.8x         2.8x   

Toyo Tanso

     17.92        82     371        330        6.8x        5.4x        21.7x         16.5x         1.1x   

Nippon Carbon

     3.16        84     374        433        10.8x        10.1x        26.0x         22.1x         2.5x   

Graphite India

     1.31        66     255        270        7.2x        6.2x        15.0x         9.2x         1.9x   

HEG Limited

     3.28        59     131        291        6.8x        6.1x        10.2x         6.4x         4.0x   

SEC Carbon

     3.08        98     128        126        N/A        N/A        N/A         N/A         0.7x   

Mean

       82         8.0x        7.0x        18.3x         18.2x         3.1x   

Median

       86         7.1x        6.2x        17.1x         16.5x         2.6x   

GrafTech (Street)

   $ 4.33 2      37   $ 600 3    $ 1,112 3      9.2x 4      6.9x 4      N/M         32.1x         5.0x   

GrafTech (Mgmt)1

   $ 4.33 2      37   $ 600 3    $ 1,064 3      12.8x        11.0x        N/A         N/A         5.0x   

Source: Company filings, equity research, FactSet

Note: Market data as of 05/15/15

1  Assumes Advanced Graphite Materials division has impairment value of $49mm; $150mm of convertible preferred with a conversion price of $5.00 (assume full conversion if stock price in excess of $5.00)
2  Pre-LOI announcement closing price as of 04/29/2015
3  Based on FY2014 shares outstanding, debt and cash
4  Pre-LOI announcement estimates

 

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Table of Contents

VALUATION ANALYSIS

 

 

Transaction multiples

    Change of control (majority) transactions within the last 10 years

Transaction multiples ($mm)

 

Date

Announced

  

Acquiror

  

Target

   Transaction
value
     FV/LTM
EBITDA
 

04/08/08

   Murray International Holdings    Hillfoot Steel Group      59         6.1x   

12/21/07

   Morgan Crucible    Certech / Carpenter Advanced Ceramics      145         7.8x   

03/06/07

   Oxbow Carbon & Minerals LLC    Great Lakes Carbon Income Fund      671         8.0x   

10/19/06

   Alcan    Carbone Savoie (GrafTech) (70% stake)      135         15.1x   

05/16/06

   Showa Denko    Showa Highpolymer (62.4% stake)      131         10.8x   

Mean

              9.5x   

Median

              8.0x   

Source: Company filings, press releases

 

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Table of Contents

VALUATION ANALYSIS

 

 

Illustrative GrafTech DCF valuation – management projections

Free cash flows ($mm)

 

     Historicals     Management forecasts and guidance        

FYE 12/31

   2014A     2015E     2016E     2017E     2018E     2019E     2020E     2021E     2022E     2023E     2024E     Terminal  

Total revenue

   $ 1,085      $ 779      $ 806      $ 908      $ 1,032      $ 1,219      $ 1,306      $ 1,348      $ 1,397      $ 1,458      $ 1,394      $ 1,422   

% growth

     NA        (28.3 %)      3.5     12.6     13.8     18.0     7.1     3.2     3.6     4.4     (4.4 %)      2.0

EBITDA

   $ 121      $ 83      $ 96      $ 166      $ 208      $ 289      $ 304      $ 315      $ 328      $ 354      $ 314        320   

% margin

     11.2     10.7     12.0     18.3     20.1     23.7     23.3     23.4     23.5     24.3     22.5     22.5

EBIT

   $ 31      $ 9      $ 28      $ 99      $ 140      $ 220      $ 226      $ 238      $ 248      $ 273      $ 237      $ 242   

% margin

     2.8     1.2     3.4     10.9     13.5     18.0     17.3     17.6     17.8     18.7     17.0     17.0

Less: Taxes

     0        (2     (7     (30     (42     (66     (68     (71     (74     (82     (71     (73

% tax rate

     0.0     20.0     25.0     30.0     30.0     30.0     30.0     30.0     30.0     30.0     30.0     30.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBIAT

   $ 31      $ 7      $ 21      $ 69      $ 98      $ 154      $ 158      $ 166      $ 174      $ 191      $ 166      $ 169   

Plus: D&A

     91        74        69        68        68        69        77        77        80        82        77        79   

Less: Capex

     (90     (51     (56     (59     (85     (84     (69     (118     (101     (74     (86     (87

Plus: (Inc) / dec in NWC

     NA        50        38        (16     (28     (42     (35     (10     (11     (13     9        (4

Less: Proxy contest costs (post-tax)

       (3                    

Unlevered FCF

     NA      $ 77      $ 71      $ 62      $ 53      $ 98      $ 132      $ 115      $ 141      $ 186      $ 166        157   

Unlevered FCF for discounting

     NA      $ 58      $ 71      $ 62      $ 53      $ 98      $ 132      $ 115      $ 141      $ 186      $ 166      $ 157   

 

Firm value ($mm)

 

           Perpetuity growth rate  
           1.50%      2.00%      2.50%  
    10.5%       $ 1,318       $ 1,358       $ 1,403   
Discount rate     11.5%         1,172         1,201         1,234   
    12.5%         1,052         1,074         1,099   

 

Implied share price ($)

 

           Perpetuity growth rate  
           1.50%      2.00%      2.50%  
    10.5%       $ 5.92       $ 6.16       $ 6.42   
Discount rate     11.5%       $ 5.05       $ 5.23       $ 5.42   
    12.5%       $ 4.20       $ 4.36       $ 4.54   
 

 

Equity value ($mm)

 

           Perpetuity growth rate  
           1.50%      2.00%      2.50%  
    10.5%       $ 1,000       $ 1,040       $ 1,085   
Discount rate     11.5%         853         883         916   
    12.5%         584         606         631   

Terminal value / Fwd EBITDA (2025E)

 

         Perpetuity growth rate  
         1.50%      2.00%      2.50%  
  10.5%      5.7x         6.0x         6.4x   
Discount rate   11.5%      5.2x         5.4x         5.7x   
  12.5%      4.7x         4.9x         5.2x   
 

 

Source: Management; Note: Excludes financial contribution of Advanced Graphite Materials division; net debt of $517mm as of 03/31/15; $150mm of convertible preferred with a strike price of $5.00 (assume full conversion if stock price in excess of $5.00) plus impairment value of Advanced Graphite Materials division of $49mm; Illustrative valuation as of 03/31/2015

 

PROJECT ATHENA

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