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M&A Model
In millions, except per share data
Transaction Assumptions
General information
Current date 9/8/2014
Acquirer
Name Apple
Ticker AAPL
Latest filing date 6/28/2014
Filing type (10K or 10Q) 10-Q
Current share price $98.76
Target
Name Disney
Ticker DIS
Latest filing date 6/28/2014
Filing type (10K or 10Q) 10Q
Current share price $90.40
% Offer premium 25%
Offer price per share $113.00
Diluted shares outstanding (MM) 1,763.4
Offer value 199,259.3
Deal structure
% Stock 60%
% Cash 40%
Tax structure Stock sale
Acquirer shares issued in transaction 1,211
Nominal exchange ratio (offer price/acq share price) 1.144x
Actual exchange ratio (% stock x offer price/acq share price) 0.687x
Other assumptions
Deal fees as % of offer value 0.50%
Deal fees 996.3
Assumed annual pretax cost synergies 100.0
Apple calendar year ending 2014 EBITDA 61,615
Disney calendar year ending 2014 EBITDA 14,307
Acquirer tax rate 26.10%
Target tax rate 34.80%
Transaction financing
% Cash consideration financed with debt 80%
% Cash consideration financed with excess cash 20%
Acquirer new borrowing 63,763.0
Acquirer excess cash used 15,940.7
% of total acquirer cash balance 9.7%
Sources of Funds
New borrowing to acquire target 63,763.0
New borrowing to refinance target debt 16,136.0
Cash used to acquire target 15,940.7
Value of stock issued to acquire target 119,555.6
Cash for fees 1,395.8
Total sources 216,791.1
Uses of Funds
Stock to target 119,556
Cash to target 79,704
Target debt refinanced 16,136.0
Deal fees (advisory, legal, and accounting) 996.3
Financing fees (related to acq debt) 399.5
Total Uses 216,791.1
Do sources equal uses? Yes
Asset write-ups
Tangible assets
Book value of target PP&E 23,013.0
% Write-up 20%
Asset write-up 4,602.6
Useful life 20 years
Incremental depreciation expense 230.1
Incremental deferred tax liabilities 1,201.3
Intangible assets
Book value of target intangible assets 7,268.0
% Write-up 150.0%
Asset write-up 10,902
Useful life 15 years
Incremental amortization expense 726.8
Incremental deferred tax liabilities 2,845.4
Sensitivity Analysis
(Decrease) 6/28/14
(17,337) 154,101.5
18,331.0
3,019.0
(480.0) 3,884.0
15,545.0
45,200.6
22,336.5
(27,924.0) 173,059.4
11,615.0
$447,091.9
26,914.0
30,474.0
(3,216.0) 2,010.0
(12,920.0) 108,929.0
0.0 0.0
0.0 8,406.7
27,767.0
0.0
3,092.0
(46,516.3) 239,499.3
$447,091.9
0.0
Pro Forma
110,939.0
3,092.0
0.0
(154,101.5)
(40,070.5)
711,917.8
671,847.3
75,922.0
1.5x
8.8x
16.0%
FY 2015 FY 2016
9/30/2015 9/30/2016
41,465.0 43,889.0
7.00 7.70
5,923.6 5,699.9
8,013.0 8,958.0
4.70 5.42
1,704.9 1,652.8
(2,550.5) (2,550.5)
(173.4) (173.4)
100.0 100.0
0.0 0.0
0.0 0.0
684.8 684.8
(1,939.1) (1,939.1)
47,538.9 50,907.9
7,134.1 6,910.4
$6.66 $7.37
$7.00 $7.70
($0.34) ($0.33)
(4.8%) (4.3%)
3,247.7 3,115.6
Offer price
$115.00 $125.00
(0.65) (0.77)
(0.44) (0.56)
(0.20) (0.31)
0.08 (0.01)
0.40 0.33
Offer price
$115.00 $125.00
(0.79) (0.93)
(0.53) (0.66)
(0.24) (0.36)
0.10 0.00
0.50 0.43
Offer price
$115.00 $125.00
(0.88) (1.03)
(0.57) (0.71)
(0.21) (0.34)
0.20 0.09
0.69 0.61
Offer price
$115.00 $125.00
0.662x 0.662x
1.196x 1.243x
1.731x 1.824x
2.265x 2.405x
2.799x 2.986x
Shares
In millions, except per share data
Target
Disney
Current share price
Basic shares outstanding (most recent filing)
+ Additional shares from options
- Shares repurchased under treasury stock method
+ Unvested RSUs
+ Additional shares from convertible debt
+ Additional shares from convertible stock
Diluted shares outstanding
4.27
4.70
5.42
7,530.0
8,013.0
8,958.0
EBITDA forecast
14,244.0
15,128.0
16,656.0
Revenue forecast
48,749.0
51,692.0
55,735.0
Contribution & Valuation
In millions, except per share data
Contribution of
Implied target valuation based on: YR 1 Revenue
Apple enterprise value 458,912.2
Pro forma enterprise value 582,933.1
Implied Disney enterprise value 124,020.9
Disney Net debt 12,280.0
Implied Disney Equity value 111,740.9
Implied Disney share price $63.37
Offer price $113.00
Offer price premium / (discount) to target valuation 78.3%
Contribution analysis
229,134.0
73,579.0
Net Income (FY+1) 83.8% 16.2%
46,503.0
100%
100% EBITDA (FY+1) 80.6% 19.4%
100%
100%
Contribution of
YR 1 EBITDA
458,912.2
569,079.0
Implied target share price based
110,166.8 $120.00
12,280.0
97,886.8 $100.00
$55.51
$113.00
$80.00
103.6%
$0.00
Revenue contribution (FY+1) EBITDA contribution (FY+1) Net i
$63.37
$55.51
$64.91
$113.00
Multiples
30.0x
25.0x 26.5x
20.0x
16.2%
17.0x
15.0x
14.9x 15.2x
.4%
10.0x
9.1x
7.7x
5.0x
% 4.3x
2.5x 2.9x
0.0x
0% 95% 100% Revenue (FY+1) EBITDA (FY+1) Net Income (FY+1)
Apple Disney Pro forma(1)
$113.00
$64.91
$55.51
0
$82 $86 $90 $94 $
Fixed exchange w
210,000
205,000
200,000
195,000
190,000
185,000
180,000
175,000
170,000
165,000
$82 $86 $90 $94 $
d exchange ratio Floating exchange ratio Fixed exchange w/collar Floating exchange w/collar
Exchange ratio Offer value Exchange ratio Offer value Exchange ratio Offer value
1.144x 199,259 1.378x 181,585 1.378x 181,547
1.144x 199,259 1.314x 181,585 1.314x 190,403
1.144x 199,259 1.256x 181,585 1.144x 199,259
1.144x 199,259 1.202x 189,655 1.144x 199,259
1.144x 199,259 1.153x 197,726 1.144x 199,259
1.144x 199,259 1.108x 205,796 1.144x 199,259
1.144x 199,259 1.066x 205,796 1.066x 207,073
1.144x 199,259 1.027x 205,796 1.027x 214,887
200,000
150,000
100,000
50,000
0
$86 $90 $94 $98 $102 $106 $110 $82 $86 $90 $94 $98 $102 $106 $110
tio
ollar