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As Of Filer Filing For·On·As Docs:Size Issuer Agent 3/27/08 Getty Images Inc SC 13E3 10:59M Getty Images Inc Donnelley … Solutions/FA Abe Acquisition Corp. Abe Investment, L.P. Getty Investments L.L.C. Hellman & Friedman Capital Partners VI, L.P. Jonathan Klein Mark Getty |
Document/Exhibit Description Pages Size
1: SC 13E3 Tender-Offer Statement - Going-Private Transaction HTML 140K
2: EX-99.(B)(1) Senior Secured Credit Facilities Commitment HTML 177K
Letter
3: EX-99.(C)(2) Presentation of Goldman Sachs to the Board of HTML 178K
Directors, Dated February 24, 2008
4: EX-99.(C)(3) Draft Presentation of Goldman Sachs, Dated HTML 189K
February 18, 2008
5: EX-99.(C)(4) Draft Presentation of Goldman Sachs, Dated HTML 200K
February 7, 2008
6: EX-99.(C)(5) Draft Presentation of Goldman Sachs, Dated HTML 104K
December 2007
7: EX-99.(C)(6) Draft Presentation of Goldman Sachs, Dated HTML 71K
November 28, 2007
8: EX-99.(C)(7) Draft Presentation of Goldman Sachs, Dated HTML 33K
November 6, 2007
9: EX-99.(C)(8) Draft Presentation of Goldman Sachs, Dated HTML 112K
October 10, 2007
10: EX-99.(C)(9) Draft Presentation of Goldman Sachs, Dated HTML 222K
September 19, 2007
| Draft Presentation of Goldman Sachs, dated September 19, 2007 |
Exhibit (c) (9)
Goldman Sachs
Presentation to the Board of Directors
gettyimages
Goldman, Sachs & Co.
19-September-2007
Goldman Sachs
I. Overview of Discussion Topics
II. Status Quo Considerations and Alternatives
A. Public Market Perspectives on Getty
B. Preliminary Stand-Alone Valuation
C. Overview of Stand-Alone Recapitalization Alternatives
III. Take Private Alternative
IV. Strategic Sale Alternatives
Appendix A: Comparison of Selected Companies
Goldman Sachs does not provide accounting, tax, or legal advice. Notwithstanding anything in this document to the contrary, and except as required to enable compliance with applicable securities law, you (and each of your employees, representatives, and other agents) may disclose to any and all persons the US federal income and state tax treatment and tax structure of the transaction and all materials of any kind (including tax opinions and other tax analyses) that are provided to you relating to such tax treatment and tax structure, without Goldman Sachs imposing any limitation of any kind.
Goldman Sachs
I. Overview of Discussion Topics
Overview of Discussion Topics 1
Goldman Sachs
Overview of Discussion Topics
Goldman Sachs appreciates the opportunity to continue working with Getty to assess current market dynamics and potential alternatives to maximize long term shareholder value
Getty has a legacy of success in the visual content market with its portfolio of creative imagery and footage
Business growth prospects remain strong but the traditional businesses face challenges
— New content forms and purchasing models emerge as viable competitors
The valuation of the Company has experienced a significant decline due to a change in views on fundamental growth potential of the Company as it is undergoing a business portfolio and model transition
To support the Board in its evaluation of alternatives, in today’s materials we review:
— Stand-alone financial outlook
— Current stand-alone valuation
— Capital structure management alternatives and potential impact on standalone valuation
— Potential sale alternatives to strategic and financial buyers
Overview of Discussion Topics 2
Goldman Sachs
Summary of Street Financial Plan
2007 – 2009 Based on GS Research, Illustrative Thereafter
($ in millions, except per share)
Fiscal Year Ending December ‘02-’06 ‘07-’12
GS Research Illustrative
2006A 2007P 2008E 2009E 2010E 2011E 2012E CAGR CAGR
Revenue $807 $856 $893 $947 $995 $1,049 $1,107 14.9% 5.3%
Growth 6.1% 4.4% 6.0% 5.1% 5.3% 5.6%
Operating Income $226 $204 $216 $233 $250 $263 $277 46.2% 6.3%
Margin 28.0% 23.8% 24.2% 24.6% 25.1% 25.1% 25.0%
EBITDA $314 $294 $316 $337 $354 $372 $392 25.8% 5.9%
Growth (6.3%) 7.4% 6.8% 4.9% 5.2% 5.4%
EPS $2.46 $2.21 $2.28 $2.48 $2.82 $3.08 $3.36 57.5% 8.8%
Growth (10.2%) 3.2% 8.8% 13.8% 9.1% 9.2%
IBES Median EPS - $2.18 $2.43 $2.48 - - - 12.5%1
Street vs. IBES EPS - 0.03 (0.15) 0.00 - - -
Levered FCF - Capex $154 $189 $165 $186 $211 $232 $255 6.2%
Growth 22.7% (12.4%) 12.3% 13.4% 10.0% 10.0%
Cash $340 $364 $525 $707 $913 $1,140 $1,391
Debt 265 385 421 417 412 408 404
Note: Levered Free Cash Flow – Capex does not include cash outflows for acquisitions. Levered Free Cash Flow defined as profit before tax – taxes – increase in working capital. Source: Wall Street research dated 6-Aug-07 for 2007-2009, illustrative thereafter.
1 Median IBES Long-Term EPS growth rate
Overview of Discussion Topics 3
Goldman Sachs
Revenue and Gross Profit Mix Over Time
($ in millions)
Revenue
CAGR
$622 $947
100%
8.8%
90% $120
$315
80%
21.4%
70%
$205
60%
50% $317
9.1%
40%
30%
$298
20%
$315
10% 1.1%
0%
2004 2009
RM RF Editorial/Film/Other
Source: Wall Street research as of 6-Aug-2007
Gross Profit
CAGR
$450 $684 8.7%
100%
90% $94
18.5%
$219
80%
70%
$156
60%
50% $257 10.5%
40%
30%
$200
20%
$208 0.8%
10%
0%
2004 2009
RM RF Editorial/Film/Other
Overview of Discussion Topics 4
Goldman Sachs
GYI Historical and Projected Financials
Fiscal Year EBITDA and Revenues
Revenue
1997-2006 CAGR = 26.0%
$101
1997
$185
1998
$248
1999
$485
2000
$451
2001
$463
2002
$523
2003
$622
2004
$734
2005
$807
2006
$856
2007
$893
2008
$947
2009
$995
2010
$1,049
2011
$1,107
2012
1997-2000 CAGR = 68.8% 2001-2006 CAGR = 12.3% 2007-2012 CAGR = 5.3%
EBITDA and Margins
1997-2006 Average Margins = 26.5%
19.1% 19.1% 14.1% 19.5% 20.8% 27.1% 31.5% 36.3% 38.7% 38.9% 34.4% 35.4% 35.6% 35.6% 35.5% 35.4%
$19 $35 $35 $94 $94 $125 $165 $226 $284 $314 $294 $316 $337 $354 $372 $392
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
1997-2000 Average Margins = 18.0% 2001-2006 Average Margins = 32.2% 2007-2012 Average Margins = 35.3%
Source: Company filings, Wall Street research and Capital IQ. Margin averages are simple averages and not weighted averages
Overview of Discussion Topics 5
Goldman Sachs
GYI Historical and Projected Financials
Fiscal Year EBIT and Free Cash Flow
EBIT and Margins
1997-2006 Average Margins = 6.8%
$8 $(16) $(55) $(74) $(47) $49 $103 $168 $226 $226 $204 $216 $233 $250 $262 $277
7.8% (8.6)% (22.2)% (15.2)% (10.3)% 10.7% 19.7% 27.0% 30.8% 28.0% 23.8% 24.2% 24.6% 25.1% 25.0% 25.0%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
1997-2000 Average Margins = (9.6)% 2001-2006 Average Margins = 17.7% 2007-2012 Average Margins = 24.6%
Unlevered Free Cash Flow and FCF/EBIT Conversion1
1997-2006 CAGR = 77.5%
10.6% (8.1%) 5.0% (88.1%) (97.9%) 140.2% 88.1% 67.4% 63.7% 65.0% 92.6% 76.8% 80.2% 80.8% 82.1% 83.4%
$1 $1 $65 $46 $69 $91 $113 $144 $147 $189 $166 $187 $202 $216 $231
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
1997-2000 CAGR = 326.4% 2001-2006 CAGR = 26.4% 2007-2012 CAGR = 4.1%
Source: Company filings, Wall Street research and Capital IQ. Margin averages are simple averages and not weighted averages
1 Free Cash Flow for projections calculated as tax-affected EBIT plus D&A and less CapEx and less increases in working capital.
Overview of Discussion Topics 6
Goldman Sachs
GYI Historical and Projected Financials
Revenue Growth and EBITDA Margin
Revenue Annual Growth %
30.0%
26.0%
25.0%
20.0%
15.0% 12.3%
10.0% 6.1% 6.0% 5.3% 5.6%
5.3% 4.4% 5.1%
5.0%
0.0%
1997-2006 2001-2006 2007-2012 2007E 2008E 2009E 2010E 2011E 2012E
CAGR CAGR CAGR
EBITDA Margin %
40.0%
35.4% 35.6% 35.6% 35.5% 35.4%
35.3% 34.4%
32.2%
30.0%
26.5%
20.0%
1997-2006 2001-2006 2007-2012 2007E 2008E 2009E 2010E 2011E 2012E
Average Margin Average Margin Average Margin
Source: Company filings, Wall Street research and Capital IQ
Overview of Discussion Topics 7
Goldman Sachs
GYI Historical and Projected EPS Growth
$4.00 45%
$3.00 ‘02-’07 CAGR 40.8%
35%
$2.00
25%
$1.00
15%
$0.00
‘07-’12 CAGR 8.8%
5%
($1.00)
‘05-’07 CAGR (1.5)%
($2.00) -5%
FY 2001A FY 2002A FY 2003A FY 2004A FY 2005A FY 2006A FY 2007E FY 2008E FY 2009E FY 2010E FY 2011E FY 2012E
Revenue Growth (7.0)% 2.7% 13.0% 19.0% 17.9% 9.9% 6.1% 4.3% 6.0% 5.1% 5.3% 5.6%
EPS $(1.84) $0.40 $1.16 $1.72 $2.28 $2.11 $2.21 $2.28 $2.48 $2.82 $3.08 $3.36
EPS Growth NM NM 190.0% 48.2% 32.4% (7.3)% 4.7% 3.1% 8.8% 13.8% 9.1% 9.2%
Source: Figures per Factset. Wall Street research dated 6-Aug-07 for 2007-2009, illustrative thereafter.
Overview of Discussion Topics 8
Goldman Sachs
Evolution of Long Term IBES EPS Growth Rate
IBES LT EPS Growth Rate
Average
Period 20.9%
Last 3 years 20.2
Last 1 year 15.0
Last 6 months 13.8
35
30
IBES LTG (%) 25
20
15 12.5%
10
Sep-2002 Sep-2003 Sep-2004 Sep-2005 Sep-2006
Daily from 11-Sep-2002 to 11-Sep-2007
Source: IBES
Overview of Discussion Topics 9
Goldman Sachs
Street Perspective of Getty Financial Performance
($ in millions, except earnings per share)
Revenue Estimates
$1,400 $947
2009E
IBES Revenue Estimates ($mm) $1,100 $898
2008E
$800 $622 $734 $807 $855
2005A 2006A 2007E
$500 2004A
Aug-2004 Feb-2005 Aug-2005 Feb-2006 Aug-2006 Feb-2007 Aug-2007
Monthly 31-Aug-2004 to 11-Sep-2007
EPS Estimates
$6.00
$5.00
$4.00 $ 2.48
2009E
IBES EPS Estimates
$3.00
$2.43
2008E
$2.00 $1.74 $2.28 $2.45 $2.18
$1.00 2004A 2005A 2006A 2007E
Aug-2004 Feb-2005 Aug-2005 Feb-2006 Aug-2006 Feb-2007 Aug-2007
Monthly 31-Aug-2004 to 11-Sep-2007
2004 2005 2006 2007 2008 2009 2010
Source: IBES
Overview of Discussion Topics 10
Goldman Sachs
Overview of Alternatives
Company remains public
Status Quo Assumes current capital structure
— Re-financing of extant convertible (including associated taxes) and short-term line of credit
— Assumes no incremental/new share repurchases
Company remains public and undertakes more aggressive recapitalization funded by incremental debt to drive EPS growth and lower cost of capital
Target leverage levels up to 3.5x LTM EBITDA
Levered Recapitalization
— Incur incremental debt to fund share repurchase
Scenarios assume upfront FY2008 repurchase
Assume no change in forward Price/Earnings ratio
Change of control transaction
Buyer expected to assume maximum reasonable and marketable leverage
— In a normal market environment, target leverage levels up to 6x LTM EBITDA
Leveraged Buyout
— Today’s financial market would likely support up to 4x LTM EBITDA leverage levels
Change-of-control transaction
Strategic Sale
Limited probable buyer universe
— Lack of strategic approaches in recent past
Overview of Discussion Topics 11
Goldman Sachs
II. Status Quo Considerations and Alternatives
A. Public Market Perspectives on Getty
Status Quo Considerations and Alternatives 12
Goldman Sachs
Historical Stock Price Performance
Averages: Last Month Three Months Six Months One Year Three Year
Getty $30.95 $41.28 $45.49 $46.13 $62.99
3 Year
$100
$90
Average = $62.99
$80
$70
Closing Price (USD)
$60
$50
$40
$30 $30.40
$20
Sep- 2004 Mar- 2005 Sep- 2005 Mar- 2006 Sep- 2006 Mar- 2007 Sep- 2007
Daily from 10-Sep-2004 to 11-Sep-2007
1 Year
$60
Average = $46.13
$50
Closing Price (USD)
$40
$30 $30.40
$20
Sep- 2006 Nov- 2006 Jan- 2007 Mar- 2007 May- 2007 Jul- 2007 Sep- 2007
Daily from 11-Sep-2006 to 11-Sep-2007
Source: Factset
Status Quo Considerations and Alternatives 13
Goldman Sachs
Historical LTM EBITDA Multiples
Average
Last 3 years 13.9 x
Last 1 year 9.1 x
Last 6 months 9.0 x
3 Year
22x
20x
LTM EBITDA Multiple
18x
16x
Average = 13.9x
14x
12x
10x
8x
6.6x
6x
Sep- 2004 Mar- 2005 Sep- 2005 Mar- 2006 Sep- 2006 Mar- 2007 Sep- 2007
Daily from 10-Sep-2004 to 11-Sep-2007
1 Year
12x
Average = 9.1x
11x
LTM EBITDA Multiple
10x
9x
8x
7x
6.6x
6x
Sep- 2006 Nov- 2006 Jan- 2007 Mar- 2007 May- 2007 Jul- 2007 Sep- 2007
Daily from 11-Sep-2006 to 11-Sep-2007
Source: FactSet
Status Quo Considerations and Alternatives 14
Goldman Sachs
Relative Stock Price Performance
1 Month
104%
102% 2.2%
100%
(1.6)%
98%
Indexed Price (3.0)%
96% (4.0)%
(4.8)%
94%
92%
13-Aug-2007 20-Aug-2007 27-Aug-2007 3-Sep-2007 10-Sep-2007
Daily from 13-Aug-2007 to 11-Sep-2007
3 Month
110%
100% 1.0%
90% (8.4)%
(12.1)%
80%
Indexed Price (23.0)%
70%
60% (38.5)%
50%
11-Jun-2007 4-Jul-2007 27-Jul-2007 19-Aug-2007 11-Sep-2007
Daily from 11-Jun-2007 to 11-Sep-2007
1 Year
160%
140%
19.5%
120%
3.3%
Indexed Price
100% (0.5)%
(10.3)%
80%
(33.2)%
60%
Sep-2006 Dec-2006 Mar-2007 Jun-2007 Sep-2007
Daily from 11-Sep-2006 to 11-Sep-2007
3 Year
280%
240%
200%
160% 61.8%
Indexed Price
37.1%
120%
11.8%
80% (10.0)%
(45.8)%
40%
Sep-2004 Jun-2005 Mar-2006 Dec-2006 Sep-2007
Daily from 10-Sep-2004 to 11-Sep-2007
Getty Images Inc Nasdaq Composite Index Digital Media/Content Composite Media Services Composite High Growth Internet Composite
Source: FactSet
Note: Digital Media/Content Composite includes: Adobe, Avid Technology, CNET, Jupitermedia. Media Services Composite includes: Omnicom, Interpublic, WPP, Harte Hanks. High Growth Tech Composite includes: Yahoo!, Valueclick.
Status Quo Considerations and Alternatives 15
Goldman Sachs
Relative Operating Metrics
Getty vs. Selected Companies
CY2006-CY2008E Revenue CAGR
Median: 7.2%
5% 17% 15% 13% 9% 9% 6% 5% 5% 4% 2%
Getty Valueclick Adobe Yahoo! CNET Omnicom WPP Avid Technology Inter-public Jupiter-media Harte Hanks
IBES 5 Year EPS CAGR
Median: 12.0%
12.5% 24.7% 20.0% 15.0% 15.0% 12.0% 12.0% 10.6% 10.3% 10.0% 10.0%
Getty Yahoo! Valueclick CNET Adobe Omnicom Avid Technology WPP Harte Hanks Jupiter-media Inter-public
CY2006 EBIT Margin
Median: 14.5%
28% 37% 21% 19% 16% 16% 13% 13% 4% 2% 2%
Getty Adobe Yahoo! Valueclick Jupiter-media Harte Hanks WPP Omnicom Avid Technology CNET Interpublic
CY2008E EBIT Margin
Median: 13.9%
27% 34% 20% 15% 15% 14% 13% 13% 10% 9% 9%
Getty Adobe Valueclick WPP CNET Harte Hanks Yahoo! Omnicom Jupiter-media Avid Technology Inter-public
Source: IBES median estimates.
Status Quo Considerations and Alternatives 16
Goldman Sachs
Historical Next Twelve Months (NTM) P/E Multiples
Average for: 3 years 1 year 6 months
Getty 25.8 x 18.0 x 18.1 x
Digital Media / Content Composite 25.7 x 24.6 x 24.1 x
Media Services Composite 18.3 x 17.8 x 17.8 x
High Growth Internet Composite 45.3 x 41.9 x 42.5 x
3 Year
70x
60x
50x
40x
38.6x
30x
IBES NTM PE Ratio (x) 23.2x
20x
16.5x
13.8x
10x
0x
Sep-2004 Jun-2005 Mar-2006 Dec-2006 Sep-2007
Daily from 10-Sep-2004 to 11-Sep-2007
1 Year
50x
40x
38.6x
30x
IBES NTM PE Ratio (x) 23.2x
20x
16.5x
13.8x
10x
Sep-2006 Dec-2006 Mar-2007 Jun-2007 Sep-2007
Daily from 12-Sep-2006 to 11-Sep-2007
Getty Images Digital Media/Content Composite Media Services Composite High Growth Internet Composite
Source: FactSet
Note: Digital Media/Content Composite Includes: Adobe, Avid Technology, CNET, Jupitermedia. Media Services Composite includes: Omnicom, Interpublic, WPP, Harte Hanks. High Growth Tech Composite includes: Yahoo!, Valueclick.
Status Quo Considerations and Alternatives 17
Goldman Sachs
P/E Multiple to EPS Growth Correlation
P/E vs. EPS Growth
25.0% Yahoo!
R2 = 0.5138
20.0% Valueclick
IBES LT EPS Growth Adobe
15.0%
Getty Omnicom
Avid Technology
10.0% WPP Jupitermedia
Harte Hanks Interpublic
5.0%
0.0%
10.0x 15.0x 20.0x 25.0x 30.0x 35.0x 40.0x 45.0x 50.0x
2008 P/E
Status Quo Considerations and Alternatives 18
Goldman Sachs
Research Analysts’ Views
Getty EPS Estimates & Recommendations
Getty EPS Estimates & Recommendations
Broker Date Rating FY 2008E EPS FY 2009E EPS
Goldman, Sachs & Co. 6-Aug-2007 Neutral $ 2.28 $ 2.48
Citigroup Investments 2-Aug-2007 Hold 2.50 2.70
Natexis Bleichroeder 2-Aug-2007 - 2.29 2.47
Lehman Brothers 21-Aug-2007 Neutral 2.52 -
Soleil Securitieis 8-Aug-2007 Hold 2.42 -
Kaufman Brothers 8-Aug-2007 Hold 2.27 -
Thomas Weisel Partners 2-Aug-2007 Market 2.50 -
Deutsche Bank 2-Aug-2007 Sell 2.35 -
Argus Research Corp 2-Aug-2007 Hold 2.41 -
Pacific Crest Securities 2-Aug-2007 Market 2.48 -
Robert W. Baird & Co. 2-Aug-2007 Neutral 2.58 -
William Blair & Co. 2-Aug-2007 Market 2.35 -
Piper Jaffray & Co. 2-Aug-2007 Market 2.45 -
Mean $ 2.43 $ 2.55
Median 2.43 2.48
Street Case 2.28 2.48
11-Sep-2007: $30.40 Median: $38.00 Present Value1
Deutsche Bank
(02-Aug-2007) $35 $30.95
Lehman Brothers
(21-Aug-2007) $35 $30.95
Kaufman Brothers
(08-Aug-2007) $36 $31.84
Citigroup Investments
(06-Aug-2007) $37 $32.72
Avg $34.60
Natexis Bleichroeder
(02-Aug-2007) $39 $34.49
Goldman, Sachs & Co.
(06-Aug-2007) $40 $35.38
Robert W. Baird & Co.
(02-Aug-2007) $44 $38.91
Thomas Weisel Partners
(02-Aug-2007) $47 $41.57
$30 $32 $34 $36 $38 $40 $42 $44 $46 $48
Evolution of Research Analysts Recommendation of Getty
December 2005 September 2006 December 2006 11-Sep-2007
Strong Buy
Strong Buy Strong Buy Strong Buy Underperform 6%
18% 22% 20% 6%
Hold Buy
35% Hold 6%
61% Buy
Buy 17% Hold
47% Hold
80%
83%
Number of Brokers 4 7 8 8
Source: Factset, Wall Street research and Bloomberg.
1 Present value of target price calculated assuming a 12 month price target discounted back to today (11-Sep-07) at illustrative Getty cost of equity of 13.1%.
Note: Consensus estimates exclude Natexis Bleichroeder, Soleil Securities, Argus Research, Pacific Crest Securities, William Blair and Piper Jaffray. Dates refer to initial date of Recommendation or initial date of Price Target, not latest confirmation
Status Quo Considerations and Alternatives 19
Goldman Sachs
Research Analysts’ Perspectives on Getty Images
Opportunities
“The Getty Images business model remains attractive. Most of the images offered on gettyimages.com are owned by independent photographers, and are created at their expense. This means Getty’s Cost of Goods Sold expense (a photographer royalty) is incurred only if an image is sold and paid for only after Getty Images is paid. Those images that are owned by Getty (~20% of total) are capitalized and depreciated, and therefore carry a 100% gross margin. Thus, the business model has high fixed costs, resulting in significant operating leverage.” (Robert Baird, 2-Aug-2007)
“Micro-payment Momentum: While traditional still image volumes shrank in the quarter, micro-payment volumes came in at 4.25mn (above our 4mn estimate) up 113%Y/Y. ASPs continued to move higher, as the price increases in Jan continue to flow through to this quarter.” (Deutsche Bank 2-Aug-2007)
“Each of the people [at micro-payment companies] we spoke with mentioned growing quickly. However, even in the micro-payment market, Getty and Corbis continue to take the lion’s share of a price of picture sold (70-80%).” (Kaufman Brothers, 2-July-2007)
“[Pump] represents Getty’s initial foray into the music licensing business, which the Company characterized as highly fragmented and similar to where the imagery business was 10 years ago.” (William Blair, 21-June-2007)
Risks
“While we have long-term confidence in CEO Jonathan Klein’s ability to navigate the evolving business landscape in the visual content industry, we continue to expect this evolution to be highly disruptive to near-term financial results.
Accordingly, we see no rush to own the shares, despite a valuation that looks appealing relative to the stock’s historic trading range. (GS, 6-Aug-2007)
“The challenge is that demand is shifting toward less expensive images. Customers who might have bought RM in the past (ASP of $536) are buying RF images (ASP of $245), and customers who bought RF images are now buying micropayments (ASP $2).” (Robert Baird, 2-Aug-2007)
“Getty reported its third consecutive quarter of relatively in-line performance, following a string of four disappointing quarters; however, the company’s dramatic reduction in guidance will be coldly received by the market … There are no signs that Getty will reaccelerate revenue growth anytime soon, and we see risk that organic revenue contraction could worsen before it improves … As time passes and industry conditions continue to shift, we believe the likelihood that Getty will reestablish itself as a “growth” company is somewhat slim.” (William Blair, 2-Aug-2007)
Status Quo Considerations and Alternatives 20
Goldman Sachs
II. Status Quo Considerations and Alternatives
B. Preliminary Stand-Alone Valuation
Status Quo Considerations and Alternatives 21
Goldman Sachs
Illustrative Discounted Cash Flow Analysis
Sensitivity Analysis
($ per share)
Multiple of Terminal LTM EBITDA Method at 7.0x LTM EBITDA
Incremental FY08E-FY12E Annual Revenue Growth
-4.0% -2.0% 0.0% 2.0% 4.0%
-4.0% $31.60 $ 33.53 $ 35.61 $ 37.83 $ 40.21
Incr. FY08E - FY12E
Operating Margin
-2.0% 33.68 35.79 38.05 40.48 43.08
0.0% 35.75 38.04 40.49 43.12 45.94
2.0% 37.82 40.28 42.92 45.77 48.81
4.0% 39.88 42.52 45.36 48.41 51.68
Implied ‘07-’12 Rev CAGR 1.3% 3.3% 5.3% 7.3% 9.3%
Source: Wall Street research dated 6-Aug-07 for 2007-2009, illustrative thereafter.
Note: LTM EBITDA as of 2012E. Assumes discount rate of 11.4% based on risk free rate of 4.36% (10 year Treasury as of 11-Sep-2007), risk premium of 5.16% (Ibbotson) and beta of 1.65 (Barra predicted beta), cost of debt of 6.95% and current capitalization
Status Quo Considerations and Alternatives 22
Goldman Sachs
Illustrative Discounted Cash Flow Analysis
Sensitivity Analysis
($ per share)
Perpetuity Growth Method
Implied Price Per Diluted Share
Terminal Growth Rate
2.0% 2.5% 3.0% 3.5% 4.0%
10.0% $ 44.74 $ 46.94 $ 49.44 $ 52.33 $ 55.70
11.0% 39.80 41.46 43.33 45.45 47.87
WACC
11.4% 38.09 39.59 41.27 43.16 45.30
12.0% 35.82 37.12 38.56 40.17 41.98
13.0% 32.53 33.57 34.72 35.98 37.38
2012E LTM EBITDA at 11.4% WACC
6.4 x 6.8 x 7.2 x 7.7 x 8.3 x
Multiple of Terminal LTM EBITDA Method
Implied Price per Diluted Share
Terminal Multiple of 2012E EBITDA
5.0 x 6.0 x 7.0 x 8.0 x 9.0 x
10.0% $ 34.58 $ 38.67 $ 42.73 $ 46.80 $ 50.87
11.0% 33.29 37.22 41.12 45.02 48.91
WACC
11.4% 32.79 36.66 40.49 44.32 48.15
12.0% 32.07 35.84 39.58 43.32 47.05
13.0% 30.91 34.52 38.12 41.70 45.28
Source: Wall Street research dated 6-Aug-07 for 2007-2009, illustrative thereafter.
Note: Assumes mid-year convention discounting. Discount rate of 11.4% based on risk free rate of 4.36% (10 year Treasury as of 11-Sep-2007), risk premium of 5.16% (Ibbotson) and beta of 1.65 (Barra predicted beta), cost of debt of 6.95% and current capitalization
Status Quo Considerations and Alternatives 23
Goldman Sachs
Illustrative Discounted Cash Flow Analysis
Cash Flow Projections
Street Base Case
2007P 2008E 2009E 2010E 2011E 2012E ’07E -’12E CAGR ’08E -’12E CAGR
Revenue $ 855.9 $ 893.2 $ 946.9 $ 995.4 $ 1,048.6 $ 1,107.1 5.3% 5.5%
Base growth rate 4.4% 6.0% 5.1% 5.3% 5.6%
Gross Profit $ 623.2 $ 645.0 $ 683.4 $ 717.8 $ 755.5 $ 797.0
Gross Margin % 72.8% 72.2% 72.2% 72.1% 72.0% 72.0%
EBIT $ 204.1 $ 215.8 $ 233.3 $ 250.0 $ 262.9 $ 277.2 6.3% 6.5%
EBIT Margin % 23.8% 24.2% 24.6% 25.1% 25.1% 25.0%
D&A (including SBC) $ 89.9 $ 100.0 $ 104.0 $ 104.0 $ 109.3 $ 115.1
EBITDA $ 294.1 $ 315.8 $ 337.3 $ 354.0 $ 372.2 $ 392.3 5.9% 5.6%
EBITDA Margin % 34.4% 35.4% 35.6% 35.6% 35.5% 35.4%
Taxes $ 74.3 $ 77.7 $ 81.6 $ 87.5 $ 92.0 $ 97.0
Tax rate 36.4% 36.0% 35.0% 35.0% 35.0% 35.0%
Change in OWC $ (31.7) $ 7.5 $ 3.9 $ (0.2) $ (0.3) $ (0.3)
OWC as percent revenue -1.9% -1.0% -0.5% -0.5% -0.5% -0.5%
Capex (excluding Acquisitions) $ 62.5 $ 65.0 $ 65.0 $ 65.0 $ 65.0 $ 65.0
Unlevered free cash flow $ 189.0 $ 165.6 $ 186.7 $ 201.7 $ 215.5 $ 230.6 4.1% 8.6%
Source: Wall Street research dated 6-Aug-07 for 2007-2009, illustrative thereafter.
Status Quo Considerations and Alternatives 24
Goldman Sachs
Illustrative Present Value of Future Stock Prices
($ per share)
Undiscounted Future Share Price
$ 70.00
Undiscounted Future Share Prices $ 55.59
$ 60.00 $ 60.69
$ 50.95
$ 50.00 $ 44.62 $ 50.57
$ 40.00 $ 42.46 $ 46.33 $ 40.46
$ 37.18
$ 30.00 $ 30.40
$ 33.97 $ 37.06
$ 20.00 $ 29.75
$ 10.00
$ 0.00
Today Sep, 2008 Sep, 2009 Sep, 2010 Sep, 2011
Present Value of Future Share Price
FY2008E FY2009E FY2010E FY2011E FY2012E
EPS $ 2.28 $ 2.48 $ 2.82 $ 3.08 $ 3.36
12.0 x 27.34 26.35 26.58 25.70 24.86
15.0 x 34.17 32.94 33.23 32.12 31.07
18.0 x 41.00 39.53 39.87 38.55 37.28
Source: Based on EPS estimates per Wall Street Research as of 6-Aug-2007 for 2007 – 2009, illustrative thereafter
Note: Assumes refinancing of extant $265mm convertible, $40mm in related taxes and $120mm line of credit with new $425mm bank loan at L+75bps. Assumes illustrative cost of equity discount rate of 13% based on risk free rate of 4.36% (10 year Treasury as of 11-Sep-2007), risk premium of 5.16% (Ibbotson) and beta of 1.65 (Barra predicted beta)
Status Quo Considerations and Alternatives 25
Goldman Sachs
II. Status Quo Considerations and Alternatives
C. Overview of Stand-Alone Recapitalization
Alternatives
Status Quo Considerations and Alternatives 26
Goldman Sachs
Capital Structure Benchmarking Analysis
Liquidity Metrics vs. Selected Companies
Gross Cash as % of CY2006 Revenue
Median: 19.8%
36% 90% 52% 48% 24% 22% 18% 13% 7% 3% 3%
Getty Adobe Yahoo! Valueclick Inter-public CNET Avid Technology WPP Omnicom Jupiter-media Harte Hanks
Gross Cash as % of Market Cap
Median: 8.2%
16% 30% 14% 12% 9% 9% 8% 7% 5% 2% 2%
Getty Interpublic Avid Technology Valueclick WPP Adobe CNET Yahoo! Omnicom Jupiter-media Harte Hanks
Net Cash as % of CY2006 Revenue
Median: (6.0)%
(12)% 90% 48% 36% 18% 2% (15)% (15)% (20)% (26)% (42)%
Getty Adobe Valueclick Yahoo! Avid Technology CNET Inter-public Harte Hanks Omnicom WPP Jupiter-media
Net Cash as % of Market Cap
Median: (4.7)%
(5)% 14% 12% 9% 5% 1% (10)% (13)% (18)% (18)% (26)%
Getty Avid Technology Valueclick Adobe Yahoo! CNET Harte Hanks Omnicom WPP Inter-public Jupiter-media
Source: IBES median estimates.
Note: Market data as of 11-Sep-2007
Status Quo Considerations and Alternatives 27
Goldman Sachs
Levered Recap Alternatives
Getty’s Range of Alternatives ($ in millions except per share data)
Increasing Leverage
Today Status Quo Case 1 Case 2 Case 3
Description $425mm total debt Refinance extant convert and line of credit $600mm total debt Refinance and $175mm repo $875mm total debt Refinance and $450mm repo $1.0bn total debt Refinance and $600mm repo
Illustrative Cost of N/A L+75bps L+125bps L+175bps L+225bps
Debt
One Time Repurchase N/A N/A 10% 25% 33%
as % of Market Cap
PF Cash Balance $ 289 $ 289 $ 289 $ 289 $ 289
Total Gross Debt $ 385 $ 425 $ 600 $ 875 $ 1,025
Pro Forma Debt / LTM 1.3x 1.5x 2.0x 3.0x 3.5x
EBITDA (2007E)
Illustrative Premia N/A N/A 10% 10% 10%
Paid
EPS Impact
FY08/FY12 EPS Accretion (Dilution) to Status Quo
Street Case N/A 3/4% 7/11% 7/14%
’07-’12 EPS CAGR 8.8% 9.6% 11.0% 11.7%
Note: Repurchase as % of market cap as of 11-Sep-2007 assuming 10% rise in share price upon repurchase. Assumes LIBOR as of 11-Sep-2007 of 5.7%
Status Quo Considerations and Alternatives 28
Goldman Sachs
Illustrative EPS Impact of Recapitalization
Summary EPS Accretion Analysis
FY2008E FY2009E FY2010E FY2011E FY2012E ’07-’12 EPS CAGR
Status Quo EPS - Street $ 2.28 $ 2.48 $ 2.82 $ 3.08 $ 3.36 8.8%
YoY Growth 8.8% 13.8% 9.1% 9.2%
Case 1
Pro Forma EPS $ 2.34 $ 2.60 $ 2.91 $ 3.19 $ 3.49 9.6%
YoY Growth 11.1% 11.9% 9.5% 9.5%
Accretion/Dilution 2.8% 5.0% 3.2% 3.5% 3.8%
Case 2
Pro Forma EPS $ 2.43 $ 2.72 $ 3.07 $ 3.39 $ 3.73 11.0%
YoY Growth 12.0% 13.0% 10.2% 10.2%
Accretion/Dilution 6.6% 9.7% 8.8% 9.9% 11.0%
Case 3
Pro Forma EPS $ 2.44 $ 2.75 $ 3.13 $ 3.47 $ 3.84 11.7%
YoY Growth 12.7% 13.9% 10.9% 10.8%
Accretion/Dilution 6.9% 10.8% 10.8% 12.6% 14.3%
Source: Wall Street research dated 6-Aug-07 for 2007-2009, illustrative thereafter.
Status Quo Considerations and Alternatives 29
Goldman Sachs
Illustrative Value Impact of Recapitalization
EPS Impact: 2008E-2012E
$ 4.10
$ 3.84
$ 3.90
$ 3.47 $ 3.73
$ 3.70
$ 3.39
$ 3.50 $ 3.13
$ 3.30 $ 3.07 $ 3.49
$ 3.10 $ 2.75
$ 2.44 $ 3.19
$ 2.90 $ 2.72 $ 2.91
$ 2.70 $ 2.43
$ 2.50 $ 2.60
$ 2.30 $ 2.34
$ 2.10
FY2008E FY2009E FY2010E FY2011E FY2012E
Case 1 Case 2 Case 3
Stock Price Sensitivity – Present Value
‘08 EPS 12.0 x P/E 15.0 x 18.0 x
Status Quo $ 2.28 $ 27.34 $ 34.17 $ 41.00
Case 1 $ 2.34 28.11 35.14 42.17
Case 2 $ 2.43 29.14 36.42 43.70
Case 3 $ 2.44 29.23 36.53 43.84
‘10 EPS 12.0 x P/E¹ 15.0 x 18.0 x
Status Quo $ 2.82 $ 26.58 $ 33.23 $ 39.87
Case 1 $ 2.91 $ 27.42 $ 34.27 $ 41.13
Case 2 $ 3.07 $ 28.92 $ 36.15 $ 43.38
Case 3 $ 3.13 $ 29.46 $ 36.82 $ 44.19
Source: Wall Street research dated 6-Aug-07 for 2007-2009, illustrative thereafter.
1 P/E based on 2010 EPS and discounted at 13% cost of equity (risk free rate of 4.36% (10 year Treasury as of 11-Sep-2007), risk premium of 5.16% (Ibbotson) and beta of 1.65 (Barra predicted beta))
Status Quo Considerations and Alternatives 30
Goldman Sachs
III. Take Private Alternative
Take Private Alternative 31
Goldman Sachs
Overview of Private Equity Trends
Aggregate Size of 10 Largest LBOs1
$ 400 Aggregate size of 10 largest LBOs increased 300% over the last year with more than $30 billion of debt in a LBO achievable in today’s market
$308bn
Value (In Billions) $ 300
$186bn
$ 200
$107bn
$ 100
$52bn
$38bn $38bn
$ 0
2002 2003 2004 2005 2006 2007YTD
LBO Activity
$685bn
20%
17%
10%
Global Announced Volume($bn) 9%
7% $373bn
6%% of Total Activity
$270bn
$168bn
$86bn $87bn
2002 2003 2004 2005 2006 2007 YTD
LBO Premiums By Year2
62%
39%
33% 34%
Premia Paid (%) 28% 26%
25% 25%
2000 2001 2002 2003 2004 2005 2006 2007
YTD
LBO Premiums by Size 3
32% 32%
28%
Premia Paid (%) 23%
$200- $500 $500-$ 2,000 $2,000-$ 5,000 >$ 5,000
Number 37 52 16 17
of Deals
1 Source: SDC/Thomson Financial.
2 Source: Public Filings / FactSet. Includes LBOs involving financial sponsors of US publicly traded and domiciled companies with an equity value greater than $200 million, excluding squeeze-outs. Includes deals that were terminated and are pending since 2000. Mean of four week average to undisturbed date. Based off undisturbed date, which is defined as the day prior to any significant public speculation or announcement of a potential sale transaction.
3 Covers 2002 to 2007YTD
Take Private Alternative 32
Goldman Sachs
The Turn In Subprime Began The Cascade
Oversupply in the Credit Markets Following the Subprime Meltdown
High Yield Backlog
Estimated Shadow Backlog
110 Deals Pulled
Deals Priced
Backlog
105
20
15
10
5
0
Jun 01 Jun 08 Jun 15 Jun 22 Jun 29 Jul 06 Jul 13 Jul 20 Jul 26 2H 2007 / Jan 2008
Growth in CLO Forward Calendar While Issuance Cooled
20 Forward Calendar Issuance
15
10
5
0
5
10
15
20
Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07
Source: Standard and Poor’s Leveraged Commentary & Data
Take Private Alternative 33
Goldman Sachs
Reaction in the Markets
Repricing In the Primary and Secondary Debt Markets Followed
Dramatic Rise in High Yield Spreads
700
600
500
400
300
200
100
0
2-Jul-07 7-Jul-07 12-Jul-07 17-Jul-07 22-Jul-07 27-Jul-07 1-Aug-07
BB Index B Index
Rising Differential Between Covenant and
Covenant-Lite Loans
102.00
101.00
100.00
99.00
98.00
97.00
96.00
95.56
95.00
94.00
93.92
93.00
1/2 1/16 1/30 2/13 2/27 3/13 3/27 4/10 4/24 5/8 5/22 6/5 6/19 7/3 7/17 7/31
Average Bid - Covenant Lite Loans Average Bid - Covenanted Loans
Source: Standard and Poor’s Leveraged Commentary & Data
Take Private Alternative 34
Goldman Sachs
Reaction in the Markets
And Spilled Over In Time Into the Equity Markets
Subprime and Credit-Driven Sentiment Has Dragged Down
Stocks in Those Sectors…
S&P 500 Index
110%
S&P 500 Homebuilding Index
S&P 500 Retailing Index
S&P 500 Financials Index
100%
(5.4%)
Indexed Price
90%(11.5%)
(11.9%)
80%
(22.3%)
70%
1-Jun 14-Jun 27-Jun 10-Jul 23-Jul 5-Aug
While the Repricing of Risk Across the Global Capital Mkts has Resulted in Substantial Volatility in Equity Mkts
S&P 500 Index CBOE Volatility Index
1,560 30
S&P 500 Peak 1,553
28
1,540
26
1,520
24
22
1,500
20
1,480
18
16
1,460
VIX Average Close 14 14
(Since Jan-04)
1,440
12
1,420 10
1-Jun 7-Jun 13-Jun 19-Jun 25-Jun 29-Jun 6-Jul 12-Jul 18-Jul 24-Jul 30-Jul 3-Aug 9-Aug
Source: Capital IQ
Take Private Alternative 35
Goldman Sachs
Reaction in the Markets
And Continued Pressure On Levered Equity Stories
Lower Rated Stocks in the S&P 500 Have Underperformed1
105%
100%
Indexed(%) 95%(5.0)%
(7.1)%
(8.8)%
90%
85%
1-Jul-07 6-Jul-07 13-Jul-07 20-Jul-07 27-Jul-07 3-Aug-07 10-Aug-07
Daily From 01-Jul-2007 to 10-Aug-2007
Investment Grade BB Rated B Rated
While Those With High Hedge Fund Ownership
Concentration Have Also Shown Weakness2
105%
100%(0.9)%
Indexed Price (%)(4.3)%
95%
90%
(12.4)%
85%
1-Jul-07 7-Jul-07 13-Jul-07 19-Jul-07 25-Jul-07 31-Jul-07 6-Aug-07
Daily From 01-Jul-2007 to 10-Aug-2007
Least Concentrated Most Concentrated S&P 500
Source: Compustat. LionShares via FactSet, Goldman Sachs Research
1 Includes 15 companies which were downgraded to non-investment grade as a result of increasing leverage and excludes companies downgraded as a result of operating performance or LBO announcements. Companies are included in composite from the date of their downgrade.
2 Baskets include the 20 stocks with the highest hedge fund ownership concentration and the lowest hedge fund ownership concentration.
Take Private Alternative 36
Goldman Sachs
The U.S. Leveraged Loan Market
Institutional Cash Inflows Less New-Issue Volume
$ 10 bn 8.6 8.8
7.0
4.5
$5 bn 3.6
3.0 3.8 3.0
1.7
0.8
0.1
$0 bn
(1.2)(1.1)
(2.3)
-$5 bn
(5.3)
(7.6)
-$ 10 bn
(9.5)(9.2)
(11.7)
-$ 15 bn
Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07
Leveraged Loan Flex Activity
Negative - Flexed Up Neutral Positive - Flexed Down
0% 20% 40% 60% 80% 100%
Jan-06
Feb-06
Mar-06
Apr-06
May-06
Jun-06
Jul-06
Aug-06
Sep-06
Oct-06
Nov-06
Dec-06
Jan-07
Feb-07
Mar-07
Apr-07
May-07
Jun-07
Jul-07
Aug-07
Average Spread to LIBOR (bps)
BB Pricing B Pricing Secondary Bids
400 bps 102.0 %
394 bps
101.0 %
350 bps
100.0 %
300 bps
269 bps
99.0 %
250 bps
98.0 %
200 bps
97.0 %
95.7 %
150 bps
96.0 %
100 bps 95.0 %
Oct-06 Nov-06 Dec-06 Feb-07 Mar-07 May-07 Jun-07 Jul-07 Sep-07
Market Data
Current 1-Week Prior 1-Month Prior 1-Year Prior
BB Pricing 269 bps 269 bps 250 bps 189 bps
B Pricing 394 bps 388 bps 336 bps 257 bps
LIBOR 5.73 % 5.62 % 5.38 % 5.39 %
10-Yr Treasury 4.37 % 4.55 % 4.85 % 4.77 %
Current 3Q07E 4Q07E 1Q08E
GS Fed Funds Forecast 5.25 % 4.75 % 4.50 % 4.50 %
Next Fed Communication: September 18 FOMC Meeting
Source: LCD Market Data
Take Private Alternative 37
Goldman Sachs
High Yield Market Update
Recent New Issue Market and Backlog
The high yield primary market was quiet last week coming out of the Labor Day holiday as no new deals priced
The currently announced backlog remains very low, standing at 1 deal for $110 million. Investors are turning their attention to the substantial backlog, the majority of which is LBO-related, as it remains at unprecedented levels
Overall the market remains focused on the large forward calendar that is slated to come to market in the coming months
Market Conditions Weakening, Spreads Wider
Over the past three months, credit spreads have widened significantly as investor concern about the large forward calendar has decreased overall risk appetite. Market volatility has contributed to wider primary market pricing and decreased total issuance
Treasury yields have moved lower in recent weeks, but investors continue to demand high new issue premiums on top of the widening secondary levels, increasing the overall cost of new financing in the high yield market
The high yield market has witnessed continued mutual fund outflows over the course of the summer, although two consecutive weeks of inflows suggest that some capital is returning
Default rates remain substantially below historical averages
High Yield Market Statistics
Volume of Issuance: $126.0 bn YTD in 2007 vs. $97.2 bn YTD in 2006
Average Deal Size: $534 mm YTD in 2007 vs. $482 mm YTD in 2006
Average Yield: 8.863% YTD in 2007 vs. 8.876% YTD in 2006
Market Indicators
The US Treasury yields fell again last week. The 10-year was 16 bps stronger on the week to yield 4.37%. The yield on the 30-year was 12 bps better, ending at 4.70%
Single-B and Double-B Indices
600
500
400
300
200
100
0
9/7/04 3/7/05 9/7/05 3/7/06 9/7/06 3/7/07 9/7/07
CDX HY8 5-Year BB Index CDX HY8 5-Year B Index
High Yield Market Volume
200
174
153
160 144
140
125 126
120 111
($ billions) 102
97
83
80
60
48
40
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 YTD 2006 YTD 2007
Source: Bloomberg, GS Internal
Take Private Alternative 38
Goldman Sachs
Key Issues to Consider in a Take Private Transaction
Rationale
Unique franchise value
Leveragability of the assets / business
— Good cash flow generation and relative projected stability
— Sustainability of strategic position
Potential for enhanced financial performance
— Portfolio reconfigurations
— More aggressive P&L management
— Investment for top line growth
Intact, experienced management team
Viable exit alternatives (sale, IPO, recap, consolidation platform, spin-offs)
Embedded option value in new businesses
Key Issues to Consider
Company/Management Perspective
Illiquid investment of uncertain duration
— Exit dependent on future market conditions and company performance
— Illiquid equity-based employee incentives
Equity sponsor(s) as new owner, decision maker
Substantially increases financial leverage and risk
— May limit financial flexibility for growth investments and acquisitions
— Debt covenants constrain financial flexibility
— Vulnerability to downturn in the industry
Less access to capital
— Potentially higher cost of financing
Sponsor Perspective
Potentially sub-optimal initial headline returns
Consideration of potential downside risk in traditional business
Need to underwrite venture risk of new businesses
Take Private Alternative 39
Goldman Sachs
Premia and Multiples at Various Share Prices
IBES Median Estimates
11-Sep-07 Getty Trading Premium
20% 25% 32% 35% 40% 45%
Implied Purchase Price Per Share $ 30.40 $ 36.48 $ 38.00 $ 40.00 $ 41.04 $ 42.56 $ 44.08
Equity Consideration - Diluted $ 1,808 $ 2,178 $ 2,271 $ 2,393 $ 2,457 $ 2,550 $ 2,643
Levered Consideration - Diluted 1,905 2,274 2,367 2,490 2,554 2,647 2,740
Premia Over Various Trading Periods Averages
Current (11-Sep-07) $ 30.40 0 % 20 % 25 % 32 % 35 % 40 % 45 %
Last 10 Days 31.08 (2)% 17 % 22 % 29 % 32 % 37 % 42 %
1 Month 30.95 (2)% 18 % 23 % 29 % 33 % 38 % 42 %
3 Months 41.28 (26)%(12)%(8)%(3)%(1)% 3 % 7 %
6 Months 45.49 (33)%(20)%(16)%(12)%(10)%(6)%(3)%
1 Year 46.13 (34)%(21)%(18)%(13)%(11)%(8)%(4)%
Implied Multiples Street Estimates
Revenue CY2007E $ 855 2.2 x 2.7 x 2.8 x 2.9 x 3.0 x 3.1 x 3.2 x
CY2008E 898 2.1 2.5 2.6 2.8 2.8 2.9 3.1 1 Yr Avg 6 M Avg
Cash EBITDA CY2007E $ 301 6.3 x 7.6 x 7.9 x 8.3 x 8.5 x 8.8 x 9.1 x 9.1 x 9.0 x
CY2008E 334 5.7 6.8 7.1 7.5 7.6 7.9 8.2 8.2 8.2
Cash EPS CY2007E $ 2.18 13.9 x 16.7 x 17.4 x 18.3 x 18.8 x 19.5 x 20.2 x
CY2008E 2.43 12.5 15.0 15.6 16.5 16.9 17.5 18.1 18.0 x 18.1 x
PEG Ratio CY2007E 1.1 x 1.3 x 1.4 x 1.5 x 1.5 x 1.6 x 1.6 x
CY2008E 1.0 1.2 1.3 1.3 1.4 1.4 1.5 1.2 x 1.3 x
Note: 1yr average and 6 month average EBITDA comparisons compare LTM EBITDA to CY2007E and NTM EBITDA to CY2008E. 1 year average and 6 month average p/e compares NTM P/E to CY2008E. Average PEG is average NTM p/e divided by average LT IBES EPS growth rate over the same period.
Source: IBES median estimates and FactSet
Take Private Alternative 40
Goldman Sachs
Shares Traded at Various Prices
Shares Traded Analysis: 1 Month
5,000 Weighted Average Price: $30.86 Total Shares Traded as Percent of Shares Outstanding: 20.74%
4,000
Volume (000)
3,000
2,000
1,000
0
29.57 to 30.08 30.09 to 30.61 30.62 to 31.13 31.14 to 31.67
Daily from 13-Aug-2007 to 11-Sep-2007
Traded as % Vol. 8% 25% 40% 27%
Cumulative Traded as % of Vol. 8% 33% 73% 100%
Shares Traded Analysis: 1 Year
90,000 Weighted Average Price: $44.70 Total Shares Traded as Percent of Shares Outstanding: 345.50%
Volume (000)
60,000
30,000
0
29.57 33.98 38.40 42.81 47.23 51.64
to to to to to to
33.98 38.39 42.81 47.22 51.63 56.06
Daily from 11-Sep-2006 to 11-Sep-2007
Traded as % Vol. 12% 6% 13% 23% 41% 6%
Cumulative Traded as % of Vol. 12% 18% 31% 54% 94% 100%
Shares Traded Analysis: 3 Month
30,000 Weighted Average Price: $37.95 Total Shares Traded as Percent of Shares Outstanding: 91.28%
24,000
Volume (000)
18,000
12,000
6,000
0
29.57 to 34.82 34.83 to 40.08 40.09 to 45.34 45.35 to 50.61
Daily from 11-Jun-2007 to 11-Sep-2007
Traded as % Vol. 52% 15% 3% 30%
Cumulative Traded as % of Vol. 52% 67% 70% 100%
Shares Traded Analysis: 3 Year
250,000 Weighted Average Price: $59.67 Total Shares Traded as Percent of Shares Outstanding: 896.17%
Volume 200,000
(000)
150,000
100,000
50,000
0
29.57 to 40.36 40.37 to 51.16 51.17 to 61.96 61.97 to 72.76 72.77 to 83.56 83.57 to 94.37
Daily from 10-Sep-2004 to 11-Sep-2007
Traded as % Vol. 7% 35% 14% 17% 18% 9%
Cumulative Traded
7% 42% 56% 73% 91% 100%
as % of Vol.
Take Private Alternative 41
Goldman Sachs
Pro Forma LBO Capitalization – Case 1
$40 Per Share Purchase Price, 4.0x PF Leverage – Illustrative for Current Credit Markets ($ in millions)
Getty LBO Dec-07 Adjustments Pro Forma Dec-07 % of Cap x2007PF Adj. EBITDA Expected Rating Illustrative Pricing
Cash and Cash Equivalents $ 289 ($139) $150
Revolving Credit Facility $ 120 ($120) $0 0.0% 0.0x
New First Lien Term Loan 0 882 882 32.5% 3.0x BBB-/BB+ L + 250
First Lien Senior Secured Debt $ 120 $ 882 32.5% 3.0x
Second Lien Debt 0 0 0 0.0% 3.0x
Senior Secured Debt $ 120 $ 882 32.5% 3.0x
Senior Notes 0 294 294 10.8% 4.0x B/B- 10.5%
Extant Convert 265 (265) 0 0.0% 4.0x
Other Debt 0 0 0 0.0% 4.0x
Total OpCo Debt $385 $1,176 43.3% 4.0x
Total Debt 385 1,176 43.3% 4.0x
New / Rollover Equity 0 1,540 1,540 56.7% 9.2x
Total Capitalization $385 $2,716 100.0% 9.2x
Getty PF EBITDA PF. Adj. EBITDA
LTM Adj. EBITDA $294.1 $294.1 $294.1
LTM Capex (ex - Acquisitions) 62.5 62.5 62.5
LTM PF Interest Expense 5.7 103.1 103.1
EBITDA / Interest Expense 51.2x 2.9x 2.9x
(EBITDA - Capex) / Interest Expense 40.3x 2.2x 2.2x
First Lien Senior Secured Debt / Adj. EBITDA 0.4x 3.0x 3.0x
Total Senior Secured Debt / Adj. EBITDA 0.4x 3.0x 3.0x
Total OpCo Debt / Adj. EBITDA 1.3x 4.0x 4.0x
Total Debt / Adj. EBITDA 1.3x 4.0x 4.0x
Total Debt / (Adj. EBITDA - Capex) 1.7x 5.1x 5.1x
Notes: $150mm minimum cash per management guidance. Total capitalization includes cash uses of $2,393mm equity value, $385mm extant debt, $150mm minimum cash, and $76mm in financing costs (2%) net of existing cash on balance sheet of $289mm
Take Private Alternative 42
Goldman Sachs
Projected Financials and Credit Statistics – Case 1
4.0x PF Leverage – Illustrative for Current Credit Markets ($ in millions)
2004 2005 2006 2007F 2008E 2009E 2010E 2011E 2012E
Total Revenue $ 622.4 $ 733.7 $ 806.6 $ 855.9 $ 893.2 $ 946.9 $ 995.4 $ 1,048.6 $ 1,107.1
Revenue growth 17.9% 9.9% 6.1% 4.4% 6.0% 5.1% 5.3% 5.6%
Expected Cost Savings $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
Pro Forma Cost Savings 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Pro Forma Adjusted EBITDA $ 225.9 $ 284.0 $ 313.7 $ 294.1 $ 315.8 $ 337.3 $ 354.0 $372.2 $392.3
EBITDA margin 36.3% 38.7% 38.9% 34.4% 35.4% 35.6% 35.6% 35.5% 35.4%
Free Cash Flow: Pro Forma
EBITDA $ 294.1 $ 315.8 $ 337.3 $ 354.0 $ 372.2 $ 392.3
Interest Expense 103.1 98.6 88.4 76.3 62.3 46.2
Interest Income 7.5 7.5 7.5 7.5 7.5 7.5
Cash Interest Expense, net 95.6 91.1 80.9 68.8 54.8 38.7
Cash Taxes 68.2 42.2 50.6 60.8 70.2 80.8
Capex 62.5 65.0 65.0 65.0 65.0 65.0
Increase in Working Capital (31.7) 7.5 3.9 (0.2) (0.3) (0.3)
Free Cash Flow for Debt Service $ 99.5 $ 110.1 $ 136.8 $ 159.7 $ 182.5 $ 208.1
Cumulative Free Cash Flow for Debt Service $ 209.6 $ 246.9 $ 296.5 $ 342.2 $ 390.6
Capitalization and Credit Statistics:
Revolver $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
First Lien Term Loan 882.2 772.1 635.3 475.7 293.1 85.1
First Lien Secured Debt $ 882.2 $ 772.1 $ 635.3 $ 475.7 $ 293.1 $ 85.1
Second Lien Debt $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Total Secured Debt $ 882.2 $ 772.1 $ 635.3 $ 475.7 $ 293.1 $ 85.1
Senior Notes $ 294.1 $ 294.1 $ 294.1 $ 294.1 $ 294.1 $ 294.1
Rollover Other Debt 0 0 0 0 0 0
Total OpCo Debt $ 1,176.3 $ 1,066.2 $ 929.4 $ 769.7 $ 587.2 $ 379.1
Total Debt 1,176.3 1,066.2 929.4 769.7 587.2 379.1
PF Adj. EBITDA / Interest Expense 2.9x 3.2x 3.8x 4.6x 6.0x 8.5x
(PF Adj. EBITDA - Capex) / Interest Expense 2.2x 2.5x 3.1x 3.8x 4.9x 7.1x
First Lien Senior Secured Debt / PF Adj. EBITDA 3.0x 2.4x 1.9x 1.3x 0.8x 0.2x
Senior Secured Debt / PF Adj. EBITDA 3.0x 2.4x 1.9x 1.3x 0.8x 0.2x
Total OpCo Debt / PF Adj. EBITDA 4.0x 3.4x 2.8x 2.2x 1.6x 1.0x
Total Debt / PF Adj. EBITDA 4.0x 3.4x 2.8x 2.2x 1.6x 1.0x
Total Debt / (PF Adj. EBITDA - Capex) 5.1x 4.3x 3.4x 2.7x 1.9x 1.2x
Notes: $150mm minimum cash per management guidance
Source: 2007E-2009E projections per GS Research as of 6-Aug-2007, illustrative thereafter
Take Private Alternative 43
Goldman Sachs
Preliminary LBO Returns Analysis – Case 1
4.0x PF Leverage – Illustrative for Current Credit Markets
Assumptions
Base case assumes illustrative purchase price of $40.00
— Represents a 31.6% offer price premium to current price
— Implies a 8.5x LTM EBITDA and 7.9x ‘08E EBITDA
Base case assumes 4.0x leverage of LTM EBITDA with 3.0x Bank Debt and 1.0x Subordinated Notes
— Interest rate on Bank Debt of L+250bps
— Interest rate on Subordinated Notes of L+475bps
— Assumes LIBOR as of 11-Sep-2007: 5.7%
Assumes minimum required cash balance of $150mm
Assumes 5% of equity to employees. IRR returns are to equity investors after 5% of equity to employees
Total debt raised of $1.2bn and equity contributed of $1.5bn
IRR Sensitivity to Operating Margin and Revenue2
Year 5 IRR
FY08E - FY12E Incremental Op Margin
(4.0)%(2.0)% 0.0 % 2.0 % 4.0 %
4.0 % 13.6 % 15.8 % 17.8 % 19.7 % 21.5 %
FY08E-FY12E Incr. Ann Rev Growth
2.0 % 11.6 % 13.8 % 15.8 % 17.7 % 19.5 %
0.0 % 9.7 % 11.8 % 13.8 % 15.6 % 17.4 %
(2.0)% 7.7 % 9.8 % 11.8 % 13.6 % 15.3 %
(4.0)% 5.7 % 7.8 % 9.7 % 11.5 % 13.2 %
IRR Sensitivity to Offer Price and Forward Exit Multiple1
Year 5 IRR
Offer Price
LTM EBITDA Mult. % Premium 7.7 x 8.0 x 8.5 x 8.7 x 9.0 x
20.0 % 25.0 % 31.6 % 35.0 % 40.0 %
$ 36.48 $ 38.00 $ 40.00 $41.04 $ 42.56
Exit LTM EBITDA Multiple
12.1 x 6.0 x 8.8% 7.3% 5.6% 4.7% 3.5%
14.4 x 7.0 x 12.5% 11.0% 9.2% 8.3% 7.1%
16.6 x 8.0 x 15.9% 14.3% 12.4% 11.5% 10.2%
Implied Forward P/E Mult.
18.8 x 9.0 x 18.8% 17.2% 15.3% 14.4% 13.1%
21.1 x 10.0 x 21.5% 19.9% 17.9% 17.0% 15.6%
IRR Sensitivity to Offer Price and Total Leverage3
Year 5 IRR
Offer Price
LTM EBITDA Mult. % Premium 7.7 x 8.0 x 8.5 x 8.7 x 9.0 x
20.0 % 25.0 % 31.6 % 35.0 % 40.0 %
$ 36.48 $ 38.00 $ 40.00 $ 41.04 $ 42.56
Leverage 4.0 x 15.0% 14.4% 13.8% 13.5% 13.1%
4.5 x 15.9% 15.3% 14.5% 14.1% 13.6%
5.0 x 17.1% 16.2% 15.3% 14.9% 14.3%
Total 5.5 x 18.5% 17.5% 16.3% 15.8% 15.1%
6.0 x 20.4% 19.0% 17.6% 16.9% 16.1%
1 Assumes 4.0x leverage
2 Assumes 4.0x leverage and entry and exit at 8.5x LTM EBITDA.
3 Assumes exit multiple equal to entry multiple. Assumes bank and sub spreads do not vary with increasing total leverage for illustrative purposes
Take Private Alternative 44
Goldman Sachs
Pro Forma LBO Capitalization – Case 2
$40 Per Share Purchase Price, 6.0x Leverage – Illustrative for “Normalized” Credit Markets ($ in millions)
Getty LBO Dec-07 Adjustments Pro Forma Dec-07 % of Cap x2007PF Adj. EBITDA Expected Rating Illustrative Pricing
Cash and Cash Equivalents $289 ($139) $150
Revolving Credit Facility $120 ($120) $0 0.0% 0.0x
New First Lien Term Loan 0 1,029 1,029 37.7% 3.5x BB+/BB L + 362.5
First Lien Senior Secured Debt $120 $1,029 37.7% 3.5x
Second Lien Debt 0 0 0 0.0% 3.5x
Senior Secured Debt $120 $1,029 37.7% 3.5x
Senior Notes 0 735 735 27.0% 6.0x B-/CCC+ 12.6%
Extant Convert 265 (265) 0 0.0% 6.0x
Other Debt 0 0 0 0.0% 6.0x
Total OpCo Debt $385 $1,764 64.7% 6.0x
Total Debt $385 1,764 64.7% 6.0x
New / Rollover Equity 0 963 963 35.3% 9.3x
Total Capitalization $385 $2,728 100.0% 9.3x
Getty PF EBITDA PF. Adj. EBITDA
LTM Adj. EBITDA $294.1 $294.1 $294.1
LTM Capex (ex - Acquisitions) 62.5 62.5 62.5
LTM PF Interest Expense 5.7 188.4 188.4
EBITDA / Interest Expense 51.2x 1.6x 1.6x
(EBITDA - Capex) / Interest Expense 40.3x 1.2x 1.2x
First Lien Senior Secured Debt / Adj. EBITDA 0.4x 3.5x 3.5x
Total Senior Secured Debt / Adj. EBITDA 0.4x 3.5x 3.5x
Total OpCo Debt / Adj. EBITDA 1.3x 6.0x 6.0x
Total Debt / Adj. EBITDA 1.3x 6.0x 6.0x
Total Debt / (Adj. EBITDA - Capex) 1.7x 7.6x 7.6x
Notes: $150mm minimum cash per management guidance. Total capitalization includes cash uses of $2,393mm equity value, $385mm extant debt, $150mm minimum cash, and $88mm in financing costs (2%) net of existing cash on balance sheet of $289mm
Take Private Alternative 45
Goldman Sachs
Projected Financials and Credit Statistics – Case 2
6.0x Leverage – Illustrative for “Normalized” Credit Markets ($ in millions)
2004 2005 2006 2007F 2008E 2009E 2010E 2011E 2012E
Total Revenue $ 622.4 $ 733.7 $ 806.6 $ 855.9 $ 893.2 $ 946.9 $ 995.4 $ 1,048.6 $ 1,107.1
Revenue growth 17.9% 9.9% 6.1% 4.4% 6.0% 5.1% 5.3% 5.6%
Expected Cost Savings $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
Pro Forma Cost Savings 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Pro Forma Adjusted EBITDA $ 225.9 $ 284.0 $ 313.7 $ 294.1 $ 315.8 $ 337.3 $ 354.0 $372.2 $392.3
EBITDA margin 36.3% 38.7% 38.9% 34.4% 35.4% 35.6% 35.6% 35.5% 35.4%
Free Cash Flow: Pro Forma
EBITDA $ 294.1 $ 315.8 $ 337.3 $ 354.0 $ 372.2 $ 392.3
Interest Expense 188.4 185.9 179.7 171.5 161.4 149.3
Interest Income 7.5 7.5 7.5 7.5 7.5 7.5
Cash Interest Expense, net 180.9 178.4 172.2 164.0 153.9 141.8
Cash Taxes 68.2 10.3 18.3 27.0 35.1 44.3
Capex 62.5 65.0 65.0 65.0 65.0 65.0
Increase in Working Capital (31.7) 7.5 3.9 (0.2) (0.3) (0.3)
Free Cash Flow for Debt Service $ 14.1 $ 54.6 $ 77.9 $ 98.2 $ 118.5 $ 141.5
Cumulative Free Cash Flow for Debt Service $ 68.8 $ 132.5 $ 176.1 $ 216.7 $ 260.0
Capitalization and Credit Statistics:
Revolver $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
First Lien Term Loan 1,029.3 974.6 896.7 798.6 680.0 538.5
First Lien Secured Debt $ 1,029.3 $ 974.6 $ 896.7 $ 798.6 $ 680.0 $ 538.5
Second Lien Debt $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Total Secured Debt $ 1,029.3 $ 974.6 $ 896.7 $ 798.6 $ 680.0 $ 538.5
Senior Notes $ 735.2 $ 735.2 $ 735.2 $ 735.2 $ 735.2 $ 735.2
Rollover Other Debt 0 0 0 0 0 0
Total OpCo Debt $ 1,764.5 $ 1,709.8 $ 1,631.9 $ 1,533.8 $ 1,415.2 $ 1,273.7
Total Debt 1,764.5 1,709.8 1,631.9 1,533.8 1,415.2 1,273.7
PF Adj. EBITDA / Interest Expense 1.6x 1.7x 1.9x 2.1x 2.3x 2.6x
(PF Adj. EBITDA - Capex) / Interest Expense 1.2x 1.3x 1.5x 1.7x 1.9x 2.2x
First Lien Senior Secured Debt / PF Adj. EBITDA 3.5x 3.1x 2.7x 2.3x 1.8x 1.4x
Senior Secured Debt / PF Adj. EBITDA 3.5x 3.1x 2.7x 2.3x 1.8x 1.4x
Total OpCo Debt / PF Adj. EBITDA 6.0x 5.4x 4.8x 4.3x 3.8x 3.2x
Total Debt / PF Adj. EBITDA 6.0x 5.4x 4.8x 4.3x 3.8x 3.2x
Total Debt / (PF Adj. EBITDA - Capex) 7.6x 6.8x 6.0x 5.3x 4.6x 3.9x
Notes: $150mm minimum cash per management guidance
Source: 2007E-2009E projections per GS Research as of 6-Aug-2007, illustrative thereafter
Take Private Alternative 46
Goldman Sachs
Preliminary LBO Returns Analysis – Case 2
6.0x Leverage - Illustrative for “Normalized” Credit Markets
Assumptions
Base case assumes illustrative offer price of $40.00
— Represents a 31.6% offer price premium to current price
— Implies a 8.5x LTM EBITDA and 7.9x ‘08E EBITDA
Base case assumes 6.0x leverage of LTM EBITDA with 3.5x Bank Debt and 2.5x Subordinated Notes
— Interest rate on Bank Debt of L+363bps
— Interest rate on Subordinated Notes of L+688bps
— Assumes LIBOR as of 11-Sep-2007: 5.7%
Assumes minimum required cash balance of $150mm
Assumes 5% of equity to employees. IRR returns are to equity investors after 5% of equity to employees Total debt raised of $1.8bn and equity contributed of $1.0bn
IRR Sensitivity to Operating Margin and Revenue2
Year 5 IRR
FY08E - FY12E Incremental Op Margin
(4.0)%(2.0)% 0.0 % 2.0 % 4.0 %
4.0 % 16.4 % 19.6 % 22.4 % 25.0 % 27.5 %
FY08E-FY12E Incr. Ann Rev Growth
2.0 % 13.5 % 16.7 % 19.6 % 22.3 % 24.7 %
0.0 % 10.5 % 13.8 % 16.7 % 19.4 % 21.8 %
(2.0)% 7.3 % 10.8 % 13.7 % 16.5 % 18.9 %
(4.0)% 3.9 % 7.6 % 10.7 % 13.4 % 16.0 %
IRR Sensitivity to Offer Price and Forward Exit Multiple1
Year 5 IRR
Offer Price
LTM EBITDA Mult. % Premium 7.7 x 8.0 x 8.5 x 8.7 x 9.0 x
20.0 % 25.0 % 31.6 % 35.0 % 40.0 %
$ 36.48 $ 38.00 $ 40.00 $ 41.04 $ 42.56
Implied Forward P/E Mult. 11.4 x 6.0 x 9.3% 6.8% 3.9% 2.6% 0.8%
15.1 x Exit LTM EBITDA Multiple 7.0 x 15.6% 12.9% 9.9% 8.5% 6.6%
18.7 x 8.0 x 20.7% 17.9% 14.7% 13.3% 11.3%
22.4 x 9.0 x 25.1% 22.2% 18.9% 17.4% 15.3%
26.0 x 10.0 x 28.9% 25.9% 22.5% 21.0% 18.9%
IRR Sensitivity to Offer Price and Total Leverage3
Year 5 IRR
Offer Price
LTM EBITDA Mult. % Premium 7.7 x 8.0 x 8.5 x 8.7 x 9.0 x
20.0 % 25.0 % 31.6 % 35.0 % 40.0 %
$ 36.48 $ 38.00 $ 40.00 $ 41.04 $ 42.56
Total Leverage 4.0 x 14.8% 14.2% 13.6% 13.3% 12.9%
4.5 x 15.6% 14.9% 14.1% 13.8% 13.3%
5.0 x 16.5% 15.7% 14.8% 14.4% 13.9%
5.5 x 17.8% 16.8% 15.7% 15.2% 14.5%
6.0 x 19.4% 18.1% 16.7% 16.1% 15.3%
1 Assumes 6.0x leverage
2 Assumes 6.0x leverage and entry and exit at 8.5x LTM EBITDA
3 Assumes exit multiple equal to entry multiple. Assumes bank and sub spreads do not vary with increasing total leverage for illustrative purposes
Take Private Alternative 47
Goldman Sachs
Bank Debt Rate Sensitivity Analysis
4.0x Total Leverage Scenario – 3.0x Bank Debt
Offer Price
xLTM EBITDA% Premium 7.7 x 8.0 x 8.5 x 8.7 x 9.0 x
20.0 % 25.0 % 31.6 % 35.0 % 40.0 %
$ 36.48 $ 38.00 $ 40.00 $ 41.04 $ 42.56
2.25% 15.1% 14.5% 13.8% 13.5% 13.1%
Bank 2.50% 15.0% 14.4% 13.8% 13.5% 13.1%
Spread 2.75% 14.9% 14.4% 13.7% 13.4% 13.0%
3.00% 14.9% 14.3% 13.7% 13.4% 13.0%
6.0x Total Leverage Scenario – 3.5x Bank Debt
Offer Price
xLTM EBITDA% Premium 7.7 x 8.0 x 8.5 x 8.7 x 9.0 x
20.0 % 25.0 % 31.6 % 35.0 % 40.0 %
$ 36.48 $ 38.00 $ 40.00 $ 41.04 $ 42.56
3.25% 19.7% 18.4% 17.0% 16.3% 15.5%
Bank 3.50% 19.5% 18.2% 16.8% 16.2% 15.4%
Spread 3.75% 19.3% 18.0% 16.6% 16.0% 15.3%
4.00% 19.1% 17.8% 16.5% 15.9% 15.1%
Note: Assumes LIBOR as of 11-Sep-2007 of 5.7%
Take Private Alternative 48
Goldman Sachs
Sample of Potentially Interested Financial Sponsors
Firm Fund Size ($bn) Selected Recent Investments Key Contacts
Nielsen Tony James The Blackstone Group 20.0 Sirius Michael Chae
Travelport Jon Hodge
Primedia Jamie Green KKR 16.1 Seven Media Group Alex Navab
Sungard Adam Clammer
Hotwire Jim Coulter TEXAS PACIFIC GROUP 15.2 MGM Gene Frantz
Univision Kelvin Davis
Artisan Entertainment
Steve Pagliuca BainCapital 12.0 Clear Channel
Ian Loring
Warner Music Group
MGM Jonathan Nelson PROVIDENCEEQUITY 12.0 Univision Glenn Creamer
Warner Music Group Paul Salem
Digitas
Philip Hammarskjold HELMAN & FRIEDMAN 8.4 DoubleClick
Andy Ballard
Young and Rubicam
Journal Register Jim Neary WARBURGPINCUS 8.0 Orion Pictures Mark Colodny
Sterling Publishing Justin Sadrian
Focus Media
Jim Attwood THE CARLYLE GROUP 7.9 Nielsen
Todd Newnam
R.H. Donnelley
Sungard
David Roux SLP SILVER LAKE PARTNERS 5.9 Thomson
Hollie Moore
Sabre
Neiman Marcus Peter Nolan LG & P 5.3
Rand McNally Michael Wong
AMI Semiconductor DJ Deb FP 2.5
WebTrends David Golob
Take Private Alternative 49
Goldman Sachs
New Challenges to LBO Transactions Have Arisen
ISS
ISS’s Contentious List highlights deals that are facing opposition or which ISS views to have “risks”
The list currently includes over 55% of pending LBO transactions
ISS has increasingly recommended votes against LBO transactions, including Clear Channel, Cornell Companies, Genesis Healthcare, Lone Star Steakhouse, Riviera Holdings and Shopko
Increased Disclosure
Rule 13e-3 requires exhaustive public disclosure
Courts are increasingly demanding detailed disclosure of projections, interactions between sponsors and management and other aspects of the process
Hedge Fund Activism
Trying to obtain “alpha” returns by demanding a higher price or asserting appraisal rights
Criticism of transactions, analyses and processes in public filings
Increasing Dissatisfaction from Mutual Funds
Dissatisfaction with high returns achieved by sponsors after public company is taken “private”
Skepticism about management’s role in process
Fewer U.S. public companies means fewer opportunities to invest
Mutual fund shareholders are sometimes publicly reported to be opposing certain LBO transactions
Increased Court Scrutiny
Litigation continues to target “going private” deals due to perceived settlement value
Recent court cases are focusing on the risks relating to LBO processes
Appraisal rights offer opportunity for court to recalculate the value of the company (plus interest) years after the deal closes
Take Private Alternative 50
Goldman Sachs
IV. Strategic Sale Alternatives
Strategic Sale Alternatives 51
Goldman Sachs
Potential Strategic Buyers
Illustrative Sample List
Market Cap Enterprise Value Cash ‘08 EV/EBITDA ‘08 P/E Growth IBES LT EPS
Adobe $27,172 $ 24,848 $ 2,324 15.8x 25.4x 15.0%
Google 161,901 152,498 9,404 16.1 26.8 30.0
News Corporation 66,657 46,9931 7,6542 7.3 15.5 19.0
REUTERS 16,924 17,599 661 13.7 21.9 22.4
SONY 47,404 46,022 11,222 5.7 14.6 N/A
1 Adjusted enterprise value deducts value of holdings in public assets. Market data as of 11-Sep-2007. Multiples based on IBES median estimates. Market cap and Enterprise value are fully diluted
2 Not pro forma for $5.6bn Dow Jones acquisition – expected to close calendar Q4 2007 Source: Public filings and IBES
Strategic Sale Alternatives 52
Goldman Sachs
Pro Forma Financial Impact
Adobe Acquires Getty
100% Stock
Purchase Price Per Share $ 38.00 $ 41.00 $ 44.00
Premium to Market Price 25% 35% 45%
Equity Consideration - Diluted $ 2,271 $ 2,455 $ 2,639
Enterprise Value 2,367 2,551 2,735
Sources of Financing
Cash as Source of Purchase Price1 $ 0 $ 0 $ 0
Amount of New Debt Required 0 0 0
Financing Fees 0 0 0
Total Incremental Debt Required $ 0 $ 0 $ 0
Ownership
Acquiror New Shares Issued - Diluted 51.9 56.1 60.3
Target’s Ownership in Pro Forma 7.7% 8.3% 8.9%
2008E Accretion / Dilution2
Acquiror Standalone EPS $ 1.72 $ 1.72 $ 1.72
Pro Forma Combined EPS 1.79 1.78 1.77
Accretion / Dilution (%) 4.2% 3.5% 2.9%
Pre-Tax Synergies to EPS Breakeven $(65.4) $(55.7) $(45.9)
as a % of Target’s SG&A N.M. N.M. N.M.
100% Cash
Purchase Price Per Share $ 38.00 $ 41.00 $ 44.00
Premium to Market Price 25% 35% 45%
Equity Consideration - Diluted $ 2,271 $ 2,455 $ 2,639
Enterprise Value 2,367 2,551 2,735
Sources of Financing
Cash as Source of Purchase Price1 $ 1,451 $ 1,451 $ 1,451
Amount of New Debt Required 820 1,004 1,188
Financing Fees 16 20 24
Total Incremental Debt Required $ 837 $ 1,024 $ 1,212
Ownership
Acquiror New Shares Issued - Diluted 0.0 0.0 0.0
Target’s Ownership in Pro Forma 0.0% 0.0% 0.0%
2008E Accretion / Dilution2
Acquiror Standalone EPS $ 1.72 $ 1.72 $ 1.72
Pro Forma Combined EPS 1.77 1.75 1.74
Accretion / Dilution (%) 3.1% 2.0% 0.9%
Pre-Tax Synergies to EPS Breakeven $(44.3) $(28.9) $(13.5)
as a % of Target’s SG&A N.M. N.M. N.M.
1Assumes use of 100% of target’s cash and up to 50% of acquiror’s cash.
2 Acquiror assumes IBES estimates as of 11-Sep-2007 and Getty Images assumes GS Research as of 6-Aug-2007. Assumes acquiror’s tax rate of 25.6%, 5.0% opportunity cost of cash and 8.0% cost of debt. Pre-tax synergies to breakeven as % of Target’s SG&A based on target’s LTM SG&A
Strategic Sale Alternatives 53
Goldman Sachs
Pro Forma Financial Impact
Google Acquires Getty
100% Stock
Purchase Price Per Share $ 38.00 $ 41.00 $ 44.00
Premium to Market Price 25% 35% 45%
Equity Consideration - Diluted $ 2,271 $ 2,455 $ 2,639
Enterprise Value 2,367 2,551 2,735
Sources of Financing
Cash as Source of Purchase Price1 $ 0 $ 0 $ 0
Amount of New Debt Required 0 0 0
Financing Fees 0 0 0
Total Incremental Debt Required $ 0 $ 0 $ 0
Ownership
Acquiror New Shares Issued - Diluted 4.4 4.7 5.1
Target’s Ownership in Pro Forma 1.4% 1.5% 1.6%
2008E Accretion / Dilution2
Acquiror Standalone EPS $ 19.46 $ 19.46 $ 19.46
Pro Forma Combined EPS 19.62 19.60 19.57
Accretion / Dilution (%) 0.8% 0.7% 0.6%
Pre-Tax Synergies to EPS Breakeven $(71.8) $(62.5) $(53.3)
as a % of Target’s SG&A N.M. N.M. N.M.
100% Cash
Purchase Price Per Share $ 38.00 $ 41.00 $ 44.00
Premium to Market Price 25% 35% 45%
Equity Consideration - Diluted $ 2,271 $ 2,455 $ 2,639
Enterprise Value 2,367 2,551 2,735
Sources of Financing
Cash as Source of Purchase Price1 $ 2,271 $ 2,455 $ 2,639
Amount of New Debt Required 0 0 0
Financing Fees 0 0 0
Total Incremental Debt Required $ 0 $ 0 $ 0
Ownership
Acquiror New Shares Issued - Diluted 0.0 0.0 0.0
Target’s Ownership in Pro Forma 0.0% 0.0% 0.0%
2008E Accretion / Dilution2
Acquiror Standalone EPS $ 19.46 $ 19.46 $ 19.46
Pro Forma Combined EPS 19.62 19.60 19.58
Accretion / Dilution (%) 0.9% 0.7% 0.6%
Pre-Tax Synergies to EPS Breakeven $(72.5) $(63.4) $(54.2)
as a % of Target’s SG&A N.M. N.M. N.M.
1Assumes use of 100% of target’s cash and up to 50% of acquiror’s cash.
2 Acquiror assumes IBES estimates as of 11-Sep-2007 and Getty Images assumes GS Research as of 6-Aug-2007. Assumes acquiror’s tax rate of 25.9%, 5% opportunity cost of cash and 8% cost of debt. Pre-tax synergies to breakeven as % of Target’s SG&A based on target’s LTM SG&A
Strategic Sale Alternatives 54
Goldman Sachs
Pro Forma Financial Impact
News Corporation Acquires Getty
100% Stock
Purchase Price Per Share $ 38.00 $ 41.00 $ 44.00
Premium to Market Price 25% 35% 45%
Equity Consideration - Diluted $ 2,271 $ 2,455 $ 2,639
Enterprise Value 2,367 2,551 2,735
Sources of Financing
Cash as Source of Purchase Price1 $ 0 $ 0 $ 0
Amount of New Debt Required 0 0 0
Financing Fees 0 0 0
Total Incremental Debt Required $ 0 $ 0 $ 0
Ownership
Acquiror New Shares Issued - Diluted 107.9 116.6 125.3
Target’s Ownership in Pro Forma 3.3% 3.6% 3.8%
2008E Accretion / Dilution2
Acquiror Standalone EPS $ 1.36 $ 1.36 $ 1.36
Pro Forma Combined EPS 1.35 1.35 1.35
Accretion / Dilution (%) (0.2)% (0.5)% (0.7)%
Pre-Tax Synergies to EPS Breakeven $ 13.1 $ 31.9 $ 50.6
as a % of Target’s SG&A 4.1% 10.0% 16.0%
50/50% Stock/Cash
Purchase Price Per Share $ 38.00 $ 41.00 $ 44.00
Premium to Market Price 25% 35% 45%
Equity Consideration - Diluted $ 2,271 $ 2,455 $ 2,639
Enterprise Value 2,367 2,551 2,735
Sources of Financing
Cash as Source of Purchase Price1 $ 1,135 $ 1,227 $ 1,319
Amount of New Debt Required 0 0 0
Financing Fees 0 0 0
Total Incremental Debt Required $ 0 $ 0 $ 0
Ownership
Acquiror New Shares Issued - Diluted 53.9 58.3 62.7
Target’s Ownership in Pro Forma 1.7% 1.8% 1.9%
2008E Accretion / Dilution2
Acquiror Standalone EPS $ 1.36 $ 1.36 $ 1.36
Pro Forma Combined EPS 1.36 1.36 1.36
Accretion / Dilution (%) 0.7% 0.5% 0.3%
Pre-Tax Synergies to EPS Breakeven $(46.2) $(32.2) $(18.2)
as a % of Target’s SG&A N.M. N.M. N.M.
1Assumes use of 100% of target’s cash and up to 50% of acquiror’s cash.
2Acquiror assumes IBES estimates as of 11-Sep-2007 and Getty Images assumes GS Research as of 6-Aug-2007. Assumes acquiror’s tax rate of 37.0%, 5% opportunity cost of cash and 8% cost of debt. Pre-tax synergies to breakeven as % of Target’s SG&A based on target’s LTM SG&A. News Corporation not pro forma for Dow Jones acquisition
Strategic Sale Alternatives 55
Goldman Sachs
Pro Forma Financial Impact
Reuters Acquires Getty
100% Stock
Purchase Price Per Share $ 38.00 $ 41.00 $ 44.00
Premium to Market Price 25% 35% 45%
Equity Consideration - Diluted $ 2,271 $ 2,455 $ 2,639
Enterprise Value 2,367 2,551 2,735
Sources of Financing
Cash as Source of Purchase Price1 $ 0 $ 0 $ 0
Amount of New Debt Required 0 0 0
Financing Fees 0 0 0
Total Incremental Debt Required $ 0 $ 0 $ 0
Ownership
Acquiror New Shares Issued - Diluted 176.6 190.9 205.2
Target’s Ownership in Pro Forma 11.8% 12.7% 13.5%
2008E Accretion / Dilution2
Acquiror Standalone EPS $ 0.59 $ 0.59 $ 0.59
Pro Forma Combined EPS 0.61 0.61 0.60
Accretion / Dilution (%) 4.3% 3.2% 2.2%
Pre-Tax Synergies to EPS Breakeven $(48.9) $(36.9) $(24.9)
as a % of Target’s SG&A N.M. N.M. N.M.
50/50% Stock/Cash
Purchase Price Per Share $ 38.00 $ 41.00 $ 44.00
Premium to Market Price 25% 35% 45%
Equity Consideration - Diluted $ 2,271 $ 2,455 $ 2,639
Enterprise Value 2,367 2,551 2,735
Sources of Financing
Cash as Source of Purchase Price1 $ 620 $ 620 $ 620
Amount of New Debt Required 515 607 699
Financing Fees 10 12 14
Total Incremental Debt Required $ 525 $ 619 $ 713
Ownership
Acquiror New Shares Issued - Diluted 88.3 95.4 102.6
Target’s Ownership in Pro Forma 6.3% 6.8% 7.2%
2008E Accretion / Dilution2
Acquiror Standalone EPS $ 0.59 $ 0.59 $ 0.59
Pro Forma Combined EPS 0.61 0.61 0.60
Accretion / Dilution (%) 4.7% 3.3% 2.0%
Pre-Tax Synergies to EPS Breakeven $(48.9) $(35.2) $(21.5)
as a % of Target’s SG&A N.M. N.M. N.M.
1Assumes use of 100% of target’s cash and up to 50% of acquiror’s cash.
2 Acquiror assumes IBES estimates as of 11-Sep-2007 and Getty Images assumes GS Research as of 6-Aug-2007. Assumes acquiror’s tax rate of 30%, 5% opportunity cost of cash and 8% cost of debt.
Pre-tax synergies to breakeven as % of Target’s SG&A based on target’s LTM SG&A.
Strategic Sale Alternatives 56
Goldman Sachs
Pro Forma Financial Impact
Sony Acquires Getty
100% Stock
Purchase Price Per Share $ 38.00 $ 41.00 $ 44.00
Premium to Market Price 25% 35% 45%
Equity Consideration - Diluted $ 2,271 $ 2,455 $ 2,639
Enterprise Value 2,367 2,551 2,735
Sources of Financing
Cash as Source of Purchase Price1 $ 0 $ 0 $ 0
Amount of New Debt Required 0 0 0
Financing Fees 0 0 0
Total Incremental Debt Required $ 0 $ 0 $ 0
Ownership
Acquiror New Shares Issued - Diluted 48.1 52.0 55.9
Target’s Ownership in Pro Forma 4.6% 4.9% 5.3%
2008E Accretion / Dilution2
Acquiror Standalone EPS $ 3.25 $ 3.25 $ 3.25
Pro Forma Combined EPS 3.23 3.22 3.21
Accretion / Dilution (%) (0.5)% (0.8)% (1.1)%
Pre-Tax Synergies to EPS Breakeven $ 31.2 $ 53.0 $ 74.8
as a % of Target’s SG&A 9.8% 16.7% 23.6%
100% Cash
Purchase Price Per Share $ 38.00 $ 41.00 $ 44.00
Premium to Market Price 25% 35% 45%
Equity Consideration - Diluted $ 2,271 $ 2,455 $ 2,639
Enterprise Value 2,367 2,551 2,735
Sources of Financing
Cash as Source of Purchase Price1 $ 2,271 $ 2,455 $ 2,639
Amount of New Debt Required 0 0 0
Financing Fees 0 0 0
Total Incremental Debt Required $ 0 $ 0 $ 0
Ownership
Acquiror New Shares Issued - Diluted 0.0 0.0 0.0
Target’s Ownership in Pro Forma 0.0% 0.0% 0.0%
2008E Accretion / Dilution2
Acquiror Standalone EPS $ 3.25 $ 3.25 $ 3.25
Pro Forma Combined EPS 3.31 3.30 3.30
Accretion / Dilution (%) 1.9% 1.8% 1.6%
Pre-Tax Synergies to EPS Breakeven $(124.3) $(115.1) $(105.9)
as a % of Target’s SG&A N.M. N.M. N.M.
1Assumes use of 100% of target’s cash and up to 50% of acquiror’s cash.
2 Acquiror assumes IBES estimates as of 11-Sep-2007 and Getty Images assumes GS Research as of 6-Aug-2007. Assumes acquiror’s tax rate of 42%, 5% opportunity cost of cash and 8% cost of debt.
Pre-tax synergies to breakeven as % of Target’s SG&A based on target’s LTM SG&A.
Strategic Sale Alternatives 57
Goldman Sachs
Appendix A: Comparison of Selected Companies
Comparison of Selected Companies 58
Goldman Sachs
Comparison of Selected Companies
($ in millions, except per share data)
Company Closing Price 09/11/07 % of 52 Week High Equity Market Cap (1) Enterprise Value (1) Enterprise Value Multiples (2)
Sales EBITDA Cash Flow Per Share Multiples (3) Calendarized P/E Multiples (2) 5-Year EPS CAGR (2) 2008 PEG 2007 EBITDA Margin (2)
2007 2008 2007 2008 2007 2008 2007 2008
Getty Images $ 30.40 54 % $ 1,808 $ 1,905 2.2 x 2.1 x 6.3 x 5.7 x 10.2 x 9.0 x 14.0 x 12.5 x 12.5 % 1.0 x 35.2 %
Digital Media/Content
Adobe Systems $ 43.74 98 % $ 27,172 $ 24,848 8.2 x 7.3 x 17.9 x 15.8 x 22.5 x 22.8 x 29.0 x 25.4 x 15.0 % 1.7 x 45.9 %
Avid Technology 28.55 65 1,182 1,022 1.1 1.0 12.9 10.1 24.4 20.7 22.0 18.6 12.0 1.5 8.6
CNET 7.08 71 1,093 1,083 2.6 2.3 12.2 10.5 NA NA 5.4 44.3 15.0 3.0 21.3
Jupitermedia 6.17 61 227 285 2.0 1.9 10.9 8.9 NA NA 68.6 30.9 10.0 3.1 18.5
Mean 74 % 3.5 x 3.1 x 13.5 x 11.3 x 23.5 x 21.7 x 31.2 x 29.8 x 13.0 % 2.3 x 23.6 %
Median 71 2.3 2.1 12.5 10.3 23.5 21.7 25.5 28.1 13.5 2.3 19.9
Marketing Services
Omnicom Group $ 50.86 93 % $ 16,713 $ 18,959 1.5 x 1.4 x 10.3 x 9.6 x 11.0 x 11.1 x 17.3 x 15.5 x 12.0 % 1.3 x 14.7 %
WPP Group 14.53 91 17,724 20,867 1.7 1.6 10.0 9.1 23.3 20.4 15.9 13.9 10.6 1.3 16.9
Interpublic Group 10.35 75 4,880 5,779 0.9 0.8 9.7 6.7 11.0 8.6 34.5 18.2 10.0 1.8 9.2
Harte Hanks 23.28 81 1,737 1,915 1.6 1.6 9.3 8.9 12.1 10.9 18.0 16.1 10.3 1.6 17.3
Mean 85 % 1.4 x 1.3 x 9.8 x 8.5 x 14.3 x 12.8 x 21.4 x 15.9 x 10.7 % 1.5 x 14.5 %
Median 86 1.6 1.5 9.8 9.0 11.6 11.0 17.7 15.8 10.5 1.4 15.8
High Growth Tech
Yahoo! $ 23.71 74 % $ 33,494 $ 31,860 6.3 x 5.5 x 24.3 x 20.7 x 22.3 x 19.4 x 56.5 x 43.9 x 24.7 % 1.8 x 26.0 %
Yahoo! (Adjusted) (4) 24,660 4.9 4.2 18.8 16.0
Valueclick 20.30 58 2,184 1,924 3.0 2.6 11.3 9.5 17.5 14.7 27.1 22.8 20.0 1.1 26.2
Mean 66 % 3.9 x 3.4 x 15.0 x 12.8 x 19.9 x 17.0 x 41.8 x 33.4 x 22.4 % 1.5 x 26.1 %
Median 66 3.9 3.4 15.0 12.8 19.9 17.0 41.8 33.4 22.4 1.5 26.1
Overall Comparative Metrics
Mean* 77 % 2.7 x 2.5 x 12.3 x 10.5 x 18.0 x 16.1 x 29.4 x 24.9 x 14.0 % 1.8 x 20.5 %
Median* 74 1.8 1.7 11.1 9.6 19.9 17.0 24.5 20.7 12.0 1.6 x 17.9
* Note: Excludes Getty Images. Where adjusted financials available, excludes unadjusted financials from calculation.
(1) Source: Latest publicly available financial statements. Equity market cap based on diluted shares outstanding.
(2) Sources: All projected sales, EBITDA and EPS estimates have been calendarized. Projected sales, EBITDA and EPS source: IBES median estimates.
(3) Cash flow per share estimates per IBES.
(4) Yahoo! enterprise value adjusted for $7,200mm combined valuation of the company’s 34% interest in Yahoo! Japan and its NOL.
Comparison of Selected Companies 59