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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 November 28, 2007 |
Exhibit (c) (6)
Goldman Sachs
Project Closeup
Board Discussion Materials
Goldman, Sachs & Co. 28-Nov-2007
Goldman Sachs
I. Process Update II. Valuation Update III. LBO Returns Analysis IV. Phase 2 and Next Steps
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. Process Update
Process Update 3
Goldman Sachs
Process Update
Contacted five financial sponsors regarding potential interest in evaluating the acquisition of Getty Images
— Selected sponsors based on historical interest in the Company and knowledge of the industry
— Each sponsor expressed interest in the opportunity
Conducted management presentations and follow-up sessions with five financial sponsors
— Provided over 55 hours of executive team time to sponsors (4 sessions with each sponsor)
— Provided management presentation, financial model and responded to selected follow-up due diligence requests
Maintained level playing field
— Excluded outside consultants and advisors during Phase 1
— Required independent bids
— Participants were not allowed to speak to potential financing sources
— Participants were prohibited from discussing rollover, incentive and employment opportunities with management
Provided assumptions for participant to use in bids
— Provided working assumption of 5× total leverage to 2007E EBITDA
Phase 1 deadline set for November 26, 2007
— Received 5 bids
Process Update 4
Goldman Sachs
Summary of Cash Bids
All Phase 1 participants submitted preliminary bids on November 26th
— Sponsor A: $45 per share
— Sponsor D: $38-$40 per share
— H&F: $37-$40 per share
— Sponsor B: $37-$40 per share
— Sponsor C: $40 per share
Each sponsor assumed 5x leverage
Bids are subject to change
Process Update 5
Goldman Sachs
Overview of Proposals
($ in millions, except per share amounts)
Current Market (1):
Sponsor A
Sponsor C
Sponsor D
Hellman & Friedman
Sponsor B
Current Market (1): Sponsor A Sponsor C Sponsor D Hellman & Friedman Sponsor B
Price Per Share (2) $ 28.81 $ 45.00 $ 40.00 $ 38.00 $ 40.00 $ 37.00 $40.00 $ 37.00 $ 40.00
Premium Analysis
Current ($ 28.81) 0.0% 56.2% 38.8% 31.9% 38.8% 28.4% 38.8% 28.4% 38.8%
10 Day Average ( $ 30.16) (4.5)% 49.2% 32.6% 26.0% 32.6% 22.7% 32.6% 22.7% 32.6%
30 Day Average ( $ 30.54) (5.7)% 47.4% 31.0% 24.4% 31.0% 21.2% 31.0% 21.2% 31.0%
Since Oct-10 BoD Meeting ($29.68) (2.9)% 51.6% 34.8% 28.0% 34.8% 24.7% 34.8% 24.7% 34.8%
90 Day Average ( $ 29.38) (1.9)% 53.2% 36.2% 29.3% 36.2% 25.9% 36.2% 25.9% 36.2%
180 Day Average ( $ 36.91) (21.9)% 21.9% 8.4% 3.0% 8.4% 0.2% 8.4% 0.2% 8.4%
YTD Average ($ 42.21) (31.7)% 6.6%(5.2)%(10.0)% (5.2)%(12.3)% (5.2)%(12.3)% (5.2)%
FD Share Count (2) 59.7 60.1 60.0 59.9 60.0 59.9 60.0 59.9 60.0
Equity Value $ 1,719 $ 2,705 $ 2,398 $ 2,276 $ 2,398 $ 2,215 $ 2,398 $ 2,215 $ 2,398
Net Debt - Current (3) 42 42 42 42 42 42 42 42 42
Enterprise Value 1,761 2,746 2,440 2,318 2,440 2,257 2,440 2,257 2,440
Multiples Analysis
EBITDA -Management Metric (4)
CY2007E (Adj) $ 316 5.6x 8.7x 7.7x 7.3x 7.7 7.2x 7.7x 7.2x 7.7x
CY2008E (Adj) $ 334 5.3x 8.2x 7.3x 6.9x 7.3x 6.8x 7.3x 6.8x 7.3x
EBITDA - IBES
CY2007E $ 306 5.8x 9.0x 8.0x 7.6x 8.0x 7.4x 8.0x 7.4x 8.0x
CY2008E $ 334 5.3× 8.2x 7.3x 6.9x 7.3x 6.8x 7.3x 6.8x 7.3x
EPS - Management
CY2007E $ 2.20 13.1 x 20.5 x 18.2 x 17.3 x 18.2 x 16.8 x 18.2 x 16.8 x 18.2 x
CY2008E $ 2.23 12.9 x 20.2 x 17.9 x 17.0 x 17.9 x 16.6 x 17.9 x 16.6 x 17.9 x
EPS - IBES
CY2007E $ 2.10 13.7 x 21.4 x 19.0 x 18.1 x 19.0 x 17.6 x 19.0 x 17.6 x 19.0 x
CY2008E $ 2.25 12.8 x 20.0 x 17.8 x 16.9 x 17.8 x 16.4 x 17.8 x
1 As of 26-Nov-2007.
2 Share count and options per GYI management.
3 Cash and debt information per management as of 30-Sep-2007.
4 Management figures per GYI and Street figures based on IBES median estimates.
Note: Management and IBES EBITDA adds back ESO expense of $14.6mm and $19.9mm for 2007 and 2008 respectively. Management and IBES EPS estimates include ESO expense. Unadjusted
IBES EBITDA for 2007 = $291.5mm and for 2008 = $314.0mm. GYI management projections not proforma for convert refinancing. IBES EBITDA and EPS estimates include analysts who do not add back the $5.4mm related to JUPM transaction and stock option review expenses.
Process Update 6
Goldman Sachs
Potential Strategic Buyers
Illustrative Sample List
Market Cap Enterprise Value Cash ‘08 EV/EBITDA ‘08 P/E IBES LT EPS Growth
Adobe $ 24,499 $ 22,544 $ 1,956 13.9x 22.2x 15.0%
Google 213,197 203,834 9,362 20.5 31.9 30.0
News Corporation 52,310 49,536 1 6,9442 7.5 15.4 18.8
Reuters 15,699 16,730 759 13.0 20.5 22.4
Sony 51,104 53,337 8,927 6.2 15.6 32.9
1 Adjusted enterprise value deducts value of holdings in public assets. Market data as of 26-Nov-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
Process Update 7
Goldman Sachs
II. Valuation Update
Valuation Update 8
Goldman Sachs
Trading Performance Update
1-Year Stock Price
Averages
3 yr: $ 61.06
1 yr: $ 42.32
6 mth: $ 36.91
3 mth: $ 29.38
1 mth: $ 30.54
Closing Price (USD)
$60 $50 $40 $30 $20 $28.81
Nov- Jan- Mar- Apr- Jun- Aug- Sep- Nov-2006 2007 2007 2007 2007 2007 2007 2007
1-Year LTM EBITDA Multiple
Averages
LTM EBITDA Multiple
11x
3 yr: 13.1x 10x 1 yr: 8.4x
9x 6 mth: 7.5x 3 mth: 6.1x 8x 1 mth: 6.3x
7x
6x 6.0x
5x
Nov- Jan- Mar- Apr- Jun- Aug- Sep- Nov-2006 2007 2007 2007 2007 2007 2007 2007
1-Year NTM P/E Multiple
NTM P/E
24.0x
21.0x
18.0x
15.0x
12.0x
9.0x
Averages
3 yr: 24.7x 1 yr: 17.1x 6 mth: 15.6x 3 mth: 13.5x 1 mth: 14.1x
Nov- Jan- Mar- Apr- Jun- Aug- Oct- Nov-2006 2007 2007 2007 2007 2007 2007 2007
Source: Bloomberg, Capital IQ and IBES
Note: Daily date from 24-Nov-2006 to 26-Nov-2007
Valuation Update 9
Goldman Sachs
GYI Historical and Projected Financials
Earnings Per Share
$ 3.00
$ 2.50
$ 2.00
$ 1.50
$ 1.00
$ 0.50
$ 0.00
$ (0.50)
$ (1.00)
$ (1.50)
$ (2.00)
Street Case Management Case
‘07-’09 CAGR 8.0% 8.9%
‘02-’07 EPS CAGR 39.3% -
‘05-’07 EPS CAGR(4.0)% -
Street Case Management Case
CY 2001A CY 2002A CY 2003A CY 2004A CY 2005A CY 2006A CY 2007E CY 2008E CY 2009E
EPS Comparison
Street Case - EPS $ (1.84) $ 0.40 $ 1.16 $ 1.72 $ 2.28 $ 2.11 $ 2.10 $ 2.25 $ 2.45
Street Case - EPS Growth NM NM 190.0 % 48.3 % 32.6 %(7.5)%(0.5)% 7.1 % 8.9 %
Mgmt Case - EPS $ (1.84) $ 0.40 $ 1.16 $ 1.72 $ 2.28 $ 2.11 $ 2.20 $ 2.23 $ 2.61
Mgmt Case - EPS Growth NM NM 190.0 % 48.3 % 32.6 %(7.5)% 4.3 % 1.3 % 17.0 %
Source: Company filings and Capital IQ for historical, IBES Median and GYI Management for projections
Note: GYI management projections not proforma for convert refinancing. IBES EPS estimates include analysts who do not add back the $5.4mm related to JUPM transaction and stock option review expenses.
Valuation Update 10
Goldman Sachs
Recent Market Valuation Update
Then vs. Now Multiples Analysis
10-Oct-2007 26-Nov-2007
Stock Price EV/EBITDA PE EV/EBITDA PE Stock Price IBES LT
2007 2007 2007% Change 2007% Change% Change Growth Rate
Getty Images Inc. $ 28.62 5.7x 13.2x 5.8x 0.8% 13.7x 4.0% $ 28.81 0.7% 10.0%
Jupitermedia Corp. $ 6.40 10.7x 71.1x 7.7x(27.5%) 59.8x(15.9%) $ 3.59(43.9%) 10.0%
Marketing Services
Omnicom Group Inc. $ 51.78 10.7x 17.7x 9.6x(9.9%) 15.6x(11.9%) $ 46.10(11.0%) 12.0%
WPP Group plc 14.43 10.0 15.7 8.6(13.9%) 13.2(15.9%) 12.19(15.5%) 11.0%
Interpublic Group of Companies Inc. 10.29 10.9 34.3 9.9(9.0%) 39.1 14.1% 9.00(12.5%) 10.0%
Harte-Hanks Inc. 19.33 7.8 15.2 6.6(16.1%) 12.8(15.9%) 16.00(17.2%) 10.3%
Mean 9.8x 20.7x 8.7x(12.2%) 20.2x(7.4%)(14.1%) 10.8%
Median 10.3 16.7 9.1(11.9%) 14.4(13.9%)(14.0%) 10.7%
Digital Media/Content
Adobe Systems Inc. $ 45.58 18.1x 28.4x 16.0x(11.8%) 25.3x(10.8%) $ 40.90(10.3%) 15.0%
Avid Technology Inc. 28.71 13.0 22.1 11.6(10.8%) 18.9(14.4%) 25.33(11.8%) 12.0%
CNET Networks Inc. 8.52 14.6 6.5 13.4(8.2%) 6.4(1.3%) 7.17(15.8%) 17.5%
ValueClick Inc. 29.32 15.5 39.1 11.0(29.3%) 29.4(24.8%) 20.88(28.8%) 22.0%
Yahoo, Inc. (1) 28.36 21.9 67.5x 17.6(19.6%) 58.7(13.1%) 25.22(11.1%) 24.6%
Mean 16.6x 32.7x 13.9x(16.0%) 27.7x(12.9%)(15.5%) 18.2%
Median 15.5 28.4 13.4(11.8%) 25.3(13.1%)(11.8%) 17.5%
Overall Comparative Metrics
Mean 13.3x 31.8x 11.2x(15.6%) 27.9x(11.0%)(17.8%) 14.4%
Median 11.9 25.2 10.4(12.8%) 22.1(13.8%)(14.0%) 12.0%
Source: Latest publicly available financial statements. Enterprise Value based on diluted shares outstanding. Projected EBITDA and EPS are based on IBES median estimates and/or other Wall Street research. All research estimates have been calendarized to December.
Note: GYI IBES EBITDA estimates adjusted to add back ESO of $14.6mm per management.
1 Yahoo! enterprise value adjusted for $674mm present value of its NOL and 34% interest in Yahoo! Japan. Yahoo! P/E multiples adjusted for 34% interest in Yahoo! Japan by adjusting both price and EPS to exclude Yahoo! Japan stake. Enterprise and equity value.
Valuation Update 11
Goldman Sachs
Premia and Multiples at Various Share Prices
IBES Median Estimates
10% 20% 30% 40% 50% 60%
Implied Purchase Price Per Share $ 28.81 $ 31.69 $ 34.57 $ 37.45 $ 40.33 $ 43.22 $ 46.10
Equity Consideration - Diluted $ 1,719 $ 1,892 $ 2,067 $ 2,242 $ 2,419 $ 2,595 $ 2,772
Levered Consideration - Diluted 1,761 1,934 2,109 2,284 2,461 2,637 2,814
Premia Over Various Trading Periods
Averages
Current (26-Nov-07) $ 28.81 0 % 10 % 20 % 30 % 40 % 50 % 60 %
Last 10 Days 30.16(4)% 5 % 15 % 24 % 34 % 43 % 53 %
30 Day 30.54(6)% 4 % 13 % 23 % 32 % 42 % 51 %
90 Day 29.38(2)% 8 % 18 % 27 % 37 % 47 % 57 %
180 Day 36.91(22)%(14)%(6)% 1 % 9 % 17 % 25 %
1 Year 42.32(32)%(25)%(18)%(12)%(5)% 2 % 9 %
Implied Multiples
Management Estimates
Revenue CY2007E $ 855 2.1 x 2.3 x 2.5 x 2.7 x 2.9 x 3.1 x 3.3 x
CY2008E 901 2.0 2.1 2.3 2.5 2.7 2.9 3.1
EBITDA (adj.) CY2007E $ 316 5.6 x 6.1 x 6.7 x 7.2 x 7.8 x 8.4 x 8.9 x
CY2008E 334 5.3 5.8 6.3 6.8 7.4 7.9 8.4
Cash EPS CY2007E $ 2.20 13.1 x 14.4 x 15.7 x 17.0 x 18.3 x 19.6 x 21.0 x
CY2008E 2.23 12.9 14.2 15.5 16.8 18.1 19.4 20.7
Street Estimates
Revenue CY2007E $ 850 2.1 x 2.3 x 2.5 x 2.7 x 2.9 x 3.1 x 3.3 x Getty
CY2008E 897 2.0 2.2 2.4 2.5 2.7 2.9 3.1 1 Yr Avg 6 M Avg
Cash EBITDA CY2007E $ 306 5.8 x 6.3 x 6.9 x 7.5 x 8.0 x 8.6 x 9.2 x 8.4 x 7.5 x
CY2008E 334 5.3 5.8 6.3 6.8 7.4 7.9 8.4
Cash EPS CY2007E $ 2.10 13.7 x 15.1 x 16.5 x 17.8 x 19.2 x 20.6 x 22.0 x
CY2008E 2.25 12.8 14.1 15.4 16.6 17.9 19.2 20.5 17.1 x 15.7 x
PEG Ratio CY2007E 1.4 x 1.5 x 1.6 x 1.8 x 1.9 x 2.1 x 2.2 x
CY2008E 1.3 1.4 1.5 1.7 1.8 1.9 2.0
Note: 1yr average and 6 month average EBITDA comparisons compare LTM EBITDA to CY2007E. 1 year average and 6 month average p/e compares NTM P/E to CY2008E. Management and IBES EBITDA adds back ESO expense of $14.6mm and $19.9mm for 2007 and 2008 respectively. Management and IBES EPS estimates include ESO expense. Unadjusted IBES EBITDA for 2007 = $291.5mm and for 2008 = $314.0mm. GYI management projections not proforma for convert refinancing. IBES EBITDA and EPS estimates include analysts who do not add back the $5.4mm related to JUPM transaction and stock option review expenses.
Source: GYI Management; IBES median estimates and FactSet
Valuation Update 12
Goldman Sachs
Breakdown by Segment
2008E Revenue
B2B Music $14 2%
Footage & Multimedia $47 5%
Other $77 9%
Creative Stills $461 51%
Editorial $180 20%
iStock $122 14%
Creative Stills Editorial iStock Footage & Multimedia B2B Music Other
2012E Revenue
B2B Music $46 4%
Footage & Multimedia $83 7%
Other $159 13%
Creative Stills $348 29%
Editorial $289 24%
iStock $262 20%
2008E Gross Margin
B2B Music $7 1%
Footage & Multimedia $33 5%
Other $51 8%
Creative Stills $345
Editorial $129 20%
iStock $86 13%
2012E Gross Margin
B2B Music $23 3%
Footage & Multimedia $58 7%
Other $108 13%
Creative Stills $260 31%
Editorial $207 25%
iStock $186 22%
Source: GYI Management
Valuation Update 13
Goldman Sachs
Illustrative 5-Year Discounted Cash Flow Analysis
Multiple of Terminal LTM EBITDA Method ($ per share)
Management Case
Terminal Multiple of 2012E EBITDA
.00993839 5.0x 5.5x 6.0x 6.5x 7.0x
WACC
10.0% $ 42.56 $ 45.11 $ 47.66 $ 50.21 $ 52.76
11.0% 41.07 43.51 45.96 48.41 50.86
12.0% 39.65 42.00 44.35 46.70 49.05
13.0% 38.29 40.55 42.81 45.07 47.33
14.0% 37.00 39.17 41.34 43.52 45.69
Multiple of Terminal Method at 6.0x LTM EBITDA1
Incremental FY08E-FY12E Annual Revenue Growth
44.35(5.0%)(2.5%) 0.0% 2.5% 5.0%
Incr. FY08E - FY12E
Operating Margin
(5.0%) $ 32.70 $ 35.38 $ 38.31 $ 41.51 $ 45.01
(2.5%) 35.16 38.10 41.33 44.85 48.70
0.0% 37.62 40.83 44.35 48.20 52.39
2.5% 40.07 43.56 47.37 51.54 56.09
5.0% 42.53 46.28 50.39 54.88 59.78
1.8% 4.3% 6.8% 9.3% 11.8%
Implied ‘07-’12 Rev CAGR
Operating Summary
2007E 2008E 2009E 2010E 2011E 2012E ‘07E -’12E CAGR
Revenue $ 855.5 $ 900.6 $ 956.7 $ 1,024.4 $ 1,099.0 $ 1,187.3 6.8%
Growth % 6.1% 5.3% 6.2% 7.1% 7.3% 8.0%
EBITDA $ 315.5 $ 334.1 $ 357.4 $ 387.1 $ 423.9 $ 467.5 8.2%
Margin % 36.9% 37.1% 37.4% 37.8% 38.6% 39.4%
Growth % 0.6% 5.9% 7.0% 8.3% 9.5% 10.3%
Unlevered free cash flow $ 172.0 $ 186.0 $ 205.8 $ 224.5 $ 246.4 $ 270.1 9.4%
Margin % 20.1% 20.6% 21.5% 21.9% 22.4% 22.7%
Growth % 28.8% 8.1% 10.7% 9.1% 9.8% 9.6%
Source: Management projections
Note: Assumes mid-year convention discounting. WACC analysis suggests 11.36% based on risk free rate of 4.87% (10 year average of 10 year U.S. Treasury as of 26-Nov-2007), risk premium of 5.16% (Ibbotson) and beta of 1.46 (Barra predicted beta), cost of debt of 8.5% and current capitalization.
1 Assume discount rate of 12.0%.
Valuation Update 14
Goldman Sachs
Illustrative Present Value of Future Stock Prices
Street Estimates ($ per share)
Present Value of Future Share Price
Today PV of ‘08E Share Price
FY ‘08 EPS FY ‘09 EPS
$ 2.25 $ 2.45
NTM Current / 3 Month Avg. 13.5 x $ 30.38 $ 29.43
NTM 6 Month Avg. 15.6 x 35.10 34.01
NTM 1 Year Avg. 17.1 x 38.48 37.28
Source: Based on IBES median estimates.
Note: Assumes illustrative cost of equity discount rate of 12.39% based on risk free rate of 4.87% (10 year average of 10 year Treasury as of 26-Nov-2007), risk premium of 5.16% (Ibbotson) and beta of 1.46 (Barra predicted beta), Multiples represent average NTM P/E for 3 months, Current, 6 months and 1 year
Valuation Update 15
Goldman Sachs
Illustrative Present Value of Future Stock Prices
Management Case ($ per share)
Assuming Current Capital Structure
Today PV of ‘08E Share Price PV of ‘09E Share Price PV of ‘10E Share Price PV of ‘11E Share Price
FY ‘08 EPS FY ‘09 EPS FY ‘10 EPS FY ‘11 EPS FY ‘12 EPS
$ 2.23 $ 2.61 $ 3.18 $ 3.67 $ 4.33
NTM Current / 3 Month Avg. 13.5 x $ 30.10 $ 31.33 $ 33.99 $ 34.93 $ 36.66
NTM 6 Month Avg. 15.6 x 34.78 36.21 39.28 40.37 42.37
NTM 1 Year Avg. 17.1 x 38.12 39.69 43.05 44.25 46.44
$265mm Convertible Replaced with Straight Debt – 6% Interest Rate
Today PV of ‘08E Share Price PV of ‘09E Share Price PV of ‘10E Share Price PV of ‘11E Share Price
FY ‘08 EPS FY ‘09 EPS FY ‘10 EPS FY ‘11 EPS FY ‘12 EPS
$ 2.05 $ 2.43 $ 3.00 $ 3.49 $ 4.15
NTM Current / 3 Month Avg. 13.5 x $ 27.74 $ 29.22 $ 32.07 $ 33.23 $ 35.14
NTM 6 Month Avg. 15.6 x 32.05 33.77 37.06 38.40 40.61
NTM 1 Year Avg. 17.1 x 35.13 37.01 40.62 42.09 44.51
$265mm Convertible Replaced with Straight Debt – 8% Interest Rate
Today PV of ‘08E Share Price PV of ‘09E Share Price PV of ‘10E Share Price PV of ‘11E Share Price
FY ‘08 EPS FY ‘09 EPS FY ‘10 EPS FY ‘11 EPS FY ‘12 EPS
$ 2.00 $ 2.38 $ 2.94 $ 3.44 $ 4.10
NTM Current / 3 Month Avg. 13.5 x $ 26.98 $ 28.54 $ 31.45 $ 32.68 $ 34.66
NTM 6 Month Avg. 15.6 x 31.18 32.99 36.35 37.76 40.05
NTM 1 Year Avg. 17.1 x 34.18 36.16 39.84 41.40 43.90
Source: Based on Management EPS estimates
Note: Assumes illustrative cost of equity discount rate of 12.39% based on risk free rate of 4.87% (10 year average of the 10 year Treasury as of 26-Nov-2007), risk premium of 5.16% (Ibbotson) and beta of 1.46 (Barra predicted beta), Multiples represent average NTM P/E for 3 months, Current, 6 months and 1 year; $265mm convertible replaced with straight debt scenarios incorporate additional net interest expense of 6% and 8%, respectively less 0.5% interest expense on convertible + the lost interest income of 5% of the cash used to pay the $40mm tax effect of removing the convertible.
Valuation Update 16
Goldman Sachs
III. LBO Returns Analysis
LBO Returns Analysis 17
Goldman Sachs
Pro Forma Capitalization
5.0x Total Leverage / Assumed CCR – B1/ B+ ($ in millions)
Getty LBO Dec-07 Adjustments Pro Forma Dec-07% of Cap x2007PF Adj. EBITDA Expected Rating Illustrative Pricing OID
Cash and Cash Equivalents $ 303($ 228) $ 75
Revolving Credit Facility $ 80( $ 80) $ 0 0.0% 0.0x
New First Lien Term Loan 0 1,118 1,118 45.6% 3.5x Ba3/BB- L + 350 99.0
First Lien Senior Secured Debt $ 80 $ 1,118 45.6% 3.5x
Second Lien Secured Debt 0 0 0 0.0% 3.5x
Senior Secured Debt $ 80 $ 1,118 45.6% 3.5x
Senior Notes 0 462 462 18.9% 5.0x B3/B- 11.5%
Extant Convert 265(265) 0 0.0% 5.0x
Other Debt 0 0 0 0.0% 5.0x
Total Senior Debt $ 345 $ 1,580 64.5% 5.0x
Total Debt 345 1,580 64.5% 5.0x
Original Equity 1,719
New / Rollover Equity 870 870 35.5% 7.8x
Total Capitalization $ 2,064 $ 2,450 100.0% 7.8x
Getty PF EBITDA PF. Adj. EBITDA
LTM Adj. EBITDA $ 315.5 $ 315.5 $ 315.5
LTM Capex (ex - Acquisitions) 64.0 64.0 64.0
LTM PF Interest Expense 5.7 148.7 148.7
EBITDA / Interest Expense 54.9x 2.1x 2.1x
(EBITDA - Capex) / Interest Expense 43.8x 1.7x 1.7x
First Lien Senior Secured Debt / Adj. EBITDA 0.3x 3.5x 3.5x
Total Senior Secured Debt / Adj. EBITDA 0.3x 3.5x 3.5x
Total Senior Debt / Adj. EBITDA 1.1x 5.0x 5.0x
Total Debt / Adj. EBITDA 1.1x 5.0x 5.0x
Total Debt / (Adj. EBITDA - Capex) 1.4x 6.3x 6.3x
LBO Returns Analysis 18
Goldman Sachs
Illustrative LBO Credit Statistics - Management Case
5.0x Total Leverage / Assumed CCR – B1 /B+ ($ in millions)
2004 2005 20061 2007E 2008E 2009E 2010E 2011E 2012E
Total Revenue $ 622.4 $ 733.7 $ 806.6 $ 855.5 $ 900.6 $ 956.7 $ 1,024.4 $ 1,099.0 $ 1,187.3
Revenue growth 17.9% 9.9% 6.1% 5.3% 6.2% 7.1% 7.3% 8.0%
GAAP EBITDA $ 225.9 $ 284.0 $ 298.7 $ 295.5 $ 314.2 $ 337.0 $ 366.2 $ 402.5 $ 445.5
Non-Cash Compensation $ 0.0 $ 0.0 $ 15.0 $ 14.6 $ 19.9 $ 20.4 $ 20.9 $ 21.4 $ 21.9
One-Time Items2 $ 5.4
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 $ 315.5 $ 334.1 $ 357.4 $ 387.1 $ 423.9 $ 467.5
EBITDA margin 36.3% 38.7% 38.9% 36.9% 37.1% 37.4% 37.8% 38.6% 39.4%
Free Cash Flow: Pro Forma
PF Adj. EBITDA $ 315.5 $ 334.1 $ 357.4 $ 387.1 $ 423.9 $ 467.5
Interest Expense 148.7 144.5 135.0 123.5 109.7 93.1
Interest Income 3.8 3.8 0.0 0.0 0.0 0.0
Cash Interest Expense, net 145.0 140.7 135.0 123.5 109.7 93.1
Cash Taxes 21.6 24.7 36.8 54.0 72.6 97.1
Capex 64.0 60.1 60.5 59.6 60.3 61.0
Increase in Working Capital 5.1 9.2 3.0 3.6 4.0 4.7
Free Cash Flow for Debt Service $ 79.9 $ 99.3 $ 122.1 $ 146.3 $ 177.3 $ 211.6
Cumulative Free Cash Flow for Debt Service $ 99.3 $ 221.4 $ 367.7 $ 545.0 $ 756.6
Capitalization and Credit Statistics:
Revolver $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
First Lien Term Loan 1,118.1 1,018.8 896.7 750.4 573.1 361.5
First Lien Secured Debt $ 1,118.1 $ 1,018.8 $ 896.7 $ 750.4 $ 573.1 $ 361.5
Second Lien Secured Debt $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Total Secured Debt $ 1,118.1 $ 1,018.8 $ 896.7 $ 750.4 $ 573.1 $ 361.5
Senior Notes $ 461.8 $ 461.8 $ 461.8 $ 461.8 $ 461.8 $ 461.8
Rollover Other Debt 0 0 0 0 0 0
Total Senior Debt $ 1,579.9 $ 1,480.7 $ 1,358.6 $ 1,212.2 $ 1,035.0 $ 823.3
Total Debt 1,579.9 1,480.7 1,358.6 1,212.2 1,035.0 823.3
PF Adj. EBITDA / Interest Expense 2.1x 2.3x 2.6x 3.1x 3.9x 5.0x
(PF Adj. EBITDA - Capex) / Interest Expense 1.7x 1.9x 2.2x 2.7x 3.3x 4.4x
First Lien Senior Secured Debt / PF Adj. EBITDA 3.5x 3.0x 2.5x 1.9x 1.4x 0.8x
Senior Secured Debt / PF Adj. EBITDA 3.5x 3.0x 2.5x 1.9x 1.4x 0.8x
Total Senior Debt / PF Adj. EBITDA 5.0x 4.4x 3.8x 3.1x 2.4x 1.8x
Total Debt / PF Adj. EBITDA 5.0x 4.4x 3.8x 3.1x 2.4x 1.8x
Total Debt / (PF Adj. EBITDA - Capex) 6.3x 5.4x 4.6x 3.7x 2.8x 2.0x
1 2006 figures reflect restated numbers.
2 Includes expenses related to stock option expense review and deal costs relating to aborted acquisition of Jupiter Media.
LBO Returns Analysis 19
Goldman Sachs
Preliminary LBO Returns Analysis
5.0x PF Leverage Management Case
IRR Sensitivity to Total Leverage and Forward Exit Multiple
Year 5 IRR
Total Leverage
23554 4.0x 4.5x 5.0x 5.5x 6.0x
Exit LTM EBITDA Multiple
6 x 15.1% 16.2% 17.6% 19.5% 22.2%
7 x 19.1% 20.6% 22.5% 25.0% 28.6%
8 x 22.6% 24.4% 26.7% 29.7% 33.9%
9 x 25.8% 27.8% 30.5% 33.9% 38.5%
10 x 28.7% 30.9% 33.8% 37.5% 42.6%
IRR Sensitivity to Operating Margin and Revenues
Year 5 IRR FY08E - FY12E Incremental Op Margin
23.6%(5.0%)(2.5%) 0.0% 2.5% 5.0%
5.0% 24.5% 27.8% 30.7% 33.5% 36.0%
FY12E
2.5% 20.9% 24.2% 27.2% 29.9% 32.5%
- 0.0% 17.1% 20.5% 23.6% 26.3% 28.9%
FY08E
Incr. Ann Rev Growth(2.5%) 13.2% 16.7% 19.8% 22.6% 25.2%
(5.0%) 9.1% 12.7% 15.9% 18.8% 21.4%
IRR Sensitivity to Offer Price and Forward Exit Multiple
Year 5 IRR
Offer Price
LTM EBITDA Mult. 6.1 x 6.7 x 7.2 x 7.8 x 8.4 x 8.9 x
% Premium 10.0 % 20.0 % 30.0 % 40.0 % 50.0 % 60.0 %
0.2355436 $ 31.69 $ 34.57 $ 37.45 $ 40.33 $ 43.22 $ 46.10
Implied Forward P/E Mult. Exit LTM EBITDA Multiple
9.4 x 6.0x 30.5% 23.0% 17.6% 13.3% 9.8% 6.9%
11.5 x 7.0x 35.9% 28.2% 22.5% 18.0% 14.4% 11.3%
13.6 x 8.0x 40.6% 32.6% 26.7% 22.1% 18.3% 15.2%
15.8 x 9.0x 44.8% 36.5% 30.5% 25.7% 21.8% 18.6%
17.9 x 10.0x 48.5% 40.0% 33.8% 28.9% 24.9% 21.6%
Note: Assumes 5.0x leverage of LTM EBITDA; 3.5x Bank Debt at L+350bps and 1.5x Subordinated Notes at 11.5%. Illustrative purchase price of $37.45 (30% premium to $28.81 share price on 26-Nov-07). Assumes LIBOR of 5.05%; $75mm minimum cash balance; IRR returns to equity holders shown after 5% equity allocated to employees. Assumes exit multiple of 7.2x LTM EBITDA.
LBO Returns Analysis 20
Goldman Sachs
IV. Phase 2 and Next Steps
Phase 2 and Next Steps 21
Goldman Sachs
Illustrative Phase 2 Timeline
Date Actions
Week of November 26 Solicit initial indications of interest from potential buyers
Process decision (narrow, continue with diligence, widen process)
Respond to potential buyers
Prepare for 2nd round due diligence (data room & data requests from Phase I and preliminary proposals)
Prepare data room for 2nd round diligence
Week of December 3rd Continue preparations for 2nd round due diligence
Open data room to selected potential buyers
Week of December 10 Begin detailed Phase II diligence
Mid-December through late Detailed due diligence
January or early February Negotiation of documentation
Late January or early February Solicit final bids
Sign definitive agreement/announce transaction
Early February through end- April Commence drafting of financing documentation (HY prospectus, bank memorandum, roadshow presentation)
Commence regulatory filings (HSR, etc.)
Bank syndication meeting and high yield roadshow
Receive regulatory approvals
Funding of financing and closing of transaction
Phase 2 and Next Steps 22
| This ‘SC 13E3’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| Filed on: | 3/27/08 | PREM14A | ||
| 11/26/07 | ||||
| List all Filings | ||||