Copy of Wyeth Valuation

8/13/2019 Copy of Wyeth Valuation

1/54

(in thousands USD) 2006 2007 2008

(in thousands)

Net Sales 20350655 22399798 22833908

growth rate 8.50% 10.07% 1.94%COGS 5587851 6313687 6247767

Gross profit 14762804 16086111 16586141

SG&A 6501976 6753698 6838359

R&D 3109060 3256785 3373213

Other exp/(income)-net -271490 -290543 11540

Total operating expenses 9339546 9719940 10223112

EBIT 5423258 6366171 6363029

% margin 27% 28% 28%

Interest expense (income) - net -6646 -90511 24942

EBT 5429904 6456682 6338087

% margin 27% 29% 28%

Income Tax rate 23% 29% 30%

Provision for Income tax 1233198 1840722 1920254

Net earnings 4196706 4615960 4417833

Basic EPS 3.12 3.44 3.31

Diluted EPS 3.08 3.38 3.27

Common Size Statement

Sales 100% 100% 100%

COGS 27% 28% 27%

Gross profit 73% 72% 73%

SG&A 32% 30% 30%

R&D 15% 15% 15%

Other exp/(income)-net -1% -1% 0%

Total operating expenses 46% 43% 45%

EBIT 27% 28% 28%

Interest expense (income) - net 0% 0% 0%

EBT 27% 29% 28%

Net earnings 21% 21% 19%


2/54

2009E 2010E 2011E 2012E 2013E

24395025 26062872 27844748 29748447 31782299

6.84% 6.84% 6.84% 6.84% 6.84%6749778 7211249 7704270 8230998 8793738

17645247 18851623 20140478 21517449 22988561

7485100 7996844 8543575 9127685 9751730

3625883 3873778 4138622 4421573 4723869

-209846 -224193 -239521 -255896 -273391

10901137 11646429 12442676 13293362 14202207

6744110 7205194 7697801 8224087 8786354

28% 28% 28% 28% 28%

-26631 -28452 -30397 -32475 -34695

6770741 7233646 7728198 8256562 8821050

28% 28% 28% 28% 28%

27% 27% 27% 27% 27%

1828100 1953084 2086613 2229272 2381683

4942641 5280561 5641584 6027290 6439366

0.00 0.00 0.00 0.00 0.00

100% 100% 100% 100% 100%

28% 28% 28% 28% 28%

72% 72% 72% 72% 72%

31% 31% 31% 31% 31%

15% 15% 15% 15% 15%

-1% -1% -1% -1% -1%

45% 45% 45% 45% 45%

28% 28% 28% 28% 28%

0% 0% 0% 0% 0%

28% 28% 28% 28% 28%

20% 20% 20% 20% 20%

Wyeth Income Statement


3/54

2014E 2015E 2016E

33955202 36276663 38756839

6.84% 6.84% 6.84%9394951 10037268 10723500

24560251 26239395 28033339

10418439 11130731 11891720

5046832 5391875 5760509

-292083 -312052 -333386

15173188 16210554 17318843

9387063 10028841 10714496

28% 28% 28%

-37067 -39602 -42309

9424130 10068442 10756805

28% 28% 28%

27% 27% 27%

2544515 2718479 2904337

6879615 7349963 7852468

0.00 0.00 0.00

100% 100% 100%

28% 28% 28%

72% 72% 72%

31% 31% 31%

15% 15% 15%

-1% -1% -1%

45% 45% 45%

28% 28% 28%

0% 0% 0%

28% 28% 28%

20% 20% 20%


4/54

(in thousands USD) 2006 2007

Net Earnings 4196706 4615960us men s o reconc e ne earn ngs o ne cas prov e y

Diet Drug Litigation Payments -2972700 -481581

Seventh Amendment Security Fund Disbursement 400000 0

Net gain on sales and disposition of assets -28545 -59851

Writedown of investment securities, net 37859 14299

Depreciation 761690 842725

Amortization 41350 75954

Stock Based Compensation 393330 367529

Change in other assets (including Deferred Income Taxes) 592165 789455

Change in working capital, net

Receivables -238764 -1624

Inventories -7910 -337173

Accounts Payable and Other Expenses 70868 169514

Accrued Taxes -7536 60379

Other Current Assets -39037 -181456

Pension Provision 354531 338779

Pension Contributions -271909 -330749

Other Items, net -27721 -6481

Net Cash Provided by Operating Activities 3254377 5875679

Cash Flow from Investing Activities:

Purchases of Intangibles and PPE -1289784 -1390668

Purchase of a Business 0 0

Proceeds from Sales of Asstes 69235 121716

Purchase of additional equity interest in affiliate -102187 -221655

Purchases of Marketable Securities -2239022 -2534216

Proceeds from sales and maturities of marketable securities 915339 1422488

Net Cash Used in Investing Activities -2646419 -2602335

Cash Flow from Financing Activities:

Proceeds from issuance of long term debt 0 2500000

Repayments and Repurchases of debt -12100 -120806

Other Borrowing Transactions, net 47334 -5717

Purchase of Common Stock for Treasury -664579 -1316734


5/54


6/54

2008 2009E 2010E 2011E 2012E 2013E 2014E

4417833 4942641 5280561 5641584 6027290 6439366 6879615

-997946 -1484076 -1585539 -1693940 -1809752 -1933482 -2065671

590462 330154 352726 376841 402605 430131 459538

-166351 -84916 -90721 -96924 -103550 -110630 -118193

187948 80035 85507 91353 97599 104272 111400

928565 1038872 1109898 1185780 1266850 1353462 1445996

79009 65438 69912 74691 79798 85253 91082

314342 358400 382904 409082 437050 466931 498854

34170 471930 504195 538666 575494 614839 656875

-336911 -192433 -205589 -219645 -234662 -250705 -267846

-230121 -191735 -204843 -218848 -233810 -249796 -266874

141335 127239 135938 145232 155161 165769 177103

-131424 -26194 -27984 -29898 -31942 -34126 -36459

692030 157179 167925 179406 191672 204776 218776

346412 346574 370269 395583 422629 451523 482393

-924111 -508923 -543717 -580890 -620605 -663035 -708365

327763 97854 104544 111691 119327 127486 136202

5273005 5528040 5905983 6309766 6741154 7202036 7694427

-1408999 -1505330 -1608247 -1718200 -1835671 -1961172 -2095254

-300000 -100000 -133333 -177778 -137037 -149383 -154733

202428 131126 140091 149669 159902 170834 182513

0 -107947 -115328 -123212 -131636 -140636 -150251

-3526203 -2766480 -2955620 -3157691 -3373577 -3604223 -3850638

1769037 1368955 1462548 1562540 1669368 1783500 1905435

-3263737 -2979677 -3209889 -3464672 -3648651 -3901080 -4162927

0 833333 890307 951176 1016206 1085682 1159909

-421258 -184721 -197350 -210843 -225258 -240658 -257112

-6790 11609 12403 13251 14157 15124 16158

-498775 -826696 -883216 -943600 -1008112 -1077035 -1150670

Wyeth Cash Flow Statement


7/54

98074 443608 473936 506339 540956 577940 617453

-1520293 -1700893 -1817181 -1941418 -2074150 -2215956 -2367457

-2349042 -1423761 -1521101 -1625096 -1736201 -1854902 -1981719

-98228 5.4 -1.3 -9.8

-438002 1124609 1174993 1219988 1356302 1446054 1549781

10453879 10015877 11140486 12315478 13535466 14891768 16337822

10015877 11140486 12315478 13535466 14891768 16337822 17887603


8/54

2015E 2016E

7349963 7852468

-2206897 -2357779

490956 524522

-126274 -134907

119017 127154

1544857 1650476

97309 103962

532960 569397

701784 749764

-286158 -305722

-285119 -304613

189211 202147

-38951 -41614

233733 249713

515373 550609

-756795 -808536

145513 155462

8220482 8782503

-2238503 -2391546

-147051 -150389

194992 208323

-160523 -171498

-4113899 -4395160

2035706 2174884

-4429279 -4725386

1239210 1323932

-274690 -293470

17263 18443

-1229340 -1313388


9/54

659668 704768

-2529316 -2702241

-2117206 -2261956

1673998 1795162

17887603 19561601

19561601 21356762


10/54

(in thousands USD) 2006 2007

Assets

Current Assets:

Cash and Cash Equivalent 6778311 10453879Accounts Receivables-net of allowances 3383341 3528009

Marketable Securities 1948931 2993839

Inventories 2480459 3035358

Other current assets including deferred taxes 2923199 2972513

Total Current Assets 17514241 22983598

PPE-net 10146259 11072158

Goodwill 3925738 4135002

Other Intangible Assets-net 356692 383558

Other assets including deferred taxes 4535785 4142966

Total Assets 36478715 42717282Liabilities and Equity (Deficit)

Current Liabilities:

Accounts Payable 1116754 1268600

Loans Payable 124225 311586

Accrued Expenses 5679141 5333528

Accrued Taxes 301728 410565

Total Current Liabilities 7221848 7324279

Long-term Debt 9096743 11492881

Pension Liabilities 806413 501840

Accrued postretirement benefit obligations other than pensions 1600751 1676126

Other Noncurrent Liabilities 3100205 3511621

Total Liabilities 21825960 24506747

Total Equity 14652755 18210535

Total 36478715 42717282

Long Term Debt 0 0

Total Assets 36478715 42717282

Total 36478715 42717282


11/54

2008 2009E 2010E 2011E 2012E 2013E

10015877 11140486 12315478 13535466 14891768 16337822

3646439 3895740 4162085 4446640 4750650 5075444

4529395 3157388 3373254 3603878 3850269 4113505

2996428 3237192 3458514 3694967 3947585 4217475

2293201 2477461 2646841 2827801 3021133 3227683

23481340 23908267 25956172 28108751 30461405 32971929

11198211 11963814 12781760 13655628 14589241 15586683

4261737 4553105 4864393 5196964 5552272 5931871

421686 450516 481317 514224 549380 586941

4668750 4987945 5328962 5693295 6082536 6498389

44031724 45863647 49412604 53168862 57234833 61575812

1254369 1355158 1447808 1546792 1652544 1765526

913245 449685 480430 513276 548368 585859

4426444 5146371 5498220 5874124 6275728 6704789

256365 322886 344961 368546 393742 420662

6850423 7274100 7771419 8302738 8870382 9476835

10826013 9456542 8585543 7619657 6640642 5591715

1601289 969847 1036154 1106994 1182678 1263535

1777315 1684731 1799913 1922970 2054440 2194899

3802842 4062836 4340605 4637365 4954414 5293140

24857882 23448057 23533634 23589725 23702556 23820125

19173842 22415590 25878970 29579137 33532277 37755687

44031724 45863647 49412604 53168862 57234833 61575812

0 9456542 8585543 7619657 6640642 5591715

44031724 45863647 49412604 53168862 57234833 61575812

44031724 36407104 40827062 45549204 50594192 55984097

Wyeth Balance Sheet


12/54

2014E 2015E 2016E

17887603 19561601 21356762

5422443 5793167 6189236

4394739 4695200 5016203

4505817 4813872 5142989

3448354 3684112 3935989

35658956 38547952 41641179

16652319 17790810 19007139

6337423 6770703 7233604

627069 669941 715743

6942673 7417332 7924443

66218440 71196737 76522108

1886232 2015190 2152965

625913 668705 714424

7163185 7652920 8176137

449422 480148 512975

10124751 10816964 11556501

4475939 3302140 2054805

1349921 1442213 1540815

2344961 2505282 2676564

5655023 6041647 6454705

23950595 24108245 24283390

42267845 47088492 52238718

66218440 71196737 76522108

4475939 3302140 2054805

66218440 71196737 76522108

61742501 67894597 74467303


13/54


Base Case

% Sales 6.3% 6.2% 6.2%

Capex 1289784 1390668 1408999

Best Case

% Sales 6.3% 6.2% 6.2%

Capex 1,514,540 1,608,247

Worst Case

% Sales 6.3% 6.2% 6.2%

Capex 1,514,540 1,608,247

Capex assumptions of Wyeth


14/54

2009E 2010E 2011E 2012E 2013E

6.2% 6.2% 6.2% 6.2% 6.2%

1505329.932 1608246.851 1718200.03 1835670.526 1961172.285

6.2% 6.2% 6.2% 6.2% 6.2%

1,736,907 1,893,228 2,073,085 2,280,393 2,515,274

6.2% 6.2% 6.2% 6.2% 6.2%

1,688,659 1,789,979 1,904,537 2,028,332 2,160,174

Capex


15/54

2014E 2015E 2016E

6.2% 6.2% 6.2%

2095254.392 2238503 2391546

6.2% 6.2% 6.2%

2,590,732 - -

6.2% 6.2% 6.2%

2,224,979 - -


16/54


Base Case

Current Assets 17514241 22983598 23481340

Current Liabilities 7221848 7324279 6850423

Working Capital 10292393 15659319 16630917

% sales 51% 70% 73%

Increase in Working Capital 5366926 971598

Best Case

Sales 24395025 26062872

Working Capital (% Sales) 70% 73%

Working Capital 17054148.05 18982710.35Increase in Working Capital 1928562.30

Worst Case

Sales 24395025 26062872

Working Capital (% Sales) 70% 73%

Working Capital 17054148.05 18982710.35

Increase in Working Capital 1928562.303


17/54

2009E 2010E 2011E 2012E 2013E

23908267 25956172 28108751 30461405 32971929

7274100 7771419 8302738 8870382 9476835

16634166 18184753 19806014 21591023 23495093

68% 70% 71% 73% 74%

3249 1550587 1621261 1785009 1904070

28147902 30681213 33595928 36955521 40761940

68% 70% 71% 73% 74%

19193130.24 21407091.24 23896837.60 26821820.07 30133300.49210419.89 2213961.01 2489746.36 2924982.47 3311480.42

27366016 29007977 30864487 32870679 35007273

68% 70% 71% 73% 74%

18659987.7 20239630.1 21953959.2 23857096.5 25879157.9

-322722.6 1579642.4 1714329.1 1903137.3 2022061.4

Working Capital Schedule


18/54

2014E 2015E 2016E

0 0 0

0% 0% 0%

-23495093 0 0

41984798 0 0

0% 0% 0%

0.00 0.00 0.00-30133300.49 0.00 0.00

36057491 0 0

0% 0% 0%

0.0 0.0 0.0

-25879157.9 0.0 0.0


19/54

Growth in Sales

Base Case

Best Case

Worst Case

Revenue

% growth

EBIT

% growth% margin

Tax rate

Taxes

NOPAT

NOPAT % margin

Plus Depreciation & Amortization

Inflow of funds

Incremental working capital

Capital Expenditure

Outflow of funds

Net Cash Flows

Discount Factor

WACC 6.6279%

Discounted Cash flows

Terminal Value

Wyeth: DCF

Equity Value as of 15 August, 2013)

Present value for explicit period

Present value for perpetuity

Enterprise Value (as of 15 August, 2013)

Less: Net Debt as of 31st June, 2013

Shares Outstanding


20/54

Share value

Revenue

% growth

EBIT

% growth

% margin

Tax rate

NOPAT

NOPAT % margin


Inflow of funds


Capital Expenditure

Outflow of funds

Net Cash Flows

Discount Factor

WACC 6.6%


Terminal Value






Shares Outstanding

Share value

Best Case


21/54

Revenue

% growth

EBIT

% growth

% margin

Tax rate

NOPAT

NOPAT % margin


Inflow of funds


Capital Expenditure

Outflow of funds

Net Cash Flows

Discount Factor

WACC 6.6%


Terminal Value





Equity Value as of 15 August, 2013)Shares Outstanding

Share value

Worst Case


22/54

FY2013E FY2014E FY2015E FY2016E FY2017E

5.9% 6.8% 7.2% 7.4% 7.5%

8.0% 9.0% 9.5% 10.0% 10.3%

5.0% 6.0% 6.4% 6.5% 6.5%

FY2011 FY2012 FY2013E FY2014E FY2015E FY2016E FY2017E

24395025 26062872 27844748 29748447 31782299 33955202 36276663

6.8% 6.8% 6.8% 6.8% 6.8% 6.8%

6744110 7205194 7697801 8224087 8786354 9387063 10028841

28% 28% 28% 28% 28% 28% 28%

27% 27% 27% 27% 27% 27% 27%

1820910 1945402 2078406 2220504 2372316 2534507 2707787

4923200 5259792 5619395 6003584 6414039 6852556 7321054

20% 20% 20% 20% 20% 20% 20%

79009 65437.66667 79797.78611 85253.42883 91082.06483 97309.19503 103962.0638

5002209 5325229 5699193 6088837 6505121 6949865 7425016


971598 3249 1550587 1621261 1785009 1904070

1390668 1408999 1505330 1608247 1718200 1835671 1961172

2380597 1508579 3158833 3339461 3620680 3865243

2944632 4190613 2930004 3165660 3329185 3559773

0.94 0.88 0.82 0.77 0.73

3930129 2577073 2611272 2575461 2582668

800679324

14276604

580904773

595181377

-5915809

601097186

203

Inflow of Funds

Outflow of funds


23/54

2961070


24395025 26062872 28147902 30681213 33595928 36955521 40761940

6.8% 8.0% 9.0% 9.5% 10.0% 10.3%

6744110 7205194 7781609 8481954 9287740 10216514 11268815

28% 28% 28% 28% 28% 28% 28%

27% 27% 27% 27% 27% 27% 27%

4923200 5259792 5680575 6191827 6780050 7458055 8226235

20% 20% 20% 20% 20% 20% 20%

79009 65437.66667 79797.78611 85253.42883 91082.06483 97309.19503 103962.0638

5002209 5325229 5760373 6277080 6871132 7555364 8330197


1928562 210420 2213961 2489746 2924982 3311480

1514540 1608247 1736907 1893228 2073085 2280393 2515274

3536809 1947326 4107189 4562831 5205376 5826754

1788420 3813046 2169891 2308301 2349989 2503443

0.94 0.88 0.82 0.77 0.73

3576031 1908519 1904058 1817954 1816285

995699163

11022847

722394570

733417418

-5915809

739333226

203

3642036

Inflow of Funds

Outflow of funds


24/54


24395025 26062872 27366016 29007977 30864487 32870679 35007273

6.8% 5.0% 6.0% 6.4% 6.5% 6.5%

6744110 7205194 7565454 8019381 8532621 9087242 9677912

28% 28% 28% 28% 28% 28% 28%

27% 27% 27% 27% 27% 27% 27%

4923200 5259792 5522781 5854148 6228813 6633686 7064876

20% 20% 20% 20% 20% 20% 20%

79009 65437.66667 79797.78611 85253.42883 91082.06483 97309.19503 103962.0638

5002209 5325229 5602579 5939401 6319896 6730996 7168838


1928562 -322723 1579642 1714329 1903137 2022061

0 1608247 1688659 1789979 1904537 2028332 2160174

3536809 1365937 3369621 3618866 3931470 4182235

1788420 4236642 2569780 2701029 2799526 2986603

0.94 0.88 0.82 0.77 0.73

3973297.38 2260239.88 2228009.64 2165716.26 2166824.76

855545593.80

12794087.91

620711068.60

633505156.51

-5915808.83

639420965.34203.00

3149856.97

Inflow of Funds

Outflow of funds


25/54

Perpetuity

3.0%1 WACC 6.6279%

3.0% 2 Perpetuity 3%

3.0%

Enterprise ########

Equity Valu ########

Perpetuity Share price 2961070

37364963

3% Implied Multiples FY13)

10329706 EV/EBITDA 23.1109

P/E 31.8622128%

27% Premium 0.2

2789021

7540685 Acquisition Price (USD 7.21E+08

20%

107080.9257

7647766

Perpetuity

-23495093 ####### 5.6% 6.1% 6.6%

2095254 15.0% ######## ######## ########

-21399839 18.0% ######## ######## ########

29047605 20.0% ######## ######## ########

22.0% ######## ######## ########

24.0% ######## ######## ########

####### 5.6% 6.1% 6.6%

2.0% ######## ######## ########

2.5% ######## ######## ########

3.0% ######## ######## ########

3.5% ######## ######## ########

Sensitivity Analysis

WACC

rminalgrowth

rate


WACC

Premium


26/54

4.0% ######## ######## ########

Perpetuity

41984798

3%

11606879

28%

27%

8473022

20%

107080.9257

8580103

Perpetuity

-30133300

2590732

-27542568

36122671

Te


27/54

Perpetuity

36057491

3.0%

9968250

28%

27%

7276822

20%

107080.9257

7383903

Perpetuity

-25879158

2224979

-23654179

31038082


28/54

7.6% 8.6%

######## ########

######## ########

######## ########

######## ########

######## ########

7.6% 8.6%

######## ########

######## ########

######## ########

######## ########


29/54

######## ########


30/54

1

Assumptions

1 WACC 6.63%

2 Perpetuity Growth rate 3%

Enterprise Value 595,181,377

Equity Valuation (USD mm) 601,097,186

Share price 2,961,070

Implied Multiples FY13)

EV/EBITDA 77.32x

P/E 106.55x

Premium 20%

Acquisition Price (USD mm) 721,316,623

2

FY13 EV/EBITDA multiple #REF!

FY13 P/E Ratio #REF!

Enterprise Value (EBITDA) #REF!Equity Valuation (P/E) #REF!

Premium 20%

Acquisition Price (USD mm) #REF!

3

FY13 EV/EBITDA multiple #REF!

Enterprise Value (USD mm) #REF!

Equity Valuation (USD mm) #REF!

Premium 20%


DCF

Trading Multiples

Transaction Multiple

Premium

Premium

Premium


31/54

4

1 year Median rolling P/E Ratio #REF!

Equity Valution #REF!

Premium 20%


Rolling P/E Ratio

Premium


32/54

####### 5.6% 6.1% 6.6% 7.6% 8.6%

15.0% 33,359 27,801 23,776 18,341 14,842

18.0% 34,229 28,526 24,397 18,819 15,229

20.0% 34,809 29,009 24,810 19,138 15,487

22.0% 35,390 29,493 25,224 19,457 15,745

24.0% 35,970 29,976 25,637 19,776 16,003

#REF! 16 17 18.6 20 22

15.0% 103,805,154 110,292,977 ######## ######## ########18.0% 106,513,115 113,170,185 ######## ######## ########

20.0% 108,318,422 115,088,323 ######## ######## ########

22.0% 110,123,729 117,006,462 ######## ######## ########

24.0% 111,929,036 118,924,601 ######## ######## ########

#REF! 17 19 19.8 22 24

15.0% 158,855,239 176,743,717 ######## ######## ########

18.0% 162,999,289 181,354,422 ######## ######## ########

20.0% 165,761,989 184,428,226 ######## ######## ########

22.0% 168,524,688 187,502,030 ######## ######## ########

24.0% 171,287,388 190,575,833 ######## ######## ########


WACC


Forward P/E Ratio


Forward Transaction P/E multiple


33/54

#REF! 19 21 22.9 25 27

15.0% 123,268,621 136,244,265 ######## ######## ########

18.0% 126,484,324 139,798,463 ######## ######## ########

20.0% 128,628,126 142,167,929 ######## ######## ########

22.0% 130,771,928 144,537,394 ######## ######## ########

24.0% 132,915,730 146,906,860 ######## ######## ########


1 year median Rolling P/E ratio


34/54

DCF of Nestle


35/54

Revenue

% growth

EBIT

% growth

% margin

Tax rate

Taxes

NOPAT

NOPAT % margin


Inflow of funds


Capital Expenditure

Outflow of funds

Net Cash FlowsDiscount Factor

WACC 6.0%


Terminal Value






Shares Outstanding

Share value

Nestle: DCF


36/54

Net Sales

Current Assets

Current Liabilities

Working Capital

% of Net Sales

Increment in Working Capital

Capex

% sales


37/54

FY2011 FY2012 FY2013E FY2014E FY2015E FY2016E FY2017E83642 89721 95251 100147 105154 110412 115932

7.3% 6.2% 5.1% 5.0% 5.0% 5.0%

12538 13464 14452 15377 16299 17224 18201

15.0% 15.0% 15.2% 15.4% 15.5% 15.6% 15.7%

27% 27% 27% 27% 27% 27% 27%

3385 3635 3902 4152 4401 4651 4914

9153 9829 10550 11225 11898 12574 13287

10.9% 11.0% 11.1% 11.2% 11.3% 11.4% 11.5%

3091 3150 3255 3422 3593 3773 3961

12244 12979 13805 14647 15491 16346 17248


2531 -7538 3305 7816 1314 1435

5368 5546 5308 5783 5797 5797

7899 -1992 8613 13600 7111 7232

5080 15797 6034 1892 9235 10016

0.94 0.89 0.84 0.79 0.75

14896.80 5366.11 1586.34 7303.54 7469.81

336940.93

36622.60

251276.32

287898.91

5738.00

282160.91

3200.00

88.18

Inflow of Funds

Outflow of funds


38/54


83,642 89,721 95,251 100,147 105,154 110,412 115,932

33,324 34,030 34,833 35,319

35,232 33,407 41,748 38,929

-1,908 623 -6,915 -3,610 4,206 5,521 6,956

-2% 1% -7% -4% 4% 5% 6%

2,531 -7,538 3,305 7,816 1,314 1,435

5368 5546 5308 5783 5797 5797

6% 6% 5% 5.50% 5.25% 5.00%

Working Capital Schedule


39/54


40/54

Perpetuity

119,410

8,359

7%

1,403

5970

5.00%


41/54

1USD=0.93 Swiss Francs 1.08

FY2011 FY2012

Revenue 89938 96474

% growth 7.3%

EBIT 13482 14477

% growth

% margin 15.0% 15.0%

Tax rate 27% 27%

Taxes 3640 3909

NOPAT 9842 10569

NOPAT % margin 10.9% 11.0%

Plus Depreciation & Amortization 3324 3387

Inflow of funds 13165 13956

FY2011 FY2012

Incremental working capital 2722

Capital Expenditure 5772

Outflow of funds 8494

Net Cash Flows 5462

Discount Factor

WACC 6.3%


Terminal Value






Shares Outstanding

Share value

Inflow of Fun

Outflow of fu

Nestle: DCF USA


42/54


43/54

: 5% is growth rate in DCF analysis on page 15. figures till 2014 are taken from latest data on page 61

: Page 15, EBIT grows by .1% each year. After 2014, increased EBIT by .1% each year

: For 2015,16,17, in DCF analysis on page15, depreciation is constant as 3.5% of sales

igns and values n last 3 years


44/54

Combined Firm DCF with Synergy


45/54

WACC Calculation


46/54

DCF Analysis of combined firm: SYNERGY calculations

All figures in million dollars

2011 2012

Sales 24,484,962 26,159,346% growth 6.8%

EBIT 6,757,592 7,219,671

Growth

% margin 27.60%

Taxes 1,824,550 1,949,311

Tax as % of ebit 27% 27%

NOPAT 4,933,042 5,270,360

82,333 68,825

5015375 5339185

Less: Capital Expenditures 1,414,771

974,320

Outflow of funds 2,389,091

FCFF 2,950,094WACC 4.63% 0.96

Discounted Cash flow 2,819,497

Terminal Value

45,650

289,867

335,517

(5,909,639)

6,245,156

2013 2014

0.00% 0.20%

0.00% 0.10%

Revenue growth

EBIT Margin growth

Base Case

Plus: Depreciation & Amortization

Inflow of funds


Less: Increase in Net Working Capital





Synergy Outcomes


47/54

2011 2012

Sales 24,484,962 26,159,346

% growth 6.8%

EBIT 6,757,592 7,219,671

Growth % margin 27.60%

Taxes 1,824,550 1,949,311

Tax as % of ebit 27%

NOPAT 5,270,360

82,333 68,825

- 1,414,771

974,320

FCFE 2,950,094

WACC 4.63% 0.96

Discounted Cash flow 2,819,497

Terminal Value

45,981

291,483

337,464

(5,909,639)

6,247,103

Overall 1,984

Per Share 8.46

Assumptions:

We have assumed the depreciation , Capex and net change in working capital of the combi

Wacc and terminal growth rates are calculated as per WACC calculation sheet

Synergy is calculated as the diffrence between the FV of combined firm and sum of firm val

We have assumed the revenue of the combined firm to grow by 0% in 2013 , 0.2% in 2014

We have assumed the margins of the combined firm to grow by 0% in 2013 , 0.1% in 2014


Synergy Value





Base Case

Plus: Depreciation & Amortization

Less: Capital Expenditures

Plus: Decrease in Net Working Capital


48/54


49/54

2013 2014 2015 2016 2017 Perpetuity

27,947,168 29,912,026 32,029,860 34,217,603 36,554,814 37,651,458

6.8% 7.0% 7.08% 6.8% 6.8% 3.0%

7,713,341 8,285,961 8,889,048 9,445,244 10,090,783 10,393,298

27.60% 27.70% 27.75% 27.60% 27.60% 27.60%

2,082,602 2,237,209 2,400,043 2,550,216 2,724,511 2,806,191

27% 27% 27% 27% 27% 27%

5,630,739 6,048,751 6,489,005 6,895,028 7,366,272 7,587,108

83,298 88,933 94,946 101,366 108,222 111,468

1,511,293 1,613,954 1,724,419 1,841,903 1,967,405 2,101,674

(4,856) 1,554,140 1,629,665 1,786,422 1,905,614 (23,493,585)

4,207,599 2,969,590 3,229,867 3,368,068 3,601,474 29,090,486

0.91 0.87 0.83 0.80 0.76

3,843,313 2,592,409 2,694,805 2,685,710 2,744,696

1,782,556,875

ned firm to be the simple addition of the individual firms Nestle and Mead Johnson

ue Nestle and Mead Johnson

and 0.25% in 2015

nd 0.15% in 2015

WITH SYNERGY


50/54


51/54

Assumptions:

1 Cost of pre-tax debt is 4.3% based on the current YTM for BBB corporate bond in USA

2 Beta = 0.69 calculated from Google Finance

3 Tax rate = 27% (JP Morgan Equity Research Report on Mead Johnson)

4 Industry average of the weights of debt and equity used (Source: Morning Star calculation)

5 Risk free rate is current risk free on 10 year US treasury bond: 2.84%

Assumptions:

1 Cost of pre-tax debt is 2.676% based on the current YTM for AA German corporate bond

2 Beta = 0.62 calculated from Google Finance (OTC Markets)

3 Tax rate = 27% (JP Morgan Equity Research Report on Nestle)

4 Market Values of Debt and Equity assumed

5 Historical risk free rate of 2.8% on 10 year US treasury bond

6 D/E ratio =19.5% for 2013 taken from p61

7 Risk free rate is current yield on 10 year German Government bond: 2.5% (Source: Bloomberg)


52/54


53/54

WACC 6.03% WACC

Terminal growth rate 3.00% Terminal growth rate

Debt 14180 Debt

Equity 72719 Equity

Beta (levered) 0.62 Beta (levered)

Risk Free Rate 2.80% Risk Free Rate

Cost of Debt 2.7% Cost of Debt

Market Risk Premium 6.50% Market Risk Premium

Weight of Debt 16.32% Weight of Debt

Weight of Equity 83.68% Weight of Equity

Cost of equity 6.83% Cost of equity

Corporate Tax 27% Corporate Tax

After Tax Cost of Debt 1.95% After Tax Cost of Debt

Beta (Unlevered) 0.54 Beta (Unlevered)

Firm Value 288,665.55 Firm Value

Nestle Mead Johnso

WACC


54/54

6.63% WACC 4.63%

3.00% Terminal growth rate 3.00%

8,585,543 Debt 8599723

29,579,137 Equity 29651856

0.69 Beta (levered) 0.37

2.84% Risk Free Rate 2.80%

4.3% Cost of Debt 2.7%

7.00% Market Risk Premium 6.50%

23% Weight of Debt 0.22

77% Weight of Equity 0.78

7.67% Cost of equity 5.41%

27% Corporate Tax 27%

3.14% After Tax Cost of Debt 1.95%

0.57 Beta (Unlevered) 0.31

############ Firm Value 335,517.00

n COMBINED FIRM

Documents

Copy of Wyeth Valuation