Aramark · NYSE:ARMK
Aramark — Merger or Acquisition (September 2006)
16 slides from Aramark's merger presentation, Sep 18, 2006
Slide 1: “Going Private” Transaction Summary
“Going Private” Transaction Summary ELC Meeting September 18, 2006
Slide 2: “Going Private” Transactions
“Going Private” Transactions Description of ARAMARK Transaction Sources of Financing Background on Sponsors Equity Structure The Effect of Financial Leverage
Slide 3: Important
Important Additional Information Regarding the Merger will be filed with the SEC. In connection with the proposed merger, ARAMARK has filed a preliminary proxy statement with the Securities and Exchange Commission (the “SEC”). INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ THE DEFINITIVE PROXY S
Slide 4: “Going Private” Transactions
“Going Private” Transactions Huge amounts of equity capital have been raised by private investment firms (“sponsors”) – Estimated to exceed $550 billion so far this year – Top 10 investment firms funds total $115 billion Additionally, significant amounts of borrowing capacity is available through de
Slide 5: “Going Private” Transactions
“Going Private” Transactions These circumstances have led to a sharp increase in “Going Private” transactions Announced deals this year exceed $180 billion Major deals announced recently include: – Hospital Corp. of America - $33 B – Kinder Morgan - $22 B – Albertson’s - $17 B – GMAC - $15 B – Univi
Slide 6: ARAMARK stock relative and absolute performance
-60% -40% -20% 0% 20% 40% 0% 20% 40% 60% 80% Sales Oper Inc EPS Stock Price RMK S&P CTAS SDX CMP “Going Private” Transactions While ARAMARK stock has outperformed its peers and the overall equity market, it has not matched the company’s performance “Relative” Performance (IPO through 4/28/06) “Absol
Slide 7: ARAMARK Transaction
ARAMARK Transaction Substantially all shares will be cashed out at $33.80 per share – Unvested options and RSU’s will vest and “spreads” paid in cash Existing debt will be repaid Funds will come from new equity (sponsors plus management) and new debt Uses Repurchase Existing Equity $6.2 B Repay Exis
Slide 8: Debt Structure
Debt Structure Bank Revolving Credit $0.6B $ Bank Term Loan 3.8 3.8 Senior Unsecured 1.7 1.7 Subordinated 0.8 0.8 Existing 0.3 0.3 Total Committed / Used $7.2B $6.6B Allowable Acquisition Facility $0.7B $ Commitment Used
Slide 9: Sources of Financing
Sources of Financing Equity will come from the four sponsors and management (ELC) Debt has been committed by JPMorgan and Goldman Sachs and will be syndicated in both the bank and public debt markets prior to closing – Additional financing will be available to fund acquisitions
Slide 10: Background on Sponsors
Background on Sponsors The four private equity firms are – Goldman Sachs Capital Partners and JPMorgan Partners are affiliates of Goldman Sachs and JPMorgan » Longstanding relationships with ARAMARK (JPMorgan -25 yrs; Goldman Sachs - 40 yrs) » Both were leading outside investors in ARAMARK’s 1984 LB
Slide 11: Sponsors Major Investments
Equity Sponsors Major Investments Goldman Sachs - Burger King - NALCO - SunGuard JPMorgan - Safety Kleen - Cabela’s - Pinnacle Foods Thomas H. Lee - Dunkin Brands - Houghton Mifflin - Warner Music Group - GNC Warburg Pincus - Neiman Marcus - Mattel - Mellon Financial
Slide 12: Equity Structure
Equity Structure Management (ELC) investment of approximately $300 million – Joe Neubauer - $200 million – Other ELC Management – $100 million Sponsors will invest remainder of equity ($1.5 – 1.7 billion) Initial Management ownership will be 15-17% – Potential ownership of up to one-third through op
Slide 13: Management Equity
Management Equity Purchased shares Stock option grants of 15.5% of fully diluted equity – 11% granted up-front at transaction price – 4.5% available over next 4 years – Four year vesting » 50% time-vested » 50% subject to EBIT achievement ARAMARK may “call” shares and mgmt. investor may “put” stock
Slide 14: Management Equity: Sources of funds
Management Equity Sources of funds – Personal funds / own assets – Cashout of options, RSU’s, etc. – Mgmt. investor loan program will be available through several banks » Guideline terms; actual amounts / terms subject to individual credit decisions » Expect interest rates in the 7.5 - 8.0% range, e
Slide 15: The Effect of Financial Leverage – Home Purchase Example
$0 $250 $500 $750 $1,000 10% Purchase Price: $500,000 Mortgage -0- Equity In $500,000 Sales Price (+10%) $550,000 Mortgage -0- Interest -0- Equity Out $550,000 ROE 10% The Effect of Financial Leverage – Home Purchase Example 100% Equity Financed
Slide 16: The Effect of Financial Leverage – Home Purchase Example
Purchase Price: $1,500,000 Mortgage -1,000,000 Equity In $500,000 Sales Price (+10%) $1,650,000 Mortgage -1,000,000 Interest -50,000 Equity Out $600,000 ROE 20% $0 $600 $1,200 $1,800 20% 10% The Effect of Financial Leverage – Home Purchase Example Use of 2/3 Debt Financing boosts equity return 2/3 M