GS Case Competition-Final Presentation (1)
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Transcript of GS Case Competition-Final Presentation (1)
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Goldman Sachs Presentation toAmerican Eagle Outfitters
Grant Kendall-Bell, Baxter Black, Ashley Fleming, Robel MinassieCorporate Advisory
October 07, 2015
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Acquisition of Talon International, Inc. Plan of Action
Company Overview Alternatives Financial
Analysis Recommendation
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Company Overview
Where we are: 5-year Performance
1 Yahoo Finance - Business Finance, Stock Market, Quotes, News
Overview Alternatives FinancialAnalysis Recommendation
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Company Overview
AEO Forecast
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Overview Alternatives FinancialAnalysis Recommendation
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Industry Overview
2 "Statista - The Statistics Portal." Statista. N.p., n.d. Web. 04 Oct. 2015. 5
Overview Alternatives FinancialAnalysis Recommendation
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Peer Group
3 "Statista - The Statistics Portal." Statista. N.p., n.d. Web. 04 Oct. 2015.
Overview Alternatives FinancialAnalysis Recommendation
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Annotated Stock Chart
4 Data from Bloomberg L.P 7
Overview Alternatives FinancialAnalysis Recommendation
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Overview of Alternatives
5 Data from Financo 8
Overview Alternatives FinancialAnalysis Recommendation
I. Maintain status quo• Board has requested action
to increase share price• Issues with sustaining
growth• Plateau of ratios
• ROCE• ROE• Cash Realization
II. Sell all or part of the company• Sold 77 kids division August 3, 2012• Aerie brand downsizing to more
profitable format• Reduction in size by one third
while retaining 90% of revenue• Opportunity for international
growth • Increasing EPS
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Overview of Alternatives
6 Data from Financo 9
Overview Alternatives FinancialAnalysis Recommendation
III. Repurchasing stock• Estimations show a decrease in share
price• Lack of reliability
• Revising dividend policy to raise yield would be more favorable to investors long term
IV. Acquisition of another company• Acquire majority stake of 85% in
Talon International Inc.• Advantages:
• Pure cash – friendly takeover• Bring supply chain in house• Leverage in competitor supply
chains• Diversification of revenue
generating assets• Synergy valuation of $49.06m
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Financial Analysis
7 Yahoo Finance - Business Finance, Stock Market, Quotes, News 10
Overview Alternatives FinancialAnalysis Recommendation
Share Price Comparison
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Financial Analysis Overview Alternatives Financial
Analysis Recommendation
Cash Flow PVYear 1 1.55 1.41Year 2 1.63 1.35Year 3 1.71 1.28Year 4 1.79 1.23Year 5 1.88 1.17
Firm Value 7.82 WACC=10%Synergy Value 49.06 G=3%
(All figures in $Millions)
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Recommendation
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Overview Alternatives FinancialAnalysis Recommendation
Next steps1. Pay $5-20 Million2. All Cash3. 85% stake4. Friendly Bid
Operating and Financial Synergy1.Combination of functional
strength2.Tax Benefits3.Reduction of Beta4.Diversification5.Economies of scale6.Optimize supply chain
efficiency
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Goldman Sachs Presentation toAmerican Eagle Outfitters
Grant Kendall-Bell, Baxter Black, Ashley Fleming, Robel MinassieCorporate Advisory
October 07, 2015 13
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Appendix Aerie Brand Contribution
Yahoo Finance - Business Finance, Stock Market, Quotes, News 14
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Appendix Synergy Evaluation
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Appendix Aerie Brand Contribution
Yahoo Finance - Business Finance, Stock Market, Quotes, News 16
AUR has driven recent comp improvement
We estimate units sold continue to decline year-over-
year
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• WithWin acquired a minority stake in CITECH Co Ltd. Transaction announced on 04/25/2012 and completed on 06/08/2012 (friendly takeover) – $15.79M (All cash deal for 47.86% ownership)
• ShopInvest NV acquired SCF SA. Transaction announced on 07/07/2006 and was completed on 09/05/2006 (friendly takeover) – $15.48M (All Cash for 84.6% ownership) – Premium of 3.57%
• Invest Saigon KK acquired a minority stake in Banners Co Ltd. Transaction announced on 10/05/2007 and completed on 10/29/2007 (friendly takeover) - $0.29M (friendly takeover for 31%)
• Private investor acquired a minority stake in SI Resources co Ltd. $12.57M (All cash for 18.28% ownership) Premium paid 32.31%
• Yi Jin Industrial Co Ltd acquired a minority stake in Kwang Ming Silk Mill Co Ltd. Transaction was announced on 08/29/2013 and completed on 10/17/2013 - $12.02M (All cash deal for 40.26%) Friendly bid – premium of 50% paid
• Jiangyin Deyuan Wollen Textile Co Ltd. Sold Jiangsu Sunshine Co Ltd. To Jiangsu Sunshine Co ltd.- $11.88M (51% ownership)
• Groupo Tavex SA acquired Santista Textil SA. $13.92M (friendly bid, All cash for 92% ownership) Premium of 2.29% paid
• Keplam KK acquired a minority stake in Econach Holdings Co Ltd. Transaction announced on 09/07/2006 and completed on 09/29/2006 (friendly bid) - $1.16M for 8% ownership
Appendix Comparable deals
Nature of Comp. deals1. Between $1-
$15Million2. Takes about 40 days
to complete the deal3. Ownership 8-92%4. All cash deal 5. Friendly bids