Accretion/Dilution Modeling

This model is for illustrative purposes only and contains no formulas, or step-by-step build-up.

Log on to www.wallstreetprep.com to purchase the actual model and corresponding step-by-step instructions

© Copyright 2009 Wall Street Prep, Inc.

Accretion / Dilution Analysis

Deal Information Shares Outstanding Calculation

Acquirer PG
Target Date Gillette Acquirer Target
Offer Price per Share 09/15/04 $45.00 Basic Shares Out. (MM's) 2,542.2 1,001.8
Target Stock Price 09/10/04 $42.90 Options Outstanding
Premium (%) 4.9% Tranche 1 36.863 3.290
Acquirer Stock Price 09/10/04 $55.67 Tranche 2 48.426 37.932
Exchange Ratio 0.81 Tranche 3 43.624 16.277
Offer Value $45,868.1 Tranche 4 22.915 19.114
Tranche 5 8.343
Transaction Assumptions Tranche 6
Percentage Stock 50.0% Avg Exercise Price
Percentage Cash 50.0% Tranche 1 24.07 19.53
Asset step-up? (Y/N) n Tranche 2 31.06 30.64
Acquirer Shares Issued In Transaction (MM's) 411.964 Tranche 3 42.36 35.38
Transaction Expenses (% offer value) 1.00% Tranche 4 49.49 45.97
Financing Fees (% debt) 3.00% Tranche 5 56.21
Acquirer Tax Rate 30.70% Tranche 6
In the money options
Allocation of Purchase Price Tranche 1 36.863 3.290
Book value (A-L) 2,457.0 Tranche 2 48.426 37.932
Less: Old Goodwill 1,024.0 Tranche 3 43.624 16.277
Tangible Book Value 1,433.0 Tranche 4 22.915 0.000
Plus: Option proceeds (increases bv) 0.0 Tranche 5 0.000 0.000
Tangible Book Value (trans. Adj.) 1,433.0 Tranche 6 0.000 0.000
Plus: Write up of Inventory 0.2% 75.0 Total in the money options 151.828 57.499
Plus: Write up of PP&E 0.3% 150.0 Total Option Proceeds $5,373.4 $1,802.4
Plus: Write up of Amortizable Intagible Assets 0.2% 100.0 Treasury Stock Method for Target? (Y/N) y
Less: Deferred taxes 99.8 Convertible Preferred Stock
Target FMV 1,658.2 Liquidation value pref. stock 0.0
Non-financing transaction expenses(1) 458.7 Conversion Price
Goodwill 44,668.6 Total in-the-$ shares frrom Convertible Preferred Stock 0.000
Purchase price $46,326.8 Annual preferred stock dividend
Convertible Debt
Sources & Uses of Funds Book value of convertible debt 0.0
Sources of Funds break circularity? (y/n) Conversion Price
Acquisition Debt n 24,116.2 Total in-the-$ shares frrom Convertible Debt 0.000
Stock Issued 22,934.1 Coupon rate on convertible debt
Total Sources $47,050.3
Uses of Funds Total additional shares from dilutive securities pre-deal 15.486
Cash to Target $22,934.1 Total additional shares from dilutive securities post-deal 55.306 17.446
Stock to Target 22,934.1 Diluted Shares Outstanding 2,597.537 1,019.292
Trans Fees (expenses) 458.7
Financing Fees 723.5 Pro Forma Balance Sheet Adjustments
Total Uses $47,050.3
Prior to Merger
Acquirer Target
Revenue, EBITDA, and EPS Estimates/Calendarization to Acquirer FYE PG Gillette Adjustments Pro Forma
Acquirer Target Cash and equivalents $5,892.0 $644.0 0.0 6,536.0
Latest fiscal year date pre-acquisition 06/30/04 12/31/03 Accounts Receivable 4,062.0 1,216.0 5,278.0
Revenue Inventories 4,400.0 1,407.0 75.0 5,882.0
Latest fiscal year pre-acquisition 9252 Deferred Tax Assets 958.0 302.0 1,260.0
1st forecast year 54320 10146 Other Current Assets 1,803.0 190.0 1,993.0
2st forecast year 57224 10679 PP&E 14,108.0 3,524.0 150.0 17,782.0
3rd forecast year 11205 Goodwill 19,610.0 1,024.0 (1,024.0) 44,668.6 64,278.6
4rd forecast year Intagibles 4,290.0 570.0 100.0 4,960.0
Adj. to Jun-30 FYE Other Assets 1,925.0 1,082.0 3,007.0
transaction year $54,320.00 $10,412.50 Deferred Financing Fees 723.5 723.5
transaction year +1 $57,224.00 $10,942.00 Total Assets $57,048.0 $9,959.0 111,700.1
transaction year +2 $0.00 $5,602.50
Accounts Payable 3,617.0 598.0 4,215.0
EBITDA Other Current Liabilities 10,243.0 2,139.0 12,382.0
Latest fiscal year pre-acquisition 2584 Deferred Tax Liabilities 2,261.0 652.0 99.8 3,012.8
1st forecast year 12567 2984 Total Debt (ex. Convertible) 20,841.0 3,112.0 24,116.2 48,069.2
2st forecast year 13515 3143 Convertible Debt 0.0 0.0
3rd forecast year 3320 Other Liabilities 2,808.0 932.0 3,740.0
4rd forecast year Minority Interest 69.0 69.0
Adj. to Jun-30 FYE Convertible Preferred Stock 1,526.0 0.0 1,526.0
transaction year $12,567.00 $3,063.50 Common Equity 15,752.0 2,457.0 (2,457.0) 22,934.1 38,686.1
transaction year +1 $13,515.00 $3,231.50 Total Liabilities + SE 57,048.0 9,959.0 111,700.1
transaction year +2 $0.00 $1,660.00 Balance Check 0.0 0.0 (0.0)

Fully-diluted EPS
latest fiscal year pre-acquisition $1.34 Pro Forma Income Statement Adjustments
1st forecast year $2.56 $1.62
2st forecast year $2.82 $1.82 Transaction Year Yr 1 Yr 2
3rd forecast year $3.14 $2.04 Date 6/30/05 6/30/06 6/30/07
4rd forecast year $2.22 % of transaction year post-deal date 79.2%
Adj. to Jun-30 FYE Acquirer
transaction year $2.56 $1.72 FY EPS $2.56 $2.82 $3.14
transaction year +1 $2.82 $1.93 Diluted Shares Outstanding 2,597.5 2,597.5 2,597.5
transaction year +2 $3.14 $2.13 Net Income 6,649.7 7,325.1 8,156.3
Target
Operating Assumptions FY EPS $1.72 $1.93 $2.13
Pre-deal assumptions Diluted Shares Outstanding 1,017.3 1,017.3 1,017.3
Interest Rate on New Debt 4.00% Net Income Converted in consensus EPS? (y/n) 1,385.3 1,963.4 2,168.7
Return on Cash 2.00% Plus: Pref. dividends saved on conversion of converts y 0.0 0.0 0.0 vz
Target Marginal Tax Rate 30.00% Plus: Interest exp. saved on conversion of converts y 0.0 0.0 0.0
Net Income (adj. for convertible securities) 1,385.3 1,963.4 2,168.7
Post-deal assumptions
Useful life of new PP&E 15 Years Pro Forma Net Income (pre adjustments) 8,035.0 9,288.5 10,325.0
Useful life of new Intagibles 13 Years
Financing Fees (amort. years) 8 Years Plus: Planned Synergies 100.0 200.0 300.0
Pretax Synergies transaction yr 100.0 Plus: Interest income from option proceeds 0.0 0.0 0.0
Pretax Synergies yr. 1 200.0 Less: Addtl. Interest Expense (763.7) (964.6) (964.6)
Pretax Synergies yr. 2 300.0 Less: Amort. Financing Costs (71.6) (90.4) (90.4)
Less: Addtl. Depreciation (7.9) (10.0) (10.0)
Contribution analysis - Year 1 Less: Amort. of ID'd Intangibles (6.3) (8.0) (8.0)
Acquirer Target Total Pretax Adjustments (Taxable) (749.5) (873.1) (773.1)
Revenue 83.9% 16.1% Tax Impact of adjustments at acquirer's 30.7% tax rate 230.1 268.0 237.3
EBITDA* 79.8% 20.2% Total Adjustments (519.4) (605.0) (535.7)
Net Income(2) 77.7% 22.3%
Ownership 86.3% 13.7% Pro Forma Net Income (post adjustments) 7,515.5 8,683.5 9,789.3
* Synergies creditted to target Diluted Shares Outstanding 2,923.7 3,009.5 3,009.5
Pro Forma EPS $2.57 $2.89 $3.25

Contribution Analysis - Year 1 Accretion/Dilution -- per share $0.01 $0.07 $0.11

Accretion/Dilution -- % 0.4% 2.3% 3.6%
Additional Synergies Requiried to Breakeven ($MM) - - -
86.3% 13.7%
Ownership
Sensitivity Analysis
Year 1 Accretion/Dilution -- per share Pretax Synergies to Required Breakeven
77.7% 22.3% % Stock Consideration % Stock Consideration Premium to
Net Income(2)
$0.07 25.0% 50.0% 75.0% 25.0% 50.0% 75.0% Current Market
$45.00 $0.15 $0.07 ($0.01) - - 34.83 4.9%
$46.00 0.13 0.05 (0.02) - - 103.95 7.2%
79.8% 20.2% $47.00 0.12 0.03 (0.04) - - 170.06 9.6%
EBITDA*
$48.00 0.11 0.02 (0.05) - - 235.58 11.9%

83.9% 16.1%
Revenue Year 2 Accretion/Dilution -- per share Pretax Synergies to Required Breakeven
% Stock Consideration % Stock Consideration Premium to
$0.11 25.0% 50.0% 75.0% 25.0% 50.0% 75.0% Current Market
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
$45.00 $0.22 $0.11 $0.02 - - - 4.9%
Acquirer Target
$46.00 0.21 0.10 (0.00) - - 7.13 7.2%
$47.00 0.19 0.08 (0.02) - - 79.90 9.6%
$48.00 0.18 0.06 (0.04) - - 152.02 11.9%