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Opportunity
amidst Adversity
M&A Recommendation
Pro-forma Analysis
Our merger model analysis suggests 18.0%, 21.7%, 22.7%, 24.1% & 25.4% of EPS accretion in the first five combined years.
1
Luxury Industry Overview
Asian and European markets growing faster, online distribution outperforming, middle class trading up, and handbags cooling down are major dynamics in luxury industry
Asian and European markets grow faster Trading up of mid class enlarges untapped market space M&A activities bring luxury brands new life
CAGR of Personal Luxury Market by Regions, 2016-17 Deals Count, 2012-17
80
High-end
Americas 1% Luxury 70
60
Asia (ex-Japan) 9%
50
Untapped
Europe 6% 40 78 75 80
Market 65 68 71
30
Japan 4% 20
Affordable 10
Rest of World 1% Luxury
0
2012 2013 2014 2015 2016 2017
Key Takeaway: Recent statistics underline the growing importance of Asia, with the Key Takeaway: Trading up of the growing middle class brings great potential for the Key Takeaway: M&A activities have been regarded as an important way to improve
solid CAGR(16-17) of 9%, underpinned by the increasing HNW and middle class. market space between affordable luxury and high-end luxury, where there are only group value and boost market shares recently, heated by LVMH’s stable
Europe has regained its position as the top region for luxury sales by value. sublines of Coach and Michael Kors, and a handful of key brands. performance of being a luxury brand house.
Relatively speaking, the US market has been underperformed.
Online distribution of luxury outperforms Consumers are less passionate about handbags Precedent M&A Transactions
Industry Growth Rate of Handbag Sales Transaction EV/LTM
Target Name Acquirer Name
EUR€bn EV (US$mn) EBITDA Revenue
Percentage
Online luxury market (in EURbn) 16%
40 SMCP Shandong Ruiyi 14,560 10.9x 2.1x
Online distribution as % of luxury market Unit growth
12% 14%
Average Selling Price growth Christian Dior LVMH 13,200 13.0x 2.5x
30 12%
Kate Spade Coach 2,400 10.0x 1.7x
8% 10% 10%
6% Jimmy Choo Michael Kors 1,350 10.2x 1.9x
20 8%
10% 3% Duemmei Hony Capital 670 12.1x 2.3x
6%
4% Stuart Weitzman Coach 574 7.6x 2.1x
10 4% 2% 2%
5% 6% 5% 5% Global Brands Group
2% BCBG Max Azria 135 11.3x 1.8x
2% 3% 1% 3% and Marquee
0 0% 0% 1%
Cerruti Trinity 70 12.6x 1.7x
16 17E 18E 19E 20E 2010 2011 2012 2013 2014 2015 2016 2017
Key Takeaway: With only 8% online penetration in 2016, online luxury has the Key Takeaway: In North America, the heyday of handbags has passed. Growth over Key Takeaway: Acquisitions were carried out for various purposes: 1. Chinese brand
potential to grow at a mid-teen CAGR over 2016-2020E, given that consumers are the last 3 years has slowed to a 4% average rate. It is hard to see the category houses introduce superior luxury brands into Chinese markets; 2. Global luxury
increasingly comfortable to buy luxury online and luxury companies are more open returning to the double-digits growth unless the fashion trend and consumer habits groups diversify away fashion risk, improve margins and boost market shares; 3.
to e-commerce. reverse. Capital markets regain confidence in luxury sector.
2
Resources: UBS reports
Michael Kors Overview
Recognized as affordable luxury, Michael Kors aims to create a global fashion luxury group and tackle problems of revenue stagnation and profit margin decline in the long term
footwear and apparel company, currently positioned as affordable luxury. Revenue 4712.1 4493.7 4718.6
Others
Milestones: APAC 400.1 % Growth NA -4.6% 5.0%
592.7
• 2011-2014, MK expanded aggressively with the affordable luxury fever. Apparel
Gross Profit 2792.2 2661.4 2859.3
604.6
• Nov 2017, MK completed the acquisition of Jimmy Choo. EMEA
Footwear % Growth NA -6.9% 4.9%
1092.7
Channels (by revenue): Michael Kors Retail (57.5%); Michael Kors Wholesale Americas 656.9 Accessories
3033.2 EBITDA 1358.3 909.7 957.7
(34.7%); Michael Kors Licensing (3.1%); Jimmy Choo (4.7%). 3057
% EBITDA Margin 28.8% 20.2% 20.3%
Challenges:
• Recovering from diluted brand equity caused by overexpansion and EBIT 1175.1 689.9 749.1
MK is actively seeking for acquisition opportunities of superior luxury brands to obtain new growth engines, capture consumption trends and diversify fashion risk
Performance after Recent Acquisition of Jimmy Choo Strategies of Michael Kors
Deal Date Nov 1st, 2017
Jimmy Choo: an UK-based high-end luxury footwear brand who keeps a good Improve Brand Image: MK nowadays is still regarded as a brand with “great
Deal Value US$1.2bn
balance between iconic, timeless products with innovative, fashion setting trends sales in outlets and all over the street ”, which makes it difficult to compete
Stock Price and Volume of MK around the deal
Price Volume and grows rapidly since the foundation in 1996. with noble luxury brands such as LV, Prada and Gucci, regarding to the trading
200 20 Deal Rationales: up of growing middle-class population.
Right after the announcement
of the deal, rose by 20% Grow global e-commerce and retail footprint Expand into Markets outside Americas: MK’s revenue mainly comes from the
180
15 Increase luxury footwear revenue Americas and could expand the presence in Asia and Europe which is the fast-
160
Continue growth of men’s products growing luxury market worldwide with low double-digit growth expected.
140 Upon completion of the 10 Increase the brand image Diversify Product Portfolio: MK’s product portfolio mainly consist of accessories
deal, further rose by 10%
120 which target at women in particular; it needs to capture new growth point in
5
footwear, apparel and male products.
100
Key takeaways – what kind of target can attract Kors? Enhance E-commerce : MK needs to further enhance e-commerce distribution
80 0 Have a strong presence outside the North Americas
to achieve higher margin and compete against main e-commence platforms.
06/30/17 08/31/17 10/31/17 12/31/17 02/28/18 04/30/18 06/30/18 Strong e-commerce track record
Vol (US$mn) Price (Rebased to 100) Diversified product offering beyond accessories
3
Resources: 10K of MK, Fact Sheet, BBG, HSBC reports, Jefferies reports, Deutsche Bank reports, JP Morgan reports
Acquisition Rationales and Potential Targets
Acquisition rationales align with MK’s strategies and 3 potential targets are selected accordingly
Key Financials
Market Cap (€bn) 1.78 3.35 2.47
LTM P/E 25.15x 28.95x 47.76x
2017 Revenue (€mn) 963 1,393 503
3-year revenue CAGR -3.8% -1.3% 12.0%
Gross Margin 51.1% 64.5% 65.5%
Business
7 Shoes 66 Footwear Ready-to-wear
Revenue Streams by Product 14 7 25
Leather goods & accessories Leather goods Footwear & accessories
Category (%) 42
Apparel Apparel
79 37 75
Accessories
Perfumes
Ownership
Top 3 Large Shareholders (%) Della Valle Family 50.3%, Diego Della Valle 10.4%, Ferragamo Family 54.3%, Kwong Ching Woo 5.99%, Cucinelli Trust (Fedone) 51%, FMR 10%,
LVMH 3.2% Oppenheimer Funds 1.54% Oppenheimer 5%
4
Resources: Fact Sheet, BBG, HSBC reports, Jefferies reports, Deutsche Bank reports, JP Morgan reports
Potential Targets Comparison
Brunello Cucinelli is our final pick for Michael Kors’s acquisition as it brings the most significant growth opportunities and strategic alignments
A Fast Growing Absolute Luxury Player A Good Fit but No Savior in Sight Good Complement but too Early to be Constructive
Strong Growth Momentum and Complementary Portfolio Product portfolio, geographical presence, and brand equities align with the acquisition rationales
BC has delivered 15% CAGR revenue growth and 25% CAGR EBITDA With footwear and leather goods accounting for 42% and 37% of With footwear accounting for 79% of revenue, Tod’s can be a good
growth since its 2012 IPO. Such momentum is expected to continue or revenue respectively, Ferragamo can be a good complement to MK’s complement to MK’s product portfolio.
even accelerate since BC’s emerging market exposure is small. product portfolio. With 53% and 36% of revenue from Europe and Asia respectively, Tod’s
BC’s strong apparel business can also help MK diversify its existing With 46% of revenue Asia and high brand equities, Ferragamo can help can significantly diversify the geographical risk of MK.
portfolio. MK expand in Asia markets and especially among consumers who trade
up towards high-end luxury.
Determined Requirements on Manufacturing to Maintain Heritage Facing Significant Fashion Risk and Management Uncertainty Stuck in the middle of luxury footwear and sporting goods
BC has a determined emphasis on the “Made in Italy”, compared with Ferragamo is one of those medium-sized companies who are less Tod’s core business of footwear, especially comfortable shoes, is
peers (Moncler, Armani, Prada) who set up factories in China. All efficient to capture the younger luxury consumers than large higher- confronted with intense competition from both sporting goods players
products of BC are sourced and manufactured in Italy, making it end European brands. and luxury brands (notably LVMH, Gucci and Prada) which mainly focus
become the epitome of top-tier luxury brand in Europe. Furthermore, no significant benefit from the new collections in FY17 on high-heel shoes but have now developed a more comfortable shoe
BC tends to pay a 15-20% premium to its suppliers, which has was observed, which means that Ferragamo has not recovered from offering.
engendered exceptional loyalty over the years, as well as allowing BC the designer change in its R&D team. As a result, the group’s performance with Chinese customers locally
to pick and choose which specialist third parties are able to step up Also, it is still experiencing management transition while making new and abroad has also been weak relative to peers. Worse still, due to its
their involvement with BC: many are now exclusive suppliers hires to strengthen second level management seems not to help, small size and lower brand awareness, Chinese customers are no
based on its recent operation performance. longer considering the Tod’s brand as a niche player in the
“comfortable yet luxury shoe” segment.
Unique Positioning
Heritage Declining Revenue and Deteriorated EBITDA Margin Dragged down by underperforming sub-brands
Revenue & EBITDA Margin 2015-2018E Both Hogan (21% of sales) Sales by brand & 2009-2017 CAGR
and Fay (7%) have failed to
1450 30.00% expand outside of Europe Roger
Vivier
and the sales of them
19%
1400 20.00% have been declining since CAGR
35.3%
Formal Casual 2009.
1350 10.00% Fay 7%
The fast-growing Roger CAGR -4.4%
CAGR
Vivier can not be the 5.0%
1300 0.00% savior in the short term
CAGR -2.8%
2015 2016 2017 2018E given its relatively small
Hogan Tod's
size.
Revenue EBITDA Margin 21% 53%
Fashion
5
Resources: Fact Sheet, BBG, HSBC reports, Jefferies reports, Deutsche Bank reports, JP Morgan reports
Brunello Cucinelli SpA Overview
BC is one of a handful of quoted players in the absolute luxury segment (resilient price-makers with strong USPs), leading to a premium valuation
performance, improving its sales density gradually. BC’s trading multiple more Revenue 415.0 456.0 503.6
than doubled, which implying investors’ recognition. RoW
Footwear % Growth NA 9.9% 10.4%
& Others
Strong resilience to economic downturn: Given customer profile (ultra HNIWs) 89.4
75.5 Gross Profit 267.1 297.1 330.0
is extremely price-insensitive, resilience to economic downturn is strong. The Europe
212.6 % Growth NA 11.2% 11.1%
only comparators we can figure out are Hermes in the accessory sector and North America Apparel
167.7 EBITDA 69.2 76.7 87.0
Ferrari in the sports care sector. 427.6
% EBITDA Margin 16.7% 16.8% 17.3%
Brand prestige: there are no obvious competitors in high-end casualwear sector
and BC has successfully established its distinguished brand image in the past EBIT 51.1 56.7 64.5
three decades, which is the most valuable asset to a luxury company. Key Takeaway: % EBIT Margin 12.3% 12.4% 12.8%
BC’s has a strong presence in Europe while China is BC’s fastest growing market,
Favorable supply chain: BC has nurtured a strong relationship with vast fabric Net Income 33.4 36.5 41.2
with a CAGR of 34%.
of skilled small operators which ensures a consistently high level of quality. BC’s product portfolio is a perfect complement to MK % Net Income Margin 8.0% 8.0% 8.2%
Favorable tax policy and strong growth momentum in emerging markets are highlights for being a perfect target for MK
Favorable Tax Policy – Patent Box BC has strong brand recognition among Chinese customers, which supports great growth opportunities
• China is now the world’s fastest-growing luxury market and is generating 25% revenues for many famous brands such as Burbbery
Background: On 30 August 2017, BC has signed the agreement with Tax • BC is actively increasing its exposure and accelerating to monetize its brand reputation in China to capture the potential profits
Authority on the so-called Patent Box regime
% Sales in Great China Background: although BC is quite uninvolved in China , it gradually nurtured its
• Definition: Patent Box is a special tax regime used by Italy to incentivize 35%
reputation among Chinese customers visiting BC’s European and US stores,
research and development by taxing patent revenues differently from
30% making it easier to enter the China market since a loyal customer base has
other commercial revenues
25%
formed
• Effect: BC estimated that the tax savings in 2017 is expected to hit €12mn,
Expansion: BC has 17 DOS in China and the number is expected to grow to 24 in
leading a bottom boost 20% 20% revenue
growth 2020. Greater China are expected to maintain 30% growth momentum. Zegna,
Outlook: By 2020, Patent Box subsidy is expected to lift cash flow generation of
15% ~US$120mn another high-end Italian luxury appraisal brand, currently sourced 50% of
more than €80mn in aggregate opportunities
10% revenues from Great China. BC’s China potential is huge
Key Takeaway: Outlook: with the support from Kors, BC’s expansion into emerging market
5%
Favorable tax policy gives BC cash advantages and motivations to maintain
would become more efficient and effective: MK can utilize its global resources
strong R&D and patent design. 0%
BC SFER BVE MONCE BRBYE to help BC accelerate the process
6
Resources: Fact Sheet, BBG, HSBC reports, Jefferies reports, Deutsche Bank reports, JP Morgan reports
Brunello Cucinelli SpA Valuation Summary
Based on the indicative valuation range suggested by DCF, Public Trading Comparable and Precedent Transaction Analysis, the offer price of EUR€3bn is reasonable
Exit Multiple
20x is sourced from Moncler, an Italian apparel
EV/EBITDA 3,060 3,611 Beta: 0.57 brand with shorter history and lower market
Base Case 3,060 3,611 Risk free rate:
3,060 3,611
0.4%~0.6%
25x is the current EV/EBITDA of Hermes, which we
Discounted Upside Case Risk premium:
2,361 3,099 think is the core comparable of BC in terms of
Cash Flow EV/EBITDA 2,361 3,099 7%~8% brand prestige and growth outlook
2,361 3,099 Cost of debt
Analysis
1.6% 15x is EV/EBITDA of Ferragamo, a luxury brand
Downside Case 2,097 WACC: suffering from declining sales and inefficient
2,097 2,550 management; in our opinion it is unlikely that BC
EV/EBITDA 2,097 2,550 3.8%~4.8%
2,550 would fall into a similar situation in the near term
Forward 1,439 5,372 Low: 2.3x We include most of the public traded luxury
EV/Sales 1,439 5,372 High:8.6x
1,439 5,372 manufacturers both in the US and in Europe
The comps list includes Hermes, Ferragamo,
Public Moncler, Burberry, Prada, Ferrari, Kering and
Forward 1,456 2,500 Low: 13.2x LVMH
Trading 1,456 2,500
EV/EBITDA 1,456 2,500 High:22.6x Of which, we identify Ferrari and Hermes are
Comps core comparables to BC
Analysis Ferrari and Hermes, are trading at 5.7x and 8.0x
Forward 1,503 2,354 Low: 25.6x EV/Sales respectively, implying a more accurate
1,503 2,354 valuation range of 3.23bn ~ 5.32 bn
P/E 1,503 2,354 High:40.2x
Acquirer Name Michael Kors No. of Shares Outstanding (mn) 68 Mitigation: Key management and
Potential Risk: Precious intangible
designers will be retained after the
Target Name Brunello Cucinelli Current Stock Price of BC (US$) 41.5 assets (reputation, brand image, etc.)
acquisition and BC’s day-to-day
of BC may be diluted after the
operation would not be intervened by
Stake to Acquire 100% Proposed Acquisition Price per Share (US$) 51.9 acquisition by MK
MK
Announcement Date August 2018 Purchase Consideration (US$bn) 3.5
Anticipated Closing December 2018 Control Premium 25% Mitigation: A compelling control
Potential Risk: Mr. Brunello, the
premium would be offered to all the
major shareholder and founder of BC
shareholders and the founder could
may not want to sell the company to
Based on the indicative valuation suggested by public trading comparables, precedent M&A still manage the company after the
others
transactions and DCF analysis:: acquisition
The implied offer price per share is US$51.9
Offering Term 25% control premium is based on the precedent transactions and recent stock price
performance of BC
Overview Selected precedent transactions we look at: MK’ acquisition of Jimmy Choo, Coach’s Mitigation: MK can finance the
Potential Risk: Fluctuation of
acquisition of Kate Spade acquisition in Euro and can use the
exchange rate could be a
free cash flow generated by BC to pay
disadvantage for an European
the interest to avoid foreign exchange
acquisition for Michael Kors
risk
The deal key financial metrics (historical and applied based on our deal assumptions):
2017 EV/EBITDA: 27.8x
Key Metrics 2017 EV/Revenues : 4.6x
2019 Forward EV/EBITDA: 22.4x Mitigation: MK can negotiate with its
Potential Risk: Debt issuance might
2019 Forward EV/Revenues: 4.0x existing creditors and control its
trigger some covenants of its existing
leasing expense. Issuing Euro-
loans, e.g. the term loan with J.P.
denominated debt can also lower the
Morgan
We propose acquiring BC with 100% of debt consisting of 3 tranches: financial cost
Tranche 1: US$1.0 billion 4-year term loan
Tranche 2: US$1.0 billion 5-year fixed rate senior unsecured notes
Tranche 3: US$1.5 billion 7-year fixed rate senior unsecured notes
The reasons why we prefer debt financing to equity financing: Mitigation: MK is recommended to
Financing Proposal Stock of MK is undervalued: MK is currently trading at 14.7x 18 Forward PE ratio, which Potential Risk: Synergies might not be
dispatch a team of senior executives
is significantly lower than the luxury industry average of 22.6x achieved instantly because of the
to Italy to ensure the smooth
Low leverage multiple and strong cash flow generating capability lead to fast uncertainty in the transition period
transition
deleveraging: total debt / EBITDA is only 2.4x 1st year after the deal and is expected to
decrease to 1.7x in 2021
8
Resources: Fact Sheet, BBG, HSBC reports, Jefferies reports, Deutsche Bank reports, JP Morgan reports
Strategic Alignments and Deal Synergies
Brunello Cucinelli’s 3 significant strategic alignments with Kraft Heinz will bring considerable synergies
Description
MK is still viewed as a representative of a soft BC has been operating in the absolute luxury sector for BC can expand more efficiently with the help of
luxury brand, which makes it difficult for it to more than 3 decades and has successfully established its MK’s global distribution networks; as a
launch a premium product line and expand into market position as a leading Europe-based absolute luxury For BC multinational brand, MK can help improve BC’s
Brand Image bargaining power with department stores and
high-end luxury business brand 332
Enhancement wholesalers
The new acquisition would significantly enhance MK’s brand image and connect MK with an absolute luxury million Also, MK’s expertise in US is a great asset to BC’s
player, making it easier for MK to launch the new business line expansion in US market
Revenue
Synergies
More than 70% of revenues are generated by BC is famous for producing high quality casualwear for MK plans to launch a new product line with higher
the accessory business; Jimmy Choo’s men and women; more than 75% of the revenues are unit price and reduce the promotional activities to
acquisition add footwear business generated from the apparel business For MK increase the unit price and explore margin
Product Portfolio
594 expansion opportunities
Diversification BC’s brand equity can accelerate the brand image
The new acquisition would instantly diversify MK’s product portfolio; following the potential acquisition of BC, million
MK would develop into a luxury conglomerate with multiple business lines ( footwear, apparel and accessory) transition/enhancement of MK, making it easier to
break into the traditional luxury sector
MK’s revenue is mainly generated in the US BC’s main revenues are sourced from developed Europe;
market but it is still underexposed to European Asian business currently only contributes ~6% of total Most of BC's back office functions (finance, audit,
and Asian market revenues but the growth rate is ~35% annually administrative, and IT) can intergrade with MK
Expansion into the 196 Europe
Non-US Market million More sophisticated cost tracking system taken by
The acquisition would first strengthen MK’s presence in Europe, which is a significant market in the luxury MK can be applied to BC to further reduce SG&A
sector; the strong growth momentum of BC in Asia would also give MK a new top-line growth opportunities Cost while ensuring the high quality of BC offerings
Synergies
In MK’s 2020 Runway, revenues from BC is actively developing its own online shopping platform BC could just take over those stores that MK
ecommerce should become a significant source and utilize it to communicate with customers, which is rare initially planned to close, which will reduce MK’s
E-Commerce of revenues in the absolute luxury sector
150 expense
Development million MK also has a stronger bargaining power with
A combination of two companies is expected to save the cost to develop the ecommerce platform department store owners, which can help BC rent
a store at a lower cost
Notes: 1. EUR/USD Cross currency swap will be executed to swap the payments of term loan and senior notes to euro. So the financing cost will be lower and investment denominated in Euro will be partially hedged. 9
Resources: Fact Sheet, BBG, HSBC reports, Jefferies reports, Deutsche Bank reports, JP Morgan reports
Pro-Forma Analysis
The merger model suggests 18.0%, 21.7%, 22.7%, 24.1% & 25.4% of EPS accretion in the first five combined years
FY19 FY20 FY21 FY19 FY20 FY21 FY19 FY20 FY21 FY19 FY20 FY21
Revenue 5,096 5,376 5,618 661 740 829 124 161 201 5,880 6,278 6,648
Cost of goods sold 1,993 2,097 2,186 229 255 283 46 60 75 2,268 2,412 2,544
Gross Profit 3,104 3,280 3,433 431 485 545 3,613 3,865 4,104
Gross margin % 60.9% 61.0% 61.1% 65.3% 65.5% 65.8% 61.4% 61.6% 61.7%
Operating expenses 1,886 1,989 2,079 317 352 392 (77) (80) (57) 2,126 2,261 2,414
EBITDA 1,218 1,290 1,354 114 132 153 1,487 1,604 1,690
EBITDA margin% 23.9% 24.0 % 24.1% 17.0% 18.0% 19.0% 25.0% 26.0% 25.0%
Depreciation & amortization 236 252 263 33 37 41 269 289 304
EBIT 982 1,038 1,091 81 95 112 1,217 1,315 1,386
Operating margin % 19.3% 19.3% 19.4% 12.0% 13.0% 14.0% 20.7% 20.9% 20.8%
Net interest expenses 27 18 18 - - - 64 56 51 91 73 69
Other expenses - - - - - - - - -
Earnings before taxes 954 1,020 1,073 81 95 112 1,126 1,241 1,317
Income tax expense 157 168 177 16 19 23 186 205 217
Net Income 797 852 896 65 76 89 940 1,036 1,099
Total diluted shares (in million) 155 155 155 68 68 68 155 155 155
Earnings per Share - $ 5.14 5.49 5.78 0.95 1.12 1.31 6.06 6.68 7.09
EPS Accretion / (Dilution) - $ 0.92 1.19 1.31
EPS Accretion / (Dilution) - % 18.0% 21.7% 22.7%
Synergy Mixture (in US$mn) EBIT Projection (in US$mn) EPS Projection (in US$) Financial Positions
Revenue Boost (BC) Revenue Boost (MK) MK Standalone EBIT BC Standalone EBIT Before Deal (FY18) After Deal (FY19) After Deal (FY20)
MK-Standalone EPS Combined EPS
Cost Savings(BC) Cost Savings (MK's Stores) Synergies Total Assets (in $million)
300 1,600 8.00 7.56
7.09 4,059 7,863 8,393
6.68 Net Debt-to-EBITDA Ratio
1,200 7.00
200 6.06 0.70 2.18 1.41
800 6.00 Debt-to-Equity Ratio
6.09 43% 120% 74%
100 5.78
400 5.00 5.49 Interest Coverage Ratio
5.14 50 16 22
4.52
0 0 4.00 Return on Equity
FY2019 FY2020 FY2021 FY2022 FY2023 FY2019 FY2020 FY2021 FY2022 FY2023 FY2018A FY2019 FY2020 FY2021 FY2022
35% 38% 30%
Notes: 1. Team analysis (Complete merger model attached in Appendix) 2. EBITDA, EBIT, Net Income and EPS adjusted based on company’s financial reports 3. Assume there will be incremental COGS with revenue synergy. 4. Assume constant exchange rate, hedge will be conducted to mitigate currency risk. 10
Resources: Fact Sheet, BBG, HSBC reports, Jefferies reports, Deutsche Bank reports, JP Morgan reports