Acquisition of Symbion Health                                                       October 2007Strictly Private and Confi...
Table of Contents1. Executive Summary                       12. Deal Rationale                          33. Regulatory Con...
1. Executive Summary1
Executive SummaryPrimary should wait for the ATO’s ruling in relation to Healthscope’s Revised Offer before pursuing Symbi...
2. Deal Rationale3
Why Symbion Health?Acquiring Symbion allows Primary to increase its market share, create an integrated healthcare network ...
SynergiesCost synergies are estimated at c$95m and are fully realised by MergeCo’s second year of operation.Estimated cost...
Divestment of Pharmacy and ConsumerThe divestment of P&C for c$1.1bn will allow Primary to focus on its core healthcare op...
3. Regulatory Concerns7
ATO Ruling and ACCC ConcernsIt is unlikely that Healthscope’s Revised Offer will proceed if the ATO does not grant CGT rel...
4. Valuation of Symbion9
Valuation SummarySymbion has an indicative valuation range of $3.60 - $4.50 per share.                                    ...
MergeCo (Excl. P&C)The transaction is expected to be EPS accretive from 2010 onwards.                                     ...
5. Bid Strategy12
Funding ConsiderationsA combination of cash and scrip is attractive to all stakeholders.                     Cash consider...
Bidding Strategy         Response to         Heathscope’s                              ATO Ruling(1)                      ...
6. Risks15
Acquisition RisksThere are a number of strategies that can be employed to mitigate acquisition risks.Situation         Det...
7. Next Steps17
Next StepsPrimary’s response should be framed around the ATO ruling.                                                      ...
8. Appendix19
Appendix I – Industry Themes20
Industry ThemesA burgeoning healthcare industry has resulted in a strong trend towards consolidation in recent years.Drive...
Key SegmentsPathology, diagnostic imaging and medical centres are key growth segments in Australian healthcare.           ...
Interloper Analysis                                 Market                                                 Enterprise     ...
Appendix II – Overview of Symbion24
Symbion Share Price ChartSymbion’s share price has steadily risen since the beginning of 2007 due in part to speculation o...
Share Register Overview                                 Estimated Ownership                                   Retail     P...
Symbion Personnel                Mr Paul McClintock                                   Chairman      Appointed Chairman in...
Appendix III – Valuation28
DCF Valuation                                      Jun-06   Jun-07      Jun-08   Jun-09            Jun-10        Jun-11   ...
Valuation AssumptionsDCF assumptions                                                        WACC calculation              ...
Trading ComparablesValuation                        2008F                     Median multiple                             ...
Transaction ComparablesSum of the parts                                                                                   ...
Transaction Comparables (Cont.)Pathology and medical centres                         Diagnostic imaging     16.0x         ...
Appendix IV – Sensitivities and Funding34
Deal Summary and Sources and Uses of FundsDeal summary                                        Sources and uses of funds De...
SensitivitiesRevenue and EBITDA sensitivity for pathology                                                  Change in Reven...
Appendix V – MergeCo Metrics37
Unable to Divest P&C                                                                                                      ...
EPS AnalysisScheme of Arrangement (offer of $4.20)                      Bear hug (offer of $4.50)                         ...
Summary MetricsTrading metrics                                                Credit metrics                       2007A  ...
Summary Metrics (Cont.) and Acquisition EVOperating metrics                                              Acquisition EV ca...
© 2007 Dillon Capital. Authorised and regulated by the Australian Prudential Regulatory Authority. All rights reserved. Di...
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  • Ubs investment banking challenge national finals presentation

    1. 1. Acquisition of Symbion Health October 2007Strictly Private and Confidential
    2. 2. Table of Contents1. Executive Summary 12. Deal Rationale 33. Regulatory Concerns 74. Valuation of Symbion 95. Bid Strategy 126. Risks 157. Next Steps 178. Appendix I Industry Themes 20 II Overview of Symbion 24 III Valuation 28 IV Sensitivities and Funding 34 V MergeCo Metrics 37
    3. 3. 1. Executive Summary1
    4. 4. Executive SummaryPrimary should wait for the ATO’s ruling in relation to Healthscope’s Revised Offer before pursuing Symbion.  Symbion remains one of the last major buying opportunities Deal Rationale  Potential to gain significant market share  Create a market leading integrated healthcare network Valuation of Symbion  Symbion has an indicative valuation range of $3.60 – $4.50 Regulatory Concerns  It is unlikely that Healthscope’s Revised Offer will proceed if the ATO refuses to grant scrip-for-scrip and de-merger relief  Wait for ATO ruling Bid Strategy  If relief is not granted for Healthscope’s Revised Offer, pursue a Scheme of Arrangement offering $4.20 per share  If relief is granted for Healthscope’s Revised Offer, pursue a bear hug offering $4.50 per share  ACCC concerns over merged entity’s market share Risks  Divesting Symbion’s pharmacy and consumer businesses  Synergy realisation and integration of businesses2
    5. 5. 2. Deal Rationale3
    6. 6. Why Symbion Health?Acquiring Symbion allows Primary to increase its market share, create an integrated healthcare network and extractsignificant value through synergy realisation. Integrated network  Create one of Australia’s largest integrated Gain market share provider of healthcare Synergies services Symbion is an attractive  Symbion is an industry leader in each of its  Complementary  Cross-referrals between target and strategic fit for divisions businesses suggest businesses Primary efficient integration  Opportunity for Primary to capture influential market  Realisation of c$95m per share annum in synergies Timing  Symbion remains one of Symbion Summary Financials (A$m) 2007A 2008F 2009F 2010F the last major buying Revenue 3,779.2 4,164.4 4,489.8 4,753.6 opportunities EBITDA 253.0 317.4 344.8 366.7 EPS (cents) 10.6 19.3 22.4 25.3  Investors are losing confidence in EBITDA Margin % 6.7% 7.6% 7.7% 7.7% Healthscope EV/EBITDA 12.8x 10.2x 9.4x 8.9x P/E 26.1x 22.4x 19.9x 17.6x  Positive industry outlook4
    7. 7. SynergiesCost synergies are estimated at c$95m and are fully realised by MergeCo’s second year of operation.Estimated cost synergies Timeline for synergy realisation Source Details Value  Consolidate laboratory operations and functions Pathology $35m  Consolidate collection centres and redeploy licences One-off implementation  Amalgamate a limited number of cost of $20m Medical practices $30m Centres  Purchasing and procurement savings MergeCo 2008F EBITDA plus business line synergies(1)  Improve resource utilisation 400 Imaging and $18m 350 Technology  Integrate Primary’s superior IT infrastructure 300 250 200 Synergies Corporate  Rationalise corporate functions $12m 150 2008F EBITDA m D A B E T $ ) ( I 100 50 Total $95m 0 Pathology & Medical Imaging and Corporate Centres Technology5 (1) Excluding implementation costs
    8. 8. Divestment of Pharmacy and ConsumerThe divestment of P&C for c$1.1bn will allow Primary to focus on its core healthcare operations. Strategic Buyer Rationale Comments Fit  Fits with current portfolio of assets  May buy Symbion’s P&C business if ATO grants scrip-for-scrip and de-merger relief  Willingness to commit shown by a bid of $1,043m  Potential ACCC competition restrictions  14 June 2007 offer of $1,085m for P&C  Sigma would have combined pharmaceutical  Potential to realise synergies market share of >50%  Leading PE firm with significant holdings in major  FIRB approval required as Symbion owns healthcare companies around the world significant market share  High performing pharmaceutical distributor and  Potential ACCC competition restrictions health product retail company  Resulting market share in pharmaceutical sector of  Potential for synergies >50%  Will require an investing partner  Grocery wholesaler and distributor  Potential ACCC concern if JV with any key  Potential interest in distribution of P&C businesses healthcare player6
    9. 9. 3. Regulatory Concerns7
    10. 10. ATO Ruling and ACCC ConcernsIt is unlikely that Healthscope’s Revised Offer will proceed if the ATO does not grant CGT relief.ATO ruling on CGT roll-over and de-merger relief MergeCo competition analysis De-merger Business Roll-over Relief Market Analysis Response Relief Segment  Total pathology market  CGT scrip-for-scrip and de-merger relief is a  Divest some Issue precondition to Healthscope’s Revised Offer share of c40% pathology Pathology collection centres  Concentration of market as required share in NSW  To enable Symbion  To enable Symbion shareholders to obtain Purpose shareholders to defer CGT relief in relation to their tax liability  Barriers to entry high but the de-merger MergeCo market share Medical  No action minimal Centres necessary Likely  No competition issues Uncertain Uncertain Ruling Health  No competition issues  No action Effect on  Failure to obtain CGT relief allows Primary to engage Technology arising from merger necessary Primary Symbion at a lower price8
    11. 11. 4. Valuation of Symbion9
    12. 12. Valuation SummarySymbion has an indicative valuation range of $3.60 - $4.50 per share. Enterprise Value 2008F EV/EBITDA Valuation Measure Price per Share (A$) Low High Low High Analyst 12 Minimum Bid Market Valuation Month Price Price $4.20 Target $3.49 52 Week Trading Range $3.28 $4.05 2,732 3,229 8.8 x 10.4 x Trading Comps - EV / 2008F EBITDA $3.95 $4.44 3,165 3,481 10.2 x 11.2 x Transaction Comps - EV / LTM EBITDA $4.09 $4.50 3,255 3,520 10.5 x 11.3 x Independent Experts Report $3.59 $3.98 DCF Valuation (1) Symbion $3.60 Synergies $4.94 2,939 3,326 9.5 x 10.7 x Indicative Bid Valuation (2) Analyst 12 Month Target + (20% Premium) $3.49 $4.20 2,868 3,326 9.2 x 10.7 x(1) EV in relation to an implied price per share of $4.20(2) Premium to average analyst 12 month price target pre-29 Jan 0710
    13. 13. MergeCo (Excl. P&C)The transaction is expected to be EPS accretive from 2010 onwards. MergeCo EPS Accretion (1) 25.0% 19% 20.0% EPS Accretion MergeCo (Excl. P&C) (cents) 2009F 2010F 2011F 17% Symbion 22.4 25.3 28.6 15.0% Primary 54.0 68.1 76.2 MergeCo (Excl. P&C) 49.8 79.7 90.9 Accretion / (Dilution) for Primary (8%) 17% 19% 10.0% 5.0% 0.0% Debt Metrics MergeCo (Excl. P&C) 2008F 2009F 2010F 2011F 2009F 2010F 2011F EBITDA Interest Coverage 4.5x 5.2x 8.0x 12.1x (5.0%) EBIT Interest Coverage 2.4x 3.2x 5.4x 8.2x Net Debt / EBITDA 3.2x 2.3x 1.5x 1.0x (10.0%) (8%) (1) Assumes offer price of $4.20 and funding structure comprising 40% debt, 30% rights issue and 30% scrip Capital Structure (Excl. P&C) (A$m) 2008F 2009F 2010F 2011F MergeCo Trading Metrics (Excl. P&C) 2008F 2009F 2010F 2011F Debt 1,295.32 1,159.88 969.67 722.12 EV / EBITDA 8.7x 7.3x 5.9x 5.6x Equity 1,972.52 1,972.52 1,972.52 1,972.52 EV / EBIT 16.0x 11.7x 8.6x 8.2x Debt / Equity 65.7% 58.8% 49.2% 36.6% P/E 24.5x 15.3x 9.6x 8.4x11
    14. 14. 5. Bid Strategy12
    15. 15. Funding ConsiderationsA combination of cash and scrip is attractive to all stakeholders. Cash consideration Scrip offer Rights Issue Debt Financing Scrip Offer  Helps facilitate a friendly transaction  Decreases dilution in voting  Cheaper than raising equity rights for Primary  Opportunity for Symbion shareholders to shareholders caused by scrip  Provides for the quick participate in the synergies portion divestment of the P&C divisions Advantages  Attractive to retail investors  Enables CGT roll-over relief Certainty of consideration  Decrease in value of Primary shares  Dilutes voting rights of existing Primary  Adds pressure to MergeCo’s shareholders debt capacity  Risk of less than 100% Disadvantages subscription  Concession of ownership in the merged entity  Uncertainty of exchange ratio due to dependency CGT payable on the current share price of Primary Cash Scrip Ownership 77% 23% Recommended: 30% rights 40% debt 30% scrip13
    16. 16. Bidding Strategy Response to Heathscope’s ATO Ruling(1) Recommendation Contingency Revised Offer Scheme of Arrangement Off-market Hostile  Publicise SYB Board’s  Offer $4.20 per share unwillingness to engage at $4.20  75% threshold easier to achieve than 90% for  Investors losing d hostile bid nie confidence in SYB Board Wait and See f de  Thorough due diligence R elie possible  Healthscope most likely to walk away  Use 20% blocking stake to protect Symbion Re Bear Hug lief  Offer $4.50 per share gr a nt e d  SYB Board under duty to maximise shareholder value  Via Scheme of Arrangement if possible(1) Whether scrip-for-scrip and de-merger relief is available to Symbion shareholders for the Healthscope Revised Offer14
    17. 17. 6. Risks15
    18. 18. Acquisition RisksThere are a number of strategies that can be employed to mitigate acquisition risks.Situation Details Possible strategies Likelihood  Concerns regarding high ACCC concentration of pathology market  Divest pathology assets as required Concerns share  Implement bear hug at $4.50 and pursue a ATO  Scrip-for-scrip and de-merger relief Scheme of Arrangement if possible Grants available to Symbion in relation to Relief Healthscope’s Revised Offer  Symbion may have to pay Healthscope a break fee  Use of scrip consideration reduces negative Unable to impact of additional debt funding  No cross-divisional synergies to be Divest P&C derived from P&C businesses Businesses  Sell off some pathology assets to pay down debt Less  Uncertainty in synergy realisation Synergies  Offer via Scheme of Arrangement allows and business integration may impact Realised thorough due diligence to be conducted negatively on EPS16
    19. 19. 7. Next Steps17
    20. 20. Next StepsPrimary’s response should be framed around the ATO ruling.  Symbion can be protected by Primary’s 20% stake  If ATO refuses to grant relief for the Healthscope Revised Offer, pursue a Scheme of Arrangement at $4.20  If ATO grants relief for Healthscope’s Revised Offer, pursue an off- market hostile bid at $4.50  Full integration of Symbion and realisation of synergies18
    21. 21. 8. Appendix19
    22. 22. Appendix I – Industry Themes20
    23. 23. Industry ThemesA burgeoning healthcare industry has resulted in a strong trend towards consolidation in recent years.Drivers of future growth Sector consolidation over the last 5 years Consumer  Greater public awareness of illness and Pharmaceuticals Symbion API Sigma Arrow Demand the importance of a healthy lifestyle Retail Pharmacy Symbion API Sigma Population Growth  Increasing pool of customers  Memberships increasing Private Health  Improves margins as most insurers bear Pathology Healthscope Gribbles Primary Insurance the costs of patients Government  Recognition of aging population Symbion Sonic Endeavour MIA CVC (PE) Funding  PBS and Medicare schemes Ageing  Increasing life expectancy ensures Diagnostic Imaging Symbion Sonic MIA DCA Demographics demand for health services Scientific  Advancements in providing treatment alternatives Medical Centres Symbion Sonic Endeavour IPN Primary Progress21
    24. 24. Key SegmentsPathology, diagnostic imaging and medical centres are key growth segments in Australian healthcare. Pathology Diagnostic Imaging Medical Centres Symbion Other IPN 2% Primary Primary 7% 2% 3% 5% Other DCA St John of Sonic 33% 35% God 38% 5% Healthscope 10% Key Players (1) Other Symbion 93% Symbion Sonic 16% 35% 16%  Major customer bases are referring  Primary source of referrals doctors and hospitals  Top 3 private operators control c67%  Private GPs comprise c70% of market of market share with large, integrated healthcare  Medicare rebates accounted for c93% providers comprising 30% Salient Features of total industry revenue  Significant growth potential due to aging population  Projected 5-year CAGR of 2.7%  Existing Medicare Agreement caps funding growth at 5%pa but estimated  Funding structure similar to pathology  Government incentives to promote the to increase consolidation of independent practices(1) Based on revenues22
    25. 25. Interloper Analysis Market Enterprise Interlopers Capitalisation Rationale Value (A$m)* (A$m)* 1,293 1,847  May submit a revised offer in response to Primary  Operates in the imaging, pathology and medical centres space 5.586 6,745  Opportunity to derive synergies for its pathology and medical imaging business groups  Leading PE firm with significant holdings in major healthcare companies around the world N/A N/A  Consortium of bidders to buy key divisions such as P&C*Data as at 25 October 200723
    26. 26. Appendix II – Overview of Symbion24
    27. 27. Symbion Share Price ChartSymbion’s share price has steadily risen since the beginning of 2007 due in part to speculation of atakeover. 4.60 4.40 4.20 $4.18 $4.15 $4.12 4.00 $4.05 3.80 A P S $ e a h c ) ( r i 3.60 3.40 3.20 3.00 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Adjusted Symbion Share Price 1 month VWAP 3 month VWAP 6 month VWAP25
    28. 28. Share Register Overview Estimated Ownership Retail Primary Institutions 20% 60% 20%Substantial shareholders Number of Shares Holder % Ownership Comments (m) 129.4 20.0% Strategic stake acquired in 2007 56.3 8.6% Long-term investor in Symbion 39.3 6.1% Became a substantial shareholder in August 2007 37.3 5.8% Became a substantial shareholder in September 2007 32.9 5.1% Became a substantial shareholder in August 200726
    29. 29. Symbion Personnel Mr Paul McClintock Chairman  Appointed Chairman in June 2005  Over 20 years experience in Investment Banking Age: 58 Mr Robert Cooke Managing Director & CEO  Appointed in November 2005  Over 26 years experience in senior management positions Age: 58 Dr Ian Blackburne  Appointed in September 2004 Chair of Board’s Remuneration Committee  Formerly Managing Director of Caltex Australia Age: 56  Appointed to the Boards of CSR, Suncorp Metaway and Teekay Corporation Mr Jim Hall Chair of the Board’s Audit Committee  Joined the Board in June 2005  Has held senior financial management positions at BHP Billiton and Orica Limited Age: 56 Dr Christine Bennett Director  Joined the Board in February 2007  Formerly CEO of Westmead Hospital, Partner of Health and Sciences, and has held senior positions in the Age: 51 NSW Department of Health27
    30. 30. Appendix III – Valuation28
    31. 31. DCF Valuation Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Cash Flows EBIT 140.9 170.4 235.2 258.6 278.3 301.2 358.5 379.8 399.5 Tax on EBIT (42.3) (51.1) (70.5) (77.6) (83.5) (90.4) (107.5) (113.9) (119.9) NOPAT 98.6 119.3 164.6 181.0 194.8 210.9 250.9 265.8 279.7 Depn & Amort 82.1 82.6 82.3 86.3 88.4 90.5 84.4 85.2 60.6 Capex (61.4) (47.7) (43.0) (46.2) (49.3) (52.4) (55.3) (58.0) (60.6) Change in Working Capital 0.0 (22.3) (25.4) (19.3) (15.6) (15.3) (14.4) (12.1) (10.0) Free Cash Flow to Firm 119.3 131.9 178.6 201.8 218.2 233.7 265.7 281.0 269.7 Terminal Value 3,994.8 Total Cash Flow 119.3 131.9 178.6 201.8 218.2 233.7 265.7 281.0 4,264.5 Discount Factor From Mid-year N/A 0.9830 0.8939 0.8130 0.7394 0.6724 0.6114 0.5561 0.5057 Discounted Cash Flow N/A 129.6 159.6 164.0 161.3 157.1 162.4 156.2 2,156.6 Output Terminal Value Valuation Date 25 Oct 07 Terminal Growth 3.00% PV of Annual Cash Flows 960.8 30.8% PV of Terminal Value 2,156.6 69.2% NPV 3,117.4 Terminal Growth Net Debt 611.2 $3.88 2.50% 2.75% 3.00% 3.25% 3.50% Equity Value 2,506.1 9.45% $4.00 $4.13 $4.27 $4.42 $4.58 Number of Shares 645.5 9.70% $3.82 $3.94 $4.07 $4.20 $4.35 WACC Implied Share Price 3.88 9.95% $3.65 $3.76 $3.88 $4.00 $4.14 Average Analyst Price Target Pre-29 Jan 07 3.49 10.20% $3.50 $3.60 $3.70 $3.82 $3.94 Premium to Analyst Price Target 11.2% 10.45% $3.35 $3.44 $3.54 $3.65 $3.7629
    32. 32. Valuation AssumptionsDCF assumptions WACC calculation  Medicare rebates capped at 5% growth affecting DCF assumptions pathology and medical imaging Risk-free Rate 6.50% Legislative Market Risk Premium 6.00%  Rebates set to expire in FY09, but assumed to Equity Beta 0.85 remain in place Cost of Equity 11.6% Revenue EBITDA Margin Cost of Debt 7.50%  Pathology – 11%  Slightly better than growth FY08 FY07 numbers due to Margin -  Diagnostic imaging – cost savings and Tax Rate 30% 5% growth FY08 higher operating Pre-tax Cost of Debt 7.50%  Consumer – 10% leverage Post-tax Cost of Debt 5.25% growth FY08  Pharmacy – 10% Target Gearing (D/E) 35.0% Operating growth FY08 E/V 74.1% Capex and D&A D/V 25.9%  Longer-term growth  Maintenance capex for radiology tied to  D&A forecast as a Post-tax WACC 9.95% Medicare rebate percentage of capex scheme merging into 100% of  Longer-term growth capex in perpetuity for P&C tied to CPI Financing  7.5% cost of debt30
    33. 33. Trading ComparablesValuation 2008F Median multiple Value Earnings Low High Low High 311 10.2x 11.2x Enterprise Value 3,168 3,479 Plus Associates 0 0 Less Net Debt & Minorities (615) (615) Implied Equity Value 2553 2864 Shares Outstanding 645.5 645.5 Implied Value per Share $3.95 $4.44 Average Analyst Price Target Pre-29 Jan 07 $3.49 $3.49 Premium to Average Analyst Price Target 13% 27%List of comparables Graph Trading Comparables EV / 2008F EBITDA 14.0x Healthscope 9.2x 12.0x Median 10.7x Primary 9.9x 10.0x API 10.6x 8.0x Symbion 10.7x 6.0x 11.8x Sonic Healthcare 10.7x 9.9x 10.6x 10.7x 10.7x 9.2x Sigma 11.8x 4.0x D A B V E T F 8 0 2 I / Median 10.7x 2.0x 0.0x Healthscope Primary API Symbion Sonic Sigma Healthcare31
    34. 34. Transaction ComparablesSum of the parts List of transactions Earnings Median multiple applied to LTM Value Pathology & Medical Centres 30-Jun-07 LTM Low High Low High Target Company Date Acquiror Enterprise Value EV / LTM EBITDA Divisional EBITDA QML Jun-02 Mayne Group 268 9.9x Pathology 115 13.4x 14.4x 1,541 1,656 LabOne Aug-05 Quest 934 13.8x Diagnostic Imaging 55 9.6x 10.6x 528 583 Consumer 39 13.4x 14.4x 523 562 Dynacare May-02 Lab Corp of America 672 14.0x Pharmacy 52 12.8x 13.8x 666 718 IPN Jun-04 Sonic Healthcare 105 15.3x 261 Median 13.9x Enterprise Value 3,257 3,518 Plus Associates 0 0 Imaging Less Net Debt & Minorities (615) (615) Implied Equity Value 2,642 2,903 Target Company Date Acquiror Enterprise Value EV / LTM EBITDA Shares Outstanding 646 646 MIA Jun-04 DCA 934 9.6x Implied Value per Share $4.09 $4.50 Qld Diagnostic Imaging Feb-02 Mayne Group 87 10.1x Average analyst price target pre 29 Jan 07 $3.49 $3.49 Unilabs SA Aug-07 Capio AB 681 13.9x Premium Over Current 17.3% 28.9% Median 10.1x Implied EV / LTM EBITDA 12.5x 13.5xValuation of pharmacy and consumer businesses Pharmacy Target Company Date Acquiror Enterprise Value EV / LTM EBITDA Chronimed Aug-04 Mayne Group 115 9.4x Earnings Median multiple applied to LTM Value CCS Medical Oct-05 Sonic 630 10.5x 30-Jun-07 LTM Low High Low High Mean Accredo Feb-05 Medco Health Solutions 2,499 16.1x Divisional EBITDA Priority healthcare Jul-05 Quest 1,341 16.7x Consumer 39 13.4x 14.4x 523 562 542 Median 13.3x Pharmacy 52 12.8x 13.8x 666 718 692 91 Consumer Enterprise Value 1,188 1,279 1,234 Target Company Date Acquiror Enterprise Value EV / LTM EBITDA Roche Consumer Health Jul-04 Bayer 2,962 12.5x Implied EV / LTM EBITDA 13.1x 14.1x 13.6x Rexall Sundown May-00 Royal Numico 1,649 14.4x Median 13.5x32
    35. 35. Transaction Comparables (Cont.)Pathology and medical centres Diagnostic imaging 16.0x 12.0x Median 13.9x Median 10.1x 14.0x 10.0x 12.0x 8.0x 10.0x 13.9x 6.0x 8.0x 15.3x 9.6x 10.1x 13.8x 14.0x 6.0x 4.0x M D A B V E T L M I / 9.9x D A B V E T L I / 4.0x 2.0x 2.0x 0.0x 0.0x MIA QLD Diagnostic Unilabs SA QML LabOne Dynacare IPN ImagingPharmacy Consumer 16.0x 20.0x Median 13.5x 14.0x 16.0x Median 13.3x 12.0x 12.0x 10.0x 8.0x 16.1x 16.7x 8.0x 14.4x 9.4x 10.5x 6.0x 12.5x 4.0x M D A B V E 4.0x T L 0.0x M I / D A B V E T L I / 2.0x 0.0x Roche Consumer Health Rexall Sundown33
    36. 36. Appendix IV – Sensitivities and Funding34
    37. 37. Deal Summary and Sources and Uses of FundsDeal summary Sources and uses of funds Deal Summary Sources PRY share price $11.98 Debt 1,571.7 SYB share price $4.05 Rights issue 650.0 Offer premium 3.6% Equity (scrip) 650.0 Offer price $4.20 2,871.7 Equity purchase price 2,166.7 Acquisition EV 2,941.6 Uses Acquisition price 2,166.7 % cash financing 54.7% Carry on debt 623.6 % debt financing 22.6% Transaction costs 81.4 % stock financing 22.6% 2,871.7 Exchange ratio 0.12x Market Capitalisations PRY 1,517.9 Value of scrip component per share $1.26 Symbion (100%) 2,614.3 Cash per share $2.94 Symbion at acquisition price (100%) 2,166.7 Total offer consideration $4.20 Share Information New shares issued to Symbion shareholders 59.7 PRY shares outstanding pre-deal 126.7 Primarys existing ownership of Symbion 20.0% Symbion shares being purchased 516.4 Exchange ratio - new for old 0.12x Rights issue shares issued 72.3 PRY shares outstanding post-deal 258.7 % of MergeCo owned by PRY 76.9% % of MergeCo owned by SYB 23.1%35
    38. 38. SensitivitiesRevenue and EBITDA sensitivity for pathology Change in Revenue -2.0% -1.0% 0.0% 1.0% 2.0% -2.0% $3.39 $3.49 $3.61 $3.73 $3.85 Change in EBITDA -1.0% $3.51 $3.62 $3.74 $3.87 $4.00 0.0% $3.62 $3.75 $3.88 $4.01 $4.15 1.0% $3.74 $3.87 $4.01 $4.15 $4.30 2.0% $3.86 $4.00 $4.14 $4.29 $4.45Synergies sensitivities Change in Synergies (A$m) -10.00 0.00 10.00 DCF Sensitivity EPS Accretion 2009F -13% -8% -3% Full Synergies (A$m) 75 85 95 105 115 EPS Accretion 2010F 13% 17% 21% DCF with Synergies $4.32 $4.44 $4.57 $4.69 $4.81 EPS Accretion 2011F 15% 19% 23%DCF with synergies sensitivity Terminal Growth 4.57 2.50% 2.75% 3.00% 3.25% 3.50% 9.45% $4.71 $4.86 $5.02 $5.19 $5.38 9.70% $4.50 $4.64 $4.79 $4.94 $5.12 WACC 9.95% $4.31 $4.44 $4.57 $4.72 $4.87 10.20% $4.13 $4.25 $4.37 $4.50 $4.65 10.45% $3.96 $4.07 $4.18 $4.31 $4.4436
    39. 39. Appendix V – MergeCo Metrics37
    40. 40. Unable to Divest P&C MergeCo EPS Accretion (w/P&C) 15.0% 12% 10% 10.0% EPS Accretion MergeCo (cents) 2009F 2010F 2011F Symbion 22.4 25.3 28.6 Primary 54.0 68.1 76.2 5.0% MergeCo 46.9 74.8 85.4 Accretion / (Dilution) for Primary -13% 10% 12% 0.0% 2009F 2010F 2011F (5.0%) Debt Metrics MergeCo 2008F 2009F 2010F 2011F EBITDA Interest Cover 1.9x 2.3x 2.8x 3.1x (10.0%) EBIT Interest Cover 1.4x 1.9x 2.4x 2.7x Net Debt / EBITDA 6.1x 4.9x 3.9x 3.5x (15.0%) (13%) Capital Structure MergeCo (A$m) 2008F 2009F 2010F 2011F MergeCo Trading Metrics 2009F 2010F 2011F Debt 2,295.32 2,288.42 2,229.00 2,159.09 EV / EBITDA 9.6x 7.7x 7.3x Equity 1,972.52 1,972.52 1,972.52 1,972.52 EV / EBIT 11.5x 9.0x 8.4x Debt/Equity 116.4% 116.0% 113.0% 109.5% P/E 22.3x 14.0x 12.3x38
    41. 41. EPS AnalysisScheme of Arrangement (offer of $4.20) Bear hug (offer of $4.50) MergeCo EPS Accretion MergeCo EPS Accretion Proposed 25.0% Proposed 15.0% 13% 11% Funding 19% Funding 20.0% 10.0% Mix 17% Mix 15.0% 5.0% 40% Debt 40% Debt 10.0% 0.0% 2009F 2010F 2011F 30% Rights 5.0% 30% Rights (5.0%) 30% Scrip 0.0% 30% Scrip (10.0%) 2009F 2010F 2011F (5.0%) (15.0%) (14%) (10.0%) (8%) (20.0%)Change in funding at $4.20 offer MergeCo EPS Accretion All Cash 25.0% 22% Offer 20.0% 17% Debt Metrics MergeCo (Excl. P&C) 2008F 2009F 2010F 2011F 15.0% 60% Debt EBITDA Interest Cover 3.2x 3.6x 5.0x 6.4x 10.0% EBIT Interest Cover 1.7x 2.2x 3.4x 4.4x 40% Rights 5.0% Net Debt / EBITDA 4.4x 3.4x 2.4x 1.9x 0.0% Debt Metrics MergeCo EBITDA Interest Cover 2008F 3.2x 2009F 3.6x 2010F 5.0x 2011F 6.4x 2009F 2010F 2011F EBITDA Interest Cover 1.6x 1.9x 2.4x 2.6x (5.0%) EBIT Interest Cover 1.2x 1.6x 2.0x 2.2x (10.0%) Net Debt / EBITDA 7.3x 6.0x 4.7x 4.4x (15.0%) (16%) (20.0%)39
    42. 42. Summary MetricsTrading metrics Credit metrics 2007A 2008F 2009F 2010F 2011F 2007A 2008F 2009F 2010F 2011F Primary Primary EV / EBITDA 14.7x 12.3x 10.7x 9.3x 8.9x EBITDA Interest Cover 9.4x 3.6x 2.7x 3.3x 3.7x EV / EBIT 20.8x 16.5x 12.1x 10.6x 10.0x EBIT Interest Cover 6.7x 2.7x 2.4x 2.9x 3.2x P/E 31.5x 23.6x 22.2x 17.6x 15.7x Net Debt / EBITDA 1.8x 4.7x 3.9x 3.2x 2.8x Symbion Symbion EV / EBITDA 12.8x 10.2x 9.4x 8.8x 8.2x EBITDA Interest Cover 3.8x 5.6x 6.7x 8.2x 10.6x EV / EBIT 13.7x 12.5x 11.6x 10.7x 9.9x EBIT Interest Cover 2.5x 4.1x 5.0x 6.2x 8.1x P/E 26.0x 22.3x 19.8x 17.5x 15.5x Net Debt / EBITDA 2.4x 1.7x 1.3x 1.0x 0.7x MergeCo MergeCo EV / EBITDA 9.6x 7.7x 7.3x EBITDA Interest Cover 1.9x 2.3x 2.8x 3.1x EV / EBIT 11.5x 9.0x 8.4x EBIT Interest Cover 1.4x 1.9x 2.4x 2.7x P/E 22.3x 14.0x 12.3x Net Debt / EBITDA 6.1x 4.9x 3.9x 3.5x MergeCo (Excl. P&C) MergeCo (Excl. P&C) EV / EBITDA 7.3x 5.9x 5.6x EBITDA Interest Cover 4.5x 5.2x 8.0x 12.1x EV / EBIT 11.7x 8.6x 8.2x EBIT Interest Cover 2.4x 3.2x 5.4x 8.2x P/E 15.3x 9.6x 8.4x Net Debt / EBITDA 3.2x 2.3x 1.5x 1.0x40
    43. 43. Summary Metrics (Cont.) and Acquisition EVOperating metrics Acquisition EV calculation (A$m) 2007A 2008F 2009F 2010F 2011F Acquisition EV Calculation Primary Share Price ($) $4.05 EBITDA 114.3 137.2 157.4 180.3 189.5 Prima Facie Premium (%) 3.6% EBIT 80.8 102.1 138.8 159.0 167.6 Acquisition price ($) $4.20 NPAT 48.2 64.2 68.4 86.2 96.6 Shares outstanding (m) 645.5 Symbion Primarys Existing Stake (20%) (129.1) EBITDA 253.0 317.4 344.8 366.7 391.8 Non-Primary Shares Outstanding (m) 516.4 EBIT 235.2 258.6 278.3 301.2 327.4 Equity Acquisition Price ($) 2,166.7 NPAT 124.3 144.6 163.2 184.6 208.7 MergeCo EBITDA 355.7 430.4 537.1 568.2 Interest-bearing Liabilities (m) 691.2 EBIT 274.1 359.9 460.6 494.9 Cash (m) 80.0 NPAT 53.5 121.4 193.5 221.0 Net Debt (m) 611.2 MergeCo (Excl. P&C) Minority Interest (m) 3.7 EBITDA 359.4 429.2 532.4 560.5 EBIT 195.0 266.7 361.4 382.3 Enterprise Value (m) 2,781.6 NPAT 80.4 128.9 206.2 235.1 EV / EBITDA Multiple (Excl 20%) 11.0x41
    44. 44. © 2007 Dillon Capital. Authorised and regulated by the Australian Prudential Regulatory Authority. All rights reserved. Dillon Capital is a trademark and service mark of Dillon Holdings Inc. or its affiliates and are used and registeredthroughout the world.Dillon Capital and its affiliates do not provide tax or legal advice. Any discussion of tax matters in these materials (i) is not intended or written to be used, and cannot be used or relied upon, by you for the purpose ofavoiding any tax penalties and (ii) may have been written in connection with the “promoting marketing” or any transaction contemplated hereby (“Transaction”). Accordingly, you should seek advice based on yourparticular circumstances from an independent tax advisor.Any terms set forth herein are intended for discussion purposes only and are subject to the final terms set forth in separate definitive written agreements. This presentation is not a commitment to lend, syndicate a financing, underwriteor purchase securities, or commit capital nor does it obligate us to enter into such a commitment. Nor are we acting in any other capacity as fiduciary to you. By accepting this presentation, subject to applicable law or regulation, youagree to keep confidential the existence of an proposed terms for any Transaction.Prior to entering into any Transaction, you should determine, without reliance upon us or our affiliates, the economic risks and merits (and independently determine that you are able to assume these risks) as well as the legal, tax andaccounting characterisations and consequences of any such Transaction. In this regard, by accepting this presentation, you acknowledge that (a) we are not in the business of providing (and you are not relying on us for) legal, tax oraccounting advice, (b) there may be legal, tax or accounting risks associated with any Transaction, (c) you should receive (and rely on) separate and qualified legal, tax and accounting advice and (d) you should apprise seniormanagement in your organisation as to such legal, tax and accounting advice (and any risks associated with any Transaction) and our disclaimer as to these matters.Any prices or levels contained herein are preliminary and indicative only and do not represent bids or offers. These indications are provided solely for your information and consideration, are subject to change at any time without noticeand are not intended as a solicitation with respect to the purchase of any instrument. The information contained in this presentation may include results of analyses from a quantitative model which represent potential future events thatmay or may not be realised, and is not a complete analysis of every material fact representing any product. Any estimates included herein constitute our judgment as of the date hereof and are subject to change without notice.
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