jpmc competition

2. CONTENTS
Industry Overview
BMW Analysis
Why Should BMW Acquire at all
Key Targets and Competitive
Analysis
Why Harley
Key Issues in Acquisition
Credit Worthiness
Valuation Drivers
Harley Davidson Valuation
Deal Structure
Synergies
Exit Strategy

3. Industry
Overview
BMW
Analysis
Why
Acquire
Key
Targets
Why
Harley
Key Issues Credit
Worthiness
Valuation
Drivers
HD
Valuation
Deal
Structure
Synergy Exit
Strategy
PREMIUM SEGMENT GROWTH IN EMERGING MARKETS
0
200
400
600
800
1000
1200
1400
2009 sales
2022 sales forecast
Premium segment forecasted growth by 2020
(Automobiles)

4. BMW Markets (Based On automobile sales volume)
29.1
2.9
4.2
4.3
10
14
17.1
18.4
0
5
1
0
1
5
2
0
2
5
3
0
3
5
Other
Japan
France
Italy
United Kingdom
China
Germany
United States
Number of produced motorcycles
104396
118452
93243
112271
118865
103759
0
20000
40000
60000
80000
100000
120000
140000
2006 2007 2008 2009 2010 2011
16.60%
15.40%
10.10%
8.80%6.60%
6.20%
36.30%
Germany
Italy
United States
France
Spain
United Kingdom
Other Markets
Market share for bike segment
Industry
Overview
BMW
Analysis
Why
Acquire
Key
Targets
Why
Harley
Key Issues Credit
Worthiness
Valuation
Drivers
HD
Valuation
Deal
Structure
Synergy Exit
Strategy

5. PRESENT NEW
PRESENTNEW
PRODUCT
MARKET
Industry
Overview
BMW
Analysis
Why
Acquire
Key
Targets
Why
Harley
Key Issues Credit
Worthiness
Valuation
Drivers
HD
Valuation
Deal
Structure
Synergy Exit
Strategy

6. STP Harley Royal Enfield Ducati Yamaha Suzuki Motors
RATIOS EPS ROE Net profit Margin
Industry
Overview
BMW
Analysis
Why
Acquire
Key
Targets
Why
Harley
Key Issues Credit
Worthiness
Valuation
Drivers
HD
Valuation
Deal
Structure
Synergy Exit
Strategy

7. SWOT Analysis Harley Royal Enfield Ducati Yamaha Suzuki Motors
Industry
Overview
BMW
Analysis
Why
Acquire
Key
Targets
Why
Harley
Key Issues Credit
Worthiness
Valuation
Drivers
HD
Valuation
Deal
Structure
Synergy Exit
Strategy

8. Industry
Overview
BMW
Analysis
Why
Acquire
Key
Targets
Why
Harley
Key Issues Credit
Worthiness
Valuation
Drivers
HD
Valuation
Deal
Structure
Synergy Exit
Strategy

9. /
Industry
Overview
BMW
Analysis
Why
Acquire
Key
Targets
Why
Harley
Key Issues Credit
Worthiness
Valuation
Drivers
HD
Valuation
Deal
Structure
Synergy Exit
Strategy

10. 4091
4624
5015
5342
5801 5727 5594
4287 4177
4662
3407
0
1000
2000
3000
4000
5000
6000
7000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Revenue distribution of motorbike sales* in 2011, by region
16,8
4,9 3,3 3 4,3
67,7
0
10
20
30
40
50
60
70
80
U
SA
Europe
Japan
C
anada
Australia
O
therregions
Revenue in million U.S. dollars
Industry
Overview
BMW
Analysis
Why
Acquire
Key
Targets
Why
Harley
Key Issues Credit
Worthiness
Valuation
Drivers
HD
Valuation
Deal
Structure
Synergy Exit
Strategy

11. Industry
Overview
BMW
Analysis
Why
Acquire
Key
Targets
Why
Harley
Key Issues Credit
Worthiness
Valuation
Drivers
HD
Valuation
Deal
Structure
Synergy Exit
Strategy

12. S&P Rating
Industry
Overview
BMW
Analysis
Why
Acquire
Key
Targets
Why
Harley
Key Issues Credit
Worthiness
Valuation
Drivers
HD
Valuation
Deal
Structure
Synergy Exit
Strategy

13. Industry
Overview
BMW
Analysis
Why
Acquire
Key
Targets
Why
Harley
Key Issues Credit
Worthiness
Valuation
Drivers
HD
Valuation
Deal
Structure
Synergy Exit
Strategy

14. 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E
EBIT 267317.3947 331684.0196 341634.54 351883.576 362440.084 373313.29 384512.6848 396048.0653 407929.5073
EBIT (1-t) 187122.1763 232178.8137 239144.18 246318.503 253708.059 261319.3 269158.8793 277233.6457 285550.6551
Add dep 6947.975255 7127.314727 7311.2833 7500.00036 7693.58857 7892.1736 8095.884525 8304.853556 8519.216445
Less WC changes 2,32,792 18,087 18,554 19,032 19,524 20,028 20,545 21,075 21,619
Less cap exp 1,094 806 827 848 870 892 915 939 963
1 2 3 4 5 6 7 8 9
Cash flow -39,816 2,20,413 2,27,075 2,33,938 2,41,008 2,48,291 2,55,795 2,63,524 2,71,488 66,216
Present value 0.907441016 0.823449198 0.7472316 0.67806858 0.61530724 0.558355 0.506674256 0.459777002 0.41722051
Present value of cash flow -36131.05702 181499.2818 169677.71 158625.964 148293.923 138634.73 129604.5691 121162.4919 140897.0842 1152264.7
2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E
EBIT 915481.6 988720.128 1067817.7 1153243.16 1245502.61 1345142.8 1452754.244 1568974.584 1694492.55
EBIT (1-t) 640837.12 692104.0896 747472.42 807270.21 871851.827 941599.97 1016927.971 1098282.209 1186144.785
Add dep 220691.2591 226387.689 232231.15 238225.449 244374.467 250682.2 257152.7508 263790.316 270599.2084
Less WC changes -50,592 34,107 34,987 35,890 36,817 37,767 38,742 39,742 40,768
Less cap exp 33,490 20,980 21,522 22,077 22,647 23,232 23,831 24,447 25,078
1 2 3 4 5 6 7 8 9
Cash flow 8,78,631 8,63,405 9,23,195 9,87,528 10,56,762 11,31,283 12,11,508 12,97,884 13,90,899 8,97,354
Present value 0.907 0.823 0.747 0.678 0.615 0.558 0.507 0.460 0.417
Present value of cash flow 797305.62 710969.88 689840.13 669611.75 650233.59 631657.81 613839.67 596737.31 954706.06 6314901.81
Bike segment Fin Co segment Total Enterprise value of HD
6314901.81 1152264.694 7467166.51
Issues:
· Difficulty in forecasting growth in sales & income based on
performance of last two years as whole auto sector had a hit
· Difficulty in assuming future capital expenditure in absence of future
plans of Harley Davidson
Industry
Overview
BMW
Analysis
Why
Acquire
Key
Targets
Why
Harley
Key Issues Credit
Worthiness
Valuation
Drivers
HD
Valuation
Deal
Structure
Synergy Exit
Strategy

15. Date Target Acquirer FV/ebidta FV/ebit
May-10 Stuart Weitzman 8 12.6
Dec-09 Bucyrus International, 8.7 11.3
Nov-09 Stanley Black 10.7 15.5
Feb-07 Volvo Ingersoll-Rand, 11.5 12.9
Apr-07 Puma PPR 12.2 13.5
Sep-08 Manitou Gehl 13.4 15.5
Jun-07 Valentino Permira 13.9 17.8
Average 11.20 14.16
Harley (Value in billion)
EBIDTA 1.68
Value of harley as per Ebidta 18.82
EBIT 1.30
Value of harley as per EBIT 18.40
Industry
Overview
BMW
Analysis
Why
Acquire
Key
Targets
Why
Harley
Key Issues Credit
Worthiness
Valuation
Drivers
HD
Valuation
Deal
Structure
Synergy Exit
Strategy

16. 2012 2013 Average 2012 2013 Average 2012 2013 Average
Isuzu Motors 10,438 8,780 0.49x 0.45x 0.47 4.7x 4.2x 4.5 8.3x 7.6x 7.95
Mitsubishi 11,093 5,415 0.44x 0.40x 0.42 6.2x 5.3x 5.75 12.8x 8.9x 10.85
Paccar 11,401 14,122 0.65x 0.61x 0.64 5.4x 4.8x 5.2 11.3x 10.0x 10.65
Scania 11,995 13,145 1.01x 0.92x 0.965 6.8x 5.6x 6.2 12.6x 10.1x 11.35
MAN 14,790 14,574 0.73x 0.67x 0.7 8.0x 6.6x 7.3 15.9x 12.4x 14.15
Fiat Industrial 18,345 13,289 0.57x 0.54x 0.555 6.3x 5.6x 5.95 16.6x 12.5x 14.55
Average 0.63 5.82 11.58
Harley figures
EBITDA 1.68
Value of Harley as per EBITDA 9.75
Revenue 6.60
Value of Harley as per Revenue 4.13
EPS 3.66
Value of Harley as per EPS per share 42.40
No. of Share 231.52
Value of Harley as per EPS in billion 9.82
Industry
Overview
BMW
Analysis
Why
Acquire
Key
Targets
Why
Harley
Key Issues Credit
Worthiness
Valuation
Drivers
HD
Valuation
Deal
Structure
Synergy Exit
Strategy

17. 0
5000
10000
Institutions Mutual
Funds
Insiders
HD’s Ownership Structure
(Pre Acquisition)
Mil USD
Harley Davidson
Method EV Value per share Weight Product
Trading
comparables 9.82 42.40 30% 12.7185
Transaction
comparables 18.40 79.4932866 50% 39.7466433
DCF 7.47 32.25207326 20% 6.450414651
Total 58.91555795
Swap Ratio 2.699116143
BMW Value per share 159.0199336
Total Valuation for HD
13.64012998
Shares outstanding bmw 602.00m
Shares outstanding Harley 231.52M
enterprice value as on jun 15 (http://ycharts.com) 13.604
Total Long Term Debt 3.844
Market Capitalization 9.76
Less cash 1.2
Price for consideration 8.6(Billion)
Deal structure for equity consideration
Debt 60%
Equity 40%
Share swap 52
Existing no .of equity shares 602
Total no. of equity shares (in million) 654
Total debt after merger (in billion) 48.3194
Price of harley as on 15 jun 2012 42
% stake of Harley shareholders in combined entity 8%
0%
10%
20%
30%
40%
50%
Series1
BMW Ownership structure Pre Acquisition
Industry
Overview
BMW
Analysis
Why
Acquire
Key
Targets
Why
Harley
Key Issues Credit
Worthiness
Valuation
Drivers
HD
Valuation
Deal
Structure
Synergy Exit
Strategy
All figures in US $

18. 0%
10%
20%
30%
40%
50%
Strategic investors
/Family
Institutional
investors
Other investors Harley Davidson
Industry
Overview
BMW
Analysis
Why
Acquire
Key
Targets
Why
Harley
Key Issues Credit
Worthiness
Valuation
Drivers
HD
Valuation
Deal
Structure
Synergy Exit
Strategy

19. Industry
Overview
BMW
Analysis
Why
Acquire
Key
Targets
Why
Harley
Key Issues Credit
Worthiness
Valuation
Drivers
HD
Valuation
Deal
Structure
Synergy Exit
Strategy

20. 
Industry
Overview
BMW
Analysis
Why
Acquire
Key
Targets
Why
Harley
Key Issues Credit
Worthiness
Valuation
Drivers
HD
Valuation
Deal
Structure
Synergy Exit
Strategy