1. PERRIER, NESTLÉ, AND THE AGNELLIS
Gulleroglu|Mbewe|Shkreta|Secilmis
24 April 2013

2. Summary
 Perrier S.A, the world’s largest mineral water company is facing financial and reputational difficulties due to a recent scandal where benzene was
found in its products
 The prominent Italian family The Agnelli’s, who own Fiat SpA, see the opportunity to take over Perrier
 They are bidding indirectly through two French companies, Exor who has 35.5% of controlling votes in Perrier and Saint Louis who owns
13.8% of the Perrier stock in the form of Treasury stock
 The Swiss-based food giant Nestle and its French ally BSN (future DANONE) contest the bid and are interested in acquiring Perrier as well
 Nestlé's advancement for Perrier was simultaneous/coordinated with BSN bid for Exor
 Nestlé's chances, at first sight, seem limited. The Agnelli’s nearly control 50% of Perrier
 Furthermore Nestle filed two lawsuits in France
 1- It asks the authorities to look at Exor’s control stake because they have breached the law
 2- It asks for the nullification of the share sales to Saint Louis
 The European competition authorities will have a close look at the merger because Nestle/Perrier would control 56% of the mineral water
market.
 Combined with BSN the market control shoots-up at 82%

3. Blueprint of events
 1989 - Exor increase control stake in Perrier to 35.5%. Prior to the increase it owned 23.7%
 19/01/1990 – Benzene scandal
 Share price drops to FF 1200 from FF 2000
 Profits from Perrier mineral water business decrease by 21%
 06/1990 – Jacques Vincent, Chairman of Perrier, replaces Gustave Leven as Perrier Chairman
 11/1991 – IFINT launches a friendly bid of FF 1320 for 2/3 of Exor with the backing of the Mentzelopoulos family
 03/01/1992 - Saint Louis acquires 13.8% of Perrier
 13/01/1992 – Nestle announces that it is interested to bid for Perrier
 20/01/1992 – Nestle and Banque Indosuez make a full bid for Perrier at FF 1475
 21/01/1992 – Perrier refuses Nestlé's and Banque Indosuez bid
 21/01/1992 – Nestle starts two court proceedings
 One against the right to vote of Exor
 The other against the sale of treasury stock to Saint Louis
 21/02/1992 – BSN makes a hostile bid for Exor at FF 1420 per share
 26/02/1992 – Exor rejects BSN offer
 26/02/1992 – Exor forced by French courts to launch a full bid for Perrier or a 2/3 bid at 2% premium over Nestlé's offer
 27/02/1992 – Exor makes an unconditional offer for 100% of Perrier at FF 1475

4. AGNELLI FAMILY
IFINT
EXOR
35% 5% 15% 10% 35%
BANQUE
INDOSUEZ
MENTZELOPOULO
S FAMILY
CREDIT AGRICOLE
PUBLIC
100%
LAZARD FRERES
IFIL
100%
BSN
5.8% 6.8%
SAINT LOUIS
6.5% 36%
WORMS et CIE
PERRIER
SOCIETE
GENERALE
OMNICO
51% 49%
LEVEN FAMILY
PUBLIC
6.7% 28.8% 8.5% 13.8% 18% 24%
Ownership structure

5. AGNELLI FAMILYIFINT
EXOR
35%
100%
IFIL
100%
SAINT LOUIS
6.5% Control
WORMS et CIE
OMNICO
49%
6.7% 28.8% 13.8%
PERRIER
7.4%
Agnelli Family indirect shareholding in Perrier

6. Agnelli’s control and capital in Perrier
Control
Rights
 IFINT = 11.23% control rights over Perrier
 Exor: 35%*28.8% = 10.08%
 OMNIC: 35%*49%*6.7% = 1.15%
 IFIL = 1.49% control rights over Perrier
 Saint Louis: 6.5%*13.8% = 0.9%
 Worms et Cie: 7.4%*57.5%*13.8% = 0.59% (based on the assumption that control rights in Saint Louis equal
57.5%)
Therefore the Agnellis control 12.72% in Perrier
Capital
 Total Capital in Perrier as of 1991: FF 449,153,000
 Exor: 10.08%* FF 449,153,000 = FF 45,274,622.40
 OMNIC: 1.15%* FF 449,153,000 = FF 5,165,259.50
 Saint Louis: 0.9%* FF 449,153,000 = FF 4,042,377
 Worms et Cie: 0.59%* FF 449,153,000 = FF 2,650,002.70
Therefore the Agnellis own in total FF 57, 132,261.60 capital in Perrier

7. Agnelli Family problems with control of Perrier
 No direct ownership in Perrier, 49.3% ownership is through allies. Therefore the Agnelli family relies on its allies to obtain control of Perrier
 Allies can change allegiances, e.g. Lazard and BSN
 The two lawsuits concerning Exor and Saint Louis' ownership can change the Agnelli family's percentage ownership and control of Perrier
 If the lawsuits are won by the Agnelli Family, they will have 49.3%
 If Exor loses the lawsuit, Exor may lose its voting rights in Perrier and Nestlé's chances of winning a bid for Perrier improve
 If Saint Louis loses the lawsuit, the Agnelli Family will lose 13.8% control in Perrier and have only 11.23% control rights in Perrier through IFINT
 They face opposition from minority shareholders – in both Exor and Perrier
 The Agnelli’s could maintain control of Perrier and reach a majority shareholding through market operations if they do not loose the lawsuits filed
by Nestle

8. EXOR
5%10%
BANQUE INDOSUEZ CREDIT AGRICOLE LAZARD FRERES
BSN
6.8%
PERRIER
28.8% 8.5%
2.4%
Nestlé's Allies
 Banque Indosuez – No direct shareholding in Perrier. Motivated by desire to maintain minority shareholder power in Perrier (i.e. keep Agnelli
Family shareholding low)
 Lazard Freres – Previous relationship with the Agnelli Family. Motivated by threat of BSN takeover by the Agnelli family
 BSN – Previous relationship with the Agnelli Family. It is agree that they will takeover the Volvic brand from Nestle if Nestle’s bid for Perrier is
successful. Motivated by fear of competition from the Agnelli Family in mineral water industry in France
 Credit Agricole – Supports Nestlé's bid for Perrier

9. Nestlé's Alliance
 Nestle is relying on alliances with former Agnelli allies
 Nestlé's bid has been approved by the French Finance Ministry and is structured to avoid competition concerns – BSN to purchase
Nestlé's Volvic brand
 Allies are well connected in France e.g. Bank Credit Agricole
 The allies are motivated by a dislike of the Agnelli family
 They could easily turn on Nestle as soon as their interests change
 The Agnelli Family holds 6.8% of BSN (through IFIL), Exor (which is effectively controlled by the Agnelli Family) holds 2.4% of Banque
Indosuez and the Agnelli Family has a seat on Lazard's board so there is some conflict of interests
 Through its alliances, Nestle has the support of 12.9% of the shareholding in Perrier
 This may not be able to be of significant influence over Perrier for Nestlé's benefit
 Option to purchase shares from the public in Exor (35%) and Perrier (24%)
 Competition law concerns
 A successful Nestle/BSN bid for Perrier would result in the companies holding 82% control of the mineral water market in France – raises
concerns of abuse of dominance, as prohibited by Article 86 of TFEU
 The strength of Nestlé's efforts lies in the outcome of the Exor and Saint Louis lawsuits
 If both lawsuits are won by Nestle, Exor's voting rights in Perrier will be suspended and Nestle will have a chance to win a bid for Perrier
and Saint Louis' shares in Perrier will be cancelled, giving Nestle the chance to bid for them as well
 If Nestle loses the lawsuits, the Agnelli Family's control of Perrier will make it difficult for Nestle to win a bid for Perrier – Nestle allies
may turn if the Agnelli threat is removed

10. Insiders and Outsiders
Insiders Outsiders
Agnelli Family (IFINT & IFIL)
Mentzepoulous Family
Exor
 In the French corporate network, to be considered an insider a connection to French corporate elite network is essential
 Corporate elite in France is composed of top executives and directors that are in control of largest corporations, who come from same type of
elite schools, political backgrounds and French origin. Insiders have cross-holdings and close relationships between each other
 Credit Agricole, Societe Generale, Suez Group, BSN and Lazard form the insiders group because either they have French origin or their CEOs
belong to elite corporate network
 Nestle belongs to somewhere in the middle between insiders and outsiders because of its Swiss background. However, it is still close to insiders
because of its strong alliances with Lazard Freres and BSN, and its French-speaking origin
 Agnelli Family, Mentzepoulous Family and Exor form the outsiders because due to their different cultural affiliations, they don’t belong to inner
circle of French corporate elite. Jaques Vincent, chairman of Exor S.A., has a reputation of not getting along well with business leaders in France
BSN

11. Valuation Model Structure
Nestlé contribution on
sales (+2.5%)
Synergies
Revenues=Sales+Other
Sales
Revenues
Average sales of ‘91 and
‘92
Base Sales
Base sales growth rate
for next ten years
Base Growth
CapEx/Sales rate of 2%
CapEx
Expenses=New Depr.+Old
Depr.+Non-depreciation
expenses
Expenses
New Working
Capital/Sales of 12%
ΔNWC
12.5% of CapEx for the
following 8-years
New Depr.
FF718mm depreciation
for old assets
Old Depr.
42% based on trailing
years’ average
Tax Rate
EBIAT=EBITx(1-Tax Rate)
EBIAT
EBIT=Revenues-
Expenses
EBIT
Non-depreciation
expense/Revenue: 85%
Non-Depr. Exp
FCFF=EBIAT-
CapEx+Depreciaton-
ΔNWC
FCFF
Expenses=New Depr.+Old
Depr.+Non-depreciation
expenses
Expenses
Revenues=Sales+Other
Sales
Revenues
CapEx/Sales rate of 2%
CapEx
New Working
Capital/Sales of 12%
ΔNWC
Output
Input
Part1Part2

12. Valuation
Perrier Financials
 Perrier has a deteriorated sales performance following
mishandling of Benzene scandal
 Nestlé acquisition is assumed to create cost and revenue
synergies
 Working capital requirement will decrease being a
subsidiary in a big conglomerate (87% to 85% of sales)
 Operations will be improved with the addition of
Nestlé’s expertise (14% to 12% of sales)
 Synergies with Nestlé’s distribution network along with
its expertise in marketing and advertising will add up
2.5% to the 5% presumed sales growth
Further Expansion Prospects
USA and UK are “brownfield” markets for mineral waters and they
offer dramatic growth opportunities for established brands. Sales
growth accompanies synergies with Nestle and improving
conditions but it ignores the market expansion towards these
densely populated and high income countries. Success in seizing this
opportunity would result with even higher growth rate
10%
11%
12%
13%
14%
15%
16%
83%
84%
85%
86%
87%
88%
1989 1990 1991 1992
Non-depreciation expenses/Sales Net Working Capital/Sales
-20%
-15%
-10%
-5%
0%
5%
10%
1990 1991 1992 (E)
Revenue Growth
Growth Actual Growth Estimate

13. Valuation
Overview
• The valuation is based on Nestlé’s perspective
• WACC for Perrier is calculated using Nestlé’s cost of debt
• Cost and revenue synergies with Nestlé are integrated into cash flows
• 10-year (1992-2001) period was used for cash flow forecasting
• Valuation base is the average of 1990 and 1991 to account better for misleading figures. The
value is calculated as of December 1991
• Complete list of assumptions can be found in the Appendices
• Restructuring Charge and Long-term Debt is subtracted from the total value to obtain equity
value after one-time charges and long-term other claims
• Trade sale of Volvic immediately after the Perrier acquisition is accounted as the final
adjustment to per-share stock price
Volvic Sales to BSN
Volvic sale with a pre-determined price of FF3.05bn is providing
additional profit for Nestle. The value of Volvic is obtained
through its share of total sales (13%). Nevertheless. it should be
noted that Volvic has the highest growth rate in sales (20%).
Gains from this trade sale is slightly over-estimated
DCF Valuationa
Total Value 17,819,145
less Long-Term Debt 5,995,319
less Restructuring Charge 600,000
Implied Value of Equity 11,223,826
Implied Price per Share 1,249
Adjustments for Volvic Salea
Volvic Share of Salesb 13%
Volvic Trade Sale Price 3,050,000
Implied Volvic Price 1,492,694
Gain from Volvic Sales 1,557,306
Gain from Volvic Sales per share 173.36
Implied Price per Share (adj) 1,423
9,050
8,769
Valuation Breakdown
(FF mm)
Terminal Value
Forecasted Period
a All values are in FF thousands except for price per share values (FF)
b The details of the calculation is given in the appendix

14. Valuation
Financial vs Strategic
• Nestlé has the upper hand in a potential bidding war. It is seeking strategic
acquisition while Exor (the Agnellis) only bid up to the stand alone and as-it-is
value. In the scenarios presented (left). Nestle offers improvements in cost and
revenue synergies
• The improvements on costs and revenues have a profound effect on the valueb,c.
Per share prices decreases 21%, 12% and 30% on average when revenue. cost
and both synergies are not realized
Food Industry Standards
P/E ratios across the food industry reveals that Perrier is highly overvalued in stock
market. This is partly due the “acquisition” battle and potential bid wars. Mostly. it
can be attributed to the highly-regarded view about Perrier’s growth opportunities
and its misleading sales figure after Benzene event
Scenarios
As-it-isa Margins+ b Sales+ c Base
WACC
10% 1,695 2,080 1,915 2,390
11% 1,369 1,693 1,542 1,940
12% 1,135 1,417 1,276 1,619
13% 960 1,209 1,077 1,378
14% 823 1,047 922 1,191
EXOR NESTLÉ
1) Highlighted (green) values are higher than the current bid (FF1475)
2) Red values are the closest range for the current valuation.
Verdict
• Nestlé has a very narrow room to increase current bid (FF1,475); even though Nestlé can create synergies with Perrier.
• Price seems slightly high under our assumptions; but not significantly higher. Sale of Volvic (potentially tax-free) and unrealized market potential can
justify current bid with slight room for improvement (~FF200)
• Exor/the Agnellis faction is overbidding. Assuming no side benefits exist. this party is close to withdrawal from the potential bid-war
a No synergies are realized margins and growth rates stay the same for the expenses and revenues.
b Only cost synergies are realized (i.e. non-depreciation expenses at 85% (from 87%) and Net working capital at 12% (from 14%)
c Only revenue synergies are realized (i.e. 2.5% additional revenue synergy is added)
d BSN. Cadbury Schweppes. Campbell Soup . General Mills. Heinz. Hershey Foods. Kellogg. Nestle. P&G and Quaker Oats
Food Industry Majorsd
P/E
Average 17.9
Median 18.0
Min 14.6
Max 20.8
Perrier 33.7

15. Underlying Assumptions
 Exor’s voting control were consistently referred to as 35.5%. It owns directly 28.8 % in Perrier but through OMNICO it controls another 6.7%
stake. Reasonable to assume that 1 share = 1 vote
 Saint Louis ownership is through treasury stock which traditionally does not come with voting rights. Yet in this case the treasury stock was sold
to a company and was not repurchased back from Perrier. Thus we assume that St. Louis has 13.8 votes
 We assume the Leven family to be neutral. Such reasoning is based on the information provided in the case “the role of the Leven family, even
though fractioned among them, is not clear. Most likely they will sell to the highest bidder”
 We assumed the Public, owning 24% of Perrier to be neutral and interested in tendering their shares to the best price offered
 Court procedures were started against Exor’s and St. Louis’s voting rights. We assume that the OMNIC voting rights will be affected by the court
decision as well if it decides to have a verdict in favor of Nestle

16. Different Scenarios
If Nestle wins both cases and Agnelli’s lose
 If the voting rights of Exor are frozen then the voting rights will decrease from 35.5% to 23.7%
 That will decrease the Agnelli’s influence from 49.3% to 37.5%
 If the court blocks the St. Louis sale the Agnelli’s control would be reduced to 35.5%
 If both decisions go Nestlé's way then the Agnelli’s will be only left with a mere 23.7% controlling stake
 Nestle controls 8.5 votes through Credit Agricole. The firm has made it clear that “it will not shy away from hostile bids to acquire what It
believed were strategically important target companies”. Financially it is much healthier then the Agnelli’s therefore is better positioned to buy
the shares of the Leven family and the Public
If Treasury stock have no voting power
• 100% – 13.8% = 86.2%
 100 / 86.2 = 1.16 per share
 The Agnelli’s would have then 35.5*1.16 = 41.18 votes
 The Agnelli’s could possibly make it through to acquire a majority stake yet the financials bend on Nestlé's side

17. Possible Court Decision
Prediction
 According to Exhibit 9 (2) the failure from Exor to disclose its 35.5% stake in Perrier to the French stock exchange authorities does seem to
constitute a breach of regulation
 Therefore we expect that the French court will strictly look at this issue and rule against Exor
 The treasury sale is less obvious
 There are no clear facts regarding the criminal charges
 However Exhibit 9 (7) states that “capital increases cannot be reserved for certain shareholders and third parties”. If this was the case
and Perrier did issue treasury stock on purpose to Exor then the issuing can be nullified
 However the St. Louis sales was done around the days when Nestle put forth its offer. If that is proven to be true then the authorities
could have enough “evidence” to nullify the sale

18. EU Antitrust Case (1)
Article 86
 Ex Article 86 of the EEC Treaty states that:
 Any abuse by one or more undertakings of a dominant position within the common market or in a substantial part
of it shall be prohibited as incompatible with the common market insofar as it may affect trade between Member
States.
 Such abuse may, in particular, consist in:
 (a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;
 (b) limiting production, markets or technical development to the prejudice of consumers;
 (c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a
competitive disadvantage;
 (d) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations
which, by their nature or according to commercial usage, have no connection with the subject of such contracts.
 The formation of a dominant position per se is not prohibited under European legislation and it will not be enough to block
the merger between Nestle and Perrier on this grounds
European
Legislation
 The European Commission has to define the product and geographical market
 Product market: Nestle/Perrier would be present only in the sparkling/still mineral water market. The correlation
with the prices of other soft drinks are very low, even negative
 Geographical market: France is the relevant market because a) transportation costs are very high b) there is very
little trade between member states c) high entrance barriers in French market
 The European authorities use the SSNIP Test to use whether there is a serious risk of potential abuse in prices
from firms which enjoy a dominant position in the relevant market.
 The SSNIP Test measures whether the monopolist in the mineral water production, Nestle/Perrier, would
find it profitable for their own margins to increase the price with 5-10%?
 Once the market are determined the EC will consider whether the merge leads to a dominant position which could lead
ultimately to an abuse of such dominance

19. EU Antitrust Case (2)
European
Legislation
 The EC will most probably find that the answer to the SSNIP test to be Yes. That would help to define the relevant market
 The approval of the merger without any amendments will result in a very concentrated market, 82% of the mineral water
market in France controlled by Nestle/Perrier and BSN, with two established brands who can exploit consumers by
imposing higher prices
 Nestle/Perrier have agreed upfront for the sale of the Volvic brand to BSN. That will not resolve the competition issues
because the parties can easily collude among each other and there are solid grounds to believe that they have close ties
among them
 In the case the authorities decide to investigate the Perrier/Nestle and BSN as a duopoly the criteria will be more stringent
and can possibly result in the sale of other brands
 We propose the selling of Contrex, Vichy St. Yorre, Thornon, Pierval whom combined have around 20% market share in
France to an independent third party
European
Legislation
Note
 Article 86 clearly states the need of “affect between Member States”
 If we only accept that the French market is the only relevant market then the European authorities should leave the
matter in the hands of the French competition authorities and not make it a European anti-competition case
 It is essential to explain why the French market constitutes a substantial part of the European market so as to have legal
ground to enact Article 86

20. A comparison of the Anglo-American and French markets
for corporate control
France Anglo-American
Legal system Civil law (codified) Common law (case based, judge discretion)
Disclosure
requirements
Mandatory disclosure upon reaching
thresholds of 5%, 10%, 20%, 33.33%,
50%, and 66.66%within 15 days to target
and 5 days to the CSE
In the US under Section 13(d) of the SEC
disclosure is required once the 5%
threshold is reached. Under the Hart-Scott-
Rodino Improvement Act unless in an
excemption, a compnay cannot buy more
than US$60 million common shares
without reporting to the antitrust
authorities
Bidder
shareholder
approval
Generally not required Generally not required, unless there is an
increase of 20% in the number of shares
outstanding
Labour union
approval
Bidder has to consult with labour union
before launching an offer
Not required
Mandatory
offers
Mandatory -tender offer for 66.66% of
the shares once threshhold of 33.33% or
50% are passed
No mandatory-tender offer in the US. In
the Uk according to the City Code this is
required once the 30% threshold is passed
Takeover bids Law of Aug. 2, 1989 serves as the basis. It
requires approval from the COB and
Stock Exchange Council
The William Act but it creates no
major/serious obstacles

21. What actually happened?
 Nestle declares victory in March 1992
 Both court decisions went Nestle’s way.
 The Court froze 1/3 of Excor’s stake in Perrier for 2 years
 Voting power of Excor was reduced to 23.7%
 Saint Louis purchase of the treasury stock violated restrictions on increasing capital. Therefore the
sale was annulled.
 Nestle made a full bid for Perrier of FF 15.3 billion ($2.7 billion) and as a result BSN retrieved from its
offer for Exor
 The Agnelli’s made a profit of $200 million from the Perrier sale. They took control of Exor
 Nestle agreed to sell Volvic to BSN for FF 3.05 billion
“This could have all been settled in an afternoon a very long time ago” (The New York Times)

22. Appendix
in FF thousands, except per share data
Average
'90-'91
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Sales 13,409,607 14,482,376 15,640,966 16,892,243 18,243,622 19,703,112 21,279,361 22,981,710 24,820,247 26,805,866 28,950,336
Other Revenues 660,342 713,169 770,223 831,841 898,388 970,259 1,047,880 1,131,710 1,160,003 1,189,003 1,218,728
Revenues 14,069,949 15,195,545 16,411,189 17,724,084 19,142,010 20,673,371 22,327,241 24,113,420 25,980,250 27,994,869 30,169,064
Depreciation (Old Assets) 717,917 718,000 718,000 718,000 718,000 718,000 718,000 718,000 718,000 718,000 718,000
Depreciation (New Assets) - 36,206 75,308 117,539 163,148 212,406 265,604 323,058 385,109 415,918 449,191
Depreciation Total 717,917 754,206 793,308 835,539 881,148 930,406 983,604 1,041,058 1,103,109 1,133,918 1,167,191
Non-depreciation expenses 12,255,878 12,916,213 13,949,510 15,065,471 16,270,709 17,572,365 18,978,155 20,496,407 22,083,212 23,795,639 25,643,704
Expenses 13,670,419 14,742,819 15,901,010 17,151,857 18,502,771 19,961,759 21,537,466 23,186,321 24,929,557 26,810,895
Operating Income
1,525,126
1,668,370 1,823,074 1,990,154 2,170,600 2,365,482 2,575,955 2,793,928 3,065,313 3,358,168
EBIAT 884,573 967,655 1,057,383 1,154,289 1,258,948 1,371,980 1,494,054 1,620,478 1,777,881 1,947,738
Net Working Capital (non-cash) 1,966,975 1,737,885 1,876,916 2,027,069 2,189,235 2,364,373 2,553,523 2,757,805 2,978,430 3,216,704 3,474,040
ΔNWC (non-cash) 229,089- 139,031 150,153 162,166 175,139 189,150 204,282 220,624 238,274 257,336
Capital Expenditures 289,648 312,819 337,845 364,872 394,062 425,587 459,634 496,405 536,117 579,007
FCFF 1,578,221 1,309,113 1,404,924 1,508,399 1,620,153 1,740,847 1,871,196 2,006,558 2,137,407 2,278,586
Cash Flow ProjectionBasis

23. Appendix
NDEa/Revenues 85.00%
NWCb/Sales 12.00%
CapEx/Sales 2.00%
Depreciation Rate Newc 12.50%
Sales Base Growth 5.50%
Synergies Growthd 2.50%
Tax Rate 42.00%
Depreciation Old (‘000 FFs)e 718,000
Restructuring Expense (‘000 FFs)f 600,000
Volvic Sale Proceeds (‘000 FFs)g 3,050,000
Market Premiumh 7.00%
Risk-free Ratei 8.00%
Betaj 1.31
Cost of Equity 17.17%
Cost of Debtk 11.00%
Stock Price (Dec'91. FFs) 1,221
Shares Outstanding (‘000) 8,983
Market Capitalization (‘000 FFs) 10,968,243
Value of Debt (‘000 FFs) 7,480,609
Enterprise Value (‘000 FFs) 18,448,852
Tax Rate 42.0%
WACC 12.79%
Terminal Growth Rate 5.00%
Cash Flow WACC
a Non-depreciation expenses
b Net working capital
c Capital expenditures depreciate on 8-year straight line basis.
d Additional growth rate through improved sales due to Nestlé partnership
e Depreciation of old assets are taken constant through the forecasted period
f One-time fee to eradicate negative results of Benzene “scandal”
g Pre-determined sale of Volvic business to BSN with the pre-determined price
h Nestlé’s market premium
i The yield on long-term government bonds in France as of Dec’91
j Perrier’s beta calculated through regresion using 3-trailing year stock prices and French stock market composite index
k Cost of debt for Nestlé

24. Appendix
Million Liters ('90) Million Liters ('91) % Growth from 1990
Perrier 3,822 3,887 1.7%
Perrier w/o Volvic 3,183 3,103 -2.5%
Volvic 639 784 22.7%
FFs millions 1990 1991
Perrier 1,891 1,919
Other Mineral Water 6,457 6,883
Soft Drinks 288 230
Roquefort Cheese 1,566 1,599
Sorrento Cheese (USA) 1,848 1,845
Services 851 872
Total 12,874 13,350
Volvic share of mineral water sales (Volume)
Volvic Share of Mineral Water Salesa 16.7% 20.2%
Mineral Water Share of Total Salesb 64.8% 65.9%
Volvic Share of Total Sales 10.8% 13.3%
Sales per Business Segments
Volvic share of total sales (FFs)
a Volume share of the mineral water sold is assumed to have 1-1 correlation with the sales figure shares.
b Perrier and other mineral water sales are divided to total sales.

25. Appendix
Company Price/Book Price/Cash Flow Price/Earnings Div. Yield Mkt. Value ($ mn)
BSN 2.6 9.8 19.1 1.9 11,533
Cadbury Schweppes 3.7 10.9 16.8 3.6 5,622
Campbell Soup 5.3 13.3 19.5 2.3 9,307
General Mills 9.5 14.5 20.8 2.3 10,773
Heinz 4.2 n/a 15.2 3.0 9,753
Hershey Foods 2.8 12.3 16.2 2.4 3,619
Kellogg 6.3 15.4 20.6 2.0 13,857
Nestle 2.9 8.8 14.6 2.2 23,184
Protector & Gamble 6.1 13.0 20.0 2.1 34,570
Quaker Oats 4.3 9.3 15.7 3.4 n/a
Perrier 0.9 9.8 33.7 0.02 1,990
Average 4.8 11.9 17.9 2.5 13,580
Median 4.3 12.3 18.0 2.3 10,773
Std Deviation 2.1 2.3 2.4 0.6 9,620
Min 2.6 8.8 14.6 1.9 3,619
Max 9.5 15.4 20.8 3.6 34,570
Morgan Stanley Capital International Perspective.
Food Industry Comparison