The document analyzes investment opportunities for MediaCo, a media and apparel company. It evaluates bidding $111M for FashionCo, selling ApparelCo, splitting MediaCo and ApparelCo, conducting a stock buyback, and purchasing a synergistic media firm. The best options are to bid for FashionCo or, if rejected, split MediaCo/ApparelCo and conduct a stock buyback and debt-financed restructuring to increase returns. RadyAdvisors recommends bidding for FashionCo or pursuing other growth opportunities if rejected.

1. RADY ADVISORSTM
.
OLIVER BINZ | ALLISON NOEL | LAUREN VOLLON | SARAH FELDMAN JANUARY 21, 2015
MEDIACO INVESTMENT OPPORTUNITY

2. COMPANY OVERVIEW
Publicly-traded with two reporting units, MediaCo and ApparelCo
Market cap of $550M
Publishes periodicals; operates a website and aTV production company
Slow or no organic growth
Develops, sources, markets, and distributes fashion-forward apparel and accessories
Growing, but margins low due to high SG&A costs
ParentCo
MediaCo
ApparelCo

3. OPERATING PERFORMANCE OF MEDIACO
0%
2%
4%
6%
8%
10%
12%
14%
$0
$100
$200
$300
$400
$500
$600
2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F
EBITDAMARGIN
SALES($MILLIONS)
Sales EBITDA margin

4. 0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
$0
$50
$100
$150
$200
$250
$300
$350
2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F
EBITDAMARGIN
SALES($MILLIONS)
Sales EBITDA margin
OPERATING PERFORMANCE OF APPARELCO

5. INDUSTRY OVERVIEW
Media
• Recent consolidation of
content publishers
• Little to no revenue growth
for the foreseeable future
• Print andTV performing in
line with general markets
Fashion
• Highly cyclical
• Comparable company
trading multiples cover a
wide range
• Growth expected to be in
mid-to-low single digits

6. WHATTO DO?
Improve the value of ParentCo to satisfy shareholders
Objective
Opportunity
Bid on FashionCo for $111M
If bid is rejected, restructure and streamline to drive shareholder value

7. OPERATING PERFORMANCE OF FASHIONCO
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
$0
$50
$100
$150
$200
$250
2012 2013 2014 2015F 2016F 2017F 2018F 2019F
EBITDAMARGIN
SALES($MILLIONS)
Sales EBITDA margin

8. NON-FINANCIAL CONSIDERATIONS
• Balancing interests of all shareholders and board members
• Protecting brand and company images
• Short-term and long-term stability

9. VALUATION METHODS
Perpetuity growth method, based on the PV of future cash flows
Captures intrinsic value
Based on comparable transactions between 2012 and 2014
Based on implied EV/EBITDA multiple
Based on comparable firms’ EV/EBITDA multiples
DCF
Precedent
Comparables
Multiple
Appendix
* Made assumptions on the following:
• Cost of debt
• Market value of equity
• Market risk premium
• Risk-free rate
• Beta

10. MEDIACO (STAND-ALONE)VALUE
$-
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
DCF Precedent Multiple Comparables
Range of valuations ($ millions)
Summary
• DCF valuation: $324M-$390M
• UsesWACC of 6.5-8%
• Implied growth rate is slightly negative
• Precedent transactions: purchased company
within +/- 1 of MediaCo’s EV/Revenue or
EV/EBITDA
• Outliers removed
• Implied EV/EBITDA multiples (5.2x and 6.4x)
• EV/EBITDAs from comparable companies
(6.4x-8.4x)

11. APPARELCO (STAND-ALONE)VALUE
$-
$50
$100
$150
$200
$250
DCF Precedent Multiple Comparables
Range of valuations ($ millions)
Summary
• DCF valuation: $100M-$130M
• UsesWACC of 8.7-10.2%
• Implied growth rate is 2%
• Precedent transactions: purchased
company within +/1 of ApparelCo’s
EV/Revenue or EV/EBITDA
• Outliers removed
• Implied EV/EBITDA multiples (4.2x and 5x)
• EV/EBITDAs from comparable companies
(8.7x-12.7x)

12. FASHIONCO (STAND ALONE)VALUE
$-
$50
$100
$150
$200
$250
DCF Precedent Multiple Comparables
Range of valuations ($ millions)
Summary
• DCF valuation: $90M-$120M
• UsesWACC of 8.5-10%
• Implied growth rate is 1-1.5%
• Precedent transactions: purchased company
within +/1 of FashionCo’s EV/Revenue or
EV/EBITDA
• Outliers removed
• Implied EV/EBITDA multiples (5.2x and 6.3x)
• EV/EBITDAs from comparable companies
(8.7x-12.7x)

13. PARENTCO + FASHIONCO (COMBINED)VALUE
$200
$300
$400
$500
$600
$700
$800
DCF Precedent Multiple Comparables
Range of valuations ($ millions)
Summary
• DCF valuation: $540M-$650M
• UsesWACC of 7-8.5%
• Implied growth rate is ~0%
• Precedent transactions: purchased company
within +/1 of ParentCo+FashionCo’s
EV/Revenue or EV/EBITDA
• Outliers removed
• EV/EBITDAs from comparable companies
range from 4.5x-15x
• EV/EBITDAs from comparable companies
range from 7.6x-9.6x

14. STRATEGIC ALTERNATIVES
Primary options:
1. Bid on FashionCo
2. Sell ApparelCo
3. Make no sales or acquisitions
a. Split MediaCo from ApparelCo
b. Stock buy-back and financial restructuring
c. Manage SG&A
d. Purchase alternative media firm
** Assumptions going forward: ParentCo  borrow EBITDA*2 at Risk-free rate + 250bp
• Borrowing capacity = $168M
• Cost of debt = 4.5%

15. STRATEGIC ALTERNATIVES
Option 1: Bid on FashionCo for $111M
• Stand-alone value of FashionCo is $90-$120M
• Synergies from merging FashionCo with ApparelCo  savings of $2M
annually due to SG&A cost reduction
• Discount rate of 9.3% (WACC of combined FashionCo and ApparelCo)
• Perpetuity valued at $21M (takeover premium)
* FairValue of buying FashionCo = at least $111M
* Walk-away offer: if higher, could make loss

16. STRATEGIC ALTERNATIVES
Option 1: Bid on FashionCo for $111M (cont’d)
• If bid is accepted  LBO
• Borrow at 4.5%, maximum of $168M
• Expected Free Cash Flows per year from FashionCo = $9M
• If financing everything with debt, we can pay at most $200M ($168M-
debt and $32M-equity) to break even
• Want to pay less to enhance shareholder wealth by increasing ROE

17. STRATEGIC ALTERNATIVES
Option 2: Sell ApparelCo
• Stand-alone value is $145-$155
• Currently under-valued in the market though
• Also has grow opportunities in the future
• Futhermore, selling would upset the Masterson family!
* Recommendation: keep ApparelCo
(ParentCo can increase returns to shareholders in other ways)

18. STRATEGIC ALTERNATIVES
Option 3: Split ApparelCo and MediaCo
• No synergies between firms*
• Set up two separate entities– allocate appropriate share volume to each
shareholder in both firms
• Shareholders will be able to diversify efficiently according to their
personal risk preferences
* Merton (1999):Companies shouldn’t diversify their operations when there are no synergies.
Shareholders can diversify for idiosyncratic risk more efficiently.

19. STRATEGIC ALTERNATIVES
Option 4: Stock buy-back + financial restructuring
• $168M value with low cost of debt
• Tax exemptions/benefits (deferred tax  gain interest on the amount)
• Value for shareholders  stock price + premium and optimization of return on equity
Before
• Average FCF MediaCo = $26M
• Average FCF ApparelCo = $6M
• ROE = $32M/$549M(market cap) = 5.8%
After
Take on $168M in debt  $381M equity
Average FCF = $25M ($32M-4.5%*$168M)
ROE = 6.4%

20. STRATEGIC ALTERNATIVES
Option 5: Look into purchasing synergistic media company
• Focus on firm with
• Internet capabilities
• Ability to capture new customers that are younger than 45
• Consolidation in sector  need to purchase firms to create growth
• Ex. Lee Entreprice, McClatchy Co.
• Could generate growth for MediaCo + ParentCo! (needs further research*)
*We at RadyAdvisorsTM would be delighted to look into this for you!

21. STRATEGIC ALTERNATIVES
Option 6: Manage SG&A
• ApparelCo could reduce SG&A by 2% if they achieved greater scale
• As company grows, look for opportunities to decrease SG&A

22. NEXT STEPS
1. Bid $111M for FashionCo
a. If bid is accepted, split MediaCo from ApparelCo+FashionCo
2. If FashionCo rejects bid
a. Split MediaCo from ApparelCo
b. Stock buy-back and financial restructuring
3. Look into purchasing media firm
4. As company grows, focus on managing costs such as SG&A

23. OLIVER BINZ | ALLISON NOEL | LAUREN VOLLON | SARAH FELDMAN RADY ADVISORSTM
THANK YOU!