The document analyzes Monmouth's potential acquisition of Robertson. Three consultants provide their analyses: 1) Multiple market analysis values Robertson at $26-30/share. 2) Dividend payout analysis values it at $13-20/share. 3) Discounted cash flow analysis values it at $34/share. Benefits of the acquisition are identified as reducing costs and improving earnings. A potential merger is modeled, finding Robertson's value could be $31-136/share depending on growth and discount rates. The next steps propose a 2:1 common stock swap at $48/share.

1. Monmouth, Inc. – Case Analysis
Golden Gate Team 2iT
Hui Lin Tan | Sophia Liu | Luca Aldegheri | Alejandro Gaviria | Guillermo Gonzalez | Ricardo Mazzini

2. Agenda
Introduction
Valuation Analysis
 Multiple Market
 Dividend Payout
 Discounted FCF
Recommendations

3. Leading Provider of Oil & Gas Industry
1) Achieve growth in EPS over the next 5 years
From $2.61 to > $3.56
2) Increase Wall Street’s interest in the stock
$24 ~ 4.21M shares outstanding
MANAGEMENT’S OBJECTIVE THROUGH ACQUISITION
“We want to implement a diversification program
to reduce vulnerability to economic conditions.”
– Harry Vincent, Executive Vice President

4. Journey Thus Far
?
Simmons purchased
44,000 Robertson
shares
Simmons’s offer:
$42 per share
($12 premium)
1st Opportunity
for Monmouth
Monmouth
retreats offer
2nd Opportunity
for Monmouth
NDP’s offer:
5:1 common
stock swap
Concerned about
shares devaluation after
NDP-Robertson merger
2000 March 2003 April 2003

5. TO BUY OR NOT TO BUY?

6. Consultant 1: Multiple Market Analysis
Robertson
Industry
Average
Most Similar
Companies
Comment
Suggestion
for Analysis
EBIAT Multiple 16.1 13.3 14 Above average 15
P/E Ratio 13.5 13.5 13 OK 13.5
Value of Robertson’s stock: $26 to $30 per share

7. Consultant 2: Dividend Payout Analysis
Value of Robertson’s stock: $13 to $20 per share
13.3
15.8
20.0
Worst case Base case Best casePessimistic Neutral Optimistic
Required rate of return 12% 10.1% 8%
Dividend per share 1.6 1.6 1.6

8. Consultant 3: Discounted FCF Analysis
Value of Robertson’s stock: $34 per share
WACC 8.97%
Growth rate 2%*
Discounted FCF $19.78
Shares outstanding 584,000
Price per share 33.87
*Growth of last 2 years
NO GO?

9. Acquisition Benefits
OPPORTUNITIES FOR BUSINESS IMPROVEMENTS
Reduction of “COGS” – by accurate market segmentation
From 69% to 65% of sales
Reduce SG&A expenses – by unifying sales force and advertising
From 22% to 19% of sales
Redistribution of market segments to achieve better earnings
75% Industrial 50% Industrial
25% Consumer 50% Consumer

10. Monmouth-Robertson’s Merger
Value Proposition
WACC
Pessimistic
11%
Neutral
9%
Optimistic
7%
Growth
0% 30.96 47.02 72.15
2% 41.06 64.56 106.47
3% 48.00 77.73 136.51

11. Next Steps
COMMON STOCK SWAP
2 shares of Monmouth : 1 share of Robertson
@ $48/share