🍎 🍕 Less apples, more pizza 🤔 Have you seen Buffett’s portfolio recently?Explore for Free

Valuation Of Precision Castparts

Published 10/20/2015, 01:26 AM
Updated 07/09/2023, 06:31 AM
CSGN
-
PCP
-
BRKa
-

On August 10, 2015, Berkshire Hathaway and Precision Castparts issued a joint press release announcing that the boards of directors of Berkshire Hathaway Inc. (N:BRKa) and Precision Castparts Corp. (NYSE: N:PCP) have unanimously approved a definitive agreement for Berkshire Hathaway to acquire, for $235 per share in cash, all outstanding PCP shares. The transaction is valued at approximately $37.2 billion, including outstanding PCP net debt.

In a notice (dated October 13, 2015) of a special meeting to PCP shareholders to be held on November 19, 2015 to vote on this proposal, PCP’s financial advisor, Credit Suisse (VX:CSGN), provides a valuation of the company by performing (1) a comparable multiples analysis, (2) a comparable transactions analysis, and (3) a discounted cash flow analysis.

(1) Comparable Multiples Analysis – Taking into account the results of the selected companies analysis, Credit Suisse applied multiple ranges of 10.0x to 11.0x to PCP’s CY 2015E EBITDA and 9.0x to 10.0 x to PCC’s CY 2016E EBITDA. The selected companies analysis indicated an implied valuation reference range of $180 to $203 per share of PCP as compared to the proposed merger agreement of $235 per share.

(2) Comparable Transactions Analysis – Taking into account the results of the selected transactions analysis, Credit Suisse applied a multiple range of 11.5x to 13.5x to PCP’s last 12 months EBITDA as of June 28, 2015. The selected transactions analysis indicated an implied valuation reference range of $218 to $260 per share of PCP as compared to the proposed merger agreement of $235 per share.

(3) Discounted Cash Flow Analysis – Credit Suisse performed a discounted cash flow analysis of PCP by calculating the estimated net present value of the projected after-tax, unlevered free cash flow of PCP based on company forecasts. Credit Suisse applied a range of terminal value multiples of 9.5x to 10.5x to PCP’s estimated FY 2021E EBITDA of $4.21 billion and discount rates ranging from 7.0% to 9.0%. This analysis indicated an implied valuation reference range of $215 to $256 per share of PCP as compared to the proposed merger agreement of $235 per share.

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.