The Deal 2010 - NMIMS - The Falcons

THE DEAL Case Study
January 2011
Team: The Falcons
Campus: NMIMS
Rishabh Bhandari
Shailabh Kothari
9892904200
rishabh.bhandari@nmims.edu
9870260065
shailabh.kothari@nmims.edu
Vinay Chokhra
Yudhajeet Banerjee
9833574996
vinay.chokhra@nmims.edu
9920272394
yudhajeet.banerjee@nmims.edu
AGENDA
Industry Outlook
Overview of Acquirer Procter & Gamble (PG)
Growth options for P&G
Overview of Target Reckitt Benckiser Group (RBG)
Earnings sensitivity for RBG
Acquisition Rationale: Strategic Fit

Valuation
Discounted Cash Flow

Trading Comparables
Transaction Comparables
Valuation Summary
Synergies
AGENDA
Financial Feasibility
Deal Structure
Execution Considerations
Key Issues
Other Alternative Targets
With developed markets showing sluggishness, emerging

markets lay the path for growth
CURRENT
CURRENT TRENDS
TRENDS
HOME
Changing Strategic Intent
The mature and stable home care market was affected mildly by price competition, as well as a
decrease in new home purchases as a result of the credit crunch.
Skin care held up relatively well, with value sales down by just under 1% in 2009. Premium
categories such as masks and nourishers/anti-agers posted positive growth
Product Innovation
95%
95%
Greater R&D spend

70%
The beauty and personal care market was impacted by poor performances in several key markets,
such as Japan and the US, although this was offset to some extent by strong growth in emerging
markets
The consumer health market held steady in 2009 as self-medication was favored by some over
expensive doctor visits and prescription drugs
Changing demographic patterns continued to impact several FMCG sectors in 2009 and 2010.
Lower birth rates and ageing populations affected eating and drinking patterns, health spending
and consumption of beauty and personal care, and tissue and hygiene products
60%
Global Expansion
80%
55%
Acquisitions in core business

75%
50%
DRIVERS
DRIVERS
AND
PERSONAL
CARE
SECTOR:
OVERVIEW
With the recovery of global economy,

leading companies expected to return to
growth in many FMCG markets in 2010
CONSTRAINTS
CONSTRAINTS
Unemployment remains high, making

consumers cautious about overspending
Economic uncertainty persists in many

markets; there is a threat of a double
dip recession in some, and sovereign
debt crises in others
New product development - combining

greener and healthier attributes
55%
60%
Investments in emerging economies
Strong Growth in China and other

emerging economies
The premiumisation trend that was in
evidence across all markets before the
recession has begun to reemerge
Divestitures from non-core activities
Shoppers have become more thrifty as a

result of the credit crunch
Developed markets are saturated,

FMCGs face price competition
Source: Euromonitor International and Annual Reports of companies in HPC
75%
60%
FY 2010
FY 2009
Growth strategies for top 100 consumer goods companies:

OC&C Consultants research
Intensification of cocooning trend during recession benefited Home

and Personal Care Sector
FY 2009
Market Size
Market size
FY 2010
USD
million
Colour Cosmetics
Surface Care
Fragrances
Dishwashing
Oral Care
USD USD
millionmillion
30,000 60,000 90,000
Men's grooming
Insecticides
Eye Care
Deodrants
Toilet Care
Adult mouth care
Polishes
Calming and sleeping
Bleach
15
%growth 2010
%growth 2010
%growth 2010
18
15
10
16
14
10
12
10
Germany
Germany
6
4
0
-6 -4 -2
80,000
Hay Fever remedies

Medicated skin care
Sun Care
40,000
Cough, Cold and Allergy
Air Care
Bath Shower
20
Top 5 Markets
CONSUMER
CONSUMER HEALTH
HEALTH
Laundry Care
Hair Care
Baby Care
CARE
PERSONAL
AND
HOME
Skin Care
Depilatories
SECTOR:
SEGMENTS
million
HOME
HOME CARE
CARE
%growth 2010
BEAUTY
BEAUTY AND
AND PERSONAL
PERSONAL
CARE
USDUSD
CARE
50,000
100,000
million
200912
4%growth
6%growth
8 10
2009
-5
Source: Euromonitor International and Passport Database August 2010
2
0
-8 -6 -4 -2 0
8 10 12
%growth 2009
%growth 2009
-15
-10
-5
10
15
P&G turns to emerging markets to realize its strategy of

acquiring larger consumer base
OVERVIEW
BUSINESS MARGINS AND PROFITABILITY
Markets more than 300 brands in over 180 countries spanning

Americas, Europe, the Middle East and Africa (EMEA), and Asian
region
Strongly focused on expanding HPC portfolio while divesting the

non-core business (Appendix A1)
Strategy to touch and improve lives of:
More consumers
In more parts of world
More completely
Net s ales
Operatin g Incom e
Net m arg in
GEOGRAPHY WISE REVENUE BREAKUP FY2010
GAMBLE:
BUSINESS
OVERVIEW
Top 50 leadership brands account for 90% of P&Gs sale and 90% of
P&Gs profit
USD mn
Global Headquarters: Cincinnati, Ohio, U.S.

Employee Strength: 127,000
North America
15%
AND
9%
42%
PROCTER
13%
21%
Western Europe
Central & Eastern Europe,
Middle East & Africa
Latin America
SEGMENT WISE REVENUE BR EAKUP - FY 2010
Asia
Be au ty
Hea lth care
Fabric care and ho me care
Source: P&G Annual Report and Investor Presentations
Groomin g
Sna cks a nd Pe t care
Bab y care and fam ily care
Ne t Earn in gs
P&G leads the market in laundry care and mens grooming

segment
P&Gs market share in different sub-segments of HPC sector
Company Rankings in different segments of HPC w.r.t. Value
Home Care
Bleach
200
3
200
6
Air Care
Surface Care
Dishwashing
Laundary Care
5
10
15
20
% Value Market Share
25
30
Beauty and Personal

Care
Procter & Gamble Beauty and Personal Care Market presence by main market share
Fragrances
35
18.60%
Unilever
10.10%
Reckitt Benckiser
8.70%
Henkel
6.60%
SC Johnson & Sons
6.20%
Company Name
200 200 200 200 200

5
6
7
8
9
2009 % Value
Share
11.70%
2006
LOreal Groupe`
10.10%
2009
Unilever
6.80%
Colgate- Palmolive
3.70%
Avon Products
3.40%
Skin Care
30
Oral Care
10
15
20
25
% Value Market Share
Procter & Gamble
Men's
200 200 200 200 200 2009 % Value

5
6
7
8
9
Share
2003
Company Name
Procter & Gamble
Hair Care
40
Procter & Gamble Consumer Health Portfolio

Health Care
PROCTER
&
GAMBLE:
LINE
OF
BUSINESS
ANALYSIS
Procter & Gamble Home Care Market presence by main market share
Company Name
Herbal
200 200 200 200 200

5
6
7
8
9
2009 % Value
Share
Johnson & Johnson
5.80%
Child Care
2003
Skin Care
2006
GlaxoSmithKline Inc
3.20%
Digestive
2009
Bayer AG
3.10%
Novartis AG
2.40%
Pfizer Inc
6.20%
Cough
10
20
30
40
% of Total Portfolio
Source: P&G Annual Report 2010 and Euromonitor International
50
60
70
Sizeable acquisition in existing markets is the most suitable

option for P&G to maintain its growth rate
STRATEGY
RATIONALE
Organic Growth
Acquisition
in existing
markets
Piecemeal
acquisitions in
Europe and Asia
Large/sizeable
acquisitions
PROCTER
PROS
Can Leverage on existing
capabilities
Low execution risk
Customer base expansion and

integration of new customer into
existing offer
Geographic infill
Select product category growth
Track record of successful

acquisitions
Limited execution risk
Synergies from increased
network density, potential
revenue benefits
Significantly gain market share vs.

competitors
Capitalize on high industry
fragmentation
Reinforce competitive
position in core markets
Meaningful distribution
synergies from network
overlaps
Execution risk mitigated by
strong market knowledge
Become Asia-Pacific Home

Care frontrunner precursor
of new opportunities
Reinforce groups
competitive position through
additional scale and market
diversification
Best Practice sharing
Cost benefit
Benefit for product
innovation
Acquisitions in new
geographies like South East
Asia and Australia
Enter new markets with strong

competitive position through sizeable
acquisitions
Increase scale and expand multicountry platform
Access to and transfer of additional
know-how of acquired assets
Acquisitions in contiguous
businesses
CONS
Focus on faster-growing segments of

the market e.g. consumer health
Focus on high growth product

categories e.g. antiseptics, nourisher
Expand market share within
independent category
Expansion in Natural/organic products
&
GAMBLE:
GROW TH
OPTIONS
Upstream integration: food producers,

chemical plants
Downstream integration: retail chains,
health spa
SUITABILI
TY
Difficult to maintain existing

growth rate in long term
Adversely affected by negative
macroeconomic and consumer
spending scenario
Fit/Integration of regional/Local
players into P&Gs model
Most businesses are family
owned uncertainty on outcome
of negotiations
Integration risk potentially costly

Anti-trust considerations in
relation to number of national
networks
No market diversification achieved
High execution risk need to

decide the level of integration
between country operations
Limited cost synergies
mainly in purchasing
Need to build
expertise/knowledge of new
markets
Channel conflict
May require different skill-set
High execution risk especially for
downstream integration
Reckitt Benckiser Group with global market share of 9% and

strong brands can be one of the targets
KEY
KEY FINANCIALS
FINANCIALS (
( mn)
mn)
OVERVIEW
OVERVIEW
Global Headquarters: Berkshire, UK
Employee Strength: 24,900
One of the leading manufacturers & marketers of branded products in HPC

sector with operations in 180 countries
17 Powerbrands generate 70% of the revenues
Competes with P&G, Colgate-Palmolive, Clorox, S.C. Johnson, Henkel and

Unilever in global markets
FY08
FY09
FY10E
FY11E
P/E (x)
16.1
14.1
14.8
14.8
EV/Sales (x)
3.2
3.1
3.0
2.9
EV/EBITDA (x)
12.8
11.2
11.4
11.3
FY08
FY09
FY10E
FY11E
6563
7753
8192
8544
24.60%
18.13%
5.66%
4.30%
1642
2017
2102
2130
28%
22.84%
4.21%
1.33%
Revenues
% change
EBITDA
World market share: 9%
% change
Net Income
4,000
3,500
3,000
Volume
('000)
Close Price
1120
1418
1491
1533
19.40%
26.61%
5.15%
2.82%
ROE
34.70%
35.30%
29.50%
26.10%
ROCE
18.40%
24.20%
23.40%
23.40%
Share price
()
Net Debt
Mkt. Cap.
31.9
-251
23,229
% change
PRICE-VOLUME
PRICE-VOLUME TRENDS
TRENDS
40.00
35.00
30.00
2,500
25.00
2,000
20.00
1,500
15.00
KEY
KEY SHAREHOLDERS
SHAREHOLDERS
1,000
10.00
Shareholder
500
5.00
0.00
TARGET
OVERVIEW :
RECKITT
BENCKISER
JAB Holdings B.V.
15.42%
Legal and General Group plc. and/or its subsidiaries
3.95%
Massachusetts Financial Services Company and/or its

subsidiaries
4.11%
Others
Source: RBG Annual Report, Company website and Bloomberg
% Holding
76.52%
Reckitt Benckiser has witnessed high growth in developing

markets in HPC sector
BUSINESS-WISE REVENUE BREAKUP
09
BUSINESSWISE REVENUE
GROWTH 09
COMPETITIVE POSITIONING
Other than Powerbrands, Reckitt Benckiser

has a variety of brands which are strong
regionally (Ex: Dosia in laundry care, Veja in
Surface Care)
Dishwashing
Concentrates heavily on Laundry care,

Surface care and Dishwashing products
Home care
Foothold in Emerging markets, 2nd in Brazil

while Western Europe continues to be the
largest market
Faces strong resistance in markets dominated

by P&G and Unilever
Low Correlation with Equity markets and high

Earnings growth vis--vis GDP growth makes
RB an attractive target (Appendix A2)
Fabric Care
Surface Care
8% 4%
1%
27%
20%
17%
13% 11%
Health & personal

care
Other Household
Pharmaceuticals
REGION-WISE REVENUE BREAKUP

09
RECKITT
BENCKISER:
KEY
DRIVERS
Food
Europe
8%
19%
28%
45%
North America &

Australia
Developing
markets
Pharma
REGION-WISE REVENUE GROWTH

09
30%
Reckitt buys condom firm SSL for $3.8 bln

Rationale:
Two new categories in over-the-counter
segment, namely condoms and foot care
Expected cost synergies: 100 million
2 New Powerbrands to the list
25%
20%
Europe
15%
North America
& Australia
10%
5%
Developing
Markets
0%
2007
Source: RBG Annual Report and Equity research Reports
RECENT ACTIVITY
2008
2009
Reckitt Benckiser acquires Paras

Pharmaceuticals for $ 726 million
Rationale:
Strong brands of Paras like Krack heel-care
lotion, Dcold remedy, SetWet hair gel,
Dermicool prickly heat powder will enhance
RBs portfolio of powerbrands while
strengthening its position in India
RBG has similar revenue drivers as P&G as both compete for

the same market
STRATEGIC
STRATEGIC
OBJECTIVES
OBJECTIVES
ACQUISITION
RATIONALE:
STRATEGIC
FIT
Cosmetics &
Toiletries
Emerging
Markets
Brand Focus
COMMENTS
COMMENTS
P&G to increase its focus on faster-growing, highermargin Cosmetics & Toiletries businesses which utilize
assets more efficiently
Beauty and personal Care are key targets as P&G shifts

away from capital-intensive Paper and Food business
Beauty, Personal Care and Health care contribute 60%

of the sales and profit growth for P&G
Expanding its portfolio in emerging world and increasing

its contribution to sales & profits is a key strategy of
Procter & Gamble
Cheer detergent, Boots Laboratories have undergone

price-cutting to make them attractive to lower-income
consumer
ALIGNMENT
ALIGNMENT WITH
WITH RB
RB
Reckitt Benckiser generates 27%

(highest contribution) through HPC
of
sales
The business grew by 14% (second highest)
Reckitt Benckiser ranks 11 currently in Consumer

health Care, up from 26 in 2005 while it
maintained position 3 in Household segment
Though a challenge for Reckitt to garner a large

market share in emerging markets with its late
entry, it has shown an impressive growth of 25%
last year.
BRIC countries are the top target markets for

Reckitt Benckiser
In response to its poor 2009 financial year results,

Procter & Gamble has heightened its focus on its core
businesses and brands
Focusing on establishing power brands in highgrowth categories is Reckitt Benckisers key

strategy in driving business growth.
In the process, it sold Folgers Coffee brand and

Noxzema Skin Care line.
Launches primarily focused on Gillette, Olay, Crest, OralB portfolios.
Within its most dynamic Health & Personal Care

division, Reckitt Benckiser continues to exploit
growth opportunities for its Powerbrands such as
Gaviscon, Lemsip, Nurofen, Clearasil as well as
the latest addition, Mucinex.
90% of profits and sales of P&G come from 50

Leadership Brands
70% of revenues of Reckitt Benckiser come from

17 Powerbrands
Source: Euromonitor and Datamonitor Reports
Reaching more consumers in more parts

of the world
On-the-ground Operations
common to both the organizations
P&G on-the-ground Operations
RB on-the-ground Operations
ACQUISITION
RATIONALE:
STRATEGIC
FIT
High RB % Company share with

an average of 35%
High growth markets for RB with a CAGR of 10%
RBG:
HOME
RBG: CONSUMER
CONSUMER
HEALTH
HOME CARE
CAREHEALTH
P&G:
HOME
P&G:
P&G:CONSUMER
HOME CARE
CAREHEALTH
P&G:
CONSUMER
HEALTH
4.50%
5.00%
4.00%
3.50%
4.00%
3.00%
3.00%
2.50%
CAGR
2004-10
CAGR 2004-10 2.00%
2.00%
1.50%
1.00%
1.00%
0.50%
0.00%
0.00%
0
0
Bubble size
shows
company
share
Bubble
size
shows
company
of category, range displayed: 0.3 to
share of category, range
2.5%.
displayed: 0.2 to 38.3%.
5.00%
5.00%
4.00%
4.00%
3.00%
3.00%
CAGR
CAGR 2004-10
2004-10
Opportunity for
Opportunity
P&G for P&G
2.00%
2.00%
1.00%
1.00%
20000
40000
60000
100002000030000400005000060000
Source: Company websites and Annual reports
Market
MarketSize
Size
0.00%
0.00%
0
0
Bubble size shows company share
Bubble
size shows
company
share of 3.3
of
category,
range
displayed:
category, range displayed: 0.2 to 5.7%.
to
24%.
20000
40000
40000
Market Size
60000
60000
Reaching more consumers more

completely
RBG:
RBG: HOME
HOME CARE
CARE
Opportunity for P&G
3
2.5
10
POWERBRAN
POWERBRAN
DS
DS
COMMENTARY
COMMENTARY
Fabric Care
#1 in fabric treatment and water softener

categories & #2 in garment care
Sales: US $1750 million
Principal Markets: UK, Italy,

Scandinavia, Australia, Ireland, New
Zealand, Japan and Korea
2
CAGR 2004-10 1.5
1
ACQUISITION
RATIONALE:
STRATEGIC
FIT
0.5
0
0
Surface Care
100002000030000 40000 5000060000 70000
Bubble size shows company share of

category, range displayed: 3.2 -19%.
Market Size
#1 in Surface Care
Principal Markets: UK, Italy,

Scandinavia, Australia, Ireland, New
Zealand, Japan and Korea
P&G:
P&G: HOME
HOME CARE
CARE
3
Dishwashing
2.5
2
#1 in automatic dishwashing, RB
continuously increasing investments to
tap the market
Principal Markets: North America,

South America, Asia Pacific, South
Asia
CAGR 2004-10 1.5

1
0.5
0
0
10000 20000 30000 40000 50000 60000 70000
Bubble size shows company share of category,

range displayed: 0.1 -27%.
Market Size
Source: RBG Annual report, Datamonitor Research Reports and Investor Presentations
Reaching more consumers more

completely
11
RBG:
RBG: CONSUMER
CONSUMER HEALTH
HEALTH
3.5
POWERBRAND
POWERBRAND
SS
Opportunity for
P&G
3
2.5
2
CAGR 2004-10 1.5
COMMENTARY
COMMENTARY
Home Care
Leader in Air Care, Pest Control, Shoe

Care
Principal Markets: UK, Russia, Korea,

Spain, Italy, Germany, Australia, Poland,
Turkey
ACQUISITION
RATIONALE:
STRATEGIC
FIT
0.5
0
0
Health & Personal Care
5000 10000 15000 20000 25000 30000

Bubble
size shows company share
Market
Size
of category, range displayed: 1.6 4.4%.
P&G
P&G :: CONSUMER
CONSUMER HEALTH
HEALTH
Strepsils #1 brand in sore throat
Principal Markets: France, Turkey,

Germany, Russia, Italy, Spain, UK,
Greece, Belgium, Switzerland, Italy
3.5
3
Food
2.5
Frenchs Mustard is #1 brand among its

competitors
0.5
Principal Markets: Africa & Middle East,

Asia Pacific, Europe, Latin America
2
CAGR 2004-10 1.5
0
0
Bubble size shows company share of
category, range displayed 0.2 - 5.8%.
20000
40000
60000
Market Size
Source: RBG Annual report, Datamonitor Research Reports and Investor Presentations
80000
DCF estimates the value based on forecasts of fundamental

conditions: 37.18 per share
12
KEY
KEY ASSUMPTIONS
ASSUMPTIONS
SENSITIVITY
SENSITIVITY ANALYSIS
ANALYSIS
1) Growth in Sales Revenue assumed at 6.00% (As

per JPMC research reports) for the period 2013
and further
Based on the variability in assuming a forecasted terminal

growth rate and WACC, we have considered the following:
1. WACC increments by 35bps
VALUATION:
DCF
2) Terminal Growth Rate assumed at 2.00% on the

basis of the following factors incorporated:
Weakening of dollar and euro against
sterling
High raw material costs
Weak consumer demand in US and UK
Heightened competition
3) EBIT Margin assumed to grow by the following
phases:
2013-2014: 24.0%
2015-2016: 24.5%
2017-2018: 25.0%
4) Depreciation as a % of Sales Revenue kept at 2%
5) WACC Calculation:
Rf: 4.75% (Bloomberg)
Beta: 0.611 (Bloomberg)
Risk Premium: 7.48% (Wall Street
Research)
Effective Tax Rate for RBG: 25%
Cost of Debt: 5.11%
2. Terminal growth increments by 75 bps
Terminal Growth Rate
WAC
C
Source: Annual Report, J.P. Morgan Equity Research Report, Thomson Reuters and Company Website
1.25%
2.00%
2.75%
8.59%
37.25
39.9
43.22
8.94%
36.07
38.5
41.46
9.29%
34.98
37.2
39.88
9.64%
33.97
36.00
38.44
9.99%
33.03
34.9
37.13
Trading comparables method derives value based on current

data: 27.89 - 35.85 per share
13
COMPARABLES
COMPARABLES TRADING
TRADING DATA
DATA
Company
Market
cap
(US$mm)
EV/EBITDA
P/E
Margins (%)
2010E
2010E
2010E
EBITDA
EBIT
ROE
ROCE
Alberto-Culver
3,146
1.90
11.30
19.00
15%
14%
11.90%
10.50%
Henkel AG & Co. KGaA Nvtg

Colgate-Palmolive
Unilever N.V.
20,358
37,659
82,230
1.30
2.60
1.60
8.90
9.70
9.80
14.20
15.40
14.90
12%
26%
17%
9%
24%
15%
12.50%
88.90%
34.79%
7.17%
30.97%
16.23%
Procter & Gamble
176,352
2.60
10.30
14.70
24%
20%
17.64%
10.56%
Reckitt Benckiser Group
36,224
3.00
11.40
14.80
26%
25%
39.81%
27.46%
2.00
1.30
2.60
10.00
8.90
11.30
15.64
14.20
19.00
Mean
Min
Max
COMPARABLES
EV/ Revenue
SELECTION
SELECTION CRITERIA
CRITERIA11
VALUATION
VALUATION
All Figures in
TRADING
Comparable Range
Revenue 2010E (mn)
EV/Revenue
Min
Mean
Max
Min
Mean
Max
1.30x
2.00x
2.60x
8.90x
10.00
11.30x
8,192.00
8,192.00
8,192.00
EBITDA 2010E (mn)

Implied Firm Value (mn)
VALUATION:
Total Debt (mn)
NA
10,649.60
136.00
2,102.00
16,384.00 21,299.20
136.00
NA
136.00
16,248.00 21,163.20
2,102.00
136.00
136.00
2) Geographical presence
3) EBIT Margin
2,102.00
18,707.80 21,020.00 23,752.60

136.00
Implied Equity Value (mn)
10,513.60
Shares Outstanding (mn)
728.17
728.17
728.17
18,571.80 20,884.00 23,616.60

728.17
728.17
728.17
Implied Share Price
14.44
22.31
29.06
25.50
28.68
32.43
Take Over Premium
20.0%
25.0%
30.0%
20.0%
25.0%
30.0%
Per Share Value
17.33
27.89
37.78
30.61
35.85
42.16
In the order of priority

Source: J.P. Morgan Equity Research reports, Datamonitor Reports and Thomson Reuters
1) Lines of Business
EV/EBITDA
4) ROE/ROCE
Transaction comparables method derives value from recent

prices for actual deals: 37.58 - 42.66 per share
14
VALUATION:
TRANSACTION
COMPARABLES
COMPARABLE
COMPARABLE TRANSACTION
TRANSACTION DATA
DATA
FV/ Revenue
(x)
2.6
3.1
1.7
2.4
5.4
2.5
5.8
3.4
FV/ EBITDA
(x)
16.0
10.3
10.0
16.7
18.1
13.6
19.2
14.8
Min
1.7
10.0
Max
5.8
19.2
Date
Target
Major Business Activity
May-10
Jan-10
Sep-09
Jun-08
Oct-07
Jul-07
Jan-05
Mean
Smashbox
Bare Escentuals
Sara Lee (Personal care business)
Clarins
Burt's Bees
Playtex
Gillette
Cosmetic and Beauty

Cosmetic and Beauty
Personal care
Cosmetic and Beauty
Beauty and Personal Care
Personal care
Mens Grooming
Acquirer
Estee Lauder
Shiseido
Unilever
Financiere FC
Clorox
Energizer
P&G
Firm Value
(US$mm)
2,501
1,700
1,874
3,883
925
1,880
57,602
VALUATION
VALUATION
SELECTION
SELECTION CRITERIA
CRITERIA
FV/Revenue
Comparable Range
Revenue 2010E (mn)
Min
Mean
Max
Min
Mean
Max
1.70x
3.36x
5.80x
10.00x
14.84
19.20x
8,192.00
8,192.00
8,192.00
EBITDA 2010E (mn)

Implied Firm Value (mn)
FV/EBITDA
NA
NA
2,102.00
2,102.00
2,102.00
13,926.40
27,501.71
47,513.60
21,020.00
31,199.69
40,358.40
136.00
136.00
136.00
136.00
136.00
136.00
Implied Equity Value (mn)
13,790.40
27,365.71
47,377.60
20,884.00
31,063.69
40,222.40
Shares Outstanding (mn)
728.17
728.17
728.17
728.17
728.17
728.17
Per share value
18.94
37.58
65.06
28.68
42.66
55.24
Total Debt (mn)
Source: J.P. Morgan Equity Research reports and Bloomberg
The transactions have been chosen on

the basis of:
1) Line of business of the target
2) Date of the transaction
3) Size of the transaction
Implied Value per Share: 35.41 per share

35.41
33.03
Share Price as on 31st August 2010
17.33
SUMMARY
Based on 8.90x EBITDA multiple

for low end and for 11.30x high end
42.16
Based on 1.3x Sales multiple for

low end and for 2.6x high end
28.68
Transaction
Comparables
(EV/Sales)
Represents the 52 Week High-Low
37.78
Transaction
Comparables
(EV/EBITDA)
VALUATION:
36.55
30.61
Trading Comparables
(EV/EBITDA)
Trading Comparables
(EV/Sales)
37.78
28.50
Stock Price Range
15
18.94
Discounted Cash Flow
65.06
33.03
10.00
20.00
Based on 10x EBITDA multiple for

low end and 19.2x for high end
55.24
30.00
WACC ranges of 8.59%-9.99%

Terminal Growth rates of 1.25%2.75%
43.22
40.00
50.00
Based on 1.7x Sales multiple for

low end and 5.8x for high end
60.00
70.00
Valuation of Synergies
REVENUE
REVENUE SYNERGIES
SYNERGIES
COST
COST SYNERGIES
SYNERGIES
NEGATIVE
NEGATIVE SYNERGIES
SYNERGIES
Geographical Reach:
Sourcing Costs:
Product Cannibalization:
Higher revenues for the combined

entity as both the firms get
access to regions not targeted
earlier
With a higher amount of Raw

Materials procured, the combined
entity will have a higher bargaining
power against its suppliers
P&G will have access to high

growth expected regions in Africa
whereas Reckitt Benckiser will
get to leverage upon a high
distribution network of P&G
Having production facilities in

countries having access to cheaper
raw materials in emerging
countries will also play a key role in
reducing costs
SYNERGIES
Cross-Selling:
VALUATION:
16
Even in existing markets, both the

companies will have the
opportunity to cross-sell different
products to newly acquired
customers
P&Gs 22 Leadership Brands and
Reckitt Benckisers 17 Power
Brands will witness a boost in
growth
Expected Revenue Synergies
upto 4% by 2016
Some of the brands of the combined entity

might have to be discontinued due to direct
competition against each other
The consumers unhappy with any of the two
companies might refrain from using any
product of the combined entity
Expected Negative Synergies upto 2%
Summary (in mn)
SG&A Expenses:
The distribution, marketing and
administrative spend will reduce as
number of employees reduce and
advertising expenses related to
direct competing brands lower
998
77
1,038
1,340
4,667
3,292
R&D Expenses:
Capital Expenses related to R&D
will reduce as both the companies
will now share the same facilities
Expected Cost Synergies upto 2%
by 2016
Present Value of Post-tax synergies expected to be realized over a period of 6 years from 2011 to 2016 : 4,667 mn
Source: Equity Research reports and Annual reports
P&G can bid upto a maximum of 41.23 (30% premium) where

value creation ceases to exist
17
Deal Anatomy (in mn)
4,667
215
Equity Value
Net Debt
FINANCIAL
FEASIBILITY:
DEAL STRUCTURE
30234.47
25782.51
Synergies
Maximum Value
Value Band
Bid Price: 33.03

Deal Value: 23,836 mn
Gain: 6,398mn
Bid Price: 37.53

Gain: 2,691 mn
Bid Price: 41.23

Deal Value: 30,234mn
Gain: 0
Bid Price: 46.25

Deal Value: 33,892mn
Loss: 3,658mn
Bid Price: 50.25

Loss: 6,571mn
Sensitivity Analysis of the Bid Structure

P&G:
P&G: STATISTICS
STATISTICS
1) Cost of Debt: 5.75%
2) Existing debt: $29,832mn
FINANCIAL
FEASIBILITY:
EXECUTION
CONSIDERATIONS
3) Cash & Liquid assets: $18,782mn
18
DEAL
DEAL STRUCTURE
STRUCTURE
Deal Structure
Bid Price Premium/ Exchange
()
Discount
Ratio
6) Number of Shares outstanding: 3131
33.03
3.54%
million
RBG:
RBG: STATISTICS
STATISTICS
35.41
11.00%
1) Share price: 31.9

2) Fully diluted shares outstanding:
728.17 million
ACQUISITION:
ACQUISITION: STATISTICS
STATISTICS
37.78
45
18.43%
41.07%
1) EV of RB: 25,782 million

2) Cost of Debt used for acquisition:
EPS ($)
ROE
Net
Debt/EBITDA
100%
0%
0%
3.73
18.66%
0.81
40%
40%
20%
3.88
19.41%
1.14
0.13:1
15%
25%
60%
3.90
19.51%
1.81
0.95:1
100%
0%
0%
3.68
18.41%
0.81
60%
20%
20%
3.77
18.85%
1.17
40%
20%
40%
3.80
19.01%
1.53
0.19:1
20%
20%
60%
3.84
19.18%
1.89
0.61:1
60%
10%
30%
3.70
18.52%
1.38
50%
20%
30%
3.74
18.69%
1.38
0%
0%
100%
3.79
18.93%
2.73
0.72:1
60%
20%
20%
3.58
17.91%
1.27
25%
40%
35%
3.68
18.41%
1.61
15%
10%
75%
3.63
18.16%
2.53
10%
10%
80%
3.54
17.70%
2.85
0.35:1
0.57:1
0.38:1
0.50:1
0.30:1
23,836
25,569
27,295
32,553
0.18:1
50
56.74%
< 1.68 x
Debt
0.88:1
5) Share price: $59.40
>16.87%
Cash
4) EPS (FY2010): $3.67
Deal
Equity
Price ()
>= 3.67
0.13:1
36,194
5.75%
3) FY10 P&G EPS: $3.67
4) FY10 P&G ROE: 16.87%
Not viable
Ideal form of financing
Viable
5) FY10 P&G Net Debt/EBITDA:1.68x

6) Risk-free rate: 4.75% and effective
P&G tax-rate: 27.3%
Source: Bloomberg and Factiva
Recommendations: Bid-price of 35.41 with Equity-Cash-Debt structure as 60-20-20. It offers RBG

a premium of 11.00% of its current market price with EPS accretion of 2.70%
Cultural Integration might take longer than Operational &

Financial Integration
19
Excessive use of leverage may inflate risk due to an increased pressure on management to service debt
Financial
Maintaining Reckitt Benckisers dividend payout ratio of 40%+ might be difficult in the initial years
Foreign exchange risk while consolidation of financial statements
Regulatory and Legal
Anti-trust regulations for cross border transactions by the European commission, Clayton Act 1976 and Hart-Scott-Rodino
Antitrust Improvements Act of 1976 in US
P&G might face delay or issues in seeking approval from its shareholders to gain a controlling stake in Reckitt Benckiser
(Appendix A3)
Managerial
Other regulations related to taxation and accounting like stamp duty and Litigation in relation to M&A activity
The management of Reckitt Benckiser might pose a hindrance to the merger in which case Hostile Merger may be
considered which has its own issues
(Appendix A4)
EXECUTION:
KEY
ISSUES
Culturally different organizational structures and changes in managerial styles might breed anxiety among people currently
working for Reckitt Benckiser
Human Resource
Integration
Harmonization of compensation and benefit plans, and leadership assessment and selection might pose an obstruction for
the overall integration
Laying off employees might invite opposition in countries where unionization is prevalent
Supply Chain
Integration
Other Issues
Sourcing due-diligence, network issues like effectiveness of transportation management, inventory policies and
reasonableness of inventory turns, right IT infrastructure for supply chain systems are significant issues that would need
attention as the merger takes place
Product cannibalization in most of the sub-segments of Surface and Fabric Care
Expected value may not be realized if merger takes longer than estimated duration
Source: Annual Reports and Company website
Colgate Palmolive is the next best alternative due to its

strategic fit with P&G
ALTERNATIVE
TARGET
FOR
ACQUISITION
Companies
20
Business
Financials
Valuation
Present in Oral care, bath & shower, hair

care, deodorants, mens grooming, baby
care segments. Leader in Oral Care with
24% share
ROE 82.24%
ROCE 30.19%
Revenue growth - (0.02%)
PAT growth 19.39%
P/E 17.95
EV/Sales 2.6
EV/EBITDA 9.7
Mkt Cap - $37,659 mn
Manufactures, distributes and markets

Personal care, household cleaning, OTC
healthcare products and food products
ROE - 12.27%
ROCE - 10.78%
Revenue growth- 11%
PAT growth - 30.68%
P/E - 23.95
EV/Sales - 1.9
EV/EBITDA - 11.3
Mkt Cap - $3,146 mn
Mainly caters to Beauty and Personal Care

and has high presence in emerging markets
(65%)
ROE - 15.29%
ROCE - 8.76%
Revenue growth - 5.75%
PAT growth - 32%
P/E - 19.01
EV/Sales - 1.13
EV/EBITDA - 9.3
Present in household, personal care and

specialty products.
ROE 16.45%
ROCE 10.56%
Revenue growth- 4.07%
PAT growth 22.61%
P/E 16.76
EV/Sales 1.8
EV/EBITDA 8.5
Mkt Cap - $4,387 mn
Portfolio consists of Skin Care 39%, Make

Up -39%, Fragrance 16%, Hair Care 6%
with an overall mkt share of 3.1% in BPC
ROE 26.73%
ROCE 13.63%
Revenue growth 6.44%
PAT growth 115.73%
P/E 26.94
EV/Sales 1.73
EV/EBITDA 9.01
Main businesses are Adhesives, Laundry &

Home Care, Cosmetics & Toiletries
ROE 15.29%
ROCE 8.76%
Revenue growth - (3.95%)
PAT growth (50.67%)
P/E 19.01
EV/Sales 1.3
EV/EBITDA 8.9
Leader in cosmetics and beauty : make-up,

coloration, fragrances with 23 global brands
and in 130 countries
ROE 26.73%
ROCE 13.63%
Revenue growth-(0.39%)
PAT growth (6.89%)
P/E 24.65
EV/Sales 2.71
EV/EBITDA 14
Source: Bloomberg, Euromonitor and Company website
Rating
(Appendix A5)
Thank You
Appendix
ACQUISITION
ACQUISITION
P&G is strongly focusing on capturing market in all the

segments of HPC sector
Jan 06:
Gillette India
Ltd, a
shavers and
razors
manufacturer
Dec 06:
Minority stake
in MDVIP Inc,
a provider of
concierge
medicine
program
services
DIVESTITURES
DIVESTITURES
T R E N D S
G A M B L E :
&
Mar 08:
Frederic
Fekkai Inc,
an owner
and
operator of
beauty
salons
USD 57 bn
Sep 06:
Innovative
Brands
LLC
acquired
the Sure
deodorant
product
line
Sep 08:
NIOXIN
Research
Laboratories
Inc, a
manufacturer
of hair care
products
Jun 09:
Zirh
International
Corp, highend men's
grooming
brand
Jun 09:
The Art of
Shaving, an
Aventurabased retailer
of razors and
shaving
products.
USD 300 mn
2006
P R O C T E R
Jan 07:`
HDS
Cosmetic Lab
Inc, doing
business as
Doctor's
Dermatologic
al Formula
A1
2007
May 06:
Softbank
Venture
Korea
acquired the
Ssangyong
Kraft paper
business
Sep 07:
Svenska
Cellulosa AB
of Sweden
acquired the
European
tissue
operations
USD 120 mn
USD 672 mn
May 06:
Dial Corp, a unit of
Henkel KGaA, acquired
the deodorant brands
assets of Gillette
USD 420 mn
Source: P&G Annual reports and EIU
2008
Apr 08:
Reckitt
Benckiser
Japan acqd
the medicated
soap Muse
business
Aug 07:
Daio Paper Corp
acquired the
disposable adult
diaper business
Sep 08:
AlbertoCulver Co
acquired the
Noxzema
skin care
brand of
Procter
USD 81mn
May 10:
Natura Pet
Products Inc,
a Davisbased
producer and
wholesaler of
pet foods
USD 60 mn
2009
Mar 09:
RCJP Acquisition
Inc acquired
Johnson
Products Inc,
manufacturer &
wholesaler of
hair care
products
Oct 09:
Warner
Chilcott
acquired
P&G
Pharmace
uticals Inc
Jul 10:
Ambi Pur
unit of
Sara Lee
Corp
USD
471mn
2010
May 10:
Hamco Inc
acquired
the
Bibsters
product line
of P&G
Jul10:
INTERBRA
NDS
acquired the
entire share
capital of
Wella
Romania
Srl(wella)
USD 3.1bn
Mar 09:
Helen of Troy LP
acquired the haircare business of
P&G
Back
Low Correlation with Equity markets and high Earnings growth

vis--vis GDP growth makes RB an attractive target
EARNINGS
EARNINGS SENSITIVITY
SENSITIVITY TO
TO GDP
GDP GROWTH
GROWTH
RATE
30
RATE
EARNINGS
SENSITIVITY TO
TO EQUITY
EQUITY MARKETS
MARKETS
25
20.00
20
10.00
30.00
0.00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
-10.00
15
10
-20.00
BENCKISER:
EARNING
SENSITiVITY
RECKITT
A2
-30.00
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
World GDP Growth Rate
-40.00
FTSE 100
Earnings Growth Rate
EARNINGS
SENSITIVITY TO
TO EXCHANGE
EXCHANGE RATE
RATE
EARNINGS
SENSITIVITY TO
TO INFLATION
INFLATION
30.00
4
3.5
25.00
30.00
0.64
25.00
0.64
3
20.00
2.5
15.00
2
1.5
10.00
20.00
0.63
15.00
0.63
10.00
1
5.00
0.5
0.00
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Bloomberg and EIU
Inflation Growth Rate
0.62
5.00
0.00
0.62
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Direct Exchange Rate
Back
Indicative timetable according to

City Takeover Code
Week
A3
11
10
12
13
14
REGULATORS
REGULATORS
1) The Takeover Panel (Panel)
Preparatory phase
2) The Financial Services Authority

4 weeks
Announcement by
P&G of intention to
bid for target
Last day for posting

RBGs written
response to the
Last day for posting
offer
of offer document
2 weeks
(FSA)
3) Alternative Investment Market (AIM)
4) The Office of Fair Trading (OFT) and
Competition Commission
5) Federal and State laws for US
Last day for paying
the offer
consideration to
target shareholders
Accepting RBGs
shareholders may
withdraw their
acceptances
Maximum Tender
Period
2 weeks
DISCLOSURE
DISCLOSURE REQUIREMENT
REQUIREMENT
1) Acquisitions of 3% or more of a
4 weeks
public company's voting shares must
2 weeks
be notified to the target

First Day for which
offer may close
Last Day for RBG to

announce new
material information
Last day for offer to

be declared
unconditional as to
acceptances
2) A listed target must make this

information public by the end of the
business day following the offer
3) Notify the acquisition to the SEC
within 10 days
LEGAL ISSUES
THRESHOLDS
THRESHOLDS
30% 30 per cent Mandatory offer triggered (Rule 9). Restrictions in Rule 5 of the City Code relevant. If
offerer has interest of between 30 per cent and 50 per cent (usually as a result of an
unsuccessful previous offer) mandatory offer triggered if any further interest acquired.
50% 50 per cent Minimum acceptance condition under the City Code. Control effectively passes.
90% 90 per cent Enables compulsory acquisition of remaining 10 per cent.
Source: SEC & FSA websites, UK City takeover code
COMMITTED
COMMITTED FUNDING
FUNDING
REQUIREMENT
REQUIREMENT
1) The consideration in cash in a bank
account
2)
A right to borrow the consideration in

cash, under a specially tailored loan
facility, with no default allowed
Back
DEFENSE
MECHANISMS
Defense mechanism that might be employed by RBG post

P&Gs bid for acquisition
A4
Defense strategy
Action
Pros
Cons
Litigation
Targets files a lawsuit against the

acquirer that will require expensive
and time-consuming legal efforts to
fight
Courts may disallow the

transaction and the target may
get enough time to prepare
itself
Involves high cost of litigation
Greenmail
Target repurchases its shares from

the acquiring company at a premium
to the market price
Usually accompanied by 2nd

agreement that acquirer will
not make another attempt for
defined period
50% tax on profits realized by

acquirer makes it less
attractive
Share repurchase
Target submits a tender offer for its

own shares forcing the acquirer to
raise its bid price or quit
Assures a good price for the

target
Highly leveraged capital

structure may not be desirable
to the target
Crown jewel defense
Target decides to sell a subsidiary or

major asset to neutral third party
The acquirer moves away if the

asset was important
Courts may declare it illegal
Pac-man defense
The target makes a counteroffer to

acquire the acquirer
The acquirer fends off

immediately with the fear of
getting acquired
Hardly used as smaller

company rarely successfully
acquires a larger company
White knight defense
Target seeks a friendly third party that

can justify higher price than hostile
acquirer
Starts a bidding war and the

target ultimately gets a good
price
The white knight may turn out

to be a villain!
White squire defense
Target seeks a friendly third party that

can acquire a minority stake in the
target
Minority stake is big enough to

block the acquirer from
gaining enough share
High risk of litigation
Back
Other alternatives
BUSINESS
BUSINESS DESCRIPTION
DESCRIPTION
KEY
KEY FINANCIALS
FINANCIALS
STRATEGIC
STRATEGIC FIT
FIT WITH
WITH
P&G
P&G
Headquartered in USA, Alberto-Culver

manufactures, distributes and markets
Personal care, household cleaning, OTC
healthcare products and food products
Financial Performance
ROE - 12.27%
ROCE - 10.78%
D/E 0.11
Revenue growth- 11%
PAT growth - 30.68%
Staling Brands, Low presence

in Emerging mkts, Strong
Impact due to high exposure
to Retail Majors like WalMart
and dispute with P&G over
Noxzema doesnt make it a
good choice
Low debt- financially attractive
Too reliant on Nivea, while

exclusive La Prairie has a stiff
competition with Pvt. Label
brands
Overall BPC portfolio P&G

being #1, there will be strong
product cannibalism
Large Skin Care portfolio &

strong focus on fragrances
P&G is marginally better
57% of its business comes from NA while

Europe is another major market
Hair Care has a share of 76% in its sales
Major Brands include TRESemm, Nexxus,
Alberto VO5 & St. Ives
Beiersdorf has high presence in emerging

markets (65%)
Mainly caters to Beauty and Personal Care
(3% market share)
New Product development alongwith new
category and regional expansion are the
growth drivers
Enjoys strong brand loyalty with Nivea,
Eucerin and La Prairie
Losing market share in Germany & WE
OTHER
OPTIONS
A5
Valuation Parameters
P/E - 23.95
EV/Sales - 1.9
EV/EBITDA - 11.3
Mkt Cap - $3,146 mn
ROE - 15.29%
ROCE - 8.76%
D/E 0.06
Revenue growth - 5.75%
PAT growth - 32%
P/E - 19.01
EV/Sales - 1.13
EV/EBITDA - 9.3
Other alternatives
BUSINESS
DESCRIPTION
KEY
KEY FINANCIALS
FINANCIALS
STRATEGIC
STRATEGIC FIT
FIT WITH
WITH
P&G
P&G
World BPC Value share 0.2%, Home

Care Value Share 1%
ROE 16.45%
ROCE 10.56%
D/E = 0.36
Revenue growth- 4.07%
PAT growth 22.61%
Although it has strong Power

Brands, but all the RBs or
P&Gs brands in the same
category are well ahead
Going Green products have a

good market and can help
P&G gain a strong foothold
Too reliant on Walmart (22%)
P&Gs oral care product

portfolio will get a boost and
the combined entity will move
to #1 position in oral care
Strong presence in emerging

markets fits well with P&Gs
growth agenda
Palmolive is world #3 in bath

and shower and is also active
in deodorants, haircare, mens
grooming & skin care
78% of its sales come from US

80% of sales from 8Power Brands: Arm &
Hammer, Trojan, Oxiclean, SpinBrush, First
Response, Nair, Orajel and Xtra
Offers a host of Eco-friendly prodcuts
Improved its OPMs by 2.4% by cost cutting
Present in Oral care, bath and shower, hair

care, deodorants, mens grooming, baby
care segments
Market share in beauty and personal care
remained static at nearly 4% in 2009
Global leader in Oral Care with 24% global
market share and contributing to 63% of
firm revenues
Dominates oral care segment of emerging
countries such as Brazil, China and India
with 44%, 26% and 38% market share
respectively
OTHER
OPTIONS
A5
P/E 16.76
EV/Sales 1.8
EV/EBITDA 8.5
Mkt Cap - $4,387 mn
ROE 82.24%
ROCE 30.19%
D/E 1.27
Revenue growth (0.02%)
PAT growth 19.39%
P/E 17.95
EV/Sales 2.6
EV/EBITDA 9.7
Other alternatives
BUSINESS
DESCRIPTION
KEY
KEY FINANCIALS
FINANCIALS
STRATEGIC
STRATEGIC FIT
FIT WITH
WITH
P&G
P&G
Though headquartered in New York, Estee

Lauders revenue is not as highly skewed
(US 47%, Europe, ME 36%, Asia - 17%)
ROE 26.73%
ROCE 13.63%
D/E 0.58
Revenue growth 6.44%
PAT growth 115.73%
Premium Fragrances, a
leading area for Estee Lauder,
expected to face stiff
competition from mass
fragrances
Less conflicts with the existing

brands of P&G expected;
companys strategy of
expanding in emerging
markets seems promising
Except Schwarzkopf, none of

the brands can be termed
global
Adhesives being the major

business area doesnt align
with P&G
With profits reducing to half,

R&D might be affected
Portfolio consists of Skin Care 39%, Make

Up -39%, Fragrance 16%, Hair Care 6%
with an overall mkt share of 3.1% in BPC
Major Brands Clinique (affordable), Mac,
Bobbi Brown (premium)
Retail distribution majorly through
departmental stores (60%)
Mainstream businesses: Adhesives 47%,

Laundry & Home Care 31%, Cosmetics &
Toiletries 22%
Mainly based out of WE & ME 62%, NA
19%, Asia Pacific 13%, LA 6% with an
overall market share of 1.8%
Major Brands Schwarzkopf, Fa, Dial,
Diadermine, Right Guard
Has 203 production sites in 57 countries
OTHER
OPTIONS
A5
P/E 26.94
EV/Sales 1.73
EV/EBITDA 9.01
ROE 15.29%
ROCE 8.76%
D/E = 0.60
PAT growth (50.67%)
P/E 19.01
EV/Sales 1.3
EV/EBITDA 8.9
Other alternatives
A5
BUSINESS
DESCRIPTION
KEY
KEY FINANCIALS
FINANCIALS
STRATEGIC
STRATEGIC FIT
FIT WITH
WITH
P&G
P&G
In terms of market share, LOreal ranks 2nd

after P&G in BPC with 93% of business in
Cosmetics
ROE 26.73%
ROCE 13.63%
D/E 0.218
PAT growth (6.89%)
Strong Emerging Market

focus and multiple R&D
facilities gel well with P&G
strategy
With current valuations, it

would be an expensive
investment
Multiple shareowners might

hinder or delay takeover
process
Very strongly focused on expansion in

emerging markets with an objective of
doubling to 2.5 million subscribers.
Currently, WE accounts for 44% business,
NA- 24%, Rest 32%
Major Brands Garnier, LOreal Paris,
Lancome, Maybelline NY
P/E 24.65
EV/Sales 2.71
EV/EBITDA 14
Back

The Deal 2010 - NMIMS - The Falcons

Enviado por

Dados do documento

Título original

Direitos autorais

Formatos disponíveis

Compartilhar este documento

Compartilhar ou incorporar documento

Opções de compartilhamento

Você considera este documento útil?

Este conteúdo é inapropriado?

Direitos autorais:

Formatos disponíveis

The Deal 2010 - NMIMS - The Falcons

Enviado por

Direitos autorais:

Formatos disponíveis

THE DEAL Case Study

Team: The Falcons

Growth options for P&G

Overview of Target Reckitt Benckiser Group (RBG)

Earnings sensitivity for RBG

Acquisition Rationale: Strategic Fit

Discounted Cash Flow

Other Alternative Targets

With developed markets showing sluggishness, emerging

Changing Strategic Intent

Greater R&D spend

Acquisitions in core business

With the recovery of global economy,

Unemployment remains high, making

Economic uncertainty persists in many

New product development - combining

Investments in emerging economies

Strong Growth in China and other

Divestitures from non-core activities

Shoppers have become more thrifty as a

Developed markets are saturated,

Source: Euromonitor International and Annual Reports of companies in HPC

Growth strategies for top 100 consumer goods companies:

Intensification of cocooning trend during recession benefited Home

30,000 60,000 90,000

Calming and sleeping

Hay Fever remedies

Cough, Cold and Allergy

P&G turns to emerging markets to realize its strategy of

BUSINESS MARGINS AND PROFITABILITY

Markets more than 300 brands in over 180 countries spanning

Strongly focused on expanding HPC portfolio while divesting the

In more parts of world

GEOGRAPHY WISE REVENUE BREAKUP FY2010

Global Headquarters: Cincinnati, Ohio, U.S.

SEGMENT WISE REVENUE BR EAKUP - FY 2010

Source: P&G Annual Report and Investor Presentations

P&G leads the market in laundry care and mens grooming

Company Rankings in different segments of HPC w.r.t. Value

Beauty and Personal

SC Johnson & Sons

200 200 200 200 200

Procter & Gamble

200 200 200 200 200 2009 % Value

Procter & Gamble

Procter & Gamble Consumer Health Portfolio

200 200 200 200 200

Johnson & Johnson

Source: P&G Annual Report 2010 and Euromonitor International

Sizeable acquisition in existing markets is the most suitable

Customer base expansion and

Track record of successful

Significantly gain market share vs.

Become Asia-Pacific Home

Enter new markets with strong

Focus on faster-growing segments of

Focus on high growth product

Upstream integration: food producers,

Difficult to maintain existing

Integration risk potentially costly

High execution risk need to

Reckitt Benckiser Group with global market share of 9% and

One of the leading manufacturers & marketers of branded products in HPC