1. Acquisition Target’s Business Valuation
January 1, 2007
TruSuccess Advisors,
27 Circle Dr.
Rockaway, NJ 07866
(973)
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Copyright © 2006 TruSuccess, Inc. All rights reserved.

2. Project Summary
Potential Acquisition target had a $9.5Bn Enterprise value ($7.7Bn Equity and $1.8Bn Net Debt)
Valuation was between 30% to 40% lower than other similar competitors despite possessing a higher market share
Company’s market share was about 20% at the end of 2004, which was second highest in the industry
Top four companies in industry account for nearly 75% of total market share
Project objectives were to fairly value the company and determine the best options for unlocking that value
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3. The Acquisition Target’s Five-Year Financial Performance*
*Company went to the current LOB format at the start of the 2001 fiscal year
Source: 2003 Annual Report
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4. The Acquisition Target’s Five-Year Financial Performance, contd.
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5. Current Stock Price Valuation
Market Valuation
As at December 31, 2003 the Acquisition Target’s shares closed at:
$31.19 per ADR on the New York Stock Exchange1
£8.54 per share on the London Stock Exchange
This represented a market cap of $7.68Bn
With total Debt of $1.8Bn this resulted in an Enterprise Value of $9.5Bn
Competitor Market Valuation
In contrast, its major US and European competitors had the following valuations (market shares in parentheses)
Competitor 1 - $17.6B in Market Cap & $20.2B in Enterprise Value (23%)
Competitor 2 - $12.3B in Market Cap & $15.0B in Enterprise Value (18%)
Competitor 3 - $11.9B in Market Cap & $14.1B in Enterprise Value (13%)
Competitor 4 - $1.6B in Market Cap & $2.3B in Enterprise Value (6%)
Competitor 5 - $6.2B in Market Cap & $10.3B in Enterprise Value (14%)
Industrial gases represent 46% of Sales and 76% of EBITDA
1 1 ADR on the NYSE is equivalent to 2 shares on the LSE
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6. Company’s Underlying Valuation suggests that the equity markets were discounting its growth opportunities
DCF Valuation (assuming no future growth opportunities)
Target’s Implied Equity Value US$MM
$8,416
Implied US$ Stock Price
$33.66
Implied GBP Stock Price
£10.52
DCF Valuation (assuming future growth opportunities)
$12,163
$48.65
£15.20
The Comps used in the analysis include the four top competitors
Assumptions used in the DCF model
Acquisition Target’s calculated WACC used was 7%
Future growth rate of Free Cash Flows used is 3.5%
Exchange rates are: GBP £1= US $1.60
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7. Acquisition Target’s Strategies for Delivering Enhanced & Sustainable Growth
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8. Growth-oriented strategies to unlock the pent-up value of the target company
Short-term Initiatives (1-2 years)
Reduce head count to match the numbers of major competitors
Announcement should be visible to the financial marketplace
Revisit the conservative corporate culture, and manner of evaluating capital investments
Involves reducing the layers of overhead costs embedded in financial evaluation methodologies
Aggressively go after the remaining ‘captive’ industrial gases schemes globally
Medium-term Initiatives (3-5 years)
Merge with or acquire a competitor, most likely Competitor 5
Acquire an air purification/ air filtration company, engaged in consumer-based marketing
Acquire an energy trading company to help reduce energy exposure
Long-term Initiatives (5+ years)
Position the company in the Renewable Energy sector, notably in Hydrogen fuel cells
Potentially partner with a major automobile manufacturer on this initiative
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9. Short-Term Growth Strategies Reducing Employee Overhead Costs
Total Employee Base was 44,507 at Sept. 30, 2003
46,280 at Sept. 30, 2002
43,171 at Sept. 30, 2001
Employees were geographical distributed as follows:
Americas 7,451
Asia/Pacific 7,565
Africa 17,138
Europe 12,353
Engineering employee cuts in Africa & Europe especially should help reduce overheads
Could consider business divestitures in each region and a reduction in headcount through rationalizations
Cuts in the Americas & Asia appear unlikely since they employ 34% of work force, but are the major sources of revenues (60%) and profits (50%)
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10. Medium-Term Growth Strategies Pursue possible M&A partners
Likely synergies exist between an Acquisition Target & Competitor 5 combination
Opportunity for Acquisition Target to expand into continental and eastern Europe
Enhanced value through Competitor 5’s engineering business
Competitor 5’s current valuation appears low, and ripe for a strategic acquisition
Position the company in the Air purification business via a major acquisition
Expected to be a significant market in the future as regulatory influences and health concerns force investments in cleaner airs for personal and commercial parties
Acquire an influential player in the energy trading business
Should help to reduce Acquisition Target’s significant power exposure
Could also serve as a platform for a stable profit contributor in this deregulated sector
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11. Long-Term Growth Strategies Reposition the company as a Renewable Energy Player
Enter the Renewable Energy market
Via a series of key strategic acquisitions in hydrogen fuel cells entities
Commit a significant portion of R&D budget to hydrogen fuel cells research
Consider alternative sources of renewable energy, such as Water and Wind
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12. Back-up Slides Acquisition Target Overview & Valuation
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13. Tracking Stock Prices - Feb. 6, 2004
U.S. Stock Prices (Market Cap)
Acquisition Target = $33.38 ($8.22 BN)
Competitor 2 = $35.85 ($11.66 BN)
Competitor 3 = $49.76 ($11.31 BN)
European Stock Prices (Exch. Rates)
Acquisition Target = £8.86 (£1=$1.8476)
Competitor 1 = € (€1=$1.2706)
Competitor 5 = € (€1=$1.2706)
Comps Dividend Yields
Acquisition Target = 4.25% (3.4% U.S. equiv)
Competitor 1 = 2.4%
Competitor 2 = 1.7%
Competitor 3 = 1.9%
Competitor 5 = 2.6%
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