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Mini-Case #3: Valuing WIRK1 It is February 2012. We are a PE firm, and are considering buying WIRK company, which is a food products distributor to stores in Germany. WIRK owns several warehouses. Its suppliers are leading food and beverages manufacturers. WIRK has been growing successfully due to its good service and generous customer policy. Like other companies in Germany, it suffered effects of the severe economic recession following 2007-2008 financial crisis. But it has recovered swiftly since then. We want to do the valuation for ourselves and for the seller, who is not very inclined to sell but has said he might do so for 300MM. There are no other companies similar to WIRK listed in the stock market, so it is not easy to make a comparison. The companies most like WIRK are hypermarkets. Summary data is given in the table. We are also looking at the data for the German stock market, represented by DAX index. 1. What would be the valuation using EV/EBITDA with a 25% discount, knowing that EBITDA for 2011 was 102MM, and debt for 2011 was 323MM? 2. What would be the valuation using P/E with a 25% discount, knowing that Nl for 2011 was 37MM? Data for Mini-Case #3 Data as of February, 2012 DAX 523 696 449 -22% 15 Market Data Share Price High price Low price Price change 12 months EV / EBITDA P/E Div. Yield M/B ROE Wal Mart Carrefour 62 17.9 62 31 48 17% -32% 7.1 8.2 13 12.7 2.4% 6.0% 2.9 2.3 24% 4% Tesco 320 420 312 -21% 7.6 9.7 4.6% 2.0 17% Ahold 10.2 10.4 7.8 3% 5.9 11.8 2.9% 2.0 15% Myer 2.13 3.93 1.75 -42% 5.0 7.6 5.2% 1.6 19% 10.87 3.6% na na Mini-Case #3: Valuing WIRK1 It is February 2012. We are a PE firm, and are considering buying WIRK company, which is a food products distributor to stores in Germany. WIRK owns several warehouses. Its suppliers are leading food and beverages manufacturers. WIRK has been growing successfully due to its good service and generous customer policy. Like other companies in Germany, it suffered effects of the severe economic recession following 2007-2008 financial crisis. But it has recovered swiftly since then. We want to do the valuation for ourselves and for the seller, who is not very inclined to sell but has said he might do so for 300MM. There are no other companies similar to WIRK listed in the stock market, so it is not easy to make a comparison. The companies most like WIRK are hypermarkets. Summary data is given in the table. We are also looking at the data for the German stock market, represented by DAX index. 1. What would be the valuation using EV/EBITDA with a 25% discount, knowing that EBITDA for 2011 was 102MM, and debt for 2011 was 323MM? 2. What would be the valuation using P/E with a 25% discount, knowing that Nl for 2011 was 37MM? Data for Mini-Case #3 Data as of February, 2012 DAX 523 696 449 -22% 15 Market Data Share Price High price Low price Price change 12 months EV / EBITDA P/E Div. Yield M/B ROE Wal Mart Carrefour 62 17.9 62 31 48 17% -32% 7.1 8.2 13 12.7 2.4% 6.0% 2.9 2.3 24% 4% Tesco 320 420 312 -21% 7.6 9.7 4.6% 2.0 17% Ahold 10.2 10.4 7.8 3% 5.9 11.8 2.9% 2.0 15% Myer 2.13 3.93 1.75 -42% 5.0 7.6 5.2% 1.6 19% 10.87 3.6% na na