CKX,Inc.MAY2007PresentationtotheSpecialCommitteeoftheBoardof DirectorsHoulihanLokeyInvestmentBankingServices1930CenturyParkWestLosAngeles, California90067310-553-8871www.hlhz.comLosAngelesNewYorkChicagoSanFranciscoWashington, D.C.MinneapolisDallasAtlantaLondonParisFrankfurtHongKong |
HoulihanLokeyTableofContentsTabExecutiveSummary..1 OverviewofFairnessAnalyses.2LicenseAgreements..AFlag Investment..BGoing-PrivateTransaction...Ci |
ExecutiveSummary |
HoulihanLokeyExecutiveSummaryTRANSACTIONOVERVIEW— GOING-PRIVATETRANSACTIONWefurtherunderstandthat theCEOoftheCompany,RobertSillerman,andtheChiefExecutiveOfficeroftheCompany’s subsidiary,19EntertainmentLimited,andadirectorandmemberoftheOfficeoftheChair,Simon Fuller(togetherwiththeirrespectiveaffiliates,andanyotherstockholderoftheCompanyacting inagroupinconnectionwiththeGoing-PrivateTransaction,collectively“Affiliated Stockholders”)maymakeanoffer(the“GoingPrivateTransaction”)toacquirethesharesofcommon stocknotheldbytheAffiliatedShareholder.WefurtherunderstandthatRobert SillermanisalsoasignificantshareholderinFlag.TheFlagTransactionand Going-PrivateTransactionarereferredtocollectivelyasthe“Transactions.”Itis ourunderstandingthattheTransactionswillbeannouncedsimultaneously.2 |
HoulihanLokeyExecutiveSummaryENGAGEMENT OVERVIEWHoulihanLokeyHowardandZukinhasbeenretainedtoassistthe SpecialCommitteeinnegotiatingtheTransactions,andtoprovideopinions,astowhether:ThecashconsiderationtobepaidbytheCompanyof$100millionandthevalueof theLicenseAgreementstobegrantedtoFlagbyEPEandMAEinexchangeforthe50percentinterest inFlagandtheconsiderationtobereceivedbytheCompany’ssubsidiariespursuanttotheLicense AgreementsintheFlagTransactionarefairtotheCompanyfromafinancialpointofview;andTheconsiderationtobereceivedbytheCompany’sstockholders(otherthanthe AffiliatedStockholders)intheGoing-PrivateTransactionisfairtothemfromafinancialpointof view.ItisimportanttonotethatallaspectsoftheTransactionsaresubjecttonegotiation. Furthermore,thefinancingfortheTransactionshavenotyetbeenfinalized.Thepurposeofthis presentationistoprovidetheSpecialCommitteewithanoverviewoftheanalysisweexpectto completewithrespecttotheTransactions,andasummaryofduediligencecompletedtodate.3 |
OverviewofFairnessAnalyses |
OverviewofFairnessAnalysesLicenseAgreementsFlagInvestmentGoing-Private Transaction |
HoulihanLokeyGoing-PrivateTransactionTRANSACTION OVERVIEWInconnectionwiththeGoing-PrivateTransaction,we understandtheAffiliatedShareholdersmayoffertheUnaffiliatedShareholdersoftheCompany considerationof$14percommonshare.Thegoing-privateofferpriceof$14per sharerepresentsa35percentand28percentpremiumovertheone-daypriorandthirty-dayprior closingsharepricesof$10.35and$10.90,respectively.Perpreliminary discussionswithcompanymanagement,fundingfortheGoing-PrivateTransactionwillconsistof approximately$800millionto$900millionofdebt(including$500millionofbankdebtand$300 millionto$400millionofsenior/mezzaninenotes)and$600millionofequity.The AffiliatedStockholderwouldreinvestapproximately$150million(ofatotalofapproximately$470 million)intotheprivatecompany.18 |
HoulihanLokeyGoing-PrivateTransactionIMPLIEDSTOCK PREMIUMANALYSIS1ImpliedStockPremiumOfferPriceper Share$14.0050.0%1-DayStockPrice-AsofMay18,2007$10.3540.0%Implied 1-DayStockPremium35.3%35.3%34.8%1-WeekStock Price$10.3930.0%28.4%Implied1-WeekStockPremium34.8%20.5%20.0%1-Month StockPrice$10.9016.2%15.6%Implied1-MonthStockPremium28.4% 10.0%3-MonthStockPrice$11.62Implied1-MonthStockPremium20.5%0.0%1Day5Day1 Month3Months6Months1Year1Basedontheaveragestockpriceovertheperiodasof May18,2007.19 |
HoulihanLokeyGoing-PrivateTransaction13E3PREMIUM PAIDANALYSIS13e3PremiumAnalysis1StockPrice PremiumMedian/MeanPremium:35.3%(2)40.0%35.0%30.0%24.7%24.2%23.7% 25.0%20.0%16.7%17.2%15.9%15.0%10.0%5.0%0.0%1TradingDay1TradingDay5TradingDay5Trading Day20TradingDay20TradingDayMedianMeanMedianMeanMedianMean1Basedonthe premiumtostockpriceon13e3transactionsfiledwiththeSECfortheperiodof1/2004—5/2007.2Impliedone-daystockpremiumasofMay18,2007.20 |
HoulihanLokeyGoing-PrivateTransactionCOMPARABLE COMPANYANDTRANSACTIONEBITDAMULTIPLES 24.0x20.0x17.4x16.0x13.9xEV/EBITDAMultiple12.9x12.0x11.0x10.8x10.3x 9.7x8.0xDiversifiedMediaContentManagementPrecedentTransactionsCompaniesAverage CompaniesAverageAverage2006/2007/20082006/2007/20081DiversifiedMediaCompanies include:CBSCorp.,WaltDisneyCo.,LionsGateEntertainmentCorp.,NewsCorp.,TimeWarnerInc., Viacom,Inc.2ContentManagementCompaniesinclude:DICEntertainmentCorp.,4Kids EntertainmentInc.,MavelEntertainmentInc.,CKx,Inc.21 |
HoulihanLokeyGoing-PrivateTransactionSUMMARYOFDUE DILIGENCECOMPLETEDTODATEWehavereviewedthe followingdocumentsprovidedbytheCompany:DraftcopyoftheLLCInterest PurchaseAgreementasofMay16,2007TheCompany’s20075-YearForecastfinancial projectionsmodelTheQ12007FinancialOverviewpresentationforBoardof DirectorsMeetingdatedMay10,2007CKxSummaryofMergerAgreementWehavehadthefollowingconversationswithmanagementandotherrelatedthird parties:TomBenson/ScottFrosch—discussedtheCompany’sfinancialprojections modelandrelevantsupportingassumptionsforeachoftheCompany’sdivisionsJasonHorowitz—discussedstructureandrationalefortheGoing-Private TransactionsSUMMARYOFREMAININGITEMSNEEDEDFinalcopyoftheLLCInterestPurchaseAgreementandsupportingGoing-Private Transactiondocumentsandexhibits22 |