CONFIDENTIAL
Exhibit (c)(3)
PRESENTATION TO
LIBERTY FINANCIAL COMPANIES, INC.
BOARD OF DIRECTORS
JUNE 4, 2001
CONFIDENTIAL
1
DISCUSSION OUTLINE
- - Asset Management Segment Transaction
- - Public Shareholder Transaction
ASSET MANAGEMENT
SEGMENT TRANSACTION
CONFIDENTIAL
2
RECENT ASSET MANAGEMENT SEGMENT OPERATING PERFORMANCE
- - $7.9 billion reduction to AUM in Q4 2000 and Q1 2001 from market action
- - Resulting in Q1 earnings 30% below management plan
- - Greater than $2.0 billion increase in AUM since April 1, 2001
2001P Q1 2001 REVISED
($ in millions) 2000A(1) AT 9/30/00 Q1 2001A ANNUALIZED 2001P(2)
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Revenues $383.9 $460.8 $105.6 $422.4 NA
Operating Expenses(3) (261.3) (297.3) (76.6) (306.4) NA
EBITDA 79.7 122.1 17.0 68.0 $80.0 -$90.0
AUM $51.8BN $60.9BN $48.9 BN NA NA
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(1) Includes Wanger for 3 months.
(2) Revised plan reflects Q1 results and current asset levels.
(3) Excludes amortization of deferred distribution costs and depreciation
expense.
Source: LFC Management
CONFIDENTIAL
3
ASSET MANAGEMENT SEGMENT TRANSACTION
- - FleetBoston is proposing to acquire the Asset Management Segment for
$900 million in cash, subject to certain adjustments
- - Adjusted for the assumption of liabilities totaling $218 million,
FleetBoston's proposal equates to approximately $1.1 billion
- - The adjusted purchase price of approximately $1.1 billion implies
multiples of:
LTM EBITDA 12.5x
LTM Revenue 2.6x
3/31/2001 AUM 2.3%
Note: Multiples based on financial data provided by LFC management.
CONFIDENTIAL
4
SUMMARY OF ASSET MANAGEMENT PROPOSAL
- - Adjusted for the assumption of the following liabilities, FleetBoston's
$900 million proposal equates to approximately $1.1 billion
($ in millions)
- --------------------------------------------------------------------------------------- ---------
Cash bid from FleetBoston $900
ASSUMED LIABILITIES:
NPV of Wanger Earn-out(1) 91
NPV of Progress Earn-out(2) 11
12b-1 Debt 108
External Debt 8
---------
Adjusted Purchase Price $1,118
- --------------------------------------------------------------------------------------- ---------
(1) Assumes maximum earn-out potential of $170MM discounted at 18%.
(2) Assumes maximum earn-out potential of $16MM discounted at 13%.
Source: LFC management.
CONFIDENTIAL
5
SUMMARY FINANCIAL ANALYSIS - ASSET MANAGEMENT SEGMENT
OVERALL VALUATION ANALYSIS IMPLIES AN ENTERPRISE REFERENCE RANGE OF
APPROXIMATELY $950 MILLION TO $1.25 BILLION
($ in millions)
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Comparable Company Analysis
Without Control Premium $900 - $1,100
With Control Premium 1,100 - 1,300
Comparable Acquisition Analysis 900 - 1,200
Discounted Cash Flow Analysis 1,033 - 1,280
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PRELIMINARY ENTERPRISE REFERENCE RANGE $950 - $1,250
- -------------------------------------------------------------------------------------------------------------------------
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FLEETBOSTON PROPOSAL $1,118
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CONFIDENTIAL
6
COMPARABLE PUBLIC COMPANIES ANALYSIS METHODOLOGY
- - Analyzed Enterprise Value to AUM, Revenues and EBITDA for companies with
similar business to the Asset Management segment
- - Applied relevant multiples to historical and projected LFC data
(provided by LFC Management) to estimate unaffected price range for the
Asset Management segment
- - Added representative control premium
CONFIDENTIAL
7
COMPARABLE PUBLIC COMPANIES ANALYSIS
COMPARABLE PUBLIC COMPANIES ANALYSIS IMPLIES AN ENTERPRISE REFERENCE RANGE OF
APPROXIMATELY $1.1 BILLION TO $1.3 BILLION
COMPANY IMPLIED ENTERPRISE
($ in millions) DATA(1) MULTIPLE RANGE REFERENCE RANGE
- ---------------------------------------------------------------------------------------------------------------------------------
LTM EBITDA $89 10.0x - 12.5x $894 - $1,118
Q1 2001 Annualized EBITDA 68 10.0 - 13.0 680 - 884
2001P EBITDA(2) 85 10.0 - 12.0 850 - 1,020
LTM Revenue 427 3.1 - 3.5 1,323 - 1,494
3/31/2001 AUM 48,939 2.0% - 2.5% 979 - 1,223
- ---------------------------------------------------------------------------------------------------------------------------------
IMPLIED ENTERPRISE REFERENCE RANGE $900 - $1,100
- ---------------------------------------------------------------------------------------------------------------------------------
IMPLIED ENTERPRISE REFERENCE RANGE WITH CONTROL PREMIUM 15% $1,035 - $1,265
25% 1,125 - 1,375
35% 1,215 - 1,485
- ---------------------------------------------------------------------------------------------------------------------------------
ENTERPRISE REFERENCE RANGE WITH CONTROL PREMIUM $1,100 - $1,300
- ---------------------------------------------------------------------------------------------------------------------------------
(1) Company data provided by LFC management.
(2) 2001P EBITDA based on midpoint of management's projected range of $80 - $90
million.
CONFIDENTIAL
8
COMPARABLE PUBLIC COMPANIES
Market data as of 5/29/2001
ENTERPRISE VALUE TO
--------------------------------------------------------------------------------------
Q1 2001
LTM LTM ANNUALIZED 2001P
3/31/2001 AUM REVENUE EBITDA EBITDA EBITDA
- --------------------------------------------------------------------------------------------------------------------------
Affiliated Managers 1.99% 3.1x 9.8x 14.8x 10.9x
Eaton Vance 5.10 5.6 13.4 12.9 13.3
Federated Investors 2.52 5.4 15.9 12.8 13.4
Franklin Resources 5.15 4.8 14.0 7.0 10.4
John Nuveen 2.80 4.9 9.1 8.8 10.0
T. Rowe Price 3.15 4.0 12.1 12.3 14.5
Waddell & Reed 8.39 5.3 11.0 11.9 13.8
- --------------------------------------------------------------------------------------------------------------------------
High 8.39% 5.6x 15.9 14.8x 14.5x
Mean 4.16 4.7 12.2 11.5 12.3
Median 3.15 4.9 12.1 12.3 13.3
Low 1.99 3.1 9.1 7.0 10.0
- --------------------------------------------------------------------------------------------------------------------------
Note: LTM data ending 3/31/01, except for Eaton Vance, which is as of 1/31/01.
Source: FactSet Research Systems.
CONFIDENTIAL
9
COMPARABLE ACQUISITIONS ANALYSIS METHODOLOGY
- - Analyzed acquisitions of businesses similar to Asset Management segment
- - Reviewed aggregate transaction value and implied multiples of selected
financial data
- - Applied relevant multiples to segment's historical and projected data
(provided by LFC) to estimate an implied enterprise reference range for
the Asset Management segment
CONFIDENTIAL
10
COMPARABLE ACQUISITIONS ANALYSIS
COMPARABLE ACQUISITION ANALYSIS IMPLIES AN ENTERPRISE REFERENCE RANGE OF
APPROXIMATELY $900 MILLION TO $1.2 BILLION
($ in millions) COMPANY DATA(1) MULTIPLE RANGE IMPLIED ENTERPRISE REFERENCE RANGE
- -----------------------------------------------------------------------------------------------------------------------------------
LTM EBITDA $89 9.0x - 13.5x $805 - $1,208
Q1 2001 Annualized EBITDA 68 9.0 - 13.5 612 - 918
2001P EBITDA(2) 85 9.0 - 13.5 765 - 1,148
LTM Revenue 427 2.5 - 3.9 1,067 - 1,665
3/31/2001 AUM 48,939 1.8% - 3.2% 881 - 1,566
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IMPLIED ENTERPRISE REFERENCE RANGE $900 - $1,200
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
(1) Company data provided by LFC management.
(2) 2001P EBITDA based on midpoint of management's projected range of $80 - $90
million.
CONFIDENTIAL
11
COMPARABLE ACQUISITIONS ANALYSIS
TRANSACTION VALUE TO:
TRANSACTION ------------------------------
ACQUIROR TARGET DATE VALUE ($MM) AUM REVENUES EBITDA
- --------------------------------------------------------------------------------------------------------------------------------
Robeco Group N.V. Harbor Capital 03/01 $490 2.9% NA NA
ABN Amro Alleghany Asset Management 10/00 825 1.8 4.7x 14.9x
Alliance Capital Mgmt. Sanford Bernstein 06/00 3,500 4.0 NA 10.5
Old Mutual United Asset Management 06/00 2,225 1.1 2.5 7.4
CDC Asset Management Nvest Companies 06/00 2,184 1.6 3.3 12.1
Liberty Financial Wanger 06/00 371 4.8 6.8 12.4
Unicredito Italiano Pioneer Group 05/00 1,314 5.5 6.1 19.1
Affiliated Managers Frontier Capital 10/99 100 3.5 5.1 9.5
UBS Global Asset Management 09/99 625 4.5 NA NA
ReliaStar Pilgrim Capital 07/99 258 3.6 5.0 10.1
AMVESCAP LGT Asset Mgmt 01/98 1,300 2.4 3.9 14.8
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High 5.5% 6.8x 19.1x
Mean 3.2 4.7 12.5
Median 3.5 4.8 12.3
Low 1.1 2.5 7.4
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(1) Assumes PV of maximum earn-out potential of $170MM discounted at 18%.
CONFIDENTIAL
12
DISCOUNTED CASH FLOW ANALYSIS METHODOLOGY
- - Forecasted Asset Management segment financial results for a five-year
period
- - Discounted to present value the cash flow available for distribution
and estimated terminal value in final year
- - Estimated terminal value based on exit multiples of 9.0x - 11.0x of
final year's projected EBITDA
- - Applied discount rate range of 13.0% to 15.0%
CONFIDENTIAL
13
DISCOUNTED CASH FLOW SUMMARY
TERMINAL MULTIPLE
9.0X 10.0X 11.0X
----------------------------------------------- ---------------------------------------------------
13.0% $324 $324 $324 Value of Interim Cash Flows
781 868 955 Terminal Value
$1,106 $1,193 $1,280 Total
---------- ---------- -------------
13.0X 14.0X 15.1X IMPLIED MULTIPLE TO MID-POINT OF MANAGEMENT'S
2001 PLAN EBITDA RANGE
DISCOUNT RATE 14.0% $317 $317 $317 Value of Interim Cash Flows
751 835 918 Terminal Value
---------- ---------- -------------
$1,068 $1,152 $1,235 Total
12.6X 13.6X 14.5X IMPLIED MULTIPLE TO MID-POINT OF MANAGEMENT'S
2001 PLAN EBITDA RANGE
15.0% $311 $311 $311 Value of Interim Cash Flows
722 802 883 Terminal Value
---------- ---------- -------------
$1,033 $1,113 $1,193 Total
12.1X 13.1X 14.0X IMPLIED MULTIPLE TO MID-POINT OF MANAGEMENT'S
2001 PLAN EBITDA RANGE
CONFIDENTIAL
14
ASSET MANAGEMENT SEGMENT TRANSACTION
OTHER MAJOR FINANCIAL TERMS:
- - 338 (h) (10) Election
- - Assumption of all material liabilities associated with the business
- Includes Severance Plan for segment's employees
- Excludes Retention Plan for segment's employees
- Excludes restricted stock and stock option liabilities
- - Transition Services Agreement with Sun Life to be assumed by FleetBoston
- - Break-up fee of 5% (approximately $45 million)
CONFIDENTIAL
15
CSFB'S OPINION
THE CONSIDERATION TO BE RECEIVED IS FAIR, AS OF THE DATE HEREOF, FROM A
FINANCIAL POINT OF VIEW, TO LIBERTY FINANCIAL COMPANIES
CSFB'S OPINIONS ARE QUALIFIED IN THEIR ENTIRETY BY THE SIGNED, WRITTEN
OPINION LETTER DELIVERED TO THE BOARD OF DIRECTORS
PUBLIC SHAREHOLDER TRANSACTION
CONFIDENTIAL
16
PUBLIC SHAREHOLDER TRANSACTION
[PUBLIC SHAREHOLDER TRANSACTION CHART]
CONFIDENTIAL
17
PUBLIC SHAREHOLDER TRANSACTION
- - LMIC to purchase all shares of LFC not already owned by LMIC
- Net proceeds per share on a fully diluted basis is $32.25
- Public shareholders will receive $33.44
- - Price, on a per outstanding share basis, is equal to:
Actual verses Estimated
Estimate Proceeds +/- After-tax Differences = Final Proceeds
Estimated FleetBoston Proceeds
- - Estimated taxes on Asset Management sale
+ Sun Life after-tax proceeds
- - Other net adjustments (after-tax)
o Stock option cost
o Transaction costs
o Net corporate assets
o Other tax adjustments
CONFIDENTIAL
20
IMPLIED PER SHARE IMPACT OF TRANSACTIONS TO MINORITY
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($ IN MILLIONS, EXCEPT PER SHARE DATA) ASSET MANAGEMENT ANNUITIES
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Cash Price from Bidder $ 900 $1,702
After-Tax Retention Payments (53) -
Tax Payable on Gain (141) (215)
----------------- -----------------
After-Tax Proceeds $ 706 $1,487
After-Tax Proceeds $2,193
Holding Company Adjustments:
Corporate Debt (650)
After-Tax Cost of Options (20)
After-Tax Transaction Costs (15)
Estimated Net Corporate Assets 68
-------------
Total Gross Proceeds Available to Shareholders 1,576
Eliminate Asset Management Segment Estimated Taxes 141
Decrease Asset Management Segment Purchase Price
by Benefit from Step-up in Tax Basis (79)
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Total Net Proceeds $1,638
Shares Outstanding (MM) 49.0
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Per Share Proceeds to Public $33.44
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Source: LFC Management.
CONFIDENTIAL
21
ESTIMATED NET CORPORATE ASSETS
($ in millions)
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Cash $79
Tax Receivable from Asset Management Entities -
(Settled at Closing) 60
LFC Corporate (Severance, retention, etc. after-tax) (25)
Taxes Payable (Excluding transaction taxes) (17)
Interest Payable (21)
Other, Net (8)
----------------
Net Corporate Assets $68
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SOURCE: LFC MANAGEMENT.
CONFIDENTIAL
22
CALCULATION OF ADDITIONAL BENEFIT TO PUBLIC MINORITY
($ in millions)
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Cash Price from Bidder $900
Inside Basis 546
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Tax Payable on Gain at 40% Tax Rate 141
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Benefit from Step-up in Tax Basis
Estimated Tax Deduction $354
Estimated Annual Tax Deduction over 15 years 24
Tax Effected Amount at 40% Tax Rate 9
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Present Value of Tax Benefit at 10% Discount Rate 79
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CONFIDENTIAL
19
TREATMENT OF PUBLIC SENIOR INDEBTEDNESS
- - General statement in the Fleet transaction announcement that
bondholders will be treated fairly
CONFIDENTIAL
18
PUBLIC SHAREHOLDER TRANSACTION
OTHER MAJOR PROVISION:
- Conditioned on closing of both Asset Management and Annuities Segment
transactions
CONFIDENTIAL
23
CSFB'S OPINION
THE CONSIDERATION TO BE RECEIVED BY THE PUBLIC HOLDERS OF LFC COMMON STOCK OTHER
THAN LIBERTY MUTUAL IS FAIR, AS OF THE DATE HEREOF, FROM A FINANCIAL POINT OF
VIEW, TO SUCH SHAREHOLDERS
CSFB'S OPINIONS ARE QUALIFIED IN THEIR ENTIRETY BY THE SIGNED, WRITTEN OPINION
LETTER DELIVERED TO THE BOARD OF DIRECTORS