Exhibit D
ANALYSIS OF STRATEGIC
ALTERNATIVES
HERCULES BOARD MEETING
DECEMBER 12-13, 2001
ANALYSIS OF STRATEGIC ALTERNATIVES
OPTION 1 - No Debt Refinancing; IMMEDIATE sale of Betz Dearborn and prompt
follow-on sales of remaining business units
OPTION 2 - Debt Refinancing; LATER sale of Betz Dearborn and remaining business
units
ASSUMPTIONS
(MILLIONS)
o EBITDA per Business Plan
---------------------------------
2002 2003
---- ----
BDD $283 $291
OTHER $316 $369
----- ---- ----
TOTAL $599 $660
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o Capital Expenditures per Business Plan
---------------------------------
2002 2003
---- ----
BDD $20 $25
OTHER $40 $50
----- ---- ----
TOTAL $60 $75
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o Betz Dearborn Sales Price - Immediate Sale (General Electric transaction)
Gross Proceeds $1,800 (6.4x 2002 EBITDA)
Net Proceeds $1,665 (5.9x 2002 EBITDA)
VALUE TO HERCULES SHAREHOLDERS
OPTION 1
Sell Betz Dearborn to GE for $1.8 Billion
and immediately sell remaining businesses
at 8.0x EBITDA $12.45 (1)
OPTION 2
Sell all businesses in 12 months
at 8.0x EBITDA $22.35 (2)
- ----------
(1) If fo11ow-on sale does not materialize, value of Hercules stock at current
trading multiple of 6.5x is $8.10 per share. If trading multiple increase
to 8.0x, value of Hercules stock increases to $12.45 per share.
(2) Excludes after tax cost of unwinding new financing estimated at $0.25 -
$0.50 per share.
SPECIALTY CHEMICAL PRIVATE SALE MULTIPLES
[The following table was depicted as a line chart in the printed materials.]
EBITDA
Multiples
----------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997 1998 1999 2000 YTD
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Private Sale Transaction Multiples 8.3x 9.9x 10.7x 8.4x 9.6x 9.5x 10.0x 11.0x 8.1x 7.6x
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SPECIALTY CHEMICAL PRIVATE SALE MULTIPLES VS. PUBLIC STOCK MULTIPLES
[The following table was depicted as a line chart in the printed materials.]
EBITDA
Multiples
----------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997 1998 1999 2000 YTD
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Private Sale Transaction Multiples 8.3x 9.9x 10.7x 8.4x 9.6x 9.5x 10.0x 11.0x 8.1x 7.6x
- ------------------------------------------------------------------------------------------------------------------------------------
Public Stock Multiples 6.4x 6.9x 6.7x 6.4x 6.6x 6.7x 6.5x 6.6x 6.4x 6.7x
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ANALYSIS OF STRATEGIC ALTERNATIVES
o Immediate sale of Betz Dearborn to General Electric is dilutive, not only
to earnings but to shareholder value as measured by Hercules stock price.
Hercules currently trades at 6.5x EBITDA versus the GE transaction at 5.9x
EBITDA, after taxes and transaction costs.
o Significant refinancing opportunities exist today.
ANALYSIS OF STRATEGIC ALTERNATIVES
Timing of sale of Betz Dearborn inopportune
o Potential for significant increase in operating income/EBITDA
> Cost takeouts
> Other operating improvements
> Strong cash flow generator for debt paydown
o Low transaction multiples
> Historic low point
> Transaction multiples barely exceed market multiples
o Perception of being a distressed seller - only distressed sellers
have been selling in this environment
ANALYSIS OF STRATEGIC ALTERNATIVES
o Major shareholders are against a sale at this time
o Costs and risks of refinancing more than outweighed by significant
potential for substantial increase in shareholder value