CONFIDENTIAL
PROJECT SPRINT
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Valuation Update for the Opinion Committee
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June 9, 2003
(THE BLACKSTONE GROUP LOGO OMITTED)
PROJECT SPRINT CONFIDENTIAL
VALUATION UPDATE FOR THE OPINION COMMITTEE
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SUMMARY
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Blackstone's preliminary view is that the appropriate valuation reference range
for Atalanta is between $13.35 and $14.10 per share, assuming the value of the
investment capital & other assets is $11.35 per share as of June 6, 2003.
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TOTAL EQUITY VALUE PRICE PER SHARE
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(CHART OMITTED) (CHART OMITTED)
($s IN MILLIONS) (PRICE PER SHARE)
Investments $98.3 Investments $11.35
Value of Asset $23.8 $17.3 Value of Asset $2.75 $2.00
Management Management
Business Business
Atalanta $122.1 $115.6 Atalanta $14.10 $13.35
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Note: Value of asset management business excludes value associated with
investments, investments in limited partnerships and other non-consolidated
assets / liabilities.
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(THE BLACKSTONE GROUP LOGO OMITTED) 1
PROJECT SPRINT CONFIDENTIAL
VALUATION UPDATE FOR THE OPINION COMMITTEE
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SUMMARY MULTIPLES: ASSET MANAGEMENT / BROKERAGE
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Blackstone believes that the preliminary indicative reference range for the
value of the asset management / brokerage business is $2.00 to $2.75 per share.
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IMPLIED REFERENCE RANGE AS A MULTIPLE OF
IMPLIED REFERENCE ------------------------------------------------------------------------------
METHODOLOGY RANGE/SHARE REVENUE EBITDA PRETAX INCOME NET INCOME
------------------------------------------------- ------------- ----------------- ------------------------ ---------------------
Comparable Company Analysis $1.95 - $3.05
LTM 1.3x - 2.0x 21.3x - 33.3x 47.9x - 75.0x 82.6x - 129.2x
2000 - 2002 Average(1) 1.0x - 1.6x 6.2x - 9.7x 7.5x - 11.8x 13.0x - 20.3x
Precedent Transaction Analysis 2.15 - 3.10
LTM 1.4x - 2.0x 23.5x - 33.8x 52.8x - 76.2x 91.1x - 131.4x
2000 - 2002 Average(1) 1.1x - 1.6x 6.8x - 9.8x 8.3x - 12.0x 14.3x - 20.7x
Discounted Cash Flow(2) 1.76 - 2.10
LTM 1.1x - 1.4x 19.2x - 22.9x 43.3x - 51.6x 74.6x - 89.0x
2000 - 2002 Average(1) 0.9x - 1.1x 5.6x - 6.7x 6.8x - 8.1x 11.7x - 14.0x
Third Party Sale 2.05 - 2.75
LTM 1.3x - 1.8x 22.4x - 30.0x 50.4x - 67.6x 86.9x - 116.5x
2000 - 2002 Average(1) 1.0x - 1.4x 6.5x - 8.7x 7.9x - 10.6x 13.7x - 18.3x
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REFERENCE RANGE(3) $2.00 - $2.75
LTM 1.3X - 1.8X 21.8X - 30.0X 49.2X - 67.6X 84.7X - 116.5X
2000 - 2002 AVERAGE 1.0X - 1.4X 6.3X - 8.7X 7.7X - 10.6X 13.3X - 18.3X
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(1) Excludes realized and unrealized gains / (losses) and amortization of
unearned compensation from net income in 2000 and 2001.
(2) Reference range based on weighted average of Management Case (25%) and
Blackstone Case (75%).
(3) Represents approximately the mean of four methodologies.
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(THE BLACKSTONE GROUP LOGO OMITTED) 2
PROJECT SPRINT CONFIDENTIAL
VALUATION UPDATE FOR THE OPINION COMMITTEE
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FINANCIAL PROJECTIONS FOR THIRD-PARTY ASSET MANAGEMENT BUSINESS - UPDATE
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REVISED BLACKSTONE CASE (JUNE 9, 2003)
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KEY ASSUMPTIONS
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o Market Appreciation: 7.5% combined market appreciation of AUM 2004 - 2007
(assumes approximately 12.5% market appreciation in 2003)
o Net Inflows: 2.5% increase of beginning of year AUM balance in net inflows
2004 - 2007 (assumes net inflows of $112 in first half of 2003 and no new net
inflows in Q3 and Q4 of 2003) (1)
o Fee Levels: Assumes weighted average fee remains constant throughout period
o Compensation & Benefits and General & Administrative Expenses: 5.5% increase
in 2003, 5.0% annual expense growth 2004 - 2007
o Includes financing costs associated with $2 million of working capital at 6%
interest rate
o Tax Rate: 42.0%
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DISCOUNTED CASH FLOW SUMMARY
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EQUITY VALUE PER SHARE
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EBITDA EXIT MULTIPLE
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7.0X 7.5X 8.0X 8.5X 9.0X
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10.0% $2.38 $2.51 $2.65 $2.78 $2.92
-----------------------------------
11.0% 2.29 2.42 2.55 2.68 2.81
WACC 12.0% 2.21 2.33 2.46 2.58 2.70
13.0% 2.13 2.25 2.37 2.49 2.61
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14.0% 2.05 2.17 2.28 2.40 2.51
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PREVIOUS BLACKSTONE CASE (MAY 7, 2003)
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KEY ASSUMPTIONS
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o Market Appreciation: 7.5% combined market appreciation of AUM 2004 - 2007
(assumes approximately 5.0% annualized market appreciation in 2003)
o Net Inflows: 2.5% increase of beginning of year AUM balance in net inflows
2004 - 2007 (assumes no net inflows in 2003)(1)
o Fee Levels: Assumes weighted average fee remains constant throughout period
o Compensation & Benefits and General & Administrative Expenses: 5.0% decline
in 2003, 4.5% annual expense growth 2004 - 2007
o Includes financing costs associated with $2 million of working capital at 6%
interest rate
o Tax Rate: 42.0%
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DISCOUNTED CASH FLOW SUMMARY
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EQUITY VALUE PER SHARE
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EBITDA EXIT MULTIPLE
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7.0X 7.5X 8.0X 8.5X 9.0X
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10.0% $2.23 $2.36 $2.49 $2.61 $2.74
-----------------------------------
11.0% 2.15 2.27 2.39 2.51 2.64
WACC 12.0% 2.07 2.18 2.30 2.42 2.54
13.0% 1.99 2.10 2.22 2.33 2.44
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14.0% 1.92 2.03 2.14 2.25 2.35
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(1) Net inflow assumption based on Blackstone estimate given that decline in
weighted average fees will likely be driven by growth in Wrap assets under
management. Management believes that net inflows will not increase during
the projection period.
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PROJECT SPRINT CONFIDENTIAL
VALUATION UPDATE FOR THE OPINION COMMITTEE
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THIRD-PARTY SALE VALUE
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The value of Atalanta in a sale to a third- party strategic buyer suggests a
preliminary reference range of $2.00 to $2.75 per share assuming an acquiror
could achieve EBITDA margins of 15% to 20% on the incremental revenue from the
Company. Blackstone believes that an acquiror could achieve incremental margins
as high as 30% to 40% but may not be willing to pay the Company's shareholders
for the full amount of operational synergies achieved.
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($ in millions, except per share data)
5/31/03 Ending AUM $2,395.0
Weighted Average Fee 0.57%
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Annual Fee Revenue $13.6
Commission and Other Revenue 1.0
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$14.6
Comparable EBITDA Margin 17.5%
Implied 2003 EBITDA $2.6
EBITDA Valuation Multiple 8.0x
Value of Asset Management Business $20.5
VALUE PER SHARE $2.36
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VALUE OF ASSET MANAGEMENT BUSINESS: SENSITIVITY ANALYSIS -
EQUITY VALUE PER SHARE
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EBITDA MARGIN
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12.5% 15.0% 17.5% 20.0% 22.5%
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WEIGHTED 0.55% $1.63 $1.96 $2.28 $2.61 $2.94
AVERAGE MGMT. -------------------------------
FEE 0.56% 1.66 1.99 2.32 2.65 2.99
0.57% 1.69 2.02 2.36 2.70 3.04
0.58% 1.71 2.06 2.40 2.74 3.09
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0.59% 1.74 2.09 2.44 2.79 3.14
EBITDA MARGIN
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12.5% 15.0% 17.5% 20.0% 22.5%
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COMPARABLE 7.0x $1.48 $1.77 $2.07 $2.36 $2.66
EBITDA MULTIPLE -------------------------------
7.5x 1.58 1.90 2.21 2.53 2.85
8.0x 1.69 2.02 2.36 2.70 3.04
8.5x 1.79 2.15 2.51 2.87 3.23
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9.0x 1.90 2.28 2.66 3.04 3.42
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(THE BLACKSTONE GROUP LOGO OMITTED) 4
PROJECT SPRINT CONFIDENTIAL
VALUATION UPDATE FOR THE OPINION COMMITTEE
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PREMIUM ANALYSIS
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The offer price of $13.95 per share represents a 36.1% premium to the closing
stock price as of December 5, 2002 (the date prior to Mr. Sosnoff's oral
proposal) and 36.4% premium to the average closing stock price of the Company
over the three-year period ending December 5, 2002.
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PRIOR TO DECEMBER 6, 2002
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%
PRICE PREMIUM
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Merger Consideration $13.95 NA
1 Day(1) $10.25 36.1%
6-Month Average(1) $9.59 45.5%
1-Year Average(1) $10.27 35.8%
3-Year Average(1) $10.23 36.4%
1-Year High(1) $12.35 13.0%
1-Year Low(1) $6.75 106.7%
%
PRICE INCREASE
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S&P Index (June 6, 2003) $987.76 NA
S&P Index (May 5, 2003) $926.55 6.6%
S&P Index (December 31, 2002) $879.82 12.3%
S&P Index (December 5, 2002) $906.55 9.0%
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(1) Represents closing stock price data prior to Mr. Sosnoff's initial
announcement of the proposed tender offer on December 6, 2002 at a price of
$12.50 per share.
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