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EXHIBIT (c)(6)
PIERRE FOODS, INC.
FAIRNESS OPINION SUMMARY
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SUMMARY OF THE
EXCHANGE OFFER
- - Exchange of all shares outstanding, except those owned by PF Management
- - Exchange is 1 common share plus attached preferred stock purchase right
for right to receive $1.21 per share in cash.
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PIERRE FOODS STOCK
PRICE
- - January 2, 2001 to March 22, 2001
- High: $1.2188
- Low: $0.875
- - Close on March 22, 2001: $1.00
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GRANT THORNTON
APPROACHES TO VALUE
- - Market Approach
- Guideline Company Method
- Guideline Transaction Method
- - Income Approach
- Discounted Cash Flow Method
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GUIDELINE COMPANY
METHOD
- - SIC Code Search
- 2011 Meat Packing Plants
- 2013 Sausages & Other Prepared Meats
- 2050 Bakery Products
- 2051 Bread & Other Bakery Products, excl. Cookies and Crackers
- - Key Word Search
- Food Processing
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GUIDELINE COMPANY
SEARCH RESULTS
- - Total Companies Reviewed
- 28
- - Total Selected
- 4
- Bridgford Foods Corp.
- Earthgrains Company
- Hormel Foods Corp.
- Rymer Foods, Inc.
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GUIDELINE COMPANY
METHOD - MULTIPLES
- - Price Multiple Used
- Invested Capital to Revenue
- - Range of Multiples of Guideline Companies:
- High: 0.8
- Low: 0.1
- Median: 0.8
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GUIDELINE COMPANY
METHOD - CONCLUSION
- - IC to Revenue Multiple Used
- 0.6
- - Indicated Invested Capital Value
- $126.7 million
- - Less debt of $118.3 million equals Equity Value
- $8.4 million
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GUIDELINE TRANSACTION
METHOD
- - SIC Code Search
- 2011 Meat Packing Plants
- 2013 Sausages & Other Prepared Meats
- 2050 Bakery Products
- 2051 Bread & Other Bakery Products, excl. Cookies and Crackers
- - Total Transactions
- 125
- - Transactions Selected
- 15 (see Schedule 9)
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GUIDELINE TRANSACTION
METHOD - MULTIPLES
- - Price Multiple Used
- Total Invested Capital to Revenue
- - Range of Multiples of Transactions
- High: 1.5x
- Low: .25x
- Median: .88x
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GUIDELINE TRANSACTION
METHOD - CONCLUSION
- - TIC to Revenue Multiple Used
- 0.7x
- - Indicated Invested Capital Value
- $148.6 million
- - Less debt of $118.3 million and Change of Control Cost of $11.5 million
equals Equity Value on a Control Interest Basis of
- $18.76 million
- - Less Lack of Control Discount to Approximate Minority Interest Value
- $12.2 million
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DISCOUNTED CASH FLOW
- - 4 Scenarios
- - Scenario 1 Assumptions - Based on Company Budget and Projections
- Sales Growth
- 5.3% in 2002
- 8.5% per annum 2003 - 2006
- 4% per annum beyond 2006
- Operating Margin
- 6.3% in 2002 rising to
- 7.7% in 2006
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DCF, continued
- - Scenario 2
- Sales Growth
- 15% per annum through 2006
- 4% per annum thereafter
- Operating Margin
- 5.6% to 5.8% per annum
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DCF, continued
- - Scenario 3
- Sales Growth
- 15% per annum through 2006
- 4% per annum thereafter
- Operating Margin
- 6.6% in 2002 rising to
- 8.9% in 2006
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DCF, continued
- - Scenario 4
- Sales Growth
- 15% per annum through 2006
- 4% per annum thereafter
- Operating Margin
- 8.9% per annum
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DISCOUNTED CASH FLOW -
CONCLUSION
- - Invested Capital Value Range
- High: $61.2 million
- Low: -$16.8 million
- - Less Debt of $118.3 million
- - Indicated Range of Equity Values
- High: $0.00
- Low: $0.00
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SUMMARY OF INDICATED
EQUITY VALUES
- - Guideline Company Method
- $8.4 million
- - Guideline Transaction Method
- $12.19 million
- - Discounted Cash Flow Method
- $0.00
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SUMMARY, continued
- - Weighted 1/3 to Each Method
- $6.85 million
- - Per Share Based On 5.78 million shares
- $1.18
- - Range of Value Conclusions, Per Share
- Low: $1.18 (weighted)
- High: $1.45 (guideline company)
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- - Question: Is the Exchange Offer fair from a financial perspective?
- - Answer:
- Yes
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