1
Exhibit B
1. SUMMARY OF SALE PROCESS
The sale process for the Company included the contact by FBR of 100 companies
which operate in eight industry groups. These companies were solicited because
FBR and the Company believed that they represented the most likely potential
buyers for the Company. Of the 100 companies that were solicited as potential
buyers, 32 requested information memorandums. After discussions with FBR's
representatives and an evaluation period of approximately four weeks, FBR
received six preliminary offers to purchase the Company or parts of the Company.
These offers were subject to customary conditions, including completion of
satisfactory due diligence. After approximately three weeks of due diligence by
the bidders, consisting of management interviews and a review of other company
material, the Company received two final non-binding offers. The first
non-binding offer specified a price range for the whole company of $13.00 to
$14.00 per share, payable entirely in cash. The second non-binding offer
specified a price of $14.50 per share for the whole company, payable entirely in
cash. During the additional due diligence and negotiation period, one bidder
withdrew from the sale process. Consequently, the Company opted to enter an
exclusive negotiating agreement with the remaining buyer at a price of $13.50
per share, payable entirely in cash to holders of the Company's common stock,
other than certain members of management, who will be required to exchange a
maximum of approximately 444,444 Company Shares, or a minimum of approximately
296,296 Company Shares, for class B common stock of NewCo.
2
2. COMPARABLE COMPANY ANALYSIS
RENTAL COMPARABLES
- ------------------
AARON RENTS, INC. - Aaron Rents purveys home and office furniture in more than
35 US states through about 450 company-owned and franchised stores. One of the
US's top furniture rental and sales companies, Aaron Rents operates in the
rent-to-rent (Aaron Rents Furniture), rent-to-own (Aaron's Rental Purchase), and
retail (Aaron's Plus) segments of the furniture industry. Its merchandise
includes home and office accessories, consumer electronics, household
appliances, and business equipment. Aaron Rents' MacTavish Furniture Industries
makes a significant amount of the firm's furniture.
CORT BUSINESS SERVICES CORPORATION - CORT Business Services (through CORT
Furniture Rental) is the #1 provider of rental furnishings in the US. Although
corporate customers account for about 80% of its sales, the company also serves
small businesses, apartments, conventions and trade shows, and individuals.
Specializing in "rent-to-rent" services (rather than "rent-to-own"), it operates
about 120 showrooms and more than 80 used-furniture sales centers in 34 states
and the District of Columbia. A Citigroup unit owns a large stake of CORT
Business Services.
RENT-A-CENTER, INC. - Rent-A-Center (formerly Renters Choice) became the #1
operator of rent-to-own stores in the US through a long string of acquisitions.
Nationwide, the company owns and operates about 2,100 stores and franchises an
additional 330 through subsidiary ColorTyme. The stores rent home electronics,
computers, furniture, accessories, and appliances. Customers take ownership of
the products if they rent for a predetermined period (usually 18 months or
more), but rentals average about four months; less than 25% of Rent-A-Center's
customers actually buy its merchandise.
RAINBOW RENTALS, INC. - Rainbow Rentals operates more than 90 rent-to-own stores
in Connecticut, Massachusetts, Michigan, New York, Ohio, Pennsylvania, Rhode
Island, South Carolina, and Tennessee. Customers -- generally with poor or
limited credit histories -- can rent home electronics, furniture, appliances,
and computers from Rainbow, and they have an option to buy the merchandise,
usually after making rental payments for 12 to 24 months. Rainbow lures
customers with such nuggets as free maintenance, "no money down," and fewer
payments for purchases of previously rented items. Cofounder Wayland Russell
owns a significant portion of the company.
CORPORATE HOUSING COMPARABLES
- -----------------------------
BRIDGESTREET ACCOMMODATIONS, INC. - BridgeStreet provides furnished housing to
business travelers and other professionals who need a place to stay for a week
or several months. It leases apartments, condominiums, townhouses, and houses
from property managers on a short-term basis and then rents them to customers.
BridgeStreet leases about 4,100 units, primarily in the US, Canada, and the UK.
Accommodations generally include furniture, washers and dryers, on-site fitness
centers, and reserved parking; amenities such as fax machines and computers can
be added upon request. BridgeStreet is expanding by acquiring regional
short-term housing providers.
3
2. COMPARABLE COMPANY ANALYSIS
1/12/00 Equity Enterprise Revenue EBITDA EBIT NI
Name Ticker Stock Price Value Value LTM LTM LTM LTM
- -----------------------------------------------------------------------------------------------------------------------------------
Aaron Rents RNT $15.44 $307,330 $ 375,034 $ 418,182 $153,617 $ 44,015 $25,100
BridgeStreet Accommodations BDS $ 1.63 $ 13,276 $ 23,105 96,903 6,032 $ 2,972 $ 1,350
Cort Business Services CBZ 16.81 220,227 312,817 291,138 102,543 53,916 27,723
Rent-A-Center RCII 19.13 652,449 1,420,591 1,396,820 476,781 179,028 52,146
Rainbow Rentals RBOW 7.94 47,030 55,065 75,766 32,444 8,945 4,653
Enterprise Enterprise Enterprise Equity
Value to Value to Value to Value to
Name Ticker LTM Revenue LTM EBITDA LTM EBIT LTM NI
- -------------------------------------------------------------------------------------------------------
Aaron Rents RNT 0.9x 2.4x 8.5x 12.2x
BridgeStreet Accommodations BDS 0.2x 3.8x 7.8x 9.8x
Cort Business Services CBZ 1.1x 3.1x 5.8x 7.9x
Rent-A-Center RCII 1.0x 3.0x 7.9x 12.5x
Rainbow Rentals RBOW 0.7x 1.7x 6.2x 10.1x
- -------------------------------------------------------------------------------------------------------
Mean 0.8x 2.8x 7.2x 10.5x
Median 0.9x 3.0x 7.8x 10.1x
- -------------------------------------------------------------------------------------------------------
IMPLIED VALUATION
LTM Revenue LTM EBITDA LTM EBIT LTM NI
Mean Median Mean Median Mean Median Mean Median
-------------------- ------------------- ------------------- ----------------
Globe $159,283 $159,283 $24,281 $24,281 $11,306 $11,306 $3,803 $ 3,803
Multiple 0.8x 0.9x 2.8x 3.0x 7.2x 7.8x 10.5x 10.1x
-------------------- ------------------- ------------------- ----------------
Implied Enterprise Value 125,945 142,848 67,983 72,346 81,828 87,896
Total Indebtedness at 11/30/99 69,441 69,441 69,441 69,441 69,441 69,441
Total Cash at 11/30/99 2,390 2,390 2,390 2,390 2,390 2,390
-------------------- ------------------- ------------------- ----------------
Implied Equity Value $ 58,894 $ 75,797 $ 932 $ 5,295 $14,777 $20,845 $40,039 $38,438
==================== =================== =================== ================
Implied Price Per Share $ 12.26 $ 15.78 $ 0.19 $ 1.10 $ 3.08 $ 4.34 $ 8.34 $ 8.00
4
3. COMPARABLE PURCHASE TRANSACTIONS
As a comparison to the Offer, we analyzed a group of 23. The parameters to
determine inclusion in the group were: US deals announced and completed in
calendar year 1999, deal value between $50 - $500 million and 100% of selling
company acquired. In addition, the deals were screened by the acquired company's
industry. The seller was required to be a business services company, or a hotel
operator; however, due to the unique nature of Globe's business the analysis
does not include directly comparable companies.
The screen produced 23 comparable transactions based upon the description above.
We then analyzed each acquired company's last twelve months (LTM) revenue,
EBITDA, and EBIT against its enterprise value (EV), as well as analyzed each
acquired company's LTM net income against its equity value. The EV/LTM revenue
multiples had a mean of 1.38x and fell in a range from a high of 3.35x to a low
of 0.40x. The EV/LTM EBITDA multiples ranged from 3.96x to 24.91x with a mean of
11.17x. The EV/LTM EBIT multiples fell in a range of 7.15x to 21.78x with a mean
of 13.51x. Only 12 of the original 23 deals had meaningful LTM Net Income. The
equity value to LTM net income multiples ranged from 10.53x to 36.01x with a
mean of 21.11x.
A summary of the results can be seen in the table below:
- ------------------------------------------------------------------------------------------------------------------
ENTERPRISE VALUE TO ENTERPRISE VALUE TO ENTERPRISE VALUE EQUITY VALUE TO LTM
LTM REVENUE LTM EBITDA TO LTM EBIT NET INCOME
- ------------------------------------------------------------------------------------------------------------------
Mean 1.38x 11.17x 13.51x 21.11x
Adjusted Mean 1.33x 10.44x 13.33x 20.68x
Median 1.25x 10.24x 11.64x 20.80x
Count 23 20 13 12
Minimum 0.40x 3.96x 7.15x 10.53x
Maximum 3.35x 24.91x 21.78x 36.01x
- ------------------------------------------------------------------------------------------------------------------
REPRESENTATIVE TRANSACTIONS
- ---------------------------
THINK NEW IDEAS, INC. - Answerthink Consulting Group (ACG) acquired Think New
Ideas Inc (TNI) in a stock swap transaction valued at $215.3 million. ACG
offered 0.7 common shares per TNI share. Based on ACG's closing stock price of
$27.5 on June 23, the last full trading day prior to the announcement, each TNI
share was valued at $19.25. The transaction was accounted for as a pooling of
interests. Think New Ideas helps companies market themselves and their products,
making special use of the Internet and other interactive technology.
MERRILL CORPORATION - DLJ Merchant Banking Partners II, a unit of Donaldson
Lufkin & Jenrette Inc, acquired all the outstanding common stock of Merrill Corp
via a tender offer for $22 in cash per share, or a total value of $384.7
million. Merrill is a leading paper and electronic document management firm
providing printing, typesetting, document reproduction, and distribution.
LAI WORLDWIDE, INC. - TMP Worldwide Inc (TMP) acquired LAI Worldwide Inc (LAI)
in a stock swap transaction valued at $74.2 million. TMP offered 0.132 common
shares per LAI share. Based on TMP's closing stock price of $69.875 on March 10,
the last full trading day prior to the announcement, each LAI share was valued
at $9.23. LAI Worldwide provides employment consulting services.
SUPERTEL HOSPITALITY, INC. - Humphrey Hospitality Inc (HHI) acquired Supertel
Hospitality Inc (SHI) in a stock swap transaction valued at $52.8 million. HHI
offered 1.3 common shares per SHI share. Based on HHI's closing stock price of
$8.375 on June 10, the last full trading day prior to the announcement, each SHI
share was valued at $10.888. Upon completion of the transaction, SHI was to own
57% of the new company.
EXECUSTAY CORPORATION - Marriott International acquired Execustay Corporation
for $140.2 million on March 29, 1999. Execustay is a provider of interim housing
for corporate clients and professionals. The Company provides fully furnished
apartments for stays of 30 days or more. After the acquisition Execustay will
operate as Execustay by Marriott.
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4. ANALYSIS OF PREMIUMS PAID
In order to determine if the proposed premium paid for Globe Business Services
was within an appropriate range, we conducted a premium paid analysis for
acquisitions comparable to the proposed acquisition of Globe Business Services.
The analysis reflects Globe's micro-cap status and the all cash nature of the
transaction. We used a Securities Data Corporation screen to determine the
proper comparable transactions for the analysis.
The screen included all acquisitions in the United States announced and
completed during calendar year 1999 and included deals between $50 - $150
million. We further screened to require an all cash deal where 100% of the
seller's stock was purchased. We set no requirement on the industry or company
type of either the buyer or the seller. Our screen resulted in 46 deals meeting
all of the required parameters.
For the 46 deals our screen produced we determined the premium paid, for the
time period of four weeks, one week and one day, before the deal was announced.
The mean premium paid four weeks prior to announcement was 55.17%, for one week
prior it was 46.75%, and for one day prior it was only 35.59%. The adjusted mean
in all cases was lower than the non-adjusted mean. The adjusted means were
51.57%, 44.00% and 34.86% for four weeks, one week and one day period prior to
announcement, respectively. The median was below the adjusted mean in all three
observations, for four weeks prior it was 43.76%, for one week prior it was
35.76% and for the one day period prior it was 31.39%.
For all 46 transactions across all three time periods, the highest premium paid
was 287.10%, and the lowest premium paid was -18.58%. Both the overall high and
the overall low premium paid occurred four weeks prior to the announcement date.
One week prior to announcement, the high premium was 216.98%, and the low was
- -2.40%. One day prior to the announcement the high was down to 108.70% and the
low was -5.13%. All these results have been summarized in the box below:
- -------------------------------------------------------------------------------------------------------------------
Premium paid 4 weeks Premium paid 1 weeks Premium paid 1 day
prior to announce date prior to announce date prior to announce date
- -------------------------------------------------------------------------------------------------------------------
Mean 55.17% 46.75% 35.59%
Adjusted Mean 51.57% 44.00% 34.86%
Median 43.76% 35.76% 31.39%
Count 46 46 46
Minimum -18.58% -2.40% -5.13%
Maximum 287.10% 216.98% 108.70%
- -------------------------------------------------------------------------------------------------------------------
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5. DISCOUNTED CASH FLOW ANALYSIS
The assumptions behind the discounted cash flow analysis included: management
projections (one aggressive case and one down-side case); terminal value based
on an average range of 7.0x - 9.0x earnings before interest and tax; discount
rate range of 15.0% - 25.0%; and a tax rate of 40.0%.
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5. DISCOUNTED CASH FLOW
Management High Case
- ------------------------------------------------------------------------------------
Terminal Value Based on EBIT
EBIT, excluding nonrecurring
Less taxes
Proforma net income
Plus: depreciation on furniture
Plus: depreciation on PP&E
Plus: amortization of goodwill
Capx - furniture
Book value of furniture sold
Capx - PP&E
Plus/less changes in working capital(1)
Net Free Cash Flow
Terminal value based on EBIT:
Total Flows
EBIT multiple 8.5x
Discount rate 20%
Tax rate 40%
Share count 4,803
Enterprise Value for Globe
----------------------------------------------------------
Discount Rate
15.0% 17.5% 20.0% 22.5% 25.0%
----------------------------------------------------------
7.0x $50,075 $39,020 $29,240 $20,563 $12,845
EBIT 7.5x $56,482 $44,774 $34,419 $25,235 $17,068
Multiple 8.0x $62,890 $50,528 $39,598 $29,907 $21,291
8.5x $69,297 $56,282 $44,777 $34,579 $25,514
9.0x $75,704 $62,036 $49,956 $39,250 $29,737
FYE 2/28
----------------------------------------------------------
2001 2002 2003 2004 2005
----------------------------------------------------------
EBIT, excluding nonrecurring $16,116 $17,507 $19,954 $22,720 $25,775
Less taxes (6,446) (7,003) (7,981) (9,088) (10,310)
----------------------------------------------------------
Proforma net income 9,670 10,504 11,972 13,632 15,465
Plus: depreciation on furniture 7,350 8,712 9,252 9,826 10,435
Plus: depreciation on PP&E 2,700 2,825 2,888 2,953 3,019
Plus: amortization of goodwill 2,624 2,660 2,630 2,600 2,580
Capx - furniture (23,000) (25,000) (27,000) (29,160) (31,493)
Book value of furniture sold 13,618 14,707 15,884 17,154 18,527
Capx - PP&E (3,250) (3,250) (3,250) (3,250) (3,250)
Plus/less changes in working capital (1) (2,306) (3,076) (2,771) (3,016) (3,153)
----------------------------------------------------------
Net Free Cash Flow 7,405 8,082 9,606 10,739 12,130
Terminal value based on EBIT: 219,087
----------------------------------------------------------
Total Flows 7,405 8,082 9,606 10,739 231,217
Enterprise value $115,443
Debt 71,964
Cash 1,299
----------
Equity value $ 44,777
----------
Price per share $ 9.32
Share Price for Globe
------------------------------------------------------------------
Discount Rate
$0 15.0% 17.5% 20.0% 22.5% 25.0%
------------------------------------------------------------------
7.0x $10.43 $ 8.12 $ 6.09 $4.28 $2.67
EBIT 7.5x $11.76 $ 9.32 $ 7.17 $5.25 $3.55
Multiple 8.0x $13.09 $10.52 $ 8.24 $6.23 $4.43
8.5x $14.43 $11.72 $ 9.32 $7.20 $5.31
9.0x $15.76 $12.92 $10.40 $8.17 $6.19
(1) Assets include: receivables, prepaid, and other assets. Liabilities
include: prepaids, accruals, and other.
8
5. DISCOUNTED CASH FLOW
Management Low Case
- ------------------------------------------------------------------------------------------------
Terminal Value Based on EBIT
EBIT, excluding nonrecurring
Less taxes
Proforma net income
Plus: depreciation on furniture
Plus: depreciation on PP&E
Plus: amortization of goodwill
Capx - furniture
Book value of furniture sold
Capx - PP&E
Plus/less changes in working capital (1)
Net Free Cash Flow
Terminal value based on EBIT:
Total Flows
EBIT multiple 8.5x
Discount rate 20%
Tax rate 40%
Share count 4,803
Enterprise Value for Globe
--------------------------------------------------------------------
Discount Rate
15.0% 17.5% 20.0% 22.5% 25.0%
--------------------------------------------------------------------
7.0x $12,640 $5,333 ($1,146) ($6,905) ($12,039)
EBIT 7.5x $16,614 $8,901 $2,066 ($4,008) ($9,420)
Multiple 8.0x $20,587 $12,469 $5,278 ($1,110) ($6,801)
8.5x $24,561 $16,038 $8,490 $1,787 ($4,182)
9.0x $28,534 $19,606 $11,702 $4,684 ($1,564)
FYE 2/28
-------------------------------------------------------------
2001 2002 2003 2004 2005
-------------------------------------------------------------
EBIT, excluding nonrecurring $13,112 $13,143 $14,247 $15,102 $15,984
Less taxes (5,245) (5,257) (5,699) (6,041) (6,394)
Proforma net income 7,867 7,886 8,548 9,061 9,591
Plus: depreciation on furniture 7,350 8,287 8,723 9,264 9,838
Plus: depreciation on PP&E 2,700 2,825 2,888 2,953 3,019
Plus: amortization of goodwill 2,624 2,660 2,630 2,600 2,580
Capx - furniture (21,000) (22,050) (23,153) (24,310) (25,526)
Book value of furniture sold 12,750 13,388 14,057 14,760 15,498
Capx - PP&E (3,250) (3,250) (3,250) (3,250) (3,250)
Plus/less changes in working capital (1) (1,439) (1,948) (2,107) (2,129) (2,216)
-------------------------------------------------------------
Net Free Cash Flow 7,602 7,797 8,336 8,949 9,534
Terminal value based on EBIT: 135,866
Total Flows 7,602 7,797 8,336 8,949 145,400
-------------------------------------------------------------
EBIT multiple Enterprise value $79,322
Discount rate Debt 72,131
Tax rate Cash 1,299
----------
Share count Equity value $8,490
----------
Price per share $1.77
----------
Share Price for Globe
----------------------------------------------------------------------
Discount Rate
15.0% 17.5% 20.0% 22.5% 25.0%
----------------------------------------------------------------------
7.0x $2.63 $1.11 ($0.24) ($1.44) ($2.51)
EBIT 7.5x $3.46 $1.85 $0.43 ($0.83) ($1.96)
Multiple 8.0x $4.29 $2.60 $1.10 ($0.23) ($1.42)
8.5x $5.11 $3.34 $1.77 $0.37 ($0.87)
9.0x $5.94 $4.08 $2.44 $0.98 ($0.33)
(1) Assets include: receivables, prepaid, and other include: prepaids,
accruals, and other.
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6. SUMMARY RANGE OF VALUES
Comparable Company Analysis Comparable Purchase Transactions
- --------------------------------------------------------------- ----------------------------------------------------------------
Implied Share Price for Globe Implied Share Price for Globe
Methodology Low Mean Median High Low Mean Median High
- --------------------------------------------------------------- ------------------------------------
LTM Revenue Multiple 0.24x 0.79x 0.90x 1.07x LTM Revenue Multiple 0.40x 1.38x 1.25x 3.35x
Implied Share Price ($6.05) $12.26 $15.78 $21.67 Implied Share Price ($0.69) $31.77 $27.36 $97.20
LTM EBITDA Multiple 1.70x 2.80x 2.98x 3.83x LTM EBITDA Multiple 3.96x 11.17x 10.24x 24.91x
Implied Share Price ($5.38) $0.19 $1.10 $5.40 Implied Share Price $6.05 $42.53 $37.80 $111.97
LTM EBIT Multiple 5.80x 7.24x 7.77x 8.52x LTM EBIT Multiple 7.15x 13.51x 11.64x 21.78x
Implied Share Price ($0.30) $3.08 $4.34 $6.10 Implied Share Price $2.88 $17.84 $13.45 $37.30
LTM NI Multiple 7.94x 10.53x 10.11x 12.51x LTM NI Multiple 10.53x 21.11x 20.80x 36.01x
Implied Share Price $6.29 $8.34 $8.00 $9.91 Implied Share Price $8.34 $16.72 $16.47 $28.51
Analysis of Premium Paid
- ---------------------------------------------------------------
4 Weeks 1 Week 1 Day
------------------------------------
Mean 55.17% 46.75% 35.59%
Implied Share Price $20.27 $17.61 $16.10
Median 43.76% 35.76% 31.39%
Implied Share Price $18.78 $16.29 $15.60
Discounted Cash Flow
------------------------------------------------------------------------------------------------------------
Management High Case Management Low Case
Share Price for Globe Share Price for Globe
------------------------------------------ -------------------------------------------
Discount Rate Discount Rate
15.0% 17.5% 20.0% 22.5% 25.0% 15.0% 17.5% 20.0% 22.5% 25.0%
------------------------------------------ -------------------------------------------
7.0x $10.43 $8.12 $6.09 $4.28 $2.67 7.0x $2.63 $1.11 ($0.24) ($1.44) ($2.51)
EBIT 7.5x $11.76 $9.32 $7.17 $5.25 $3.55 EBIT 7.5x $3.46 $1.85 $0.43 ($0.83) ($1.96)
Multiple 8.0x $13.09 $10.52 $8.24 $6.23 $4.43 Multiple 8.0x $4.29 $2.60 $1.10 ($0.23) ($1.42)
8.5x $14.43 $11.72 $9.32 $7.20 $5.31 8.5x $5.11 $3.34 $1.77 $0.37 ($0.87)
9.0x $15.76 $12.92 $10.40 $8.17 $6.19 9.0x $5.94 $4.08 $2.44 $0.98 ($0.33)