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Should AGI Acquire Mercury Athletic Footwear?

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by

William Campbell

on 30 January 2014

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Transcript of Should AGI Acquire Mercury Athletic Footwear?

Is Mercury an Appropriate Target for AGI?
AGI
$470.3 Million Sales Revenue in 2006
42% Revenue - Athletic Footwear
58% Revenue - Casual Footwear
Among the best profit margins in the Industry
Prosperous, Active, and Fashion-Conscious Brand Image.


Mercury Athletic Footwear
$431.1 Million Sales Revenue in 2006
Appeals to Youth Market (15-25).
Active lifestyle and Extreme Sport Brand Image
Faltering Women's Casual Footwear Segment
AGI Inc. Should Acquire Mercury Athletic Footwear.
Revenues will Roughly Double
Relieve Pressure from Manufacturers to Boost Capacity Utilization
Profitable Advantage in Merging Men's Footwear Segments.

Industry Overview
Mature
Highly Competitive
Low Growth
Stable Margins
Valuation
Questions?
WACC: 10.13%
Terminal Multiple 5.7x
Terminal Growth Rate: 3.3%
After Tax Cost of Debt: 3.6%
Cost of Equity: 11.76%
Tangible Assets - Total Liabilities = Net Assets
LBO Valuation Approach
EBITDA Multiple: 6x based on comparable and 6 turns.
Market Approach
Asset Approach
Projections
2006 EBITDA: $51,804

EBITDA Multiple: 6x

Enterprise Value: $310,827

DCF Approach
Final Valuation
EV: $328,955
Approach
Weight
LBO
DCF
Market
Asset
20%
40%
40%
0%

$310,827
$328,955
$307,373
$127,163
Net Assets: $127,136
Final Value: $316,697
EBITDA: 5.9 x $51,805 = EV: $307,373
Full transcript