Delponte Eugenia – Corporate finance Jupiter VS Pluto Assignment

Questions in italics & Answers in bold:

1. What is the value of Pluto (Equity Value and Enterprise Value) "as is" (Scenario 1)? 129,8 Mln€

What is the value of Pluto "per share"? 10,82€

What is the difference between this value and the current market price? 10,82€ – 9€ = 1,82€

DISCOUNT RATE (=COST OF EQUITY) 15,0%

PRESENT VALUE 122,8

EXCESS CASH 7,0
EQUITY VALUE 129,8
ENTERPRISE VALUE 129,8
VALUE PER SHARE 10,82

DIFFERENCE €/Share 1,82 = 2%

PRESENT VALUE (TV) 63,4 = 49% of Equity/Enterprise Value

2. What is the value (Equity Value and Enterprise Value) of Pluto if it is taken over by the Jupiter group
through the Leveraged Buy-Out (Scenario 2)?

Equity value is 69,6MLN€ and Enterprise value is 161,6MLN€

PRESENT VALUE 65,6

EXCESS CASH 7,0
TRANSACTION COST (3,00)
EQUITY VALUE 69,6
NEW DEBT 92,0
ENTERPRISE VALUE 161,6

3. What is the Terminal Value in Scenario 1 and in Scenario 2? 127,6 MLN€ in Scenario 1 and 127,7MLN€
in Scenario2

What is the Present Value of the Terminal Value (at 31st December 2021) in both Scenarios? 63,4MLN€
in Scenario 1 and 47,2MLN€ in Scenario 2

What percentage of, respectively, Equity Value and Enterprise Value does (the present value of) the
Terminal Value represent in each of the two Scenarios? 49% of Equity and Enterprise Value in Scenario
1 and 68% of Equity and 29% of Enterprise Value in Scenario 2

4. Assuming Pluto is bought out by "New Pluto" at € 11 per share:4.1 What premium (compared to
market price) will the shareholders in Pluto receive? (Please calculate both the absolute premium andthe
percentage premium).

11€-9€= 2€ *12MLN€= 24MLN€

%: 24/(9*12)= 22%

4.2 What would be the Equity investment of the Jupiter group? (In order to answer this question please
prepare a Table with the Sources and Applications of funds in the Buy-Out) 32,4MLN€

TABLE OF SOURCES AND APPLICATIONS OF FUNDS

PRICE PER SHARE 11,0

SOURCES APPLICATIONS

EQUITY
- JUPITER GROUP 32,4 PURCHASE OF PLUTO'S SHARES 132,0
- MANAGEMENT 3,6
36 REPAYMENT OF OLD DEBT 0,0

DEBT TRANSACTION COST 3,0

- SENIOR 72,0
- MEZZANINE 20,0
92

EXCESS CASH 7,0

TOTAL SOURCES 135 TOTAL APPLICATIONS 135

Proportion
MANAGEMENT 2,4 = 20,0%
JUPITER GROUP 9,6 = 80,0%

4.3 What percentage of the Equity in "New Pluto" will the management hold? 20%

What percentage will the Jupiter group hold? 80%

4.4 Please calculate the return (Internal Rate of Return) of the management team on its investment and
the return of the Jupiter group on its investment.

Management: 59,2% - Jupiter 34,7%

IRR JUPITER GROUP 2021 2022 2023 2024 2025 2026

-32,4 0,0 0,0 0,0 14,1 124,603
IRR 34,7%

IRR Management 2021 2022 2023 2024 2025 2026

-3,6 0,0 0,0 0,0 3,5 31,2
IRR 59,2%