Pershing Square Activist Presentation Deck
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A Revised Proposal for Creating Value
at McDonald's
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Lack of transparency had created an undervaluation by the market
► McDonald's currently trades at roughly 8.9x EV/2006E EBITDA), despite over 85% of its
pre-tax unlevered cash flows being generated by Brand McDonald's (2)
(2)
(3)
Final Revised Proposal.ppt
Objective 3: Unlock Shareholder Value at
McDonald's (cont'd)
We believe Brand McDonald's, valued independently, is worth 12.5x - 13.5x EV/'06E EBITDA
High branded intellectual property/franchise businesses such as Choice Hotels, PepsiCo and
Coca-Cola trade in the range of 12x - 19x EV/'06E EBITDA
■ Real Estate C-Corporations and REITs typically trade in the range of 13x-16x EV/'06E EBITDA
Only when Pershing's ideas regarding transparency became public did Wall Street analysts
begin deriving sum-of-the parts valuations in the mid $40s per share
Recent UBS sum of the parts valuation: $46 per share (3)
■ Recent Goldman Sachs sum of the parts valuation: $44 per share (4)
Based on McDonald's recent stock price of $34 per share.
Pre-tax unlevered cash flows calculated as FY'05E EBITDA- Maintenance CapEx. We note that FY'05E EBITDA- Maintenance CapEx contribution is based on Pershing's
estimates. CapEx is net of proceeds from restaurant closings. The Company does not provide EBITDA and Maintenance CapEx allocation by segment.
UBS research report dated 11/10/2005.
Goldman Sachs research report dated 11/18/2005. McDonald's sum-of-the-parts valuation of $44 is before estimated frictional costs.
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