J.P.Morgan Investment Banking Pitch Book
KEY TRANSACTION CONSIDERATIONS
Cost of capital and leverage will drive buyers' ability to pay
Strategic buyer 2006E break-even EPS analysis
MGM Mirage
Harrah's
Las Vegas Sands
Wynn Resorts
MGM Mirage (100% cash)
Harrah's (100% cash)
Las Vegas Sands (100% cash)
Wynn Resorts (50% cash)²
Cost of capital Potential synergies¹
7.25%
$45mm
JPMorgan
6.25%
8.00%
15.0% IRR
No synergies
$78.50
$90.50
$71.50
$89.00
$40mm
$35mm
$30mm
Full synergies
$100.50
$113.00
$87.00
$96.00
¹ Does not include any tax synergies related to Kerzner's U.S. NOLS
2 100% cash to the seller; based on an IRR hurdle rate; 50% pro forma debt to total
capitalization, 15% IRR hurdle, 3.00% perpetuity
Financial buyer analysis
■ 70% pro forma leverage on capital structure
■ $2.6bn of new debt
9.0% interest rate on new debt
■ Existing net debt of $557mm refinanced
■ $100mm of total transaction costs, including cost of new debt
and $37mm of bond tender costs
■ 3/31/06 entry, 12/31/10 exit
Perpetuity
growth rate
2.75%
3.00%
3.25%
20.0%
$82.65
85.34
88.27
Cost of capital
22.5%
$79.86
82.30
84.95
Factors other than attractive capital markets and
accretion/dilution will also affect buyers' willingness to pay
25.0%
$77.38
79.60
82.01
KERZNER INTERNATIONAL 11View entire presentation