Pershing Square Activist Presentation Deck
D
A Revised Proposal for Creating Value
at McDonald's
Based on an approximate
$48 sum-of-the-parts
value for McDonald's
Brand McDonald's operating metrics and business characteristics (100% royalty-based revenues, low cost
of capital and high earnings stability) are much closer to high branded intellectual property businesses
such as PepsiCo, Coca-Cola or Choice Hotels or a typical Real Estate C-Corporation than they are to a
typical QSR. We believe Brand McDonald's could be worth 12.5x13.5x EV/2006E EBITDA.
2005E Operating Metrics:
EBITDA Margins
EBITDA - CapEx Margins
Long-term EPS Growth
(2)
Business Characteristics:
Maint. Capital Requirements
Earnings Stability
Average Cost of Capital
Fixed Asset Value
Trading Multiples
Adjusted Enterprise Value (³) /
CY 2006E EBITDA
CY 2006E EBITDA - CapEx
Revised Proposal: Allows Investors to
Value on a Sum-of-the-Parts Basis
Brand
McDonald's
60%
50%
9%
Low
High
Low
High
13.0x
15.5x
Typical
Real Estate
C-Corp
-70% - 80%
-65% -75%
ΝΑ
Low
High
Low
High
~13x - 16x
~17x - 20x
Choice
Hotels
66%
61%
16%
Low
High
Low
Low
19.1x
20.3x
PEPSICO
23%
18%
11%
Low
High
Low
Low
12.2x
15.4x
Coca-Cola
31%
27%
9%
Low
High
Low
Low
12.0x
13.6x
Final Revised Proposal.ppt
Typical
Mature QSR
(1)
~15% - 20%
-7.5% -12.5%
-10% -12%
Medium
Medium
Medium
Low
~8.5x - 9.5x
~12x - 15x
Stock prices as of 1/13/2006. Projections based on Wall Street research estimates. Analysis assumes a 7x EV/EBITDA valuation multiple for McOpCo.
(1) Typical mature QSR business characteristics based on YUM! Brands and Wendy's.
(2) Brand McDonald's long-term EPS growth rate is based on the Company's current dividend payout ratio and assumes excess free cash flow after dividends is used for share buybacks.
(3) Adjusted for unconsolidated assets.
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