I think the market assumes that SMHC buys all of the Freedom assets. It is a big bite and they will sell off pieces to reduce the ultimate purchase price. I think it creates a monster of a company, covering almost every market segment with a great brand. I will give this management team a year from the acquisition date, and I suspect I will be happy.
Purchasing @ 5.1x upcoming 4/30 EBITDA provides a 35% control premium (EV = ~$800M)
Selling or Re-IPO'ing at 6.75x in 3 yrs returns 33% IRR and in 4 yrs 28% IRR.
Conservative deal assumptions:
- Used the research analyst forecast
- Pegged growth @ 2.0% beyond CY15
- Normalized EBIT margin of 20.7%
- 2.9x debt / EBITDA
- All senior debt @ 7%
- Minimum cash requirement of $30M
- CAPEX, Working Capital and D&A as a % of revenue pegged to LTM on a go-forward basis