After reviewing the attached Panera Bread case study:
1) Make a list of the factors that you believe are important for the board of directors of Panera Bread to consider with respect to a decision regarding an offer from Silver Capital Partners
2) Based on the analyses in this presentation, make a recommendation for whether the board should accept the offer from Silver Capital Partners and explain why you come to this conclusion
3) If you were informed that Panera Bread’s management had prepared financial projections with an EBITDA in 2021 that was 19% higher than the consensus forecast, would that change your opinion? Explain why/why not.
Title Layout Panera Bread Company Buyout Case Study 5 The Private Equity Perspective 6 Panera Bread Company Background › Panera Bread Company operates more than 2,000 bakery- café locations around the United States and in Ontario, Canada › The company has both owned (about 900) and franchised (about 1,100) locations › Panera Bread was founded in 1993 and became a public company in 1991 as part of Au Bon Pain › As an analyst at Silver Capital Partner, a private equity firm, you have been asked to help evaluate a buyout transaction of Panera Bread › There have been several recent buyouts of similar companies, including Popeyes ($1.8bn) and Checkers ($525m) 7 Panera Bread Financial Summary › Panera Bread had sales of $2.8 billion in 2016 with an EBITDA of 14.1%, its average EBITDA for the past 4 years was 15.4% › You believe that the shareholders of Panera Bread would accept to sell 100% of the shares for a price of $300.00 per share › Is this a reasonable price and would this be a good investment for Silver Capital Partners? › Would this price represent a fair value for the shareholders of Panera Bread? 8 Panera Bread Stock › At the end of 2016, Panera’s stock price was $205.00 or a market capitalization of about $4.7 billion › During the first quarter of 2017, the stock price has increased and closed at $261.87 on March 27 9 $0.00 $50.00 $100.00 $150.00 $200.00 $250.00 $300.00 Panera Bread Stock Price Panera Bread Financial Overview 10 Historical Income Statement For Years Ending December 31 (in $ millions) 2013 2014 2015 2016 Total Revenues 2,385.0 2,529.2 2,681.6 2,795.4 Cost of Sales 1,837.6 1,982.4 2,135.5 2,205.4 Gross Profit 547.4 546.8 546.1 590.0 General & Administrative Expense 123.3 138.1 142.9 179.9 Other Expense 7.8 8.7 26.2 16.0 Depreciation & Amortization 106.5 124.8 135.4 154.4 Total Operating Expenses 237.7 271.6 304.5 350.2 Operating Income 309.8 275.2 241.6 239.8 Other Income / (Expense) Other Income (Expense) 4.0 3.2 (1.2) (1.4) Interest Income (Expense) (1.1) (1.8) (3.8) (8.9) Total Other Income / (Expense) 3.0 1.4 (5.0) (10.3) Earnings Before Taxes 312.7 276.6 236.6 229.5 Income Tax Expense 116.6 98.0 87.2 84.3 Net Income / (Loss) 196.2 178.6 149.3 145.2 EBITDA 416.3 400.1 377.0 394.1 Panera Bread Financial Overview 11 Historical Balance Sheet For Years Ending December 31 (in $ millions) 2013 2014 2015 2016 ASSETS Current Assets Cash & Equivalents 125.2 196.5 241.9 105.5 Accounts Receivable 33.0 36.6 38.2 53.5 Other Receivables 51.6 70.1 77.6 59.4 Investments - - - - Inventory 21.9 22.8 22.5 23.8 Prepaid Expenses 43.1 51.6 59.5 69.2 Other Current Assets 27.9 28.6 28.7 - Total Current Assets 302.7 406.2 468.3 311.4 Fixed Assets Land 2.9 2.1 1.6 5.6 Buildings & Leasehold Improvements 687.6 792.8 780.7 820.1 Equipment 392.4 478.5 531.0 618.2 Furniture & Fixtures 176.5 197.2 188.7 204.6 Vehicles - - - - Total Fixed Assets 1,259.3 1,470.6 1,502.0 1,648.5 Less: Accumulated Depreciation (589.9) (683.3) (725.8) (845.7) Net Fixed Assets 669.4 787.3 776.2 802.8 Other Assets Goodwill 123.0 120.8 121.8 122.4 Other Intangible Assets 79.8 70.9 63.9 54.8 Accumulated Amortization - - - - Intangible Assets, Net 202.8 191.7 185.7 177.2 Other Assets 6.0 5.7 10.6 10.2 Total Other Assets 208.7 197.4 196.3 187.4 TOTAL ASSETS 1,180.9 1,390.9 1,440.8 1,301.6 Panera Bread Financial Overview 12 Historical Balance Sheet For Years Ending December 31 (in $ millions) 2013 2014 2015 2016 LIABILITIES & EQUITY Current Liabilities Line of Credit - - - - Accounts Payable 17.5 19.5 19.8 22.5 Other Payables - - - - Accrued Liabilities 285.8 333.2 359.5 408.6 Notes Payable - - 17.2 17.2 Other Current Liabilities - - 2.9 - Total Current Liabilities 303.3 352.7 399.4 448.3 Long-Term Liabilities Long-Term Debt - 100.0 389.0 410.6 Capital Leases - - - - Notes Payable - - - - Other Liabilities 177.6 202.0 154.7 154.3 Total Long-Term Liabilities 177.6 302.0 543.7 564.9 Total Liabilities 481.0 654.7 943.2 1,013.2 Stockholders' Equity Common Equity 0.0 0.0 0.0 0.0