Page 10 of 26 – SEC Filing Multiple 7.0x 8.0x 9.0x Fiscal 2018 EBITDA ($MM) $90 $90 $90 Enterprise Value ($MM) $630 $720 $810 Estimated net debt ($MM) $10 $10 $10 Implied equity value ($MM) $620 $710 $800 Share price7 $21.85 $24.72 $27.60
Given our high degree of confidence in the industry, in Blue
Bird’s competitive position and in the management team led by Phil Horlock, and the very low interest rate environment, we
are not prepared to accept a material discount to our estimate of near term value. Furthermore, we believe that the Company will
continue to compound value and generate free cash flow beyond 2018.
We believe that the timing of the Proposal was highly opportunistic
as it was submitted by American Securities in advance of the Company’s fiscal third quarter earnings release, scheduled for
August 4th. We believe that third quarter earnings will benefit from the seasonal increase in bus deliveries8
and deliver substantial free cash flow. Allison Transmission Holdings, Inc. (NYSE: ALSN), a key supplier of transmissions to the
school bus industry, stated on its earnings conference call on July 28, 2016 that, “the school bus end market was up tremendously
in the second quarter, up 29% year-over-year”9.
American Securities characterized Blue Bird as a company with
a leading, defensible market position, operating in an industry with stable underlying demand and blessed with a proven management
team committed to investing in and building the business. As we have demonstrated, we believe that the Proposal understates the
attractiveness of the Company given the growth in the school bus industry, the success of the Company in increasing market share
and its highly cash generative business model. We urge the Special Committee to ignore the Proposal and allow the management team
to drive increasing value for the benefit of all of the Company’s stockholders.
7
Based on between 28.4 million and 29.0 million fully diluted shares outstanding, which assumes conversion of the Preferred Stock
and cashless exercise of all warrants.
8
2016 Fiscal Second Quarter Earnings Call Presentation dated May 23, 2016, page 16.
9
Allison Transmission Holdings, Inc. Q2 2016 Earnings Call transcript, page 10. Please note that Allison’s second quarter
corresponds to Blue Bird’s fiscal third quarter.
Page 3 of 4
Follow Blue Bird Corp (NASDAQ:BLBD)
Follow Blue Bird Corp (NASDAQ:BLBD)
We may use your email to send marketing emails about our services. Click here to read our privacy policy.
| Multiple | 7.0x | 8.0x | 9.0x |
| Fiscal 2018 EBITDA ($MM) | $90 | $90 | $90 |
| Enterprise Value ($MM) | $630 | $720 | $810 |
| Estimated net debt ($MM) | $10 | $10 | $10 |
| Implied equity value ($MM) | $620 | $710 | $800 |
| Share price7 | $21.85 | $24.72 | $27.60 |
Given our high degree of confidence in the industry, in Blue
Bird’s competitive position and in the management team led by Phil Horlock, and the very low interest rate environment, we
are not prepared to accept a material discount to our estimate of near term value. Furthermore, we believe that the Company will
continue to compound value and generate free cash flow beyond 2018.
We believe that the timing of the Proposal was highly opportunistic
as it was submitted by American Securities in advance of the Company’s fiscal third quarter earnings release, scheduled for
August 4th. We believe that third quarter earnings will benefit from the seasonal increase in bus deliveries8
and deliver substantial free cash flow. Allison Transmission Holdings, Inc. (NYSE: ALSN), a key supplier of transmissions to the
school bus industry, stated on its earnings conference call on July 28, 2016 that, “the school bus end market was up tremendously
in the second quarter, up 29% year-over-year”9.
American Securities characterized Blue Bird as a company with
a leading, defensible market position, operating in an industry with stable underlying demand and blessed with a proven management
team committed to investing in and building the business. As we have demonstrated, we believe that the Proposal understates the
attractiveness of the Company given the growth in the school bus industry, the success of the Company in increasing market share
and its highly cash generative business model. We urge the Special Committee to ignore the Proposal and allow the management team
to drive increasing value for the benefit of all of the Company’s stockholders.
7
Based on between 28.4 million and 29.0 million fully diluted shares outstanding, which assumes conversion of the Preferred Stock
and cashless exercise of all warrants.
8
2016 Fiscal Second Quarter Earnings Call Presentation dated May 23, 2016, page 16.
9
Allison Transmission Holdings, Inc. Q2 2016 Earnings Call transcript, page 10. Please note that Allison’s second quarter
corresponds to Blue Bird’s fiscal third quarter.
| Page 3 of 4 |
