NEWPORT PARTNERS: CASE PRESENTATION

SLIDES
 RE
Option: Purchase Rustica Option: Purchase Wildflower CO
Industries (88 mil USD) MM
(140 mil USD)
+Industry leader; strong management 
+Strong brand recognition as premier EN
team label in a stable industry; growth
DA


-Expensive deal which requires heavy potential in international market and

debt (100 mil USD) DIY segment
-65% market share in saturated market: -Vulnerable to boom-and-bust cycle of TIO
little room for further growth residential and commercial
-Low barriers to entry: uncertain if construction sector N
maintaining market share is -Growth over-reliant on growth of big
sustainable box retailers
-Complex company with multiple 
divisions: will require more attention
from Newport
Recommendation: Acquire 40% stake in Yellowstone Cattle


Bank (30 mil USD)

+Manageable deal size. No need to run up debt at a time when leverage is hard to
come by
+Relatively uncomplicated company (cf Rustica). Not expected to demand inordinate
amount of time or resources from Newport (i.e. “operation-lite” acquisition)
+Clear exit strategy – presence of numerous strategic buyers when Newport is ready
to sell YCB
+Value-for-money compared to recent transactions of comparable public companies
+Ample cost-saving opportunities through integration of backend and switch services
(estimated 1.5 million USD annual savings from 2003 on)
+Projected 20% growth for the next four years, on the back of growing credit card
usage
 Several risks to be managed (to be discussed later)
 Yellowstone Cattle Bank: Overview
CO
Provider of payment processing services to mid-market banks
Ranked 44th largest payment processing company by volume, 24th by number of merchants serviced
MP
Strong growth of merchant base since inception in 1995 (35% annually compounded) AN
Once acquired, YCB expected to grow by at least 20% for the next four years
Growth driven by overall expansion of industry i.e. rapid growth of credit/debit card usage (see chart Y
below) AN
Recommended Newport Strategy:
 - Acquire and oversee smooth implementation of cost-saving measures and capture of ALY

expanding credit/debit card sectors
- Look to sell off in 3-4 years to a larger payment processor looking to move down-market
SIS
Growth in Credit/Debit Card Usage as
 Strong Profit Growth Projected


Share of Payment Methods

Year 1995 ( Total : $3 . 8
bill )

CAGR (1995-2005)
Checks 0%
Cash 1.1%
Credit 10.2%
Debit 35.6%
Other 16.9%
 RIS
 POSSIBLE RISKS  WAYS TO MANAGE K
Newport can only acquire a minority YCB mgt and shareholders are open to
MA
40% stake in YCB at the moment negotiating a shareholders NA
(from a passive investor).
Implications on how much control it
agreement with final acquirer. We
will have to negotiate this carefully.
GE
can exercise over YCB mgt Newport can potentially increase its ME
 ownership in YCB through later NT
 acquisitions
 
Current CEO may not want to cede Have to exercise care in selecting the
any control and seems reluctant to right partner to deal with him. CEO
address succession issues. has faultless track record so best to
 retain him.
 
Can expect intense competition from 
many bidders given attractive price. Have to be prepared to pay more than
 $30 million
