MERGER VALUATION

Sim ple EPS Math

Merger Valuation
Current
PNR Share Price
PNR Shares O/S
PNR Market Cap
PNR Ow nership of New Co
TYC Ow nership of New Co

3/27/12

$35.00
102

$36.00
102

$37.00
102

$38.00
102

$39.00
102

$40.26
102

$41.00
102

$42.00
102

3,563
47.5%
52.5%

3,665
47.5%
52.5%

3,767
47.5%
52.5%

3,868
47.5%
52.5%

3,970
47.5%
52.5%

4,098
47.5%
52.5%

4,174
47.5%
52.5%

4,276
47.5%
52.5%

New Co Valuation
New Co Equity Valuation
Plus: PNR Net Debt
Plus: TFC Net Debt
Plus: TFC Minority Interest

7,501
1,360
275
94

7,715
1,360
275
94

7,930
1,360
275
94

8,144
1,360
275
94

8,358
1,360
275
94

8,628
1,360
275
94

8,787
1,360
275
94

9,001
1,360
275
94

New Co Enterprise Value (TEV)

9,230

9,444

9,659

9,873

10,087

10,357

10,516

10,730

Statistic
TEV / 2012E EBITDA
TEV / 2013E EBITDA
TEV / 2015E EBITDA

1,105
1,264
1,700

8.4x
7.3x
5.4x

8.5x
7.5x
5.6x

8.7x
7.6x
5.7x

8.9x
7.8x
5.8x

9.1x
8.0x
5.9x

9.4x
8.2x
6.1x

9.5x
8.3x
6.2x

9.7x
8.5x
6.3x

TEV / 2012E Revenues

7,731

1.2x

1.2x

1.2x

1.3x

1.3x

1.3x

1.4x

1.4x

Net Debt / 2012E EBITDA

Net Debt / 2013E EBITDA
Net Debt / 2015E EBITDA

1,105
1,264
1,700

1.5x
1.3x
1.0x

Current Share Price

($m m , except per share data)
PF EBIT (pre-Synergies) (3)
Interest

$39.00
2013

2014

2015

1,068
(82)

1,235
(82)

1,365
(82)

986
(256)

1,153
(300)

1,283
(334)

730
214

853
205

950
195

EPS (pre-Synergies)

$3.41

$4.16

$4.87

Cost Synergies
Tax-Effected (1)
Tax-Effected Synergies ($/Share)

50
37
$0.17

150
111
$0.54

200
148
$0.76

EPS (post-Synergies)

$3.58

$4.70

$5.63

FCF (2)
Dividends (1/3 of FCF)
Buybacks (2/3 of FCF)
Shares Bought Back
Share Repurchase Price

600
200
400
9
$45.00

768
256
512
10
$50.00

855
285
570
9
$60.00

Value Returned to Shareholders

Dividends ($/Share)
% of Current Share Price
% of Payout
Total Returned to Shareholders
% of Current Share Price
Cum ulative Returned
% of Current Share Price

$0.93
2%
27%
$2.80
7%
$2.80
7%

$1.25
3%
30%
$3.74
10%
$6.55
17%

$1.46
4%
30%
$4.39
11%
$10.93
28%

Valuation
PE Multiple (excludes Synergies)
PE Multiple (includes Synergies)

11.4x
10.9x

9.4x
8.3x

8.0x
6.9x

8.0x
7.7x

7.0x
6.3x

6.4x
5.7x

EBT
Taxes

(1)

Net Income
Shares O/S

TFC Valuation
New Co Equity Value Attributable to:
PNR Shareholders
TYC Shareholders

3,563
3,938

3,665
4,051

3,767
4,163

3,868
4,276

3,970
4,388

4,098
4,530

4,174
4,613

4,276
4,726

TFC Net Debt

TFC Minority Interest
Implied TEV of TFC

275
94
4,307

275
94
4,420

275
94
4,532

275
94
4,645

275
94
4,757

275
94
4,899

275
94
4,982

275
94
5,095

TFC Valuation
2012 TFC EBITDA (excludes synergies)
Implied TEV / EBITDA (excludes synergies)
2012 TFC EBITDA (includes synergies) (1)
Implied TEV / EBITDA (includes synergies) (1)

515
8.4x
555
7.8x

515
8.6x
555
8.0x

515
8.8x
555
8.2x

515
9.0x
555
8.4x

515
9.2x
555
8.6x

515
9.5x
555
8.8x

515
9.7x
555
9.0x

515
9.9x
555
9.2x

TEV / EBITDA (excludes Synergies)

TEV / EBITDA (includes Synergies)
EBITDA (excludes Synergies)
EBITDA (includes Synergies)

1,264
1,314

1,442
1,592

1,581
1,781

Anticipated Synergies (Pre-tax)

Operating/G&A Cost Synergies
Day One Cost Avoidance Synergies
Day One Tax Synergies (2)

160
40
50

160
40
50

160
40
50

160
40
50

160
40
50

160
40
50

160
40
50

160
40
50

Market Cap
Net Debt
Minority Interest

8,358
1,635
94

8,358
1,635
94

8,358
1,635
94

250
3.2%

250
3.2%

250
3.2%

250
3.2%

250
3.2%

250
3.2%

250
3.2%

250
3.2%

10,087

10,087

10,087

8,398
84
1%
$0.04

9,056
91
1%
$0.04

9,670
97
1%
$0.05

Total Run-Rate Synergies

% of New Co Revenues
2013 Synergies
2014 Synergies

(3)

140
200

(1) Assumes $40mm of "Day One" cost avoidance synergies; $80mm public company corporate cost avoidance, net of $40mm of integration/corporate investments
(2) Assumes tax rate of 24-26% vs current PNR tax rate of 29%
(3) Expected by 2015

TEV
Revenue Synergies
PF Revenues
Synergies
% of Revenues
EPS from Synergies
(1) Taxed at 26%, high end of 24-26% guidance
(2) Assumes FCF equals 90% of net income

VALUATION SENSITIVITY
Bear Case
($m m , FYE 12/31)

Base Case

Bull Case

Low

Mid

High

Low

Mid

High

Low

Mid

High

1,264
8.5x
10,744
(1,635)

1,264
9.0x
11,376
(1,635)

1,264
9.5x
12,008
(1,635)

1,289
8.5x
10,957
(1,635)

1,289
9.0x
11,601
(1,635)

1,289
9.5x
12,246
(1,635)

1,314
8.5x
11,169
(1,635)

1,314
9.0x
11,826
(1,635)

1,314
9.5x
12,483
(1,635)

9,109
214

9,741
214

10,373
214

9,321
214

9,966
214

10,610
214

9,534
214

10,191
214

10,848
214

TEV / EBITDA
2013 EBITDA
Multiple
Total Enterprise Value (TEV)
Less: Net Debt
Im plied Equity Value
Shares O/S
Im plied Share Price
Dividends Received
% Premium / Discount to Current
P/E
2013 EPS
Multiple
Im plied Share Price
Dividends Received
% Premium / Discount to Current

$42.57
$0.88
11%

$45.52
$0.88
19%

$48.47
$0.88
27%

$43.56
$0.91
14%

$46.57
$0.91
22%

$49.58
$0.91
29%

$44.55
$0.93
17%

$47.62
$0.93
25%

$50.69
$0.93
32%

$3.41
13.0x
$44.34
$0.88
16%

$3.41
14.0x
$47.75
$0.88
25%

$3.41
15.0x
$51.16
$0.88
33%

$3.50
13.0x
$45.46
$0.91
19%

$3.50
14.0x
$48.96
$0.91
28%

$3.50
15.0x
$52.45
$0.91
37%

$3.58
13.0x
$46.58
$0.93
22%

$3.58
14.0x
$50.17
$0.93
31%

$3.58
15.0x
$53.75
$0.93
40%

Current Share Price

$39.00