EX-99.C.3 4 y49806ex99-c_3.txt MATERIALS PRESENTED BY MERRILL LYNCH & CO. 1 Exhibit 99(c)(3) Confidential Presentation to: The Board of Directors of [BNP PARIBAS LOGO] Project Neptune May 4, 2001 [MERRILL LYNCH LOGO] 2 Executive Summary -------------------------------------------------------------------------------- U.S. Regional Bank Environment Overview o U.S. Regional Banks outperformed the broader market in 2000 despite a challenging operating environment as investors sought shelter from the plummeting NASDAQ and looked to benefit from declining interest rates. YTD 2001, U.S. Regional Banks have performed in-line with the S&P 500 o Over the last 12 months, the S&P Regional Bank Index was up 20.0% vs. the S&P 500 which was down 13.7% over the same period o Regional Bank valuations have recovered to 12x to 14x NTM earnings from the beginning of last year when banks were trading at 10x to 12x NTM earnings o 4Q'00 and 1Q'01 earnings in the sector were generally in-line with expectations, although earnings quality concerns have prompted significantly downward revisions in estimates over the last year o Although several large credit quality issues arose in 2000 (e.g., Bank of America, First Union, Bank One, Wachovia), the full effect of the slowing economy on credit quality likely has not yet worked its way through portfolios o Large restructurings and management changes occurred in 2000 (e.g., First Union, Bank One, KeyCorp, Huntington) o Spread reliant banks, such as Neptune, should benefit from the Federal Reserve's recent interest rate cuts o To date, the Federal Reserve has lowered rates by 200 basis points in 2001 with the current federal funds target rate at 4.5%, its lowest level since 1994 o While financial services consolidation in the U.S. in 2000 and 2001 has been driven largely by specialty finance, brokerage and asset management transactions, regional bank consolidation has continued at a steady pace, including the following recently announced or closed transactions: o Fleet/Summit o Fifth Third/Old Kent o Royal Bank of Canada/Centura o First Union/Wachovia o Renewed interest in the U.S. by foreign banks (e.g, HSBC, ABN Amro, Royal Bank of Canada) is likely to continue [MERRILL LYNCH LOGO] 1 3 Executive Summary -------------------------------------------------------------------------------- U.S. Regional Banks Outperformed the Broader Market in 2000 in Anticipation of Declining Interest Rates S&P Regional Banks: +24.5% S&P Regional Banks: -6.9% S&P 500: -10.1% S&P 500: -4.0% NASDAQ: -39.3% NASDAQ: -10.1% [LINE GRAPH APPEARS HERE] [LINE GRAPH APPEARS HERE] [The first graph compares the price performance of the S&P Regional Banks with that of the S&P 500 and NASDAQ for the period from December 31, 1999 through December 29, 2000. The second graph compares the price performance of the S&P Regional Banks with that of the S&P 500 and NASDAQ for the period January 1, 2001 through May 2, 2001.] [MERRILL LYNCH LOGO] 2 4 Executive Summary -------------------------------------------------------------------------------- Transaction Terms o Transaction Description: Acquisition of outstanding Neptune shares not owned by Jupiter, representing 55% of outstanding shares o Assumed Purchase Price: o Per share U.S. $35.00 per share o Aggregate Approximately U.S. $2.45 billion (fully diluted) o Transaction Structure: 100% cash Purchase accounting o Expected Closing: End of 3Q2001 o Required Approvals: U.S. regulatory approvals Neptune shareholders o Management: Existing management team: Walter Dods, CEO Don McGrath, President and COO [MERRILL LYNCH LOGO] 3 5 Executive Summary -------------------------------------------------------------------------------- Strategic Rationale o Jupiter is committed to expanding its U.S. retail banking operations, and Neptune is a logical vehicle for its U.S. acquisition strategy o Acquiring full ownership of Neptune would allow Jupiter to: o Further diversify Jupiter's earnings base o Strengthen Jupiter's presence in higher growth, attractive Western U.S. markets o Simplify Neptune's ownership structure o Financially attractive o Pricing is in line with recent comparable transactions o Immediately accretive to cash EPS, neutral to GAAP EPS, without synergies o IRR above Jupiter's cost of capital o Low risk transaction o Management team in place o Manageable transaction size o No synergies assumed, though potential for cross-sell o Existing Jupiter representation on Neptune's Board has granted Jupiter ongoing access to Neptune's operating and financial data, which should increase Jupiter's comfort level related to the proposed transaction [MERRILL LYNCH LOGO] 4 6 Executive Summary -------------------------------------------------------------------------------- Pricing Multiples
Average Multiples in Recent Acquisition Transactions(1) Assumed Purchase Price per share $35.00 Aggregate Transaction Value $2.45 billion Market Premium(2) 41% 43% Price/LTM Cash EPS 16.99X 17.12X Price/Estimated Forward Cash EPS 15.15 15.66 Price/Estimated Forward GAAP EPS 17.68 16.05 Price/Book 2.13 2.65 Price/Tangible Book 3.39 2.90 --------------------
Source: SNL Securities, First Call and various investor presentations. (1) Includes transactions announced since 6/30/00 valued between $1-$5 billion, where target was publicly traded. (2) Premium to market price one week prior to announcement. Neptune premium based on April 25, 2001 closing price. [MERRILL LYNCH LOGO] 5 7 Executive Summary -------------------------------------------------------------------------------- Pricing Performance Since 11/1/98 (Split-adjusted) All-time High (1/29/01): $27.25 All-time Low (2/25/00): 14.44 52-Week High: 27.25 52-Week Low: 14.44 2-Year Average: 20.29 1-Year Average: 21.14 6-Month Average: 24.90 3-Month Average: 25.25 Current Price (5/2/01): 25.09 [LINE GRAPH APPEARS HERE] [The graph shows the price and trading volume for Neptune common stock for the period from November 1, 1998 through May 2, 2001.] [MERRILL LYNCH LOGO] 6 8 Executive Summary -------------------------------------------------------------------------------- Peer Group Comparison ($in millions) (financials as of 3/31/2001)
Peer Group(1) --------------------------------------------- Neptune Peer Rank Balance Sheet Neptune (of 8 peers) Low Mean High ------------------------ --------- -------------- --------- -------- --------- Total Assets $19,419 3 $3,878 $14,513 $35,809 Total Loans 14,203 2 2,456 9,535 25,977 Total Deposits 14,710 2 3,196 10,342 27,208 Total Equity 2,045 2 331 1,256 3,333 Total Tangible Equity 1,289 3 311 1,153 3,287 Profitability ROAA 1.38% 3 0.44% 1.21% 2.11% ROAE 12.73 6 4.60 14.21 25.52 Cash ROAA 1.62 3 0.53 1.30 2.19 Cash ROAE 22.26 3 6.39 16.93 28.08 Net Interest Margin 4.58 4 3.37 4.44 5.52 Efficiency Ratio 52.90 2 67.92 56.63 41.78 Capitalization Equity/Assets 10.53% 1 6.55% 8.63% 10.21% Tangible Equity/Assets 6.90 6 6.01 7.90 9.78 Tier 1 Capital Ratio(2) 9.73 7 8.42 10.75 14.05 Total Capital Ratio(2) 11.39 6 11.10 12.60 15.31 Asset Quality NPAs/Assets 0.66% 6 0.25% 0.56% 1.23% NPLs/Loans 0.76 6 0.34 0.81 1.66 Reserves/NPLs 172.0 7 149.0 307.4 651.5 Reserves/NPAs 147.0 6 144.1 265.8 486.8 Pricing Multiples(3) Price/Forward EPS 12.67x 5 9.51x 12.50x 15.61x Price/Forward Cash EPS 10.86 5 9.25 11.80 15.15 Price/Book Value 1.53 7 1.32 2.11 3.99 Price/Tang. Book Value 2.43 3 1.45 2.35 4.25
-------------------- Source: SNL Securities, First Call and Neptune press release. (1) Peer group includes Commerce Bancshares, Compass Bancshares, Cullen Frost, Pacific Century, Provident Financial, Trustmark, UnionBanCal and Westamerica. (2) As of 12/31/00. 1Q2001 not yet available. (3) Prices as of May 2, 2001. [MERRILL LYNCH LOGO] 7 9 Executive Summary -------------------------------------------------------------------------------- Analyst Recommendations For Neptune
12 Month Last Price Long-Term Firm Recommendation Update 2001 EPS 2002 EPS Target(1) Growth Rate ----------------------- -------------------- --------- -------- -------- ---------- ----------- Merrill Lynch Long-Term Assumulate 24-Apr-01 $1.90 $2.05 NA 8.0% Dain Rauscher Wessels Buy 25-Apr-01 1.95 2.15 $30.00 10.0% Lehman Brothers Strong Buy 20-Apr-01 1.90 2.10 $32.00 11.0% Goldman Sachs Market Outperform 19-Apr-01 1.90 2.10 NA NA Keefe, Bruyette & Woods Outperform 19-Apr-01 1.95 2.20 $31.00 NA Credit Suisse First Boston Hold 18-Apr-01 1.90 2.10 NA 9.0% Fox-Pitt Kelton Buy 21-Apr-01 1.93 2.15 $30.0 NA ------------------------------------ Mean $1.92 $2.12 Median $1.90 $2.10 ------------------------------------
Source: First Call, Bloomberg, and individual broker reports. (1) Assumes no change of control. [MERRILL LYNCH LOGO] 8 10 Executive Summary -------------------------------------------------------------------------------- Shareholder Value Created - EPS impact (without assuming any synergies per management) - GAAP EPS: Neutral impact - Cash EPS: Immediately accretive - Jupiter's EPS growth expectation remains unchanged - All assumptions are conservative - No cost saves - No revenue enhancements - Total investment IRR above Jupiter's estimated cost of capital of approximately 9-10% - Maintains Jupiter's strong performance and capital ratios [MERRILL LYNCH LOGO] 9 11 Executive Summary -------------------------------------------------------------------------------- Financial Impact Pro Forma Financial Impact 2001 2002 GAAP ESP(1) 0.0% +0.3% Cash EPS(1) +2.2% +2.3% Capital Ratios (including full CVR impact) Tier 1 Capital Ratio (at 12/31/00) 7.1% Pro Forma Tier 1 Capital Ratio 7.0% (at 9/30/01, after deal closes) Internal Rate of Return on Total Investment(2) Terminal Value Multiple of Forward Cash Earnings 12.0x 13.0x ----- ----- Internal Rate of Return 12.34% 13.83% -------------------- (1) Neptune estimates obtained from First Call and Jupiter estimates obtained from I/B/E/S. (2) Cash outflow calculated at 45% of current market value plus total offer value for the 55% of Neptune not owned by Jupiter. [MERRILL LYNCH LOGO] 10 12 Executive Summary -------------------------------------------------------------------------------- Competitive Landscape - It is highly likely that there are other interested acquirors of Neptune - Some of the interested acquirors have the theoretical capacity to make a competitive offer - However, since Jupiter already holds 45% of Neptune, we believe that a bid from a third-party is unlikely, though it cannot be precluded - Jupiter should be the most desirable merger partner to Neptune from a social perspective [MERRILL LYNCH LOGO] 11 13 -------------------------------------------------------------------------------- Appendix: Detailed Valuation Analysis -------------------------------------------------------------------------------- 14
Detailed Valuation Analysis Acquisition Comparables(1) Price/ Price/ Price/ Deal Implied Price Premium Price/ LTM Estimated LTM Announce Value -------------------------- Price/ Tangible Deposit GAAP GAAP Cash Date Buyer/Seller ($M) 1-Day 1-Week 1-Month Book Book Premium Earnings Earnings Earnings -------- ------------ ----- ----- ------ ------- ------ -------- ------- -------- --------- -------- 01/26/2001 Royal Bank of Canada 2,280.9 1.29x 1.34x 1.27x 2.38x 2.79x 19.00% 17.17x 15.85x 17.16x Centura Banks 01/24/2001 BB&T 1,167.9 1.47 1.50 1.53 2.95 3.25 28.75 21.18 19.55 20.48 F&M National 11/20/2000 Fifth Third 4,919.3 1.42 1.39 1.39 2.88 3.12 20.68 15.70 14.20 14.69 Old Kent 11/01/2000 Comerica 1,289.4 1.14 1.47 1.46 2.40 2.42 11.08 16.32 14.60 16.15 Imperial Bancorp Summary Statistics High 1.47x 1.50x 1.53x 2.95x 3.25x 28.75% 21.18x 19.55x 20.48x Mean 1.33 1.43 1.41 2.65 2.90 19.88 17.59 16.05 17.12 Median 1.36 1.43 1.43 2.64 2.96 19.84 16.74 15.22 16.66 Low 1.14 1.34 1.27 2.38 2.42 11.08 15.70 14.20 14.69 Neptune(2) $25.09 $24.78 $24.60 $16.40 $10.33 $115.65 $1.79 $1.98 $2.06 Summary Statistics High $36.94 $37.15x $37.67 $48.38 $33.60 $ 43.58 $37.91 $38.71 $42.18 Mean 33.44 35.34 34.78 43.54 29.93 33.32 31.49 31.78 35.27 Median 34.09 35.49 35.12 43.33 30.54 33.28 29.97 30.14 34.31 Low 28.63 33.24 31.23 39.11 25.03 23.14 28.10 28.12 30.27
Price/ Estimated Announce Cash Date Earnings ---------- --------- 01/26/2001 15.85x 01/24/2001 18.95 11/20/2000 13.37 11/01/2000 14.46 High 18.95x Mean 15.66 Median 15.16 Low 13.37 Neptune(2) $2.31 High $43.77 Mean 36.17 Median 35.01 Low 30.89 15 Source: SNL Securities, First Call and various investor presentations. (1) Includes transactions announced since 6/30/00 valued between $1-$5 billion, where target was publicly traded. (2) Assumes transaction announced on May 2, 2001. [MERRILL LYNCH LOGO] 12 16 Detailed Valuation Analysis -------------------------------------------------------------------------------- Jupiter IRR Analysis Assumptions and Results Assumptions - No synergies - First Call estimated earnings of $1.92 per share for 2001 and $2.12 per share in 2002 - First Call estimated EPS growth of 9% after 2002 - Earnings in excess of those necessary to maintain Neptune's current tangible common equity ratio of 6.00% are dividendable Total Investment IRR - Measures Jupiter's internal rate of return based on total investment going forward, including acquisition of 55% of Neptune not presently owned - Cash outflow calculated at 45% of current market value plus the total offer value for the 55% not presently owned - Cash inflows represent dividends distributed over a 5-year period plus the terminal value at the end of year 5 - Terminal value at the end of year 5 equal to a multiple (assumed to be 12 to 13x) of estimated forward cash earnings At $35.00 Per Share - Internal rates of return are higher than Jupiter's estimated cost of capital of approximately 9-10% Terminal Value Multiple of Forward Cash Earnings ----------------------------------- 12.0x 13.0x ----- ----- Internal Rate of Return 12.34% 13.83% [MERRILL LYNCH LOGO] 13 17 Detailed Valuation Analysis -------------------------------------------------------------------------------- Pro Forma Merger Analysis - Key Assumptions - Projected earnings - Jupiter: I/B/E/S estimates of $8.42 per share in 2001 and $9.17 per share in 2002. Aggregate earnings of $3,647.5 mm in 2001 and $3,975.2 mm in 2002 - Neptune: First Call estimates of $1.92 per share in 2001 and $2.12 per share in 2002. Aggregate earnings of $239.3 mm in 2001 and $264.3 mm in 2002 - Fully-diluted shares assumptions - Jupiter: 433.4 mm - Neptune: 124.7 mm - Asset growth of 5% for both Jupiter and Neptune - Transaction closes 9/30/01 - Exchange rate of EUR1.00 = $0.90 - Jupiter's tax rate (French marginal tax rate) = 35.4% - No synergies - No restructuring charge - Cost of cash = 4.67% (1-year Euro LIBOR rate as of 4/30/01) - Pro forma EPS analysis excludes impact of potential exercise of CVRs [MERRILL LYNCH LOGO] 14 18 Detailed Valuation Analysis -------------------------------------------------------------------------------- Pro Forma Merger Analysis - Impact on Jupiter Assumes No Synergies All Cash Offer At $35.00 per share Pricing Multiples Market Premium(1) 41% 2001E EPS 2001E Cash EPS 15.6x 2002E EPS 16.5x 2001E Cash EPS 14.3x Book Value 2.13x Tangible Book 3.39x Financing ($in mm) Cash $2,445 Preferred Shares 0 Common Stock 0 ------------ Total $2,445 ============ Pro Forma EPS Impact 2001E 0.0% 2002E 0.3% Cash 2001E 2.2% Cash 2002E 2.3% Capital Ratios (including full CVR impact) Tier 1 Capital Ratio (at 12/31/00) 7.1% Pro Forma Tier 1 Capital Ratio (at 9/30/01) 7.0% -------------------- (1) Premium to market price one week prior to announcement. Premium on April 25, 2001 closing price. [MERRILL LYNCH LOGO] 15