EX-99.(C)(2) 3 0003.txt MERRILL LYNCH BOARD PRESENTATION Strictly Confidential Presentation to the Special Committee of the Board of Directors of Business Resource Group July 6, 2000 [MERRILL LYNCH LOGO] -------------------------------------------------------------------------------- Page 1 Transaction Summary -------------------------------------------------------------------------------- o Two-Step Structure Cash tender offer at $9.25 per share (the "Transaction Price") of Business Resource Group (the "Company") common stock (the "Shares") by a newly formed affiliate corporation ("Purchaser") of Three Cities Research ("TCR"), followed by a back-end cash merger at $9.25 per Share o Commencement of Tender Offer Tender offer to commence within five business days of public announcement o Tender Offer Schedule Initial expiration date for tender offer will be 20-25 business days following commencement; may be extended until 60 days following commencement to permit satisfaction of closing conditions o Principal Tender Offer Closing Conditions o Tender of at least 51% of the outstanding Shares not owned by TCR affiliates (or as to which TCR has a binding agreement to acquire) o Tender of at least 53.5% of the outstanding Shares o No material disruptions in US capital markets o Representations and warranties of Company remaining true o Compliance by Company with its obligations under the Plan and Agreement of Merger (the "Merger Agreement") o No withdrawal or adverse modification of Company board's recommendation of transaction o Absence of Financing Condition Need to obtain third-party financing is not a condition to consummation of transaction o Reincorporation Merger If the number of Shares tendered exceeds the minimum tender condition described above, but is less than 90% of the Shares outstanding, as an interim step, Company will reincorporate into the State of Delaware and then, as the final step, merge with Purchaser [MERRILL LYNCH LOGO] -------------------------------------------------------------------------------- Page 2 Transaction Summary -------------------------------------------------------------------------------- o No solicitation During pendency of transaction, Company and its advisors will be prohibited from soliciting additional third-party interest in the acquisition of the Company; however, they will be permitted to fully respond to any unsolicited communication, and if deemed appropriate in light of the board's fiduciary duties, the Company's board will be permitted to withdraw its recommendation of the transaction o Antitrust filing Transaction will be subject to review by US federal government under HSR Act o Principal Termination Rights o Breach of representation or warranty under Merger Agreement or failure of a closing condition o By Company, in order to accept a Superior Proposal (as defined in the Merger Agreement) o Termination Fees If Company terminates to accept a Superior Proposal, Company will be required to pay a termination of $750,000 to Purchaser and reimburse Purchaser for its expenses (up to $500,000) in connection with transaction o Organization of Acquisition Corporation TCR will form a limited liability company ("Holdings") which will indirectly hold 100% of the equity of Purchaser o Contributions by Company Management Two members of Company management, Brian McNay and Jeffrey Tuttle, will enter into agreements with Holdings pursuant to which they will contribute a total of approximately 320,000 Shares to Holdings in exchange for equity units in Holdings. Two other members of management, John Peth and John Palmer, will acquire units of Holdings in consideration of the cancellation of a portion of their Company stock options or the contribution of cash [MERRILL LYNCH LOGO] -------------------------------------------------------------------------------- Page 3 Transaction Summary -------------------------------------------------------------------------------- o TCR Financing One or more TCR funds will contribute, or arrange for the contribution of, at least $31 million, in the form of cash or demand notes, to Purchaser. Affiliates of TCR will also commit to at least $15 million in subordinated, mezzanine debt financing for the acquisition. And finally, Purchaser will receive a commitment of $45 million in senior debt financing from Comerica Bank--California Transaction Summary Source: Outside counsel to the Special Committee of the Board of Directors of the Company [MERRILL LYNCH LOGO] -------------------------------------------------------------------------------- Page 4 Valuation Analysis -------------------------------------------------------------------------------- Historical Stock Performance [GRAPHIC OMITTED] Source: Factset Research Systems [MERRILL LYNCH LOGO] -------------------------------------------------------------------------------- Page 5 Valuation Analysis -------------------------------------------------------------------------------- Premium Analysis Per Share Share Price Premium --------- ----------- ------- Transaction Price $9.25 NA 7/5/00 Price $6.50 42% 52 Week High $9.00 3% 52 Week Low $2.87 222% Source: Price information from Factset Research Systems [MERRILL LYNCH LOGO] -------------------------------------------------------------------------------- Page 6 Valuation -------------------------------------------------------------------------------- Historical Financial Summary Sales [BAR GRAPH] Adjusted EBITDA [BAR GRAPH] EPS [BAR GRAPH] Source: 1997-1999, Company Form 10K for the year ended October 31, 1999; LTM 3/31/00, unaudited financial statements for March 31, 1999 and March 31, 2000 provided by Company management; Confidential Offering Memorandum prepared by Huntington Holdings, Inc. [MERRILL LYNCH LOGO] -------------------------------------------------------------------------------- Page 7 Valuation - Discounted Cash Flow -------------------------------------------------------------------------------- Summary of Financial Projections
Key Assumptions 2000 2001 2002 2003 2004 --------------- ---- ---- ---- ---- ---- Sales Growth 56.5% 25.1% 22.0% 10.5% 10.5% EBITDA margins 6.6% 8.6% 8.6% 8.6% 8.6% EBIT margins 5.6% 7.8% 7.5% 7.4% 7.4% Adjusted working capital (% Rev) 13.1% 13.1% 13.1% 13.1% 13.1% Capital expenditures $1.3 $1.0 $2.0 $2.3 $2.5 Cash paid in acquisitions $6.7 $5.7 $6.9 $8.4 $11.1
Forecast 2000E 2001E 2002E 2003E 2004E -------- ----- ----- ----- ----- ----- Sales $195.6 $244.7 $298.5 $329.8 $364.3 EBITDA (a) $13.0 $21.1 $25.7 $28.4 $31.3 EBIT (a) $11.0 $19.1 $22.3 $24.4 $27.0 (a) Excludes special items
Source: Confidential Offering Memorandum prepared by Huntington Holdings, Inc.; Revised Forecast of Fiscal 2000 and Fiscal 2001, dated May 15, 2000 provided by Company management; discussions with Company management. [MERRILL LYNCH LOGO] -------------------------------------------------------------------------------- Page 8 VALUATION ANALYSIS -------------------------------------------------------------------------------- Selected Comparable Company Analysis
Market Value Market Cap. as a Multiple of: as a Multiple of: ----------------- ----------------- LTM LTM Price Shares Market Market Net to Cash LTM LTM Companies (07/05/00) (millions) Value Can. (a) Common Flow (b) EBITDA EBIT --------- ---------- ---------- ----- -------- ------ -------- ------ ---- Hon Indlistries $ 24.81 60.15 $ 1,492.5 $ 1,731.7 14.9x 8.6x 7.4x 10.4x Kimball International -C1 B $ 15.00 40.20 $ 603.0 $ 510.9 12.2x 6.7x 4.5x 7.2x Miller (Herman) Inc $ 27.36 78.57 $ 2,149.6 $ 2,323.7 15.5x 9.4x 7.7x 10.3x Mity-Lite Inc $ 12.75 4.82 $ 61.4 $ 55.3 13.5x 10.7x 7.4x 8.3x Open Plan Systems Inc $ 1.88 4.40 $ 8.3 $ 11.6 5.2x 6.7x 6.Ox 12.9x Steelcase Inc $ 17.31 151.16 $ 2,616.9 $ 2,995.1 15.3x 8.4x 7.lx 10.6x Reconditioned Systems Inc $ 2.80 1.33 $ 3.7 $ 2.8 4.Ox 3.7x 2.6x 2.9x -------------------------------------- Maximum 15.5x 10.7x 7.7x 12.9x Mean 11.5 7.7 6.1 8.9 -------------------------------------------------- Median 13.5 8.4 7.1 10.3 -------------------------------------------------- Minimum 4.0 3.7 2.6 2.9
(a) Market Capitalization = Market Value + Preferred Equity at Liquidation Value (Incl. Redeemable) + Short-Term Debt + Long-Term Debt + Minority Interest - Cash & Marketable Securities (b) Cash Flow = Income Available to Common Shareholders + Depreciation, Depletion & Amortization + Deferred Taxes - Unremitted Earnings of Unconsolidated Subsidiaries [MERRILL LYNCH LOGO] -------------------------------------------------------------------------------- Page 9 VALUATION ANALYSIS -------------------------------------------------------------------------------- M&A Transaction Analysis
Effective Offer Enterprise Date Target Acquiror Value Value Consideration (c) --------- ---------------------------- ----------------------------- ------- ---------- ------------------------ 11/9/99 Baquet-Pastrijak Inc. Business Resource Group $4.4 $4.4 Cash, debt stock; earnout 8/3/99 Modern Office Interiors Business Resource Group 0.9 1.4 Cash, debt stock; earnout 2/2/99 Re'Nu Office Systems Inc. Business Resource Group 4.1 5.1 Cash, debt stock; earnout 5/26/98 Office Furniture Networking Business Resource Group 3.5 3.3 Cash, stock; earnout Pending DO Group, Inc. Mity-Lite Inc. 5.8 6.8(a) Cash and assumed debt 4/9/99 The CenterCore Group, Inc. Mity-Lite Inc. 5.3 7.3 Cash and assumed debt 4/26/99 Steelcase Strafor S.A. Steelcase Inc. 225.2 325.2 Cash 11/4/99 Knoll Inc. Warburg, Pincus Ventures Inc. 1,147.7 1,200.6(b) Cash Offer Value As a Enterprise Value a Multiple Of: As a Multiple Of: ---------------- ----------------- LTM Effective Net To LTM LTM Date Common EBITDA EBIT --------- ---------------- ------- ---- 11/9/99 8.3 x N/A x 5.0 x 8/3/99 12.2 N/A 11.2 2/2/99 16.5 N/A 10.8 5/26/98 12.8 7.8 8.2 Pending N/A N/A N/A 4/9/99 NM NM NM 4/26/99 12.6 N/A 9.8 11/4/99 12.5 5.8 6.9 ----------------------------------------- Max 16.5 x 7.8 x 11.2 x Mean 12.5 x 6.8 x 8.6 x ------------------------------------------------ Median 12.5 x 6.8 x 9.0 x ------------------------------------------------ Min 8.3 x 5.8 x 5.0 x
(a) Acquisition of 50.1% interest in DO Group, Inc. not already owned by Mity-Lite Inc. (b) Acquisition of 40% interest not alreadv owned by Warburg, Pincus Ventures Inc. (c) The PV of the maximum potential earnout payments were included in the transaction values indicated. [MERRILL LYNCH LOGO] -------------------------------------------------------------------------------- Page 10 Valuation Analysis -------------------------------------------------------------------------------- Valuation Summary Methodology Equity Value per Share ----------- ---------------------- Discounted Cash Flow Analysis $7.29 - $8.87 Market Comparable Analysis $6.23 - $7.49 M&A Transaction Analysis $6.80 - $7.20 [MERRILL LYNCH LOGO] -------------------------------------------------------------------------------- Page 11