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52 week high18.7%52 week low45.9%3 year average52.4%(1) Estimates for Gillette at offer price per IBES, except for 2004E Sales, diluted shares and net debt, per Gillette’s management.(2) Averages based on trading days.Historical Stock Trading Analysis and Relative Trading. Goldman Sachs and UBS reviewed the historical trading prices for shares of Gillette common stock and Procter & Gamble common stock for the three-year period from January 26, 2002 through January 26, 2005 and the one-year period from January 26, 2004 to January 26, 2005. Goldman Sachs and UBS also analyzed the historical trading ratio of the respective common stock of Gillette and Procter & Gamble for various periods between January 26, I-57
Table of ContentsChapter One — The Merger2004 and January 26, 2005 as set forth in the table below, and compared it to the offer ratio of 0.975 to be paid pursuant to the merger agreement: Current (Spot)AverageJanuary 26, 20050.812x 1 Week0.801x 1 Month0.800x 3 Months0.805x 6 Months0.780x 1 Year0.770x High0.829x Low0.703x Discounted Cash Flow Analysis— Gillette. Goldman Sachs and UBS performed (a) a discounted cash flow analysis with respect to Gillette that used (i) consensus estimates with respect to Gillette provided by the Institutional Brokerage Estimate System, or IBES (a data service that compiles estimates issued by securities analysts) for fiscal years 2005 and 2006 and (ii) per Gillette management, annual earnings per share, or EPS, growthat the IBES long-term growth rate of 11.1% for 2007 through 2009 (the “Gillette Street Case”), which Gillette management had informed Goldman Sachs and UBS approximated Gillette management’s strategic plan re-based for earnings performance in the second half of 2004, as well as (b) a discounted cash flow analysis with respect to Gillette that used the internal financial forecasts prepared by Gillette management (“Gillette Management Upside Case”) for fiscal years 2005 through 2009 provided to Goldman Sachs and UBS by Gillette management. Goldman Sachs and UBS assumed discount rates ranging from 8.0% to 9.0%, calculated present values of the unleveraged after-tax cash flows generated over the period covered by the financial forecasts and then added terminal values assuming perpetuity growth rates ranging from 3.0% to 4.0%. This analysis indicated implied equity values per Gillette share ranging from $37.69 to $54.61, based on the Gillette Street Case for Gillette, and implied equity values per Gillette share ranging from $42.76 to $61.81, based on the Gillette Management Upside Case, as compared to the implied offer value of $54.05 per share (based on the closing price of Procter & Gamble’s common stock of $55.44 on January 26, 2005). Discounted Cash Flow Analysis— Procter& Gamble.Goldman Sachs and UBS performed a discounted cash flow analysis with respect to Procter & Gamble that used the Procter & Gamble Adjusted Street Forecasts (which reflect the IBES consensus estimate for 2005 for Procter & Gamble, adjusted to reflect revised Procter & Gamble management guidance given to the public on January 27, 2005 and EPS growth at IBES long-term growth rate of 10.9% thereafter, per Gillette’s management) for fiscal years 2005 through 2009, assumed discount rates ranging