1. 11/21/2015 KICC Application 1
Goizueta Finance Group
2015 M&A Competition
Benjamin Detemmerman, Benjamin Poon, Jia Tang, Kasper Stockel, Michael Bolliger
Synergy is Still King
NAVIS Global

2. Company & Industry
Problem
Analysis
Whole Foods should merge with Publix
Merging with Publix allows shareholders’ gain to be maximized
Overview
Problems &
Solution
Financials
Whole Foods should not go private with
Blackstone
Executive Summary
11/21/2015 2GFG M&A Competition 2015

3. Company and industry overview
11/21/2015 3
Mission
To promote the vitality and well-
being of people by supplying the
highest quality, most wholesome
foods available.
Locations
412 9 10
Growth rate
• Grocery market 3%
• Natural retail market 9%
Company IndustryCompany Industry
Core
competence
• Premium quality brand
• Superior customer
shopping experience
GFG M&A Competition 2015

4. Increasing costs & competitions hamper Whole Foods’s growth
11/21/2015 4
Missing Targets by
Sales Growth -0.6%
Sales/Square
Foot
-5%
ROIC -0.6%
Gross Margin is narrowingCOGS is growing
Same store sales growth decelerated The only driver of growth is expansion
CostsCompetition
20%
COGS 2013-15
0%
2%
4%
6%
8%
10%
2011 2012 2013 2014 2015
Same Store Sales Growth
34.8%
35.0%
35.2%
35.4%
35.6%
35.8%
36.0%
2013 2014 2015
Gross Margin
290
315
340
365
390
415
440
2011 2012 2013 2014 2015
Number of Stores
Results:
Falling short of expectations
GFG M&A Competition 2015
Key Question:
How to maximize shareholder value in the long run?

5. Whole Foods’s possible alternatives
11/21/2015 5
Go private and get
acquired by Blackstone
Merge with Publix
Others?
GFG M&A Competition 2015

6. Whole Foods should not be acquired by The Blackstone Group
11/21/2015 6
….while Whole Foods is not the caseCompanies that go private with PE are usually
Whole Foods currently has If Whole Foods goes private with PE
• Mature firms with no growth prospect
• Struggling with a FCF problem
• In need of capital restructuring
• Suffering from agency problem
• The industry is growing, and Whole Foods
ranks first
• FCF/OCF = 25.94%
• High debt capacity
• Committed executives
• Sound long-term plans
• Low market price
• Restructure of management level
• Short-sighted, strategies made to ensure
a profitable exit strategy in 3-5 years
• Disadvantageous to shareholders’ gains
GFG M&A Competition 2015

7. Whole Foods’s possible alternatives
11/21/2015 7
Go private and get
acquired by Blackstone
Merge with Publix
Others?
GFG M&A Competition 2015

8. Whole Foods should merge with Publix
11/21/2015 8
Whole Foods Market
• The largest natural and organic foods
supermarket in the U.S.
• 433 stores worldwide, including UK, Canada
and across 42 U.S. states
Publix
• One of the 10 largest-volume supermarket
chains in the U.S., rank 1st in Florida
• 1,109 store locations in 6 Southern states
取長補短,相得益彰 (Compensate our weaknesses while gain through combined strengths)
GFG M&A Competition 2015

9. How are the synergies going to benefit Whole Foods
11/21/2015 9
Cost Synergies
Growth Synergies
• Significant reduction of COGS
• Reduction of overhead costs
• Having access to pharmacy industry and boost
product sales
• Increase in online sales
• Cross-selling opportunities
0%
2%
4%
6%
8%
10%
2011 2012 2013 2014 2015
Same Store Sales Growth
34.8%
35.0%
35.2%
35.4%
35.6%
35.8%
36.0%
2013 2014 2015
Gross Margin
GFG M&A Competition 2015
Narrowing Gross Margin
Decelerated Sales Growth
Benefits from SynergiesExisting Problems

10. Synergy benefits under different scenarios
11/21/2015 10
• Overhead savings 4%
• COGS savings of 3.5%
• EBITDA margin on Pharmacy products
8.5%
• Overhead savings 2%
• COGS savings of 2%
• EBITDA margin on Pharmacy products
7.1% but sales 20% below expectations
• Ready to eat products 22% below
expectation
18.63%
39.45%
11.86%
30.05%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%
Worst Case: $4.69bn Cost
Synergies and Merger Gains
Overhead Costs COGS
Pharma Extension Ready to eat extension
20.50%
39.24%
10.89%
29.37%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Best Case: $7.73bn Cost
Synergies and Merger Gains
Overhead Costs Cogs
Pharma Extension Ready to Eat Extension
• Overhead savings 2.5%
• COGS savings of 2.5%
• EBITDA margin on Pharmacy products
7.9%
15.74%
37.23%
13.07%
33.96%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%
Base Case: $5.81bn Cost
Synergies and Merger Gains
Overhead Costs Cogs
Pharma Extension Ready to Eat Extension
Best Case Base Case Worst Case
GFG M&A Competition 2015
Growth
Synergies
Cost
Synergies
Growth
Synergies
Cost
Synergies
Growth
Synergies
Cost
Synergies

11. Whole Foods shareholder gains
11/21/2015 11
• Publix pays a 20% premium to acquire all of Whole Foods Shares
• 1 WFM to 1.8 Publix share exchange rate
• WFM Shareholders own 45% of the total shares of the post-merger firm
• Why Shares? So WFM Shareholders maintain an ownership stake
Merger Approach: Exchange of Shares
BEST CASE BASE CASE WORST CASE
Post-merger firm now worth $34.06bn $32.02bn $30.95bn
Total gain to Whole Foods
shareholders
$16.10bn $14.84bn $14.23bn

12. Buyout may be unfavorable – Whole Foods is currently underpriced
• Growth uncertainty and increasing competition drives down current
price
• Whole Foods share is underpriced:
• Current share price: $29.93
• Intrinsic value: $34.45
11/21/2015 12GFG M&A Competition 2015

13. Comparison of Alternatives
• Blackstone pays a premium to take Whole Foods private.
• The worst case merger scenario would generate higher returns
than a 30% premium.
• The best case merger scenario would generate higher returns
than a 50% premium.
11/21/2015 13GFG M&A Competition 2015

14. Merging with Publix is always the best option
11/21/2015 14
• Highly unlikely – LBO Industry Premium Avg. of 24.3%
• Best alternative for Whole Foods shareholders is to merge
GFG M&A Competition 2015
10.00
11.00
12.00
13.00
14.00
15.00
16.00
17.00
WFM Current
Value
Historic Avg.
Premium
30% PE Case Worst Case 50% PE Case Best Case
Comparison of Alternatives

15. Whole Foods’s possible alternatives
11/21/2015 15
Go private and get
acquired by Blackstone
Merge with Publix
Others?
GFG M&A Competition 2015

16. Why Whole Foods is the best fit for Publix?
16
Financial
• Increasing sales in natural and organic food industry
• Unleveraged
• Solid cash positions (FCF/OCF=25.94%)
• The largest natural and organic foods
supermarket in the U.S.
• Strong brand image
• National presence, covering 42 states
• Global presence
Geographical Brand
Cultural
• Great cultural fit
Strategy Compatibility
GFG M&A Competition 2015

17. 11/21/2015 KICC 2014 17
Don’t sell the chicken that lays golden eggs.
別殺生金蛋的雞

18. Index Page
11/21/2015 AIG M&A Case 2015 18
• Cover Page
• Executive Summary
• Company Overview
• Problem Analysis
• Alternatives Tree
• M&A with Blackstone
• Bad Timing - Underpriced
• M&A with Publix
• Synergies
• Scenario Analysis
• Shareholder Gains
• Financial Comparison
• Whole Foods is the best fit for Publix
• Appendix:
• Risk & Mitigation
• Implementation Timeline
• Historical LBO Premiums
• Distribution of Merger Gains
• Alternatives Evaluation
• Position Map
• Synergies with Publix Pharmacy
• Key Assumptions of Synergy Calculation
• Calculation of Total Shareholder Value

19. Appendix: Risks & Mitigation
11/21/2015 AIG M&A Case 2015 19
Risks
1. Risk of adverse selection
2. Cultural risks: both companies have distinct cultures with could
result in incompatibilities, lower productivity, turnover of key talents
3. Strategic risk leading to costly diversion:
Mitigation
1. Risk of adverse selection: Incentivize actions by performance-
contingent payout structures and other incentive structures
2. Cultural risks: walk the talk and articulate the mission and vision
of the new company on a steady basis.
3. Strategic risk leading to costly diversion: Clear process
planning and scenario technique to address unexpected outcomes
Index Page

20. Appendix: Implementation Process
11/21/2015 AIG M&A Case 2015 20
2016 2017 2018
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Overhead Costs
Gradual Implementation
COGS
Cost Savings
Pharmacy
Pre-launch marketing
Post-launch marketing
Ready-to-Eat
WFM Ready-to-Eat in Publix
Evaluation and improvements
1 Year Pilot
covering 10% of
Publix Stores
Planning
Phase of 2
Years Index Page

21. Appendix: Historical LBO Premiums
11/21/2015 AIG M&A Case 2015 21
Index Page

22. Appendix: Distribution of Merger Gains
11/21/2015 AIG M&A Case 2015 22
Index Page
• Merged Company Value: $34.06bn
• WFM Shareholders Value $16.1bn
• Merged Company Value: $32.07bn
• WFM Shareholders Value $14,84bn
• Merged Company Value: $30.95bn
• WFM Shareholders Value $14.23bn
Best Case Base Case Worst Case
68.95%
31.05%
Best Case Distribution of Merger
Gains
Whole Foods Shareholders Publix Shareholders
71.00%
29.00%
Base Case Distribution of Merger
Gains
Whole Foods Shareholders Publix Shareholders
76.90%
23.10%
Worst Case Distribution of Merger
Gains
Whole Foods Shareholders Publix Shareholders

23. Appendix: Alternatives Evaluation
11/21/2015 KICC 2014 23
Customer Base
Expansion
4 0 0 5
Cost of
Implementation
4 3 4 2
Time Needed 3 3 3 1
Ease of
Implementation
3 4 3 1
More DesirableLess Desirable
Merging with Publix Acquired by
Blackstone
International
M&A
Integrate with
suppliers
0 1 2 3 4 5
Index Page

24. Appendix: Position Map
11/21/2015 AIG M&A Case 24
FreshFoodNon-perishable
Premium Value
Index Page

25. Appendix: Synergy potential of Pharmacies in Whole Food Stores
11/21/2015 KICC 2014 25
• Publix Pharmacies open new growth driver for
the merged company
• In-store pharmacies to provide health consulting
to advice customers on diets, nutrition, and
weight loss by eating more organic and natural
foods in order to prevent diabetes and high
cholesterol.
• Future Vision: expand health services to Whole
Foods Markets
Index Page

26. Appendix: Key Assumptions of Synergy calculation
11/21/2015 KICC 2014 26
• Three Cases considered
• Best Case: 4.4Bn
• Base Case: 3.1Bn
• Low Case: 2.7Bn
• 38.5% Tax Rate
• WACC 9.2%
• EBITDA margins of 8.5%
• Ramp up of synergies of 5 years
Key Assumptions of Synergy calculation
Index Page

27. 11/21/2015 KICC 2014 27
Index Page
Appendix: Calculating the Total Shareholder Value
Publix P $20,00 WFM P $29,93
Publix # 777090000 WFM # 357860000
Publix V $15.541.800.000 WFM V $10.710.749.800
Premium 20%
Price Paid $12.852.899.760
Shares Issued by Publix to pay for WFM 642644988
Total Shares post-merger 1419734988
Share Exchange Rate 1,80 Publix Shares for each WFM share
Apparent Cost $2.142.149.960
PVCS $5.818.000.000
Apparent NPV Publix $3.675.850.040
Value of New Company $32.070.549.800
New Stock Price $22,59
True Cost $3.806.028.518
True NPV Publix $2.011.971.482
WFM Shareholders get 3806028518 65,42% of the merger gains
Publix Shareholders get 2011971482 34,58% of the merger gains
WFM Shareholders now have 45,27% of the total shares in the new company
Publix Shareholders now have 54,73% of the total shares in the new company
WFM total shareholder value $14.841.722.170
Publix total shareholder value $17.228.827.630
$32.070.549.800
71.00%
29.00%
Base Case Distribution of Merger Gains
Whole Foods Shareholders Publix Shareholders