Citigroup Practical Banking Pres 06

Structure of an Investment Bank — Conduit to the Corporate ClientClient Investment Banking Coverage Groups Other Product Groups M&A Capital Markets  Bank Loans  Inv.. Capital Raising:

The Practical Side of Investment Banking

October 10, 2006

Table of Contents

1 Citigroup’s Investment Banking Michigan Team

2 Structure of an Investment Bank

3 Deal Teams and the Role of an Associate

4 Why Citigroup?

1 Citigroup’s Investment Banking Michigan Team

Citigroup’s Investment Banking Michigan Team

Ben Riback (A4)*

Global Consumer Arun Prasad (A3) Health Care Owen Bittinger (A3) Palo Alto Benjamin Carpenter (A3)

Los Angeles

Paul Croci (A3) Pablo Pallas (A3)

London

Martin Valdes (A3)*

Latin America Sarah Ransdell Bayer (A2)

Palo Alto

Patty Yang (A2)

Hong Kong Jason Godley Generalist Julius Peter Generalist Harsh Singh Generalist

Associates

2 Structure of an Investment Bank

What is an Investment Bank?

 Sells and trades stocks and bonds

 Manages the firm’s risk and makes markets for the securities underwritten by the investment bank

An “investment bank” typically consists of three distinct, but related businesses:

Large /

Global

Small / Regional

Who are the Leading Investment Banks in the United States?

Structure of an Investment Bank — Conduit to the Corporate Client

Client

Investment Banking Coverage Groups

Other Product Groups M&A

Capital Markets

 Bank Loans

 Inv Grade Debt

 High Yield

Research

Products and Services

Industry Coverage Groups

Consumer

Energy, Power

& Chemicals

Financial Entrepreneurs

Financial Institutions

3 Deal Teams and the Role of an Associate

Structure of a Typical Deal Team

Client

Investment Banking Coverage Officer

Attorneys

The Coverage Officer has primary client responsibility and the Associate ensures that all members of the working party, both internal and external, are informed and working together.

Strategic Advisory

for strategic advice

regarding a company’s operations or strategic direction

ideas that may or may not be obvious to their client

basis

M&A process, allowing management to focus on running their business

Strategic Advisory – M&A

Life of an M&A Transaction

 Solicitation of binding bids

 Negotiations

 Contract Signing

 Preparation for announcement

– Press release

– Q&A script

 Week of announcement

– Market reaction

– Roadshow?

 Banker’s work is largely done once the deal is made public

 Between announcement & closing

– SH vote

– HSR

– Other regulatory approvals

 Closing

– Lucites

– Dinner

Valuation: The Foundation of Every Deal

Primary Valuation Techniques

 Discounted Cash Flow Analysis

 Public Market Analysis (Comparable

Companies)

 Private Market Analysis (Precedent

Transactions)

 LBO Analysis

Secondary Valuation Techniques

 Pro Forma Consequences Analysis

– Accretion/dilution

– Capital Structure

– EPS Growth Rates

 Relative Contribution Analysis

 Liquidation Analysis

 How is my client trading relative to peers?

– WHY is it trading this way?

 Growth? Margins?

 “Hot” market versus fundamentals

– HOW can the company improve its valuation?

 Does an acquisition make sense?

 What is an appropriate price?

 Is cash or stock a better choice?

 What is appropriate leverage?

 How would the market value the company

Valuation and the Associate

 A single, quantitatively derived answer

 A precise number

 A static number

 Lots of number crunching

 More art than science

 Heavily dependent on judgment

The associate is responsible to ensure numbers are accurate and assumptions are realistic.

Raise Capital for Clients

Capital Raising Assignment

The associate manages the flow of information and therefore must be organized and anticipate everything.

Capital Raising: Pre-Filing

 Screen the Deal Internally

– Put together all internal memos and coordinate meetings

 Commitment Committee

 Investor Issues Committee

 Organizational Meeting

– Establish agenda, timetable, information request list and working group list

 Due Diligence Meetings

 Drafting of Registration Statement

– Development of business section and positioning

– Participation in drafting sessions

– Work with underwriters’ counsel on underwriting agreement

 Marketing Preparation

– Prepare roadshow presentation with company

– Coordinate for reds to be delivered as necessary

Capital Raising: Marketing

 Prepare memos for sales forces

– Institutional sales memo

– Retail Sales Memo

 Coordinate dry-run (company presentation to sales force)

– Accompany company to investor

meetings—keep meetings on time

– Feedback to Capital Markets desk:

know how the book is building

– ANTICIPATE everything

Capital Raising: Pricing/Closing

 Pricing: Handled by ECM

– Coordinate bring down due diligence call prior to pricing

 Finalize registration statement

– Meet with lawyers and printers to add in final pricing information

 Closing: Help coordinate wiring of funds to company

– How much? Where? When? Wire instructions via memo to syndicate

 Post-deal client relationship

– Create post-mortem book

– Organize closing dinner

– Design Lucite

Keys to Success as an Associate

Goals

▲ Develop credibility early with team, especially analysts

▲ Leadership: Delegating authority

▲ Time management skills: Balance multiple projects

▲ Understand the transaction and communicate both up

and down

▲ Develop a rapport with the analysts and communicate

the big picture

▲ Manage expectations and define responsibilities

▲ Get your hands dirty

▲ Don’t be afraid to ask questions

▲ Proactive client interaction

▲ Educate senior bankers and exceed expectations

Pitfalls

▼ Presenting materials with mistakes or typos

▼ Waiting to get involved

▼ Failure to anticipate

▼ Not leveraging firm’s resources appropriately

▼ Getting lost in the detail and missing the big picture

▼ Insubstantial interaction with clients

▼ Does not properly delegate work

▼ Losing confidence under pressure

▼ Lack of attention to detail

▼ Lack of follow through

▼ Lack of involvement in recruiting and training activities

4 Why Citigroup?

Citigroup is the #2 Global M&A Advisor YTD

Source: Securities Data Company, Inc.

Note: Data as of September 30, 2006, based on rank date.

Deal Size Companies

We Advised on 7 of the 10 Largest Deals YTD

Source: Securities Data Company, Inc.

Data as of September 30, 2006, based on rank date.

Deal Size Companies

We Have Advised on Many Landmark, Cross-Border Deals

Source: Securities Data Company, Inc.

(1) Advising a non-U.S or non-European client in a cross-border transaction

M&A deals rank-eligible 2004-YTD 2006 (as of August 31st).

Announced Cross-Border (2004–YTD 2006)

US$3,957 mm

August 2005

Pending

Advised on Mittal Steel’s proposed

offer to acquire Arcelor

US$28,389 mm

April 2006

Pending

Advised on NYSE’s proposed

merger with Euronext

US$5,227 mm

July 2005

Completed

Advised on G-TECH Holdings

sale to Lottomatica SpA

US$4,736 mm

January 2006

Citigroup’s Dominance in Capital Raising

THIRD CHANGE INQUARTER MARKET SHAREMARKET SECTOR NO 1 RANKED MANAGER MKT SHARE FROM PREV Q

Global Debt, Equity & Equity-related Citigroup 9.3% 0.80

U.S.Debt, Equity & Equity-related Citigroup 10.6 0.20

STOCKS

Global Common Stock J.P Morgan 11.3 3.60

Global Convertibles Citigroup 19.2 3.30

Global Common Stock- U.S Issuers Goldman Sachs 16.0 -0.40

Global Convertibles- U.S Issuers Citigroup 31.6 17.00

BONDS

U.S Asset-backed Securities Citigroup 9.6 -0.60

U.S Investment Grade Corporate Debt Citigroup 17.1 2.20

U.S High Yield Corporate Debt Citigroup 17.8 1.30

U.S.Mortgage-backed Securities Royal Bank of Scotland 10.8 0.30

SYNDICATED LOANS

U.S Syndicated Loans J.P Morgan 28.1 -5.40

THE WALL STREET JOURNAL.

YEAR-END REVIEW OF MARKETS & FINANCE

Citigroup is a leading bookrunner in Global Capital Markets

Who's No 1?

Leading stock and bond underwriters, by 2005 proceeds

Global Stocks and Bonds

U.S public, Rule 144a, domestic and international equity and euro-market issues, ranked by 2005 proceeds

R10 TUESDAY, JANUARY, 3, 2006

THE WALL STREET JOURNAL.

SCORECARD OF WALL STREET UNDERWRITING:

FIRST NINE MONTHS

C12 MONDAY, OCTOBER, 1, 2006

Who's No 1?

Leading stock-and-bond underwriters, by volume, third-quarter 2006

Global Stocks and Bonds

In the U.S public, Rule 144a, domestic and international equity and Euro markets, ranked by first nine months

2006 proceeds

2005 MKT CHANGE FROMMARKET SECTOR NO 1 RANKED MANAGER SHARE 2004 (pct Pts.)Global Debt, Stock & Stock-Related Citigroup 8.7% -0.70

U.S.Debt, Stock & Stock-Related Citigroup 10.1 -0.90

STOCKS

Global Common Stock Citigroup 9.5 -1.10

Global Convertible Offerings J.P Morgan 14.6 5.00

Global Common Stock- U.S Issuers Morgan Stanley 12.1 -3.30

Global Conv Offerings- U.S Issuers Goldman Sachs 15.7 4.90

BONDS

U.S Asset-backed Securities Citigroup 8.6 -1.10

U.S Investment Grade Corporate Debt Citigroup 16.5 -3.90

U.S High Yield Corporate Debt J.P Morgan 13.0 1.60

U.S.Mortgage-backed Securities Bear Sterms 10.7 -1.70

SYNDICATED LOANS

U.S Syndicated Loans J.P Morgan 28.1 -4.00

Citigroup $564.7 1,856 8.7% $539.9 1Lehman Brothers 420.8 1,249 6.5 377.2 5Deutsche Bank AG 418.1 1,398 6.4 343.4 7J.P Morgan 414.6 1,553 6.4 395.6 3Morgan Stanley 383.5 1,238 5.9 416.3 2Merill Lynch 343.2 1,450 5.3 385.7 4Credit Suisse First Boston 337.3 1,138 5.2 366.5 6

Goldman Sachs 310.2 819 4.8 291.1 9Barclays Capital 269.7 853 4.1 191.8 12TOP 10 TOTALS $3,785.6 12,742 58.3% $3,611.2

INDUSTRY TOTAL $6,511.3 20,118 100.0% $5,767.0

FIRST NINE MONTHS 2006 FIRST NINE MONTHS 2005PROCEEDS MARKET NO OF PROCEEDS MARKET(billions) SHARE ISSUES (billions) SHARE RANK

So What Does This Mean For You?

Acquisition of American Household Inc

Buy-Side AdvisorAcquisition Finance

Acquisition by Constellation Brands Inc

Acquisition by GTCRBuy-Side Advisor

$400,000,000

May 2006

Senior NotesSole Bookrunning Manager

$190,000,000

May 2006

Convertible Senior Subordinated NotesSole Bookrunning Manager

$300,000,000

July 2004Senior NotesJoint Bookrunning Manager

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