The Spin-Off Report fair value estimate for Phillips 66 is raised to $30 per share (from $24) following the investor update on April 9, 2012, which highlighted opportunities in its midstream and chemical operations. ConocoPhillips (NYSE: COP) is separating its refining, marketing, midstream and chemicals operations into Phillips 66. The stock will begin ‘regular-way’ trading on the NYSE under the ticker ‘PSX’ on May 1, 2012. The parent will retain the exploration and production (E&P) assets. ‘When-issued’ trading of PSX is likely to commence around April 12. COP has received all regulatory approvals.

As noted in the ConocoPhillips Spin-Off Report, dated January 26, 2012, the fair value estimate for the spin-off would be reconsidered after the capital structure, and share distribution were finalized, amended Form 10s were filed, and management provided a pre-separation operations update.

The fair value for the parent post-spin remains unchanged at $62 per share, while the fair value estimate for PSX is raised to $30 per share (from $24), based on a 1:2 share distribution for the spin-off entity. Previously the valuation was based entirely on historic and relative multiples in the refining sector. But management confirmed during an April 2012 operations update that a greater percentage of future capital would be allotted to the more stable chemicals and midstream businesses. Future expenditures in the refining business would focus on efforts to lifts spreads not capacity. As a result, one might consider a sum-of-the-parts approach when reaching a fair value estimate. One may expect a certain post-spin discount as earnings from the chemicals and midstream segments are generated overwhelmingly from joint ventures, which arguably creates greater uncertainty and less transparency. Although notably the two large COP joint ventures, CPChem and DCP Midstream, are each more than a decade old.

The $30 per share post-spin valuation is also supported by considering the dividend yield of the refiner and midstream peer groups. Refiners Marathon Petroleum Corp. (NYSE: MPC), which less than a year ago was spun-off from Marathon Oil (NYSE: MRO) and Valero Energy Corp. (NYSE: VLO), which has a similar margin performance as the future PSX each trade at around a 2.4% dividend yield, while non-MLP (master limited partnership) midstream companies, including Kinder Morgan Inc. (NYSE: KMI), Williams Companies (NYSE: WMB) and ONEOK Inc. (NYSE: OKE) have yields averaging 3.0%. Using a range of yields between 2.4% and 3.0% for PSX and a proposed dividend of $0.80 per share results in a $30 per share initial post-transaction valuation (see exhibit in attachment). While cash flow generation from refineries can be volatile, more stable revenue generation from the other businesses should help offset. Over the last two years, free cash flow (cash flow from operations minus capital expenditures) has averaged about $2.5 billion, more than ample to cover the proposed $512 million needed for an $0.80 dividend and leave cash available to buy back stock.

The sum-of-the parts valuation considers the three PSX business segments separately. The valuation for the refining business is based on a multiple to daily processing capacity compared to other refiners with similar margins (such as Valero). The average income attributable to PSX over the last three-years from its chemicals operations is compared to multiples to trailing 12-month earnings for similar chemicals companies, such as LyondellBasell NV( NYSE: LYB). A 20% discount is applied given uncertainty and lack of transparency from the joint venture. Similarly the midstream average income attributable to PSX over the last three years is compared to multiples to trailing 12-month earnings for other midstream companies with associated MLPs: KMI, OKE and WMB. The same 20% discount is applied. The resulting $30 per share post-spin valuation is shown in the attached exhibit.

On March 28, 2012, Tyco International (NYSE: TYC) announced plans to merge its Flow Control business with Pentair Inc. (NYSE: PNR) in an all-stock deal that will be structured as a Reverse Morris Trust, thus maintaining the tax-free status of the transaction. Tyco shareholders will own approximately 52.5% of the company to be named Pentair, while PNR shareholders will own approximately 47.5%. The new company will assume $275 million in net debt from Tyco’s Flow Control. Including debt and minority interest, and based on yesterday’s closing prices, the deal values Flow Control at about $4.9 billion. The CEO of Pentair is expected to lead the combined entity. New Pentair is estimated to generate annual sales of about $7.7 billion and will be an industry leader in valves and assorted products for energy, water, infrastructure and industrial usage. The transaction still requires regulatory and shareholder approval.

The deal follows the September 2011 announcement by Tyco to separate into three publicly-traded companies: (1) ADT North American Residential, which designs, installs and maintains home security systems, (2) Flow Control, (3) Commercial Fire and Security, which manufactures commercial fire and retail security systems. The separation is still scheduled for completion by the end of September 2012. Capital and liability allocations are yet to be finalized for the two remaining pieces. The spin-off of ADT will require SEC approval, an affirmative IRS ruling and is subject to a shareholder vote. TYC CEO Ed Breen will become non-executive chairman of the commercial fire and security business, and a consultant to the ADT business. At the time of the announcement, it was expected that the three entities (including Flow Control) would initially pay a dividend, which in sum was equal to TYC’s current $1.00 annual payment.

ADT North America generated pro forma estimated sales of $3.1 billion in F2011, while Commercial Fire and Safety contributed $10.2 billion. The ADT business will control approximately 26% of the U.S. home security market. North American revenue and consolidated segment operating margins have generally been trending higher since 2009. The commercial portion of ADT will remain with the parent, which will include the Commercial Fire and Security business.

The ADT business does not have a pure-play publicly traded comparable as it did acquire competitor Broad View Security (formerly Brinks Home Security) in 2010 for 3.3x 2010 estimated sales, or 9.5x 2010 estimated EBITDA. Applying a 3.3x multiple to 2011E ADT sales, one could arrive at an enterprise value of $10.2 billion.

The parent company, Commercial Fire and Security, could be compared to MSA Worldwide (NYSE: MSA), which currently trades at a 1.5x EV/sales multiple. Applying that multiple to the remaining business would result in an EV of $15.3 billion. Based on this sum-of-the-parts valuation, one could arrive at an EV of $30.4 billion, representing modest upside to the current EV of $27.8 billion.

Following the spin-off of its consumer and office products business (C&OP), initial trading of MeadWestvaco (NYSE:MWV) is expected at $27 per share. Given global growth prospects for the packaging industry, near-term upside is likely limited. However investors with a longer-term time horizon may arrive at a $39 per share fair value estimate. Shares of ACCO Brands Corporation (NYSE:ABD) are expected to trade at an initial value of $11 per share following ABD’s merger with the C&OP business. The spin-off of MWV’s C&OP business, and subsequent merger of that business with ABD, is expected to take place in June 2012.

Given consensus estimate growth rates for sales of 2.3% and EBITDA growth of 4% for MWV’s peer group in 2012, and GDP growth forecasts for advanced nations of just 2.8%, according to The Conference Board, the parent stock is likely to trade at a lower range in the near term prior to approaching a $39 per share level in a stronger economic environment. The loss of the higher-margin C&OP business and increased focus on the commoditized packaging business may make it difficult to generate sales growth and margins in line with management’s annual expectations (discussed below) in the near term. In fact, management commented on its latest conference call of weakness in demand in North America and Europe, which it expects to last at least through 1H 2012.

The initial trading value estimate of $27 per share may be reached by subtracting the implied value of the C&OP business from MWV’s current valuation (see exhibit in attachment). However, an investor with a longer time horizon may still receive an acceptable return given management’s stated goals. Management has committed to maintaining the current $1.00 per share annual dividend following the transaction, which yields 3.2% at the current stock price. Second, management targets earnings growth of 7% to 10% annually for the parent post spin, consisting of approximately 5% revenue growth and 50 to 100 basis points of margin expansion.

At a minimum, the 3.2% dividend yield should provide a degree of support for MWV’s share price post spin given the relative attractiveness versus the current S&P 500’s yield of 2.0%. If MeadWestvaco can grow EBITDA at the low end of management range, a longer-term fair value estimate in three years of $39 per share can be derived assuming a constant valuation multiple (see exhibit in attachment), which is currently in line with peers. If it is assumed that the $1.00 per share annual dividend remains constant, and the stock rises from the immediate post-spin price of $27 to $39 within three years, total return would approach 56%, representing an approximate 16% CAGR over the three-year period.

ConocoPhillips (NYSE: COP) expects Phillips 66, the spin-off entity that includes the company’s refining, marketing, midstream and chemicals operations, will begin ‘regular-way’ trading on the NYSE under the ticker ‘PSX’ on May 1, 2012. The transaction still requires SEC approval and an IRS private letter ruling on the tax-free status of the distribution. The Conoco board is scheduled to approve the separation at a meeting on April 4. Five days later, Phillips 66 management will provide an update on the spin-off entity’s operations. At that time, The Spin-Off Report’s fair value estimate may be reconsidered. ‘When-issued’ trading of PSX is likely to commence around April 12 with a record date for shareholders to receive the stock distribution set for April 16.

When considering a variety of relative- and absolute-value metrics and methodologies, an investor may conclude that COP is currently fairly valued on a sum-of-the-parts calculation. A lack of investment in recent years has resulted in relatively weak refiner margins, and COP has idled facilities with the intent to sell or close certain older, less competitive facilities. However, an investor may find an opportunity post separation in the E&P business once it is no longer saddled with the volatile and capital-intensive refining operations. COP has bought back 15% of its stock over the last three years and is committed to continuing to buy back stock and raise dividends in the future. Following the cash distribution from the spin-off, COP should be well positioned to develop liquids-rich assets, make targeted acquisitions to build proved reserves, and/or lift the dividend. One may reach fair value estimates of $62 post-spin for COP and a fair value estimate of $24 (following a 1:2 share distribution) for PSX. Please see the ConocoPhillips Spin-Off Report, dated January 26, 2012, for further details.

Sara Lee Corporation (SLE) announced that the spin-off of its international coffee and tea business is expected to be completed by late June 2012. The entity, temporarily known as DE Holdings International, will be domiciled in Amsterdam. The company has applied for a listing on NYSE Euronext. In addition the company confirmed the previously disclosed $3 per share special dividend will be paid to SLE shareholders at the time of the spin-off. Following the transaction, deferred tax liabilities of $700 million will be released. At the time of the spin-off, SLE expects to have $1.4 billion in net debt.

SLE has received a private letter ruling from the IRS confirming that the spin-off transaction will satisfy the key requirements for tax-free status. The announcement likely comes as a welcome to investors since the original spin-off was announced in January 2011. Following the transaction the parent company will be comprised of the North American retail and food service businesses, including the Sara Lee, Jimmy Dean, and Hillshire Farm brands. DE International will be comprised of the former international beverage segment.

The spin-off was originally announced on January 28, 2011, following drawn-out takeover discussions for one or both businesses. According to The Wall Street Journal, all of the offers fell below the $20 per share takeout price that would have been deemed acceptable by management

On January 20, 2012, Ralcorp Holdings, Inc. (NYSE: RAH) released initial preliminary 1Q F2012 results and prospective financial information for the first twelve months following separation of Post Holdings Inc. (NYSE: POST). It appears that sales levels for Post have bottomed and management is expecting a slight return to growth following the separation. However, increased costs related to the spin-off and operations as a standalone company will likely result in lower EBITDA in the near term. If one were to approach valuing shares based on the mid-point of management estimates, and considering comparables’ earnings multiples, the stock may initially trade around $29 per share immediately following separation. This may provide an opportunistic entry point for value investors.

The Post business has been in decline for several years, with sales and margins suffering from a lack of demand and increased commodity costs. Given this, the Spin-Off Report fair value estimate of $43 for Post Holdings was derived using a F2013 EBITDA estimate of $265 million assuming that the POST business was reaching a trough and a return to EBITDA growth was reasonable after separation costs subsided.

The well-known brand portfolio and distribution network would appear to allow a quick rebound in sales upon the emergence of a stronger consumer. Also, the placement of a fair degree of debt on Post Holdings, levered at 4.3x projected net debt, would allow for a strong earnings rebound in a recovery mode. If shares begin trading at levels at or below $29, it would likely provide investors with an attractive entry point as management attempts to turn around the branded cereal business. Please see the Ralcorp Holdings Spin-Off Report, dated December 2, 2011, and follow up FLASH, dated January 17, 2012, for further details.

Shares of Post Holdings will be distributed after the bell on February 3, 2012, to Ralcorp Holdings, Inc. (NYSE: RAH) shareholders of record, as of the close of business on January 30, 2012. Post has been approved to trade on the NYSE under the ticker ‘POST’ following the separation. RAH shareholders will receive one share of POST for every two shares of RAH. The ‘when issued’ market for POST stock is expected to begin on January 26, 2012, with regular way trading expected to commence on February 6, 2012. The SEC still must declare effective the companies’ Registration Statement. The receipt of an IRS letter ruling on the tax-free status must be received to conclude the regulatory review.

As noted in our initial Ralcorp Holdings, Inc. Spin-Off Report (December 2, 2011), the fair value calculation would be adjusted based on the finalized distribution ratio, capital structure, dividend policy and changes in company/industry fundamentals. The fair value estimate was adjusted to reflect changes in the debt level and distribution made to the parent which were disclosed in an amended Form 10 containing the most recent quarterly data. Additionally the share distribution was set at 1:2. The adjustments to the initial calculations are shown on the next page.

The fair value estimate for initial trading in RAH is revised to $62, from $63 (see exhibit in attachment), based on the modestly adjusted cash distribution to the parent following the separation. If one were to assume 2012 revenue growth on par with 2011 with slight margin expansion, a fair value estimate of $67 per share appears to be reasonable within a 12-month time horizon.

Based on the revised capital structure, POST will incur a higher net debt position than previously estimated. Combined with the final share distribution of 1:2 versus the prior assumption of 1:1, POST shares can be assigned a fair value estimate of $43 versus the previous estimate of $28 (see exhibit in attachment). Investors with a longer time horizon and a more positive outlook on POST’s business prospects may see upside potential to $52. However this scenario is reliant on the company reversing its current negative earnings trends.

On November 26th, Vivendi SA’s (Ticker: VIV FP, EUR 18.80, Market Capitalization: EUR 25.3 billion) Supervisory Board, headed by Chairman Jean-René Fourtou, approved the demerger of telecommunications company SFR, following a study that was launched on September 11th. Vivendi was included in The Global Spin-Off Radar Screen in June (EUR 15.17), in anticipation of a potential separation between its telecommunications and media assets. The rationale for the spin-off is to offer SFR more autonomy to operate in a very competitive market that has resulted in a significant decline in revenues. After the distribution of SFR shares, Vivendi will be comprised of pay-TV Canal+, music company Universal Music Group and Brazilian broadband company GVT, and will be headed by current Vice-Chairman Vincent Bolloré—whose Group Bolloré holds 5% of Vivendi’s shares. The demerger is subject to regulatory approvals, as well as shareholder approval at the annual shareholders’ meeting in June 2014.

Vivendi is a French telecommunications conglomerate headquartered in Paris, France. It has been actively purchasing companies over the past 20 years under CEOs Jean-Bernard Lévy and Jean-Marie Messier, holding stakes in NBC Universal (until it was sold to General Electric and Comcast) and French utility Veolia Environment, among others. As of 2013, the conglomerate comprised of SFR, Canal +, GVT, Universal Music Group, as well as Moroccan telecommunications company Maroc Telecom and gaming company Activision Blizzard. As part of its strategic shift from a holding company to a focused media group, executed under Chairman Fourtou, Vivendi agreed in July to sell most of its 63% stake in Activision Blizzard for USD 8.2 billion. It expects to dispose its remaining shares within the next year, for approximately USD 1.4 billion, thus bringing the total proceeds to USD 9.6 billion, or EUR 7.1 billion. Additionally, Vivendi reached an agreement in November to sell its 53% stake in Maroc Telecom to Etisalat for USD 5.7 billion, or EUR 4.2 billion. As far as its media assets are concerned, Vivendi purchased on October the remaining 20 percent stake in Canal + from Lagardère, for EUR 1 billion.

Vivendi’s media assets have been performing significantly better than those of SFR. For the nine months through September 30th, 2013, Universal Music Group generated EBITDA of EUR 386 million, a 20

percent year-on-year increase. GVT’s EBITDA increased by 0.6 percent, to EUR 531 million—even though the change in constant currency terms was 14 percent. EBITDA at Canal + declined by 6.7 percent to EUR 847 million, bringing the total EBITDA for the nine-month period to EUR 1,764, at par with the same period in 2012. SFR, on the other hand, had EBITDA of EUR 2,201 million, representing a 19.5 percent decline on a yearly basis. Assuming the same year-on-year changes to each company’s full year EBITDA, and after adjusting for EUR 114 in corporate overhead expenses, SFR could achieve EBITDA of EUR 2,599 million in 2013, and Vivendi post-spin-off EBITDA of EUR 2,374 million.

SFR could be compared to a set of European telecommunications companies, such as Orange and Iliad SA, that trade at an average enterprise value-to-EBITDA of 7.57, resulting in an enterprise value of EUR 19.7 billion. Vivendi, post spin-off, could be valued at a similar multiple as another major European media company, Liberty Global Plc. Applying its 11.06 enterprise-to-EBITDA multiple, a post spin-off Vivendi could be valued at EUR 26.3 billion. Consequently, the combined entity could have an enterprise value of EUR 45.9 billion. As of September 30th, Vivendi had EUR 7.2 billion of net debt, including the cash proceeds from the sale of Maroc Telecom and Activision Blizzard, as well as the outflows from the purchase of 20 percent of Canal +. Further adjustment is required to incorporate the EUR 1.1 billion of additional cash Vivendi is expected to generate from the sale of its remaining shares in Activision Blizzard, thus reducing net debt to EUR 6.1 billion. The resulting market capitalization is EUR 39.8 billion, which compares to the current market value of EUR 25.3 billion.

On December 13, 2010, Forest Oil Corporation (NYSE: FST) announced that Lone Pine Resources, a wholly-owned subsidiary that will hold all of Forest Oil’s Canadian oil and natural gas exploration and production assets, had filed a Form S-1 registration statement with the SEC related to a proposed initial public offering (IPO) for approximately 19.9% of Lone Pine’s common stock. Forest Oil also announced that following the completion of the IPO, it intended to distribute its then-80.1% ownership of Lone Pine stock to Forest Oil shareholders via a tax-free distribution. The IPO is expected to be completed in the first half of 2011, while the tax-free distribution of shares is expected approximately four months after the completion of the IPO.

The Canadian operations of Forest Oil were previously operated as Canadian Forest Oil Ltd. As of December 31, 2009, Canadian Forest Oil held estimated proved reserves of approximately 322 billion cubic feet of natural gas equivalents (Bcfe), of which approximately 69% was comprised of natural gas reserves. The company’s primary area of operation is in the Western Canadian Sedimentary Basin, although the company owns significant acreage in the Utica Shale in Quebec and the Liard Basin in the northwest region of the country, which represent shale gas prospects that the company believes hold significant development potential. As a stand-alone entity, Lone Pine will seek to exploit its active resource plays by applying horizontal drilling and multi-stage hydraulic fracture stimulation techniques, while investing sufficient resources into its shale gas projects to commence their development in the near future.

Forest Oil will continue its core, US-based exploration and production of unconventional resource plays in the Texas Panhandle and the East Texas/North Louisiana area. Excluding the proved reserves of the Canadian operations being divested, Forest Oil had proved reserves of approximately 1,800 Bcfe as of December 31, 2009, of which the majority was natural gas. The separation is expected to allow Lone Pine to pursue it exploration and development efforts under a capital budget consistent with its own business strategy, thus enhancing the value of this business.

On December 8, 2010, NTELOS Holdings Corporation (NASDAQ: NTLS), a Virginia-based regional communications services provider, announced that its Board of Directors had approved the tax-free spin-off of its wireline business from its wireless business during the second half of 2011. The transaction is subject to customary spin-off approvals, including IRS, SEC, and final Board of Directors approval, but will also require confirmation from state regulatory bodies and the Federal Communications Commission.

The spin-off company, New Wireline, will operate the company’s land-line businesses as a rural exchange carrier, offering communications services to residential and small business customers in select cities in Virginia, and as a competitive wireline operator, providing large business customers with high capacity internet protocol and data services primarily in Virginia and West Virginia. New Wireline’s operations are supported by a 5,700 route-mile fiber optic network. For the twelve months ended September 30, 2010, the wireline operations of NTELOS Holdings as reported, plus the historical results of recently-completed acquisitions, generated pro-forma revenue of $214 million and EBITDA of $105 million, excluding its share of corporate expenses. New Wireline is expected to have debt of approximately $315 million upon the completion of the spin-off, and will pay a yet-unspecified dividend to New Wireless (post-spin-off NTELOS Holdings) as part of the separation.

Following the completion of the spin-off, New Wireless (post-spin-off NTELOS Holdings) will continue providing wireless digital voice and data service to approximately 435,000 subscribers primarily in Virginia and West Virginia, as well as operating a wholesale business that provides Sprint Nextel Corporation (NYSE: S) with service in the western Virginia and West Virginia area for Sprint Nextel customers. For the twelve months ended September 30, 2010, the wireless operations of NTELOS Holdings generated revenue of $406 million and EBITDA of $149 million, adjusted for charges from voluntary early retirement and workforce reduction plans and excluding its share of corporate expenses.

One of the stated reasons for effecting the spin-off is the divergent growth prospects and internal competition for capital that has existed under NTELOS Holdings’ current structure. The wireless business, for example, is positioned as a regional, independent leader that could potentially be acquired by one of the national wireless carriers, while the wireline business is likely to continue acquiring assets in order to expand its offerings and drive future growth.

The spin-off could unlock shareholder value, as the company appears to be valued as a wireless operator, without giving consideration to the higher-multiple wireline business. On a consolidated basis, NTELOS currently trades at an EV/2011E EBITDA multiple of 5.3x, which is in line with the average multiple of 5.2x EBITDA for comparable, regional wireless companies. However, such a valuation arguably does not reflect the higher valuation of the wireline assets, as comparable, regional wireline companies trade at EBITDA multiples closer to 7.3x.