Zebra during EQT´s ownership: Valuation and analysis of the value creation

Jan Bormeth Vilhelmsen & Martin Anker Larsen

Student thesis: Master thesis


The master thesis at hand is a study of the Danish retail store chain Tiger and EQT’s decision to acquire a 70% stake in the company. The aim in this thesis is twofold. Firstly, a valuation of Zebra per June 30, 2015, will be conducted. Secondly, an analysis of the value creation during EQT’s ownership period is performed. The main objective in this thesis is to estimate the fair Enterprise Value per June 30, 2015, through a DCF-analysis. Based on Zebra’s strategic position and its historical financial performance, the expected future earnings and cash flow generations were forecasted and resulted in an Enterprise Value of DKK 8,864 million from which the Group accounted for DKK 8,350 million and the Japanese Joint Venture for DKK 515 million. Based on these figures, Zebra’s fair value of equity comprises DKK 7,789 million. Of this figure, EQT’s share of the equity amounts to DKK 5,219 million and DKK 2,874 million when correcting for the 50/50 owned subsidiaries. At EQT’s entry in the beginning of 2013, the purchase price for its stake was DKK 1,600 million, according to different sources, resulting in an IRR for EQT on 26.48% per year. This IRR is satisfying since it is above the expected return for Private Equity investments which historically has a threshold for an IRR on over 20% per year, and in more recent time a threshold between 12-17% per year. The objective in the second part of this thesis is to analyze how EQT has created or destroyed value during its ownership period based on an IRR for Zebra, excluding the Japanese Joint Venture. The value created is almost solely driven by EBITDA-growth which represents 122% of the value creation. However, the EBITDA-growth is only driven by sales growth. As opposed to LBO-cases in general, EQT has not been able to improve the operational performance in Zebra as expressed in a lower EBITDA margin during its ownership period. Zebra as a LBO-case also differs considerably from other cases when it comes to the degree of leverage as it only accounted for 8% of the overall value creation.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
Publication date2015
Number of pages187