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Biotech / Medical : ROTC:Rotech medical

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To: JohnSK who wrote (148)	10/2/1997 1:13:00 AM
From: JohnSK	of 161

Observations, ramblings, opinions: Where does one begin ... 1) Based just on the financial information presented in the proxy documentation, I can't see why anyone (even institutional investors) would support the proposed merger. The balance sheet, earnings growth rate, etc. for ROTC all appear to be superior. 2) Regarding "Opinions of Financial Advisors": If this were a straight buyout of ROTC for an agreed upon price, then only an evaluation of ROTC's fair value is necessary. But where a share swap at a fixed ratio is used, it seems to me an evaluation of IHS's fair value is also required. The selection of $38.50 was arbitrary, and judging by now was way too high. Most of the valuations calculated by Smith Barney are worthless, as the valuation ranges are huge. Both DLJ & SB did discounted cash flow analyses. DLJ used a discount rate range of 11% to 13%. SB used 12.5% to 17.5% (resulting in a lower valuation). Just who is SB representing? Come on, a cost of capital of 17.5%? I think even the lower rates used by DLJ may be too high! Bottom line - ROTC shareholders will not receive value that is comparable to the valuations calculated by DLJ or SB if things stay as they are today. (continued)

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