Project Hypothetical Example��Acquisition Candidate

®

Summary of Raratonga Strategic Rationale

Slide 2

• A medium-sized specialty chemicals player with leading positions in Coatings and Engineered Materials
• $3.4 billion revenue (2007E)
• 13.4% EBITDA margins – growing through active restructuring
• 5% - 7% revenue growth is stated target

• Basic chemicals exposure relatively minor and concentrated in one site.
• Additional value created through a combination of our’s strengths in operations efficiency and Raratongas’ market focused approach in attractive segments of common interest.

• Catapults our market-facing business strategy in several areas:
• Coatings
• Engineered Materials (Epoxy Systems)
• Mining chemicals

• Enables leverage of our R&D and focus onto specific, differentiated application areas – this is the key to the growth synergies

Raratonga – Company Overview

Slide 3

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Market Valuation ($ millions, except per share data)

Financial Summary ($ millions)

Relative share performance (dividend adjusted)

Major shareholders

Key Management

Shareholder Position (MM) Mkt. Value ($MM) %O/S

Wellington Management Company LLP 3.57 $239.3 7.43%

Mellon Bank Corp 2.05 $137.1 4.26%

ClearBridge Advisors LLC 1.45 $97.4 3.03%

Barclays Global Investors 1.36 $91.2 2.83%

Vanguard Group Inc 1.23 $82.6 2.57%

Management Role Position %O/S

James Cronin CFO 84,479 0.18%

David Lilley CEO 43,386 0.09%

Roy Smith Secretary/General Counsel 41,467 0.09%

Shane Fleming President, Specialty Chemicals 28,619 0.06%

Steven Speak President, Engineered Materials 19,431 0.04%

Source: CapitalIQ; Note: 9/1/2004 = 100

Source: Public filings (Bloomberg)

Raratonga – Segment Overview

Slide 4

Performance Chemicals

Surface Specialties

Building Block Chemicals

Sales $773 MM

EBIT¹ $69 MM

% Margin 8.9 %

EBITDA $102 MM

% Margin 13.2 %

Sales $1,583 MM

EBIT¹ $85 MM

% Margin 5.4 %

EBITDA $ 157 MM

% Margin 9.9 %

Sales $641 MM

EBIT¹ $121 MM

% Margin 18.9 %

EBITDA $132 MM

% Margin 20.6 %

Sales $ 387 MM

EBIT¹ $20 MM

% Margin 5.2 %

EBITDA $42 MM

% Margin 11.0 %

Source: Company filing and equity research; results as reported Last 12 Months ending June 30, 2007 (Performance Chem. not adjusted for divested Water Treatment Chemicals)

¹ Segment EBIT not adjusted for non-operating expenses and corporate eliminations

% of Total Sales:

22.8%

46.8%

18.9%

11.4%

Engineered Materials

Raratonga

Employee Headcount: 6,700

Manufacturing/R&D Sites: 43

Description

Products & Services

End Markets

Diverse portfolio of specialty products & solutions in a variety of applications and markets.

Coatings raw materials primarily made up of UCB’s businesses acquired in 2005 & Solutia’s resins, additives, and adhesives business acquired in 2003.

High performance composites & structural film adhesives sold to large aerospace contractors like Boeing, Airbus, & Lockheed Martin. Back-integrated into PAN & pitch type carbon fibers.

Intermediate chemicals produced at Fortier, LA. ~30% consumed internally (e.g., melamine for amino resins) & much of the rest sold under contract to Degussa or Kemira.

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• Specialty additives & urethanes (sulfosuccinate surfactants, acrylamides, urethanes)
• Mining chemicals (separation of ore)
• Polymer additives
• Pressure sensitive adhesives
• Phosphines

• Liquid coating resins (water- & solvent-borne acrylics, alkyds, polyesters, PU, phenolic, epoxy, amino resins)
• Radiation-cured (oligomers, photo-initiators, monomers)
• Powder coating (polyester UV & conventional cure)

• Advanced composite materials based on epoxy, bismaleimide, phenolic, polyamide resins
• Structural film adhesives
• Polyacrylonitrile ("PAN“) carbon fibers

• Acrylonitrile
• Hydrocyanic acid
• Melamine
• Sulfuric acid

• Emulsion polymerization, textiles, adhesives, inks
• Mining (copper, alumina)
• Plastics, coatings, fibers
• Pharmaceutical catalysts, biocides

• Coatings & inks for industrial metal, wood, & plastics
• Heavy duty metal, appliance, white goods, architectural
• Automotive, containers, furniture, machinery, etc.

• Large commercial aircraft
• Military aircraft
• Business / regional jets
• Helicopters
• High performance automotive
• Satellites & launch vehicles

• Acrylic fiber
• ABS
• Water treatment (Kemira)
• Coatings

Strategic Characterization of Raratonga Business Units

Slide 5

Surface Specialties:

• Pioneer and Worldwide leader in UV/EB Energy curable Coatings (=RAD Cure, acrylic-based)
• #1 in high-end Water Borne Coatings, leading the market conversion away from solvent borne
• Market leader in Powder Coatings (1st or 2nd)
• Significant participation in commoditized Amino Resin and Solvent Borne Coatings – low profitability

Engineered Materials:

• Market leader in Advanced Composites and Structural Film Adhesives mainly to aerospace industry
• Strong positions with Boeing, Airbus and Lockheed Martin in both civil and military aircraft markets, protected by long qualification times and partial integration into carbon fibers

Performance Chemicals:

• Portfolio of technology driven product lines: major player in Mining Chemicals ($200m) and Phosphines ($50m), leader in high-end Pressure Sensitive Adhesives ($95m) and Sulfoccinate Surfactants ($100m). Polymer Additives ($130m) with strength in triazine chemistry

Building Block Chemicals:

• Single-site, mostly merchant business based on acrylonitrile and melamine

Raratonga

= $100 EBITDA

Engineered Materials

Surface Specialties

Performance Chemicals

Aminos

Powder Coating

Solvent Borne

Water Borne

Building Blocks

Raratonga Growth & Margin Forecasts

Slide 6

Raratonga

EBITDA Margin (% of Revenue)

Forecast Revenue CAGR

= $200 MM Revenue

Key Demand Drivers

Engineered Materials:

• Newer aircraft models with ever higher use of carbon fiber based composites – civil and military
• Growth in renewable energy production propelling wind turbine industry and with it prepregs
• Automotive industry remains a significant untapped growth potential

Surface Specialties:

• Strong market trend towards eco-friendly coatings fuels growth in Water Borne segment
• Geographic expansion into Asia for both Powder and Radiation Curing

Performance Chemicals:

• Mining and Phosphine chemicals currently in cyclical upwind
• our strength in LA (Chile and Brazil), Russia and Australia

Building Blocks

0%

2%

4%

6%

8%

10%

12%

0%

5%

10%

15%

20%

25%

30%

35%

Global GDP Growth

Forecast EBITDA Range (07-09)

Engineered Materials

Performance Chemicals

Solvent borne

Water borne

Powder Coatings

Radcure

Aminos

Raratonga Fit With our Businesses

Slide 7

Divest

Performance

Market Facing

Sources: Company website, presentations and SEC filings; analyst reports; our analysis

Note: Based on 2006 sales, excluding divested water treatment business

$2.5 B (79% Raratonga of sales)

$0.3B (11% of Raratonga sales)

$0.3B (10% of Raratonga sales)

• Unique opportunity to jump start Coatings MFB with technically-driven platforms covering several chemistries
• 2/3 of the revenue is from value creating segments
• 1/3 of the revenue from commoditized segments that will require further restructuring and a commodity model
• Engineered Materials fits squarely with Epoxy Systems growth strategy, providing an entry into high-end of composites (aerospace)
• Mining Chemicals: triple opportunity to start a Mining MFB, to start in a service intensive business, and to strengthen presence in certain countries (Chile, Brazil, Australia, Russia, South Africa)
• Adhesives: niche in high end PSA (e.g. medical tape)
• Sulfosuccccinate surfactants are used mainly in emulsion polymerization and have therefore good fit with our Polyglycols & Surfactants
• Polymer Additives does not have a current fit in our, except technical leverage with Plastics
• ‘Others’ includes a line of ‘Specialty PU Resins and Systems’, with know-how on PU dispersions and cast elastomers. Adhesives: niche in high end PSA (e.g. medical tape)

Surfactants

$0.1

$0.1

Polymer Additives

$0.1

Others

Building Blocks

$0.3

Linden’s Portfolio Aligns Well With Major Themes

Slide 8

• Large exposure to mature, transportation-related, consumables (additives) markets

Raratonga Valuation Analysis

• Purchase Price:
• $5.1 B at 30% premium ($85/share; 11.1x 2007E EBITDA)
• $4.8 B at 22% premium ($80/share; 10.5x 2007E EBITDA)
• Synergy Assumptions: $481 M total run rate
• Cost Synergies: $267 M run rate^†
• 7.8% of 2007E Revenue (7% of COGS and 21% of SARD)
• Integration Costs: 1.6x cost synergy
• Growth Synergies: $214 M run rate^‡
• Calculated at sub-segment level
• Tax rate: 28%

Slide 9

†Run rate fully realized in year 3

‡Annuitized value of growth synergy NPV

Linden Preliminary Value

Slide 10

Assuming 100% cost and growth synergies realized ($325 MM run rate), the deal is expected to create approximately $900 MM of value

IRR

Cost:

10.4%

Cost + Growth:

11.2%

*Value created at 8.5% discount rate is $2.8 B

Raratonga Stretch Case IRR

11

Stretch synergies from raw materials new technologies ($69M and $40M respectively) bring total cost synergies to $376 M, 11% revenue) Creates approximately 13.6% IRR at 30% premium

Overview of Raratonga Cost Synergies

Slide 12

• Total cost synergies: $267M
• 25% realized Y1, 66% realized Y2, 100% realized thereafter
• SARD reduction of $80M between Coatings MFB & Raratonga
• No growth of cost synergies
• Integration Costs: 1.6x cost synergy
• 75% incurred in Y1 and remaining 25% incurred in Y2

Components of Cost Synergies

Methodology & Key Conclusions

Estimated Cost Synergies ($ M) generated from the following areas:

6

Slide 13

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Raratonga – Potential Year 10 Revenue & EBIT

World Leader in UV Cure

Oligomers

PUD Manufacturing Expertise

Polyester Based Powder Resins

Leading Market Channel

Alkyd Dispersion Resins

Powder Coating Resins

UV Cure

Coating Polyurethane

Dispersions

UNOXOL^TM Based Diacrylates

Differentiated Polyesters

Total Incremental Revenue: $1,049

Total Incremental EBIT: $171

65/10

130/26

110/10

120/12

State of the Art Mechanical Dispersions

State of the Art High Throughput

UNOXOL^TM Based Starting Materials

Differentiated Polyesters

State of the Art Mechanical Dispersions

Differentiated Polyesters

Carbon Fiber & Prepregs

Engineered Materials

570/108

Leader in Epoxy Chemistry

New Graphene Materials & Chemistry

Leading Market Channels

Mining and Flocculates

54/5

State of the Art High Throughput

Broad Portfolio of Polymers

Revenue/EBIT ($ million)

US

New US

Raratonga

Raratonga

Raratonga Issues and Challenges

Slide 14

• Information access is limited to public information

• Asbestos related liability of $55m (insurance receivable of $38m) and involved with 8600 claimants as of YE06.
• One among several defendants in approx. 35 cases related to lead exposure in paints

• Preserving the value of Raratonga capabilities while capturing value from synergies (customer retention issues, etc)

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• Portfolio contains several weak areas totaling around $1bn in revenue: premium on current valuation must remain under 20% to create LT value

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Recommendation

• What would you suggest the recommendations should be for this hypothetical Example?

Slide 15

Back-Up

Strategy

®

Raratonga Business Unit Highlights

• $1.6bn Revenue, growing at 5% pa w/projected earnings growth of 15% pa
• 10% EBITDA Margin
• Raratonga participates in the Architectural, Industrial, and Transportation Coatings Market Segments, with application emphasis in Automotive, Industrial Maintenance, Plastic and Metal Furniture, Wood, and Appliances
• Key competitors and competitive position:
• #1 in Radiation Curing, with clear leadership over Sartomer and BASF
• #1 or #2 in Powder Coatings – both DSM and Raratonga lay a claim to the industry leadership position. Attractive top line growth in this segment, but profitability is suppressed due to the crowded competitive landscape and low end product participation, particularly in Asia
• Strong market leadership in the conversion to water borne coatings, coupled with differentiated technology
• Other key competitors to Raratonga are Hexion, Cray Valley, and Ineos
• Strengths/Weaknesses:
• Strengths are UV Curing Technology, Water borne coating participation, value chain position (specialty intermediate supplier)
• Weaknesses are current earnings, heavy existing asset base in mature solvent borne and amino resin coatings, and in recently constructed powder coating facilities facing extreme competitive pressures
• Geographic focus or diversity:
• Liquid Coatings - 55% EU, 25% NA, 17% Asia
• Powder Coatings - 48% Asia, 35% EMEA, 17% Americas
• Highlight areas of fit with our
• Raratonga presents an strong basis for growth for our Coatings MFB with the opportunity to reinforce our’s efforts into various water-borne chemistries, leverage our acrylic acid position, strengthen our presence in targeted segments such as wood and industrial coatings, and garner critical formulation expertise

Slide 17

Surface Specialties (Coatings)

Raratonga Business Unit Highlights

• $640m revenue, growing at 10% cagr
• 21% EBITDA margin
• Major industries served: aerospace (civil and military aircraft), F1 racing cars
• Key competitors and competitive position: Hexcel, Toray
• Raratonga is segment leader on military aircraft: ‘new programs using larger amounts of composites’
• Hexcel position similar to Raratonga in terms of integration
• Toray a major player in carbon fibers
• Strengths
• Prime technical and commercial position with critical accounts
• Broad range of capabilities developed over 65 years of participation
• Integrated materials science approach to product development (carbon fiber, resin matrix and interface optimisation)
• Global technology organisation
• Integration to a reasonable degree (investing to reach 50%), targeted strictly for strategic aerospace customers and critical applications
• Weaknesses
• Toray and Teijin each have around 27% share of global carbon fiber production vs. 6% for Raratonga
• Geographic focus or diversity
• Appropriate to the distribution of the aerospace industry: 63% NA, 30 % Europe. Highlight areas of fit with our
• our’s stated strategy to enter Epoxy Systems
• our Epoxy systems is supplying wind energy composites market and would provide an entry to major users of prepregs (Hexcel is supplier to wind energy while Raratonga is not)
• our has a larger presence in Asia Pacific and Middle East than Raratonga
• our Automotive can provide a channel into composites for automotive use

Slide 18

Engineered Materials

Raratonga Business Unit Highlights

• $680 revenue, with some segments growing and others shrinking (excludes divested Water Treatment revenues)
• 13% EBITDA margin – stated targeted EBIT growth of 10%
• Industries served: mineral separation/processing, pharmaceutical/chemicals/electronic manufacturing, plastics, textiles, non-wovens, formulated PU/Epoxy systems, pressure-sensitive adhesives
• Position:
• #1 in specialty mining chemicals for copper and alumina processing
• #1 in high purity phosphine and derivative chemicals
• A leading global supplier of polymer additive light stabilizers, with emphasis on triazine chemistry
• Niche supplier for adhesives, emulsion polymers, inks and acrylic monomer stabilisation
• Key competitors and competitive position
• Mining chemicals: Nalco, Clariant
• Polymer additives: Ciba, Chemtura, Adeka, Clariant
• PSA: Avery, 3M, National Starch, R&H, Basf
• Strengths
• World’s largest full-line/full-service supplier of mining reagents
• Technically-driven model in Polymer Additives focused on targeted market segments (eg agric film, rotomolding, automotive…)
• Technology leader in emulsion- and solvent-borne high-end PSA systems (e.g. skin adhesion, high temp, challenging surfaces)
• Weaknesses
• Polymer Additives and Urethanes are ‘turnaround’ businesses
• Geographic focus or diversity
• Global presence in Mining Chemicals
• Highlight areas of fit with our
• Mining Chemicals will enable launch of MFB in our
• PSA with Adhesives, Surfactants, Urethane, Acrylic Monomer stabilizers, PU pre-polymers, Polyester Polyols

Slide 19

Performance Chemicals

Raratonga Business Unit Highlights

• $390 revenue, flat volumes – based on purchased propylene and ammonia
• 11% EBITDA margin
• Industries served: acrylamide, amino acids, composites
• Key competitors and competitive position
• Minor position in acrylonitrile (215kt, one site only, 12% NA cap share)
• Only NA producer of melamine – excess supply in China
• Strengths/Weaknesses
• Only internal consumption is 1/3 of melamine for amino resins
• Long term supply agreements with Degussa (HCN) and Kemira (acrylonitrile)
• Geographic focus or diversity
• One site only is a strength. Site started up in ’54.
• Highlight areas of fit with our:
• our purchases of acrylonitrile (ABS is 60%)
• For the purposes of the financial model we have assumed a divestiture of this business at a $80m loss (delta between 10 and 5 multiple).

Slide 20

Building Block Chemicals

Raratonga Technology Capabilities

Slide 21

• Overall good impression that Raratonga are trying to protect their innovations
• Patent applications filed in 2006/7 (8 in total) include:
• Self-cross-linking PU dispersion
• Binding agent for radiation cured waterborne paints
• Radiation cured polyester-urethane resin
• The 2 core businesses (Rad cure and Powder Coatings) appear to rely mainly on market leadership, trade secrets and applications know-how (did find some applications IP in Europe)
• Engineered Materials appear protected only through 10 composition patents.
• Interesting patent claiming gel-free composition using rad-cure resin
• Patents covering benefits of engineered textile preforms with resin infusion technology
• ‘Out of Autoclave’ technology delivers aerospace performance with simple vacuum/oven cure process
• Carbon fiber patents were not found to differentiate Raratonga
• Polymer Additives business supported by numerous patents in triazine chemistry and a few in hindered amines (HALS)
• Mining Chemicals business mainly protected by patents covering Bayer’s alumina process
• PSA: technology leader in emulsion- and solvent-borne systems.
• Creating new technology platform with eco-friendly UV-cure resins