RPC Group Plc: Proposed acquisition of Superfos Industries A/S and Rights Issue. December 2010

Transcription

1 RPC Group Plc: Proposed acquisition of Superfos Industries A/S and Rights Issue December 2010

2 Disclaimer IMPORTANT NOTICE THIS DOCUMENT IS STRICTLY CONFIDENTIAL AND IS BEING PROVIDED TO YOU SOLELY FOR YOUR INFORMATION AND FOR USE AT A PRESENTATION TO BE HELD IN CONNECTION WITH THE PROPOSED TRANSACTION (AS DEFINED BELOW) BY THE COMPANY AND MAY NOT BE REPRODUCED IN ANY FORM OR FURTHER DISTRIBUTED TO ANY OTHER PERSON OR PUBLISHED IN WHOLE OR IN PART, FOR ANY PURPOSE. FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF APPLICABLE SECURITIES LAWS. THIS DOCUMENT IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION IN AND MAY NOT BE TAKEN OR TRANSMITTED INTO THE UNITED STATES OF AMERICA, CANADA, JAPAN, AUSTRALIA OR SOUTH AFRICA AND MAY NOT BE COPIED, FORWARDED, DISTRIBUTED OR TRANSMITTED IN OR INTO THE UNITED STATES OF AMERICA, CANADA, JAPAN, AUSTRALIA OR SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD BE UNLAWFUL. THE DISTRIBUTION OF THIS DOCUMENT IN ANY OTHER JURISDICTIONS MAY BE RESTRICTED BY LAW AND PERSONS INTO WHOSE POSSESSION THIS DOCUMENT COMES SHOULD INFORM THEMSELVES ABOUT, AND OBSERVE ANY SUCH RESTRICTIONS. ANY FAILURE TO COMPLY WITH SUCH RESTRICTIONS MAY CONSTITUTE A VIOLATION OF THE LAWS OF THE UNITED STATES, CANADA, JAPAN, AUSTRALIA OR ANY OTHER SUCH JURISDICTION. BY ACCEPTING THIS DOCUMENT, YOU AGREE TO BE BOUND BY THESE RESTRICTIONS. This presentation comprises the written materials/slides for a presentation concerning the proposed acquisition and rights issue by RPC Group Plc (the "Company") (the "Transaction"). This document does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any shares in the Company or securities in any other entity nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied on in connection with, any contract or investment decision in relation thereto. This document does not constitute a recommendation regarding shares of the Company. The information contained herein is for discussion purposes only and does not purport to contain all information that may be required to evaluate the Company and/or its financial position. The contents of this presentation have not been verified by the Company or N M Rothschild & Sons Limited, J.P. Morgan Securities Ltd. (which conducts its UK investment banking activities as J.P. Morgan Cazenove) and Panmure Gordon (UK) Limited (together, the "Banks"). This document is not a prospectus and investors should not subscribe for any shares referred to in this document except on the basis of information in the prospectus expected to be published by the Company on.or around 16 December 2010 (the "Prospectus"). Copies of the Prospectus will, following publication, be available from the Company at its registered office. The Prospectus includes a description of risk factors in relation to an investment in the Company. This document contains forward-looking statements that involve substantial risks and uncertainties and actual results and developments may differ materially from those expressed or implied by these statements or a variety of factors. These forward-looking statements are subject to risks, uncertainties and assumptions about the Company and its subsidiaries and investments, including those described in the risk factor section of the Prospectus. These forward looking statements speak only as of the date of this presentation. 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None of the Banks is providing any such persons with advice on the suitability of the matters set out in this presentation or otherwise providing them with any investment advice or personal recommendations. Any presentations, research or other information communicated or otherwise made available in this presentation is incidental to the provision of services by the Banks to the Company and is not based on individual circumstances. The Banks are advising the Company and no one else in connection with the Transaction and will not be responsible to anyone other than the Company for providing the protections afforded to their clients. Prospective purchasers of securities of the Company are required to make their own independent investigation and appraisal of the business and financial condition of the Company and the nature of the securities of the Company. Attendees of this presentation should seek their own independent legal, investment and tax advice as they see fit. 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The Nil Paid Rights, the Fully Paid Rights, the New Ordinary Shares and the Provisional Allotment Letters are being offered and sold outside the United States only in offshore transactions within the meaning of and in accordance with Regulation S under the Securities Act. There will be no public offer of the Nil Paid Rights, the Fully Paid Rights, the New Ordinary Shares or the Provisional Allotment Letters in the United States. The terms "Nil Paid Rights", "Fully Paid Rights" "New Ordinary Shares" and "Provisional Allotment Letters" are defined in the Prospectus. By accepting this document, you will be taken to have represented, warranted and undertaken to the Company and the Banks that: (i) you are a Qualified Investor; and (ii) you have read and agree to comply with, and be bound by, the contents of this notice. 2

3 Transaction highlights Summary Transaction RPC will acquire Superfos for a consideration of 240m on a debt-free, cash-free basis which equates to a multiple of 4.6x 2009 EBITDA (before non-recurring items) or a 0.8x multiple of 2009 revenues Superfos is well recognised in the industry and this transaction offers substantial strategic and financial benefits by combining two industry leaders: Strategic rationale - Broadening of product range across existing and new geographies - Entry into higher growth markets - Higher operating margins through synergies - Exposure to new and innovative products - Experienced management team - Enhanced working capital performance Expected earnings to enhance materially in Year 1 1 Financing Conditions Rights issue of 88.8m Balance of purchase price funded via new debt facilities Acquisition is subject to shareholder approval and regulatory clearances expected to complete in first quarter of After adjustment for the bonus element of the rights issue. This statement should not be interpreted to mean that future EPS of RPC will necessarily match or exceed its historical published EPS 3

4 Superfos overview Profile of the acquired business Production facilities and distribution centres Superfos is among Europe s leading packaging manufacturers within the injection moulded plastic packaging market The Company is primarily engaged in the design, development, manufacture and distribution of IMPP Superfos will continue to benefit from strong management Circa 60% of Superfos sales serve the food market IMPP is a fast growing packaging segment with Superfos well placed to take advantage through product innovations, and the conversion from other packaging materials Source: Superfos Management information, Superfos Servicing clients across the European continent Turnover by region (2009A) 100% = EUR 294.5m 25% Other 30% Nordic Strongest positions in Nordic, Central East and French Superfos operates nine manufacturing facilities, five stand-alone distribution centres and three additional sales offices As at October 2010 the company had c.1,325 employees Since 1999 Superfos has been owned by private equity firms IK Investment Partners and Ratos 19% French 26% Central East Source: Superfos 4

5 Superfos overview Products recognised for innovative solutions Packaging solutions for many end-uses Turnover by segment (2009A) 100% = EUR 294.5m 8% Distributors Superfos products provide customers with solutions Closure systems Easy opening and re-closing of lids Prolonged shelf life and product freshness 32% Non-Food Source: Superfos 60% Food Decoration Value adding decoration opportunities Range of sharp decoration options with offset, offset with lacquer or IML (In-Mould Labelling) On-pack branding Innovation Thinner pack walls Longer shelf life technology and large industry leading customers Sustainable and eco-friendly packaging Light weight products Food Non-food End-user appeal Multiple colour, shape and size combinations Value adding features for end-user convenience Production & handling by customer Stability in customer filling line Increased stackability to minimise warehouse storage Transport security Source: Superfos 5

6 Strategic fit Combining two leading companies RPC and Superfos are recognised as industry leading companies with innovative products Superfos and RPC are both recognised as industry leaders Superfos has a track record of product innovation recent product developments are in Thin Wall Packaging and Barrier Technology, providing growth opportunities RPC is recognised as an innovative industry leader across all conversion technologies (injection moulding, thermoforming and blow moulding) recent process developments include light-weighting for OTF IMPP, providing potential cost reductions Superfos is well positioned in mainland Europe RPC s strong market positions include a leading IMPP position in the UK 6

7 Strategic fit Clear synergistic opportunities Whilst Superfos is currently a well run business, both revenue and cost synergies are readily achievable at a cash outlay of c. 5m pounds Clear synergistic opportunities Revenue synergies: - Leveraging RPC s products in the high margin Nordic region and in other high growth markets, including Poland, Turkey, Tunisia and Algeria - Improving product offering in the UK Cost synergies: - Optimising the manufacturing footprint of the combined group - Harmonising transport arrangements - Head office duplication - Best practice exchange, including technology transfer Purchasing synergies exist across a range of areas: - Polymer - Label supply Cash synergies: - Working capital management significant difference in working capital efficiency exists between RPC and Superfos Management expect synergies of at least 10m from 3 rd year onwards 7

8 Financial considerations Superfos financials Operating profit CAGR of 16.8% Operating profit margin improved 3.3% between performance benefited from the reduction of polymer prices and a time lag in passing this through to the customer base m (Dec year end) Revenue Operating profit * Margin 9.6% 4.8% 6.4% EBITDA * EBITDA Margin 17.8% 12.2% 13.9% * Excluding non-recurring items and aligned to RPC s accounting policies Based on IFRS accounting Source: Superfos 8

9 Financial considerations Financial update m YTD SEP 10 YTD SEP 09 Revenues* EBITDA* EBITDA Margin 14.5% 19.7% * Excluding non-recurring items and aligned to RPC s accounting policies Based on IFRS accounting Source: Superfos Although Superfos generally has the ability to pass on input price variations to its customers, this pass-through typically lags behind the actual price movements, usually by approximately four months A beneficial time lag effect in 2009 and an adverse lag in 2010 were primarily responsible for a year-on-year reduction in contribution and hence EBITDA in Superfos 9

10 Financial considerations Financing The consideration for the acquisition will be financed from existing and new debt facilities, and from a rights issue of 88.8m Superfos acquired for 240m on a cash-free, debt-free basis New debt - 200m revolving credit facility maturing on 30 September This facility will replace RPC s existing 200m RCF - 130m term loan to be used solely for the acquisition Equity m rights issue underwritten by J.P. Morgan Cazenove and Panmure Gordon - Fundraising is not conditional on completion of acquisition RPC has agreed to commit to any undertakings or disposals required to obtain the necessary approval from competition authorities 10

11 Financial considerations Debt facilities RPC pre transaction m H1 10/11 Bank Facilities RCF 200m Floating Rate Notes $40m + 35m Uncommitted facilities 49m Total facilities 304m RPC post transaction m Pro-forma Bank Facilities RCF 200m Term loan 1 130m Floating Rate Notes $40m + 35m Uncommitted facilities 48m Total facilities 413m Covenants Net Assets > 85m 155.8m Net Debt: EBITDA must be < 3.0x 1.0x Adjusted interest cover must be > 5.0x 20.9x Source: RPC Covenants (pro forma) Net Assets > 180m Net Debt: EBITDA must be < 3.0x Adjusted interest cover must be > 5.0x 1 Term loan to be taken out in the capital markets within 18 months of acquisition 11

12 Integration RPC operates a de-centralised structure Superfos will trade as a separate cluster within RPC ( RPC Superfos ) Superfos management to be retained Polymer purchasing will be centrally coordinated immediately upon acquisition Responsibility for integration and other synergy work streams will be set up under the guidance of RPC s Director Business Improvement, responsible for leading the RPC 2010 programme 12

13 Offering summary Expected timetable and Rights Issue summary Proposed funds to be raised* Price Discount to TERP Record Date for Rights Issue EGM to approve Rights Issue Deadline for acceptance of Rights Issue Expected date of completion of Acquisition Use of Proceeds Joint Sponsor / Financial Adviser Joint Sponsors and Joint Bookrunners 88.8m 143p 35.4% 31 Dec Jan Jan 2011 Early February 2011 Class 1 Acquisition Rothschild J.P. Morgan Cazenove and Panmure Gordon * Rights issue shares will not carry the right to the interim dividend for the year ended March

14 Summary The Directors believe the acquisition will provide: - Broadening of product range across existing and new geographies - Entry into higher growth markets - Higher operating margins through synergies - Exposure to new and innovative products - Experienced management team - Enhanced working capital performance Clear strategic rationale for combining two industry leaders. Synergies of at least 10m are expected by year 3 after acquisition Deal expected to enhance earnings materially in the first year after acquisition 1 1 Adjusted for the bonus element of the rights issue 14

15 Appendix 15

16 Financial review Overview of RPC A leading European supplier of rigid plastic packaging for the food and non-food, consumer and industrial markets 41 operating locations and employs over 5,900 people in 11 countries Key customers include Unilever, Kraft, Nestle and Procter & Gamble Successful RPC 2010 implementation m (Mar year end) 2009/ /09 H1 10/11 H1 09/10 Revenue Adj. EBIT Adj. PBT EPS 26.4p 18.0p 14.7p 12.0p DPS 10.5p 9.3p 3.4p 3.1p ROCE % 11.8% 9.1% 13.1%* 10.3%* Free cash flow * Measured over previous twelve months Source: Company filings 16

17 RPC 2010 Structural cost savings (annualised) of 18m achieved by September 2010 with steady state savings now estimated at 21m versus an original estimate of 12m Programme nearing completion with performance enhancement work stream evolved into a continuous improvement programme Site RPC 2010 plant closures Other sites closed in last 4 years 17

18 Financial review RPC - key figures Revenue Adjusted operating profit Adjusted basic EPS p 18.0p 26.4p FY 07/08 FY 08/09 FY 09/10 H1 10/11 FY 07/08 FY 08/09 FY 09/10 H1 10/11 FY 07/08 FY 08/09 FY 09/10 H1 10/11 All figures (except adjusted basic EPS) in m Adjusted = before restructuring costs, impairment losses and mark to market charges Source: Company accounts 18

19 Financial review RPC - key figures Net cash from operating activities ROCE* Dividend per share % 9.1% 11.8% 13.1% 9.0p 9.3p 10.5p p FY 07/08 FY 08/09 FY 09/10 H1 10/11 Net cash from operating activities in m Source: Company accounts * Presented on an LTM basis for HY figures FY 07/08 FY 08/09 FY 09/10 H1 10/11 FY 07/08 FY 08/09 FY 09/10 H1 10/11 19