Premier Foods plc · LSE:PFD
Premier Foods — Merger or Acquisition (July 2006)
53 slides from Premier Foods's merger presentation, July 2006
Slide 1: Acquisition of Campbell's UK and Ireland
Premier Foods Acquisition of Campbell's UK and Ireland July 2006
Slide 2: Disclaimer
Disclaimer This document, which is personal to the recipient and has been issued by Premier Foods plc (the “Company”), comprises slides for a presentation concerning the acquisition by the Company of the UK and Irish businesses of Valentine (the “Acquisition”) and the proposed rights issue to be mad
Slide 3: David Kappler, Chairman
DAVID KAPPLER CHAIRMAN 3
Slide 4: Robert Schofield, Chief Executive
ROBERT SCHOFIELD CHIEF EXECUTIVE 4
Slide 5: Highlights of Transaction
Highlights of Transaction Acquiring UK and Irish grocery operations of Campbell's for £460m Conditional only upon shareholder approval 2005 sales £263m, Operating profit: £21m, Acquired EBITDA £54m1, Acquired EBITDA margin 20.6% Iconic British brands: Oxo, Batchelors, Homepride Increases P
Slide 6: Premier's Acquisition Criteria
Premier’s Acquisition Criteria Reinforce branded mix of the Group 9 Maintain a focus on the UK grocery market 9 Bring brands with leading category positions 9 Provide attractive levels of commercial and cost synergies 9 Can be integrated at minimal risk 9 Provide the platforms to support
Slide 7: The Campbell's Business And Our Plans
The Campbell’s Business And Our Plans 7
Slide 8: Campbell's Overview
Campbell’s Overview GREAT BRITISH BRANDS AA SIGNIFICANT, SIGNIFICANT, STRAIGHTFORWARD, STRAIGHTFORWARD, BRANDED BRANDED BUSINESS BUSINESS 8
Slide 9: Campbell's Overview
Campbell’s Overview GREAT BRITISH BRANDS A SIMPLE PORTFOLIO 94% Branded Mix 65% from Top 3 Brands 98% UK & Ireland AA SIGNIFICANT, SIGNIFICANT, STRAIGHTFORWARD, STRAIGHTFORWARD, BRANDED BRANDED BUSINESS BUSINESS 9
Slide 10: Campbell's Overview
Campbell’s Overview GREAT BRITISH BRANDS SITES AND PEOPLE 4 manufacturing sites 2 HQs 1,205 employees A SIMPLE PORTFOLIO 94% Branded Mix 65% from Top 3 Brands 98% UK & Ireland AA SIGNIFICANT, SIGNIFICANT, STRAIGHTFORWARD, STRAIGHTFORWARD, BRANDED BRANDED BUSINESS BUSINESS 10
Slide 11: Campbell's Overview
Campbell’s Overview GREAT BRITISH BRANDS SITES AND PEOPLE 4 manufacturing sites 2 HQs 1,205 employees A SIMPLE PORTFOLIO BIG PROFITABLE BUSINESS 94% Branded Mix 2005 sales: £263m 65% from Top 3 Brands Acquired EBITDA1 £54m 98% UK & Ireland Acquired EBITDA margin1 over 20% AA SIGNIFICANT, SIGNIFICANT
Slide 12: Campbell's Principal Brands
Campbell’s Principal Brands £114m retail sales1 £42m retail sales1 Dried soup, block noodles, canned vegetables Stocks and gravy Launched in 1895 Launched in 1899 96% distribution1 99% distribution1 750,000 mugs of soup enjoyed every day 2 million cubes used every day 39% 39% OF OF SALES SALES 15% 1
Slide 13: Campbell's Principal Brands
Campbell’s Principal Brands £28m retail sales1 £37m retail sales1 Canned pies and meats 100 year heritage 107 year heritage Pioneered cooking sauce category 10% 10% OF OF SALES SALES 96% distribution1 Everyday, traditional, British positioning £20m retail sales1 Soup and meatballs 2 year licence 10%
Slide 14: Category Leading Positions
7 Category Leading Positions 1 CATEGORY BRAND CATEGORY RANKING Stock Oxo No 1 Dehydrated Soup Batchelors Cup-a-Soup No 1 Savoury Pasta Batchelors Pasta 'n' Sauce No 1 Block Noodles Batchelors Supernoodles No 1 Savoury Rice Batchelors Savoury Rice No 1 Canned Peas Batchelors/Farrow Peas No 1 Canned P
Slide 15: A Glove Fit Acquisition
A Glove Fit Acquisition CONVENIENCE FOODS, PICKLES, SAUCES & MEAT FREE SALES £659.4m 1 CONVENIENCE PICKLES SAUCES MEAT FREE FOODS Branston Branston Loyd Grossman Quorn C&B Sarson’s Oxo Cauldron Smash Hayward’s Homepride Waistline Batchelors Campbells Fray Bentos 15 1 Ag
Slide 16: Campbell's Locations
Campbell’s Locations 4 manufacturing sites Site Utilisation Products Kings Lynn 46% Canned soup, canned sauces, canned pies Worksop 48% Canned peas, sauces in jars, stock, block noodles, R&D Ashford 34% Dried soup, dried pasta & sauce, rice Dublin Worksop Thurles 14% Dried soup, dried sauces, Kings
Slide 17: Premier's Plan for Campbell's
Premier’s Plan for Campbell's Rejuvenate the brands Unlock the potential of Oxo Modernise Batchelors Refocus Homepride Drive channel growth Release the costs Integrate and deliver the synergies AA SIMPLE SIMPLE STRATEGY STRATEGY 17
Slide 18: Unlocking the Power of an Iconic Brand
Unlocking the Power of an Iconic Brand Extended choice and usage Grown the core Added 2m new consumers 3:1 product preference 52% Retail Sales Growth in 3 years1 CORE CORE COMPETENCE COMPETENCE 1 IRI Retail sales 52 weeks ending 20th May 2006 18
Slide 19: The Brand Today
The Brand Today Excellent platform - £42m retail sales1 High profitability – scale to invest Strong advertising heritage No. 1 in stocks but small presence in other categories “Little Cubes of Gold” AN AN ICONIC ICONIC BRAND BRAND WITH WITH GREAT GREAT POTENTIAL POTENTIAL TO TO UNLOCK UNLOCK
Slide 20: Premier's Plans for Oxo
Premier’s Plans for Drive brand status Re-invest in advertising 21st Century stock Build gravy presence Re-energise the core Stretch the brand cross category to leverage wholesome, home-cooked heritage Sauces Marinades and glazes TRULY TRULY ICONIC ICONIC POTENTIAL POTENTIAL 20
Slide 21: The Brand Today
The Brand Today Superscale brand - £114m retail sales1 Outdated products and formats …but… Becomes Premier’s biggest brand Potential to improve food and nutritional values Inefficient support investment Need to focus and modernise AA SLEEPING SLEEPING GIANT GIANT 1 IRI Retail sales 52 we
Slide 22: Premier's Plans for Batchelors
Premier’s Plans for Drive brand potential – turnaround required Exploit growing opportunity for convenient, contemporary hot snacks Bring products and formats into 21st Century Move from dried into wet snacks AWAKENING AWAKENING AA SLEEPING SLEEPING GIANT GIANT 22
Slide 23: The Brand Today
The Brand Today £37m retail sales1 Distinct, traditional everyday cooking sauce heritage Pioneered cooking sauce category Strong product heartland of traditional everyday products RE-FOCUS RE-FOCUS ON ON BRAND BRAND HEARTLAND HEARTLAND 1 IRI Retail sales 52 weeks ending 20th May 2006 23
Slide 24: Premier's Plans for Homepride and Loyd Grossman
Premier’s Plans for + Core brand Drive brand Leverage distinct mainstream traditional heritage Leverage contemporary premium positioning COMPLEMENTARY BRANDS LEVERAGE LEVERAGE STRONG STRONG No.2 No.2 CATEGORY CATEGORY POSITION POSITION 24
Slide 25: Premier's Plans
Premier’s Plans £20m retail sales1 £28m retail sales1 Classic brand Classic brand 2 year licence High purchase frequency Migrate soup to Batchelors Drive with promotions Migrate meatballs to Fray Bentos Migration track record on Hartley’s MANAGE MANAGE AS AS CLASSIC CLASSIC BRAND
Slide 26: Growth by Leveraging Channels
Growth by Leveraging Channels Complements and builds Premier’s ‘one stop shop’ range for Food Service Leverage Premier experience and relationships Develop the right formats to unlock the brand opportunities E.g. Batchelors ‘on the go’ hot snacking in Impulse Drive on-shelf presence in Gro
Slide 27: Synergies and Integration
Synergies and Integration £28m cost synergies - administrative, operational efficiency, logistics and procurement Strong Premier management with significant integration experience 5 acquisitions since 2002 All integration successfully completed Additional integration resource identified
Slide 28: No.1 Branded Position in Categories
No.1 Branded Position in 19 Categories BRANDED CATEGORY BRANDED CATEGORY POSITION1 POSITION1 Tofu No.1 Canned Pies No.1 Ambient Custard No.1 Dehydrated Soup No.1 Jelly No.1 Savoury Pasta No.1 Sweet Pickles No.1 Block Noodles No.1 Instant Mashed Potato No.1 Savoury Rice No.1 Ambient Milk Puddings No.
Slide 29: Portfolio Development
Portfolio Development % of Model Premier Campbell's Aggregated 1 % of Sales Aggregated Growth Sales Sales Sales Sales Rate £m £m £m Year ended Year ended 31 Dec 2005 31 Jul 2005 Drive 232.7 32% 143.9 376.6 38% 4-6% Core 165.0 22% 52.1 217.1 22% 0-3% Classic 49.4 7% 50.3 99.7 10% (2.0% ) Brand - like
Slide 30: Paul Thomas, Finance Director
PAUL THOMAS FINANCE DIRECTOR 30
Slide 31: Campbell's Historical Trading
Campbell's Historical Trading 12 months ended 12 months ended 12 months ended 31 July 2003 31 July 2004 31 July 2005 £m £m £m Sales 280.4 274.5 262.7 Gross profit 81.5 73.7 70.6 Gross margin 29.1% 26.8% 26.9% Operating profit 29.4 22.9 21.2 Acquired EBITDA 63.9 58.0 54.1 Acquired EBITDA margin 22.8%
Slide 32: Campbell's Current Trading
Campbell's Current Trading 12 months ended 9 months ended 31 July 2005 30 April 2006 £m £m Sales 262.7 199.3 Gross profit 70.6 54.7 Gross margin 26.9% 27.4% Operating profit 21.2 24.4 Acquired EBITDA 54.1 46.5 Acquired EBITDA margin 20.6% 23.3% Q4 of Campbell’s year is seasonally low quarter Yea
Slide 33: A Stronger Premier
A Stronger Premier 2005 Sales Premier 1 Campbell's 1 Aggregated £m £m £m Convenience Foods, Pickles, Sauces & Meat-Free 396.7 262.7 659.4 Spreads, Desserts & Beverages 286.7 - 286.7 Grocery 683.4 262.7 946.1 Fresh Produce 106.3 - 106.3 Total sales 789.7 262.7 1,052.4 Acquired EBITDA 2 124.3 54.1 178
Slide 34: Premier's Cost Synergies
Premier’s Cost Synergies Synergies targeted at £28m p.a. at a net cost of £41m Administration - Rapid integration of sales, marketing and finance functions (6 months) Procurement - Increase purchasing scale (1 year) Operational - 3 year plan to eliminate overcapacity and improve efficiency (
Slide 35: Other Matters
Other Matters Limited Campbell’s pensions exposure Net deficit £20m 2005 service charge £3m Scheme closed to new members Tax guidance remains unchanged Overall P&L rate expected to continue at 30-31% Tax cash rate at circa 28% 35
Slide 36: Capital Expenditure
Capital Expenditure Underlying capital expenditure target remains at 3% One off enablers to support sales growth/business development:- Chilled facility (“Methwold”) – £11m total, £8m in H2 2006, £3m in H1 2007 Quorn forming capacity £7m total in 2007 ERP system implementation £25-30m tota
Slide 37: Financing
Financing Consideration of £460m Sources £450m Rights issue £10m from debt facilities Extension of existing debt facility to £1,085m Additional working capital Acquisition headroom Pro forma net debt following acquisition and rights issue of £613m 1 Net debt / EBITDA ratio of 3.4x
Slide 38: Rights Issue
Rights Issue Fully underwritten £450m rights issue Underwritten by Merrill Lynch International and Hoare Govett Actual price to be determined on posting of Prospectus Minimum Rights Price of 160 pence per share Historic EPS will be adjusted for the rights issue bonus element1 Dividend po
Slide 39: Anticipated Transaction Timetable
Anticipated Transaction Timetable Late July Prospectus published 7 August Interim results Mid August EGM; completion of acquisition through bridge financing EGM + 1 Commence nil paid rights trading Early September Rights Issue closes 39
Slide 40: Robert Schofield, Chief Executive
ROBERT SCHOFIELD CHIEF EXECUTIVE 40
Slide 41: Recap
Recap Campbell’s is a great strategic fit It will deliver significant financial benefits for our shareholders It will strengthen the Premier business Financing will provide firepower and flexibility for future acquisitions Creating Scale In The UK Market 41
Slide 42: Premier's Overall Strategy is Unchanged
Premier’s Overall Strategy is Unchanged Drive branded organic growth Utilising Premier’s scale with our customers Utilising Premier’s scale to drive our cost base Acquiring great British brands and integrating quickly Creating Scale In The UK Market 42
Slide 43: Premier's Journey So Far
Premier’s Journey So Far 1999 HILLSDOWN GROUP A rag bag of unaligned, decentralised and underperforming businesses Harmonised into Premier Foods – Focused Grocery Group New strategy unveiled Branded development Cost efficiency Customer focused Branded acquisition approach Creating Sc
Slide 44: Premier's Journey So Far
Premier’s Journey So Far ACQUIRED BUSINESSES THE COMPANIES SOLD BUSINESSES May 2002 Nestlé Ambient Foods Division December 2003 Ambrosia Successful IPO launched in 2004 February 2005 Bird’s June 2005 Marlow Foods Typhoo Tea October 2005 October 2005 Cauldron Foods 44
Slide 45: Premier's Journey So Far – The Results
Premier’s Journey So Far – The Results A better quality business since 2001 Sales from £741m to £790m EBITDA from £76m to £124m EBITDA margin from 10.3% to 15.7% Branded mix from 50% in 2003 to 61% 5 factories closed Creating Scale In The UK Market AA BIGGER BIGGER STRONGER STRONGER BUSI
Slide 46: Premier Today
Premier Today We have announced our largest acquisition to date A new dimension in scale and ambition 33% of our sales1 44% of our profit1 We have significantly raised our sights Creating Scale In The UK Market WHAT WHAT DOES DOES THIS THIS MEAN MEAN FOR FOR OUR OUR FUTURE? FUTURE? 1 See S
Slide 47: Premier Tomorrow
Premier Tomorrow Our Ambition To become the consolidator for British brands and associated own label supply to the Grocery Food sector To create a group that will:- Continue to drive synergies out of British grocery businesses Inject innovation to drive real category and brand growth Creat
Slide 48: Premier Culture
Premier Culture We combine the best of our current listed status and our private equity past Listed company attributes Private equity attributes Transparent reporting Speed, vitality and decisiveness Strong business control mechanisms Rigorous cash management Strong people processes Le
Slide 49: Summary
Summary We have a great deal that will: Deliver for the shareholders Strengthen the business We continue to operate with: A proven strategy Clear acquisition criteria We have a vision to further consolidate in the British grocery sector: We have created a financing structure to: Av
Slide 50: Appendix
APPENDIX 50
Slide 51: A. Campbell's UK/Ireland Financials
A. Campbell's UK/Ireland Financials 12 months ended 12 months ended 12 months ended 9 months ended 31 July 2003 31 July 2004 31 July 2005 30 April 2006 £m £m £m £m Sales 280.4 274.5 262.7 199.3 Cost of sales (199.0) (200.8) (192.1) (144.6) Gross profit 81.5 73.7 70.6 54.7 Gross margin 29.1% 26.8% 26
Slide 52: B. Campbell's Is An Excellent Strategic Fit
B. Campbell's Is An Excellent Strategic Fit Reinforce branded mix of the Group 94% branded Maintain a focus on the UK grocery market 98% UK and Ireland Bring brands with leading category positions 7 category #1’s Provide attractive levels of commercial and cost synergies £28m of hard synergi
Slide 53: C. Premier's Acquisition Track Record
C. Premier’s Acquisition Track Record Nestlé – May 02, £132m Category leading brand ambient brands Business successfully rejuvenated, e.g. sales of Branston grown 30% since acquisition Ambrosia – Dec 03, £106m Category leading brand ambient desserts brand in 3% pa decline Sales grown 17%