Ricegrowers Ltd. Class B · ASX:SGLLV
Ricegrowers Ltd. Class B — SunRice — Merger or Acquisition (October 2010)
29 slides from Ricegrowers Ltd. Class B's merger presentation, October 2010
Slide 1: Potential Offer for SunRice
Potential Offer for SunRice October 2010
Slide 2: Contents
Contents Section Description Page 1 Introduction 3 2 Proposal highlights 5 3 About Ebro 6 4 Background and overview 14 5 Summary of the Exclusivity Agreement 15 6 Details of rice purchasing commitment 16 7 Grower Advisory Board 22 8 Other options considered 23 9 Conclusion 28 10 Recap of indicative
Slide 3: 1. Introduction
1. Introduction On 21 October 2010, SunRice announced that it had entered into an agreement for exclusive negotiations (“Exclusivity Agreement”) with Ebro Foods S.A. from Spain in relation to a potential offer for an implied Enterprise Value of approximately $600m – Ebro is a world leader in the r
Slide 4: 1. Introduction (cont'd) - Indicative timetable
1. Introduction (cont’d) Indicative timetable Date Event October 2010 Shareholder information meetings being held October/ November 2010 SunRice negotiates with Ebro Late November 2010 Execute formal document if agreement can be reached Early December 2010 SunRice and Ebro to meet shareholders (TBC)
Slide 5: 2. Proposal highlights
2. Proposal highlights Global market An expanded global rice food business leader Material value Implied Enterprise Value is approximately $600m; equity of $315m enhancement A Class shareholders - $50,000 per share in cash for B Class shareholders - $5.025 per share in cash plus 60.3 cents p
Slide 6: 3. About Ebro
3. About Ebro Ebro is the largest branded rice company and the second largest branded pasta company in the world Ebro has over 23 operating subsidiaries in Europe, America, North Africa and Asia with a portfolio of over 60 brands Ebro is the leading food group in Spain in turnover, profit, mar
Slide 7: 3. About Ebro (cont'd) - Key brands
3. About Ebro (cont’d) Key brands 7
Slide 8: 3. About Ebro (cont'd) - Rice business
3. About Ebro (cont’d) Rice business commentary Rice market share information Ebro is the largest rice processor in the world Country Market share with leading brands in most countries in Europe, USA and Canada Spain 24.0% Portugal 16.0% Significant global operations Germany 20.0% Belgium 31.7%
Slide 9: 3. About Ebro (cont'd) - Key rice products
3. About Ebro (cont’d) Key rice products 9
Slide 10: 3. About Ebro (cont'd) - Pasta business
3. About Ebro (cont’d) Pasta business commentary Pasta market share information Strategy in pasta is focused on: Country Market share – Convenience – e.g. microwave products Germany 11.2% and quick cook Belgium 13.7% – Health – e.g. pasta enriched with vegetables, whole grain pasta, high fiber Cze
Slide 11: 3. About Ebro (cont'd) - Key pasta products
3. About Ebro (cont’d) Key pasta products 11
Slide 12: 3. About Ebro (cont'd)
3. About Ebro (cont’d) SunRice and Ebro have participated in two successful joint ventures – Anglo Australia, UK was formed to supply Australian rice to food ingredients customers throughout the UK and Europe – Herto, Belgium was a rice cake manufacturer for Europe SunRice and Ebro have enjoyed
Slide 13: 3. About Ebro (cont'd) - Ebro and SunRice markets
3. About Ebro (cont’d) Europe North America Middle East Asia Africa Latin America Pacific Australia New Ebro markets Zealand SunRice markets 13
Slide 14: 4. Background and overview
4. Background and overview The offer was unsolicited The Board is of the view that the Proposed Transaction would be likely to produce a superior outcome for shareholders and growers compared to the other available options The Proposed Transaction can only proceed with the agreement of both A
Slide 15: 5. Summary of the Exclusivity Agreement
5. Summary of the Exclusivity Agreement Consideration per share1 A Class B Class share share Total cash consideration $50,000 $5.025 Franking credits n.a. $0.603 Total consideration plus franking credits $50,000 $5.628 Note 1 – This is based on the current number of eligible A Class and B Class shar
Slide 16: 6. Details of rice purchasing commitment
6. Details of rice purchasing commitment SunRice currently buys the vast majority of paddy rice produced in NSW The purchasing commitment will be for 5 years (under Scenario 1 below, purchasing commitment will renew automatically for successive 5 year periods) – Ebro can terminate or modify the
Slide 17: 6. Details of rice purchasing commitment (cont'd) - Illustrative mechanism
6. Details of rice purchasing commitment (cont’d) Illustrative mechanism Grower payments (consistent with current arrangements) 60% 10% 7% 7% 5% Balance Crop Crop Crop Marketing Year Planting Harvest A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S P A U U U E C O E A E A P A U U U E C O
Slide 18: 6. Details of rice purchasing commitment (cont'd)
6. Details of rice purchasing commitment (cont’d) Ebro will also buy 100kt p.a. of NSW long grain and other rice varieties at market prices (unless it loses the right to export) The timing of payments made to rice growers will be consistent with the existing payment structures To address the i
Slide 19: 6. Pricing mechanism if Exclusive Licence retained
6. Details of rice purchasing commitment (cont’d) Scenario 1 – Pricing mechanism assuming Exclusive Licence retained (first 5 years) Pool 1 – 1st 400kt MG paddy Pool 2 – next 400kt MG paddy Pool 3 – 800kt+ MG paddy Minimum of the following price1: The price will be at the Pool 1 Prevailing mar
Slide 20: 6. Pricing mechanism if Exclusive Licence not retained
6. Details of rice purchasing commitment (cont’d) Scenario 2 – Pricing mechanism assuming Exclusive Licence not retained (first 5 years) Pool 1 – 1st 400kt MG paddy 400kt+ MG paddy Minimum of the following price1: Ebro will commit to buy the remaining paddy offered to it for 2 years – The averag
Slide 21: 6. Details of rice purchasing commitment (cont'd) - 2010 and 2011 crop
6. Details of rice purchasing commitment (cont’d) 2010 crop 2011 crop SunRice will pay growers for the crop harvested SunRice will pay growers for the crop harvested in April 2010 as follows: in April 2011 a price: – Premium pool of approximately 85kt: at – Consistent with SunRice usual practice
Slide 22: 7. Grower Advisory Board
7. Grower Advisory Board A Grower Advisory Board will be established consisting of three representatives from the NSW rice growing community, three representatives from Ebro and an independent non-voting Chairperson – The first grower representatives will be nominated by SunRice The role of the
Slide 23: 8. Other options considered
8. Other options considered The Board considered a range of options when assessing the potential offer from Ebro These options (described further in this section) included: 1) Status quo 2) ASX listing 3) Delisting from the NSX 4) Break-up The Board is of the view that the Proposed Transaction
Slide 24: 8. Other options considered - Status Quo
8. Other options considered (cont’d) 1) Status Quo Advantages Considerations Existing shareholders retain control and Shareholders unable to receive full value for ownership their shares – Shares continue to trade at low value SunRice’s gearing is currently high when compared to peer group bus
Slide 25: 8. Other options considered - ASX listing
8. Other options considered (cont’d) 2) ASX listing Advantages Considerations More effective share pricing mechanism Existing control mechanisms (e.g. A Class voting structure) will need to be removed Increased liquidity – May be a transitional phase Board likely to comprise a majority of
Slide 26: 8. Other options considered - Delisting
8. Other options considered (cont’d) 3) Delisting Advantages Considerations Existing shareholders retain control If the price of SunRice shares is set too high, sellers of SunRice shares may not be able to dispose of their shares given a lack of buyers No observable share price, SunRice may be
Slide 27: 8. Other options considered - Breakup
8. Other options considered (cont’d) 4) Breakup Advantages Considerations Raises additional capital Reduces earnings base and diversification of earnings May be able to achieve a premium valuation for Potentially significant tax payable on disposals certain businesses Lengthy process, exec
Slide 28: 9. Conclusion
9. Conclusion The Board has assessed a range of options to maximise value for shareholders and deliver certainty for growers The Board is of the view that the Proposed Transaction would be likely to produce a superior outcome for shareholders and growers compared to the other available options –
Slide 29: 10. Recap of indicative timing
10. Recap of indicative timing Indicative timetable Date Event October 2010 Shareholder information meetings being held October/ November 2010 SunRice negotiates with Ebro Late November 2010 Execute formal document if agreement can be reached Early December 2010 SunRice and Ebro to meet shareholders