Tetragon Financial Group Limited · EURONEXT:TFG
Tetragon Financial — Merger or Acquisition (October 2012)
21 slides from Tetragon Financial's merger presentation, Oct 29, 2012
Slide 1: Tetragon Financial Group Limited (TFG)
Tetragon Financial Group Limited (“TFG”) 29 October, 2012 THE INFORMATION CONTAINED HEREIN DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO PURCHASE ANY SECURITY OF TFG. THIS INFORMATION IS CURRENT ONLY AS OF 29 OCTOBER 2012, UNLESS OTHERWISE STATED. TFG UNDERTAKES NO OBLIGATION
Slide 2: Legal Disclaimer
Legal Disclaimer This document has been prepared by TFG (together with the Master Fund, the “Company”). TFG is a Guernsey closed-ended investment company whose shares (“Shares”) are listed on Euronext Amsterdam. The Company’s investment manager is Tetragon Financial Management LP (the “Investment Ma
Slide 3: TFG Acquires Polygon for 11.7 million shares
TFG Acquires Polygon* for 11.7 million shares** • This is a major step towards implementing TFG’s asset management growth strategy • Polygon is an alternative asset manager – Hedge Funds – 25% of LCM – 13% of GreenOak • All share consideration • Also approved a $150 million share buyback • TFG expec
Slide 4: Transformational Deal for TFG Shareholders
Transformational Deal for TFG Shareholders • The acquisition will strengthen TFG’s capital and asset management platform • We believe that TFG can to become a world-class financial services company with capital, investment expertise and infrastructure • TFG expects to invest in the acquired and pote
Slide 5: Our Industry
Our Industry • Asset management in niche areas can grow faster with capital backing • Duration of capital and investment horizon has shortened • Regulation is forcing proprietary trading activities out of banks • Institutional capital seeks genuine alpha and low fees • Regulation is becoming more co
Slide 6: A Changing Backdrop
A Changing Backdrop Pre 2008 Post 2008 Investment Banks Investment Banks • Public companies • Public Companies • Advisory Financial Crisis • Advisory • Deposit Taking • Deposit Taking • Customer Facilitation • Customer Facilitation • Proprietary Trading Regulatory Changes Alternative Asset Managemen
Slide 7: Our Industry
Our Industry Capital • Asset management in niche areas can grow faster with capital backing • Duration of capital and investment horizon has shortened • Regulation is forcing proprietary trading activities out of banks Investment Expertise • Institutional capital seeks genuine alpha and low fees Inf
Slide 8: Evolution of TFG
Evolution of TFG TFG Polygon TFG Post-Acquisition Investment Portfolio Investment Portfolio / Capital Asset Management Asset Management Asset Management / Investment Expertise LCM LCM + LCM = LCM GreenOak GreenOak GreenOak Hedge Funds Hedge Funds Contracted management fees Contracted management fees
Slide 9: Polygon Assets and Businesses Being Acquired
Polygon Assets and Businesses Being Acquired • LCM: 25% of approximately $4.5 billion AUM loan manager • GreenOak: 13% of approximately $1.9 billion AUM real estate asset manager and advisory firm • Hedge Funds: 100% of approximately $450 million AUM hedge fund management business • Approximately $2
Slide 10: LCM
LCM LCM Assets Under Management History ($MM) • Loan manager established in 2001 • Bought by TFG (75%) and Polygon (25%) in 2010 $5,000 • Specialist in below investment grade U.S. broadly $4,500 syndicated leveraged loans • Excellent 10 year performance $4,000 • Experienced team, dating back to earl
Slide 11: GreenOak Real Estate
GreenOak Real Estate GreenOak Assets Under Management History ($MM) • GreenOak Real Estate is a real estate focused principal investing and advisory firm – established spring 2010 $3,000 • Founding partners: John Carrafiell, Sonny Kalsi, Fred Schmidt, Polygon (13%) and TFG (10%) • Offices in New Yor
Slide 12: Polygon Hedge Fund Products
Polygon Hedge Fund Products • Convertible Securities launched May 2009, with Mike Polygon Hedge Funds Assets Under Management ($MM) Humphries as CIO $700 • European Event Driven Equities launched July 2009, with Reade Griffith as CIO $600 • Mining Equities launched June 2012 , with Mike Humphries an
Slide 13: Infrastructure
Infrastructure • Principal offices: London, New York and Tokyo • US SEC and FINRA registrations, UK FSA authorisation, Guernsey GSFC supervision, Dutch AFM supervision and Japan FSA registration Legal Operations Compliance Marketing Financial Control Research Systems Development Technology Securitie
Slide 14: Deal Process 2012
Deal Process 2012 • In anticipation of the potential for a transaction, the board of directors of TFG constituted a committee composed of the four independent directors with no financial or beneficial interest in Polygon or the transaction (Rupert Dorey, David Jeffreys, Byron Knief and Greville V.B.
Slide 15: Deal Structure
Deal Structure • All-share consideration • The majority of shares vest over five years • Non-competition / Exclusivity: grow all new Polygon businesses within TFG 2012 | 15
Slide 16: TFG Valuation
TFG Valuation TETRAGON
Slide 17: Evaluating TFG's Asset Management Businesses – Case Study
Evaluating TFG’s Asset Management Businesses – Case Study • The market traditionally does not use NAV as the most relevant means of valuing asset management businesses • The table demonstrates this issue using TFG’s original 75% investment in LCM LCM (using 100% of LCM’s financials) 2011 2012 Estima
Slide 18: Pro Forma Financials – Estimated and Illustrative
Pro Forma Financials – Estimated and Illustrative TFG Estimated Cash Flow (US$ millions) 2012 Estimated Ranges for 2013 Estimate Low High Opening Cash 212 144 144 Net cash from operating activities(1) 363 350 375 Investments • CLOs (113) (100) (125) • Direct Bank Loans 21 (10) (15) • Real Estate Veh
Slide 19: Share Buyback
Share Buyback • Intention for TFG to buy back up to a maximum of $150 million of existing shares • Deutsche Bank to act as dealer manager • A modified Dutch auction structure to be used • Details to be announced shortly 2012 | 19
Slide 20: Listing
Listing • Active versus Investment Income – The Company has been diversifying its assets from those that produce investment income to those that produce “active income” – Polygon – generally represents “active income” • Active income may help facilitate a possible move of TFG to a US listing over th
Slide 21: Summary
Summary • Transaction expedites TFG’s growth strategy to diversify and strengthen its income streams and to create a broad- based financial services platform • Transaction accelerates TFG’s ability to generate asset management fee income in addition to capital appreciation and cash flow from investm
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