Slide 1: Acquisition of A&P Canada by METRO Inc.
Acquisition of A&P Canada by METRO Inc. July 19, 2005
Slide 2: Forward-Looking Statements
Forward-Looking Statements This document contains forward-looking statements with respect to METRO Inc. (“METRO”), including its business operations, strategy, financial performance and condition, expectations as to synergies and operations on a combined basis after the transaction. Although managem
Slide 3: Table of Contents
Table of Contents Section The Transaction 1 Overview of A&P Canada 2 Strategic Rationale 3 Integration Plan 4 Financial Analysis 5 Summary 6 2
Slide 4: The Transaction
The Transaction
Slide 5: The Transaction Overview
The Transaction Overview METRO has announced it has entered into an agreement with The Great Atlantic & Pacific Tea Company, Inc. (“GAP”) to purchase its Canadian subsidiary A&P Canada A&P Canada holds the #2 food retailer position in Ontario and the Greater Toronto Area, Canada’s largest and mo
Slide 6: The Transaction Positions METRO as a Leading Player in Canada's Two Largest Markets
The Transaction Positions METRO as a Leading Player in Canada’s Two Largest Markets Excellent strategic fit – complementary operations and strategy Significantly increases scale – combined sales approaching $11Bn Strong #2 market position in Canada’s two largest markets Enhances geographical
Slide 7: Overview of A&P Canada
Overview of A&P Canada
Slide 8: Overview of A&P Canada
Overview of A&P Canada General Overview Principal Banners #2 food retailer in the key Ontario Banners # of Stores market with 21% market share(1) Fresh Successfully executing a two tiered 62 strategy focused on both Fresh and 59 Discount stores Operates 133 Fresh stores and 103 3 Discount stor
Slide 9: Leading Market Position
Overview of A&P Canada Leading Market Position Ontario Other 3% 10% 21% Sobeys 18% 48% Loblaw 8
Slide 10: Attractive, Modern Store Base
Overview of A&P Canada Attractive, Modern Store Base Prime real estate portfolio Concentrated in the Greater Toronto Area (approximately 100 stores) Present in Ontario since 1928 Stores supported by five efficient and strategically located distribution centres 83% of its stores are corpora
Slide 11: Prime Real Estate Footprint
Overview of A&P Canada Prime Real Estate Footprint Ontario(1) Greater Toronto Area (1) Excludes stores in the Thunder Bay area. 10
Slide 12: Consistent and Improving Profitability
Overview of A&P Canada Consistent and Improving Profitability Adjusted EBITDA (1)(2) Consistent track record of ($ in millions) profitability $195 Improved performance in recent $187 years driven by: $185 Implementation of strategic initiatives in Fresh and Discount $175 $173 segments Specif
Slide 13: Strategic Rationale
Strategic Rationale
Slide 14: Significantly Increases Scale
Strategic Rationale Significantly Increases Scale Pro Forma LTM Sales ($ in billions) Loblaws $26.7 Sobeys $12.2 Pro Forma $10.5 METRO $6.1 (1) Safeway Can. $5.7 A&P Canada $4.4 (2) Overwaitea $3.1 $0 $10 $20 $30 (1) Represents 2004 sales (12/31/2004). (2) Represents 2004 sales (12/31/2004). Source:
Slide 15: Strong #2 Market Position in Canada's Two Largest Provinces
Strategic Rationale Strong #2 Market Position in Canada’s Two Largest Provinces Regional Sales Share Total Sales = $67bn Quebec $16bn sales, 24% of total Western Canada $23bn sales, 34% of total #2 Position 35% Market Share Ontario $22bn sales, 33% of total Atlantic Canada Pro Forma $6bn sales, 9% o
Slide 16: Enhances Geographic Diversification
Strategic Rationale Enhances Geographic Diversification Combined Footprint METRO A&P Canada 15
Slide 17: Long-term Strategic Investment by GAP
Strategic Rationale Long-term Strategic Investment by GAP GAP becomes an important METRO shareholder with its investment of $500 million representing a 16% share ownership Long-term strategic investment Board representation Highly-regarded METRO management team and retail operations Creati
Slide 18: Significant Expected Synergies
Strategic Rationale Significant Expected Synergies METRO estimates annual synergies of approximately $60 million Achievable over a 24-month period Synergies to come primarily from: Procurement Store operations Distribution Other SG&A 17
Slide 19: A Compelling Fit
Strategic Rationale A Compelling Fit Banners # of Stores Total Sq. Ft. Similar strategies METRO A&P Total (mm) Food Banners Fresh and Discount Fresh 281 133 414 12.5 Strong management teams Well recognized brands and strong consumers’ perception Discount 62 103 165 6.0 Both companies devel
Slide 20: Integration Plan
Integration Plan
Slide 21: Straight-Forward Integration
Integration Plan Straight-Forward Integration Maintain the A&P Canada business growth focus Retain A&P Canada management Continue implementation of A&P Canada business strategies Optimize procurement synergies Reorganize business processes to integrate SAP system Combine best practices o
Slide 22: IT Agreement
Integration Plan IT Agreement METRO has signed a two-year IT service agreement with GAP IT service will be provided through existing systems Annual cost of $20 million METRO intends to replace the existing IT systems with SAP within the two- year period (1) LTM EBITDA for the period ended Ju
Slide 23: Financial Analysis
Financial Analysis
Slide 24: Financial Analysis
Financial Analysis Total transaction value of $1.78 billion $1.2 billion in cash consideration $500 million in Class A shares of METRO $83 million in assumed net debt (1) ($ millions) LTM Adj. EBITDA (2) Reported Adjusted EBITDA $187 Less: Impact of IT Agreement (20) Pro Forma Adjusted EBITD
Slide 25: Financial Analysis
Financial Analysis Financing structure provides METRO with financial flexibility: the $1.2 billion in cash portion financed through bank debt $500 million in Class A shares issued to GAP LTM METRO Pro Forma Ratios Net Debt / Capitalization 49% Net Debt / EBITDA (1) 2.7x METRO will have a new
Slide 26: Summary Pro Forma LTM Financials
Financial Analysis Summary Pro Forma LTM Financials (1)(2) ($ in millions) METRO A&P Canada Adjustments METRO Pro Forma Stores 343 236 579 Revenues $6,107 $4,392 $10,499 (3) (4) EBITDA $333 $167 $60 $560 % margin 5.5% 3.8% 5.3% Total Assets $1,579 $1,100(5) $1,293 $3,972 Total Net Debt $41 $83 $1,22
Slide 27: Upside Opportunities
Financial Analysis Upside Opportunities LTM EBITDA Margin Sales per Sq. Ft. 6.0% $12.00 5.1% 5.0% $11.08 $319MM $11.00 4.0% 3.8% $10.27 $167MM $10.00 3.0% 2.0% $9.00 (2) A&P Canada (1) METRO A&P Canada (3) METRO (4) (1) LTM EBITDA for the period ended June 18, 2005. EBITDA adjusted for non-recurring
Slide 28: Summary
Summary
Slide 29: Summary Positions METRO as a Leading Player in Canada's Two Largest Markets
Summary Positions METRO as a Leading Player in Canada’s Two Largest Markets Excellent strategic fit – complementary operations and strategy Significantly increases scale – combined sales approaching $11Bn Strong #2 market position in Canada’s two largest markets Long-term strategic investmen
Slide 30: Appendix
Appendix
Slide 31: Track Record of Creating Shareholder Value
Appendix Track Record of Creating Shareholder Value Total Shareholder Return (1) Earnings per Share Performance ($) 250% 10/31/1990 12/31/1998 Share Price F ully D ilut e d to 07/15/05 to 07/15/05 E P S B e f o re 225% METRO 4347.4% 215.4% U nus ua l It e m s 215% S&P/TSX 418.6% 100.2% $2.00 $30 200
Slide 32: METRO has Delivered Consistent Growth and Profitability
Appendix METRO has Delivered Consistent Growth and Profitability Sales ($ in millions) EBITDA(1) ($ in millions) EBITDA EBITDA $6,500 Margin $5,999 $6,107 $333 $5,766 $350 $320 6.0% $315 $5,500 $5,338 $300 $280 5.5% $5,049 $4,828 $248 $250 $218 5.0% $4,500 $4,155 $186 4.5% $3,799 $200 $169 $3,500 $1