Tp Icap Group Plc · LSE:TCAP
Tp Icap — Tullett Prebon — Merger or Acquisition (November 2015)
35 slides from Tp Icap's merger presentation, Nov 11, 2015
Slide 1: Building the world's best operator in hybrid voice broking and information services
Tullett Prebon plc Building the world’s best operator in hybrid voice broking and information services The Brewery | 11 November 2015
Slide 2: Important notice
Important notice NOT FOR RELEASE, PRESENTATION, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION. This presentation has been prepared by Tullett Prebon plc (“Tullett Prebon”) in con
Slide 3: Introduction
Introduction John Phizackerley Chief Executive
Slide 4: Agenda
Agenda • Introduction • A transformational acquisition for Tullett Prebon • Key terms of the acquisition • Financial overview • The benefits of the acquisition for Tullett Prebon • Approvals and timetable • Q&A 4
Slide 5: A unique and transformational acquisition for Tullett Prebon
A unique and transformational acquisition for Tullett Prebon • Combines the complementary strengths of two leading global hybrid voice broking franchises to create the largest player in the industry • Talented employees • A leading brand name • Experienced senior management • Strategically valuable
Slide 6: A unique and transformational acquisition for Tullett Prebon
A unique and transformational acquisition for Tullett Prebon • Achieves significant cost synergies of at least £60m • From elimination of duplicated management and support costs • Additional efficiencies expected over time • EPS accretive for Tullett Prebon on a fully-phased basis • Maintain dividen
Slide 7: Tullett Prebon's recent trading performance
Tullett Prebon’s recent trading performance Revenues for 10 months to 31 Oct (£m) • We have grown revenues and diversified into new products, regions and clients • Rising cost of regulation and technology • Full year operating margin now expected to be c.1.5 percentage points lower than in 2014 671
Slide 8: Key terms of the acquisition
Key terms of the acquisition • Acquisition of ICAP Global Broking and Information Business1 (“IGBB”) • Over 2,500 employees in 35 locations across 22 countries • Revenue of £773m2 and operating profit of £111m3 • In consideration for the acquisition, Tullett Prebon will issue new shares to ICAP shar
Slide 9: Creating the largest player in the industry
Creating the largest player in the industry • Multi-platform hybrid voice business operating across all major asset classes • 3,245 brokers and c.5,500 total staff • Historical revenue in excess of £1.5bn • Historical adjusted trading operating profit of £232m • Portfolio of powerful brands • High q
Slide 10: New ownership of Enlarged Tullett Prebon
New ownership of Enlarged Tullett Prebon Tullett Prebon ICAP shareholders shareholders 44% 36.1% 100% Enlarged 19.9% ICAP Group NewCo 100% Existing Tullett IGBB Prebon businesses 10
Slide 11: Additions to Tullett Prebon's senior management and Board
Additions to Tullett Prebon’s senior management and Board • On completion, it is intended that Ken Pigaga, currently Group Chief Operating Officer of ICAP, will be appointed to the Board of the Enlarged Group as a Director1 and Chief Operating Officer • ICAP will appoint a new Non-executive Director
Slide 12: Integration drives value creation
Integration drives value creation • Project Management Office will be established to manage the integration and deliver synergies − Building on Tullett Prebon’s successful track record of targeted cost reductions − Track synergies from multiple workstreams − Board will monitor progress − Integration
Slide 13: Financial overview
Financial overview PAUL MAINWARING FINANCE DIRECTOR Paul Mainwaring Finance Director
Slide 14: Tullett Prebon: underlying profit & loss
Tullett Prebon: underlying profit & loss Adjusted for full year of acquired businesses – 12 months to June 2015 Adjustments for full year of acquired businesses PVM MOAB M&D £m Reported (+) 5m Jul to Nov-14 (+) 12m to Jun-15 (+) 6m to Dec-14 Adjusted Revenue 759 33 15 4 811 Contribution 268 10 5 1 2
Slide 15: IGBB: underlying profit & loss
IGBB: underlying profit & loss Carve-out financials Illustrative Tullett Prebon adjusted for indirect costs not transferring estimate of adjusted IGBB £m 12m to Mar-15 12m to Sep-15 12m to Jun-15 Revenue 808 773 763 Contribution 280 286 305 Management & support costs (182) (174) (196) Operating prof
Slide 16: Illustrative Enlarged Group: underlying profit & loss
Illustrative Enlarged Group: underlying profit & loss Excluding synergies Illustrative Tullett Prebon Illustrative Adjusted Tullett Prebon estimate of adjusted IGBB Enlarged Group £m 12m to Jun-15 12m to Jun-15 12m to Jun-15 Revenue 811 763 1,574 Contribution 284 305 589 Management & support costs (
Slide 17: Illustrative Enlarged Group
Illustrative Enlarged Group Contribution analysis Illustrative Tullett Prebon Illustrative Adjusted Tullett Prebon estimate of adjusted IGBB Enlarged Group £m 12m to Jun-15 12m to Jun-15 12m to Jun-15 Broking revenue 760 715 1,475 Information sales / RMS / iSwap revenue 51 48 99 Total revenue 811 76
Slide 18: Significant cost synergies
Significant cost synergies From de-duplication of management and support costs Tullett Prebon IGBB Combined Combined Addressable Addressable Addressable Fully-phased cost £m Cost base Headcount Cost base Headcount Cost base Headcount synergies Technology (52) 300 (66) 377 (118) 677 24 Other (92) 445
Slide 19: Illustrative Enlarged Group balance sheet
Illustrative Enlarged Group balance sheet Additional intangible Tullett Prebon IGBB Illustrative combined assets arising Sep-15 £m Jun-15 (adjusted) Intangible assets arising on 334 82 953 1,369 consolidation Other non-current assets 65 105 170 Current assets less current and (58) (12) (70) non-curr
Slide 20: Debt finance and costs
Debt finance and costs • Bank bridge facility of £470m to: a) Repay IGBB £330m debt to ICAP group b) Fund maturity of Tullett Prebon £141m July 2016 notes • Revolving credit facility of £250m • Capital market issuance to refinance bank bridge facility • Illustrative cash interest cost of £550m gross
Slide 21: Investment firm consolidation waiver
Investment firm consolidation waiver Current IFCW Proposed new IFCW Duration 10 years from 24 September 2014 10 years from date of grant Net debt / EBITDA of <2.5x Net debt / EBITDA <2.5x Required financial EBIT / net interest payable of >4.0x EBIT / net interest payable >4.0x ratios Limit on net de
Slide 22: Effective rate of tax (ERT)
Effective rate of tax (ERT) • Tullett Prebon projected ERT on underlying PBT for 2015: 20.5% • IGBB reported ERT on trading PBT 6m to Sep-15: 21.6% • Illustrative Enlarged Group ERT on underlying PBT: c.22% 22
Slide 23: Dividend illustration
Dividend illustration Tullett Prebon intends to maintain its annual dividend of 16.85 pence per share during the integration period, with an ambition to grow the dividend over time £m Number of outstanding Tullett Prebon shares (m) 243.5 Number of new Tullett Prebon shares to be issued (m) 309.9 New
Slide 24: Accelerating the delivery of Tullett Prebon's strategy
Accelerating the delivery of Tullett Prebon’s strategy John Phizackerley Chief Executive
Slide 25: Changes in our industry spell opportunity
Changes in our industry spell opportunity Secular pressure from increased regulation Cyclical pressures from low interest rates and lack of volatility Technology trends and interaction between hybrid voice and electronic broking IDB consolidation, BGC-GFI Culture and conduct reform 25
Slide 26: A strategic review of our industry
A strategic review of our industry Outlook for hybrid voice broking Outlook for electronic broking Fee pools Competition Mapping our products by profile Survey of clients and employees 26
Slide 27: Conclusions from our strategic review
Conclusions from our strategic review • The scale of the fee pool available for hybrid voice is considerable • Many asset classes are not suitable for trading on electronic venues • We launched our 10 Strategic “Arrow” initiatives 27
Slide 28: High level wins
High level wins Strengthening our broking bench and extending our franchise Strengthening our broking bench and extending our franchise • A highly respected brand in ICAP and an operation which fills in gaps in Tullett Prebon’s brokerage coverage map • Build scale in the US and leverage our support
Slide 29: High level wins
High level wins Growing our businesses to global significance Strengthening our broking bench and extending our franchise Growing our businesses to global significance • Build Tullett Prebon’s energy and commodities business • Enlarged energy and commodities revenue of approximately £320 million • A
Slide 30: High level wins
High level wins Enhancing our technology Strengthening our broking bench and extending our franchise Growing our businesses to global significance Enhancing our technology • Technology is in our DNA • Exciting platforms such as iSwap and Fusion • IT integration – a key synergies workstream • Operati
Slide 31: High level wins
High level wins Recharging our corporate functions Strengthening our broking bench and extending our franchise Growing our businesses to global significance Enhancing our technology Recharging our corporate functions • High quality corporate and regulatory infrastructure − As important to our client
Slide 32: Approvals and timetable
Approvals and timetable John Phizackerley Chief Executive
Slide 33: Approvals and timetable
Approvals and timetable Completion of the acquisition is conditional on, inter alia: • Tullett Prebon shareholder approval • ICAP shareholder approval • Anti-trust approval, including from the Competition and Markets Authority and the US antitrust agencies • Approval by various regulatory bodies inc
Slide 34: Delivering Tullett Prebon's objectives of becoming the world's most trusted source of liquidity
Delivering Tullett Prebon’s objectives of becoming the world’s most trusted source of liquidity in hybrid OTC markets and the best operator in global hybrid voice broking 34
Slide 35: Q&A
© tullett prebon Q&A
Tullett Prebon — Merger or Acquisition (November 2015) on 6ix