Banco Santander-chile · BCS:BSANTANDER
Banco Santander-chile — Merger or Acquisition (September 2013)
54 slides from Banco Santander-chile's merger presentation, Sep 20, 2013
Slide 1: Background: Description of the transaction
It is important to bear in mind that, for the purposes of this analysis, the sale of Santander AM and the distribution agreement must be analyzed jointly, because the amounts involved in the payment for fund distribution directly affects the sale value of Santander AM. In other words, all else being
Slide 2: Mutual fund types in Chile
· Stock Mutual Funds, which invest in market capitalization instruments. These may be categorized according to the origin of their investment, into domestic stock funds, for which at least 90% of the portfolio must be invested in domestic stock, economic activity sector or primary origin of the inve
Slide 3: Background: The Industry in Chile
August 28, 2013 Background: The Industry in Chile Convenience Translation The industry in Chile The Fund Managers with the largest market share in our country as of February 28, 2012, were the following:
Slide 4: Investment Funds
Investment Funds : (Source: ACAFI) These funds are made up of contributions by individuals or corporations, which are contributed through shares that are not redeemable until the fund is cashed out. As of December 2012, there were around 89 series of Investment Funds operating in our country, with t
Slide 5: Regulation; Appraisal of Santander AM
For both Mutual Funds and Investment Funds, the government participates directly in their regulation through the Superintendency of Securities and Insurance, which oversees the market’s correct development and protects investors by avoiding any possible asymmetries in the information to which they h
Slide 6: Appraisal methodologies: market approach
The following methodologies were used for the Appraisal: 1. Market approach: The market approach is based on the fact that the value of an asset can be estimated by comparing it with assets of similar characteristics. To use this approach, we have selected 7 companies engaged in similar industries,
Slide 7: Discounted cash flow method
Note that in the specific case of this transaction, we do not consider market multiples to be appropriate for determining the value of Santander AM, because the specificities of the fund distribution contract make it difficult to compare these companies with Santander AM. August 28, 2013 Appraisal o
Slide 8: Economic Value of Equity (MM CLP)
Economic Value of Equity (MM CLP) August 28, 2013 Appraisal of Santander AM Convenience Translation Value of Santander AM The value of Santander AM will depend on the discount rate used and the growth in projected sales for Santander AM. The total value of Santander AM is comprised both of the value
Slide 9: Report of the Independent Evaluator
Convenience Translation This is a Convenience Translation into English from the Original Previously Issued in Spanish. Claro y Asociados has not reviewed the English translation of this report and is only responsible for the Spanish version of the report. Report of the Independent Evaluator Director
Slide 10: Contents
Contents Convenience Translation * Executive Summary * Limitation of Liability * Introduction * Conditions of the Operation * Financial Evaluation * Opportunity and Considerations * Conclusions * Attachments 2
Slide 11: Executive Summary: Background Information
Executive Summary Background Information Convenience Translation * This summary describes the methodology used and the main conclusions reached by Claro y Asociados (the "Independent Evaluator" or "CyA"), following the analysis of the transaction proposed by Banco Santander S.A. (Spain) ("Grupo Sant
Slide 12: Executive Summary: Methodology 1
Executive Summary Methodology Convenience Translation 1. The first analysis was a Discounted Cash Flow ("DCF") analysis of the revenues that SAM produces for Santander Chile so as to determine the value created by retaining the entire amount of the commissions paid on the managed assets. This value
Slide 13: Executive Summary: Methodology 2
Executive Summary Methodology Convenience Translation 2. In the second analysis, SAM was treated as a complete unit, which, rather than having its own distribution network, outsources it by paying rebates to Santander Chile. The rebates used for this analysis were those included in the Distribution
Slide 14: Executive Summary: Considerations and Conclusions
Executive Summary Considerations and Conclusions Convenience Translation * The combination of payment of a Price at the time of concluding the transaction and a ten-year Distribution Agreement (which can be extended for a further ten years) adds a certain degree of complexity to the Transaction. * I
Slide 15: Executive Summary: Considerations and Conclusions
Executive Summary Considerations and Conclusions Convenience Translation * With regard to the value added to Santander Chile, the evaluation concludes that the Transaction might have the following effects: i. Santander Chile's expertise would be concentrated on its major asset, the distribution netw
Slide 16: Contents
Contents Convenience Translation * Executive Summary * Limitation of Liability * Introduction * Conditions of the Operation * Financial Evaluation * Opportunity and Considerations * Conclusions * Attachments 8
Slide 17: Limitation of Liability
Limitation of Liability Convenience Translation * The present report (the "Report") has been prepared by Claro y Asociados Limitada in their capacity as independent evaluators, from a financial perspective, at the request of the Directors' Committee of Banco Santander Chile S.A. in the terms establi
Slide 18: Contents
Contents Convenience Translation * Executive Summary * Limitation of Liability * Introduction * Conditions of the Operation * Financial Evaluation * Opportunity and Considerations * Conclusions * Attachments 10
Slide 19: Introduction: Context of the Global Operation
Introduction Context of the Global Operation Convenience Translation * On May 30, 2013, Banco Santander S.A. (Spain) announced the association agreement with Warburg Pincus and General Atlantic to promote the global assets management business. * Under this agreement Warburg Pincus and General Atlant
Slide 20: Introduction: Appointment of the Independent Evaluator
Introduction Convenience Translation Appointment of the Independent Evaluator * Grupo Santander has made a financial offer to Santander Chile for 100% of the shares of its subsidiary, the fund management company Santander Asset Management S.A. In Attachment II to its offer, Grupo Santander has set o
Slide 21: Contents
Contents Convenience Translation * Executive Summary * Limitation of Liability * Introduction * Conditions of the Operation * Financial Evaluation * Opportunity and Considerations * Conclusions * Attachments 13
Slide 22: The Asset Management Industry in Chile
Conditions of the Operation The Asset Management Industry in Chile Convenience Translation * There are 20 Fund Management Companies ("FMC") in the Chilean Association of Mutual Fund Managers. Of these, 10 are owned by banks and 10 by other kinds of institutions. * Traditional banks (i.e., retail ban
Slide 23: SAM's business as of December 2012
Conditions of the Operation SAM's business as of December 2012 Convenience Translation * SAM is principally engaged in the management of open-ended mutual funds and has little presence in other kinds of funds. * The segments in which the products are distributed are balanced between personal (Privat
Slide 24: SAM's Performance compared to the Industry
Conditions of the Operation SAM's Performance compared to the Industry Convenience Translation * After 2009, the assets managed by SAM did not recover as quickly as those managed by the rest of the industry.* Since then SAM's Assets under Management have remained flat, and its market share has dropp
Slide 25: Background to the Proposed Transaction
Conditions of the Operation Background to the Proposed Transaction Convenience Translation Convenience Translation * Grupo Santander is SAM's indirect owner. SAM belongs almost entirely to Banco Santander Chile, which in turn is controlled by Grupo Santander. * This fact explains why the transaction
Slide 26: Situation before and after the Transaction
Conditions of the Operation Background to the Proposed Transaction Convenience Translation * The following diagram illustrates the situation before and after the Transaction. Situation before the Transaction Grupo Santander Banco Santander Rebates Chile Distribution SAM Customers (Fund Management Co
Slide 27: Transfer of SAM ownership for Price and Distribution Agreement
Conditions of the Operation Background to the Proposed Transaction Convenience Translation * The Transaction involves the transfer of the ownership of SAM to Grupo Santander in exchange for payment of a Price and a Distribution Agreement. Sale of Santander Asset Management Payment of CLP 1 130 billi
Slide 28: Main Terms of the Offer
Conditions of the Operation Main Terms of the Offer Convenience Translation Price* The Transaction involves the payment of CLP 130 billion in cash for all the shares of Santander Asset Management FMC. * This Price takes into account SAM's surplus cash, which can be withdrawn before the Transaction a
Slide 29: Main Terms of the Distribution Agreement
Conditions of the Operation Main Terms of the Distribution Agreement Convenience Translation Period* The Distribution Agreement will last for an initial term of ten years, with five automatic renewals every two years, giving a potential term of twenty years. Rebates* The distribution service that Sa
Slide 30: Business Plan and Adjustment of Rebates
Conditions of the Operation Business Plan and Adjustment of Rebates Convenience Translation * The Business Plan in the offer envisages aggressive growth in the coming years. * In view of the performance of the industry in recent years, there is a strong possibility that the growth figures specified
Slide 31: Contents
Contents Convenience Translation * Executive Summary * Limitation of Liability * Introduction * Conditions of the Operation * Financial Evaluation * Opportunity and Considerations * Conclusions * Attachments 23
Slide 32: Financial Evaluation: Approach Utilized
Financial Evaluation Convenience Translation Approach Utilized * In exchange for the sale of SAM, Santander Chile will receive the payment of a Price and the structuring of a Distribution Agreement. In the opinion of CyA, the Transaction must be evaluated as a whole (combined effect of the Price and
Slide 33: Approach Utilized: Transaction Validation
Financial Evaluation Approach Utilized Convenience Translation Transaction Validation as a Whole * In order to determine whether the transaction as a whole is at its fair value, the value SAM represents today for Santander Chile will be compared to the amount of the Price plus the value of the Distr
Slide 34: Traditional Methodology of DCF and Comparable Multiples
Financial Evaluation Convenience Translation Traditional Methodology of DCF and Comparable Multiples * In order to implement the plan described above, evaluations of each of the components were performed using generally accepted methods. Method Considerations --------------- ------------------------
Slide 35: Estimate of WACC rate and End Value
Financial Evaluation Convenience Translation Estimate of WACC[] rate and End Value Criterion Currency, Risk- * Determination of a nominal WACC rate in CLP. free and market * The 10-year BCP[] risk free rate was used as a reference. * A market risk premium of 6.0% was defined. rate Beta Estimate* Sel
Slide 36: Comparable Stock market Multiples
Financial Evaluation Comparable Stock market Multiples Convenience Translation Name Market Cap (US$ bn) AUM (US$ bn) FV/EBITDA (LTM) Equity/AUM Affiliated Managers Group, Inc 8.095 431.800 16.9 1.9% Ameriprise Financial. Inc. 15.153 562.364 7.9 2.7% BlackRock, Inc. 45.608 3.791.588 12.9 1.2% Cohen a
Slide 37: Comparable Transactions
Financial Evaluation Convenience Translation Comparable Transactions * Recent comparable transactions in the region are shown, with the Equity/AUM multiple. * It is important to point out that this multiple should be regarded carefully because traded companies have dissimilar characteristics to thos
Slide 38: Results: Determination of current value of SAM
Financial Evaluation Convenience Translation Results of the Evaluation of the Transaction as a Whole 1 Determination of the current value of SAM * In this valuation by discounted cash flows, SAM is considered in its current condition, receiving 100% of the commissions from assets management (0% reba
Slide 39: Results: Distribution Agreement plus Price
Financial Evaluation Convenience Translation Results of the Evaluation of the Transaction as a Whole 2 Determination of the value of the Funds Distribution Agreement, plus payment of the Price * For this second valuation, the flows which Santander Chile would receive under the Distribution Agreement
Slide 40: Results: Comparison of values
Financial Evaluation Convenience Translation Results of the Evaluation of the Transaction as a Whole 3 Comparison of the value obtained in 1 with the value obtained in 2 Sale of Santander Asset Management + Available cash CLP 354,653m ~ CLP 439,392m vs 1 Payment of CLP 130 billion Funds Distribution
Slide 41: Results: Valuation of SAM as an integrated unit
Financial Evaluation Convenience Translation Results of the Evaluation of the Transaction by its Components 4 Valuation of SAM as an integrated unit * The following shows the results obtained by means of DCF and comparable multiples for SAM as an integrated unit (paying rebates equivalent to those i
Slide 42: Business Plan Analysis
Financial Evaluation Convenience Translation Business Plan Analysis * The Business Plan set forth in theTransaction requires very aggressive growthrates forthe firstfiveyears and thereafter a growth rate in accordance with the market of around 10% per year. * Despite the fact that the Evaluator cons
Slide 43: Additional Information Regarding the Global Operation
Financial Evaluation Convenience Translation Additional Information Regarding the Global Operation * On May 30, 2013, Grupo Santander announced the agreement reached with Warburg Pincus and General Atlantic for its coming partnership in the assets management business. * This announcement indicates t
Slide 44: Table of Contents
Table of Contents Convenience Translation * Executive Summary * Limitation of Liability * Introduction * Conditions of the Operation * Financial Evaluation * Opportunity and Considerations * Conclusions * Attachments 36
Slide 45: Analysis of the Opportunity for Santander Chile
Opportunity and Considerations Analysis of the Opportunity for Santander Chile Convenience Translation Focus on * Analyzing the rebates structures, the greater importance of the distribution channel over that of the fund manager is undeniable. Distribution * The Transaction represents an opportunity
Slide 46: Evaluation of the Terms and Conditions of the Offer
Opportunity and Considerations Convenience Translation Evaluation of the Terms and Conditions of the Offer * The Offer Letter clearly specifies the definition of the Price and its payment mechanism, Payment of the taking into consideration the cash surplus, which is taken as a credit to the Price. L
Slide 47: Evaluation of the Distribution Agreement conditions
Opportunity and Considerations Convenience Translation Evaluation of the Distribution Agreement conditions * The Distribution Agreement stipulates exclusivity for Santander Chile, but not for SAM. Exclusivity * CyA considers that it is not necessary to force reciprocal exclusivity, but it would be i
Slide 48: Evaluation of the Distribution Agreement Conditions
Opportunity and Considerations Convenience Translation Evaluation of the Distribution Agreement Conditions Agreement Term* The conditions under which the distributor may terminate the agreement in each of the renewal windows are relatively demanding, making such termination very unfeasible. * CyA ra
Slide 49: Evaluation of the Distribution Agreement Conditions
Opportunity and Considerations Convenience Translation Evaluation of the Distribution Agreement Conditions Severe regulatory * CyA detected the risk that, in the event of the possibility that a regulatory agency disqualifies fee sharing, Santander Chile should continue to distribute the funds withou
Slide 50: Table of contents
Table of contents Convenience Translation * Executive Summary * Limitation of Liability * Introduction * Conditions of the Operation * Financial Evaluation * Opportunity and Considerations * Conclusions * Attachments 42
Slide 51: Conclusions: Final comments
Conclusions Final comments Convenience Translation * After analyzing the financial conditions set forth in the Transaction, the report does not propose modifications to the Transaction value ranges. * Certain undefined items are noted with respect to some terms and conditions in the Distribution Agr
Slide 52: Table of contents
Table of contents Convenience Translation * Executive Summary * Limitation of Liability * Introduction * Operation Conditions * Financial Evaluation * Opportunity and Considerations * Conclusions * Attachments 44
Slide 53: Attachment I: Form of Payment of the Price
Attachment I Form of Payment of the Price Convenience Translation * The payment of the Price of the Transaction will be subject to a credit in accordance with the condition of the corporate shareholder equity at the time of the Transaction. * At February 28, 2013, the net shareholder equity amounted
Slide 54: Attachment II: Companies Utilized for the Beta Calculation
Attachment II Convenience Translation Companies Utilized for the Beta Calculation Company Country AUM (US$m) Beta ------------- ------------- ----------- ----- Blackrock United States 3,791,588 1.191 Legg Mason United States 643,300 1.452 T. Rowe Price United States 576,800 1.434 Invesco United Stat
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