Britvic — Merger or Acquisition (November 2012)
55 slides from Britvic's merger presentation, Nov 14, 2012
Slide 1: Building brands, creating value
14 November 2012 Building brands, creating value Gerald Corbett Roger White John Gibney Chairman, Britvic CEO, A.G. Barr CFO, Britvic 1
Slide 2: Disclaimer
Disclaimer This Presentation is made, and has been produced, in connection with the proposed recommended merger (the "Merger") of A.G. Barr p.l.c. ("A.G. Barr") and Britvic plc ("Britvic"). The information set out in this Presentation is not intended to form the basis of any contract. By attending (
Slide 3: Agenda
Agenda Gerald Corbett – Introduction Roger White – Business rationale John Gibney – Financial rationale Summary 03
Slide 4: Gerald Corbett
eNOS a Gerald Corbett USS BRITVIC ple SOFT DRINKS
Slide 5: Stronger business with enhanced growth opportunities
Stronger business with enhanced growth opportunities • Compelling industrial combination • Complementary businesses in brands, geographies, channels • Strong presence in key sub segments of the soft drinks market • Stronger commercial and operational platform from which to grow • Enhanced innovation
Slide 6: Key transaction terms
Key transaction terms • All share equity merger with 0.816 A.G. Barr shares for each Britvic share Barr Britvic Soft Drinks Board • c.63% of combined business owned by Britvic shareholders and c.37% by A.G. Barr shareholders Gerald Corbett Ronald Hanna • Combined business to be renamed Barr Britvic
Slide 7: Roger White
eNOS a Roger White USS BRITVIC ple SOFT DRINKS
Slide 8: Creation of a stronger soft drinks growth platform
Creation of a stronger soft drinks growth platform • Taking the best of both businesses • Britvic is a large scale business – Well developed systems and processes – Strong brands • A.G. Barr is a smaller agile business – Growing brands from niche positions – Strong focus on execution • Complementary
Slide 9: A.G. Barr
A.G. Barr • Differentiated portfolio of growth brands – IRN-BRU: “Scotland’s other national drink”; growing strongly in North of England – Rubicon: leading brand in exotic juice category • Brand growth underpinned by equity investment over many years • Strong balance sheet with low level of gearing
Slide 10: Britvic
Britvic • Portfolio of leading, scale, household brands • Extensive consumer reach across the UK and Ireland • 5 brands worth over £100m retail sales value in GB alone • #1 stills brands – Robinsons, Fruit Shoot, J2O, Teisseire, Ballygowan, MiWadi • #1 supplier in UK pubs & clubs and #2 in grocery •
Slide 11: Barr Britvic Soft Drinks – a great fit
Barr Britvic Soft Drinks – a great fit • Complementary brand portfolios, geographies and channels • Greater scale, improved combined supply chain platform • Committed to maintaining and developing our successful relationship with Pepsi • Long term partnerships with Orangina and Rockstar • Opportunit
Slide 12: Attractive portfolio of brands
Attractive portfolio of brands Category Market value(1) Market growth(1) Cola £1.6bn +4.4% Non-cola carbs (2) £0.7bn +3.9% Squash £0.5bn +3.5% Energy £0.8bn +13.7% Water £0.5bn +5.8% Note: (1) UK Take Home segment (2) Non-cola Cold/Hot £0.1bn +32.0% carbs is defined as fruit carbs Pure juice and and
Slide 13: Complementary operational strengths
Complementary operational strengths Geography • A.G. Barr brands regionally strong in Scotland and North of England • Britvic a national presence Channel • Britvic #2 in grocery, #1 in pubs & clubs • A.G. Barr is strong in small retail convenience stores Operations • National production and distribu
Slide 14: Successful 25 year relationship with Pepsi
Successful 25 year relationship with Pepsi • Britvic has enjoyed a strong relationship with Pepsi since 1987 • Bottling agreement until 2023 • Further agreements in last 5 years – Lipton Ice Tea, Mountain Dew, Gatorade, SoBe Pure Rush and SoBe VWater • Commercial collaboration • Power of One across
Slide 15: Significant synergy opportunity
Significant synergy opportunity • Multiple options to achieve • Full run rate synergies delivered in 2016 • Recurring cost synergies at full run rate of ~£35m p.a. • At least £5m p.a. contribution from annual net revenue synergies • Preliminary analysis reviewed by independent adviser • Alex Short a
Slide 16: Reducing risk during integration
Reducing risk during integration • Minimum disruption to business as usual • A.G. Barr and Britvic both experienced operators with significant knowledge and expertise across the sector – very similar basic operations • Utilise Britvic core systems – capacity and quality • Integration will be managed
Slide 17: Immediate business priorities
Immediate business priorities • Near term focus on integration, delivery of synergies and business optimisation • Capitalise on opportunities for brand expansion in GB • Maintain and develop successful relationship with Pepsi • Drive business performance in Ireland and France • Accelerating business
Slide 18: Vision and strategy
Vision and strategy “Create a high performing fully integrated soft drinks business with powerful growing brands” • Deliver the immediate business priorities • Grow and develop our core brands including our franchise brands • Deliver sustainable profitable growth in our established markets • Energis
Slide 19: Stronger together
Stronger together • Stronger soft drinks growth platform • Significant synergy benefits • Robust long term capital structure • Great people working together • Performance driven culture Combination is stronger than the sum of its parts 19
Slide 20: John Gibney
eNOS a John Gibney USS BRITVIC ple SOFT DRINKS
Slide 21: Barr Britvic Soft Drinks financial highlights
Barr Britvic Soft Drinks financial highlights • Pro forma revenue in excess of c.£1.5bn(1) • Combined pro forma EBITA of £172m(2) – With an expected £40m p.a. of synergies to be realised in 2016 • Strong financial base – Benefits of deleveraging from strong FCF conversion and synergy realisation – U
Slide 22: Plan for synergy realisation
Plan for synergy realisation • Full run rate synergies of £40m in 2016 – ~£3m to be realised in the first 12 months after completion of the merger – ~£16m to be realised in year 2 – ~£30m to be realised in year 3 – and full £40m run rate achieved – in 2016 • One-off costs to achieve synergies of ~£4
Slide 23: Detailed integration plan unlocking synergy delivery
Detailed integration plan unlocking synergy delivery • Create a single corporate structure • Detailed plan to be developed swiftly post closing under Integration Director’s leadership • Commence full validation of benefits, costs and plan actions immediately post completion • Integrate the A.G. Barr
Slide 24: Robust long term capital structure
Robust long term capital structure Facility profile (£m) • Combined historic adjusted net debt of c.£459m(1) per last 500 reported financial years for both companies 450 400 – No change to coupon profile (5.5-6.0%) 350 300 • Expect benefits of deleveraging from strong FCF 250 conversion and synergie
Slide 25: Transitional dividend arrangements
Transitional dividend arrangements A.G. Barr Britvic Financial year To Jan-13 To Sep-12 Interim (paid) 2.6p 5.3p Second interim 7.4p 12.4p Total 10.0p 17.7p % growth vs. prior year 7.5% 0.0% To effective date Special dividend 10.0p Total to effective date 10.0p 27.7p Honouring existing dividend poli
Slide 26: Dividend policy
Dividend policy • The combined group will follow a progressive dividend policy targeting a dividend cover of 2.0x to 2.5x • Based on adjusted EPS • Absolute level of dividends based on performance, cash flow and rate of synergy realisation • Intention is to retain the January financial year end for
Slide 27: Accounting for the transaction
Accounting for the transaction • Accounting policies adopted will be those of Britvic • For accounting purposes it is expected that A.G. Barr will be merged into Britvic’s balance sheet – A.G. Barr’s assets and liabilities will be fair valued at the merger resulting in the valuation of A.G. Barr’s b
Slide 28: Enhanced financial opportunities for combined business
Enhanced financial opportunities for combined business • Strong growth prospects • Delivery of significant synergies • Opportunity to build operating margins • Strong free cash flow generation leading to rapid deleveraging Clear financial focus 28
Slide 29: Next steps and milestones in process
Next steps and milestones in process • Scheme / Prospectus documents to be posted as soon as practicable • Transaction conditional on shareholder approval and OFT approval • Final OFT filing to be made as soon as possible • Scheme expected to be effective in February 2013 Completion expected in Febr
Slide 30: Roger White
eNOS a Roger White USS BRITVIC ple SOFT DRINKS
Slide 31: Barr Britvic Soft Drinks will create shareholder value
Barr Britvic Soft Drinks will create shareholder value • Stronger business with more growth opportunities • Significant synergies • Clear vision and strategy • Experienced team to deliver our plans 31
Slide 32: Wes ES:
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Slide 33: Appendix
Appendix
Slide 34: Pro forma financials
Pro forma financials
Slide 35: Pro forma profit & loss
Pro forma profit & loss Britvic A.G.Barr Combined All figures in £m unless stated otherwise For the year ended 02 Oct 11 For the year ended 28 Jan 12 Revenue 1,290.4 237.0 1,527.4 Gross profit 663.1 118.7 781.8 Gross margin (%) (1) 51.4% 50.1% 51.2% EBITDA (2) 185.7 40.7 226.4 EBITA (3) 138.1 33.7 1
Slide 36: Pro forma cash flow
Pro forma cash flow Britvic A.G.Barr Combined All figures in £m unless stated otherwise For the year ended 02 Oct 11 For the year ended 28 Jan 12 Change in working capital -13.5 -6.3 -19.8 Capex 49.0 6.6 55.6 Operating cash flow (1) 145.9 31.3 177.2 Notes (1) Has been calculated on a pre-tax basis.
Slide 37: Pro forma balance sheet
Pro forma balance sheet Britvic A.G.Barr Combined All figures in £m unless stated otherwise As at 02 Oct 11 As at 28 Jan 12 Total assets 1,065.4 196.3 1,261.7 Cash (1) 43.0 8.3 51.3 Net debt (2) 452.0 6.6 458.6 Pension deficit (3) 45.1 0.4 45.5 Notes (1) Corresponds to the "cash and cash equivalents
Slide 38: Overview of Britvic
Overview of Britvic
Slide 39: From small beginnings to a global player
― mid 19thC Chelmsford a chemist begins creating homemade soft drinks ― 1987 Tango acquired ― 1987 Pepsi – first 20 year bottling arrangement agreed in the UK ― 1995 Robinsons acquired ― 2000 Orchid Drinks acquired, inc. Amé/Purdeys ― 2004 Ben Shaws acquired, inc Pennine Water ― 2005 Publicly traded
Slide 40: Overview of Britvic
Overview of Britvic • GB – #1 supplier of stills with Robinsons, J20 and Fruit Shoot – Bottling both carbonates and stills for Pepsi – #2 in take-home, #1 in pubs and clubs • Ireland – #1 brands in Ballygowan, 7Up, MiWadi and Club Orange – Pepsi bottler for 7Up, Pepsi and Mountain Dew – Concentrate
Slide 41: Where we operate
Factories Beckton Huddersfield Leeds Norwich Rugby Widford Offices Hemel Hempstead Solihull 2100 employees Where we operate 41
Slide 42: Where we operate
Factories Dublin (Kylemore) Newcastle West Distribution Dublin (Clondalkin) Belfast Customer Care Centre Thurles 500 employees Where we operate 42
Slide 43: Where we operate
Béziers Crolles La Roche-sur-Foron Nantes 600 employees Where we operate 43
Slide 44: Innovation launches in recent years
Innovation launches in recent years 44
Slide 45: Britvic-owned brands with global appeal
Britvic-owned brands with global appeal 45
Slide 46: A growing Fruit Shoot franchise model
A growing Fruit Shoot franchise model Concentrate manufacturing facility operational Spring 2012 In-market manufacture established in USA & Australia USA – Agreements with 4 Pepsi bottlers Including PAB, the wholly-owned beverage unit of Pepsi – Local manufacture by Pepsi Bottling Ventures o
Slide 47: Overview of A.G. Barr
Overview of A.G. Barr
Slide 48: Overview of A.G. Barr
Overview of A.G. Barr • Over 100 years in the business of making, moving and selling Head Office Regional Office soft drinks Sales Branch Distribution Depot Factory • Long established plc; FTSE 250 Forfar • Brand builder – 88% company owned brands Cumbernauld Pitcox Newcastle • Asset based business
Slide 49: A strong track record of revenue growth
A strong track record of revenue growth IRN-BRU 9% Rubicon 107% Barr 65% Aug-12 Rockstar Aug-11 140% Aug-10 KA 374% Aug-09 Three year Orangina 12% growth rate Strathmore 18% Simply 367% 0 20 40 60 80 100 120 52 week sales value (£m) Source: Nielsen top-line retail value by brand 49
Slide 50: An exciting range of brands – IRN-BRU
An exciting range of brands – IRN-BRU • Largest brand within A.G. Barr’s portfolio • Retail sales of c.£110m in 2012 • Growing in Scotland – focus on Sugar Free • Sugar free accounted for 32% of total brand sales in 2012 • Strong growth in North of England • Introduced IRN-BRU on the Russian market
Slide 51: An exciting range of brands – exotics
An exciting range of brands – exotics • Acquired Rubicon in August 2008 for £59.8m • Brand investment and range extensions • First national TV campaign • Launch of Rubicon ice cream • New pack sizes, formats and flavours in juice • Sales of the Rubicon business have doubled since acquisition • KA la
Slide 52: An exciting range of brands – Barr
An exciting range of brands – Barr • Traditional flavoured carbonates • Great quality at affordable prices • Range has grown and now available in variety of pack sizes and formats • Significant growth especially in the North of England • Barr’s Originals launched in 2008 • High quality ingredients,
Slide 53: Investment in assets
Investment in assets • 2009 closure of Mansfield site announced • 2010 investment in additional filling capacity at Cumbernauld • 2011 closure of Mansfield site • September 2011 announcement of intention to establish new site in south of the UK Magna Park, Milton Keynes 53
Slide 54: The soft drinks market
<a ee, a) Be gen MAS ik. al The soft drinks market
Slide 55: Soft drinks market shares by region and channel
GB Take-Home £7.2bn Ireland Take-Home €500m France Juice €1.3bn Other Britvic Other Britvic 13% 11% 12% Other 4% 14% Britvic AG Barr 3% Richmond 4% 24% Innocent 3% Danone 4% Tropicana Red Bull 3% 12% CCE Private Label Tropicana 5% 28% Private Label 8% Joker 59% Danone 5% 11% GSK 13% GSK 7% Private L