Csl Limited · ASX:CSL

Csl — Merger or Acquisition (December 2003)

43 slides from Csl's merger presentation, Dec 9, 2003

1. Slide 1: ZLB Behring

   NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES ZLB Behring A World Leading Plasma Therapeutics Business Created Through The Combination of ZLB and Aventis Behring December 9, 2003

2. Slide 2: Disclaimer

   Disclaimer Forward looking statements The forward looking statements included in these materials involve subjective judgment and analysis and are subject to significant uncertainties, risks, and contingencies, many of which are outside the control of, and are unknown to, CSL. In particular, they spe

3. Slide 3: Agenda

   Agenda 1. Overview of ASX Announcement Brian McNamee 2. Strategic Rationale Brian McNamee 3. Operations and Integration Peter Turner 4. Financial Effects Tony Cipa 5. Conclusion Brian McNamee

4. Slide 4: 1. Overview of ASX Announcement

   1. Overview of ASX Announcement

5. Slide 5: ASX Announcement

   ASX Announcement „ General trading „ Animal Health „ Merck R&D Briefing „ Transaction Overview 2

6. Slide 6: Acquisition Summary

   Acquisition Summary „ Sale & Purchase Agreement signed to acquire Aventis’ plasma therapeutics division, Aventis Behring „ Agreement reached after extensive due diligence and exclusivity period „ Acquisition includes manufacturing facilities, inventory, rFVIII assets, plasma collection business, acc

7. Slide 7: Purchase Price

   Purchase Price A$m US$m equiv(1) „ Deferred payment schedule Up-front Payment 550 786 allows time for realisation of Deferred Payments synergies July ’06 settlement 30 43 „ Aventis participates in merger Dec ’06 settlement 30 43 Dec ’07 settlement 65 93 synergies through Contingent 125 179 Payment T

8. Slide 8: Strategic and Financial Highlights

   Strategic and Financial Highlights „ Improved competitive position „ Breadth of product portfolio – adds leadership in haemophilia and Strategic Position specialty products (eg. A1PI) to CSL’s strength in immunology „ Improved profit per litre and efficiency of throughput – through production effici

9. Slide 9: Historical Financials and Multiples

   Historical Financials and Multiples Jan - Sep (US$ M illion) CY2002 (1) 2003 (1) „ Acquisition multiples, based on Aventis Behring 2002 Sales 1,003 789 R&D Spend 79 49 standalone financials, before % of Sales 7.9% 6.2% synergies(2): EBITDA 115 77 „ 0.65x Sales M argin (% ) 11.5% 9.8% EBIT 45 25 „ 3.

10. Slide 10: Discount to Book Value

    Discount to Book Value „ Purchase price represents a discount of approximately US$625m to estimated book value of net assets acquired and US$200m to estimated book value of inventory acquired(1) 1,500 1,000 US$m 500 0 Acquired Assets Estimated Purchase Price(3) Net Book Value (2) ___________________

11. Slide 11: Profit Improvement Initiatives

    Profit Improvement Initiatives Overview Sources of Synergies „ Synergies from profit improvement „ Optimise production facilities – initiatives to exceed US$100m pa centres of excellence / yield enhancement „ Integration plan developed over 10 months of due „ Enhance R&D portfolio, diligence focused

12. Slide 12: Benefits from Acquired Inventory

    Benefits from Acquired Inventory „ Inventory acquired with Aventis Behring provides a number of benefits(1) „ Includes raw materials, WIP and finished goods „ Enables CSL to implement manufacturing optimisation plans between plants, without risk of causing disruption in sales „ Provides benefit to e

13. Slide 13: Financial Impact

    Financial Impact „ Up-front cash purchase price and transaction costs funded through mix of equity ~60% and debt ~40%(1) „ Underwritten institutional placement to raise a minimum of A$420m „ Non-underwritten share purchase plan to raise up to A$100m „ Committed bridge facility „ Arrangements in plac

14. Slide 14: Financial Impact

    Financial Impact „ ZLB Behring return on capital employed(1) expected to reach 15% by the third year post closing „ Ability to generate strong cash flows „ Cash flow enhanced by profit improvement initiatives „ ZLB Behring moderate capex needs – Combined capex approximately US$70m pa – Benefits from

15. Slide 15: 2. Strategic Rationale

    2. Strategic Rationale

16. Slide 16: Summary Strategic Rationale

    Summary Strategic Rationale „ Plasma industry offers attractive economic returns „ Highly complementary product portfolios and pipeline „ Strong growth potential in recombinant Factor VIII „ More efficient manufacturing platform and plasma sourcing „ Enhanced revenue per litre processed „ Strengthen

17. Slide 17: Plasma Industry Offers Attractive Economic Returns

    Plasma Industry Offers Attractive Economic Returns „ Essential, life-saving products „ Many markets with significant under-treatment „ Incremental benefits from additional plasma products (eg. A1PI, wound healing) „ New products (eg. rHDL) „ Growing focus on profitable litres CAGR(1) Estimated CAGR(

18. Slide 18: Highly Complementary Product Portfolios

    Highly Complementary Product Portfolios ZLB Standalone Sales „ Total plasma product sales Others approximately A$2 billion 5% Albumin „ Decreased relative dependence on 25% IVIG and Albumin „ Aventis Behring strength in IVIG haemophilia and specialty products 70% „ vWf, rFVIII (Helixate), A1PI ZLB B

19. Slide 19: Strong Growth Potential in Recombinant Factor VIII

    Strong Growth Potential in Recombinant Factor VIII „ Helixate - recombinant Factor VIII „ rFVIII market volumes expected to grow at 6-8% pa(1) – ZLB Behring expects to regain market share lost during Bayer supply interruption – Higher dosages, patients ageing, prophylactic treatment „ Supply contrac

20. Slide 20: More Efficient Manufacturing Platform and Plasma Sourcing

    More Efficient Manufacturing Platform and Plasma Sourcing „ Manufacturing flows optimised by focusing on “centres of excellence” „ Yield uplift in IVIG „ Enhanced utilisation of cryo precipitate „ Acquired inventory and manufacturing efficiency gains allow production of required output at lower cost

21. Slide 21: Enhanced Revenue Per Litre of Plasma Processed

    Enhanced Revenue Contribution Per Litre of Plasma Processed ZLB Standalone(1) Indicative ZLB Behring(2) A1PI Factor IX Factor VIII Revenue/ Revenue/ Albumin Albumin IVIG L L IVIG Enhanced Revenue Per Litre Processed And Efficiency Of Throughput ________________________________ (1) Key products only

22. Slide 22: Strengthened Global Marketing Reach

    Strengthened Global Marketing Reach Americas Europe Japan Asia Pacific And Asia Pacific Excluding Japan 100% 100% 100% 100% ZLB AB ZLB AB ZLB AB CSL AB ZLB „ Product marketing „ Product marketing „ Distributor „ CSL contract „ Hospital sales force „ Hospital sales force fractionation „ Relationships

23. Slide 23: Complements CSL Bioplasma

    Complements CSL Bioplasma „ ZLB Behring’s strong commercial sales network complements CSL Bioplasma’s position as a leading contract fractionator in the region „ Extensive regional sales network „ Extensive product range „ Shared product development will strengthen both 19

24. Slide 24: 3. Operations and Integration

    3. Operations and Integration

25. Slide 25: Overview of Assets Acquired

    Overview of Assets Acquired „ Manufacturing facilities „ Kankakee (Illinois, USA) K ing of Prussia „ Marburg (Germany) – Vienna (Austria) 7 2 Marburg Kankakee 3 (Barcelona plant to be closed by 5 Aventis) „ rFVIII assets „ Helixate supply contract Manufacturing Plants „ Freudenberg patent Sales Head

26. Slide 26: Strength of Combined Product Portfolio

    Strength of Combined Product Portfolio „ Global market shares and rankings CSL/ZLB (1) Aventis Behring (2) Share Rank Share Rank Haem ophilia (FVIII & FIX) 2% #10 16% #2 Plasm a 4% #10 33% (3) #1 Recom binant - - 7% #4 Critical Care (4) 6% #5 22% #1 Im m unoglobulin 16% #3 9% #4 W ound Healing - - 2

27. Slide 27: Improved Manufacturing and Plasma Sourcing Platform

    Improved Manufacturing and Plasma Sourcing Platform „ Manufacturing(1) Capacity Current Throughput Plant (m PEQ) (m PEQ) Bern 2.0 1.6 Kankakee 2.0 1.9 Marburg / Vienna 1.2 0.7 Total 5.2 4.2 „ Plasma Sourcing ZLB Aventis Behring Number of Centres 42 68 Collection Volume (litres) 1.3m 2.5m(2) „ Manufa

28. Slide 28: Thorough Due Diligence / Integration Planning

    Thorough Due Diligence / Integration Planning Feb June Dec 2003 2003 2003 Preliminary Due Due Diligence Confirmatory Due Diligence Diligence CSL/ZLB 25 people 50 people 12 people Due „ Manuf. Ops „ Plasma „ Commercial: „ Legal „ Confirm diligence „ Quality „ HR, IT „ US, Europe „ Finance Manufacturi

29. Slide 29: Integration Will Be Accomplished in Two Steps

    Integration Will Be Accomplished in Two Steps Dec April 2003 2004 Due Integration Integration Diligence Planning Execution Time Frame Signing Closing (Indicative) December 1H 2004 Key „ Project office (tools/systems) „ Integration project office Activities „ Integration planning „ Integration teams,

30. Slide 30: 4. Financial Effects

    4. Financial Effects

31. Slide 31: Funding Structure

    Funding Structure „ Approximately A$500m (US$350m) equity raising, comprising: 1. Institutional placement to raise a minimum of A$420m „ ASX waiver allows issue of approx 28m shares „ Fully underwritten at a minimum price of A$14.95 „ Executed during one day trading halt Equity 2. Share Purchase Pla

32. Slide 32: Improved Currency Matching of Revenues and Costs

    Improved Currency Matching of Revenues and Costs ZLB Standalone CHF EUR EUR 1% Operating Costs Revenues 10% 10% CHF 28% US$ 62% US$ 89% Indicative ZLB Behring(1) YEN CHF 7% YEN 6% Revenues Operating Costs 3% US$ EUR EUR 57% 38% US$ 34% 55% ________________________________ (1) Indicative currency bre

33. Slide 33: Key Acquisition Metrics

    Key Acquisition Metrics „ Significantly accretive to EPS(1) „ Estimated accretion to EPS in 2004/2005 in excess of 10%(2) relative to 2002/2003A, before additional earnings from sale of acquired inventory „ Sale of acquired inventory generates additional earnings for approx. two years (contributes a

34. Slide 34: Discount on Acquisition

    Discount on Acquisition „ Discount on acquisition represents the difference between fair value of net assets acquired and the purchase price(1) „ Discount allocated across all of Aventis Behring’s non-monetary assets „ Majority of discount allocated to inventory „ Earnings benefit from discount is l

35. Slide 35: Capital Structure

    Capital Structure „ Funding mix optimised to: CSL Pro-forma „ Maximise earnings benefit, Standalone Capitalisation(1) A$ million June 03 and Net Interest-Bearing Debt 495 817 „ Minimise credit risk PV of Deferred Payments - 139 „ Strong post-integration cash Net Debt 495 956 flow profile Equity 1,28

36. Slide 36: 5. Conclusion

    5. Conclusion

37. Slide 37: Strategically and Financially Compelling Transaction

    Strategically and Financially Compelling Transaction „ Creates a leading player in an essential industry „ Combines complementary strengths and improves competitive position „ Improves revenue per litre and efficiency of throughput „ Most extensive product portfolio „ High yields „ Delivers efficien

38. Slide 38: Bookbuild Process

    Bookbuild Process „ Price range A$14.95 upwards „ Investor participation Institutional and Sophisticated Investors through Broker Firm „ Australia / NZ preliminary book close 5.30pm „ Fresh price range guidance 6.00pm „ Australia / NZ book closes 7.00pm „ International book closes 7.00am 31

39. Slide 39: Risks Associated with the Acquisition

    Risks Associated with the Acquisition CSL is subject to a number of risks associated with the acquisition of Aventis Behring. Without limitation, those risks include: „ The proposed acquisition may not be consummated or may be delayed. For example, CSL must obtain approvals from regulatory authoriti

40. Slide 40: Risks Associated with the Businesses of CSL and Aventis Behring

    Risks Associated with the Businesses of CSL and Aventis Behring The businesses of CSL and/or Aventis Behring are subject to a number of risks affecting ordinary operating activities, many of which are outside their control. Without limitation, those risks include: „ Developments in the various busin

41. Slide 41: Additional Business Risks

    Additional Business Risks In addition to the previous points, there are three other specific business risks faced by Aventis Behring „ Genentech has initiated litigation against Bayer which aims to have Bayer’s rights to produce recombinant factor VIII cancelled. If successful, this may adversely im

42. Slide 42: Important Notice/Disclaimer

    Important Notice/Disclaimer Currency Conversion Unless otherwise indicated, where references are made in these materials to an Australian dollar equivalent of a US dollar amount, the Australian dollar amount has been calculated on the basis of an exchange rate of A$1.00 = US$0.70. However, exchange

43. Slide 43: Important Notice/Disclaimer (cont'd)

    Important Notice/Disclaimer (cont’d) US Securities law restrictions These materials are neither an offer to sell nor the solicitation of an offer to buy securities as those terms are defined in the U.S. Securities Act of 1933, as amended (the “Securities Act”). The offer of shares by CSL that is des

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