Estre Ambiental Inc · OTC:ESTRF
Estre Ambiental — SPAC Merger (September 2017)
29 slides from Estre Ambiental's SPAC merger presentation, Sep 26, 2017
Slide 1: Presenters
Presenters 2 Sergio Pedreiro CEO and Director Estre Andreas Gruson Director Estre Marc Lasry Founder and Chairman Avenue Capital Steve Trevor CEO, President and Director Boulevard
Slide 2: Investment highlights
3 Investment highlights Strong underlying volume growth: Municipal Solid Waste (“MSW”) volume growing 4% per year, >2x US growth Unmet demand: 37 million tons (47%) MSW in Brazil not properly disposed of Positive shift in regulatory framework: 2010 Solid Waste National Policy adopted Fragmented indu
Slide 3: Investment highlights (continued)
4 Investment highlights (continued) US$132 / US$145 million estimated 2017 / 2018 Adj. EBITDA(1), US$1.1 billion Enterprise Value, US$816 million equity market cap(2) 25% discount to median of broad waste peers (7.7x 2018E Adj. EBITDA vs. comparables at 10x)(1)(3) Double-digit Adj. EBITDA(1) organic
Slide 4: Attractive operating, value and leverage metrics vs. peers
Attractive operating, value and leverage metrics vs. peers(1)(2) 5 2017E-2019E Net Revenues CAGR 2017E-2019E Adj. EBITDA(2) CAGR 2017E Adj. EBITDA(2)(3) margin EV / 2017E Adj. EBITDA(2) EV / 2018E Adj. EBITDA(2) Net Debt / 2017E Adj. EBITDA(2)(4) Higher growth opportunities in Brazil when compared t
Slide 5: Inflection point in Brazil macroeconomic backdrop
10 Year Credit Default Swap Currency BOVESPA Index 6 Inflection point in Brazil macroeconomic backdrop Source: BMI; IBGE; Brazilian Central Bank; Focus report; FactSet and Barclays estimates as of Aug 14, 2017. Interest rates have come down significantly, as inflation is expected to return within ta
Slide 6: Leading waste management company in Brazil
7 Leading waste management company in Brazil Full-range of waste and environmental services for more than 31 million people Collection Services 500+ Clients 801 vehicles on collection, sweeping, and cleaning services for 31 million people Landfill Operations 13 Landfills 6 million tons disposed in E
Slide 7: Attractive growth opportunity
8 Attractive growth opportunity 80 million tons annual of MSW 4% growth from 2008 to 2015 Fragmented industry Favorable regulatory framework 47% of MSW not properly disposed of 7 million not collected 30 million sent to illegal dumps Source: ABRELPE – Panorama of Solid Waste in Brazil (2015). Brazil
Slide 8: Favorable, evolving regulatory environment
9 Favorable, evolving regulatory environment Brazil Regulatory Framework Government committed to sound environmental practices National Solid Waste Policy enacted as Federal Law in 2010 Deadline to comply with proper solid waste destination ranges from July 2018 to July 2021 depending on size of the
Slide 9: Summary Financials, excluding results from divested operations
US$ 60 101 122 132 US$ 378 404 437 466 US$ 28 24 38 36 US$ 32 77 85 96 Summary Financials, excluding results from divested operations(1) 10 7% 1,393 2016 1,289 2015 2017E 1,485 2014 1,206 2014 191 30% 420 2017E 389 2015 2016 323 88 2016 2017E 2014 114 76 120 2015 306 269 103 2016 2017E 2015 2014 247
Slide 10: Simple growth algorithm
Simple growth algorithm 11 Organic Growth Margin Expansion M&A Price, Volume & New Business Adj. EBITDA Growth M&A and Tuck-in Acquisitions + 1 Sales Growth New business activities include a pipeline of 10 new collection contracts and 5 new landfills; projected R$30 million CAPEX per year; estimated
Slide 11: Strategic Latin American waste platform poised for significant potential growth
Estre’s landfills serve markets that are among the largest and fastest growing in Brazil and are well positioned to capture growth from unserved smaller municipalities in their coverage area 134 million cubic meters of remaining capacity (>15 years) – robust pipeline of additional capacity 12 Strate
Slide 12: Guidance
13 Guidance Assumes (i) Estre signs 29% of its pending contracts and pipeline (historically, Estre has had an 82% renewal rate and a 75% win rate on new public contracts), (ii) no adjusted EBITDA margin expansion due to public company standup costs, and (iii) CAPEX expansion due to accelerated inves
Slide 13: Selected financial data, excluding results from divested operations
14 Lower SG&A as % of net revenues reflecting elimination of redundancies, synergies, and cost discipline Selected financial data, excluding results from divested operations(1) Metrics exclude the effects of the following divested operations: (i) residual Estre contracts with Petrobras related to Es
Slide 14: New capital structure optimization; competitive leverage
15 New capital structure optimization; competitive leverage Significantly enhanced liquidity for growth Debentures amortization schedule (US$ million) Reduced post transaction leverage adds strategic flexibility and attractive new debt terms 8 year maturity @ CDI (interbank rate) + 2% Pre-payable at
Slide 15: Transaction overview – Boulevard acquisition of Estre
Transaction overview – Boulevard acquisition of Estre 16 Estimated pro forma enterprise value of US$1.1 billion with US$816 million market cap (74%) and US$294 million Net Debt(2) (26%) Sources: US$370 million from Boulevard cash in trust Uses: US$200 million debt reduction (US$250 million retired a
Slide 16: New board of directors
17 New board of directors Majority independent board bringing mix of US and Brazilian waste management sector experience and best practices Top Tier Governance Primary responsibilities will include, among other things: Review of strategic planning Budget approval Performance monitoring Approval and
Slide 17: Estimated potential equity growth
18 Estimated potential equity growth Commitment to long-term value creation for shareholders Growth in Equity Value 1 year forward Adj. EBITDA multiple 7.7x 8.5x(2) (3) 8.5x 8.5x Adj. EBITDA(2) US$145 US$145 US$159 US$190 (US$ million) Illustrative potential growth in equity value(1) 3-Year Potentia
Slide 18: Estimated potential equity growth
Estimated potential equity growth o 2 3 Commitment to long-term value creation for shareholders Illustrative potential growth in equity value) (US$ milion) @ cower ncauey vane 1513 a 1,096 938 = || LS Inital Fully-Distributed 1-Year Potential 3-Year Potential 3-Year Potential Multiple Equity Value E
Slide 19: Execution-focused team driving operational improvements and margin expansion
20 Execution-focused team driving operational improvements and margin expansion Reputable management team with deep industry knowledge and proven track-record
Slide 20: Highlights of Estre's New Compliance Program
21 Highlights of Estre’s New Compliance Program Define, implement and manage compliance with the Brazilian Anticorruption Laws Top-down compliance policies applicable to all employees and third parties Whistleblower channel / hotline Continuous education and training Regular due diligence and intern
Slide 21: Revenue – continuing operations
22 Revenue – continuing operations Residual Estre contracts with Petrobras related to Estre O&G operations, following Estre’s divestment in September 2014. Average price adjustments applied on Landfills and Collection contracts. (R$ million) 2014 2015 2016 Net Revenues 1,294 1,339 1,393 Divested Ope
Slide 22: Adjusted EBITDA reconciliation
23 Adjusted EBTIDA reconciliation Reflects certain accounting gains and losses that Estre’s management believes to be non-recurring in nature resulting from the sale of assets either above or below book value, sold as part of Estre’s efforts to streamline its operations as part of its restructuring
Slide 23: Divested operations reconciliation notes
Reflects (i) R$24 million of net revenues from Estrans landfill in Buenos Aires, Argentina following the sale of Estre’s investment in this entity in December 2015; (ii) R$54 million of net revenues from sub-scale collection contracts (Azaleia) following Estre’s sale of these contracts back to the o
Slide 24: Adjusted Results, Net Debt - reconciliation
25 Adjusted Results, Net Debt - reconciliation
Slide 25: Important Disclosures
26 Important Disclosures This presentation is for informational purposes only and has been prepared to assist interested parties in making their own evaluation with respect to the proposed business combination between Estre Ambiental S.A. (together with its subsidiaries, “Estre” or the “Company”) an
Slide 26: Disclaimer (continued)
Disclaimer (continued) 27 Forward Looking Statements Certain statements included in this presentation are not historical facts but are forward-looking statements for purposes of the safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995. Forward-looking state
Slide 27: Disclaimer (continued)
Disclaimer (continued) 28 Participants in the Solicitation Boulevard, Estre and Holdco (when formed) and their respective directors and certain of their respective executive officers may be considered participants in the solicitation of proxies with respect to the Proposed Business Combination under
Slide 28: Disclaimer (continued)
Disclaimer (continued) 29 This presentation also includes adjusted CAPEX measures, which diverge from similarly titled measures that will be presented in Estre’s financial statements in accordance with IFRS. Accordingly, appropriate caution should be exercised in placing undue reliance on these figu
Slide 29: Disclaimer (continued)
Disclaimer (continued) ‘This presentation also includes adjusted CAPEX measures, which diverge from similarly titled measures that wl be presented in ste’ financial statements in acordance with IFRS. ‘Accordingly, appropriate caution should be exercised in pacing undue reliance on these figures, Nt