Bega Cheese Limited · ASX:BGA
Bega Cheese — Investor Presentation (November 2020)
59 slides from Bega Cheese's investor presentation, Nov 26, 2020
Slide 1: Acquisition of Lion Dairy & Drinks and Capital Raising
Acquisition of Lion Dairy & Drinks and Capital Raising The Great Australian Food Company 26 November 2020 Page 1 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 2: Important Notices & Disclaimer
Important Notices & Disclaimer The following notice and disclaimer applies to this investor presentation (Presentation) and you are therefore advised to read this carefully before reading or making any other use of this Presentation or any information contained in this Presentation. By accepting thi
Slide 3: Important Notices & Disclaimer
Important Notices & Disclaimer SUMMARY INFORMATION This Presentation contains summary information about Bega and its subsidiaries and their respective activities which is current only as at the date of this Presentation (unless otherwise stated). The information in this Presentation is of a general
Slide 4: Important Notices & Disclaimer
Important Notices & Disclaimer FORWARD LOOKING STATEMENTS The information in this Presentation is subject to change without notice and Bega is not obliged to update or correct it. This Presentation contains statements that constitute "forward-looking statements" . The forward-looking statements in t
Slide 5: Important Notices & Disclaimer
Important Notices & Disclaimer DISCLAIMER No party other than Bega has authorised or caused the issue, lodgement, submission, dispatch or provision of this Presentation, or takes any responsibility for, or makes or purports to make any statements, representations or undertakings in this Presentation
Slide 6: Executive summary
Executive summary Transaction overview Bega Cheese Limited (“Bega”) has entered into a binding agreement to acquire Lion Dairy & Drinks Pty Ltd (“LD&D”) for $534 million1 Implies EV / EBITDA multiple of 10.9x pro forma normalised LTM Sep-20 EBITDA2 of $56 million and 6.3x post synergy realisatio
Slide 7: Executive summary
Executive summary Transaction overview All cash transaction funded with a combination of: 1. $267 million debt from new and existing facilities, including a $500 million acquisition facility 1 2. An underwritten Capital Raising of $401 million, comprising: Transaction funding a 1 for 4.5 pro-rat
Slide 8: Strong strategic alignment
Strong strategic alignment ✓ Cultural fit – heritage, community, customers, suppliers ✓ Immediate delivery of Bega’s 2023 strategy to achieve 70% branded sales ✓ Complementary CPG capability to unlock competitive advantage ✓ Unique national cold chain distribution ✓ Substantial synergy potential – $
Slide 9: Overview of Lion Dairy & Drinks
Overview of Lion Dairy & Drinks Page 9
Slide 10: Lion Dairy & Drinks highlights
Lion Dairy & Drinks highlights Attractive portfolio of Milk-Based Beverages, Yoghurt, Juice, White Milk, Plant-Based Beverages, Culinary and other brands Some of Australia’s iconic dairy and beverage brands with #1 and #2 market share positions in its core categories Australia’s largest national col
Slide 11: Portfolio of well-known brands and assets
Portfolio of well-known brands and assets Milk-Based Beverages Culinary (Cream and Custard) Joint ventures: Yoghurt International chilled dairy business Vitasoy Australia Products White Milk Yoplait brand (licensed) Capitol Chilled Foods Australia (CCFA) Chilled and Ambient Juice
Slide 12: Australia-wide manufacturing footprint
Australia-wide manufacturing footprint Large-scale, well-invested national manufacturing capability across 13 facilities Manufacturing Australia’s most iconic dairy and beverage brands for 130+ years 13 Malanda Manufacturing capabilities provide flexibility to produce multiple categories and a
Slide 13: Extensive distribution network and property portfolio
Extensive distribution network and property portfolio Australia’s largest national cold chain distribution network Major distribution centres within a network of 136 distribution centres nationally Integrated distribution network for scale, efficiency and flexibility Competitive differentiat
Slide 14: Category overview
Category overview Milk Based Beverages Yoghurt Market leading brands in a growing category Growing market opportunity with increasing recognition as a ‘better for you’ category #1 player in the category1, with a national powerhouse brand in Dare and well- #1 supplier1 in the growing and profitab
Slide 15: Category overview
Category overview Chilled Juice White Milk Consumer driven demand supporting growth opportunity Opportunity to leverage combined manufacturing footprint together with Bega’s core dairy and processing expertise Product portfolio includes well recognised brands in convenience and take-home #2 bran
Slide 16: Category overview
Category overview Other Brands Portfolio includes Vitasoy joint venture providing exposure to the growing plant-based beverages market Vitasoy JV market leading plant-based beverages brand aligned with consumer trends in HORECA1 channels Capitol Chilled Foods Australia (CCFA) JV between LD&D and
Slide 17: Financial profile of LD&D
Financial profile of LD&D Key financials (LTM Sep-20) Recent drivers Historical revenue has been stable at c.$1.6 billion, with earnings primarily derived from Milk Based Beverages, Yoghurt, Culinary and Revenue : $1.6 billion Water Ice categories Milk Based Beverages and Yoghurt accounted for 9
Slide 18: Acquisition rationale
Acquisition rationale Page 18
Slide 19: Acquisition Rationale
Acquisition Rationale 1. Creates large-scale dairy and foods business with increased branded portfolio. Achieving 2023 branded portfolio target ahead of schedule 2. Highly complementary CPG capability 3. Significant expansion of domestic distribution network, with a focus on route channel 4. Strengt
Slide 20: Strong alignment with Bega's 2023 strategy
Strong alignment with Bega’s 2023 strategy Pre 2017 Now Our focus 2023 Limited investment Building brand Acquisition of LD&D in brands growth engine Increase brand organic accomplishes strategic growth rate objectives Fonterra responsible for Bega Extension of Bega brand into brand in Australia new
Slide 21: Strengthens core dairy footprint
Strengthens core dairy footprint 1. 75% increase in milk intake to 1.7 billion litres per annum with sizable increase in NSW and entry into new regions: QLD, WA, TAS, and SA 2. Expanded product capability with new branded dairy categories: Dairy drinks (Milk Based Beverages, White Milk) Yoghurt
Slide 22: Increasing branded sales
Increasing branded sales Pro forma Bega (FY20) Bega standalone (FY20) and LD&D (LTM Sep-20) Bulk Bulk 20% 41% Revenue Branded 59% composition Branded by segment 80% Bulk Bulk 24% 36% EBITDA by Branded segment 64% Branded 76% 1 Bulk includes inter-segment eliminations 2 EBITDA presented post AASB 16
Slide 23: Highly complementary CPG capability
Highly complementary CPG capability Combined portfolio of market leading brands Enhanced manufacturing capability Expansion of points of distribution Manufacturing facilities Distribution centres and warehouses Combined Combined 13 7 20 136 10 146 Rare opportunity to acquire LD&D’s portfolio of ic
Slide 24: Substantial synergy opportunity
Substantial synergy opportunity Synergy Drivers Integration and optimisation of corporate support functions Corporate IT systems, commercial cross-over as well as finance functions and processes reorganisation Coordinated approach to mitigate disruption to the underlying business and prioritis
Slide 25: Financially compelling returns for shareholders
Financially compelling returns for shareholders Significant synergy opportunity – high confidence in base case synergies of $41 million per annum ($36 million expected to be realised in FY22) Transaction expected to be double digit EPS accretive1 in FY222 Bega to maintain a strong balance shee
Slide 26: Transaction funding and financial impacts
Transaction funding and financial impacts Page 26
Slide 27: Details of the Capital Raising
Details of the Capital Raising Underwritten Capital Raising of $401 million which comprises: a 1 for 4.5 pro-rata accelerated non-renounceable entitlement offer of approximately $220 million, comprising an Institutional Entitlement Offer and a Retail Entitlement Offer1 (Entitlement Offer); and O
Slide 28: Sources and uses of funds
Sources and uses of funds Transaction funding structure Sources and uses of funds Sources of funds $m Bega has secured a $70 million increased facility limit of Syndicated Placement 181 Revolving 1 to $140 million, with a 2-year term. Furthermore, Entitlement offer 220 Syndicated Revolving 2, with
Slide 29: Pro forma balance sheet
Pro forma balance sheet Transaction Pro forma Notes: Capital Debt Lion Dairy Acquisition In $’m Bega1 and Upfront Post 1 Net Assets of Bega as reported at 30 June 2020. Refer to the Investors section on Raising2 Funding3 and Drinks4 Adjustment5 Costs6 Acquisition Bega’s website for Bega’s FY20 annua
Slide 30: Capital Raising timetable
Capital Raising timetable Event Date Announcement of Offer, Institutional Entitlement Offer and Placement opens Thursday, 26 November 2020 Institutional Entitlement Offer and Placement closes Thursday, 26 November 2020 Announcement of results of Institutional Entitlement Offer and Placement Friday,
Slide 31: Bega Trading Update
Bega Trading Update Page 31
Slide 32: Trading update
Trading update Strong retail sales performance from branded business driven by heritage brand performance and product innovation Execution of organisation review delivering headcount reduction and material savings in non-manufacturing costs Strong performance in branded Continued reduction of
Slide 33: Appendix
Appendix Page 33
Slide 34: Overview of Transaction Documents
Overview of Transaction Documents Share Sale and Purchase Agreement Bega has agreed to purchase all of the shares (Sale Shares) in Lion-Dairy & Drinks Pty Ltd (Target) from Kirin Foods Australia Holdings Pty Ltd (Seller) under the terms of a Share Sale and Purchase Agreement (“SPA”) between Bega,
Slide 35: Overview of the Underwriting Agreement terms
Overview of the Underwriting Agreement terms Summary of Underwriting Agreement Bell Potter Securities Limited (ABN 25 006 390 772) (“BPS”) and UBS AG, Australia Branch (ABN 47 088 129 613) (“UBS”, together with BPS, the “Underwriters”) will be acting as underwriters, joint managers and bookrunners t
Slide 36: Overview of the Underwriting Agreement terms
Overview of the Underwriting Agreement terms any Group company becomes insolvent; Bega ceases to be admitted to the official list of ASX or its ordinary shares are suspended from official quotation, or cease to be quoted, on ASX (for any reason other than a trading halt in connection with the Of
Slide 37: Overview of the Underwriting Agreement terms
Overview of the Underwriting Agreement terms any information supplied by Bega to the Underwriters in relation to the Group or the Offer is, or becomes, misleading or deceptive (including by omission); there is introduced, or a proposal to introduce, a new law in Australia, or the Reserve Bank of
Slide 38: Risks
Risks This section discusses some of the risks associated with an investment in shares in Bega. These risks may affect the future operating and financial performance of Bega and the value of Bega’s shares. The risks set out below are not listed in order of importance and do not necessarily constitut
Slide 39: Specific Bega Investment Risks
Specific Bega Investment Risks Milk and other key ingredient supply and pricing Bega relies on milk supply from its farmer suppliers. In turn, the farmer suppliers need suitable climatic conditions in order to produce pasture and source grain and hay/fibre to feed their dairy herds. Farmer suppl
Slide 40: Specific Bega Investment Risks
Specific Bega Investment Risks Fonterra legal proceedings In 2001, Bega granted Fonterra Brands (Australia) Pty Ltd (Fonterra) an exclusive licence to use the Bega trademarks in Australia on natural cheddar cheese, processed cheddar cheese, string cheese and butter (Licensed Products). Fonterra co
Slide 41: Specific Bega Investment Risks
Specific Bega Investment Risks Failure to maintain supplier relationships Failure to maintain supplier relationships could adversely impact Bega. In addition, there is a risk that existing arrangements with key customers are not renewed or extended at the end of their term, or any extension or ren
Slide 42: Specific Bega Investment Risks
Specific Bega Investment Risks Bank debt facilities and covenants Bega utilises debt to partially fund its business operations and may need to access additional debt financing to grow its operations. If Bega is unable to refinance, repay or renew its debt facilities or otherwise obtain debt financ
Slide 43: Specific Bega Investment Risks
Specific Bega Investment Risks Workplace health and safety risk Safety risks are inherent in Bega's business activities including equipment handling. A health and safety incident may lead to a serious injury or death, which may result in reputational damage and business disruptions, and adversely
Slide 44: Specific Bega Investment Risks
Specific Bega Investment Risks Information technology risk Failure to manage Bega's IT infrastructure, systems and security (including cyber threats) and ensure Bega's IT environment is able to support its business including the integration of LD&D could potentially affect Bega's ability to delive
Slide 45: Acquisition Risks
Acquisition Risks Reliance on information provided There is a risk that information provided by the Seller (including financial information) was incomplete, inaccurate, out of date or unreliable and there is no assurance that the due diligence was conclusive or identified all material issues in re
Slide 46: Acquisition Risks
Acquisition Risks Finance Facilities Bega has approval from its banks for new facilities, which together with existing facilities, are intended to be drawn down to pay the purchase price for the Sale Shares. Draw down of the new facilities is subject to finalisation and signing of facility documen
Slide 47: Acquisition Risks
Acquisition Risks Vitasoy Joint Venture The LDD Business includes a 49% interest in Vitasoy Australia Pty Ltd, which is a joint venture company in which the other 51% is held by Vita International. Vita International has rights under "change of control" provisions in the Vitasoy Shareholders Agree
Slide 48: Acquisition Risks
Acquisition Risks Restraints and Exclusivity A number of contracts associated with the LDD Business include provisions that impose restraints including provisions requiring the relevant LDD Group entity to deal exclusively with the counterparty. These provisions may restrict the ability of Bega to
Slide 49: General Bega Investment Risks
General Bega Investment Risks General market and share price risk The operating and financial performance of the Bega business and the LDD Business will also be influenced by a variety of general economic and business conditions, including levels of consumer spending, inflation, interest and excha
Slide 50: General Bega Investment Risks
General Bega Investment Risks Government policies and legislation risk Bega may be affected by changes to government policies and legislation, including those relating to the agricultural industry, property, the environment, taxation, the regulation of trade practices and competition. Changes in a
Slide 51: General Bega Investment Risks
General Bega Investment Risks Litigation Legal proceedings and claims may raise from time to time in the ordinary course of Bega’s business and may result in high legal costs, adverse monetary judgements and/or damage to Bega’s reputation which could have an adverse impact on Bega’s financial posi
Slide 52: Capital Raising Risks
Capital Raising Risks Underwriting risk Bega has entered into an underwriting agreement under which the Underwriters have agreed to fully underwrite the Capital Raising, subject to the terms and conditions of the underwriting agreement. If certain events occur, the Underwriters may terminate the u
Slide 53: Foreign Selling Restrictions
Foreign Selling Restrictions This document does not constitute an offer of new ordinary shares (New Shares) of the Company in any jurisdiction in which it would be unlawful. In particular, this document may not be distributed to any person, and the New Shares may not be offered or sold, in any count
Slide 54: Foreign Selling Restrictions
Foreign Selling Restrictions Norway This document has not been approved by, or registered with, any Norwegian securities regulator under the Norwegian Securities Trading Act of 29 June 2007 no. 75. Accordingly, this document shall not be deemed to constitute an offer to the public in Norway within t
Slide 55: Foreign Selling Restrictions
Foreign Selling Restrictions Singapore This document has not been and will not be registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this document and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of th
Slide 56: Foreign Selling Restrictions
Foreign Selling Restrictions United States This document may not be distributed or released in the United States. This document does not constitute an offer to sell, or a solicitation of an offer to buy, any securities in the United States or any other jurisdiction in which such an offer would be il
Slide 57: Foreign Selling Restrictions
Foreign Selling Restrictions Canada The New Shares will not be qualified for sale under the securities laws of any province or territory of Canada. The New Shares may only be offered, sold or distributed, directly or indirectly, in the provinces of British Columbia, Alberta, Ontario or Québec and no
Slide 58: Foreign Selling Restrictions
Foreign Selling Restrictions United Arab Emirates (excluding the Dubai International Financial Centre) This document is strictly private and confidential and is being distributed to a limited number of investors and must not be provided to any person other than the original recipient, and may not be
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