Bapcor Ltd · ASX:BAP
Bapcor — Burson Group — Merger or Acquisition (June 2015)
46 slides from Bapcor's merger presentation, Jun 15, 2015
Slide 1: Acquisition of Metcash Automotive Holdings and Entitlement Offer
Burson Group Limited ABN 80 153 199 912 Acquisition of Metcash Automotive Holdings and Entitlement Offer 15 June 2015
Slide 2: Important Notices and Disclaimer
Important Notices and Disclaimer Important Notices and Disclaimer This presentation is issued by Burson Group Limited (“Burson”). This presentation has been prepared in relation to the proposed acquisition of Metcash Automotive Holdings Pty Ltd (owner of the relevant automotive business) (the "Metca
Slide 3: Important Notices and Disclaimer (cont’d)
Important Notices and Disclaimer (cont’d) Future performance and forward looking statements This presentation contains forward looking statements about Burson and the Metcash Automotive Business. Often, but not always, forward looking statements can generally be identified by the use of forward look
Slide 4: Important Notices and Disclaimer (cont’d)
Important Notices and Disclaimer (cont’d) Disclosure The underwriter, together with its affiliates, is a full service financial institution engaged in various activities, which may include trading, financing, financial advisory, investment management, investment research, principal investment, hedgi
Slide 5: Contents
Contents 1 Transaction Overview 2 Overview of Metcash Automotive Holdings 3 Strategic Rationale 4 Transaction Impact 5 Burson Trading Update 6 Acquisition Funding A Appendices 5
Slide 6: Transaction Overview
OVERVIEW OF BURSON 1 TRANSACTION 2 3 STRATEGIC 4 TRANSACTION 5 6 ACQUISITION A METCASH TRADING APPENDICES OVERVIEW RATIONALE IMPACT FUNDING AUTOMOTIVE UPDATE
Slide 7: Transaction Overview
Transaction Overview Acquisition of a leading Australian automotive aftermarket parts and accessories distributor • Burson Group Limited (“BAP”) has entered into a binding agreement for the 100% acquisition of Metcash Automotive Holdings Pty Ltd (“MAH”) for $275 million (1) from Metcash Trading Limi
Slide 8: Transaction Overview (cont’d)
Transaction Overview (cont’d) • Complementary to BAP’s position in the supply chain – adds presence in wholesale, retail and service • Increases the scale of BAP’s wholesale and distribution business – important to competitive position and service levels • MAH’s marketing network increases the addre
Slide 9: Key Highlights of Transaction
Key Highlights of Transaction Creates the leading Australian owned automotive aftermarket business which spans the supply chain Market leader – acquisition of a leading Australian automotive aftermarket parts and accessories distributor Increases scale – enhances scale and competitive positi
Slide 10: Overview of Metcash Automotive Holdings
OVERVIEW OF BURSON 1 TRANSACTION 2 3 STRATEGIC 4 TRANSACTION 5 6 ACQUISITION A METCASH TRADING APPENDICES OVERVIEW RATIONALE IMPACT FUNDING AUTOMOTIVE UPDATE
Slide 11: Overview of Metcash Automotive Holdings
Overview of Metcash Automotive Holdings MAH is wholesaler and distributor of automotive parts and accessories to a marketing network of 276 stores and 140 service workshops, as well as ~3,000 other aftermarket customers Revenue(1) Operations • Distribution network to source, distribute and sell auto
Slide 12: Wholesale and Distribution Platform with Scale
Wholesale and Distribution Platform with Scale One of the largest distributors in Australia with $180 million of wholesale and distribution revenue(1) 10 Distribution Centres with 11,450m2 of space • National distribution platform 2 • Distributes and sells to MAH marketing network and 1 external thi
Slide 13: Complementary Marketing Network
Complementary Marketing Network 416 stores and outlets that complement and enhance wholesale and distribution platform One of the largest networks in Australia (1) • Marketing network stores and outlets purchase parts and accessories from MAH wholesale network Retail-focused stores Total: 276 Secu
Slide 14: Brands and Stores in the Marketing Network
Brands and Stores in the Marketing Network Five main brands across 416 stores and outlets – size of network has grown, driving increasing demand for wholesale business with opportunity to continue to further expand each segment Brand Competitive positioning Relationship with MAH Historical stores Cu
Slide 15: Historic Financial Performance
Historic Financial Performance Historic revenue and earnings growth driven largely by acquisitions and a moderate level of organic growth • FY2015 revenue and EBITDA growth driven by: Revenue (3) ̶ Annualised impact of two small $ million, 30 April year end acquisitions made part way though 261 223
Slide 16: Strong Management Team
Strong Management Team Team with the experience and expertise to manage both wholesale and marketing network businesses with a successful track record • Paul Dumbrell has led the business since 2009 and has been a driving force behind MAH’s strategy • Senior management team bring skills and expertis
Slide 17: Strategic Rationale
OVERVIEW OF BURSON 1 TRANSACTION 2 3 STRATEGIC 4 TRANSACTION 5 6 ACQUISITION A METCASH TRADING APPENDICES OVERVIEW RATIONALE IMPACT FUNDING AUTOMOTIVE UPDATE
Slide 18: Strategic Rationale
Strategic Rationale The acquisition of MAH is strategically compelling and aligned with BAP’s growth strategy–complementary to current BAP business with minimal overlap and provides additional avenues for growth Parts and “Trade” Parts Parts Manufacturer Parts Wholesaler Components End Vehicle Owner
Slide 19: Strategic Rationale (cont’d)
Strategic Rationale (cont’d) 1 Increases Scale and Market Position Increases BAP’s wholesale and 7 Focus on MAH Business distribution sales and footprint Enhanced scale will enable BAP to Potential to extract synergies from continue to increase service levels businesses MAH has acquired and im
Slide 20: Transaction Impact
OVERVIEW OF BURSON 1 TRANSACTION 2 3 STRATEGIC 4 TRANSACTION 5 6 ACQUISITION A METCASH TRADING APPENDICES OVERVIEW RATIONALE IMPACT FUNDING AUTOMOTIVE UPDATE
Slide 21: Expected Financial Impact
Expected Financial Impact • Expect approximately 20% EPS accretion on a full year pro forma basis (including incremental combined group costs and pre-synergies) (1) ̶ Before amortisation of identifiable acquired intangibles and expensing of transaction costs ̶ No revenue and/or cost synergies have b
Slide 22: Combined Group Financials
Combined Group Financials Combined group generates $619 million in pro forma revenue and $70 million in pro forma EBITDA, after including incremental combined group costs and pre-synergies Pro forma financial contribution (1) Divisional revenue (2) Incremental (3) Combined Pro forma BAP standalone (
Slide 23: Expanded Management Structure
Expanded Management Structure • BAP will continue to operate MAH as a separate entity ̶ Customer facing functions will continue to be operated separately ̶ Back-office functions and supply chain will be reviewed to determine best operational structure over time • Paul Dumbrell, current CEO of MAH, w
Slide 24: Burson Trading Update
OVERVIEW OF BURSON 1 TRANSACTION 2 3 STRATEGIC 4 TRANSACTION 5 6 ACQUISITION A METCASH TRADING APPENDICES OVERVIEW RATIONALE IMPACT FUNDING AUTOMOTIVE UPDATE
Slide 25: BAP Trading Update
BAP Trading Update • BAP has experienced strong trading conditions in 2H FY2015 up until the date of this presentation: ̶ 125 stores open as at 15 June 2015 and expect 133 to be open by the end of July 2015 ̶ Same store sales growth for YTD FY2015 trading (until end of May 2015) of 4.6% ̶ Gross marg
Slide 26: Acquisition Funding
OVERVIEW OF 1 TRANSACTION 2 3 STRATEGIC 4 TRANSACTION 5 TRADING 6 ACQUISITION A METCASH APPENDICES OVERVIEW RATIONALE IMPACT UPDATE FUNDING AUTOMOTIVE
Slide 27: Acquisition Funding
Acquisition Funding Sources of funds $ million Uses of funds $ million Debt funding 71 1 Purchase price for MAH 275 Potential adjustment to purchase price for Entitlement Offer 218 2 12(2) specified acquisition Placement to MAH CEO (1) 15 3 Transaction fees and other uses 16 Total 303 Total 303 •1 P
Slide 28: Sources of Funding
Sources of Funding • 7 for 15 underwritten pro-rata accelerated renounceable Entitlement Offer to raise gross proceeds of $218 million – ~$151 million Institutional Entitlement Offer Entitlement Offer – ~$67 million Retail Entitlement Offer • Issue price of $2.85 per share, representing an 11.6% dis
Slide 29: Entitlement Offer Details
Entitlement Offer Details Offer Size • 7 for 15 pro-rata renounceable Entitlement Offer to raise gross proceeds of up to $218 million • $2.85 per New Share representing Offer Price – 11.6% discount to TERP of $3.22 on 12 June 2015 (1) – 16.2% discount to last closing price of $3.40 on 12 June 2015 (
Slide 30: Entitlement Offer Timetable
Entitlement Offer Timetable Event Date Announcement of Acquisition, Entitlement Offer and trading halt Monday 15 June, 2015 Institutional Entitlement Offer opens Monday 15 June, 2015 Institutional Entitlement Offer closes Tuesday 16 June, 2015 Institutional Shortfall Bookbuild (opens and closes) Wed
Slide 31: Appendices
OVERVIEW OF BURSON 1 TRANSACTION 2 3 STRATEGIC 4 TRANSACTION 5 6 ACQUISITION A METCASH TRADING APPENDICES OVERVIEW RATIONALE IMPACT FUNDING AUTOMOTIVE UPDATE
Slide 32: Pro Forma Historical Combined Income Statement
Pro Forma Historical Combined Income Statement Pro forma income statement presented on a historical basis, including incremental combined group costs and pre-synergies BAP MAH Pro Forma Pro Forma Combined BAP (1) (2) $ million 31 December 2014 30 April 2015 Adjustments and MAH Sales 358 261 - 619 (3
Slide 33: Pro Forma Historical Combined Balance Sheet
Pro Forma Historical Combined Balance Sheet Pro forma balance sheet presented on a historical basis–assumes the specified acquisition does not occur (and the adjustment for purchase price does not occur) BAP MAH Adjustments for Pro Forma (1) (2) $ million 31 Dec 2014 30 April 2015 Acquisition and Fu
Slide 34: Risks
Risks Introduction There are a number of risks, both specific to BAP and MAH and of a general nature, which may, either individually or in combination, affect the future operational and financial performance of BAP and MAH, the industries in which they operate, and the value of BAP shares. This sect
Slide 35: Risks (cont’d)
Risks (cont’d) Operational Risks Industry Trends and Customer Decisions Demand for automotive parts and accessories is affected by a number of industry factors, including the number of vehicles, vehicle age and vehicle usage. An unfavourable trend in these factors may reduce the demand for automotiv
Slide 36: Risks (cont’d)
Risks (cont’d) Operational Risks Property Leases The Combined Group has a large number of leased premises. The growth prospects of the Combined Group are likely to result from increased contribution from existing stores and the Combined Group’s ability to continue to open and operate new stores on a
Slide 37: Risks (cont’d)
Risks (cont’d) Acquisition Risks Change of Control The acquisition of MAH may trigger change of control clauses in some material contracts to which MAH is a party. Where triggered, the change of control clauses will, in most cases, require BAP to seek the counterparty's consent in relation to the ac
Slide 38: Risks (cont’d)
Risks (cont’d) Acquisition Risks Franchisee Risk MAH relies on its franchisees for the maintenance of its brand, their contribution towards its network footprint and their purchases from MAH’s wholesale business and for franchise fees and associated income. If franchisees decide not to renew their e
Slide 39: Risks (cont’d)
Risks (cont’d) Acquisition Risks Historical Liability If the acquisition of MAH completes, BAP may become directly or indirectly liable for any liabilities that MAH has incurred in the past, which were not identified during its due diligence or which are greater than expected, and for which the mark
Slide 40: Risks (cont’d)
Risks (cont’d) General Risks Taxation Future changes in taxation law, including changes in interpretation or application of the law by the courts or taxation authorities, may affect taxation treatment of an investment in BAP shares or the holding and disposal of those shares. Further, changes in tax
Slide 41: Risks (cont’d)
Risks (cont’d) General Risks Risks associated with not taking up New Shares under the Entitlement Offer Entitlements under the Entitlement Offer cannot be traded on ASX or privately transferred. However, New Shares equivalent to the number of New Shares not taken up will be offered for subscription
Slide 42: Underwriting Agreement
Underwriting Agreement As noted above, BAP has entered into an underwriting agreement ("Underwriting Agreement") with Morgan Stanley Australia Securities Limited ("Underwriter") who has agreed to manage and fully underwrite the Entitlement Offer, subject to certain terms and conditions. As is custom
Slide 43: International Offer Restrictions
International Offer Restrictions This document does not constitute an offer of entitlements ("Entitlements") or 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 Entitlements
Slide 44: International Offer Restrictions (cont’d)
International Offer Restrictions (cont’d) Hong Kong WARNING: This document has not been, and will not be, registered as a prospectus under the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong, nor has it been authorised by the Securities and Futures Commission in
Slide 45: International Offer Restrictions (cont’d)
International Offer Restrictions (cont’d) New Zealand This document has not been registered, filed with or approved by any New Zealand regulatory authority under the Financial Markets Conduct Act 2013 (the "FMC Act"). The Entitlements and the New Shares in the entitlement offer are not being offered
Slide 46: International Offer Restrictions (cont’d)
International Offer Restrictions (cont’d) Switzerland The Entitlements and the New Shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange ("SIX") or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared w