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Hemocrite - June 2004

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HEMOCRITE
Tim Wainwright Mitch Pender Jan Sorenson Feargal Brady

Agenda
Hemocrite:
•Leading worldwide group of free sheet press “Presse Gratuite” •Present in USA, Asia and EU • Strong growth over last 3 years : • Sales growth 13% p.a. • External growth 7% p.a. • Profitability expected to improve :
22/11/09 Hemocrite - June 2004 • Efficient marketing 2

Highlights & overview Valuation Methods The buyers What form of negotiation?

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Highlights & overview

Revenues & Margins
(in € millions)
2000 2001 2002 2003 B 2004 E 2005 E

Net revenues EBITDA EBIT
16% 14% EBIT / EBITDA (%) 12% 10% 8% 6% 4% 2% 0% 2000
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407 45 27

488 57 36

520 58 38

565 63 39
700 600 500 400 300 200 100 0 SALES (Euro Million)

594 77 50

622 89 61

Sales (€M) EBITDA EBIT

2001

2002

2003 E

2004 E

2005 E
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Hemocrite - June 2004

Revenue by Market
Asia-Pacific 12% US 6% France 44% EU other 17%

UK 21%
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Breakdown of 2002 consolidated sales. Total = €520

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Balance Sheet
(in € millions)

2002
€ 103 € 17 € 113 € 23 € 256 € 207 € 34 € 14 €1 € 49
Hemocrite - June 2004

%
40% 7% 44% 9% 100% 81% 13% 5% 0% 19%
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Assets -Intangible fixed assets -Investments & financial assets -Tangible fixed assets -Working capital requirements Total Assets Sh Equity & Liabilities -Shareholders equity -Net financial debt -Provisions -Minority interests Total Sh Eq & Liab
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Strategy for growth
• Foundation for growth is based on tripartite strategy:
1. International Product Innovation International Expansion: Reorganisation Expansion • PAST - Since 1992,major market evolutions of – At origin of focused on acquiring & Streamlined structure developed free-press in UK, Spain & Belgium established business in Thailand, Mexico, China being implemented including •Belgium (Centralization) •FUTURE - Positioned to in sales offices) of high •Spain (Reduction takerenewal process – Ongoing product advantage and extensive databases of of sales and maint) growth•countries – Italy, Hungary and Czech UK (Reorganisation client needs will 2. Product enable Rep. continued growth 3. Reorganisation Innovation •FUTURE – Profit enhancement opportunities
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Key investment considerations
• HEMOCRITE offers a potential purchaser:
Euro Market Leader

Motivated Workforce

Strong Brands

Management Experience

HEMOCRITE

Unique Know-how

Earnings Growth

Sales Growth

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Valuation Methods

DCF Valuation
CASE1. As per Hemocrite Projections
2003 E 2004 E

(€Millions)
2005 E

Net Sales EBIT Interest EBT Taxes Net Income Plus Dep'n Cash Flow Retention for growth Plus Horizon Value Net Cash to acquirer NPV of cashflows

565 39 2 37 15 22 15 37 15 22 € 455

594 49 2 48 19 29 15 43 15 29

622 61 2 59 24 36 15 50 15 594 629

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DCF Valuation
• Assumptions:
– – – – – – – Sales projections as per Hemocrite Discount Rate 15% Cost of debt 5% Tax rate 40% Fixed assets €223m Depreciation term 15 years Retention for gowth equals depreciation

• Alternative Valuations:
– Zero Growth = €248m

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Market Multiple Analysis
Hemocrite Market Multiple Valuation (€million) Basis Europe USA Hybrid BS Value / Turnover 3.5 4.3 3.6 BS Value / Op Profit 15.5 11.2 14.7 Acq Price 1820.0 2236.0 1894.9 Acq Price 899.0 649.6 854.1

Hemocrite PER Valuation (€million) Basis Europe PER 27.5 Acq Price 605.0

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The Buyers

The Buyers
• Four Types of Merger
Firm A Product A Firm B Product A Firm AB Product A

– 1. Horizontal Merger – 2. Vertical Merger – 3. Congeneric Merger – 4. Conglomerate Merger
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Firm A
Product A

Firm A Product A Firm B Product a Firm AB Product Aa

Firm B
Product (A)

Firm AB
Product A(A)

Firm A
Product A

Firm B
Product Z

Firm AB
Product AZ

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The Buyers
• Group C
– US group – Radio, TV & Free Dailies – Objectives
• High rentability • Entry to Europe

• Group D
– World leader in distribution of free leaflets – Objectives
• Diversification

Horizontal Merger
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Congeneric Merger
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The Buyers
Motivation for Group C to purchase Hemocrite (Horizontal Merger) • Strong Growth Perspective • Synergy 1: Economies of Scale • Synergy 2: Financial Economics • Synergy 3: Tax Effect • Synergy 4: Increased Market Power • Complementary resources • Managers` Personal Incentives • Diversification of its Portfolio
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YES YES YES (YES) YES YES ? NO
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The Buyers
Motivation for Group D to purchase Hemocrite (Congeneric Merger) • Strong Growth Perspective • Synergy 1: Economies of Scale • Synergy 2: Financial Economics • Synergy 3: Tax Effect • Synergy 4: Increased Market Power • Complementary resources • Managers` Personal Incentives • Diversification of its Portfolio
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YES (YES) (YES) YES (YES) (YES) ? YES
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What form of negotiation

Negotiation Objectives
• Hemocrite Objectives:
– Price
• Maximise transaction value • Minimise restrictions, representatives & warranties

– Other
• Minimise disruption to operations • Guarantee a successful result • Ensure confidentiality is maintained
– inviting the shark to dinner

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Negotiating Techniques
Technique
Organised Auction Exclusive Auction Private Negotiations

Strengths
• Transparent • Seller retains control • Highest price • Simplified procedure • Predetermined timetable • More focused • Discretion/Ltd disruption • Flexibility • Easier to manage

Weaknesses
• Expense • Confidentiality • Many interested parties • Candidate selection • Decreased confidentiality • Fall-out from failure • No strict timetable • Drawn-out negotiations • Lowest weakness

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Selection of negotiation
Low Number of potential buyers Required degree of confidentiality Deadlines Complexity of deal Quality of target (Hemocrites) √ √ √ √ Med High √

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Recommended Technique
• 4 to 5 potential industry buyers • Margins are good - possible financial buyers • Sales, growth and margins increasing - good time to sell • Obviously a target of many buyers - healthy competition • Company is well known - confidentiality can be maintained

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Recommended Technique
Auction is recommended
• Based on number and quality of potential buyers (recent MBO in competitor company, appetite for consolidation) • Potential to lure 1 or 2 into private negotiations, pre-auction and heighten interest • Essential to obtain management buy-in to ensure positive image and knowledge transfer

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Q&A

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