Fairmount Santrol Holdings Inc
Fairmount Santrol — Merger or Acquisition (May 2018)
44 slides from Fairmount Santrol's merger presentation, May 9, 2018
Slide 1: Fairmount and Unimin to create Covia
May 2018 Fairmount and Unimin to create Covia A Compelling Strategic Transaction Creating a Leader in Proppant and Industrial Materials Solutions Filed by Unimin Corporation Pursuant to Rule 425 under the Securities Act of 1933 and deemed filed pursuant to Rule 14a-12 under the Securities Exchange A
Slide 2: Disclaimer and Forward Looking Statements
Disclaimer and Forward Looking Statements CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION This presentation contains statements which, to the extent they are not statements of historical or present fact, constitute “forward-looking” statements within the meaning of Section 21E of the Secu
Slide 3: Disclaimer and Forward Looking Statements: Combined Company Data
Disclaimer and Forward Looking Statements Note on Combined Company Data The combined company information included in this presentation has been prepared based on the arithmetic sum of the historical results of Fairmount Santrol and Unimin, and was not prepared in accordance with Regulation S-X of th
Slide 4: Significant Value Delivered to Fairmount Shareholders
Section 1 Significant Value Delivered to Fairmount Shareholders Covia
Slide 5: Fairmount Shareholders Get a Very Compelling Deal
Fairmount Shareholders Get a Very Compelling Deal Subject to final diluted FMSA share count Source: Unimin’s Form S-4 INCREASED SCALE AND GROWTH OPPORTUNITIES SIGNIFICANT VALUE FOR FMSA SHAREHOLDERS FROM UNIMIN $170M cash distribution, (~$0.74 per share) (1) ~35% ownership, a premium to historical a
Slide 6: 35% Ownership Implies a Premium Even at Equal Multiples
35% Ownership Implies a Premium Even at Equal Multiples Implied Value Contribution to Combined Company (1) (2) Relative cumulative EBITDA contribution (like-for-like basis). Adjusted for net debt as of Dec-17 (Fairmount: $637M; Unimin: $800M) by applying the implied Fairmount Santrol EBITDA multiple
Slide 7: Industrial peers trade at ~10.0x multiples
Industrial peers trade at ~10.0x multiples with lower volatility compared to proppant companies Recently evidenced by US Silica’s acquisition of EP Minerals for ~12.5x adj. EBITDA (3) 47% of Covia’s 2015-2017A gross profit from industrial segment Industrial Peer Multiples (1,2) TEV multiple of 2018E
Slide 8: Substantial Identified Synergies
Substantial Identified Synergies Immediate and Substantial Synergies Expected at Low Implementation Costs (1) Origin-Destination Pair Optimization Account Consolidation Procurement SG&A Targeted synergies of approximately $150M annually 50% of synergies expected within 12 months and full run-rate ac
Slide 9: Origin / Destination Pairings: Illustrative Synergy Example
Rates between similar lanes can vary up to $13 per ton to the same destination Further freight reductions through elimination of 2-line hauls or truck-to-rail transport Production optimization will also improve mine yields and lower plant costs (~$3-10 per ton savings) Fairmount cost advantage to th
Slide 10: Roadmap to Completion
Roadmap to Completion Positioned for Day 1 Readiness and Synergy Capture Form S-4 Effective ü US Anti-Trust Clearance ü Management Appointment ü Integration Planning (Ongoing) ü Mexican Anti-Trust Clearance ü New Name Established – Covia (Ticker: CVIA) Shareholder Vote (May 25, 2018) Shareholder App
Slide 11: Key Investment Highlights
Section 2 Key Investment Highlights Covia
Slide 12: Covia: A Differentiated Business Model
Industry Leading Scale Covia: A Differentiated Business Model Expansive and Advantaged Distribution Network Broad Product Portfolio Longstanding, Blue-Chip Customer Base Diversified End Market Exposure Generating Strong Financial Profile and Significant Cash Flow Generation 1 2 4 5 3 Key Pro Forma I
Slide 13: Industry Leading Size & Scale
2017A Reserves (1) Source: Unimin’s Form S-4 and Company Filings Note: SLCA figures are not pro forma for the acquisition of EP Minerals announced on 3/22/2018 due to lack of disclosed data Reflects proven and probable reserves for all companies except HCLP and SND, which report proven reserves only
Slide 14: Covia Platform Has A Leading Operational Footprint
Covia Platform Has A Leading Operational Footprint Includes two Permian mining facilities under construction and two inactive processing facilities Note: Locations represented as accurately as possible, indicative only Footprint of more than 50 processing & coating plants across North America (1) Ac
Slide 15: Broad Product Portfolio
Broad Product Portfolio Wide Range of Customer Segments Glass Construction & Building Products Ceramics Coatings & Polymers Metals & Castings Filtration Oil & Gas High-Purity Sands High quality silica sand for O&G and Industrial end-markets Custom Blending Custom blends of sand, aggregates, minerals
Slide 16: Broad and Complementary Distribution Network
Broad and Complementary Distribution Network 3 Terminals Terminals Mexico Canada Canadian Pacific BNSF CSX CN Excludes in-basin plants Includes O&G and Industrial Note: Assets and selected rail lines represented as accurately as possible, indicative only Broad Based, Low-Cost and Highly Flexible Sup
Slide 17: Diversified, Strong & Highly Complementary Logistics Network
Regional reflects trucking and barge Unimin figures include owned and exclusively controlled terminals as well as expansions currently underway, but exclude 3rd party terminals utilized Combined distribution network has access to all major Class 1 railroads Combined terminal network increases throug
Slide 18: Longstanding, Blue-Chip Customer Base
Selected Industrial Customers Longstanding, Blue-Chip Customer Base Selected Energy Customers 4 A leading asset footprint and national logistics network allows Covia to serve blue-chip customers across end markets Broad and loyal customer base comprised of S&P 500 and industry-leading companies Long
Slide 19: Diversity Across Segments, Geographies and Minerals
Industrial 40% Energy 60% Diversity Across Segments, Geographies and Minerals 5 2017A Covia Industrial Revenues Diverse Geographies Complementary Segments Drive Value Covia 2017A Volumes by Segment
Slide 20: Resilient Cash Flow Generation Through-the-Cycle
Resilient Cash Flow Generation Through-the-Cycle Covia’s Significant Adjusted EBITDA Through-The-Cycle (1) (2) (3) Energy Segment Industrial Segment Synergies Excludes Unimin’s high purity quartz business, which will be distributed to Sibelco; includes targeted synergies of approximately $150M in 20
Slide 21: Strong Pro Forma Business and Financial Profile
Q1’18 LTM Tons Sold 37.1M Q1’18 LTM Revenue $2.4B Q1’18 LTM Adj. EBITDA (1) $550M Q1’18 LTM Adj. EBITDA + Synergies (1) (2) $700M 3/31/18 Net Debt (2025 $1.65Bn Maturity) $1,605M Net Debt / Q1’18 LTM Adj. EBITDA + Synergies (2) 2.3x Source: Unimin’s Form S-4, Company filings, and preliminary managem
Slide 22: Fairmount Santrol Financial Update and Outlook
Fairmount Santrol Financial Update and Outlook Sequential proppant volumes -5%, driven by seasonal impacts on production, process engineering changes, and to a lesser extent, rail delays Raw sand pricing up ~$4/ton sequentially Adjusted EBITDA increased over $7 million or 11% sequentially I&R volume
Slide 23: Unimin Financial Update and Outlook
Unimin Financial Update and Outlook Sequential Energy volumes +4%, driven by seasonal impacts on production in Q4 Proppant pricing increases of $3 sequentially on like-for-like basis Industrial volumes and profitability flat versus Q1-17. Pricing improvements in US & Canada offset by FX impacts and
Slide 24: Experienced and Proven Management Team for Covia
Experienced and Proven Management Team for Covia Best in Class Management Team with Extensive Industry Experience Years of Industry Experience Prior Positions ~24 President and Chief Executive Officer of Fairmount Santrol since 2013 Previously served as Vice President of Finance and CFO, Corporate C
Slide 25: Industry Update
Section 3 Industry Update Covia
Slide 26: 2018 Tailwinds in Industrial End-Markets
2018 Tailwinds in Industrial End-Markets Industrial Production +3.2% YoY growth vs. 2.0% in 2017 (1) Consumer Confidence at 130.8 (2) highest level since 2000 and above 2017 average of 120.5 2018 Construction Spending Forecast +4.0% (4) Foundry Spending Growth +4.7% vs. 2017 (3) Industrial profitabi
Slide 27: Industrial Market Overview – Demand
GDP+ Growth? Industrial Market Overview – Demand Company Products Demand Drivers Applications GDP Consumer Trends Auto Silica Nepheline Syenite Container Float Feldspar Clay & Kaolin DustShield Fiberglass Display Glass Housing Construction Consumer Trends Silica Nepheline Syenite Sanitaryware Tile F
Slide 28: Expected Increase in Proppant Demand for 2018
Expected Increase in Proppant Demand for 2018 2018 Proppant demand forecasted to reach 100 million tons (vs. ~75 million tons in 2017) U.S. Horizontal Land Rig Count Higher average rig count vs. 2017 Increasing proportion of horizontal vs. vertical wells Higher proportion of wells drilled actually c
Slide 29: Growing Demand Across All Basins
Growing Demand Across All Basins Expected 2018 demand to be supplied by both Northern White and Local/Regional sands Millions of tons 100M Tons or more in 2018 Coarse 40/70 100 Mesh 40/70 ~75M tons of demand supplied outside of the Permian Key assumptions: 50M tons of Permian demand 35M tons average
Slide 30: Permian Assets Strategically Placed to Meet Local Needs
Permian Assets Strategically Placed to Meet Local Needs Combined 6 million ton capacity Two plants in complementary locations with attractive grade mix scheduled to come online in Q2 ‘18 Strategically located terminal network Carlsbad Hobbs Lamesa Snyder Big Spring Midland Odessa San Angelo Pecos Ri
Slide 31: Well Suited to Meet Demand Across All Basins
Well Suited to Meet Demand Across All Basins Operational & Logistics Footprint Source: Management estimates Northern White Supplier of Choice in All Basins ~75M tons Northern White Demand Mix (Permian + Rest of North America) Combined Company Industry Production by grade well balanced to meet demand
Slide 32: A Compelling Strategic Combination
A Compelling Strategic Combination Creating a Leader in Proppants and Industrial Materials Solutions Procurement Transaction creates significant value for FMSA shareholders: $170 million cash consideration Approximately 35% ownership of stronger, more diverse company Strong case for multiple uplift
Slide 33: Appendix
Appendix Covia
Slide 34: A Fully Integrated I&R Products Solutions Provider
A Fully Integrated I&R Products Solutions Provider Diverse base of >800 customers and multiple product lines contribute to the more steady dynamics of I&R Products / Characteristics Target Markets 99.9% pure silica Engineered sand-based resin products Expert custom blends of sand, aggregates, minera
Slide 35: Energy Products to Address All Well Environments
Energy Products to Address All Well Environments Raw sand Tier 1, API NWS 99.8% pure silica Northern White Silica Sands Tier 2, API Regional sand (Voca) Texas Gold® Frac Sand Permian Regional sand (Kermit) Permian Sand Increases: Reservoir Recovery – Both IP & EUR (by optimizing well geometry) & Ope
Slide 36: Unimin's Industrial Business
Unimin’s Industrial Business Large, Resilient, and Growing Business Generating Strong Cash Flows Highly resilient and growing business generating strong cash flows with annual volume sales in excess of 10M tons for the last 10 years Owned and operated private railroad in West Virginia, New Jersey, V
Slide 37: Unimin's Energy Business
Unimin’s Energy Business A Leading Supplier of Proppants to the O&G Segments Well Cementing Additives Gravel Packing Sand Product Highlights High quality reserves produce monocrystalline silica grains that are spherical, stronger and have superior particle size distribution (within API specification
Slide 38: Covia's Minerals Serve a Wide Variety of Industries
Covia’s Minerals Serve a Wide Variety of Industries Silica Nepheline Syenite Feldspar Olivine Clay & Kaolin Ceramics ü Lime Coated Products DustShield Glass ü Filtration ü Colored Play Sand Custom Blending Coatings & Polymers ü Sports & Recreation ü Resin Systems Metals & Castings ü Oil & Gas ü ü Co
Slide 39: Covia Financials
Covia Financials
Slide 40: Covia Historical Financials
Covia Historical Financials Key Financial Figures Source: Unimin’s Form S-4, Company filings, and preliminary management estimates Note: 2015 – 2017 financials prepared under US GAAP Preliminary Covia estimates of results for the quarters ended 3/31/2018
Slide 41: Unimin Historical Financials
Unimin Historical Financials Unimin revenue decreased 27% from 2015 to 2016, but saw a 33% uptick from 2016 to 2017 Energy: gross profit increased at a 25% CAGR from 2015 to 2017 Experienced significant momentum in 2017 with a rebound in rig count and frac sand demand 64% increase in 2017 volumes as
Slide 42: Fairmount Santrol Historical Financials
Fairmount Santrol Historical Financials FMSA revenue decreased 35% from 2015 to 2016, but saw a 79% uptick from 2016 to 2017 (‘15 – ‘17 CAGR of 8%) FMSA gross profit increased at a 17% CAGR from 2015 to 2017 Proppant Solutions: gross profit increased at an 18% CAGR from 2015 to 2017 2017 segment rev
Slide 43: Unimin Reconciliation of Net Income (Loss) to Adj. EBITDA
Unimin Reconciliation of Net Income (Loss) to Adj. EBITDA Adjustments Description Goodwill and other asset impairments for 2016 represent impairment charges for a terminal that was closed and the writedown of greenfield land; goodwill and other asset impairments for 2015 represent impairment charges
Slide 44: Fairmount Santrol Reconciliation of Net Income (Loss) to Adj. EBITDA
Fairmount Santrol Reconciliation of Net Income (Loss) to Adj. EBITDA Description Represents the non-cash expense for stock-based awards issued to FMSA’s employees and outside directors Non-cash charges in 2016 are associated with the impairment of mineral reserves and other long-lived assets; charge
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