Motorcycle Holdings Ltd. · ASX:MTO
Motorcycle — Merger or Acquisition (October 2017)
34 slides from Motorcycle's merger presentation, Oct 4, 2017
Slide 1: Acquisition of Cassons Pty Ltd – Underwritten Entitlement Offer
MOTORCYCLE HOLDINGS For personal use only ACQUISITION OF CASSONS PTY LTD UNDERWRITTEN ENTITLEMENT OFFER TO RAISE A$67 million OCTOBER 2017 INVESTOR PRESENTATION MotorCycle Holdings Investor Presentation NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES
Slide 2: Important Notice and disclaimer
Important Notice and disclaimer Important information For personal use only This investor presentation has been prepared by MotorCycle Holdings Limited ACN 150 386 995 (MTO or Company). This presentation has been prepared in relation to the acquisition (Acquisition) of Cassons Pty Ltd (Cassons) and
Slide 3: Important Notice and disclaimer
Important Notice and disclaimer For personal use only Not financial product advice The information in this presentation does not take into account the investment objectives, financial situation or particular needs of any recipient and should not be relied on in considering the merits of any particul
Slide 4: In summary: Securing Motorcycle market leadership
In summary: Securing Motorcycle market leadership For personal use only Acquisition of Cassons, a leading, successful wholesaler and retailer of motorcycle 1 accessories with FY17 $76.5 million in annual turnover (FY16 $74.0 million) and pro forma FY17 EBITDA of $16.7 million (FY16 $16.6 million) 2
Slide 5: Transaction summary
Transaction summary For personal use only • Binding conditional agreement to acquire Cassons Pty Ltd for $123.2* million, implying an earnings multiple of 7.4 times pro forma FY17 EBITDA • Cassons is a wholesaler and retailer of motorcycle accessories • Cassons operates across two business lines tha
Slide 6: Transaction summary
Transaction summary For personal use only • The equity raising will be through: - A$67 million renounceable Entitlement Offer at $3.85 per share, fully underwritten by Morgans, with retail rights trading Equity - MTO Managing Director and Founder David Ahmet will participate in the entitlement issue
Slide 7: Overview of Cassons Group
Overview of Cassons Group CPL - Wholesale For personal use only Retail brands House brands distributed in Employees Australia (64 CPL, 157 MCA) Cassons Year history Distributed brands Group Retail stores MCA - Retail • CPL commenced as a wholesaler in 1988 and imports and distributes motorcycle, bic
Slide 8: Strategic rationale
Strategic rationale For personal use only The transaction will accelerate MTO’s strategy to grow accessories division Acquisition • Strengthens MTO’s reach into retail channels via additional stores and online distribution supports plan to grow accessories • MTO becomes vertically integrated within
Slide 9: Cassons - CPL
Cassons - CPL For personal use only CPL is a wholesale business that distributes more than 49 brands to a diverse customer base • Operated for 30 years with a wholesale store in western Sydney • Growth driven by increased market penetration of house and 3rd party brands, and roll-out of additional r
Slide 10: Long term customer & supplier relationships
Long term customer & supplier relationships For personal use only • Key supplier relationships built over many years • CPL’s top ten customers make up ~46% of FY17 revenue • CPL’s top ten suppliers comprise ~59% of FY17 purchases • Vertical integration - Six key house retail brands are owned by CPL
Slide 11: MCA – growing retail and online presence
MCA – growing retail and online presence For personal use only • Operating since 1973 and trades as Motorcycle Accessories Supermarket (MCA) • 8* retail stores (Auburn, Caringbah, Dandenong, Penrith, Campbelltown, Ringwood, Sydney, Keilor) and online distribution • Store footprint ranges between 545
Slide 12: Opportunity to realise synergies
Opportunity to realise synergies For personal use only Combination benefits Scale benefits ü Increased resources and focus on accessories ü Large, successful accessories importer and distributer market – higher margin business adds product lines, diversifies revenues ü Board and Management skills en
Slide 13: Increase scale and diversification
Increase scale and diversification For personal use only ü Substantial increase in the scale of the business - Revenue increase from $235 million to $310 million - EBITDA increase from $15 million to $30 million ü Increased geographic footprint and diversification - Increased retail store footprint
Slide 14: Illustrative financial impact
Illustrative financial impact For personal use only Revenue EBITDA 350 35 300 30 250 25 200 20 $m $m 150 15 100 10 50 5 0 0 MTO Cassons Combined Group MTO Cassons Combined Group Earnings per share before synergies and amortisation Gearing 1.6 35 1.4 30 1.2 Earnings per share (cents) 25 Net debt/EBIT
Slide 15: MTO's strategy
MTO’s strategy For personal use only The acquisition of Cassons is in line with MTO’s stated strategy Key business elements Leading growth opportunities • Dealership acquisitions New motorcycle sales • Greenfield site development • Acquiring rights to distribute new motorcycles Core • Increased sale
Slide 16: Growth opportunities
Growth opportunities For personal use only • Continued store roll-out of MCA • Ability to introduce MTO products e.g. used motorcycles and services through MCA stores • Addition of further brands/ suppliers to the wholesale distribution business of Cassons. New Metzeler tyre brand sourced in late FY
Slide 17: Funding the acquisition
Funding the acquisition For personal use only Entitlement Offer Vendor Share Placement Structure and size • Fully underwritten 11 for 24 renounceable • $24.5 million share placement to the Cassen family rights issue to raise $67.0 million - representing approximately 6.4 million new shares - escrowe
Slide 18: Entitlement offer timetable
Entitlement offer timetable For personal use only Event Date Announcement of the Entitlement Offer Wednesday, 4 October 2017 Mailing of the Entitlement Offer details Thursday, 5 October 2017 Ex-date and Rights trading commences Friday, 6 October 2017 Record Date for Entitlement Offer (7.00pm AEDT) M
Slide 19: Appendix A
APPENDIX A For personal use only MotorCycleHoldings Motorcycle HoldingsInvestor InvestorPresentation Presentation 19 NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES
Slide 20: FY17 Pro forma historical earnings summary
FY17 Pro forma historical earnings summary For personal use only The financial information is illustrative and is to be read in conjunction with the important note - financial information on page 22 In accounting for the Cassons Acquisition in the Proforma historical combined balance sheet, MTO has
Slide 21: Pro forma historical Balance Sheet
Pro forma historical Balance Sheet as at 30 June 2017 For personal use only Acquisition Debt NOTES: MTO Cassons Funding and Offer Proceeds 1. The MTO balance sheet has been extracted from the MTO audited Historical Acquisition Associated Costs and Offer Pro Forma financial statements for the year en
Slide 22: Important note – financial information
Important note For personal use only Important note – financial information The financial information contained in this presentation comprises MTO’s: 1. Pro forma historical earnings summary, comprising key line items from MTO’s income statement and financial information summary for the year ended 3
Slide 23: Key Terms of Sale Deed
Key Terms of Sale Deed For personal use only Conditions to Completion • MTO raising sufficient funds through rights issue and debt financing (credit approved term sheet in place) OTHER KEY TERMS: • Change of control consents for leases / key contracts • Rob and John Cassen • Buyer forming view that
Slide 24: Board of Directors
Board of Directors For personal use only The Company has selected a Board that offers depth of experience across a range of successful high growth companies David Peter Henley Warren Bee Rick Dennis David Ahmet Independent Independent Foster Non-Executive Independent Non- Non-Executive Founder, CEO
Slide 25: Senior Management
Senior Management For personal use only Experienced senior team with a strong track record in the motorcycle and automotive industry and more than 80 years of combined industry experience David Ahmet Bob Donovan Chris Chenoweth Co-founder, CEO and Chief Financial Officer GM and Group Bike Sales Mana
Slide 26: Cassons Group
Cassons Group For personal use only Rob Cassen and John Cassen will join the MTO team Rob Cassen John Cassen Principal Principal • 33 years experience in the motorcycle industry • 35 years experience in the motorcycle industry • Successfully built one of Australia’s largest motorcycle • Successfully
Slide 27: History of consistent growth
History of consistent growth For personal use only 45 franchises, 27 locations, MTO has delivered strong growth 8% market share nationally* 20 acquisitions 2017 KTM Gold Coast and KTM Epping, Harley Davidson Sunshine Coast acquired | 27 locations 2015 Canberra Harley Davidson and Sydney’s Harley Dav
Slide 28: Key risks
Key risks There are a number of risks, of a general and specific nature, which may affect the future operating and financial performance of MTO. Many of the circumstances giving rise to For personal use only these risks are beyond the control of MTO. This section describes certain specific areas tha
Slide 29: Key risks cont.
Key risks cont. RISKS ASSOCIATED Acquisition WITH THE ACQUISITION OF CASSONS Description For personal use only Risk There is a significant crossover of leading brands distributed by Cassons and those retailed by major online retailers. Continued advancement of technology to improve the online buying
Slide 30: Key risks cont.
Key risks cont. RISKS ASSOCIATED Acquisition Risk WITH THE ACQUISITION OF CASSONS Description For personal use only MTO has entered into a commitment letter under which the Commonwealth Bank (CBA) has agreed to provide a Senior Loan Facility to finance in part the acquisition of the shares in Casson
Slide 31: Key risks – MTO specific risks
Key risks – MTO specific risks MOTORCYCLE HOLDINGS SPECIFIC RISKS For personal use only Risk Description Retail environment and As the products sold by MTO are discretionary items for many customers, the Company is particularly exposed to a deterioration in general economic general economic and busi
Slide 32: Key risks – MTO specific risks cont.
Key risks – MTO specific risks cont. MOTORCYCLE HOLDINGS SPECIFIC RISKS For personal use only Risk Description Legislative or regulatory changes, in particular changes in relation to the sale of consumer finance and consumer insurance, could have an adverse impact on MTO. The financial services indu
Slide 33: General risks
General risks For personal use only Risk Description The price MTO shares are traded on ASX could fluctuate due to various factors including recommendations by brokers and analysts, domestic and international economic conditions, general movements in local and international stock markets, exchange r
Slide 34: 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 For personal use only unlawful. In particular, this document may not be distributed to any person
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