Olam Group Limited · SGX:VC2
Olam — Olam International — Merger or Acquisition (April 2007)
52 slides from Olam's merger presentation, Apr 23, 2007
Slide 1: Acquisition of 100% of Universal Blanchers LLC
Olam International Limited Acquisition of 100% of Universal Blanchers LLC 23rd April 2007 Singapore 0
Slide 2: Forward looking statements
Forward looking statements This presentation may contain statements regarding the business of Olam International Limited (‘Olam’) and its subsidiaries (‘Group’) and Universal Blanchers LLC (‘UB’) that are of a forward looking nature and are therefore based on management’s assumptions about future de
Slide 3: Presenters
Presenters Robert Feerick Chairman, Horizon Partners Michael Fisher CEO, Universal Blanchers Sunny Verghese Group Managing Director & CEO, Olam Shekhar Anantharaman Senior Managing Director, Olam 2
Slide 4: Presentation Outline
Presentation Outline Transaction Overview Overview of Universal Blanchers (UB) Transaction Rationale for Olam Transaction Rationale for Universal Blanchers (UB) Financials & Summary Q&A 3
Slide 5: Presentation Outline
Presentation Outline Transaction Overview Overview of Universal Blanchers (UB) Transaction Rationale for Olam Transaction Rationale for Universal Blanchers (UB) Financials & Summary Q&A 4
Slide 6: Transaction Overview
Transaction Overview Transaction Acquisition of 100% of equity in Universal Blanchers LLC (UB) Consideration Enterprise value of US$77m Estimated net equity value of US$72.3m Financing All cash transaction funded through Internal accruals and borrowings Closing Expected to be completed by 31st May 2
Slide 7: A transformational acquisition for our edible nuts business
A transformational acquisition for our edible nuts business World’s largest World’s largest independent peanut blancher with a independent peanut dominant market share in independent peanut blancher and roasting/butter/paste/ extract manufacturing in the US ingredients processor Preferred peanut
Slide 8: A transformational acquisition for our edible nuts business
A transformational acquisition for our edible nuts business Consistent with our Allows us to build significant presence in one of largest peanut and overall and most important peanut markets (USA) in the world with edible nuts strategy opportunities to participate in the entire value chain Allow
Slide 9: A transformational acquisition for our edible nuts business
A transformational acquisition for our edible nuts business Consistent with our Accelerates access to a new and important origin & market M&A policy for peanuts (the US) Accelerated access into a new value chain adjacency (ingredient manufacturing) Consistent with our string-of-pearls approach
Slide 10: Presentation Outline
Presentation Outline Transaction Overview Overview of Universal Blanchers (UB) Transaction Rationale for Olam Transaction Rationale for Universal Blanchers (UB) Financials & Summary Q&A 9
Slide 11: UB: World's largest independent peanut blancher & ingredient processor
UB: World’s largest independent peanut blancher & ingredient processor World’s largest independent peanut blancher & ingredient processor with dominant market share in independent blanching (79%), roasting (65%) and ingredient manufacturing (41%) within the US Operations comprise: Service tolling:
Slide 12: Extensive presence in the major peanut growing regions
Extensive presence in the major peanut growing regions UB operates 5 plants servicing all major peanut growing regions in the US EDENTON • Roasting • Paste production • Granulation SYLVESTER • Blanching • Cleaning • Remilling BLAKELY DUBLIN (2) • Blanching • Blanching • Cleaning • Cleaning • Remilli
Slide 13: State-of-the-Art Blanching & Ingredient Manufacturing Facilities
State-of-the-Art Blanching & Ingredient Manufacturing Facilities Blakeley (Georgia) 12
Slide 14: State-of-the-Art Blanching & Ingredient Manufacturing Facilities
State-of-the-Art Blanching & Ingredient Manufacturing Facilities Dublin (Texas) Sylvester (Georgia) 13
Slide 15: Snapshot of US peanut farming and shelling
Snapshot of US peanut farming and shelling 14
Slide 16: Snapshot of US peanut industry value chain
Snapshot of US peanut industry value chain 15
Slide 17: Significant participation in the more attractive parts of the peanut value chain
Significant participation in the more attractive parts of the peanut value chain UB’s participation in the value chain Pre-clean, Production Production Metal Cotton Peanut Drying, of Peanut & Marketing Spinners/ of Candy, Crop inputs Shelling Ginning Detection, Growing growers Roasting, Butter/Paste
Slide 18: Minimal exposure to commodity price risk
Minimal exposure to commodity price risk Universal’s toll and contract model insulates the company from peanut price fluctuations All blanching is done on a toll basis, allowing UB to avoid taking title to peanuts While UB takes ownership of peanuts when producing value-added products, most of this
Slide 19: The UB Advantage
The UB Advantage UB has built a differentiated position and market share leadership by investing in quality Better foreign material removal Advanced sorting/cleaning equipment removes more debris (stones, dirt, grass, etc.) prior to processing Higher yields Advanced processing equipment leads to a f
Slide 20: UB provides blanching and ingredients to leading confectionary and snack brands
UB provides blanching and ingredients to many of the leading confectionary and snack food brands including 19
Slide 21: Increasing demand for peanuts
Increasing demand for peanuts The market for peanut products in the U.S. has grown steadily during the last 10 years U.S. Peanut Usage1 1996-2005 (in Million Pounds) CAGR Decline due to 2.9% 1,802 drought 1,698 conditions 1,547 1,552 1,454 1,493 1,388 1,412 Other 1,300 1,227 902 939 819 829 53% 52%
Slide 22: Increasing demand for outsourced processing
Increasing demand for outsourced processing The last several years has seen a shift away from in-house peanut processing by consumer packaged goods (CPG) companies to outsourced processing Peanut Industry Structure CPG In-House Processing CPG Growers Shellers - Finished Consumers Outsourced Product
Slide 23: Key Performance Metrics
Key Performance Metrics Pounds Revenue (million) Volume Processed US$m 400 100 350 80 72.5 300 74 83 62.6 64.7 63 64 58.7 250 56.0 63 60 Ingredients 200 Blanching 40 150 241 257 264 234 100 197 20 50 0 0 FY2002 FY2003 FY2004 FY2005 FY2006 FY2002 FY2003 FY2004 FY2005 FY2006 US$m US$m 12 EBITDA Net As
Slide 24: Continued revenue growth
Continued revenue growth Specific strategic initiatives will further Universal’s position as an industry leader, and support the company’s growth Strategic Initiatives Leverage on Enhance Product Growth & Continuous Customer Relationships Development Capability Improvement • Continue to build and •
Slide 25: Continued profit growth
Continued profit growth A variety of additional profit enhancement initiatives will allow Universal to continue margin expansion Profit Enhancers Operational Continue Shift to Value- Secure Contracts Improvements Added Processing & Pricing • Increasing roasting and • Growth of value-added • Value-ad
Slide 26: Dominant player in outsourced peanut processing market
Dominant player in outsourced peanut processing market Leadership position • World’s largest independent peanut blancher • Dominant market share in US’ Strong management team Efficient operations and outsourced independent Superior proprietary peanut roasting and peanut • Longstanding and processing
Slide 27: Presentation Outline
Presentation Outline Transaction Overview Overview of Universal Blanchers (UB) Transaction Rationale for Olam Transaction Rationale for Universal Blanchers (UB) Financials & Summary Q&A 26
Slide 28: The global peanut supply chain
The global peanut supply chain Farmers Raw/Bl. Kernels Processed Raw food Oil Consumption Consumption Crushing Granules & Snacks Butter & Paste Confectionery Extracts 27
Slide 29: Major growing areas
Major growing areas World Production of Peanuts is estimated at 33m tonnes China 14,100 Vietnam 450 India 6,700 Ghana 440 United States 2,000 Argentina 420 Nigeria 1,520 Sudan 370 Indonesia 1,200 Congo 370 Burma, Union of 720 Burkina 320 Senegal 700 Brazil 250 Chad 450 Others 3,358 China, India, USA
Slide 30: Peanuts world trade
Peanuts world trade Main exporters Main importers China 550,000 W & E. Europe 525,000 Argentina 400,000 S.E. Asia 200,000 U.S.A 225,000 Canada / Mexico 150,000 India 60,000 Russia 100,000 Brazil 40,000 Algeria 35,000 South Africa 10,000 South Africa 10,000 Total world trade 1.4 – 1.5m Mts World trad
Slide 31: World peanut consumption
World peanut consumption 33m MT in shell 22m MT Raw Kernels 4m MT Processed 6m MT Raw food 12m MT Oil Consumption Consumption Crushing World Trade - 1.5m MT Domestic consumption - 20.5m MT 30
Slide 32: Strategic choices for Olam
Strategic choices for Olam Participate in processed food consumption segments with an estimtated market size of ~ 4.0m Mts Build an unique & differentiated position in world trade (~1.5m Mts) with direct delivery capability from all key origins to all importing markets Build capability to cater to d
Slide 33: Strategic thrusts of our peanut business
Strategic thrusts of our peanut business 9 Major Origins - China, Argentina, USA 9 Other Origins - Brazil, South Africa, India, Africa 9 Value Chain - Grower > Sheller > Blancher > Ingredient Mfg 9 Major Import Markets - Western Europe - Eastern Europe / Russia - North & South Africa - South East As
Slide 34: USA and our overall edible nuts strategy
USA and our overall edible nuts strategy Currently the largest market for Olam’s Cashew business. Single Largest market for most Nut categories, both in terms of volume, as well as scope for value added participation. Probably the most advanced and well developed market for Nuts in terms of variety
Slide 35: Transaction rationale for Olam
Transaction rationale for Olam Accelerated entry into the largest “processed peanut” market in the world with tremendous scope of Value added participation within supply chain Achieve significant market share in all participating segments without impacting industry viability Established customer fra
Slide 36: UB: Segmental Market Share Analysis
UB: Segmental Market Share Analysis Blanching Roasting UB Competitors 5% 3% Competitors 11% Internal Snack Blanching Candy UB Internal 29% 60% Internal Roasting Roasting 36% 56% Blanching: Peanut Opportunity to Butter/Paste Roasting: Opportunity increase market share to grow market via UB via outsou
Slide 37: Value and earnings accretive with strong growth prospects
Value and earnings accretive with strong growth prospects Strong current cash flows ~ $ 11m EBITDA for FY 06 Base case estimates: EBITDA likely to grow by 5% p.a. over the next three years. Potential outsourcing opportunities which can provide substantial growth beyond base case forecasts with addit
Slide 38: Presentation Outline
Presentation Outline Transaction Overview Overview of Universal Blanchers (UB) Transaction Rationale for Olam Transaction Rationale for Universal Blanchers (UB) Financials & Summary Q&A 37
Slide 39: From start-up to leading peanut processor
From start-up to leading peanut processor 1979 Founded by Thomas Beaty in Blakely, Georgia 1990 Expanded peanut operations in Southwest along with growing production 1999 Horizon Partners, together with management, acquired UB 2000 Acquired Seabrook Enterprises, peanut processing assets of ED & F Ma
Slide 40: A very experienced management team
A very experienced management team Michael Fisher 2002 • Extensive experience in consumer packaged foods from mid- President & CEO size to multi-billion dollar food companies • Previously president of Fischer Food Company Charles Davis 2000 • UB’s independent accountant for 18 years before UB was CF
Slide 41: UB is well positioned for sustained long term growth & profitability
UB is well positioned for sustained long term growth & profitability A solid strategic foundation, with fundamentally appealing attributes Long-term customer base of global food companies Unrivaled position in the peanut industry with unparalleled customer service Technologically advanced proc
Slide 42: UB's fit for Olam
UB’s fit for Olam Universal Blanchers is the ideal entry vehicle for supporting Olam’s growth in North America and expansion of its edible nuts division Acquisition Rationale Production Olam Universal as the Centre Presence Strategic Entry Vehicle • Industry leadership South Africa • Value-added ser
Slide 43: Olam's fit and attractiveness for UB
Olam’s fit and attractiveness for UB We are a customer driven organization and we believe that this partnership will help us provide greater services to more customers in multiple markets. Olam can provide the geographical platform, financial resources and a global mindset - to expand UB’s current U
Slide 44: Universal's Key Objective
Universal’s Key Objective Build the largest processor of peanuts and other nut products to serve the snack and confectionery customers on both a domestic and international basis. 43
Slide 45: Presentation Outline
Presentation Outline Transaction Overview Overview of Universal Blanchers (UB) Transaction Rationale for Olam Transaction Rationale for Universal Blanchers (UB) Financials & Summary Q&A 44
Slide 46: Pricing parameters compare favorably with precedent transactions
Pricing parameters compare favorably with precedent transactions The purchase price of US$ 77m on an enterprise value basis translates into an implied multiple of approximately 6.6x trailing EBITDA for 2006 and 8.6x trailing EBIT for 2006 14.0 Current transaction US 12 ingredients 12.0 market 10.0 8
Slide 47: Strong Financial Track Record
Strong Financial Track Record Universal has been steadily growing both the top and bottom lines Net Sales EBITDA ($ Million) ($ Million) R = 13.8% 4- ’06 CAG $80.5 % ’ 0 $72.5 = 27.5 $64.7 G R 6 CA ’0 $12.5 $56.0 ’04- $11.0 $8.4 $6.8 2004 2005 2006 TTM 2004 2005 2006 TTM 12/31/06 12/31/06 Margin 12.
Slide 48: Sales potential
Sales potential Universal has identified annual sales opportunities in excess of $120 m by 2010 . . Sales Growth Opportunity (US$ million) $0.0 to $38.2 $84.2 to $122.4 $11.7 $72.5 2006 Base Forecast Incremental 2010(E) 47
Slide 49: EBITDA potential
EBITDA potential … and more than $25 million in EBITDA EBITDA Opportunity (in US$ million) $0.0 to $12.0 $13.8 to $25.8 $2.8 $11.0 2006 Base Forecast Incremental 2010(E) 48
Slide 50: Presentation Outline
Presentation Outline Transaction Overview Overview of Universal Blanchers (UB) Transaction Rationale for Olam Transaction Rationale for Universal Blanchers (UB) Financial Parameters Summary Q&A 49
Slide 51: Summary
Summary Olam to acquire 100% stake in UB for US$77 million on a cash and debt free basis UB is the world’s largest independent peanut blancher with dominant market share in independent peanut roasting and various peanut ingredients within the US The transaction fits well with Olam’s Peanuts and edib
Slide 52: Thank You Q&A
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