Mitchells & Butlers plc · LSE:MAB
Mitchells & Butlers — Merger or Acquisition (July 2006)
35 slides from Mitchells & Butlers's merger presentation, July 2006
Slide 1: Acquisition of Whitbread Pub Restaurants
Acquisition of Whitbread Pub Restaurants July 2006
Slide 2: Roger Carr, Chairman
cree) & Butlers Roger Carr Chairman
Slide 3: Tim Clarke, Chief Executive
cree) & Butlers Tim Clarke Chief Executive
Slide 4: Agenda
Agenda Key features of transaction Financial and strategic rationale Assets acquired Brand conversion plans and profits uplifts Management integration Productivity and purchasing gains Value Creation 4
Slide 5: Acquisition sources of value
Acquisition sources of value Accelerates MAB repositioning to high growth eating out market 239 of the best pub sites in the UK Acquired for £490m and £7m contingent deferred consideration Equivalent to £2.1m per pub site (highly attractive vs greenfield sites) Increase sales through conversion to M
Slide 6: Financial and strategic rationale
Financial and strategic rationale Opportunity to raise profitability to levels in MAB pub restaurants* Comparable EBITDA per site over 50% higher in MAB Create value for shareholders Extend leadership of residential, eating out market Add sites with £1m+ p.a. of sales potential Value creative acquis
Slide 7: Assets Acquired
Assets Acquired Short Leasehold, 5% Long Leasehold, 6% 15% 4% 19% 7% Freehold, 80% 6% 7% 3% 3% Trading Statistics 6% 31% AWT £16k 9% Declining trajectory -3.7% LFLs* Locational characteristics Mid market suburbia Affluent commuter belts Quality assets in prime MAB target locations * 13 weeks to 1 Ju
Slide 8: High Quality Sites
High Quality Sites 239 sites with huge unlocked development potential Current trading performance only relevant pre conversion Value to be added from MAB formats and operating skills Sites are equivalent to top quartile of MAB estate Value underpinned by current property valuations Irreplaceable ass
Slide 9: The Scotsbridge Mill, Rickmansworth
The Scotsbridge Mill, Rickmansworth 9
Slide 10: Royal Saracens' Hotel, Beaconsfield
Royal Saracens’ Hotel, Beaconsfield 10
Slide 11: The Katarina, Brighton
The Katarina, Brighton 11
Slide 12: The Downlands, Worthing
The Downlands, Worthing saree OED & Butlers 12
Slide 13: The Windmill, Littlehampton
The Windmill, Littlehampton 13
Slide 14: The Fishers' Pond, Eastleigh
The Fishers’ Pond, Eastleigh 14
Slide 15: The Cockle Shell, Swansea
The Cockle Shell, Swansea Mitchells () & Butlers 15
Slide 16: The Ship Inn, Lymington
The Ship Inn, Lymington cateehone) & Butlers 16
Slide 17: The Amesbury Archer, Amesbury
The Amesbury Archer, Amesbury 17
Slide 18: The Bathampton Mill, Bathampton
The Bathampton Mill, Bathampton 18
Slide 19: The Mansion House, Reading
The Mansion House, Reading 19
Slide 20: Conversion plan and upside opportunity
Conversion plan and upside opportunity Intensive preparation and planning All sites visited and surveyed by profit accountable, operators and property management All sites have a detailed operational and investment appraisal Conversion uplifts reality checked against comparable MAB sites Local demog
Slide 21: The conversion opportunity
The conversion opportunity 207 conversions to MAB brands and formats 11 ex-Beefeaters to be traded as new steak house format under development 5 Franchises 16 Disposals Detailed future plans for all sites 21
Slide 22: MAB Conversion Plans
MAB Conversion Plans Convert 207 sites in under 2 years MAB proven brands & formats 176 Restaurants Harvester Innkeepers Fayre Premium Country Dining Bells of Ouzeley, Old Windsor Pub Carvery Toby Carvery Vintage Inns 31 Pubs & Bars Ember Inns Sizzling Pub Co Toby Carvery, Carlisle High returns from
Slide 23: MAB Conversion Opportunity
MAB Conversion Opportunity Per pub Acquired sites* MAB Pub Restaurants** AWT £16k £21K Ave EBITDA £190k £320k Sales 30%+ ahead drives higher margins * 12 months to 1 June 2006 ** Comparable sample of 378 sites 12 months to 13 May 2006 23
Slide 24: Current performance
Current performance Expected unsustainable profits pre-conversion Low food and drinks volumes relative to site capacity Uncompetitive retail pricing given food quality Low staff productivity Comparison to MAB demonstrates scale of potential upside 24
Slide 25: Management integration
Management integration Pubs to be initially traded under existing brands Beefeater sites converted first Transitional services agreement with Whitbread Pending conversion of IT systems Managed separately to maintain operational focus Transferred to MAB divisions post conversion Adam Fowle to manage
Slide 26: Karim Naffah, Finance Director
Karim Naffah Finance Director
Slide 27: Structure and Acquisition Costs
Structure and Acquisition Costs Asset purchase - Class 2 transaction – due to complete on 28 July - Transitional arrangements, winding down over 12 months Acquisition Price - Cash on completion £490m - Contingent deferred consideration £7m £497m Transaction Costs - Fees / Stamp duty £12m Total Acqui
Slide 28: Acquired Sites - Financial Performance
Acquired Sites - Financial Performance MAT to Feb 06 MAT to May 06 Turnover £195m £194m EBITDA £48m £45m EBIT* £40m £37m LFL Sales down 3.7% in 13 weeks to end May * On MAB depreciation basis 28
Slide 29: Expected Returns
Expected Returns Marginally dilutive in Year 1 NOPAT covers WACC in Year 2 First full year post-conversion is Year 3 Returns building towards existing MAB levels Intensive conversion programme in first 2 years 29
Slide 30: Value Creation Opportunity
Value Creation Opportunity Investment EBITDA EBITDA per site per site Multiple Acquisition Price £497m £2.1m £190K 11x Transaction Costs £12m Integration Costs £9m Expansionary Capex £85m Total Investment £603m £2.5m £300K+ 8.3x Realise full potential of high quality sites 30
Slide 31: Acquisition Financing
Acquisition Financing Short-term bridge facility in place to fund acquisition Move to medium-term unsecured loan facility in addition to refinancing of existing business Refinance acquired assets post conversion on longer- term structure based on uplifted EBITDA Consistent approach to financing stra
Slide 32: Return of Funds
Return of Funds On-track to implement refinancing by end September On-going disposals to generate at least £70m this year Plan to solicit offers for c.100 smaller drinks-led pubs Completed £32m of £59m second half buy-back Still expect to return of the order of £500m 32
Slide 33: Summary
Summary Investment in high quality sites with excellent potential - Consistent with stated strategy - Additional source of growth - Significant value creation opportunity Continue to expect return of c.£500m to shareholders - Refinancing to capitalise on strong business performance - Further disposa
Slide 34: Acquisition of Whitbread Pub Restaurants
Acquisition of Whitbread Pub Restaurants July 2006
Slide 35: Cautionary Note Regarding Forward-Looking Statements
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This presentation contains certain forward-looking statements as defined under US legislation (section 21E of the Securities Exchange Act of 1934) with respect to the financial condition, results of operations and business of Mitchells & Butlers a
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