22/11/09 Hemocrite - June 2004 1

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HEMOCRITE
Tim Wainwright
Mitch Pender
Jan Sorenson
Feargal Brady
 Agenda

Hemocrite: Highlights &

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

Highlights & overview

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

Net revenues 407 488 520 565 594 622

EBITDA 45 57 58 63 77 89
EBIT 27 36 38 39 50 61
16% 700

14% 600
12%

SALES (Euro Million)

500
EBIT / EBITDA (%)

10%
400 Sales (€M)
8% EBITDA
300 EBIT
6%
200
4%

2% 100

0% 0
2000 2001 2002 2003 E 2004 E 2005 E
22/11/09 Hemocrite - June 2004 4
 Revenue by Market

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

Breakdown of
UK 2002
21% consolidated
sales.
22/11/09 Hemocrite - June 2004
Total = €520 5
 Balance Sheet
(in € millions) 2002 %
Assets
-Intangible fixed assets € 103 40%
-Investments & financial assets € 17 7%
-Tangible fixed assets € 113 44%
-Working capital requirements € 23 9%
Total Assets € 256 100%
Sh Equity & Liabilities
-Shareholders equity € 207 81%
-Net financial debt € 34 13%
-Provisions € 14 5%
-Minority interests €1 0%
Total Sh Eq & Liab € 49 19%

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 Strategy for growth
• Foundation for growth is based on tri-
partite strategy:
1. International
International
Product Innovation
ReorganisationExpansion:
Expansion

• PAST –- Since
At origin
1992,
of major
Streamlined focused market
structure ondeveloped
acquiring
evolutions
& of
established
free-press
being inbusiness
UK, Spain
implemented in Thailand,
& BelgiumMexico, China
including
•Belgium (Centralization)
•FUTURE•Spain
- Positioned
– Ongoing product
(Reduction to in
take renewal
advantage
sales process
offices) of high
growth
and •countries
extensive databases
– Italy, Hungary
UK (Reorganisation of of
client and
needs
sales Czech
and will
maint)
Rep.
enable continued growth 2. Product
3. Reorganisation
Innovation
•FUTURE – Profit enhancement opportunities

22/11/09 Hemocrite - June 2004 7

 Key investment considerations

• HEMOCRITE offers a potential purchaser:

Euro
Market
Leader
Motivated Strong
Workforce Brands

HEMOCRITE
Management Unique
Experience Know-how

Earnings Sales
Growth Growth

22/11/09 Hemocrite - June 2004 8

22/11/09 Hemocrite - June 2004 9

Valuation Methods
 DCF Valuation
(€Millions)
CASE1. As per Hemocrite Projections
2003 E 2004 E 2005 E
Net Sales 565 594 622
EBIT 39 49 61
Interest 2 2 2
EBT 37 48 59
Taxes 15 19 24
Net Income 22 29 36
Plus Dep'n 15 15 15
Cash Flow 37 43 50
Retention for growth 15 15 15
Plus Horizon Value 594
Net Cash to acquirer 22 29 629

NPV of cashflows € 455

22/11/09 Hemocrite - June 2004 10

 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 BS Value / BS Value / Op Acq Price Acq Price

Turnover Profit
Europe 3.5 15.5 1820.0 899.0

USA 4.3 11.2 2236.0 649.6

Hybrid 3.6 14.7 1894.9 854.1

Hemocrite PER Valuation (€million)

Basis PER Acq Price

Europe 27.5 605.0

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22/11/09 Hemocrite - June 2004 13

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

– 1. Horizontal Merger Firm AB

Product A

– 2. Vertical Merger
Firm A
Product A Firm AB

Firm B Product Aa

Product a

– 3. Congeneric Merger Firm A Firm B Firm AB

Product A Product (A) Product A(A)

– 4. Conglomerate Merger Firm A

Product A
Firm B
Product Z
Firm AB
Product AZ

22/11/09 Hemocrite - June 2004 14

 The Buyers
• Group C • Group D
– US group – World leader in
– Radio, TV & Free distribution of free
Dailies leaflets
– Objectives – Objectives
• High rentability • Diversification
• Entry to Europe

Horizontal Congeneric
Merger Merger
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 The Buyers
Motivation for Group C to purchase Hemocrite
(Horizontal Merger)
• Strong Growth Perspective YES
• Synergy 1: Economies of Scale YES
• Synergy 2: Financial Economics YES
• Synergy 3: Tax Effect (YES)
• Synergy 4: Increased Market Power YES
• Complementary resources YES
• Managers` Personal Incentives ?
• Diversification of its Portfolio NO
22/11/09 Hemocrite - June 2004 16
 The Buyers
Motivation for Group D to purchase Hemocrite
(Congeneric Merger)
• Strong Growth Perspective YES
• Synergy 1: Economies of Scale (YES)
• Synergy 2: Financial Economics (YES)
• Synergy 3: Tax Effect YES
• Synergy 4: Increased Market Power (YES)
• Complementary resources (YES)
• Managers` Personal Incentives ?
• Diversification of its Portfolio YES
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22/11/09 Hemocrite - June 2004 18

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

22/11/09 Hemocrite - June 2004 19

 Negotiating Techniques
Technique Strengths Weaknesses
Organised • Transparent • Expense
Auction • Seller retains control • Confidentiality
• Highest price • Many interested parties

Exclusive • Simplified procedure • Candidate selection

Auction • Predetermined timetable • Decreased confidentiality
• More focused • Fall-out from failure

Private • Discretion/Ltd disruption • No strict timetable

Negotiations • Flexibility • Drawn-out negotiations
• Easier to manage • Lowest weakness

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 Selection of negotiation

Low Med High

Number of potential buyers √

Required degree of confidentiality √
Deadlines √
Complexity of deal √
Quality of target (Hemocrites) √

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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

22/11/09 Hemocrite - June 2004 22

 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

22/11/09 Hemocrite - June 2004 24