Tuesday, February 17, 2009 Offices of Katten Muchin Rosenman LLP 19th Floor Conference Center 525 West Monroe Street • Chicago, IL
Panelists: Feng Xue Chair Asia/China Practice Katten Muchin Rosenman LLP Jack Calderon Managing Director Lincoln International Steven Hyde Vice President of International Business Development Navistar International Steve Moss Managing Director ChinaVest/Wells Fargo Andrew W. Rice Senior Vice President of International Business The Jordan Company
Moderator: Walter Weinberg Chair Chicago Corporate Practice Katten Muchin Rosenman LLP Table of Contents
Tab 1: Katten China Brochure
Tab 2: Feng Xue Biography Walter S. Weinberg Biography Presentation – Private Equity Investments in China in a Time of Economic Crisis
Tab 3: Andrew W. Rice Biography Presentation – The Jordan Company Overview of China Investment Activities
Tab 4: Steven Hyde Biography Presentation – Investing in China
Tab 5: Steve Moss Biography Presentation – Lifting the Veil and Going for Gold: China Investment Essentials
Tab 6: Jack Calderon Biography Presentation – Lincoln International’s Global Reach Feng Xue Partner Chicago, Illinois p_312.902.5588 f_312.577.8807 [email protected]
Feng Xue, Chair of the firm’s Asia/China Practice, concentrates on private equity, mergers and acquisitions, securities regulations, and general corporate transactions, with an emphasis on China- related investment transactions. Mr. Xue has worked with major international law firms in Chicago, Shanghai, and Beijing, and has extensive experience in a wide variety of the legal issues that affect investing in China.
He has negotiated and documented the establishment of numerous joint ventures, WFOEs, and distribution/franchise relationships, as well as cross-border acquisitions in China in a variety of industries. Increasingly, his practice consists of representing Chinese companies in their acquisition and expansion efforts overseas. Mr. Xue sits on the boards of directors of several Chinese companies and serves as general counsel to dozens of private equity funds and technology companies doing business in China.
Also a seasoned practitioner of corporate law in the United States, Mr. Xue focuses his U.S. corporate practice on complex merger and acquisition transactions, securities offerings, middle market buyout fund acquisitions, and venture capital investments.
An experienced writer, he co-wrote Laws of the People's Republic of China, Volumes III, IV, and V, published by China Science Press, and Western Corporate Laws, published by China Law Press. In addition, he has been quoted in numerous Chinese and US media on issues related to doing business in China, including the Street.com of Wall Street Journal on Chinese legal framework for foreign investors. He is a frequent speaker on the legal issues affecting foreign investment in China.
Mr. Xue's speaking engagements include:
Q Great Chicago China Business Conference, Kellogg School of Management, April 18, 2008, on China Outbound Investments and Chinese Law and Government.
Q Harvard China Review 2008 Conference: Building China Confidence (March 29, Harvard University), on China PE investments.
Q Kellogg School of Management Global Initiative Clinical Course (February 27, 2008), on doing business in China.
Q PWC China-India Road Show (November 2007, Chicago), on China-related legal due diligence and structuring issues.
Q Milestone 2007 Conference (October 2007, Beijing), on oversea IPOs for Chinese company and legal requirements.
Q World Trade Center Chicago China Promise to Profit Conference (October 2007, Chicago), on evolving legal issues of doing business in China (impact of new tax, labor and M&A laws in China.
Q PWC Doing Business in China Press Conference (September 2007, New York), on legal issues of doing business in China.
Q ACG New York Chapter China Forum (August 2007, New York), on China M&A issues. Q China Real Estate Forum (May 11, 2007, New York), on Chinese real estate companies public offerings in HK and the US.
Q China VC Summit (April 25, 2007, Palo Alto, CA), on US VC’s investment in Chinese companies and the impact of Chinese MOFCOM Circular 10.
Q US-China Investment and M&A Summit (April 10, 2007, Shanghai), on China- related cross border M&A.
Mr. Xue earned his B.A. from Beijing University in 1990, his LL.M. from Duke University School of Law in 1995 and his J.D. from Duke University School of Law in 1998. Prior to attending law school, Mr. Xue worked as a senior legislative officer for the Legislative Affairs Commission and Law Committee of the Chinese National People’s Congress, where he participated in the drafting of Chinese national legislation. Walter S. Weinberg Partner Chicago, Illinois p_312.902.5405 f_312.577.8771 [email protected]
Walter Weinberg is a Partner and Chairman of the Chicago Corporate Group of Katten Muchin Rosenman LLP. He has over 20 years of experience representing start-ups, middle market and large cap companies, including many companies controlled or sponsored by private equity or venture capital groups, in their equity and debt financings, acquisitions, dispositions and other transactions as well as their day-to-day legal needs. Mr. Weinberg represents private equity and venture capital funds in structuring (and re-structuring), negotiating and documenting their investments in, and exits from, portfolio companies, including their sponsorship of, or other participation in, leveraged and management buy-outs. He has represented clients in the formation of private equity funds and real estate funds and represents institutional investors in connection with their investment in funds. He has represented numerous clients in mergers and acquisitions of privately and publicly-held companies across a wide variety of industries, including significant experience with publishing and information services companies, technology companies, insurance companies and REITs. He advises senior executives and management groups on employment and compensation arrangements and counsels boards of directors (and committees thereof) on their fiduciary and other duties and responsibilities.
He has been a speaker at programs of the American Bar Association’s Venture Capital and Private Equity Committee of the Business Law Section and seminars of the Chicago Bar Association regarding venture capital and securities law matters, and has lectured at the "Venture Capital and Entrepreneurship" class at Northwestern University’s Kellogg School of Business. Mr. Weinberg has been a speaker at many other industry private equity and middle market seminars. He has been recognized by Leading Lawyers Network of Illinois in the areas of Corporate Finance Law, Mergers & Acquisitions Law, Securities & Venture Finance Law, and Small, Closely & Privately Held Businesses; listed in Chambers USA: America's Leading Lawyers for Business (2005-2008); Who's Who in American Law; Who's Who Legal: Illinois 2006; Best Lawyers in America; and Illinois Super Lawyers (2007-2008); and The Guide to the World's Leading Investment Funds Lawyers.
Mr. Weinberg received his undergraduate degree with General Honors in Economics from The University of Chicago, where he graduated Phi Beta Kappa. He received his law degree from Northwestern University School of Law, where he graduated cum laude and was elected to the Order of the Coif. Mr. Weinberg served as an editor of the Northwestern Journal of International Law and Business. PRIVATE EQUITY INVESTMENTS IN CHINA IN A TIME OF ECONOMIC CRISIS
February 2009
Feng Xue Katten Muchin Rosenman LLP 525 W. Monroe Street Chicago, IL 60601 Phone: 312-902-5588 E-mail: [email protected]
How Bad Is China Hurt in This Global Recession?
• Demise of export economy
• Dramatic slowdown of manufacturing activities
• Burst of real estate bubble
• High unemployment
• Concerns over social stability
• Bad investments made in the US
• Alarming reduction of FDI and fleeing of FIEs
1 The Bright Spots and the Opportunities
• Backward Banking System and Unfinished Modernization * Not entirely open * Limited loan to individuals * 30% to 40% down payment • The Culture of Saving • The Huge and Expanding Domestic Market • The Perceived Savior/White Knight and Nationalistic Pride • Buying Opportunities in the US (financial institutions and manufacturing plants) • Lower/rational valuation • Prompt government actions – China’s Stimulus Plan • Expected 8% Growth • Resilient business community – might be the first to recover 2
Private Equity in a Public Economy
• PE and VC are both “imported” concepts. Used without difference until recently.
• Private fortune in a socialist economy. SOEs vs. Private Companies
• Domestic Companies vs. FIEs
• FIEs subject to separate regulatory framework
• Foreign PE/VC as a form of FDI
3 The Players
• HOME GROWN – Chinese Government Sponsored Funds (Central, local and etc.) – Chinese Securities firms, public companies, universities and SOEs – Private Investment Companies (2nd generation of the richest families) – Angel Investors --- individuals • GUEST INVESTORS – Big foreign banks’ PE investment arms (DB, CitiGroup, Morgan Stanley, JP Morgan, HSBC, etc.) – Major international PEs/VCs (Carlyle, Warburg, Pincus, Actis, GA, Newbridge, Temasek, Singapore government, Sequoia, Draper Fisher, etc.) – Foreign PEs/VCs focusing only on China/Asia (SAIF, IDG, ChinaVest, WI Harper, etc.) – Strategic Investors (Intel Capital, IMB, Motorola, GE Capital, etc.) – Taiwanese/HK money • JOINT VENTURES – Chinese money with foreign management (IDG/Tianjin, NewMargin and etc.) 4
The Deals
• PE-backed Acquisitions (Not many)
• VC Investments (Numerous)
• Deal Structures
– Very complicated due to regulatory requirements
5 China Specific Headaches for PEs
• Lack of Exit Mechanism – Trade Sale/M&A – Domestic IPO (hard for domestic investors and harder for foreign investors) – Roadblocks for offshore IPOs (Nasdaq, HKSE and etc.) • The Ever-Changing Law/Lack of Guidelines • Industries restricted to foreign investment • Grey Areas • Policy and political uncertainty • Entrepreneurs and Professional Managers – International experience, knowledge of capital markets – Governance issues • Valuation and Due Diligence
6
Hot Laws You Should Know
• MOC Circular 10
– Made VC investments and PE-backed acquisitions much more difficult, if possible at all.
• SAFE Circulars 11, 29, 75 and 106
• New Uniform Tax Law
• New Labor Contract Law
• New Foreign Exchange Regulation
• New Pledge Law
7 Summary – Words of Wisdom
• China Venture Capital Association and Deloitte’s “Seven Disciplines of Chinese Venture Leaders”: – The “Guanxi” Discipline – The Discipline of Corporate Governance – The Discipline of Intellectual Property – The Discipline of Local Adaptation – The Discipline of Value Addition – The Discipline of Financial and Legal Structuring – The Discipline of Creating Opportunities from Regulations
8
The Year of Ox – Can We Call It “Bull” Instead?
• Crisis in Chinese Wei (meaning “danger”) Ji (meaning “opportunity”)
• Chinese Year 4706: the year of Ox, which represents “prosperity through perseverance and hard work”
• Chinese business community remains largely optimistic and upbeat
9 Andrew W. Rice Senior Vice President-International The Jordan Company p_847.945.7904 f_847.945.5698 [email protected]
Andrew Rice is Senior Vice President of International Business at The Jordan Company ("TJC"). Mr. Rice joined TJC in 1989 and has held numerous strategy, international business development and investment positions.
Mr. Rice has traveled extensively assisting Jordan companies expand overseas. Since 1990, he has helped coordinate over 45 wholly-owned start-up operations, joint ventures and acquisitions in China, Russia, the Czech Republic, India, Malaysia, Spain, England, Italy, Israel, Mexico, Brazil and other countries. Mr. Rice travels regularly to China to support Jordan initiatives, including 20 trips over the past two years.
Prior to joining TJC, Mr. Rice held various corporate development, strategy and marketing positions at Ameritech, IC Industries, and The Pillsbury Company.
Mr. Rice earned a B.S. in Industrial Engineering and an M.S. in Engineering Administration (a joint engineering and MBA program), both from New Mexico State University. In 1978, Mr. Rice was named The Outstanding Industrial Engineering Student in the U.S. by the Institute of Industrial Engineers. He also completed one year of graduate studies in international economics at the University of Melbourne, Australia, where he studied as a Rotary Foundation Graduate Fellow.
Mr. Rice currently serves on the Board of Directors of the Association for Corporate Growth, the US- China Chamber of Commerce and several community service organizations. Formerly, he was on the board of the Illinois Finance Authority and the Washington, D.C. based Small Business Exporters Association. Mr. Rice is also a member of the Executives' Club of Chicago, the International Trade Association of Greater Chicago, and the American Chamber of Commerce-China (Beijing).
The Jordan Company ("TJC")
TJC is one of the leading global middle-market private equity firms. TJC has $6 billion of funds under management. Together with its affiliates, TJC has sales of more than $7 billion worldwide with businesses in a variety of industries; including specialty plastics, electric motors, automotive parts, coal mining equipment, CATV, water meters, facilities management services, container leasing, lighting equipment services, advertising and media services, galvanized steel, and healthcare products among other businesses. TJC has had a global perspective since the early 1990's, including over 80 foreign acquisitions and JVs in China, Russia, India, Malaysia, the Czech Republic, Brazil, Mexico and other countries. Since 1995, TJC has completed more than 24 acquisitions, Joint Ventures and Greenfield start-ups in China. This has included the acquisition of both private companies and State Owned Enterprises (SOEs). In addition, TJC has helped numerous portfolio companies establish sourcing offices in China. In May 2006, TJC acquired two SOEs in Heilongjiang Province that are leading manufacturers of coal mining equipment. These high profile landmark deals were the first SOEs in Heilongjiang acquired 100% by a foreign firm as part of China's Northeast Region Revitalization Program. The Jordan Company Overview of China Investment Activities
November 2008 1
Background of The Jordan Company
• The Jordan Company (TJC) has been a global private equity leader in the middle market for over 25 years
- Primarily US based platform companies - Including over 80 overseas acquisitions and JVs - Most add-ons for platform companies in US and Europe
• Founded in 1982. Headquartered in New York.
• Other Corporate Offices in Chicago, Shanghai and Beijing.
• $6+ billion in capital under management.
• General Partner for The Resolute Fund I and The Resolute Fund II
2 The Jordan Company Broad Experience and Capabilities in China
• 24 China investments since 1995. – Acquisitions, JVs and Greenfield Start-ups
• Currently 18 operations in China.
• Investments in private companies and SOEs
• Telecom equipment, motors, specialty plastics, auto parts, water meters, coal mining equipment, CATV components, electronics
• Most investments majority control positions
• Helped numerous portfolio companies set-up sourcing offices in China and sales distribution networks within China and Asia.
• Also experienced in stand-alone deals independent of our existing portfolio in key growing industries in China
3
The Jordan Company China Presence (Primarily in 2nd and 3rd Tier Cities)
Jiamusi
Harbin Jixi Urumqi Beijing Erdos
Zhengzhou Wuxi Yangzhou Huainan Shanghai
China HQ Fuzhou Manufacturing/ Operations Guangzhou Sourcing Office Foshan City (Hong Kong) Corporate/Regional Offices 4 The Jordan Company China Support
Jordan China support is a major competitive advantage for both US and Europe portfolio companies expanding into China and stand-alone Chinese companies that need help to grow. 20 business development and operations professionals and 20+ sourcing engineers on Jordan China staff.
– Evaluate and help negotiate JV’s and acquisitions. Coordinate legal, accounting and operational due diligence efforts. Start-ups.
– Maintain relationships with government officials and business leaders.
– Preliminary research on companies and industries (China Impact research).
– Help hire dedicated sourcing, QA, marketing and manufacturing managers.
– Help negotiate P.O.’s, supply contracts, lease agreements, equipment purchases, etc...
– Find/qualify potential suppliers and partners.
– Organize visits to China and U.S.
5
Examples of Jordan Investments in China
• 1995 Dura-Line China (Shanghai)-Greenfield/JV
– JV to manufacture and sell fiber optic cable conduit to Chinese telecom customers. – High import duties and transportation costs. Exporting from U.S. not feasible. – Very high sales in China first full year of operation. – Exports to other Asian Countries in second year
• 1996 Viewsonics China (Shanghai)- Acquisition
– Manufacturing and assembly of CATV network components for export to U.S. and Europe. – Worldwide low cost supplier. – 100% export. – Sales and distribution via US parent company
6 Examples of Jordan Investments in China
• 1997 Sate-Lite China (Shunde)- Greenfield WOFE
– Initially to supply reflectors for bicycles assembled in China for export to U.S. and Europe. – Now also manufactures office products and other products for Jordan Specialty Plastic’s companies for export to the U.S. and Europe (Staples, Office Max, etc..). – 2004 set-up Asia sales and distribution network.
• 2002 Kinetek DeSheng-KDS (Shunde)- Acquisition
– Jordan motor group (Kinetek) began sourcing product from KDS in China in 2000 – Developed supplier relationship with KDS. Acquired in 2002. – Ongoing program to move U.S. and European electric motor manufacturing to China for export back to those markets. – Expand sales within China/Asia. (Motors for elevators, golf carts, others)
7
Examples of Jordan Investments China
• 2005 Brainin China (Shunde)- Greenfield WOFE, PEP Subsidiary
– Commenced operations in January 2005 to manufacture precision metal stampings and electrical contacts. – Initially for 100% sales in China to supply current US customers with manufacturing and assembly in China. – Later will develop export sales directly to US and Europe. – 4 months to start production
• 2005 Smith-Blair China (Shanghai)- Greenfield WOFE, Sensus Subsidiary
– New facility in Shanghai to manufacture water and sewer pipe joining and repair products. 8 months to start production – Production began in June 2005. – 100% export to supply high volume commodity products for US market. – Provides a platform for other products to be manufactured and/or assembled in China for export.
8 Grand Opening Ceremony Sensus Manufacturing
9
Acquisition of a Private Company Sensus PDC Rongtai
• 2005 Sensus PDC Rongtai (Yangzhou)- JV/Acquisition
– In 2004, Sensus PDC needed a manufacturing capability in China to supply US customers that were setting-up China assembly operations.
– Jordan lead efforts to evaluate 20+ potential partners.
– In July 2005, Sensus PDC acquired controlling interest in Rongtai Yangzhou (a private company) to form a JV to manufacture aluminum die cast parts for the automotive and telecom markets. – Rongtai had existing sales with products related to Sensus PDC. Good operational fit.
– The JV serves the growing Chinese market and also exports to the US and Europe.
10 100% Acquisition of two SOEs Jixi and Jiamusi Coal Mining Machinery Cos • 2006 Jixi & Jiamusi Coal Mining Machinery Co. (Heilongjiang Province) – Acquisitions – 70% of China’s electricity generated by coal fired power plants – Coal mine mechanization and safety major concerns of the government. – Market leaders with combined revenue above US$ 100MM. – Typical SOEs, with 6,000 plus employees before deal. – Carved out non-core businesses (schools, hospital, etc… ) – Settled pension/severance liabilities – Reduced and restructured back taxes and bad bank loans. – Expecting high growth next 5-10 years through both domestic and international expansion.
5 additional add-on acquisitions and JVs in 2007 and 2008
11
Grand Opening Ceremony Jiamusi Coal Mining Equipment
12 Major Trends Emergence of Private Chinese Companies
• Over the past 10-15 years many entrepreneurs have started private companies in China. There are and estimated 3-4 million private manufacturing businesses in China today. • 300,000 private businesses that are well managed middle-market companies with strong market positions. • 3,000 to 4,000 of these are companies with proper Western management controls and GAAP accounting that have significant growth potential. • Many of the entrepreneurs that have built these 3,000+ companies are looking for foreign partners to help them expand both domestically and overseas. • Numerous opportunities to acquire or do JVs with these “platform” companies to consolidate fragmented high growth niche markets. • Similar to the US in the 1970’s and 1980’s.
13
Major Trends Chinese Firms Want More Than Capital
• Chinese companies want more than capital from their foreign partners. They also want assistance to manage growth and to become global suppliers.
• Foreign customers require their Chinese suppliers to adhere to strict QA, supply chain, operations, HR, financial, tax and legal procedures. Supplier audits of Chinese suppliers are detailed and comprehensive.
• As a result, many Chinese companies want their foreign partners to take the lead in implementing these controls and procedures so that they can become world-class suppliers.
14 Major Trends Decision Making Has Moved to Local Level
• Decision making has been shifted down the past 10 years from the Central Government (Beijing) to the Provinces to the cities to the districts.
• Important to have relationships with the local officials that approve investments and support the business going forward.
– Sponsor US investment seminars and local events
• Electricity and gas examples of local help.
15
Relationships Important with both Chinese and US Government Officials
16 Major Trends Massive Infrastructure Build-out will Continue
• Massive infrastructure build-out will continue making it easier to do business.
• Highways, telecom network, ports, electricity, hotels, industrial parks, entire new cities. – Supply contracts for infrastructure needs for the Beijing Olympics will lead to other contracts in China next 3-5 years.
• China has a very business friendly environment. – However, it can be administratively burdensome to set-up a new company or rep office (especially first time).
17
Major Trends Most US Investment Will be to Serve China Market
• Most new US investment in China is to serve the growing Chinese market. Government is changing many laws to make it easier to sell and distribute in China. Often the implementation lags behind new laws. Examples:
a. It is now allowed for foreign owned plants to Buy/Sell/Trade other companies products. - Prior to 2007, a foreign owned manufacturers could only sell products it actually manufactured in China.
b. It will be easier to set-up branches for distribution, sales and service. - Before administratively difficult. WOFE subs and local Rep offices were often required in each Province. VAT issues.
18 Major Trends Changing Regulatory and Tax Environment
• Tax law changed in 2007 reducing corporate taxes From 33% to 25%. Eliminated favorable 5 year tax incentives (2 years no taxes/ 3 years at 50% tax rate) for foreign investors on new investments.
• Several new central government deal review/approval processes for foreign buyers regarding anti-monopoly and “famous brands”. This will primarily be an issue for control investments and large, high profile deals.
• New limited partnership law passed, which will eliminate double taxation. This will open the way for domestic RMB PE funds.
• Chinese financial entities approved to setup RMB denominated funds. Several are now operational. They have capital, but few have experience investing in and managing portfolio companies.
• The government is considering allowing foreign PE firms to raise RMB funds in China because of expertise in corporate management, business development, and doing IPO’s.
19
Major Trends Private Equity Investment in China Will Grow • Multinationals and a few Private Equity firms like Jordan have been proactively supporting their divisions and portfolio companies as they have invested in China the past 10 years.
• This trend will accelerate as more Private Equity are now entering China to support portfolio companies.
– Awareness developing about the positive role that private equity firms can play as investors in China.
– Leverage will become more available for LBO’s in future as government opens up financial markets. • Lack of debt financing currently a deterrent due to high hurdle rates
20 Jordan China Press Conference
21
What does The Jordan Company Bring to a Stand Alone Chinese Company?
• Broad operations experience through its other portfolio companies.
• Experience in many countries and cultures, with different sales, marketing and distribution techniques.
• Ability to cross-fertilize ideas and best-practices from existing portfolio companies to new ones, including new Chinese stand alone companies.
• Access to capital to grow the business internally and through follow-on acquisitions that fit (in China and overseas).
• Experience hiring top managers to work with the Chinese management to implement world class controls, procedures, QA, logistics, governance and management systems.
• Track record of implementing management programs for senior management and middle managers with training in US
22 Jordan Criteria for China Investments
• Companies that fit with existing Jordan businesses
• Stand-alone investments that have significant market share with barriers to entry or large export opportunity
• Industry consolidations and/or SOE privatizations
• Growth capital in profitable private entrepreneurial companies looking for foreign partners to expand
• Willing to selectively co-invest with other PE firms
• Jordan is planning to invest $500-$700 million in China during the next 5-7 years.
23
Our China Deal Flow
Fits with Existing Portfolio Companies • Coal Mining Equipment (IMM Add-ons) • Energy and Chemicals • Electric Motors and Controls
As well as Other Sectors • Logistics/ Supply Chain • Environmental Protection Equipment (air and water) • Business and Financial Services • Infrastructure • Consumer Products/ Retail • Manufacturing/ Industrial • Pharma/Biotech • IT
24 Contact Information
In China Contact; In the US Contact;
Youming Ye Andrew Rice Managing Director Senior Vice President-International The Jordan Company (China) The Jordan Company 1168 Nan Jing Road West, Suite 2308-10 1751 Lake Cook Rd., Suite 550 CITIC Square Deerfield, IL 60015 Shanghai, China 200041 USA Tel: (86)-21-5292-5566 Tel: (01)-847-945-7904 Fax: (86)-21-5292-8500 Fax: (01)-847-945-5698 Email: [email protected] Email: [email protected]
25 Steven Hyde 1221 Barbara Court Naperville, IL 60540 630.357.5489 [email protected]
SUMMARY
Business development professional with 30 years experience in the international automotive industry, concentrating on emerging markets in China, India and the former Soviet Union. Manage new business prospecting and business structure analysis; negotiate license, joint venture and sales deals. Serve key role in product planning and business strategy. Broad knowledge of the worldwide truck and diesel engine business.
EDUCATION
UNIVERSITY OF CHICAGO GRADUATE SCHOOL OF BUSINESS, Chicago, Illinois August, 1976 Master of Business Administration Concentrations in finance and international business; Leon Carroll Marshall Scholar LONDON BUSINESS SCHOOL, London, England June, 1976 International Education Program UNIVERSITY OF CHICAGO, Chicago, Illinois June, 1971 Bachelor of Arts, Mathematics University of Chicago President's Scholar; National Merit Scholar
EXPERIENCE
NAVISTAR, INC., Warrenville, Illinois 1976 - Present Vice President, International Business Development (1994 - Present) Manage new business development for the Engine Group outside of North America. Prepare recommendations for new business opportunities, including market surveys, feasibility studies, financial analyses and strategic impact. Lead Navistar's negotiations team.
Q Recent accomplishments: – Joint venture with a major Chinese automotive company – Strategic cooperation agreement with a leading German industrial firm, which introduces a new line of truck engines for Navistar in North America – License agreement with a leading Chinese automotive company – Joint venture negotiations with a major Indian industrial firm – Distribution agreements for International's engines worldwide – Long term sales agreements in the former Soviet Union of over $10 million per year
Q Coordinate and integrate business development activities between Navistar's US and Brazil engine operations
Q Skills: communications; cross-cultural understanding; negotiations; market and industry knowledge; people development Director, Sales, Marketing and Dealer Systems (1989 - 1994) Managed a staff of 100+ systems professionals in the design, development, and deployment of information systems serving International's sales, marketing and distribution organization, and its worldwide truck dealer network.
Q Major strategic development projects: – Truck order and proposal system, improving order accuracy, reducing order-to-delivery time, and increasing the capability to implement pricing actions – Accountability management system, providing analysis of sales transactions at all levels of detail – Dealer communications network improvements, enabling today's Internet infrastructure
Director, Pricing Strategy and Management (1986 - 1989) Define, develop, and implement Truck Group pricing strategies to improve revenue, reduce inconsistencies, and increase operational effectiveness.
Q Key accomplishments: – Truck pricing strategy that has remained the basis for International's strategy today – Profit-by-customer financial analysis model that let to the accountability management system
Manager, Corporate Planning (1984 - 1986) Review and recommend capital spending plans, evaluate business strategies proposed by International's operating groups, and participate in CEO-led business planning programs. Reported to VP - Corporate Planning.
Q Major accomplishments: – Financial management participation in the divestiture of International Harvester's Agricultural Equipment business – Developed a pricing model and strategy for Truck Division
Financial Planning and Management (1976 - 1984) Several positions in manufacturing finance, and business planning starting on the factory floor and progressing to World Headquarters. Reported at first to Plant Controller, later to VP-Finance, Truck Group.
Q Major accomplishments: – Financial program manager for the $100 million consolidation of Truck Division manufacturing – Development of quality management systems at North American truck manufacturing plants – Numerous systems and process improvements for manufacturing financial management
AFFILIATIONS AND COMMUNITY SERVICE Q Vice President and Director, Naperville Heritage Society (1988 - present) Q Director, Naper Settlement and Museum Board (1998 - 2002) Investing in China … How much is China hit by this global economic downturn? Is China still an attractive place for the automotive industry?
February 17, 2009
Navistar … Profile
• Founded in 1831 – incorporated as International Harvester in 1902, renamed Navistar in 1985
• $15 billion sales, 18,000 employees in 2008
• Primary businesses: • Medium and heavy duty trucks and buses • Diesel engines, 3 liter to 15 liter • Strengths … • Market Leadership in North America • Technology - Truck and Engine • Limitations … • Lack geographical diversity (100% North America in 1998, 91% in 2008, target 70% in 2014) •Organization (2008) … centered on growth • North American Truck • Worldwide Truck Business • Worldwide Bus Business • Defense • Worldwide Engine Business
2 Core business … North America
MARKET SHARE LEADERSHIP …
3
Strategic Pillars – Engine Business
Worldwide Leader 3 to 13L Diesel Engines $3.5 Billion Revenue 10% Return on Sales
Competitive Great Cost Profitable Products Structure Growth
Differentiation Controlling Our Destiny Leveraging Assets • Cost Effective Emissions • Engine Systems Control • Grow with Truck • Fuel Economy • Global Flexibility • High-Margin Segments • Full Range of Global • Manufacturing • Global Diversification & Engine Platforms • Supply base Growth
4 Navistar … Why China? Why now?
• China commercial vehicle industry … – Long term growth, despite near term setbacks • Strong growth of the highway system • Modernization of supply and logistics systems – Industry is rapidly consolidating, with foreign partners – Technology is a driver because … • High desire to export from China • Environmental and safety progress • Navistar business model: • Alliances with China industry leaders • China partner provides market access, local products, distribution, Government relations, etc. • Navistar brings money, technology, quality and management systems
5
Navistar Engine Group – Today …
Dongfeng (China)
North America
Chicago, IL I-6 Engine HQ/Manufacturing/Engineering South America Mahindra & Mahindra (India) Indianapolis, Indiana V-8 Engine for Ford São Paulo, Brazil Grey Iron Foundry HQ and Technical Center Huntsville, Alabama São Paulo, Brazil V-6, V-8, and new Big Bore ACTEON, 10-Series, 229) Waukesha, Wisconsin Canoas , Brazil Foundry NGD 3.0, MS off road Cordoba, Argentina HS engine, components
6 Insert PowerPoint Presentation Name Here Leveraging Assets for Global Growth
EPA 2010
Truck Growth $400 million North America $1 billion
Global Growth South America $1.1 billion $1 billion Euro IV and V
$ 2 billion $3.5 billion North and South American products and manufacturing assets will serve markets worldwide
7
Navistar Engines in China …
LIGHT, MEDIUM & HEAVY DUTY TRUCKS AND BUSES Steve Moss Managing Director Wells Fargo Securities, LLC p_312.762.9054 f_312.762.9059 [email protected]
Background Steve Moss is a Managing Director in the Investment Banking Group of Wells Fargo Securities, LLC. Mr. Moss manages our Chicago office and is responsible for our Retail/Consumer and mid-west investment banking efforts. Mr. Moss has vast transaction experience in investment-grade and high yield debt, convertible debt, public equity/IPOs, M&A, private equity and PIPEs and derivatives.
Prior to joining Wells Fargo Securities in August 2002, Mr. Moss was at Merrill Lynch for six years, most recently as a Managing Director and head of a 12-member banking team responsible for enterprise hardware, storage, PCs, handhelds, imaging and other related technology companies. Prior to joining Merrill Lynch, Mr. Moss spent seven years at Salomon Brothers where he covered clients in multiple industry sectors. Mr. Moss began his investment banking career in 1985 as a Public Finance analyst at Merrill Lynch.
Industry Experience
Soft and Hard Lines Retailing, Consumer Products, Food and Agricultural Products, Technology, Telecommunications, Manufacturing, Distribution, Restaurants, Media, Business Services, Industrial Products, Aerospace, Transportation and Process Technology
Representative Past Clients
Home Depot, Lowe's, Johnson Outdoors, J. Jill, Dress Barn, Foot Locker, Payless ShoeSource, West Marine, Big Dog Holdings, Federated/Macy's, Big Five, General Mills, Hormel, Ruby Tuesday, Darden Restaurants, McDonald's, Beef Products, Mosaic, CF Industries, Hewlett-Packard, IBM, Compaq, Dell, EMC, Research in Motion, Interactive Intelligence, Palm, Handspring, Ameritech, Cincinnati Bell, Aliant Communications, Generac Power Systems, Brightpoint, Ingram Micro, Cintas, A.O. Smith, Breeze-Eastern, Bemis, Mohawk Industries, United Healthcare, Joy Global, Martin Marietta Materials, Toro, Valspar, Johnson Controls, CheckFree and Western Union
Education
M.B.A, The Amos Tuck School of Business B.A., Dartmouth College
Jack Calderon Managing Director Lincoln International
Role at Lincoln International
Jack leads Lincoln International’s Electronics group which includes Electronic Manufacturing Services (EMS), Interconnects, and Defense Electronics. He has extensive operating and transaction experience in defense electronics and electronic manufacturing services. Jack leads deal teams, manages key client relationships and markets the firm’s services.
Advisory Expertise
Jack has extensive experience in advising companies on merger and acquisitions, restructuring, fairness opinions, and other strategic matters. In addition to completing multiple transactions for public company, private equity, and private owner clients, Jack also has experience in cross border advisory work encompassing both Europe and Asia. Jack has led numerous sell-side and buy-side transactions. Jack's advisory work is exclusively focused on the commercial and defense electronics industries.
Industry Expertise
Jack is an expert in the electronics industry. He spent 20 years in various operating management positions in the industry, beginning with Honeywell and culminating as CEO of publicly traded EFTC (now part of Suntron). Jack is a frequent speaker at industry events and publishes the quarterly EMS Dealreader which tracks all transactions in the electronic manufacturing services (EMS) industry globally, as well as the EMS Stock Index. Jack serves as a member of the Board of Directors of the IPC which is the global standards-setting organization for the manufacture of electronic products. In addition to the EMS industry, he focuses on interconnects (circuit boards, flex circuits, and connectors), defense electronic products, specialty systems, and design and product repair service providers.
Past Affiliations
Prior to joining Lincoln International, Jack served as Chairman and Chief Executive Officer of EFTC, a publicly traded electronics manufacturing service provider, which merged with K-Tec to create Suntron (NASDAQ:SUNT). EFTC specialized in manufacturing complex electronics primarily for the aerospace industry.
Jack began his career in Honeywell's Aerospace and Defense Group in 1979. In his 20 year operating career, he held a variety of positions with several companies including Program Manager; Vice President of Marketing and Contracts; Vice President of Corporate Development; Vice President and General Manager of Latin American Operations and Chief Executive Officer.
Academic Credentials
Jack earned a Juris Doctor degree from The American University, and a Bachelor of Arts degree in economics, cum laude, from Case Western Reserve University. Lincoln International’s Global Reach • Globally integrated investment bank with international project teams – Lincoln constantly shares employees and other information resources across borders to remain a uniquely integrated firm – Lincoln understands the local cultures and has valuable local contacts around the world • Advisory on cross-border transactions is a core competency – Over 30% of Lincoln International’s 2008 transactions involved a cross-border element
London Frankfurt Vienna Paris Tokyo Madrid Chicago New York Los Angeles ICICI China Everbright
North America EuropeStrategic Partners Asia • Offices in Chicago, Los Angeles • Offices in Frankfurt, London, Madrid, • Japan – Office in Tokyo India China Japan and New York Paris and Vienna • China – Partnership with China Everbright • Over 65 bankers • 60 bankers, plus a 24 person advisory • India – Partnership with ICICI directors board
Strategic Alliance with China Everbright
"Clients on three continents will benefit from our close collaboration and experience. The exchange of intellectual capital, resources and contacts between Lincoln International and China Everbright make this valuable partnership beneficial to our clients." - Wang Mingquan, Chairman of China Everbright
Summary of capabilities
• Headquartered in Hong Kong/Beijing Industry Research Coverage • Additional M&A locations in Shanghai and Shenzhen Location • China Everbright has established over 384 banking • Aerospace offices (30 main branches included) in 36 major cities all • Automotive/Transportation over 23 provinces, autonomous regions and cities and 1 • Banking/financial institutions representative office in Hong Kong • Chemicals • Commodities • Extensive research capabilities across China/Hong Kong • Conglomerates with over 50 dedicated research analysts, including 30 • Consumer Investment banking services sector analysts and other macroeconomic analysts • Electronics • • Industrial (over 80 total bankers) One of top 10 largest securities brokers on mainland China • Infrastructure • Oil/Petrochemical • Appointed as one of first 3 designated securities brokers Capabilities • Pharmaceutical by the China Securities Regulatory Commission • Power/Utilities • Full service offerings including mergers & acquisitions, • Real estate underwriting/IPOs, brokerage, asset/fund management, • Telecom/Technology/Media insurance and banking • Textile & Apparel • Water • Significant access to Chinese companies and high level government officials
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