Formula Systems Group joins Asseco Family
Warsaw, September 3 rd 2010 Agenda
Israel’s Economy & Local IT Market
Formula Systems Group Overview
Formula Systems
Matrix IT
Magic Software Enterprises
Sapiens International Group
Opportunities
Transaction Conditions
2 Israel’s economy & local IT market Overview of Israel
• Population: 7 million • GDP: $183.4 B • GDP per capita: US$26,200 • Import: US$47 B • Export: US$42.1 B • High -Tech oriented economy
Source: Central Bureau of Statistics (CBS), Bank of Israel Overview of Israel
• 86 % of the population lives within a 15 km wide strip along a 160 KM coast line • Amdocs • World leader in number of engineers per capita. • Comverse nd • Nice • World’s 2 highest number of start-ups • Checkpoint (in absolute terms) after the USA • Mercury st • NDS • Hold the 1 spot (after Canada) for listing by non -USA • Formula companies on the NASDAQ
(Israel in Blue) Technology StartStart--upsups Hub
• Israel is one of the largest world centers for start-up enterprises, with about 1300 active start-ups. • Innovative, technology-intensive activity, representing several technology breakthroughs. • Investments by venture capital funds constitute an added value above financial contributions - in management, world market familiarity, strategic guidance and economic credibility.
Source: IVC Research Center (2004) An Innovation Heaven –– Scientists & Engineers per 10,000 pp
Source: Central Bureau of Statistics (CBS), Bank of Israel HT Development Centers in Israel
Source: Central Bureau of Statistics (CBS), Bank of Israel Local IT market
Source: Central Bureau of Statistics (CBS), Bank of Israel Local IT market --US$US$ 4 B
Source: Central Bureau of Statistics (CBS), Bank of Israel Local IT market ––IndustryIndustry share (%)
Source: Central Bureau of Statistics (CBS), Bank of Israel Agenda
Israel’s Economy & Local IT Market
Formula Systems Group Overview
Formula Systems
Matrix IT
Magic Software Enterprises
Sapiens International Group
Opportunities
Transaction Conditions
12 Formula Systems Overview
COMPANY PROFILE FINANCIAL FIGURES 1)
Founded in 1985, listed since 1991 2009 1H 2010 on TASE and 1997 on NASDAQ Global Market Revenues 469.4 262.6 Controlling stakes in 3 subsidiaries: EBITDA 45.0 25.6 Matrix IT – 50.1% EBIT 37.3 22.3
Magic Software Enterprises – 58.1% Net Income 19.1 8.6 Sapiens International Corp – 71.6% Cash 2) 133.5 110.0 3)
Holding company 1) All data in USD million 2) Cash and short terms investments reduced by credit from banks and others Total group employment of ca.5,200 3) Following dividends of $31M and $11M for M&A, group wise people SHAREHOLDERS 4) Current market cap of USD ~190 Free float Emblaze 31.1% / 29.0% 49.2% / 50.7% million
Clal Insurance Enterprises Holdings Menora Mivtachim Holdings 10.3% / 10.7% 9.4% / 9.6% 4) Shares / votes at GSM 13 Formula Systems Performance 2007 – 1H2010*
REVENUES EBITDA
600 50 45,0 503,2 500 469,4 40 38,9 414,7 400 32,5 30 25,6 300 262,6 20 200 Revenues 2006-2009 10 100
0 0 2007 2008 2009 1 2010 2007 2008 2009 1 2010 2007 2008 2009 1H 2010H 2007 2008 2009 1H 2010H
* All data in USD million 14 Matrix IT Overview COMPANY PROFILE FINANCIAL FIGURES 1) 2009 1H 2010 Public company based in Israel Listed on TASE, with market cap of Revenues 368.5 191.2 USD ~310 million EBITDA 31.9 18.2 Largest company within the Group: EBIT 28.4 16.4 Ca. 80 % of group revenues Net Income 20.3 11.6 Ca. 62% of group income Cash 2) 63.1 61.8 Ca. 4,250 employees 1) All data in USD million Israeli‘s largest IT & Integration 2) Cash and short terms investments reduced by credit from banks and others company SHAREHOLDERS Diversified business profile Free float Formula Systems 39.2% Continuously growing business 50.1% (excluding F/X differences)
Clal Gemel 10.7% 15 Matrix IT Business Profile
PRODUCTS AND SERVICES CLIENTS AND REFERENCES Diversified business profile: Banks- Leumi, Poalim, Discount, Mizrahi, Igud Top Professional Services Credit Cards (Visa, MasterCard)- Offshore QA and Development LeumiCard, IsraCard, Visa Cal Centers Communications- Bezeq, Cellcom Software Packages (3rd Party) and Orange, Netvision, Smile, PelePhone, Product Distribution Yes, Hot Integration and IT Infrastructure Utilities - Israel Electric Corp, Mekorot , Training and Education Israel Railway, IAA Government Ministries – Education, Main sectors: Foreign affairs, Defense MOD, Treasury, Defense Healthcare Finance Hi Tech – Amdocs, Comverse, Nice, Verint, SAP, Nokia Siemens, Microsoft, Telecom Applied Materials, Texas Instruments Government Automotive Retail – Toyota, Chevrolet, Manufacturing / Retail Kia, Buick, Nissan, Renault, Peugeot, Citroen Healthcare Israeli Aerospace Industries – IAI, Elbit 21 Centers of Excellence Health Care – Clalit HIS, Maccabi HIS 16 Matrix IT Performance 2007 – 1H2010*
REVENUES EBITDA
500 40 34,6 32,6 381,3 30,8 400 375,8 30 339,5 300 20 18,2 200 191,2 Revenues 2006-2009 10 100
0 0 2007 2008 2009 1 2010 200720072008 20082009 2009 1H1 2010 2010H 2007 2008 2009 1H 2010H
* All data in USD million 17 Magic Software Enterprises Overview
COMPANY PROFILE FINANCIAL FIGURES 1) 2009 1H 2010 International company based in Israel Revenues 55.4 41.2
Listed on NASDAQ and TASE, with EBITDA 7.83) 4.7 market cap of USD ~90 million EBIT 6.2 3.8 Branches in USA, Netherlands, UK, Germany, France, Hungary, Israel, Net Income 6.2 3.8 Japan and India (Development Cash2) 41.9 25.8 4) Center) 1) All data in USD million 2) Cash and short terms investments reduced by credit from banks and others Subsidiary in USA with 2 locations: 3) Including $2.0M income from sale of HQ building 4) Following a $16.0M ($0.50 per share) dividend and $8.4M IT services assets CoreTech Consulting Group LLC acquisition SHAREHOLDERS Subsidiary in UK: Free float Hermes Logistics Technologies Ltd. 41.9% Headcount: 630 people
Formula Systems 58.1% 18 Magic Software Enterprises Business Profile
PRODUCTS AND SERVICES CLIENTS AND REFERENCES
Main products: UPS uniPaaS – End-to-end application Sun Life Financial development platform iBOLT – business and process Allstate integration suite Sterling Crane Ca. 2,500 business partners: Mizuno Independent Soft. Vendors SONY Value Added Resellers Corporations (End-users) Adidas Canada Markets (geography): Guardian Life Insurance USA - 50% Sheba Medical Center Europe - 26% Steelcase Japan - 13% Sun Life Insurance Rest of the world - 9% State of Washington Courts
19 Magic Software Enterprises Performance 2007 – 1H2010*
REVENUES EBITDA
70 10 62,0 58,4 60 55,4 8 7,8 50 41,2 40 6 5,5 4,6 30 4 20 Revenues2,5 2006-2009 2 10
0 0 2007 2008 2009 1 2010 2007 2008 2009 1 2010 2007 2008 2009 1H 2010H 2007 2008 2009 1H 2010H
* All data in USD million 20 Sapiens International Corporation Overview
COMPANY PROFILE FINANCIAL FIGURES 1) 2009 1H 2010 Public company registered in Netherlands Antilles Revenues 45.7 24.4
Listed on NASDAQ Global Market EBITDA 7.2 4.2 and TASE, with market cap of USD ~50 Million EBIT 5.3 3.2 Offices in US, UK, Japan, Israel Net Income 4.2 2.9 and Canada Cash 2) 11.2 10.4
Business Solutions for the 1) All data in USD million 2) Cash and short terms investments reduced by credit from banks and others Insurance sector and after $2.5m for M&A Strong client base 100+ large SHAREHOLDERS
customers (Fortune 1000) Free float 29% Headcount: 350
Formula Systems 71%
21 Sapiens International Corporation Business Profile
PRODUCTS AND SERVICES CLIENTS AND REFERENCES
Software for Insurance covering: ING Policy Administration (General Allianz Insurance) Reinsurance Aviva Life & Pensions AXA Closed Books Barclays IT Services & Outsourcing of App. Maintenance Philadelphia insurance (part of Tokio marine) Sapiens eMerge – a model-driven architecture, using rule-based, Menora Mivtachim Insurance enterprise-scale transaction engine Texas Farm Bureau Insurance Co that facilitates business process integration and application Liverpool Victoria Friendly Society scalability. Ltd.
22 Sapiens International Corporation Performance 2007 – 1H2010*
REVENUES EBITDA
50 8 45,7 7,3 42,4 43,5 40 6
30 4,3 4,2 24,4 4 20 Revenues 2006-2009 2 1,8 10
0 0 2007 2008 2009 1 2010 2007 2008 2009 1 2010 2007 2008 2009 1H 2010H 2007 2008 2009 1H 2010H
* All data in USD million 23 Agenda
Israel’s Economy & Local IT Market
Formula Systems Group Overview
Formula Systems
Matrix IT
Magic Software Enterprises
Sapiens International Group
Opportunities
Transaction Conditions
24 Opportunities Synergies
International presence, including USA and Japan
Access to new markets, incl. very innovative Israeli market
Access to top professionals, across the world
Exchange of know -how, technologies and products
Business alliances with global technology players
Creation of multicultural Corporation
Further growth – organic and M&A
25 Opportunities Further Growth Plans
FORMULA SYSTEMS MATRIX IT
Acquisition of international listed Acquisition of one of the Israeli IT companies dealing with software or competitors to become the clear software services that have critical dominant player in Israel mass ($50m-$200m) and provide good yield or can be turned around fast
MAGIC SAPIENS
Acquisition of complementary Acquisition of service based technologies and services companies companies or old products with with intensive install base of customer base,….in the insurance customers to leverage on worldwide sector
26 Agenda
Israel’s Economy & Local IT Market
Formula Systems Group Overview
Formula Systems
Matrix IT
Magic Software Enterprises
Sapiens International Group
Opportunities
Transaction Conditions
27 Transaction Conditions
Purchase of 50.2% stake (51.2% voting rights)
Total purchase price not exceeding USD 145.3 million (including closing costs) to be paid at the closing date Current market valuation of 50.2% stake in Formula results in 49% control premium to be paid by Asseco, but premium based on the current market valuation of Formula assets (including excess cash of USD 16m in the holding company) is only 12% Asseco is buying Formula at P/E=15.2 (based on 2009 net profit) however after deducting excess cash available at Formula level from the price for the shares P/E gets down to 8.3
Financed with own cash and excisting credit lines
28 Thank You