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Citi Corporate and Investment Banking | Latin America TMT Investment Banking June 2013 Discussion Materials Strictly Private and Confidential Table of Contents 1. Executive Summary 2. Selected Countries Overview & Opportunities A. Argentina B. Brazil C. Chile D. Colombia E. Mexico F. Peru ’s Presence in LatAm Regional Coverage – Corporate and Investment Bank Key Facts / Figures Citi Latin America has been a leader in the region MEXICO since the beginning of the 1900’s 53 Employees 500 Clients Presence since 1903 Number of CIB employees: ~350 CCA Number of countries/territories: 25 85 Employees VENEZUELA #1 M&A house in Latin America COLOMBIA 23 Employees 18 Employees #1 Capital Markets advisor in the region 913 Clients 959 Clients Presence since 1916 Presence since 1917 ECUADOR BRAZIL 9 Employees 77 Employees 450 Clients 1,259 Clients Presence since 1960 Presence since 1915 ’s Investment Banking Platform Highlights Best Investment Bank, Latin America, 2011 / 2010 PERU 16 Employees Best Debt Bank, Latin America, 2011 689 Clients Presence since 1920 PARAGUAY Best Country Investment Bank, Mexico, 2012 / 2011 4 Employees CHILE 278 Clients Best Country Investment Bank, Argentina, 2012 / 2011 19 Employees Presence since 1958 619 Clients Unmatched regional & global relationships Partnership with Banco de Chile Presence since 1916 Expanded Investment Banking presence in Argentina, URUGUAY ARGENTINA 6 Employees Colombia and Peru 563 Clients 19 Employees Presence since 1915 JV with Banco de Chile in Chile 1,409 Clients Presence since 1914 1 Case Study: Time Warner / Chilevision Citi acted as the exclusive financial advisor to Time Warner on its acquisition of 100% of Chilevision, Chile’s most profitable broadcaster and one of the industry leaders in audience and ratings. Chilevision Overview Strategic Rationale Time Warner Originally founded in 1959 by Univ. de Chile, Chilevisión is one of the leading Entered the Chilean local broadcasting market as a marquee player, buying an free-to-air broadcasting companies in Chile asset considered extremely well-run and with consistently strong ratings, audience share and profitability – Widely viewed as the most profitable free-to-air broadcaster in Chile Increased its leadership position in Chile and across the Latin American region covering ~85% of the Chilean population Expands the growing Turner portfolio of international networks and businesses around the world – Among the top 3 networks in Chile in terms of audience & market share Bancard (Sebastian Piñera) 2 – Employs ~830 people with more than 3,200m of studio space Piñera, the first democratically elected conservative in more than 50 years in Chile, promised on the campaign trail that he would sell his assets before taking In 2005, Sebastian Piñera, the current President of Chile, acquired 100% of office in March 2010 Chilevisión from Claxson Group for ~US$24 mm CHV was the last major asset that Mr. Piñera had left to sell and was being strongly criticized for delays in the sale process 2009 Revenues and EBITDA were ~US$77 mm and ~US$22 mm respectively High return on investment since acquisition in 2005 Transaction Overview On August 25, 2010, Time Warner Inc. reached an agreement to acquire 100% of Red de Television Chilevisión S.A. Under the agreement, TW assumed 100% ownership of CHV, owned by the Citi advised Time Warner president of Chile, Sebastian Piñera, through a holding company – Bancard on the Acquisition of Network expected to be operated by Turner Broadcasting System Latin America, a division of Turner Broadcasting System, Inc. ("TBS") Local management team remained in place to run the channel Undisclosed Amount Sell-side process was competitive, as 10 strategic and financial players August 2010 participated in the process 2 1. Executive Summary Executive Summary Citi’s Perspective on the Latin America TV and Advertising Business: Latin America presents solid macro fundamentals driving a strong increase in disposable income, consumption and entertainment expenditure While Brazil, Mexico, Colombia, Chile and Peru are very attractive to foreign investors, Argentina, Ecuador, Bolivia and Venezuela present significant challenges such as currency, capital controls and expropriation risk While FTA TV penetration is higher than 90% in most of the markets, Pay TV penetration presents significant upside (Brazil, Colombia, Chile, Peru <50%) and an area of major focus by industry participants Advertising also presents significant upside, with average adspend per capita of US$71, approximately 25% of Western Europe’s and 15% of the US average – LatAm TV advertising spending expected grow 9.4% (1) ’12E-15E CAGR Market Participants: The FTA business is dominated by local groups as a result of current or past foreign ownership restrictions, which in some of the countries also apply to the Pay TV segment With regard to Pay TV, the market is relatively balanced between traditional Cable providers and DTH players – While DirecTV dominates the DTH segment on a regional level, Televisa, Net (Slim), VTR (Liberty Global) and Cablevision have leading market shares in their respective Cable TV markets – Telecom operators are increasingly entering the video business through DTH offerings or acquisitions of Cable TV providers Televisa, Globo and Grupo Clarin are the biggest and most diversified players in the sector, with operations in Pay TV distribution, Pay TV networks, FTA and other media Latin America content is well received internationally; productions from Mexico, Colombia, Argentina and Brazil are exported globally The Digital Video industry is expanding aggressively, driven by recent entrance of Netflix, Totalmovie, Sunday TV and iTunes, which operate SVoD and TVoD on a regional level Potential Opportunities for Sony: While Terra (digital media) and Chello Latinoamerica (regional Pay TV networks) are the most actionable opportunities in the space, there could be interesting potential for partnerships with local operators Grupo El Comercio (Peru FTA) and 7gLab (Colombia Animation Studio) are working with advisors to raise funds/sell the asset Grupo Clarin and Telefonica (Telefe) are being forced as part of the Argentine New Media law to sell assets, which could result in an opportunity for an operator to acquire a FTA network, Pay TV networks or studios at an attractive valuation – political situation could be an issue Other assets that could be sold to or partner with Sony are Megavision (Chile FTA), RCN (Colombia FTA), Caracol (Colombia FTA) and CityTV (Colombia FTA / Pay TV network) (1) ZenithOptimedia. 3 Latin America Presents Solid Macroeconomic Fundamentals Latin America has a Relevant Portion of the Middle ...with a higher rate of economic expansion... Class of the Emerging Markets (2007-2012E Regional GDP Growth, %) Population with income between US$6,000 and US$30,000 (PPP) 8.2% India Africa 5% 3% Middle East China 5.4% 8% 4.8% 33% 3.3% 2.3% Asia excl. 1.9% China & India 14% Latin America Asia Pacific LatAm Africa Mid Cent. Euorpe North West Europe CEE 17% East America 20% ..GDP per capita is a multiple of China and India… ...resulting in an unprecedented expansion of the middle class and increased consumer spending 2003 2011 7% Addition to Middle 11% Class Population 39% Latin 38% 55% 31 mm America Brazil $8,000 50% 7% 7% 26% 29% $6,000 30% China 10 mm Mexico 48% 19% 34% $4,000 5% 9% 15% 20% 41% 51% 3 mm $2,000 India Peru 29% 30% 11% 20% 7% $0 39% 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 38% 1 mm Chile 50% 35% Source: EIU and Goldman Sachs, “The Expanding Middle”, Global Economics Paper No. 170, 2008. Socio Economic Segment A/B C D E 4 LatAm Markets & Macroeconomic Performance Stock Market Performance Real GDP Growth (2012 – June 2013; LCY) (’13 – ’18E Average Real GDP) 5.5% 28.8% 31.1% 4.6% 4.6% 3.8% 3.7% 3.6% 7.0% 3.4% (5.4%) (12.5%) (18.3%) Peru Chile Colombia Mexico Argentina Brazil Peru Brazil Chile Colombia Mexico US Argentina Peru Chile Colombia Argentina Mexico Brazil LatAm Currencies Forecasted Inflation (2012 – June 2013) (’12 – ’17E Average Inflation – Local Currency) 8.9% 8.2% (1) 4.5% 2.0% 5.0% (1.0%) 3.7% 3.1% 2.8% 2.7% (15.0%) (23.7%) Argentina Brazil Mexico Chile Colombia Peru Mexico Chile Colombia Peru Brazil Argentina Argentina Brazil Mexico Chile Colombia Peru Note: Market data as of June 13, 2013. EIU data as of June 2013. (1) EIU estimates based on official inflation rates from the Government of Argentina. 5 Latin America Media Industry Overview Adspend Per Capita Key Highlights per Country (US$) $481.7 Argentina Brazil Mexico Colombia Chile Peru $267.9 Total Households 2012E ('000) 11,777 65,933 23,296 9,267 5,216 6,057 Average: $158 TV Households 2012E ('000) 11,424 62,508 22,195 8,670 5,073 5,025 $71.5 $57.2 $39.2 $31.3 TV Households CAGR 2012E-2015E (%) 2.0% 4.1% 2.3% 2.5% 3.2% 2.3% TV Penetration (%) 97.0 94.8 95.3 93.6 97.3 83.0 North Western Latin Central & Asia MENA(1) America Europe America Eastern Pacific Pay-TV Subs ('000) 8,194 16,607 13,273 4,226 2,295 1,322 Europe Pay-TV Penetration (%) 71.7% 26.6% 59.8% 48.7% 45.2% 45.2% Adspend Intensity Subscribers Technology Breakdow n (%) (% of GDP) Cable (2) 76.1% 37.5% 44.4% 74.7% 51.1% 71.3% 0.98% DTH 22.0 61.0 54.9 20.0 45.6 28.7 IPTV 0.1 1.5 0.7 5.2 3.3 0.0 0.62% 0.61% 0.60% Average: 0.60% 0.51% Total Ad-spend 2012E (US$ mm) $4,694 $18,560 $5,296 $1,443 $1,434 $675 0.28% Ad-spend '12E-15E CAGR (%) 16.7% 9.2% 8.4% 7.0% 6.2% 9.9% 12E Ad-spend Intensity (% of '12E GDP) 0.6% 0.8% 0.3% 0.3% 0.4% 0.2%