Morning Wrap

Today ’s Newsflow Equity Research 17 Feb 2021 08:26 GMT Upcoming Events Select headline to navigate to article

Total Produce Dole combination should unlock significant Company Events value 18-Feb Air France-KLM; FY20 Results Barclays; FY20 Results Irish Further speculation on Ulster / AIB loan 19-Feb IRES REIT; FY20 Results sale / BOI and branches Kingspan; FY20 Results NatWest Group; FY20 Results SEGRO; FY20 Results 23-Feb HeidelbergCement; FY20 Results HSBC; FY20 Results 24-Feb Lloyds Banking Group; FY20 Results William Hill; Q420 Results

Economic Events Ireland

United Kingdom

United States

Europe

This document is intended for the sole use of Goodbody Investment Banking and its affiliates

Goodbody Capital Markets Equity Research +353 1 6419221 Equity Sales +353 1 6670222 Bloomberg GDSE

Goodbody Stockbrokers UC, trading as “Goodbody”, is regulated by the Central . In the UK, Goodbody is authorised and subject to limited regulation by the Financial Conduct Authority. Goodbody is a member of and the Stock Exchange. Goodbody is a member of the FEXCO group of companies. For the attention of US clients of Goodbody Securities Inc, this third-party research report has been produced by our affiliate, Goodbody Stockbrokers Goodbody Morning Wrap

Total Produce Dole combination should unlock significant value

Total Produce (TP) has announced this morning that it has entered into a binding agreement Recommendation: Buy to combine with Dole (TP currently owns 45%) under a new entity called Dole plc. TP Closing Price: €1.47 shareholders will receive 82.5% of Dole plc shares with the remaining 17.5% going to the 55% owner of Dole, Castle & Cooke (C&C). As per the agreement, the new entity will IPO Patrick Higgins +353-1-641 0403 and list in the US. In addition, Dole plc, the newco, will raise $500-700m of equity capital [email protected] which will be used to de-lever the combined balance sheet to c.3x.

The combination of the two companies is expected to lead to synergies of $30-40m over the medium term through revenue expansion and cost efficiencies across products, regions, procurement, and supply chain. The equity raise will see net debt / EBITDA of 3.0x. Thereafter, the Group has secured committed debt facilities to backstop and refinance existing Total Produce and Dole debt facilities upon completion of the transaction. This will result in a significant improvement in average cost of capital and earnings and FCF profiles.

The minimum agreed valuation of $215m for the remaining 55% stake in Dole would imply Total Produce's fair value of the combined entity is c.$1bn (c.€850m) which represents a c.46% premium to the current share price. This valuation implies an EV/EBITDA multiple of c.7.6x pre synergies (6.9x post synergies).

Overall, we consider the transaction, which is expected to close in late Q2 / early Q3, to be a strong strategic step for Total Produce. It resolves a longstanding overhang for the stock, creates the clear global leader in the fresh produce sector, and enables management to focus on unlocking the significant value from the combined entity.

Home…

This document is intended for the sole use of Goodbody Investment Banking and its affiliates

Page 2 17 Feb. 21 Goodbody Morning Wrap

Irish Banks Further speculation on Ulster Bank / AIB loan sale / BOI and branches

The Joint Committee on Finance, Public Expenditure and Reform released a statement Eamonn Hughes yesterday entitled “Interim report on banking – Ulster Bank”. It said it understands an +353-1-641 9442 announcement on the outcome of the strategic review being undertaken by Natwest of UB’s [email protected] operations in Ireland may be imminent and the release expressed the Committee’s concern Barry Egan about the implications of an exit. It requested that UB/Natwest representatives engage with it +353-1-641 6059 at the earliest opportunity and it is seeking an urgent Dail (parliamentary) debate on the issue. [email protected] The Committee noted that if Ulster Bank/Natwest representatives don’t engage in timely and meaningful manner with the Committee that “it is of the opinion that it will have to give

serious consideration to recommending the urgent introduction of legislation to require that

any sale of Ulster Bank assets is to another pillar bank or banks, notwithstanding the competition issues that might arise as a result”. However, the Finance Minister Pascal Donohoe said that the decision is being made by Natwest, adding that “neither I nor the Oireachtas have a formal role inside the decision-making process at Natwest”.

In recent months, UB has declined offers to appear before the Oireachtas Finance Committee as the strategic review is ongoing and presumably Natwest’s full listing status means all shareholders will have to be informed of its decision at the same time. Maybe investors were a little nervous about the reference on legislating on UB loan sales and the implications from a Natwest perspective, but it would seem difficult to us how Ireland could legislate for actions of a UK corporate and we note the Finance Minister’s observation that the decision lies with Natwest. All the same, the timing of the Oireachtas statement probably only adds to the speculation building into Friday’s Natwest FY20 results when it is due to update the market on UB strategic review outcome, if it has reached a conclusion.

The Central Bank governor spoke at a Leaders Lounge Event yesterday. The main themes of the speech were on leading through disruption, but he made a few references to the financial system. He started off by saying that an important difference to what we experienced ten years ago – so far at least – is that the financial system has been able to absorb rather than amplify the effects of the shock. Nonetheless, he added that the more prolonged need for measures to contain the pandemic persist, the greater the risk that liquidity problems will evolve into solvency pressures for affected businesses, increased risk of financial difficulties for households, and greater challenges for the financial system and wider economy. He also suggested that the Central Bank is also focused on the approach of the financial system to managing distressed debt, including that related to pre-existing mortgage arrears.

There was nothing too surprising in the Governor’s remarks about the financial This document is intended for the sole use of Goodbody Investment Banking and its affiliates system and these are issues we (and investors) are also monitoring closely.

Bloomberg reports that AIB has chosen Apollo for its Project Oak NPE portfolio sale, which originally had a par value of €1bn. No further details were available.

AIB’s NPEs were 6.6% of loans at the Q3 but are anticipated to rise in the pandemic. All the same, the move was widely anticipated and will help AIB manage is its legacy NPE book and minimise the impact from calendar provisioning.

Finally, the Irish Independent reports that BOI is in talks with An Post (Irish Post Office) on plans to use the post office network for BOI customers, with the move seen as suggesting at potential reconfiguration of its brank network in its ongoing business transformation.

BOI is due to report FY20 results on March 1st at which we expect it to announce that it is reducing its current FY21 cost target of <€1.65bn to c.€1.5bn by FY23.

Home…

Page 3 17 Feb. 21 Goodbody Morning Wrap

Issuer & Analyst Disclosures

Analyst Certification The named Research Analyst certifies that: (1) All of the views expressed in this research report accurately reflect my personal views about any and all of the subject securities and issuers. (2) No part of my remuneration was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by me in this report.

Regulatory Information Goodbody Stockbrokers UC, trading as Goodbody, is regulated by the Central Bank of Ireland. In the UK, is also subject to regulation by the Financial Conduct Authority. Goodbody is a member of and the London Stock Exchange. Goodbody is a member of the FEXCO group of companies. This publication has been approved by Goodbody. The information has been taken from sources we believe to be reliable, we do not guarantee their accuracy or completeness and any such information may be incomplete or condensed. All opinions and estimates constitute best judgement at the time of publication and are subject to change without notice. The information, tools and material presented in this document are provided to you for information purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities.

Conflicts of Interest Goodbody has procedures and policies in place to identify and manage any potential conflicts of interest that arise in connection with its research business. Goodbody analysts and other staff who are involved in the preparation and dissemination of research operate and have a management reporting line that is independent to its business. Information barriers are in place between the Corporate Finance arm and the Research arm to ensure that any confidential and or price sensitive information is handled in an appropriate manner.

Our Investment Research Conflicts of Interest Policy is available at Conflicts of Interest

Investors should be aware, that, where appropriate, research may be disclosed to the issuer(s) in advance of publication, in order to correct factual inaccuracies only and not to materially amend the research in any way. Goodbody is satisfied that it has operational procedures in place, which ensure that such disclosures will not compromise the report’s objectivity.

Goodbody has provided investment banking services to AIB Group, , , Bank of Ireland, , Collagen Solutions, Datalex, Draper Esprit, FBD Holdings, First Derivatives, Grafton Group, Greencore, Hammerson, Harworth, Hibernia REIT, ICG, Kingspan, , Playtech, Rank Group, Supermarket Income REIT, Total Produce and Yew Grove REIT in the past 12 months.

Goodbody Stockbrokers acts as corporate broker to AIB Group, Applegreen, ARYZTA, Cairn Homes, Datalex, Draper Esprit, FBD Holdings, First Derivatives, Grafton Group, Greencore, Hibernia REIT, ICG, Kingspan, Origin Enterprises, Playtech, Rank Group, and Yew Grove REIT The list of companies for which Goodbody acts as market maker and on which it provides research, is available at Regulatory Disclosures

This document is intended for the sole use of Goodbody Investment Banking and its affiliates

Page 4 17 Feb. 21 Goodbody Morning Wrap

Other disclosures

We would like to inform you that Eamonn Hughes holds shares in AIB Group

A description of this company is available at Company Descriptions

All prices used in this report are as at close of business of the previous working day unless otherwise indicated.

A summary of our standard valuation methods are available at Valuation Methodologies

A summary of share price recommendations and whether material investment banking services have been provided to these companies is available at Regulatory Disclosures

Other important disclosures are available at Regulatory Disclosures

Goodbody updates its recommendations on a regular basis. A breakdown of all recommendations provided by Goodbody is available at Regulatory Disclosures Where Goodbody has provided investment banking services to an issuer, details of the proportion of buys, holds and sells attributed to that issuer will also be included. This is updated on a quarterly basis.

The date on which stock recommendations were first released for all stocks mentioned in this report are available at https://www.goodbody.ie/assets/Reg_Disclosures.pdf. If a different recommendation has been made in the previous twelve months, this will also be disclosed here.

Recommendation Definitions Goodbody uses the terms “Buy”, “Sell” and “Hold. The term “Buy” means that the analyst expects the security to appreciate in excess of 10% over a twelve month period. The term “Sell” means that the security is expected to decline in excess of 10% over the next twelve months. The term “Hold” means that the analyst expects the security to neither appreciate more than 10%, or depreciate more than 10% over the next twelve months.

On 26th November, 2012, the terms “Add” and “Reduce” were removed from the Recommendation Definitions and both were replaced with the “Hold” recommendation. Any Previous Recommendation that refers to either an “Add” means that the analyst expected the security to appreciate by up to 15% over a twelve month period. Any Previous Recommendation to “Reduce” means that the analyst expected the security to decline by up to 15% over the next twelve months.

In the event that a stock is delisted the firm will automatically cease coverage. If however the firm ceases to cover a stock for any other reason the firm will disclose this fact.

Distribution of research to clients of Goodbody Securities Inc (GSI) in the US

GSI distributes third-party research produced by its affiliate, Goodbody GSI is a member of FINRA and SIPC GSI does not act as a market-maker.

This information was current as of the last business day of the month preceding the date of the report. An affiliate of GSI may have acted, in the past 12 months, as lead manager/co-lead manager of a publicly disclosed offer of the securities in this company. Investors should be aware that an affiliate of GSI may have provided investment banking or non-investment-banking services to, and received compensation from this company in the past 12 months or may provide such services in the next three months. The term investment banking services includes acting as broker as well as the provision of corporate finance services, such as underwriting and managing or advising on a public offer. All transactions by US persons involving securities of companies discussed in this report are to be effected through GSI.

Disclaimer While all reasonable care has been taken in the production and dissemination of this report it is not to be relied upon in substitution for the

exercise of independent judgement. Nothing in this report constitutes investment, legal, accounting or tax advice, or a representation that This document is intended for the sole use of Goodbody Investment Banking and its affiliates any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you.

Private customers having access, should not act upon it in anyway but should consult with their independent professional advisors. The price, value and income of certain investments may rise or may be subject to sudden and large falls in value. You may not recover the total amount originally invested. Past performance should not be taken as an indication or guarantee of future performance; neither should simulated performance. The value of securities may be subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities.

All material presented in this report, unless specifically indicated otherwise is copyright to Goodbody. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of Goodbody.

Goodbody, Ballsbridge Park, Ballsbridge, Dublin 4, Ireland T (+353 1) 6670400 W www.goodbody.ie E [email protected] Page 5 17 Feb. 21