Capstone: Valuation 28C00500
21 March 2019
Strictly private and confidential Agenda
1 Introduction to Investment Banking and valuation 3 2 Valuation methods and an example of private company valuation 11 3 Special Situations 24 4 IPO valuation 31 5 Special situation – Demerger 37 6 Introduction to Nordea Investment Banking 39
1 | Capstone: Valuation 28C00500 Present today Nordea Markets Investment Banking is the leading Nordic merger & acquisitions advisor. Investment banking division advises on mergers, acquisitions, divestments, spin-offs and public offers
Jaakko joined Nordea in 2009. He has extensive experience from various cross-border M&A transactions and several ECM transactions
Prior to Nordea he worked for ABN AMRO / Alfred Berg for over 5 years
Jaakko holds an MSc degree in Finance from Wholesale Banking Retail Banking Wealth Management Aalto University
Advisory
FICC Debt Capital Markets
Financial Institutions Group Jaakko Eteläaho Nordea’s Corporate Corporate & and Investment Director Private Equity clients Banking International Division
Shipping, Offshore & Oil Equities C&IB country units
2 | Capstone: Valuation 28C00500 Introduction to Investment Banking and valuation
3 | Capstone: Valuation 28C00500 What we actually do – a whole spectrum of IB products
Acquisitions – Konecranes’ EUR 1.1bn acquisition of IPOs – Altia IPO Mergers – Ahlstrom-Munksjö EUR 1.2bn merger Terex MHPS
Share issues – Ahlstrom-Munksjö EUR 150m Sale of a company – Fortum 700m acquisition of rights issue Ekokem Public take-out – Nokia’s EUR 347m acquisition of Comptel
4 | Capstone: Valuation 28C00500 But before all the media coverage and champagne, there’s a whole lot of demanding yet interesting, intensive yet meaningful, good-old hard work that needs to be done
We help our clients in many fronts… …and our work tends to get top management’s / board’s / owners’ attention
Valuation ▪ One of the most well-known expertise of any Investment Banker The Client ▪ “How much should we pay for the Terex MHPS business?”
Negotiation tactics We assist in key strategic Owners & ▪ It is our job to ensure our client has the best possible tools and arguments to decision making, e.g. formulating Board of Directors strike a deal with good terms a bid and its terms ▪ “They told us that the merger consideration should be X per Ahlstrom share because of [this and that]. How should I revert back?”
Preparation of the “Equity story” and sale material ▪ As with anything you intend to sell, you need to market it! Over the course of a project we ▪ “Here is a 60 page investor presentation of the company. You will find all the CEO & CFO spend most of our time working necessary information there to make your investment decision.” with the CEO/CFO
Process design ▪ Ultimately, our client hires us to design, coordinate and execute an entire process We also work with the broader ▪ “Your company would be a nice match to a number of industrial companies. But Business unit management team particularly we think you could receive a good valuation by listing the company as well. We heads and other during preparation when we need propose a dual-track process to investigate both options!” management team specific insight relating to the business Analysis and advice ▪ And of course, we advice our clients whatever questions/problems they may face ▪ “How do we finance this deal? Could we issue new shares? What do you recommend?”
5 | Capstone: Valuation 28C00500 Practical valuation: Stocks are correctly valued? Financial instruments are generally valued based on their ability to generate cash flow / returns
Long bull market indicates over valuation – average annual return of 12.3% over the last 10 years
350 +218.5% 300
250
200
150
100
50
0 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19
STOXX Europe 600 1
In relation to LT history earnings based valuation indicated “high valuation” Or have the parameters changed?
Return % -94.9% 8.8% 8.6% 8.4%
7.0% 7.1% 7.0% 6.3% 6.4% 6.5% -5.6% 6.0% 5.9%
3.3% -5.9% 2.8% 2.6% Target return 1.6% 1.6% 1.2% R 0.5% 0.5% 0 0.1% 0.4% 0.2%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
STOXX Europe Earnings Yield2 Germany Bund 10 Year Yield1
Note: 1) Dividends reinvested on paydate 2) Calendar year averages Source: FactSet as of 12 March 2019
6 | Capstone: Valuation 28C00500 How to assess value of a firm?
Components impacting corporate value
▪ General economic growth
Growth ▪ Market specific growth
▪ Company specific growth
▪ Industry features Enterprise value, Margin ▪ Growth of margin value of a firm
▪ Interest rate level ▪ Taxation
“Discount factor” ▪ Risk premia ▪ Political risk
▪ Capital weights ▪ Legal
Value can only be defined in a context; Several affecting factors
7 | Capstone: Valuation 28C00500 Structural changes or major disruptions are difficult to forecast
Paper industry Retail industry Market capitalization (EURbn) Large paper companies, total Market capitalization (EURbn) Sears Walmart Amazon Apple 921 748
248 319
183 157
64 75 60 57 40 16 15 3 0 13/01/2006 13/01/2012 19/10/2018 13/01/2006 13/01/2012 19/10/2018
Note: 1) Large paper companies: International Paper, Stora Enso, UPM Kymmene, SCA, Metsä Board, Mondi, Nippon Paper, Smurfit and DS Smith Source: Factset
8 | Capstone: Valuation 28C00500 Case Nokia: Financial market value always correct?
EUR Oct, 2007: Nokia acquires Jul, 2013: Nokia acquires Jan, 2016: Nokia acquires 70.0 20 Jun, 2000 NAVTEQ Corp. Siemens’ stake in NSN Alcatel-Lucent 64.88 Market cap.: EUR 303,190m Deal value: EUR 5,150m Deal value: EUR 1,700m Deal value: EUR 15,600m EV: 308,521m EV/sales: 10.0x EV/sales: 0.1x EV/sales: 0.7x 60.0 EV/sales: 15.5x EV/EBITDA: 29.0x EV/EBITDA: 1.4x EV/EBITDA: 7.6x P/E: 115.9x EV/EBIT: 34.1x EV/EBIT: 2.4x EV/EBIT: 13.2x
Sep, 2013: Microsoft acquires 50.0 Feb, 2017: Nokia offers to 1 Oct, 2007: Nokia’s devices and services acquire Comptel Market cap.: EUR 102,993m business Deal value: EUR 355.9m EV: 96,398m Deal value: EUR 5,440m 40.0 EV/sales: 3.2x EV/sales: 2.3x EV/sales: 0.4x EV/EBITDA: 19.1x P/E: 24.7x EV/EBIT: neg.
26.17 30.0 3 Sep, 2013: Current: Market cap: EUR 5,134m Market cap.: EUR 30,309m EV: 1,881m EV: EUR 29,251m 20.0 EV/sales: 0.25x EV/sales2: 1.27x P/E: neg. P/E2: 19.2x
Annual growth 10.0 (CAGR) 97% 5.42 1 in years 1.37 1994-2000 0.0 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19
Note: 1) Nokia Oyj share price minimum L19y occurred on 18 Jul 2012 2) Consensus estimate for FY’19 Source: FactSet as of 12 March 2019, Nokia releases
9 | Capstone: Valuation 28C00500 Valuation in public and private context
▪ Easy to invest in, stocks are traded in exchange ▪ Floor valuation from the equity market (Current price) ▪ Valuation is de facto fair and transparent ▪ Further assessment needed to define the value of the - According to securities legislation everything that impacts or company to a buyer and the value the owner is willing to could impact pricing of a security must be made publicly accept available - Synergies must be taken into account – a premium is Public normally a must companies ▪ Performance can be easily assessed and followed - To acquire profitably a buyer must believe in something ▪ Special case: What is the value of a division of a listed others do not (synergies or better understanding of the company? potential development of an industry/company) - Conglomerate structure might have hidden value
▪ Valuation is typically non-transparent ▪ Non-transparent / subjective valuation - Might be difficult to assess ▪ Requires significant analysis and understanding of how to ▪ Difficult to invest in develop the business, why to own the business - Illiquid by nature Private - No marketplace for shares companies ▪ Synergy assessment / business plan needed
▪ Valuation should rely on exit value or valuation of the dividend streams Hockey club
Acquiring shares (part of the firm) Acquiring the firm
10 | Capstone: Valuation 28C00500 Valuation methods and an example of private company valuation Case Hartwall
11 | Capstone: Valuation 28C00500 Different valuation methods and underlying metrics
Commonly used valuation methods Relative multiple valuation logic
Relevance level Income Balance ▪ Review of the EV/EBITDA and EV/EBIT Valuation trading multiples of comparable quoted Statement Sheet Trading multiples companies in the selected peer groups analysis (TMA) EV/EBITDA ▪ Takes into account the valuation levels Sales on the stock market Enterprise EV/CE EV/Sales Capital EBITDA Value Employed ▪ We asses by a leveraged buyout (EV) analysis how much a potential financial EV/EBIT buyer would be willing to pay for the EBIT Leveraged buyout target analysis (LBO) ▪ The LBO analysis is based on assumptions on the financial buyer’s = = investment return requirement and availability of leverage Net Debt Net Debt Financial Items & & & Minority Interest Minority Interest Discounted cash flow ▪ Takes into account the time-value of Minorities analysis money by discounting future cash flows (Market Value) (Book Value) (DCF) to their present value
+ +
▪ Review of historical transaction multiples (EV/EBITDA) P/E Equity Value P/BV Equity Value Net Result ▪ Takes into account the valuation levels (Market Value) (Book Value) M&A multiples observed in actual transactions ▪ Availability of comparable transactions and valuation multiples is limited Relevant for trade/owner of whole firm Relevant for shareholders (w/ dividends)
12 | Capstone: Valuation 28C00500 Key drivers in valuation Understanding what drives the business is key in successful modelling and thus valuing correctly
▪ Industry ▪ Company specific − Technological / structural changes − Company guidance and analyst reports (if Find a driver for sales − Retail / e-tail any) growth Growth & Margin − Paper industry / mobile devices − Ability to tackle potential technological / GDP vs. (e.g.) users − Growth? Cyclicality? structural changes Understand the cost base ▪ Peer group Fixed vs. variable costs − Comparable comps’ vs. target company
▪ Capital expenditures − Maintenance capex level vs. growth investment needs Understand the capital Cash flow ▪ Change in NWC base ▪ Dividend payout vs. need for capital raise
▪ Links to P&L and cash flow are correct ▪ Does the resulting change in interest bearing Does the investment need ▪ Working capital of metal companies vs. debt alter the financial position of the to support the growth software companies company? profile? Balance sheet − Inventories − Check indebtedness ratios − Accounts receivables What does growth imply − Accounts payables for working capital?
▪ Basis for DCF and LBO ▪ Basis for financial analysis Model ready for use ▪ Outputs used in multiple valuation ▪ Basis for recommendation to the target ▪ Benchmarking to listed peers company
13 | Capstone: Valuation 28C00500 Case – EUR 470m acquisition of Hartwall by Royal Unibrew
14 | Capstone: Valuation 28C00500 Overview of financial case
Applied ”Sellers case case"
Applied case CAGR CAGR EURm 2012 2013E 2014E 2015E 2016E 2017E 13E-17E 13E-17E Sales 308 320 327 333 340 347 2.0% 4.5% Growth-% -4.4% 3.9% 2.0% 2.0% 2.0% 2.0% EBITDA 48 57 60 62 64 66 3.6% 9.1% EBITDA-% 15.7% 17.8% 18.5% 18.7% 18.8% 19.0% Capex -8 -11 -11 -11 -12 -12 1.8% 4.7% % of sales -2.7% -3.4% -3.4% -3.3% -3.5% -3.5% NWC % of sales -23.0% -23.0% -23.0% -23.0% -23.0% -23.0% NWC change -5.4 2.8 1.5 1.5 1.5 1.6
Were the growth rates credible? ▪ Implied volume growth of 2.5% assuming 2.0% inflation? ▪ Margin growth? ▪ With limited capex?
15 | Capstone: Valuation 28C00500 How to define the right peers? Nordic breweries are the most comparable peers in the selected group of listed peers which, however, generally show higher growth and are more geographically diversified than Hartwall
Profitability Growth Company Product mix Geographic mix Size (sales) Cash conversion
(EBITDA %) (EBITDA g)
Nordic
breweries
Global
breweries Softdrinks
Comparable to Hartwall
Less comparable to Hartwall
16 | Capstone: Valuation 28C00500 Peers suggest an implied EV/EBITDA multiple of Hartwall of c.9-10x, however, also assuming higher growth
Company Share price¹ MV² EV³ EV/EBITDA EV/EBIT P/E EV/(EBITDA-CAPEX) EUR EURm EURm 2013E 2014E 2015E 2016E 2013E 2014E 2015E 2016E 2013E 2014E 2015E 2016E 2013E 2014E 2015E 2016E Carlsberg 74.05 11,440 16,861 8.8x 8.2x 7.7x 7.1x 12.3x 11.4x 10.5x 9.5x 14.0x 12.3x 11.0x 9.9x 13.5x 12.3x 11.1x 7.1x Royal Unibrew 69.49 702 742 9.0x 8.7x 8.3x 8.2x 11.2x 10.7x 10.2x 10.0x 14.0x 12.8x 11.6x 13.0x 11.7x 11.4x 11.0x 8.2x Olvi 23.90 496 554 9.8x 9.0x 8.5x n.a. 13.0x 12.0x 12.2x n.a. 14.3x 13.1x 13.7x n.a. 19.2x 12.9x 13.9x n.a. Median Nordic 702 742 9.0x 8.7x 8.3x 7.7x 12.3x 11.4x 10.5x 9.7x 14.0x 12.8x 11.6x 11.4x 13.5x 12.3x 11.1x 7.7x Average Nordic 4,212 6,052 9.2x 8.6x 8.2x 7.7x 12.2x 11.4x 11.0x 9.7x 14.1x 12.7x 12.1x 11.4x 14.8x 12.2x 12.0x 7.7x Anheuser-Busch InBev 72.35 112,673 143,753 11.0x 9.5x 8.8x 7.9x 13.2x 11.3x 10.4x 9.6x 19.0x 16.8x 15.1x 13.0x 14.0x 11.7x 10.8x 7.9x SABMiller 39.36 62,673 69,188 13.9x 13.0x 11.9x 11.1x 18.3x 16.6x 14.9x 13.9x 20.0x 18.0x 16.2x 14.3x 18.7x 16.9x 15.2x 11.1x Heineken 54.71 31,464 43,028 9.5x 9.0x 8.3x 8.0x 13.4x 12.4x 11.4x 10.9x 18.0x 15.8x 14.0x 12.5x 14.3x 13.0x 11.9x 8.0x Carlsberg 74.05 11,440 16,861 8.8x 8.2x 7.7x 7.1x 12.3x 11.4x 10.5x 9.5x 14.0x 12.3x 11.0x 9.9x 13.5x 12.3x 11.1x 7.1x Median Global Brewers 47,069 56,108 10.3x 9.2x 8.6x 8.0x 13.3x 11.9x 11.0x 10.2x 18.5x 16.3x 14.6x 12.7x 14.1x 12.6x 11.5x 8.0x Average Global Brewers 54,563 68,208 10.8x 9.9x 9.2x 8.5x 14.3x 12.9x 11.8x 11.0x 17.8x 15.8x 14.1x 12.4x 15.1x 13.5x 12.2x 8.5x Coca-Cola Co. 31.23 138,914 147,034 13.7x 12.7x 12.0x 11.3x 16.3x 15.1x 14.4x 13.8x 19.0x 17.5x 16.2x 15.2x 17.4x 16.0x 14.8x 11.3x PepsiCo Inc. 62.22 96,124 112,108 11.2x 10.6x 10.0x 9.3x 14.3x 13.3x 12.5x 11.8x 18.5x 17.0x 15.7x 14.1x 14.5x 13.7x 12.9x 9.3x Dr. Pepper Snapple Group 35.97 7,211 9,311 9.0x 8.8x 8.6x 7.9x 10.9x 10.5x 10.1x 9.5x 15.1x 14.1x 13.1x 11.9x 10.6x 10.5x 10.2x 8.0x Britvic 6.18 1,513 2,095 10.0x 9.2x 8.5x 7.8x 13.3x 11.9x 11.0x 10.0x 15.9x 13.5x 12.2x 11.1x 13.3x 12.2x 11.5x 7.8x Barr 6.63 748 802 15.0x 13.8x 12.7x n.m. 18.1x 16.6x 15.3x n.m. 22.4x 20.5x 18.7x n.m. 20.9x 18.0x 15.0x n.a. Median Soft drinks 7,211 9,311 11.2x 10.6x 10.0x 8.6x 14.3x 13.3x 12.5x 10.9x 18.5x 17.0x 15.7x 13.0x 14.5x 13.7x 12.9x 8.6x Average Soft drinks 48,902 54,270 11.8x 11.0x 10.4x 9.1x 14.6x 13.5x 12.7x 11.3x 18.2x 16.5x 15.2x 13.1x 15.4x 14.1x 12.9x 9.1x
1) Share priceOrkla as of close 30/05/2013 2) Market cap defined as common shares outstanding less treasury shares from the latest quarter report, times share price as of 30/05/2013 NIBD (NotesOrkla Payable/Short-Term Debt + Current Portion of Long - Term Debt/Capital 6.59 Leases + Total6,662 Long-Term Debt)6,110 – Cash & cash10.2x equivalents (quarter9.3x report) 8.8x n.a. 13.7x 12.2x 11.5x n.a. 17.3x 16.2x 15.6x n.a. 13.6x 12.2x 11.3x n.a. 3) Enterprise Value defined as Market cap plus NIBD, Minority Interests and Preferred equity less Associate companies Estimates are annualised and actuals (“A”) are based on estimates to be consistent with the way estimates are calculated Source: FactSet FactSet;, Reuters Global Reuters Fundamentals Global Fundamentals (1) Share Price as of close 30/05/2013 17(2) Market| Capstone: cap defined Valuation as 28C00500 common shares outstanding less treasury shares from the latest quater report, times share price as of 30/05/2013 NIBD (Notes Payable/Short-Term Debt + Current Portion of Long-Term Debt/Capital Leases + Total Long-Term Debt) - Cash & cash equivalents (quarter report) (3) Enterprise Value defined as Market cap plus NIBD, Minority Interests and Preferred equity less Associate companies Estimates are annualised and actuals ("A") are based on estimates to be consistent with the way estimates are calculated DCF indicated an EV of Hartwall of EUR 597m
DCF WACC 2013E H2 13E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E WACC components Sales 320 160 327 333 340 347 354 361 368 375 383 Risk-free rate 1.8% Growth-% 4.0% - 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% Interest margin 3.0% EBITDA 57 29 60 62 64 66 68 69 71 72 73 Cost of debt 4.8% EBITDA-% 17.8% 17.8% 18.5% 18.7% 18.8% 19.0% 19.2% 19.2% 19.2% 19.2% 19.2% Tax on EBIT -10 -5 -9 -9 -9 -10 -10 -11 -11 -11 -12 Beta 1.2 Capex -11 -5 -11 -11 -12 -12 -12 -12 -13 -13 -13 Equity market risk premium 6.0% Change in NWC 3 1 1 2 2 2 2 2 2 2 2 Cost of equity 9.1% NWC -74 .- -75 -77 -78 -80 -81 -83 -85 -86 -88 Share of debt 20.0% NWC days of sales -84 - -84 -84 -84 -84 -84 -84 -84 -84 -84 Share of equity 80.0%
Free Cash Flow (FCF) 20 42 43 45 46 47 48 49 49 50 Tax rate 20.0% Discounted FCF @ WACC 8.0% 19 38 36 34 32 31 29 27 26 24 WACC 8.0%
Present value of FCF 2013E-2022E 296 Present value of terminal value 2023E- (terminal grow th assumption 0.0%) 302 Terminal value implied EV/EBITDA 2022E 8.6x Enterprise value 597
EV sensitivity to WACC and terminal growth EV sensitivity to margin and growth
Implied EV EURm Implied EV EURm Terminal growth rate Weighted Average Cost of Capital Additional sales growth Additional EBITDA margin 597.4 8.0% 8.5% 9.0% 9.5% 10.0% 597.4 -2.0% -1.0% 0.0% 1.0% 2.0% -1.5% 546 517 490 466 445 -3.0% 401 430 460 489 518 -1.0% 561 530 502 477 453 -2.0% 439 470 502 533 564 -0.5% 578 545 515 488 463 -1.0% 480 514 547 581 615 0.0% 597 561 529 500 474 0.0% 525 561 597 634 670 0.5% 619 579 544 513 485 1.0% 574 613 652 691 730 1.0% 644 600 562 528 499 2.0% 627 669 712 754 796 1.5% 672 624 582 545 513 3.0% 685 731 777 822 868
18 | Capstone: Valuation 28C00500 Our analysis suggests a WACC of Hartwall of 8%
Component Considerations Used for analysis ▪ Important to distinguish between Hartwall ▪ All figures in nominal terms, i.e. assuming price increases and general, macro- Growth/ reflecting inflation economic ‘inflation’ inflation ▪ However, logically fine to at the same time ▪ Seller’s forecasts in nominal terms, hence, assume zero Hartwall price increases argument for including inflation
▪ Finnish government bond ▪ 10Y to match Hartwall cash flow duration Risk-free rate ▪ 1.8% ▪ Equity research analysts assume risk free rate between 3-4%
Market risk ▪ 5-6% market risk premium common ▪ 6.0% premium practice
▪ Derived e.g. based on industry statistics, Unlevered Beta beta of publicly traded peers and betas ▪ 1.2 WACC: 8.0% applied by equity research analysts
▪ Derived e.g. based on industry statistics, debt-to-equity ratio of peers and target Debt/Equity ▪ 20/80 capital structures applied by equity research analysts
▪ Assumed long-term risk-free rate and Interest rate on margin ▪ 4.8% debt ▪ Assumed interest margin 3.0%
▪ Current Finnish tax rate of 24.5% Corporate tax ▪ However, plan to lower to 20% in 2014 ▪ 20% applied for WACC purposes rate onwards
19 | Capstone: Valuation 28C00500 Cash flow (EURm) H2 2013 2014E 2015E 2016E 2017E 2018E EBITDA 29 60 62 64 66 68 Taxes -5 -2 -2 -2 -2 -3 Operating cash flow 26 59 60 62 63 65
Change in NWC 1 1 2 2 2 2 Capex -5 -11 -11 -12 -12 -12 Cash flow to service debt 22 49 51 52 53 55
Cash interest -8 -16 -14 -12 -10 -7 Debt amortization -14 -33 -37 -40 -43 -47 Change in cash 0 0 0 0 0 0
Debt (EURm) Entry 2013E 2014E 2015E 2016E 2017E 2018E Senior debt 271 257 224 187 147 104 57 LBO based on Potential Private Equity case indicatesMezzanine an debt EV of Hartwall0 0 of EUR0 402m0 0 0 0 Vendor note 0 0 0 0 0 0 0 Cash 0 0 0 0 0 0 0 Total net debt 271 257 224 187 147 104 57 LBO analysis key assumptions LBO output on key financials and LBO value components
▪ Potential PE Case financials Debt ratios Entry 2013E 2014E 2015E 2016E 2017E 2018E ▪ Entry end of June 2013, exit end of 2017, i.e. 4.5 year holding period Total net debt/EBITDA 4.75x 4.5x 3.7x 3.0x 2.3x 1.6x 0.8x 1 ▪ Entry leverage 4.75x EBITDA 2013E (5.1x LTM EBITDA of EUR 53m) and min 30- Interest cover 7.0x 3.9x 4.5x 5.3x 6.7x 9.1x 35% equity contribution Cash flow cover 1.0x 1.0x 1.0x 1.0x 1.0x 1.0x ▪ Exit multiple equals entry multiple ▪ Cash sweep in use, RCF facility of EUR 40m Value (EURm) 2013E 2014E 2015E 2016E 2017E 2018E ▪ Shareholder loan 90% of equity contribution EV/EBITDA 7.0x 7.0x 7.0x 7.0x 7.0x 7.0x EV 399 423 436 448 461 475 Entry capital structure and multiples Total net debt 257 224 187 147 104 57 Entry capital structure Equity value 142 200 249 301 358 418 Uses of funds EURm x EBITDA 2013 x EBITDA 2014 % of total EV 402 7.0x 6.6x 97% Transaction costs 13 0.2x 0.2x 3% LBO analysis supports a valuation of EUR 402m with IRR 22.5%, Total 415 7.3x 6.9x 100% money back 2.5x and exit multiple of 7.0x EBITDA LTM
Sources of funds EURm x EBITDA 2013 x EBITDA 2014 % of total LBO value components Senior loan 271 4.8x 4.8x 65% Mezzanine 0 0.0x 0.0x 0% 358 Vendor note 0 0.0x 0.0x 0% Total equity 144 2.5x 2.5x 35% Total 415 7.3x 7.3x 100% 167
IRR & multiples x EBITDA x EBIT IRR 27 13 Exit multiple LTM 2017 7.0x 9.4x 144 33 Exit multiple NTM 2018 6.8x 8.8x Entry multiple LTM 12/13 7.6x 12.0x Entry multiple 2013 7.0x 10.3x Entry multiple 2014 6.6x 9.3x IRR 22% Equity at entry Sales growth Margin Multiple Net debt Equity at exit (Jun 2013) improvement expansion reduction (Dec 2017)
Note: 1) Leverage <5.0x to secure equity contribution of min 30-35%
20 | Capstone: Valuation 28C00500 Dividend yield valuation suggests that IPO is a credible exit route for a PE investor LBO requires exit valuation of EUR 461m to support the private equity return requirements
Illustrative IPO dividend yield valuation LBO exit value assumption
Illustrative valuation Pro forma P&L (EURm) 2017E LBO exit value assumption (EURm) 2017E based on 2017E Potential EBITDA 66 EV/EBITDA 7.0x PE case financials, 5% Depreciation -17 EV 461 EBIT 49 IRR 22.5% dividend yield Interest cost -3% -3 requirement and 50% Net debt 104 payout ratio x EBITDA 1.6x EBT 46 Tax -20% -9 Without a robust growth Net profit 37 Dividend yield benchmarking (forward looking) story we would expect Dividend yield valuation (EURm) 2017E Nordic breweries OMX Helsinki 25 Hartwall to yield close to Payout ratio 50% Global breweries Nordic food* 5% exceeding OMX Dividend 18 10% Helsinki 25 yield Dividend yield requirement 5% 9% MCAP 367 Pro forma net debt / Net debt 104 8% x EBITDA 1.6x EBITDA of 1.6x assumed 7% for post-IPO Hartwall, EV 471 x EBITDA 7.1x 6% cost of debt 3% Equity ratio ** 46% 5% EV sensitivity to yield and payout The assumptions yield an 4% IPO valuation that is in Implied EV 2017E (EURm) line with the assumed PE Yield 3% 471 30% 40.0% 50.0% 60.0% 70.0% exit valuation, indicating 4.0% 379 471 563 654 746 2% the IPO is a credible exit 4.5% 348 430 512 593 675 route for a PE investor 5.0% 324 397 471 544 618 1% 5.5% 304 371 437 504 571 0% 6.0% 287 348 410 471 532 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
Note: * Nordic food includes Apetit, Atria, Orkla, Raisio, HK Scan and Cloetta, ** Assuming that shareholder loans are converted to equity at IPO Source: FactSet, Bloomberg
21 | Capstone: Valuation 28C00500 Precedent transactions
Segment Soft Wine Cider drinks & EV EV / EV / EV / Ann Date Target Beer & RTD & juice Spirits Acquirer EURm Sales EBITDA EBIT Stake 19/12/2012 Duvel Moortgat ✓ Fibemi 517 3.2x 10.8x 15.3x 24% 22/11/2012 Gleeson Group ✓ ✓ ✓ ✓ C&C Group 58 n.a. 5.7x n.a. 100% 14/11/2012 Britvic ✓ A.G.Barr 1,650 1.1x 8.5x 11.8x 100% 31/05/2012 JSC Baltika Breweries ✓ ✓ ✓ Baltic Beverages Holding 6,091 2.7x 9.0x 11.1x 15% 03/04/2012 StarBev ✓ Molson Coors Brewing Company 2,650 3.8x 11.0x n.a. 100% 24/01/2012 SABMiller Plc (Ukraine and Russia) ✓ Anadolu Efes Biracilik ve Malt Sanayii 1,458 2.8x 12.8x n.a. n.m. 03/08/2011 Pivovarna Lasko ✓ ✓ KS Nalozbe 88 0.3x 9.0x n.a. 100% 25/02/2011 Solan de Cabras ✓ Grupo Mahou-San Miguel 136 2.7x n.a. n.a. 100% 17/01/2011 Gruppo Spumador ✓ Refresco Holding 160 1.0x 10.6x 30.1x 100% 02/12/2010 Wimm-Bill-Dann Foods OJSC ✓ PepsiCo 4,638 2.8x 20.0x 30.4x 100% 01/07/2010 Droga Kolinska ✓ Atlantic Grupa 382 1.2x 8.4x 16.4x 100% 14/06/2010 Agros Nova ✓ IK Investment Partners 248 1.1x n.a. n.a. 99% 28/05/2010 Fruite Entreprises ✓ Britvic 237 0.9x 9.6x n.a. 100% 20/05/2010 Eckes-Granini Group ✓ Harald Eckes-Chantre 833 1.0x 11.2x 14.4x 24% 09/04/2010 Innocent Limited ✓ The Coca-Cola Company 145 1.3x n.a. n.a. 40% 30/03/2010 Efes Breweries International ✓ Anadolu Efes Biracilik ve Malt Sanayii 896 1.4x 7.2x 14.6x 26% 24/03/2010 Refresco Holding ✓ 3i Group 766 0.7x 6.4x 11.4x 20% 22/03/2010 Coca-Cola Drikker & Coca-Cola Drycker ✓ Bottling Holdings 606 1.1x 8.3x 13.3x 100% 07/12/2009 Grande Brasserie de Nouvelle Caledonie ✓ Asia Pacific Breweries 65 2.2x n.a. 11.5x 87% 30/11/2009 The Gaymer Cider Company ✓ C&C Group 49 0.7x 8.3x n.a. 100% 13/11/2009 Orangina Schweppes Group ✓ Suntory Holdings 2,245 2.2x n.a. n.a. 100% 15/10/2009 Anheuser-Busch InBev (Central European operations)2 ✓ CVC Capital Partners 1,493 n.a. n.a. n.a. 100% 27/08/2009 Anheuser-Busch InBev (Ireland1 and Scotland) ✓ C&C Group 204 1.1x 8.3x n.a. n.m. 14/05/2009 Kompania Piwowarska ✓ SABMiller 2,910 2.8x n.a. n.a. 28% Mean mature markets 441 1.3x 8.8x 15.4x Median mature markets 221 1.1x 8.4x 13.3x Mean new markets 1,936 2.2x 11.1x 18.1x Median new markets 1,475 2.7x 9.0x 15.5x Grey = Mature market deals Why would the multiples be higher for companies in the new markets? Note: Search criteria: Target geography: Europe, Date range: 1/1-2009 – 19/2-2013, shaded areas indicate transactions in mature markets 1) Including Northern Ireland, 2) Renamed StarBev following acquisition Source: MergerMarket
22 | Capstone: Valuation 28C00500 Preliminary valuation indicates an EV of ~EUR 375-425m (7.5-8.5x 2013E)
Metric Valuation (EV in EURm) 13E/14E Comments multiples ▪ Comprises Carlsberg, Royal Unibrew and 9.0x / 8.7x EV/EBITDA 13E/14E Olvi Nordic ▪ Narrow gap between highest and lowest Brewers 12.3x / 11.4x EV/EBIT 13E/14E multiples relative to ‘Global brewers’ and ‘Soft Beverages’ 9.0x / 8.7x EV/EBITDA 13E/14E Royal ▪ Royal Unibrew one of the more comparable Unibrew peers to Hartwall
Comps EV/EBIT 13E/14E 11.2x / 10.7x
Global ▪ Global brewers and Soft beverage peers are Brewers Multiples 13E/14E trading at slightly higher multiples driven by more optimistic growth expectations and Soft Bev Multiples 13E/14E margins
EV/EBITDA LTM 8.4x Mature ▪ Precedent transactions in more mature Markets markets of Europe EV/EBIT LTM 13.3x
Precedent Precedent New ▪ Precedent transactions in less mature Transactions Multiples LTM Markets markets of Europe 7.0x exit mult. LBO LBO (IRR 22.5%) ▪ LBO IRR 22.5%, exit end of 2017, acquisition DCF net debt 5.0x EBITDA 13E*, minimum equity DCF (WACC 8.0%) 0% term. growth contribution 30-35%, exit multiple 7.0x in PE base case 200 300 400 500 600 700 800 900 EURm
1,490 2,235 2,980 3,725 4,470 5,215 5,960 6,705 DKKm EV/EBITDA 2012 4.1x 6.2x 8.3x 10.3x 12.4x 14.5x 16.5x 18.6x Buyer base case EV/EBITDA 2013E 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 16.0x 18.0x Buyer base case EV/EBITDA 2014E 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 16.0x 18.0x Buyer MGMTcase EV/EBITDA 2014E 3.5x 5.2x 7.0x 8.7x 10.4x 12.2x 13.9x 15.7x
On July 11, 2013 it was announced that Royal Unibrew Note: * IN Buyer base case, management case and Potential PE case leverage acquired Hartwall for EV of EUR 470m (implying ’13E EV/EBITDA of 9.4x) limited to below 5.0x EBITDA due to minimum equity requirement of 30-35%
23 | Capstone: Valuation 28C00500 Special Situations Valuation in mergers and acquisitions
24 | Capstone: Valuation 28C00500 Reasons for making acquisitions
Expanding to new markets, businesses or geographical Synergies Diversification areas
A rapid way to increase market Acquiring expertise or sales Increasing production capacity share channels
Economies of scale Competitor elimination Pure financial interest
25 | Capstone: Valuation 28C00500 Why valuation in M&A context might differ from “fair” value
MARKET SITUATION ▪ Valuation level ▪ Cycles ▪ Strategic and financial position of competitors
▪ What does it cost? ▪ What can I get for it? SELLER ▪ What do I have to offer to get it? “Fair” ▪ How much will it affect my result? ▪ How much can the others pay? value ▪ How much is it worth for us?
BUYER ▪ How can I finance the acquisition and how ▪ How seriously do I want to sell it? should I explain it to the markets?
Are there any synergies for me? Are there any synergies to share? ▪ Value of ▪ Does the acquisition change our strategic control ▪ Can we change our strategic path? path? ▪ Board seats ▪ Does the sale enable something that ▪ Does the acquisition open possibilities would otherwise not be achievable? that would otherwise not be achievable? ▪ Location of headquarters SOCIAL ASPECTS
26 | Capstone: Valuation 28C00500 Case Comptel: Value of a company can deviate from price set in the market Nokia’s offer 28.8% premium over Comptel’s market price
Value of a company is also dependend on ownership Share price reactions
EUR 3.30 06.02.2017 EUR 3.10 Comptel share at EUR 2.36 EUR 2.90 EUR 2.70 28.8% premium EUR 2.50 EUR 2.30 07.02.2017 EUR 2.10 Nokia offers EUR 3.04 per Comptel share EUR 1.90 EUR 1.70 EUR 1.50
Post announcement Comptel share at EUR ~3.04
EUR 6.00 Why is Comptel more valuable under Nokia ownership? EUR 5.50
EUR 5.00 Nokia completes acquisition of Comptel EUR 4.50 Nokia share price up by 1.5%
“The acquisition advances Nokia's strategy to build a standalone software EUR 4.00 business at scale by expanding and strengthening its software portfolio and go-to-market capabilities. Comptel bolsters Nokia's software portfolio by EUR 3.50 adding capabilities that help digital service providers bring new communications services to market faster, master the orchestration of services and order flows, capture data-in-motion and refine decision- making.” Nokia, 29 June 2017
Source: Company materials, Factset
27 | Capstone: Valuation 28C00500 Case Nokia
Acquisition of NAVTEQ Corp NSN – Acquisition of 50% stake Microsoft deal Acquisition of Alcatel Lucent
Return based on assumed value Comparison to Ericsson Nokia share price increased by The offer valued Alcatel-Lucent at a 33.9%... premium of 34%; Nokia share price fell 1.5% at announcement Assume EUR 2.0 revenue increase per EUR sold mobile device 6.0 EUR 13.0 Discount rate 20%, terminal growth rate 5.5 3% 5.0 8.0 Ericsson Nokia 2008 2009 2010 2011 Terminal 4.5 Units sold 3.0 468.4 431.8 452.9 417.1 EV/Sales 2014 1.0x 1.4x 4.0 Shareholder value creation (millions) EUR 1.017 per share Apr/15 May/15 Jun/15 Marg. revenue 936.8 863.6 905.8 834.2 3.5 2€/unit EV/Sales 2015 1.0x 1.3x Nokia’s relative valuation Marginal cost 3.0 0 0 0 0 of 0 Ericsson Nokia EV/EBIT 2014 10.9x 13.5x 2.5 Navteq stand- EV/EBIT 2015 12.7x 14.6x -100 -100 -100 -100 alone profit EV/EBIT 2016 11.0x 13.3x EV/EBIT 2015 9.0x 12.1x 2.0 Profit 836.8 763.6 805.8 734.2 750.0 Alcatel-Lucent valuation Discounted 697.3 530.3 466.3 354.1 3773.9 P/E 2014 16.2x 23.7x profit Pre- Post- synergies synergies NPV of the 5821.9 P/E 2015 14.2x 19.9x profit EV/EBIT 2015 15.5x 8.2x EV/EBIT 2016 13.2x 7.6x
High multiples seem justified based on … while Microsoft share price the above assumptions Annual operating cost synergies of dropped 4.5% day after EUR 900 million announcement
Announcement date: 1 Oct, 2007 Announcement date: 1 Jul, 2013 Announcement date: 2 Sep, 2013 Announcement date: 15 Apr, 2015 Deal value: EUR 5,150m Deal value: EUR 1,700m (50%) Deal value EUR 5,440m Deal value EUR 15,600m EV/sales: 10.0x EV/sales: 0.1x EV/sales: 0.4x EV/sales: 0.7x EV/EBITDA: 29.0x EV/EBITDA: 1.4x EV/EBIT: neg. EV/EBITDA: 7.6x EV/EBIT: 34.1x EV/EBIT: 2.4x EV/EBIT: 13.2x
Source: Factset, Mergermarket
28 | Capstone: Valuation 28C00500 Case study: Konecranes acquisition of Terex MHPS A transformational transaction with broad involvement by Nordea
Overview of the transaction Enhanced investment case ▪ Konecranes, on May 16, 2016 signed an agreement to acquire from Terex Critical mass and scope to Konecranes’ global service organisation its Material Handling and Port Solutions (“MHPS”) segment
1) ▪ The acquisition was valued at EUR 1,126m enterprise value Scale benefits and synergies in industrial lifting - USD 595m and EUR 200m cash consideration - Directed issue of 19.6m new Konecranes class B shares to Terex Combines complementary port segment technological & marketing capabilities into complete offering to better compete in global markets ▪ The transaction created a focused industrial lifting and port solutions service and equipment world leader Geographical complementarity creating truly global footprint ▪ Significant value creation to shareholders with +18% share price appreciation during announcement day and a total of +83% since the Critical mass for future technology development announcement ▪ Nordea Advisory acted as Financial Adviser to Konecranes, and DCM Leveraging Konecranes’ IT infrastructure Corporate Debt acted as Joint Underwriter and Bookrunner A transformational acquisition for Konecranes Significant value creation for Konecranes shareholders
2015 sales (EURm) Share price (EUR) 42 3 517 25 +18%
38 23 1 391 34 21 2 126 16/5 - Announcement 19 30 +83% 26
22
18 Konecranes Terex MHPS Combined Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17
Note: 1) Based on Konecranes’ closing price of EUR 20.60 as at 13 May 2016 Source: Factset
29 | Capstone: Valuation 28C00500 Konecranes and Terex after the merger announcement
Share price development Research analyst comments
Konecranes Terex S&P 500 160 Terex merger increasingly likely to fall Transaction valued EV EUR apart 150 1,126m: EUR 723m in cash + “Terex is looking for USD 3.5bn 25% of combined shares, valuation, which is closely in line with our view of a fair value for Terex in the case corresponding 2015 EBITDA 140 the KonecranesTerex merger goes multiple of 10.5x and 5.3x ahead and the merged company including run-rate synergies achieves full synergies in addition to 2% 130 revenue synergies. If Zoomlion matches Terex’s asking price, which we see as increasingly likely given that the Chinese 120 could have other interests in acquiring Terex than pure financial ones, then we believe the KonecranesTerex merger 110 would likely fall apart.”
100 16 March, 2016
90 The best possible strategic outcome for Konecranes 80 “This was clearly the best outcome for Konecranes – acquiring MHPS instead 70 of merging with all of Terex. The strategic fit is good, with potential to drive out costs from an overlapping 60 services network and manufacturing Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 footprint, together with other sourcing costs. Konecranes ambitiously targets May 16th, EUR 140m of cost savings (4% of August 11th, January 26th, May 27th, combined revenue).” Konecranes December 31st, Announcement of the Terex receives acquisition Zoomlion announces it announces the Konecranes Terex business combination of proposal from Zoomlion has terminated 11 July, 2016 acquisition of MHPS deal closing Konecranes and Terex Heavy Industries Terex MHPS negotiations with Terex
Source: Factset, Stock exchange announcements, Nordea Equity Research
30 | Capstone: Valuation 28C00500 IPO valuation Case Verkkokauppa.com
31 | Capstone: Valuation 28C00500 The price discovery process for an IPO
Today T – 9-10 weeks T – 4-6 weeks T – 3-4 weeks T- 1-2 weeks T – 7-10 days T-1
Pre-marketing Broad marketing
Early Investor Price- Final Initial Pilot fishing Bookbuilding and investor education range price valuation meetings roadshow meetings (“pre-marketing”) decision decision
Management deal Pricing Equity research Final price based on Follow-up with road show First introduction publishes IPO range subscription Corporate certain investors for most investors research used to determined Scope: up to 10 level, quality Finance as well as position and market days of 1-1 and of orders, valuation Purpose: collect broadening of the Key market the deal group meetings price based on initial investor target list input: broad sensitivity publicly feedback, assess Research is feedback from Purpose: Purpose: and available interest, educate distributed to the market generate real additional foremost, data about the investors. Research Set by demand for the feedback on the estimated opportunity analysts meet Corporate IPO back of a more aftermarket investors during Finance, the detailed performance approx. 2 weeks presentation board of the Purpose: educate company, and investors and collect selling as much feedback as shareholders possible, including valuation
32 | Capstone: Valuation 28C00500 Listing of Verkkokauppa.com with a market cap of EUR 173m IPO of Verkkokauppa.com was the largest IPO in Finland since 2007
Offering summary First day of trading (EUR) Allocation split
▪ Share closed at EUR 23.74 on the first day of trading, up By geography Listing place ▪ NASDAQ OMX First North Finland 3.2% from IPO price
First day of trading ▪ 4 April 2014 Sweden 11% ▪ The company issued 820,000 new shares Cont. Eur Selling ▪ Rite Internet Ventures Holding AB (and its wholly 13% shareholder owned subsidiary) sold 1,220,659 shares ▪ Mr. Samuli Seppälä sold 384,997 shares 14% 62% EUR 23.74 UK Finland ▪ EUR 20-24 per share, equivalent to a market cap of +3.2% Price range EUR 150.2-180.3m
▪ EUR 23 per share, equivalent to a market cap of By investor type IPO price EUR 172.7m Hedge ▪ Offering of 2,425,656 shares corresponding to 32.3% of the shares outstanding, corresponding to EUR 13% 55.8m First day of trading ▪ In addition, Rite Internet Ventures Holding AB granted an over-allotment option of up to 363,848 additional Offer size shares (corresponding to 15% of the base offering) 87%
▪ On 5 May it was announced that the greenshoe has Long been executed increasing the size of the offering to EUR 64m ▪ Free float of 40% post IPO Multiple estimates Pricing multiples @ EUR 23 per share1) 2013A 2014E 2015E ▪ Public offering in Finland EV/Sales 0.6x 0.5x 0.5x Offer structure ▪ Institutional offering to institutional investors outside the US EV/EBIT 20.0x 15.4x 11.4x
EV/(EBITDA – Capex) 18.5x 15.4x 11.5x ▪ 180 days for Company, Board of Directors, Lock-up period management and selling shareholders P/E 36.0x 25.8x 18.6x
Note: Based on Nordea research estimates, Below-EBIT figures exclude IPO related direct NRIs (2013A and 2014E) Source: Bloomberg, Nordea Research
33 | Capstone: Valuation 28C00500 Verkkokauppa.com – financial targets and related forecasts at IPO
Target Historical actuals Consensus estimates
Net sales, EURm 9.3% 11.4% ▪ The Company aims to grow at a rate faster 260 284 310 Continued top 192 225 238 than its underlying market and targets a line growth >10% p.a. medium term net sales growth rate of over 10% p.a. 2011 2012 2013 2014E 2015E 2016E
EBITDA EURm, EBITDA-% 15.5 12.5 9.5 Improving relative 7.5 ▪ Company can benefit from improving scale 5.0% profitability 3.2% 3.7% 4.4% economies >3.2% 1.7 0.9 (EBITDA -%) ▪ Target is to improve from 2013A level 2011 2012 2013 2014E 2015E 2016E
% ▪ The Company aims to ensure adequate equity funding to finance the growth of its 42% Equity ratio operations with a medium term target to >25% 11% 8% 15% N/A maintain an equity ratio of over 25%, taking into account the seasonal nature of the 2011 2012 2013 PF 20131 business
Dividend and Evaluated ▪ The Company and the market it operates in are in a state of rapid transformation distribution of ▪ The Company will evaluate the feasibility of distributing dividends each year funds policy annually ▪ Possible dividend payments should not jeopardize the realization of the Company’s strategic growth targets
1) PF balance sheet including Rite option exercise, repayment of capital loans, IPO net proceeds and accrued interest of capital loans until repayment Note: all presented figures for fiscal year or as of year end Source: Offering document, Broker research
34 | Capstone: Valuation 28C00500 Peer group selection – lack of direct peers led us to seek out the most relevant peers Finnish investors benchmarked against Nordic peers, while online is more familiar to international investors
EBIT margin Net profit-% Forecasted operative Sales CAGR Capex / Sales Asset turnover, Peer expansion expansion '13-15 '13-15 ave x parameters clearly '13-15, bps '13-15,bps supported a premium to the Nordic non-grocery retailer Upside from online CDON 7.4% 332 338 1.0% 2.5x space in all critical areas aspects of the business model (and Online retailers 14.3% 89 11 3.4% 2.6x financial Some Finnish and performance) especially Anglosaxon Verkkokauppa.com 9.2% 131 124 0.3% 4.2x investors viewed the case through listed online Positioning overall retailers, providing significant upside to the Discount to online retailers needed valuation
A premium valuation to Nordic peers justified
EBIT margin Net profit-% Sales CAGR Capex / Sales Asset turnover, Peer expansion expansion '13-15 '13-15 ave x '13-15, bps '13-15,bps
Clas Ohlson 4.3% -36 -20 2.9% 2.0x Base demand based Nordic on Nordic peers in the non-grocery (incl. 4.3% 371 143 2.6% 1.5x Non-grocery space Kesko)
Verkkokauppa.com 9.2% 131 124 0.3% 4.2x
Positioning overall
Note: Arrows reflect Verkkokauppa.com positioning relative to peer performance
35 | Capstone: Valuation 28C00500 Verkkokauppa.com value creation since the IPO to date
Share price and equity development EV/EBIT NTM 12.0 @IPO: Mar 2017: Current
10.0 40.4x
8.0 35.8x 35.6x 19.2x 6.0 15.8x 14.1x 11.4x 4.0 11.0x 11.0x
2.0
0.0
Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18 Oct-18
grocery grocery grocery
- - -
Nordic Nordic Nordic
Online retail Online retail Online retail Online
non non non
74 Dividends paid 137 58 30 5 Which factors might have lead to 173 183 significant changes in valuation multiples – both absolutely as well as
Equity value Sales growth Margin Multiple Net debt Equity relatively – since the IPO? at IPO decrease expansion reduction value now
Source:Factset as of 13 March 2019
36 | Capstone: Valuation 28C00500 Special situation – Demerger
37 | Capstone: Valuation 28C00500 United Technologies will break up into three companies– more focused business in the LT Separation expected to provide increased focus, which should lead to improved operating performance
Contemplated breakup
▪ In November 2018, UTC announced its Revenue 2018 (EURbn) Sum of the parts (SOTP) suggests 25.5% or EUR 25bn premium over current mcap intention to separate into three 9.6 independent companies: 158.1 - Otis would have elevator, escalator and (10.2) moving walkways businesses 24.9 123.2 - Carrier (formerly CCS) would have (34.9) HVAC, refrigeration, building 103.4 +25.5% automation, fire safety and security 11.3 businesses - Collins Aerospace Systems and Pratt & 28.0 Whitney businesses would stay at UTC 16.6 98.2 ▪ Separation expected to be completed in 27.3 18-24 months Otis Carrier (formerly CCS) Otis Carrier Aero Fire & Elimi- Implied Net Implied Current Rest of UTC Security nations EV debt mcap mcap1 Analysts see potential through SOTP valuation Analysts’ comments on the breakup
EBITDA Enterprise Enterprise Jefferies Avg. High “Otis: More Flexiblity as a Standalone. “What exactly is the value of the 20E value value (27 Nov 2018) EV/EBITDA2 EV/EBITDA2 (EURm) (EURm) (EURm) Otis lost share over the past decade due to conglomerate again? a focus on higher margins. As a There was a time when markets weren't as Otis 1,820 13.5x 24,574 15.0x 27,304 standalone, management believes it can be efficient and where diversified investing more aggressive on pricing and wasn't as easy to achieve as it is today. In investments in the offering. While margins that bygone era, the industrial Carrier 2,312 12.0x 27,696 12.1x 27,974 have contracted by more than 600bp from conglomerates served as the one-stop the early 2014 peak, competitors' margins shop for long-term investors where the fire Aero 8,079 10.9x 88,060 12.8x 103,410 have also. The company believes it can and forget types would load into high maintain a 200-400bp premium to quality diversified blue chip industrials. Fire & Security 717 10.5x 7,532 13.4x 9,612 competitors' margins.” Those cycles have been muted with global growth and largely quelled for the last nine Eliminations/Corporate (1,017) 10.0x (10,172) 10.0x (10,172) years of economic expansion. Jefferies, Nov 2018 UBS, Nov 2018 Implied value 11,911 11.6x 137,690 12.8x 158,128
Note: EUR/USD = 1.1306 1) As of 28 Nov 2018 2) Applicable peer group used for each business unit Source: Company filings, Equity research
38 | Capstone: Valuation 28C00500 Introduction to Nordea Investment Banking
39 | Capstone: Valuation 28C00500 Nordea’s recent investment banking advisory activity in Finland Strong track record including number of high profile transactions
December 2018 (pending) December 2018 September 2018 June 2018 June 2018 June 2018 May 2018 Public offer for Amer Sports Rights issue Public offer for Acquisition IPO Accelerated Accelerated Technopolis Bookbuilding bookbuilding
Mascot Bidco Create CreateCreate Create Create Create Public offer for tombstoneDeal value tombstoneDeal valuetombstone Deal value Public offer for tombstoneDeal value tombstoneDeal value Deal value tombstoneDeal value hereEUR 4.6bn hereEUR 150mhere EUR 730m hereSEK 2,725m hereEUR 553m EUR 60m hereEUR 327m
Lead Manager Joint Lead Manager and Financial Adviser Sole financial advisor to Joint Global Coordinator Joint Bookrunner Joint Bookrunner Joint Underwriter to Kildare Partners Cramo and Joint Bookrunner
May 2018 March 2018 June 2017 June 2017 June 2017 February 2017 January 2017 Accelerated IPO Merger of Public offer for IPO Public offer for Public offer for bookbuilding Lemminkäinen Sponda Comptel PKC and YIT Create Create CreateCreate CreateCreate Create CreateCreate Create tombstoneDeal value tombstoneDeal value tombstoneDeal valuetombstone Merger with tombstoneDeal valuetombstone Public offer for tombstoneDeal value tombstoneDeal valuetombstone Public offer for Deal valuetombstonePublic offer for hereEUR 130m hereEUR 174m hereEUR 1.6bnhere hereEUR 2.0bnhere hereEUR 65m hereEUR 347mhere EUR 571mhere
Joint Bookrunner Sole Global Coordinator Financial Adviser Financial Adviser Sole Global Coordinator Financial Adviser Financial Adviser and Joint Bookrunner to Lemminkäinen to Blackstone and Joint Bookrunner to Nokia to MSSL
November 2016 November 2016 November 2016 May 2016 May 2016 IPO Merger of Public offer for Acquisition of Sale of Ekokem Ahlstrom and Norvestia Anvia’s ICT Munksjö business Create Create Create Create Create tombstoneDeal value Deal valuetombstoneMerger with Deal valuetombstonePublic offer for tombstoneDeal value Acquisition of Deal valuetombstoneSale to hereEUR 415m EUR 1.2bnhere EUR 165mhere hereEUR 107m EUR 715mhere 2016 2017-2018 ICT business Winner of Winner of Global Joint Bookrunner Financial Adviser Financial Adviser Financial Adviser Financial Adviser Mergermarket Finland Finance Best to Elisa to Ekokem to Ahlstrom to Norvestia M&A Financial Adviser Investment Bank in of the Year Finland
40 | Capstone: Valuation 28C00500 Internship opportunities at Nordea Corporate & Investment Banking
▪ Advisory: 6-9 analyst interns in Finland for: ▪ Spring 2020: January – May ▪ Summer 2020: May – August Recruitment ▪ Autumn 2020: August – December
▪ Debt Capital Markets: around 4 analyst interns for flexible 6 month periods
▪ Large Corporate Coverage 1-2 analyst interns
▪ Application deadline for all 2020 internship positions is in early Autumn 2019 Application deadlines ▪ Information distributed via KY Finance email list
▪ For questions, please contact either: Contact information ▪ Jaakko Eteläaho ([email protected] or +358 40 744 1900) ▪ Nicolas Lindfors ([email protected] or +358 40 843 2680)
In addition, we hire full-time employees throughout the year
41 | Capstone: Valuation 28C00500 Introducing Aalto Finance Alumni
Platform to rekindle old friendships and develop new connections Global reach bridges the gap between friends world over
1. Connect ▪ Countries with at least one resident Finance Alumni shown in burgundy ▪ Meet old friends from university ▪ Hear and learn from peer group experiences ▪ Make new connections, both leisure and business 2. Catch up ▪ Reach interesting people through powerful network ▪ Learn latest developments from fields populated by peer group ▪ Find out about current topics encircling Aalto Finance department 3. Contribute ▪ Be active in growing Aalto Finance Alumni network from the get-go ▪ Propose ideas for future events or other Alumni activities ▪ Support Aalto Finance Alumni1
AFA in brief ▪ Extensive Alumni network with residents across EU and in 14 non- ▪ Established in 2016 EU countries provides connection to over 600 Aalto Finance Alumni2 ▪ Aalto Finance Alumni (AFA) is a non-profit alumni organization for graduates from Helsinki School of Economics’ finance faculty. ▪ Occupation of Finance Alumni: 54% financial sector, 22% industry, 13% ▪ The purpose of AFA is to promote the collaboration, networking and professional management consulting, 8% public development of finance alumni by organizing events and sharing information sector / other, 3% entrepreneurs2 ▪ The board of AFA consists of good mix of alumnus, academia and students that rotate ▪ AFA mentoring program together on a yearly basis (KY Finance board members). with KY Finance connects finance students and experienced alumni to network, develop skills and learn from each other ▪ Our Publication, AFA Quarterly, reaches the whole alumni network on quarterly basis
Note: 1) Please contact Aalto Finance Alumni for more information about possible ways you can contribute 2) Finance Alumni Book 2016 3) Aalto Finance Alumni analytics 4) To join Aalto Finance Alumni mailing list, please contact us at [email protected]
42 | Capstone: Valuation 28C00500 Meet Nordea representatives at the after-exam
SAVE THE DATE!
10.4.2019 at Bar Runar
The best group will be awarded with fast track proceedings in the coming internship application process – and with champagne!
43 | Capstone: Valuation 28C00500 Thank you!
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44 | Capstone: Valuation 28C00500