www.pwc.com.au/dealsdigest Retail & Consumer Deals Digest May 2016 Consumer confidence ticks up Latest Australian ABS trade above long-run average results Consumer Confidence rose 2.0% to 113.9 The latest Australian Bureau of Statistics this week, partly reversing the fall in the (ABS) Retail Trade figures show that previous week and bringing confidence Australian retail turnover rose 0.4% in back above its long-run average. March 2016 (seasonally adjusted), Consumers appeared comfortable ahead following a rise in February of 0.1% and a of the Budget release on 4 May 2016, with rise of 0.4% in January 2016. few major policy measures likely to make a The sectors contributing to the rising significant hit to average family ‘wallets’. trend in the month of March 2016 were According to ANZ Economist Felicity Clothing, footwear and personal accessory Emmett, Consumer Confidence has been retailing (0.7%), Household goods volatile in the lead-up to the Budget, but retailing (0.2%), Other retailing (0.2%), the solid gain last week is a good sign, Food retailing (0.1%), and Department potentially driven in part by leaks around stores (0.1%). Cafes, restaurants and Retail & Consumer Deals Digest is a monthly bulletin the Budget suggesting no major hits to takeaway food services (0.0%) was providing a consolidated view households. It’s possible also, that the relatively unchanged in trend terms in of sector trends, deal activity recent speculation around the RBA rate March 2016. and relevant news headlines cut to a record low 1.75% may have in the retail & consumer On a state level, retail sales rose in trend sector. supported consumer sentiment over the terms in the Australian Capital Territory past week. The Budget is important in If you'd like to join this (0.8%), South Australia (0.3%), Victoria subscription or opt out, please shaping confidence over the next few (0.2%), Tasmania (0.2%), New South email [email protected] weeks in the lead-up to a double Wales (0.2%) and Queensland (0.1%). dissolution election in early July. Western Australia (0.0%) was relatively ANZ / Roy Morgan weekly consumer unchanged. Retail sales declined in trend confidence rating terms for Northern Territory (-0.1%) in March 2016. Sources: Australian Bureau of Statistics data, Reserve Bank of Australia Source: ANZ / Roy Morgan Weekly Consumer Confidence Index © 2016 PricewaterhouseCoopers. All rights reserved. PwC refers to the Australian member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This material has been prepared by PwC for general circulation on matters of interest only. It is not advice and does not take into account the objectives, financial situation or needs of any recipient. Any recipient should, before acting on this material, make their own enquiries and obtain their own professional advice in relation to any issue or matter referred to herein. We do not, in preparing this material, accept or assume responsibility for any purpose or to any person to whom this material is shown and shall not be liable in respect of any loss, damage or expense whatsoever caused by any use the reader June choose to make of this material. © 2016 PwC. All rights reserved. "PwC" refers to PricewaterhouseCoopers, an Australian limited liability partnership, or as the context requires, the PricewaterhouseCoopers global network or other member firms of the network each of which is a separate and independent legal entity. Announced deals in FY2016 YTD and LTM According to Mergermarket, announced retail deal activity in FY2016 (year-to-date) is weaker relative to the prior comparable period. FY2016 year to date, 83 deals have been announced for a total value of c. $6.0bn, excluding transactions with undisclosed deal value. Across the last twelve months, deal activity has trailed the prior comparable period (102 announced deals versus 126 announced deals). Deal activity in value terms is lower due to a few large announcements in the PCP (KKR proposed takeover of Treasury Wine Estates, Woolworths’ takeover of David Jones, the Wilmar International bid for Goodman Fielder, and JBS’s announced takeover of P&M Quality Smallgoods). Australia and New Zealand Announced R&C Deals FY2016TD and LTM vs. Prior Year Comparable Period FY2016TD PCP LTM PCP Deal value (in A$m) # of deals Deal value # of deals Deal value # of deals Deal value # of deals Deal value $0 to $5M 0 0 0 0 0 0 0 0 $6 to $10M 7 60 15 130 9 74 16 138 $11 to $20M 13 209 15 220 18 290 20 288 $21 to $30M 6 140 6 149 7 161 6 149 $31 to $50M 6 227 7 299 6 227 8 338 $51 to $100M 9 672 10 749 12 904 12 917 $101 to $300M 10 1,576 13 2,010 12 2,015 16 2,543 $301 to $500M 2 712 2 703 3 1,122 3 1,153 >$500M 2 2,444 4 4,942 2 2,444 5 8,627 Subtotal 55 6,040 72 9,202 69 7,237 86 14,153 Undisclosed 27 n/a 32 n/a 33 n/a 40 n/a Total Announced 83 6,040 104 9,202 102 7,237 126 14,153 Total Completed 55 1,082 99 9,142 75 2,279 105 8,634 Source: Mergermarket; based on announced and completed transactions as at 11 May 2016 Notes: 1) FY2016TD refers to the period 1 July 2015 to 11 May 2016, reflecting the latest available Mergermarket data as at 11 May 2016 2) PCP refers to prior year comparable period Recently completed / announced deals • 6 May 2016 – Australian Pharmaceutical Manufacturers (APM), the Melbourne-based vitamins supplier is up for sale. APM is one of Swisse Wellness' three main suppliers and makes and packages a range of tablets, gels and powdered products. APM’s EBITDA has grown from A$1m to A$12m over the last few years. • 4 May 2016 – Inner Mongolia Fuyuan Farming, a subsidiary of China Mengniu, the listed Hong Kong-based investment holding company, has agreed to acquire 79% stake in Burra Foods Australia from Itochu Corporation and Mr. Grant Crothers for a consideration of approximately A$ 237m . The enterprise value of the transaction is A$300m. Burra Foods’ founder, Grant Crothers and Itochu Corporation have maintained a combined 21 per cent interest in the company with Mr Crothers continuing in his role as Managing Director/CEO. • 28 April 2016 – HanesBrands, the US listed intimate apparel and home furnishing manufacturer and retailer, announced that it has entered into a definitive agreement to acquire Pacific Brands for A$1.15 per share in cash. The transaction is valued at approximately USD800m on an enterprise value basis or slightly more than 10 times projected calendar 2016 EBITDA. The acquisition would be Hanes’ sixth in the past three years and would add Australia and New Zealand to the list of countries where the company holds the No. 1 or No. 2 market share position for underwear, intimate apparel or hosiery. • 19 April 2016 – McCormick & Company, the US listed company, announced that it purchased 100% of the shares of Botanical Food Company, a privately held company based in Australia that manufactures and sells the Gourmet Garden brand of packaged herbs. McCormick engages in manufacture, marketing and distribution of spices, seasonings, specialty foods and flavours. The purchase price is approximately A$150m. The transaction multiple is expected to be around 12 times EBITDA. Gourmet Garden’s annual sales are approximately A$70m. • 14 April 2016 – GUD Holdings announced that it has entered into an agreement to sell its 51% stake in Sunbeam Corporation Limited and and its 49% share of Jarden Consumer Solutions (Asia) Limited to its joint venture partner the US-based Sunbeam Products. GUD expects to receive cash of approximately AUD 35m (USD 26.8m) as a result of these transactions, which are expected to complete in July 2016. © 2016 PricewaterhouseCoopers. All rights reserved. PwC refers to the Australian member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This material has been prepared by PwC for general circulation on matters of interest only. It is not advice and does not take into account the objectives, financial situation or needs of any recipient. Any recipient should, before acting on this material, make their own enquiries and obtain their own professional advice in relation to any issue or matter referred to herein. We do not, in preparing this material, accept or assume responsibility for any purpose or to any person to whom this material is shown and shall not be liable in respect of any loss, damage or expense whatsoever caused by any use the reader June choose to make of this material. © 2016 PwC. All rights reserved. "PwC" refers to PricewaterhouseCoopers, an Australian limited liability partnership, or as the context requires, the PricewaterhouseCoopers global network or other member firms of the network each of which is a separate and independent legal entity. Also recently in the news • Lindt & Sprüngli Australia will open its second Lindt Chocolate Shop in Queensland, at Harbour Town on the Gold Coast. The new shop, opening in late May or early June, will feature classic Lindt design elements and will offer Australia’s largest selection of Lindor pick and mix with exclusive flavours such as Irish cream and dark hazelnut. • Eastland shopping centre unveiled the next phase of its development with a new gallery and 80 new brands added.