DECEMBER 2009Deal making in high definitionSector connections
All inquiries should be directed to any of theindividuals at J.P. Morgan or Thomson Reuterslisted below.Sam BridgesJ.P. Mo...
Deal making in high definition   1Table of contents1.   Introduction                      22.   General observations      ...
2   Sector connections                 1. Introduction                 As economies around the world begin to emerge from ...
Deal making in high definition   3We examine the behavior of sectors across two time periods; the “dot.com “bubble (1Q2000...
4   Sector connections                 Exhibit 1.1                  Sector breakdown by market value and EPS 12 month grow...
Deal making in high definition   5Exhibit 1.2 Sector median for EBITDA and PE multiples (1998-3Q 2009)                    ...
6   Sector connections                Exhibit 1.4                 Overall M&A activity by target sector year- on- year per...
Deal making in high definition   72. General observationsGeneral observations•   The growth of M&A: Business conditions fo...
8   Sector connections                    borrowing for corporate issuers is due to the high cost of going to the loans ma...
Deal making in high definition   93. Food Beverages and TobaccoExecutive summaryEPS growth of 8.9% in this sector is forec...
10               Equity Value/Net Income                                                                                  ...
Deal making in high definition         11Exhibit 3.5                                                                      ...
12Top 20 Food Beverage and Tobacco acquisitions                                                                           ...
Top Food Beverage and Tobacco IPOs since 2005Issue Date   Proceeds ($mm) Issuer                          Domicile       Su...
14   Sector connections                 4. Household & Personal Products                 Executive summary                ...
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
Deal Making In High Definition by J.P. Morgan + Thomson Reuters
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Deal Making In High Definition by J.P. Morgan + Thomson Reuters (December 2009)

Sector Connections: Food Beverages and Tobacco, Household & Personal Products, Consumer Durables and Apparels, Food and Staples Retail, Retailing, Healthcare, Telecom Services, Media, Information Technology, Energy, Utilities, Banks, Insurance, Auto and Components, Chemicals, Metals & Mining, Transport, Real Estate.

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  1. 1. DECEMBER 2009Deal making in high definitionSector connections
  2. 2. All inquiries should be directed to any of theindividuals at J.P. Morgan or Thomson Reuterslisted below.Sam BridgesJ.P. MorganAssociate10 Aldermanbury, London EC2V 7RF0207 325 0545Hernan CristernaJ.P. MorganManaging Director10 Aldermanbury, London EC2V 7RF0207 325 4631Vincent FlasseurThomson ReutersDeals Intelligence30 South Colonnade, London, E14 5EP0207 542 1958
  3. 3. Deal making in high definition 1Table of contents1. Introduction 22. General observations 73. Food Beverages and Tobacco 94. Household & Personal Products 145. Consumer Durables and Apparels 196. Food and Staples Retail 247. Retailing 298. Healthcare 349. Telecom Services 3910. Media 4411. Information Technology 4912. Energy 5413. Utilities 5914. Banks 6415. Insurance 6916. Auto and Components 7417. Chemicals 7918. Metals & Mining 8419. Transport 8920. Real Estate 94
  4. 4. 2 Sector connections 1. Introduction As economies around the world begin to emerge from recession, many industry sectors will become ripe for increased M&A activity. This latest report from J.P. Morgan and Thomson Reuters looks at which industry sectors are most suited to respond to this upturn. In our last report , “The Era of Globalized M&A: Winds of Change”, we established that business confidence, rather than opportunism, was the most important driver for M&A activity and was very closely tied to macro-economic conditions and stock market performance. To this end, M&A requires three main drivers: 1) Confidence 2) Improved business conditions 3) Available funds to make acquisitions In the third quarter of 2009, there was positive GDP growth in the Eurozone (+0.4%) and the United States (+0.9%). The MSCI European and North American indices both grew by over 20% in 2009 from January to November. This suggests that the developed world is poised to emerge from recession, and the M&A environment is likely to see a significant increase in activity. To help support this concept our framework will focus on: 1) Deal volumes and cross-border activity; 2) Sector performance vs. the broader world index; 3) Valuation; 4) Historical sector valuation and future EPS growth; 5) Capital raising; 6) Geographic footprint; The current financial crises resulted in the postponement of M&A projects in 2009 as companies focused on ensuring that they have sufficient liquidity. With favorable capital market conditions, many companies have raised record amounts of additional capital. As developed economies such as US and the Eurozone emerge from recession, plans are now being dusted off as CEOs recognize the need to increase earnings by expanding their businesses. The aim of this report is to a) analyze the historical growth patterns across various sectors, and b) to identify the sectors which are well capitalized and potential candidates for M&A through 2010 and beyond.
  5. 5. Deal making in high definition 3We examine the behavior of sectors across two time periods; the “dot.com “bubble (1Q2000-1Q 2002) and the “leverage bubble” (4Q 2005-2Q 2008). The dot.com bubble, whilepredominantly confined to the telecoms and technology sectors, did produce increasedlevels of activity across other sectors whereas the leverage bubble was a product ofcheap financing, and a key factor in the rise in M&A across many sectors.The table opposite forms the basis of the analysis that looks at the value destructioncaused by the financial crisis and the estimated earnings per share growth over a 12month period. We have examined 18 sectors in total which have experienced a degree ofM&A activity at one time or another over the entire time period. The sectors can beaggregated into the following groups:1) Consumer, retail and healthcare;2) Telecoms, media and technology;4) Natural resources;3) Financial institutions;5) Diversified industries; and6) Real estate;
  6. 6. 4 Sector connections Exhibit 1.1 Sector breakdown by market value and EPS 12 month growth forecast Sector Sector as a % of Mkt value EPS Growth Regional key growth areas total market difference (12 month between 2007 estimate)* and 2009 Food beverages and 6.5% (8.5%) 8.9% Europe ex. UK tobacco Household & personal 1.9% Flat 2.7% UK products Consumer durables and 1.7% (8.5%) 113.1% North America apparels Food and staples retail 2.8% (14.1%) 7.5% Pacific ex. Japan Retailing 2.5% (29.5%) 9.2% Emerging markets Healthcare 10.8% (13.9%) 9.0% Europe ex. UK Telecom services 6.0% (26.6%) 1.6% Emerging markets Media 2.4% (45.1%) 6.8% Emerging markets Information technology 13.9% (18.1%) 35.6% Europe ex. UK Energy 13.4% (17.1%) 3.8% North America Utilities 5.4% (19.4%) 7.4% Europe ex. UK Banks 12.4% (28.9%) 24.8% Emerging markets Insurance 4.8% (37.2%) 29.3% North America Auto and components 2.5% (30.2%) N/A Emerging markets Chemicals 2.9% (21.1%) 16.1% Emerging markets Metals & mining 5.3% (14.9%) 17.1% UK Transport 2.3% (26.4%) 18.9% North America Real estate 2.5% (31.1%) (1.8%) Emerging markets Total market 100% (25.2%) 19.2% - * 12 month forecast is from 3Q 2009-3Q 2010 Financing acquisitions remains the single biggest challenge as lenders shy away from over exposure on risky loans and CEOs balance the need for growth over the potential negative ratings from the agencies on highly leveraged acquisitions. The cost of debt is relatively simple to calculate – it includes the risk-free rate and a risk premium. The cost of equity is more complex as it does not pay a set return to investors and so the risk is normally calculated by comparing the investment to other similar investments in order to determine a median. The multiples examined across the sectors (see exhibit 1.2) indicate that real estate has the highest EBITDA valuation multiple of 24.8x earnings.
  7. 7. Deal making in high definition 5Exhibit 1.2 Sector median for EBITDA and PE multiples (1998-3Q 2009) 40.8 EBITDA P/E 35 34.6 29.4 28 24.8 25.9 22.3 22.1 23.3 23.9 22.8 23.4 20.4 21.1 18 16.8 16.6 17.8 16.4 11.7 11.1 10.8 10.7 10.5 10.4 10.3 10 9.9 9.5 9.3 8.9 l ts re g to s a g e s Se rt IT gy e es l o es e ai al nk lin in i nc r o cc at uc ed Au pa ca et er i ti sp ic ic in st ai Ba ra ba od ti l rv M R Ap En lth m M an lE et su U To he Pr s ea R & Tr le ea d In C an H al s ap m d R al an on co St s et le rs le s M & ge ab Te Pe od ra ur & Fo ve D ld er Be ho m od se su ou Fo on H CHistorically, chemicals has commanded the highest premiums (defined as the one monthmedian share price prior to the announcement date) across all sectors, while real estateis the lowest in the sample.Exhibit 1.3 Sector premium median (1998-3Q 2009) as a percentage 30.4 28.5 28.1 28.1 27.5 26.5 26.2 22.5 22.4 22.4 21.2 20 19.9 19 18.3 17.7 16.4 15.1 l ts re to g s e g ia s Se rt IT gy re es l o es e ai al nk in lin nc o cc at uc ed Au pa ca et er i ti sp ic ic in st ai Ba ra ba od ti l rv M R Ap En lth m M an lE et su U To he Pr s ea R & Tr le ea d In C an H al ls ap m d R an a on co St s et le rs le s M & ge ab Pe Te od ra ur & Fo ve D d er Be l ho m od se su ou Fo on H C
  8. 8. 6 Sector connections Exhibit 1.4 Overall M&A activity by target sector year- on- year percentage change based value/number of deals Based on $ value Based on number of deals 188% Auto & Components (4)% 95% HH & Perso Products (23)% 7% Healthcare (9)% (3)% Transport (16)% (6)% Energy (4)% (10)% IT (20)% (23)% Insurance (21)% (23)% Metals & Mining 23% (25)% Retailing (14)% (34)% Global M&A All Sectors (9)% (35)% Real Estate (7)% (40)% Banks 35% (46)% Chemicals (22)% (48)% Utilities 14% (53)% Media (11)% (54)% Food & Staples Retail (6)% (61)% Consumer Durables & Apparel (22)% (64)% Telecom Services (21)% (71)% Food Beverages & Tobacco (8)% Fundamental to any up tick in M&A is economic growth. With a number of key markets emerging from recession during the third quarter, improved business confidence should re-energize M&A deal flow with only the UK and Spain yet to experience growth of the major developed markets. Exhibit 1.5 Quarter-on-quarter GDP percentage change 2007-3Q 2009 Quarter France US UK Eurozone Germany Spain Japan 1Q 2007 0.7 0.3 0.7 0.8 0.3 0.9 1.4 2Q 2007 0.4 0.8 0.6 0.4 0.3 0.8 0.0 3Q 2007 0.7 0.9 0.5 0.6 0.8 0.7 (0.6) 4Q 2007 0.3 0.5 0.5 0.3 0.1 0.6 1.0 1Q 2008 0.5 (0.2) 0.6 0.8 1.6 0.4 1.0 2Q 2008 (0.4) 0.4 (0.1) (0.3) (0.6) 0.0 (0.7) 3Q 2008 (0.2) (0.7) (0.7) (0.4) (0.3) (0.6) (1.7) 4Q 2008 (1.5) (1.4) (1.8) (1.8) (2.4) (1.1) (3.0) 1Q 2009 (1.4) (1.6) (2.5) (2.5) (3.5) (1.6) (3.2) 2Q 2009 0.3 (0.2) (0.6) (0.2) 0.4 (1.1) 0.7 3Q2009 0.3 0.9 (0.4) 0.4 0.7 (0.3) 1.2
  9. 9. Deal making in high definition 72. General observationsGeneral observations• The growth of M&A: Business conditions for companies to consider undertaking M&A are improving. At date of publication, global corporate bond issuance is up 17% compared to the same period last year while follow on equity issuance is up 41%. Syndicated lending continues to suffer from effects of the credit crunch but the capital markets have provided much needed liquidity and easier access to capital. Private equity firms have started to take advantage of this change in economic health. We have already seen an increase in the financial sponsor activity during the fourth quarter, including the recently announced leveraged buyouts of Anheuser-Busch InBev’s Central European and Busch Entertainment assets (USD5.7 billion) and IMS Health (USD5.1 billion). As conditions continue to improve, we can expect an influx of financial sponsor activity as these firms put to work the funds they raised at record levels in the year following the onset of the credit crisis in mid-2007.• Consolidation: Bearing in mind the expected growth in M&A activity in 2010, we have focused on looking at various factors across industries to establish which sectors in particular demonstrate characteristics that make them likely candidates for consolidation in the near term. Based on analysis covering earnings per share growth, equity capital markets performance, fundraising activity, market capitalization, and M&A trends seen during the last major economic cycles, including consideration structure, premia and exit multiple analysis, we have identified the following sectors as having strong credentials conducive to M&A: – Consumer durables & apparels – Telecommunications, media & technology – Insurance – Food beverages & tobacco – Opportunities may present themselves in the following sectors especially so in the emerging markets – Banking – Utilities – Chemicals• We expect the following sectors to see little in the way of M&A activity: – Real estate – Auto & componentsBy sector• The consumer durables and apparel sector has seen 12 month EPS growth of 113.1% through to November 2009 suggesting a confident and bullish market with a market value decrease of 8.5% between 2007 and 2009. Follow–on, convertible and corporate bond issuance has been strong in 2009 suggesting that companies in the sector have shored up balance sheets to support the strong earnings potential and market pricing.• Twelve of the 20 largest telecoms IPOs in the sector to reach the market since 2005 are from emerging markets and more notably from MENA. We have already seen serious attempts for domestic consolidation in the emerging markets most notably from Bharti/ MTN. We also expect to see cross-border M&A to take place between low growth developed markets and the high growth opportunities that the emerging markets represent.• Corporate bond issuance in media in the first nine months of 2009 already exceeds the volumes of the last 2 years with USD40.8 billion almost double 2008 figures. Strong
  10. 10. 8 Sector connections borrowing for corporate issuers is due to the high cost of going to the loans market at this time, meaning it is much more cost effective to borrow on the bonds market in the current recession. Follow-on issuance is also up with USD7.2 billion, almost treble last year’s value of USD2.5 billion. • Earnings in the information technology sector are forecasted to grow by 36% over the next 12 months with emerging Asia and developed Europe offering the best prospects. Emerging markets players more than doubled (150%) their market capitalization since 2002 and now account for 14% of the sector’s capitalization. Emerging Asia is now the second largest area by market capital behind North America. • The insurance sector is likely to see regulatory changes that will promote consolidation. The number of public participants in the sector has increased from 92 in 2007 to 97 in 2009, with more companies in North America and Japan. Cross-border activity accounted for as much as 40% of the top 20 deals between 1998 and 2009 with a mixture of intra-European cross-border activity and a degree of transatlantic flow. • In food beverages and tobacco, emerging markets along with Japan offer the best prospects for earnings growth over the next 12 months with estimated 12 month EPS growth above the sector’s average of 8.9%. • Banking has already seen a large degree of consolidation and government bailout activity in 2008 and 2009. However, based on expected improvement in EPS growth and likely regulatory policy in the US that would limit the size and scope of these institutions, there may still be plenty of room for M&A activity. The obvious targets will be in the emerging markets as growing economies in Asia have led to a more competitive global landscape. • Of the 20 largest utilities IPOs to reach the market since 2005 it is worth noting that 7 were from BRIC (Brazil, Russia, India and China) countries, including 4 from India alone. Renewable energy alongside privatizations of the last remaining government controlled entities across developed and emerging market represent some of the main sources of new entrants in the sector. • During the last cycle in chemicals, emerging markets were the key growth areas with 11% market share compared to 7% in 2002. The UK market share contracted to 3% during the last cycle compared to 6% in 2002. Based on analysis of the top 20 IPOs, North America has had 8 newly listed companies compared to 4 from emerging markets. Furthermore, growth in the number of constituents in the developed markets has been confined to North America while emerging markets saw a decline in the number of companies operating in 2009 compared with 2007. • The real estate sector’s mean 12 month EPS growth rate forecast of -1.8% in 2009 is well below the 2002 return of 18.5% and the 2009 world average of 19.2%. The credit crunch has resulted in a steep decline in M&A activity as buyers no longer have access to financing and depressed stock prices have held strategic buyers at bay. Since the height of the last boom in M&A, the number of participants has declined by 20.4% to 109 with the biggest falls in developed markets such as Europe and North America. In the near term, we can anticipate M&A activity to remain relatively flat with moderately priced and attractive opportunities in EMEA and Asia. • Activity in auto and components in 2009 is in line to reach an all time high level, but this is mostly due to the sector’s need to restructure as a result of the collapse of the global economy following the credit crisis. Illustrating the concentration of M&A activity in the sector, it is worth noting that, since 1998, 19 of the 20 largest acquisitions targeting automobile and component companies took place either in the US or in Europe. We therefore expect limited consolidation until the effectiveness of the restructurings and a global recovery result in significantly stronger earnings.
  11. 11. Deal making in high definition 93. Food Beverages and TobaccoExecutive summaryEPS growth of 8.9% in this sector is forecast to grow below the sector average for the next12 months increasing pressure on low growth companies in developed markets to acquiretargets already established in emerging markets.• M&A activity peaked in 2008 with the Anheuser-Busch/InBev deal (USD60 billion) ending 5 years of continuous growth from the 2003 low of USD52 billion. In 2008 a record USD298 billion worth of transactions got announced, 40% of which were initiated by foreign acquirors. (Exhibit 3.1).• Cross-border activity is an essential driver to this sector’s M&A activity. Foreign acquisitions account for 48% of all transactions since 1998, and despite the slow down recorded in 2009 their proportion have increased to 50% in 2009. By comparison cross- border deals only account for 34% of global M&A since 1998 and stand at a record low of 27% so far in 2009. (Exhibit 3.1).• Since 1998 the largest transactions targeting the sector have predominantly been paid in cash with valuations well in excess of the sector’s EBITDA multiple median of 10.7x, especially during the recent leverage bubble. (Exhibit 3.2-4).• The market value of emerging markets players have more than doubled since 2002 and are now worth a combined USD100 billion (up 114%) and accounts for 8% of the global sector’s market capitalization. Nevertheless the US, Europe and the UK still make up for an imposing 85% of the sectors capitalization. (Exhibit 3.7-8)• Emerging markets along with Japan offer the best prospects for earnings growth over the next 12 months with estimated 12 month EPS growth above the sector’s average of 8.9%. (Exhibit 3.6)Exhibit 3.1 Food Beverage and Tobacco targeted M&A Sector M&A ($bn) Cross Border M&A ($bn) MSCI Sector Index MSCI World Index 160 180 Dot.com bubble Leverage bubble 140 160 120 140 100 . Index price M&A ($bn) 80 120 60 100 40 80 20 0 60 1Q98 2Q98 3Q98 4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09
  12. 12. 10 Equity Value/Net Income Rank Value/EBITDA Offer Price/Target Share Price (%) Sector connections 0 10 20 30 40 50 60 0 20 40 60 80 100 0 5 10 15 20 25 30 35 40Jan-98 Jan-98 Jan-98 Exhibit 3.3 Exhibit 3.2 Exhibit 3.4May-98 May-98 May-98Oct-98 Oct-98 Oct-98Mar-99 Mar-99 Mar-99 Jul-99 Jul-99 Jul-99 Sector median*Dec-99 Dec-99 Dec-99May-00 May-00 May-00Sep-00 Sep-00 Sep-00Feb-01 Feb-01 Feb-01 Jul-01 Jul-01 Jul-01Dec-01 Dec-01 Dec-01Apr-02 Apr-02 * Sector median across all charts is represented by this line Apr-02Sep-02 Sep-02 Sep-02Feb-03 Feb-03 Feb-03 Cash Only Cash Only Cash OnlyJun-03 Jun-03 Jun-03Nov-03 Nov-03 Nov-03 Apr-04 Stock OnlyApr-04 Apr-04 Stock Only Stock OnlyAug-04 Aug-04 Aug-04 Jan-05 HybridJan-05 Hybrid Jan-05 HybridJun-05 Jun-05 Jun-05 Price/earnings–Food Beverage and Tobacco acquisitions >$500mmOct-05 Oct-05 Oct-05Mar-06 Mar-06 Mar-06 Rank value/EBITDA–Food Beverage and Tobacco acquisitions >$500mmAug-06 Aug-06 Aug-06Jan-07 Jan-07 Jan-07May-07 May-07 May-07Oct-07 Oct-07 Oct-07 Offer price to target share price–Food Beverage and Tobacco acquisitions >$500mmMar-08 Mar-08 Mar-08 Jul-08 Jul-08 Jul-08Dec-08 Dec-08 Dec-08May-09 May-09 May-09Sep-09 Sep-09 Sep-09
  13. 13. Deal making in high definition 11Exhibit 3.5 Exhibit 3.6 Market value ($m) EPS growth % 12 mths MSCI AC World (U$) MSCI ACWI Fd./Bev./Tob. ($) MSCI AC World MSCI ACWI Fd./Bev./Tob. 27.3 26.0 22,114,240 16,733,020 31,774,960 23,752,480 19.2 15.3 1,303,085 13.6 1,424,755 10.8 8.9 797,885 7.6 672,971 03/31/2000 03/31/2002 06/30/2007 09/30/2009 03/31/2000 03/31/2002 06/30/2007 09/30/2009Exhibit 3.7 Exhibit 3.8 Food Beverage and Tobacco market Food Beverage and Tobacco market capitalisation by region–1Q2002 capitalisation by region–3Q2009 EM EMEA EM Asia EM Lat. Am. EM EMEA EM Asia EM Lat. Am. 51.1% 43.3% 25.7% 22.9% 1.1% 16.3% 0.6% 13.7% 2.1% 2.1% 3.8% 5.0% 2.6% 5.0% 3.3% 1.5% North Europe ex. UK Pacific ex. Japan EM North Europe ex. UK Pacific ex. Japan EM America UK Japan America UK JapanExhibit 3.9 Exhibit 3.10 Food Beverage and Tobacco IPOs Food Beverage and Tobacco follow on offeringsValue ($bn) No. of issues Value ($bn) No. of issues12 70 35 140 31.2 10.3 60 30 120 10 50 25 100 8 7.1 7.1 40 20 80 17.7 6 4.8 30 15 60 4.4 4 3.3 3.1 2.8 20 10 40 2.3 6.6 2.0 5.8 2 5.4 1.2 10 5 3.4 3.23.6 20 0.9 2.5 2.7 1.9 1.6 0 0 0 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009Exhibit 3.11 Exhibit 3.12 Food Beverage and Tobacco convertibles Food Beverage and Tobacco corporate bonds Value ($bn) No. of issues Value ($bn) No. of issues 6 20 80 250 73.2 5.4 18 70 5 63.8 4.6 16 200 60 14 4 3.6 3.6 50 46.7 12 43.7 150 43.0 39.5 3 2.7 10 40 38.0 2.4 27.9 2.2 8 27.8 100 30 26.8 2 1.5 6 21.3 20 18.3 1.0 1.1 4 50 1 0.5 0.5 10 2 0 0 0 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
  14. 14. 12Top 20 Food Beverage and Tobacco acquisitions Sector connections Value Value/ Target Exhibit 3.13Rank Date ($mm) Consideration Premium EBITDA P/E Target Name Nation Sub Sector Acquiror Name Acquiror Nation11/06/08 60,408.1 Cash Only 39.4 15.3 24.6 Anheuser-Busch Cos Inc US Food and Beverage InBev NV Belgium02/05/00 23,699.2 Cash Only 42.3 14.7 28.7 Bestfoods US Food and Beverage Unilever PLC UK28/04/08 23,194.2 Cash Only 28.1 18.5 34.0 William Wrigley Jr. Co US Food and Beverage Mars Inc US14/03/07 21,489.4 Cash Only 57.7 15.8 28.6 Altadis SA Spain Tobacco Imperial Tobacco Overseas Hldg UK08/08/08 19,826.7 Other 0.0 12.9 16.4 British American Tobacco PLC UK Tobacco Shareholders Switzerland25/06/00 19,357.5 Cash Only 6.5 13.9 39.8 Nabisco Holdings Corp(Nabisco) US Food and Beverage Philip Morris Cos Inc US07/09/09 19,309.6 Cash and Stock Combination 31.0 15.2 27.9 Cadbury PLC UK Food and Beverage Kraft Foods Inc US15/12/06 18,799.9 Cash Only 13.3 20.3 Gallaher Group PLC UK Tobacco JTI(UK)Management Ltd UK25/10/07 18,631.5 Unknown 36.6 21.2 24.6 Scottish & Newcastle PLC UK Food and Beverage Sunrise Acquisitions Ltd Jersey05/04/05 17,765.2 Cash and Stock Combination 36.4 13.4 21.1 Allied Domecq PLC UK Food and Beverage Goal Acquisitions Ltd Guernsey09/07/07 16,824.9 Other 37.7 24.6 37.2 Koninklijke Numico NV Netherlands Food and Beverage Groupe Danone SA France25/06/00 15,151.5 Unknown 222.1 10.9 37.9 Nabisco Group Holdings Corp US Food and Beverage RJ Reynolds Tobacco Holdings US04/12/00 14,306.0 Cash and Stock Combination 18.5 15.9 36.7 Quaker Oats Co US Food and Beverage PepsiCo Inc US08/09/08 11,617.7 Cash Only 28.7 11.9 19.3 UST Inc US Tobacco Armchair Merger Sub Inc US20/04/09 10,757.6 Cash and Stock Combination 44.8 7.2 33.6 Pepsi Bottling Group Inc US Food and Beverage PepsiCo Inc US17/07/00 10,528.7 Other NP N/M Pillsbury Co(Diageo PLC) US Food and Beverage General Mills Inc US31/03/08 8,888.0 Unknown 23.3 33.8 Vin & Sprit AB Sweden Food and Beverage Pernod Ricard SA France19/12/00 8,169.6 Cash Only NP NP Seagram Co-Alcohol & Spirit Canada Food and Beverage Investor Group UK08/03/99 7,831.8 Unknown NP NP RJ Reynolds International Netherlands Tobacco Japan Tobacco Inc Japan03/03/04 7,758.0 Other NP NP John Labatt Ltd Canada Food and Beverage Ambev Brazil
  15. 15. Top Food Beverage and Tobacco IPOs since 2005Issue Date Proceeds ($mm) Issuer Domicile Sub Sector Exchange PE Backed? Exhibit 3.1412/14/05 1,598.9 Goodman Fielder Ltd Australia Food and Beverage Australia No New Zealand07/19/05 1,170.5 RHM PLC UK Food and Beverage London Yes03/15/08 1,047.9 Want Want China Holdings Ltd China Food and Beverage Hong Kong No05/24/06 979.8 Thai Beverage PCL Thailand Food and Beverage Singapore No02/10/09 828.0 Mead Johnson Nutrition Co US Food and Beverage New York No12/08/05 822.1 Britvic PLC UK Food and Beverage London03/29/07 774.3 JBS SA Brazil Food and Beverage BOVESPA No07/15/05 614.4 Almarai Co Ltd Saudi Arabia Agriculture & Livestock Saudi Exch No01/28/08 565.8 Sabeco Vietnam Food and Beverage Hanoi No06/26/07 527.5 Marfrig Frigorificos e Brazil Food and Beverage BOVESPA No12/07/07 516.8 Uni-President China Holdings China Food and Beverage Hong Kong No03/15/07 459.9 China Agri-Inds Hldg Ltd Hong Kong Food and Beverage Hong Kong No11/03/06 440.3 Dangote Sugar Refinery Plc Nigeria Food and Beverage Nigeria No11/15/05 401.9 Cosan SA Industria e Comercio Brazil Food and Beverage BOVESPA No05/09/08 370.9 BAT Myronivskyi Khliboprodukt Ukraine Agriculture & Livestock London No10/24/07 370.0 Agrenco Ltd Brazil Agriculture & Livestock BOVESPA No07/19/07 359.3 Acucar Guarani SA Brazil Food and Beverage BOVESPA No SOMA02/14/07 353.3 China Huiyuan Juice Group Ltd China Food and Beverage Hong Kong Yes02/28/07 321.4 Samling Global Ltd Malaysia Agriculture & Livestock Hong Kong No05/05/06 317.2 Coca-Cola Icecek Uretim AS Turkey Food and Beverage Istanbul No Deal making in high definition 13
  16. 16. 14 Sector connections 4. Household & Personal Products Executive summary We expect minimal M&A activity from this sector which accounts for only 1.9% market share of all sectors coupled with low forecasted EPS over the next 12 months. • Equity performance across the sector over the last 12 months is disappointingly low at (9)%. North America, the largest market by capitalization (70% of global market) was the worse hit, down 14% in the last year. (Exhibit 4.7-8). • Earnings growth rates forecast for the sector is historically low at 2.7% for the next 12 months. By comparison, in June 2007, just before the credit crisis started, analysts estimated the sector to outgrow the global market with a 12 month growth rate of 14%. Today, emerging Asia and Latin America offer the best prospect for growth with expected +42% and +12% respectively. (Exhibit 4.6). Exhibit 4.1 Household & Personal Products targeted M&A Sector M&A ($bn) Cross Border M&A ($bn) MSCI Sector Index MSCI World Index 14 180 12 160 10 140 . Index price M&A ($bn) 8 120 6 100 4 80 2 0 60 98 98 98 98 99 99 99 99 00 00 00 00 01 01 01 01 02 02 02 02 03 03 03 03 04 04 04 04 05 05 05 05 06 06 06 06 07 07 07 07 08 08 08 08 09 09 09 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q

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