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ACG Presentation
1. Management and Private Equity
Partnering to Create Value
September 29, 2004
ACG Conference
Beverly Hills Hotel
Bumble Bee Seafoods
2. 2
Bumble Bee has a colorful history
Castle & Cook acquires BBS
Castle & Cook sells to Management / Private
Equity group
Management sells to Pillsbury
Pillsbury sells to Unicord (Thailand)
Unicord files for bankruptcy and sells to International Home
Foods (IHF)
BBS/IHF acquire Clover Leaf and Orleans
IHF sold to ConAgra Foods
Management / Centre Partners acquire Bumble Bee
BBS completes reverse merger with Connors Bros. Income Fund
(Canada)
1985
1988
1989
1998
1999
2001
2004
1962
2003
1997
3. 3
The recent evolution began when
ConAgra acquired IHF
Chef Boyardee
Gulden’s Mustard
Jiffy Pop
Pam Cooking Spray
Hunt’s Tomato Products
Hunts Ketchup
Orville Redenbacher / Act II
Wesson Oil
Bumble Bee did not fit
ConAgra’s Synergies
IHF Brands ConAgra Brands
4. 4
ConAgra had three options
ConAgra maintained Bumble Bee as a separate business
unit after the IHF acquisition
With changes in senior management, they decided to move
towards ‘functional’ centralization of their food businesses
In response to this strategy, Bumble Bee management
presented ConAgra with three options:
– Fully merge canned seafood into shelf stable grocery
– Consolidate all of ConAgra’s seafood businesses under
the Bumble Bee umbrella
– Sell Bumble Bee
ConAgra chose to sell
5. 5
A ‘limited sale’ process was utilized
ConAgra chose a ‘limited sale’ process
A handful of private equity firms were invited
– This included Centre Partners whom management knew
Preliminary indications of interest were followed by
management presentations
Centre Partners was selected and given exclusivity in
July 2002
6. 6
Centre ‘teamed’ with Management
Centre teamed with Management in evaluating the
business
Strong gains had been realized but further improvements
were in the works
Importantly, Centre believed in management’s Vision
Completing the transaction took almost 10 months
Management ‘put their money where their mouth was’ by
acquiring almost 20% of the business
7. 7
Attractive transaction value /
reasonable debt levels
Transaction Value of $197 million
– 5.8X TTM EBITDA at time of valuation
– 4.4X TTM EBITDA at time of Closing
– 3.5X TTM EBITDA first 12 months post-Closing
Debt of $162.2 million represented 3.6X TTM EBITDA at
Closing
– Fleet / Bank of America led financing consortium
$145 million revolving line of credit; $96 million drawn at Closing
$26.2 million term loan
– Audax and American Capital provided $40 million in mezz debt
8. 8
Centre Partners
Entities
Bumble Bee
Holding LP
Luxco
(SARL)
Finsotec
SA
(Ecuador)
BCP Ecuador
SA
(Ecuador)
Paramount
Seafoods
PTY Ltd
(Australia)
SEAFMAN
(Ecuador)
Kent
Warehouse
LLC
50%
100%100% 100%
100%
100%
Bumble Bee
GP LLC
Bumble
Bee LLC 1
100%
Buzz Corporation
(Cayman)
100%
100%
Controlling
Vote
Clover Leaf LP
(Canadian LP)
99.99%
LP
NSULC
.01% GP
100%
Mayaguez
Water Trt.
(Puerto
Rico)
100%
Limited partnership structure
100%
9. 9
Key challenge was the transition to
a ‘stand alone’ entity
ConAgra had provided ‘support’ service
– Information technology
– Treasury & currency management
– Accounts receivable and payable
– Insurance and benefits
– Customer service / deduction management
– Legal and tax
The transition was completed in six months
10. 10
And management focus shifted
towards creating equity value
Divested non-core assets
– Australian business
– Ecuador processing facility
Completed sale – leaseback of California
processing facility
Aggressively drove down working capital
Management focus shifted from ‘PBT’ to ‘Cash
Flow’
11. 11
Business continued to demonstrate
strong performance
Despite challenge of moving to ‘stand-alone’,
business continued to outpace projections
TTM sales through April 2004 up 4.3%
Market shares up in all major categories
New, higher margin products gained distribution
TTM EBITDA through April 2004 up 26.7%
12. 12
And we began to embark on our
growth strategy
Synergistic acquisitions that fit with core
competencies
– Protein based
– Canned food processing
– Sales, logistics, back room
– ‘Plug and play’
Fair valuations in 5x – 7x EBITDA range
13. 13
Connors was target, but…
Bumble Bee is #1 or #2 in virtually every category of
canned seafood with revenues of $535 million
Connors was a natural fit
– Leading global producer of sardines
– 52% share of U.S. sardine category; 70%+ share of Canadian
category
– Revenues of approximately $115 million
– Duplicative sales and administrative organization
Along with product / brand synergy, significant cost
synergies in the areas of SG&A
Connors was public on the TSE and was trading at a
9X EBITDA multiple
14. 14
Unique ‘Income Trust’ Structure
Connors structured as a Canadian “Income Trust”
– Structure beginning to evolve in the U.S. in form of IDS
– Income Trusts are an attractive public vehicle for
companies that deliver reliable and sustainable cash flow –
even if they show ‘slow’ or ‘no’ top-line growth
– 80 – 95% of ‘distributable cash’ is paid out monthly in form
of dividend
– Stock price is based on cash distributions with yields
ranging from 7.5 – 11.0% (based on historical
performance)
Income Trusts are an attractive acquisition vehicle due
to the ability to raise relatively inexpensive capital
15. 15
Centre relationship with CIBC
was catalyst
Centre Partners had a relationship with CIBC who
represented Connors and who was working with
Centre on another transaction
Connors had engaged CIBC to help them identify
acquisition targets - but they were thinking small
With CIBC, Centre negotiated a ‘reverse merger’
where Connors, the smaller company, acquired
Bumble Bee
16. 16
Valuation was favorable
Centre / Management had acquired Bumble Bee from
ConAgra at a 4.4X TTM EBITDA multiple
– $197 million transaction value
– $162 million in debt
– $35 million in equity
Connors valued Bumble Bee at 7X forward 12 month
EBITDA which was accretive to Connors unitholders
– $385 million valuation
Centre/Management received cash and continued to be the
largest shareholder with a 31.7% equity stake
Bumble Bee took over management of the combined
business
17. 17
Tax implications required complex
structure
Bumble Bee Seafoods, LLC(3)
(Delaware)
(“Bumble Bee Seafoods”)
Clover Leaf Seafoods, L.P. (2)(4)
(Ontario)
(“Clover Leaf Seafoods”)
Connors Bros.
Income Fund
(Ontario)
(the “Fund”)
Black’s Harbour
Transfer Ltd.
(New Brunswick)
(“Blacks Harbour
Transfer”)
Connors Bros., Limited
(New Brunswick)
(“Connors Bros.”)
Connors
Commercial Trust
(Ontario)
(“Connors Trust”)
100% of Connors Shares
Connors Notes
100% of Connors Trust Units
Connors Trust Notes
31.7% of
Limited
Partnership
Interest
23.5% of
Limited
Partnership
Interests
44.8% of Limited
Partnership
Interests
100% of
Stinson Shares
31.7%
Class B
Interest
Unitholders
100% of Blacks Harbour
Transfer Shares
Blacks Harbour Transfer
Notes
Stinson Notes
Stinson Notes
Stinson Seafood (2001), Inc.
(Delaware)
(Stinson”)
Bumble Bee
Holdings II, LLC.
(Delaware)
(“New Holdings”)
Connors
CL GP Limited
(Canada)
(“Clover Leaf GP”)
100%
Bumble Bee Note
General
Partnership
Interest
Credit
Facility
Indirect(2)
Indirect(1)
68.3%
Class A
Interest
18. 18
Transaction well received by
investment community
As part of the transaction, CD$250 million needed to be
raised
Management and CIBC undertook a 7 day ‘road show’
More than CD$400 million of commitments were obtained
from institutional investors
The story of growth and synergy was well understood
Conservative debt ratio of 1.5X was maintained with
Fleet / Bank of America again being the lead bank
Transaction completed in April 2004
19. 19
Integration completed rapidly
U.S. sales, marketing, logistics, finance, IT and
customer service integrated in first 60 days
Canada integrated in 90 days
International integration will be fully completed by
end of calendar year
Annual SG&A cost synergy estimated at $5 – 7
million; 25% - 35% of Connors’ prior year EBITDA
20. 20
Model for future transactions
The Connors transaction will be the future model
– Identify companies that fit core competencies but are
not ‘strategic’ for their owner / parent
– Establish fair value based on historical earnings
– Ensure immediate accretion to Connors unit holders
– Integrate SG&A organizations quickly and efficiently
– Drive cost synergies to increase distributions
Transactions to be financed with a
combination of debt and new equity
21. 21
Management and Private Equity
working together to create value
• Management knew they had a solid business with strong
growth potential
• The Company had a Vision that their corporate parent did
not share
• Centre Partners evaluated the business and understood
Management’s Vision
• A ‘partnership’ was created where both Management and
Centre had the same objectives
‘Partnering’ has generated significant value