The Canadian Tire/Forzani Group transaction has the potential to significantly change the landscape of Canada’s retail industry. Comments from our Corporate Finance Group.
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Forward-Looking Statements
Statements contained in this presentation that are not historical facts are forward looking statements which involve certain risks and uncertainties including, but not limited to, risks associated with the uncertainty of managing rapidly changing technologies, limited access to capital, competition, the ability to attract and retain qualified employees, our ability to execute our strategy, the uncertainty of the future performance of our partner companies, acquisitions and dispositions of additional partner companies, the inability to manage growth, government regulation and legal liabilities and the effect of economic conditions in the business sectors in which our partner companies operate, negative media coverage and other uncertainties as described in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K.
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Forward-Looking Statements
Statements contained in this presentation that are not historical facts are forward looking statements which involve certain risks and uncertainties including, but not limited to, risks associated with the uncertainty of managing rapidly changing technologies, limited access to capital, competition, the ability to attract and retain qualified employees, our ability to execute our strategy, the uncertainty of the future performance of our partner companies, acquisitions and dispositions of additional partner companies, the inability to manage growth, government regulation and legal liabilities and the effect of economic conditions in the business sectors in which our partner companies operate, negative media coverage and other uncertainties as described in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K.
Safeguard does not assume any obligation to update any forward looking statements or other information contained in this presentation.
Why Own Safeguard?
- Full Value Yet to be Realized
- Ownership Stakes in Exciting Partner Companies
- Top Performance of Proven Team
- Financial Strength, Flexibility and Liquidity
- Strong Alignment of Interests
Forward-Looking Statements
Statements contained in this presentation that are not historical facts are forward looking statements which involve certain risks and uncertainties including, but not limited to, risks associated with the uncertainty of managing rapidly changing technologies, limited access to capital, competition, the ability to attract and retain qualified employees, our ability to execute our strategy, the uncertainty of the future performance of our partner companies, acquisitions and dispositions of additional partner companies, the inability to manage growth, government regulation and legal liabilities and the effect of economic conditions in the business sectors in which our partner companies operate, negative media coverage and other uncertainties as described in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K.
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Why Canadian Tire is interested in Forzani
1. Corporate Finance & Retail Groups
Why Canadian Tire is Interested in Forzani
Our Views on the Transaction and
Issues that We Consider Relevant to Our Clients and Contacts
Montréal, May 2011
2. What Does This Mean to You
RSM Richter Chamberland has analyzed Canadian Tire’s offer to acquire the Forzani Group. The offer is
valued at $771 million and has the potential to significantly change the landscape of Canada’s retail sporting
goods industry. This offer illustrates once again the value that acquirers attribute to the Canadian retail space.
2
3. Canadian Tire Offer for Forzani
• Offer Price - $771 million
• $26.50 / share offer
– 45% premium over recent trading price of $18
• Offer implies a 7.1x Jan 2011 year-ended EBITDA of $110 million
• Potential annual synergies estimated by Canadian Tire - $35 million
– Supply chain
– Purchasing
– Selling, general & administrative expenses
• Offer represents a multiple of 5.4x EBITDA of $145 million (including synergies)
3
4. Forzani at a Glance
• 321 corporate and 213 franchise stores Banner Stores Banner Stores
across Canada
• $1.4 billion revenues, split: 140 19
– 73% retail
72 14
– 27% wholesale
• Retail revenue split:
65 13
– 40% soft goods
– 32% footwear 64 7
– 28% hard goods
• EBITDA - $110 million 54 6
53 Other 27
4
5. Why is Forzani a Strategic Interest
to Canadian Tire
• Largest Canadian sporting goods retailer (534 locations) - 20% market share
• Canadian Tire has a 10% market share in the sporting goods industry and understands the market
• Well recognized and respected banners, each focused on its own niche
• Over 200 franchises (minimizing capital expenditure and working capital requirements)
• Valuable leases (financial and strategic importance)
– Defensive strategy against US competitors entering the Canadian market
– Higher proportion of mall based stores than Canadian Tire
• Canadian Tire needs growth and Forzani can be a platform for future acquisitions
• Relatively few product overlaps (Forzani sales are 70% soft goods and footwear)
5
6. Points of Interest
For Canadian Retailers For Sporting Goods Retailers
• Locations and lease terms can be great value • Get ready for more consolidation
drivers
― Strategic positioning nationwide For Wholesalers
― Barriers to entry for foreign competition • Will this continue to be a level playing field?
• Brand names are a value driver • Opportunity for your business to expand?
• Position in niche markets can be a value ― Cross merchandising of private label soft
driver goods between Forzani, Canadian Tire
(or Mark’s Work Warehouse)?
• Is franchising a good thing?
Good Bad
Royalties Controlling the brand
Minimize capital expenditure and Guarantees to franchisees’ banks
working capital requirements and landlords
Sharing profits
Managing independent entrepreneurs
6
7. Corporate Finance Team Leaders
Mathieu Gauvin, CA, CFA, CBV David Pelletier, LL.B., MBA, CBV
Partner Vice President
Corporate Finance Group Corporate Finance Group
T 514.934.8699 T 514.934.3417
mgauvin@rsmrichter.com dpelletier@rsmrichter.com
Raymond Massi, CA, CIRP Alon Wexler, CA, CBV
Partner Principal
Corporate Finance Group Corporate Finance Group
T 514.934.3537 T 514.934.3531
rmassi@rsmrichter.com awexler@rsmrrichter.com
Andrew Michelin, CA, CBV, ASA
Partner
Corporate Finance Group
T 514.934.3594
amichelin@rsmrichter.com
7
8. Retail Team Leaders
Phil Lichtsztral, CA Gilles Benchaya, CA
Partner Partner
Assurance, Retail Consulting Services Group Insolvency
T 514.934.3426 T 514.934.3496
plichtsztral@rsmrch.com gbenchaya@rsmrichter.com
Marie-Claude Frigon, CA
Partner
Assurance, Retail Consulting Services Group
T 514.934.3448
mfrigon@rsmrch.com
8