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RPC Group Plc
Acquisition of Letica and Fully-underwritten Rights Issue
101
RPC Group Plc
Acquisition of Letica Corporation and Fully-underwritten Rights Issue
February 2017
RPC Group Plc
Acquisition of Letica and Fully-underwritten Rights Issue
102
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RPC Group Plc
Acquisition of Letica and Fully-underwritten Rights Issue
103
Compelling strategic acquisition in line with our Vision 2020 Letica Transaction Summary
Transaction
Notes
1. FX rate: £1.00 = $1.25
2. Adjusted EBITDA defined as reported EBITDA before capitalisation of certain expenses, stock valuation policy adjustments and non-recurring / other costs
3. Refer to slide 11 for details 4. Net proceeds of c. £540m after expenses
● RPC will acquire Letica for upfront cash consideration of $490m (£391m1), on a cash-free and debt-free basis
− Represents a multiple of 8.5x Adjusted EBITDA2 (for FY ended 30 June 2016) of $57m (£46m1), before synergies
● Potential additional earn-out payment3 of up to $150m (£120m1) in FY 2020, based on future financial performance
− If maximum earn-out achieved, represents a multiple of 6.4x average two-year EBITDA of $101m (£80m1) for the
period ending 1 July 2019
● Fully underwritten 1 for 4 rights issue to raise gross proceeds of approximately £552m4
● Proceeds used to part fund upfront consideration for Letica and reduce existing drawn debt following recent acquisitions
− Total enterprise value of c. £850m
● Target enlarged group leverage of c. 2.1x net debt / EBITDA
● Opportunity to acquire a leading North American manufacturer and distributor of rigid plastic packaging and foodservice
products serving building and construction, foodservice, food, chemical and retail markets
● Fits with Vision 2020, creating a meaningful RPC presence outside of Europe
● Provides well-invested U.S. business platform in anticipation of a global consolidation trend
● Potential buy-and-build platform in North America
● Meets RPC’s strict acquisition criteria and earnings accretive in the first full year
Financing
Strategic
rationale
RPC Group Plc
Acquisition of Letica and Fully-underwritten Rights Issue
104
● Founded and privately-owned since 1968
● Headquartered in Rochester, MI
● FY 2016 sales of $450m1 (£359m1) and Adjusted EBITDA of $57m1,3
(£46m1)
− 100% of sales in North America
● Sells to c. 750 customers
− Average top-ten Rigid Packaging customer tenure of >20 years
− Average top-ten Foodservice Packaging customer tenure of >14 years
● Over 250 rigid plastic and paper-based product configurations
● Robust engineering capabilities in injection moulding, including
proprietary, in-house design centre
● Well-capitalised manufacturing footprint with 13 owned plants in the U.S.
● Integrated distribution network with over 400 tractors and trailers
● Non-unionised workforce of c. 1,750
Leading manufacturer of rigid packaging and foodservice products Business overview of Letica
Source: Letica Management information
Notes
1. Stated financials and segment percentage of sales as of FY ended 30 June 2016 (Letica); FX rate: £1.00 = $1.25
2. Excludes Letica’s distribution business (<1% Letica sales)
3. Adjusted EBITDA defined as reported EBITDA before capitalisation of certain expenses, stock valuation policy adjustments and non-recurring / other costs
Sales by Operating Segment (2016)1,2
Rigid Packaging
71%
Foodservice Packaging
29%
Representative Products
RPC Group Plc
Acquisition of Letica and Fully-underwritten Rights Issue
105
Current With Letica
Sales1,2 c. $280m c. $730m
# of Manufacturing Facilities 7 20
# of Employees c. 850 c. 2,600
Polymer Purchase <50kt c. 160kt
RPC North America Profile
Extended geographic footprint and greater ability to serve customers Benefits to RPC Group
Where we manufacture in 2017
Where we sell
Europe75%
N.A.18%
Other 7%
Increase
from c. 8%
pre-Letica
Provides nationwide footprint in the United States
Enlarged RPC Regional Sales Mix1
Enlarged RPC Group Sales2,3
Notes
1. 2015/16 sales by destination, to include a full year of announced acquisitions
2. FX rate: £1.00 = $1.25 3. 2017E financials: average consensus estimates + ESE (31 December 2016) + Astrapak (28 February 2016) + Letica (30 June 2016)
2017E RPC:Consensus + ESE + Astrapak
With Letica
c.£2.9b
c.£3.3b
RPC Group Plc
Acquisition of Letica and Fully-underwritten Rights Issue
106
Greater relevance in the global supply chain Benefits to RPC Group
Customers Polymer
325kt
850kt
1,100kt
Pre-PromensAcquisition
Sept-2016 Run-rate Post AcquisitionRun-rate
Projected N.A. Polyethylene Demand and Capacity
Letica >100kt of
annual polymer
purchases,
primarily HDPE
RPC Polymer Purchasing
● Enhanced positioning with multi-national customers
● Improved ability to respond to global RFP requirements
● Greater production and design capabilities enhancing
responsiveness to customers
● Increased points of contact with decision makers 5
10
15
20
25
30
2014 2016E 2018E 2020E
Domestic Demand Capacity
(Mill
ion M
T)
PE capacity
additions
expected to
outpace
domestic
demand
Source: Company information, IHS Chemicals
RPC Group Plc
Acquisition of Letica and Fully-underwritten Rights Issue
107
Shared commitment to innovation and product development
● Robust engineering capabilities supported by dedicated,
full-service design centre in Rochester, MI
− 48 engineers and technicians with >10 years average
experience
− Close partnership with customers to develop
customised solutions
− In-house automation engineers design and build
custom post-moulding processes
− Proprietary IP developed and controlled internally;
50+ patents today
● 28 design and engineering centres worldwide
● Over £100m in capital investment in FY 2016,
including investment in new product
development and process technology
● In-house tooling and mould design allows
integrated process expertise across all main
plastic conversion technologies
● 50+ innovation awards and finalist positions
since 2012
● Close partnership with customers as a concept-
to-reality team, taking customer needs and
developing finished products
Lightweight PK
Series
Hinged Lid Series Non-Round Series
“Easy Open”
Recent Letica Developments
Source: Letica Management information, company information
Plastic Conversion Technologies
Shared
culture of
innovation
− Injection Moulding
− Blow Moulding
− Thermoforming − Reaction Injection Moulding
− Rotational Moulding
− Blown Film Extrusion
Benefits to RPC Group
RPC Group Plc
Acquisition of Letica and Fully-underwritten Rights Issue
108
Compelling fit with Vision 2020
Meaningful presence in
North America
● Well-capitalised North American footprint, with 13 owned manufacturing facilities in 11 states
● Approximately 1.7 million sq. ft. manufacturing and warehouse footprint
● Integrated distribution network supports attractive delivery and turnaround times
● Expected to more than double RPC’s North American revenues and polymer purchases1
● Resilient and growing business with incremental cost savings and productivity plans in place by
Letica Management to expand margins
● Highly-visible additional cost synergy opportunities for RPC (e.g. resin buy, distribution); additional
potential upside from best practice sharing and cross-selling
● Manageable integration requirements; key Letica family members remaining with the business
Letica acquisition highlights
Strategic platform for
continued growth and
investment
● Embedded culture of innovation and new product development
● Deep injection moulding expertise with differentiated design and printing capabilities
● Broad portfolio of over 250 product configurations
Attractive financial profile
with clear synergy
opportunities
Strong positions in
attractive markets
● Leading positions in growing end markets
● Important partner for many blue-chip, North American customers and brands
● Primary supplier to its largest customers
Notes
1. Based on Letica revenue and polymer purchases for FY ended 30 June 2016
RPC Group Plc
Acquisition of Letica and Fully-underwritten Rights Issue
109
Letica Financials ($m)
Business generating robust margins Attractive financial profile with clear synergy opportunities
Notes
1. Adjusted EBITDA defined as reported EBITDA before capitalisation of certain expenses, stock valuation policy adjustments and non-recurring / other costs
2. Adjusted EBITDA less adjusted depreciation and amortisation expense. For the purpose of calculating Adjusted EBIT, depreciation and amortisation have been assumed to be approximately $25m
based on the Directors’ understanding of the sustainable level of depreciation and amortisation in Letica’s business
3. Includes $5m (£4m) of pre-tax synergies
● Accelerating financial performance, driven by above-GDP volume growth rates across Rigid Packaging product lines
− FY 2014 to FY 2016 volume CAGR of >7% (Rigid Packaging)
● Strong Adjusted EBITDA margin expansion due to cost management and productivity
● Attractive pipeline of identified new business opportunities to drive incremental growth and profitability
● Cost savings and productivity initiatives identified by Letica Management, incremental to RPC’s cost synergy guidance
● Improved sales and profitability for the six-month period ended 31 December 2016, due to volume growth in both Rigid Packaging and Foodservice
FY
June 2014
FY
June 2015
FY
June 2016
Sales $445 $459 $450
Adjusted EBITDA1 40 43 57
% of Sales 9.0% 9.4% 12.8%
Adjusted EBIT2 15 18 32
% of Sales 3.4% 4.0% 7.2%
Adjusted EBIT + Synergies3 20 23 37
% of Sales 4.5% 5.0% 8.3%
RPC Group Plc
Acquisition of Letica and Fully-underwritten Rights Issue
110
Highly-visible cost savings and manageable integration requirements
Targeted ongoing annual pre-tax cost synergies of at least $5m (£4m1) per annum and incremental cost saving initiatives identified by
Letica Management of c. $12m (£10m1) per annum expected to be realised within the first two full years. Minimal expected cash costs
to achieve
Synergy opportunities – at least $5m (£4m1) per annum (c. 1.1% of Letica sales2)
● Polymer procurement synergies
● Distribution/logistics optimisation, utilising Letica’s truck business
● Elimination of duplicative corporate overhead structures
● Further cost base optimisation through best-practice exchange
Incremental cost savings opportunities – c. $12m (£10m1) per annum
● Closer alignment of current Letica benefit programs to market terms
● Enhanced efficiency in selling, general and administrative expenses
● Manufacturing cost improvements
Integration plan
● Letica will operate as a standalone business within the RPC Superfos division
– Letica brand name to be retained and actively marketed
– Current Letica Management team to be retained, including CEO, business unit leaders and VP of Operations
Attractive financial profile with clear synergy opportunities
Notes
1. FX rate: £1.00 = $1.25
2. FY ended 30 June 2016 (Letica)
RPC Group Plc
Acquisition of Letica and Fully-underwritten Rights Issue
111
Letica Earn-out Mechanism Earn-out Structure
If $70m (£56m1) EBITDA p.a. achieved then no
earn-out, acquisition multiple drops to ~7.0x
Threshold
EBITDA
Maximum Earn-out
Achievement
Two-Year Cumulative EBITDA2 $140 $201
Consideration at Close $490 $490
Earn-out Paid 0 150
Total Consideration $490 $640
Two-Year Average EBITDA $70 $101
Adjusted D&A3 25 25
Average Two-Year EBIT $45 $76
Total Consideration / Two-Year Average EBITDA 7.0x 6.4x
Notes
1. FX rate: £1.00 = $1.25
2. Two-Year cumulative EBITDA for the period ending 1 July 2019
3. For the purpose of calculating Adjusted EBIT, depreciation and amortisation have been assumed to be approximately $25m based on the Directors’ understanding of the sustainable level of
depreciation and amortisation in Letica’s business
Earn-out Structure Earn-out Sensitivity ($m)
● Maximum earn-out payment of $150m (£120m1),
based on Letica’s financial performance during the
two years commencing 1 July 2017
● Maximum earn-out payment requires Letica to
achieve at least $201m (£160m1) of EBITDA over
the two-year period ending 1 July 2019
● No earn-out payments payable unless Letica
achieves over $140m (£112m1) EBITDA over the
two-year period ending 1 July 2019
● Earn-out payment to be accrued on a ratable basis
● Synergies to be included
● Continued employment of Anton and Mara Letica
for the two year earn-out period is a condition
RPC Group Plc
Acquisition of Letica and Fully-underwritten Rights Issue
112
Acquisition criteria and Vision 2020 financial metrics
RPC acquisition criteria
● Strategic fit
● Strong incumbent management
● Financial track record
● Financial criteria:
− ROCE > WACC of RPC
− Quantifiable cost synergies
− Earnings accretion
− Impact on Group KPIs
Vision 2020 financial metrics
● RONOA of at least 20%
● Return on sales of at least 8%
Clear acquisition rationale and strategy
Strong incumbent management team remaining in place
Growing profitability from diversified geographic and product markets
Letica RONOA of >20%1,2
Letica ROS of >10%1
Letica business and financial benchmarking
Notes
1. Together with $5m (£4m) of pre-tax cost synergies and run-rate impact of incremental cost savings opportunities; FY ended 30 June 2016 (Letica)
2. RONOA calculated as adjusted operating profit divided by the average of opening and closing property, plant and equipment and working capital over the previous 12 months
ROCE1 ahead of WACC
Polymer purchasing, distribution optimisation, removal of overhead
and best practices
EPS accretion expected in first full financial year post acquisition
See below
Letica benchmarking
RPC Group Plc
Acquisition of Letica and Fully-underwritten Rights Issue
113
Overview of acquisitions since 30 September 2016
Status Announced Completed Announced Completed Completed
Sales £359m2
(Jun 16A)
£171m3 (Dec 16E)
£81m (Feb 16A)
£51m3 (Dec 16E)
£52m (last reported)
End
markets
• Industrial
• Consumer
• Foodservice
• Waste storage • Industrial
• Consumer
• Pharma
• Personal care
• Industrial
• Chemical
• Personal care
• Consumer
Products
• Round and
non-round
containers
• Paper and plastic
cups and food trays
• Mobile and
stationary waste
storage containers
• Industrial and
consumer product
packaging
• Medical devices
• Pharma packaging
• Personal care
packaging
• Rigid plastic
packaging
• Components
• Closures
• Shrink film
Region North America Europe South Africa Europe Europe
Australia
Notes
1. Jagtenberg, Sanders and Synergy Packaging acquired since September 2016
2. FX rate: £1.00 = $1.25
3. ESE announced sales of €200m, Plastiape announced sales of €60m, FX rate: £1.00 = €1.17
Others1
Recently-announced acquisitions
Total consideration, excluding Letica, of c. £460 million allocated to acquisitions
representing an underlying EBITDA multiple below 8x (pre-synergies)
RPC Group Plc
Acquisition of Letica and Fully-underwritten Rights Issue
114
Acquisition of ESE World B.V. Recently-announced acquisitions
Source: Company information
Mobile container
production site
R&D centre & assembly
for steel products
Markets with own
sales offices
Leading design and engineering company in temporary waste
solutions ● Europe’s largest “pure play” temporary waste storage solutions provider
with leading European market positions and a diversified customer base
● Well-known European brands include ESE, Citec, Multicom and PWS
● Manufacturing footprint includes one facility in France and one facility in
Germany, in addition to the R&D centre in Germany
● Employs c. 600 people of which c. 200 in sales and product
development
● Headquartered in Maastricht, Netherlands
● Acquisition rationale
– Strategic opportunity to acquire an established growth platform in European waste storage solutions market
– Enhances overall polymer procurement position
– Complementary business to RPC’s existing materials handling business
RPC Group Plc
Acquisition of Letica and Fully-underwritten Rights Issue
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Acquisition of Astrapak Recently-announced acquisitions
Source: Company information
LIMPOPO
GAUTENG
MPUMALANGA
KWAZULU
NATAL FREE STATE
NORTH WEST
NORTHERN
CAPE
WESTERN
CAPE
EASTERN
CAPE
Leading design and engineering company in South Africa using all
main conversion technologies - a ‘mini RPC’
● Leading, specialised manufacturer of rigid plastic products in South Africa
● Packaging solutions for petrochemical, cosmetics, personal care and food
industries
● Nine manufacturing plants across South Africa
● Employs c. 1,100 people
● Acquisition rationale
– Growth platform for fast-growing African continent
– Extension of RPC’s contact with a number of existing major international customers
– Scalable platform from which further organic and buy-and-build strategy can be initiated
RPC Group Plc
Acquisition of Letica and Fully-underwritten Rights Issue
116
Acquisition financing structure
● £552m1 rights issue fully underwritten by Deutsche Bank, Jefferies and BofA Merrill Lynch
– 1 for 4 rights issue at 665p
– Discount to TERP: c. 32.2%
– Proceeds used to part fund upfront consideration for Letica ($490m / £391m)2,3 and reduce existing drawn debt following
acquisitions with a total c. £460m of enterprise value made in the second half of FY 2017
– Fundraising not conditional on completion of the Letica acquisition
– No shareholder approval required
● Target enlarged group leverage of c. 2.1x net debt / EBITDA4
● New $750m Bridge Facility to provide additional headroom for the enlarged group
Transaction structure and timetable
Notes
1. Net proceeds of c. £540m after expenses
2. Subject to customary adjustments
3. FX rate: £1.00 = $1.25
4. Defined as reported EBITDA before capitalisation of certain expenses, stock valuation policy adjustments and non-recurring / other costs
RPC Group Plc
Acquisition of Letica and Fully-underwritten Rights Issue
117
Third quarter FY 2017
revenues increased
significantly compared to
the same period in FY 2016
due to the contribution of
acquisitions, the positive
effect of foreign exchange
changes during the period
and continued organic
growth, which was off-set by
polymer price reductions
passed on to customers
The fourth quarter of FY
2017 has started well
Adjusted operating profit
was significantly ahead of
the same period in FY 2016,
and better than
management expectations,
benefiting from organic
growth, the contribution of
acquisitions, realisation of
synergies, the easing of the
polymer price headwind as
well as a foreign exchange
translation benefit
The GCS and BPI
businesses continued to
perform well with
acquisition-related
synergies in line with
expectations, and the Group
achieved good cash flow
development in the third
quarter
Update on trading and prospects RPC Trading Update
RPC Group Plc
Acquisition of Letica and Fully-underwritten Rights Issue
118
Transaction timetable Transaction structure and timetable
Announcement of the Acquisition and Rights Issue [25 January 2017]
Record Date for Rights Issue [1 February 2017]
General Meeting to approve Rights Issue [6 February 2017]
Admission and commencement of dealings in Nil Paid Rights, on the London Stock Exchange [7 February 2017]
Deadline for acceptance of Rights Issue [21 February 2017]
Commencement of dealing in New Ordinary Shares fully paid [22 February 2017]
Expected date of completion of Acquisition By the end of March 2017
Lead Financial Advisor and Sponsor Wells Fargo and Rothschild
Joint Global Co-coordinators and Joint Bookrunners Deutsche Bank; [ ]
Joint Financial Advisor and Joint Bookrunner Deutsche Bank; [ ]
Expected Timetable and Rights Issue Summary
Record Date for Rights Issue 7 February 2017
Announcement of the Acquisition and Rights Issue 9 February 2017
Prospectus Published 9 February 2017
Admission and commencement of dealings in Nil Paid Rights on the London Stock Exchange 10 February 2017
Deadline for acceptance of Rights Issue 24 February 2017
Announcement of Rights Issue Take Up and Rump Placing 27 February 2017
Commencement of dealing in New Ordinary Shares fully paid 27 February 2017
Expected date of completion of Acquisition By the end of March 2017
Financial Advisor on Letica Acquisition Wells Fargo Securities
Financial Advisor on the Financing and Sponsor Rothschild
Joint Global Coordinators and Underwriters Deutsche Bank and Jefferies
Co-bookrunner and Underwriter BofA Merrill Lynch
RPC Group Plc
Acquisition of Letica and Fully-underwritten Rights Issue
119 Appendix
RPC Group Plc
Acquisition of Letica and Fully-underwritten Rights Issue
120
Balanced end markets characterised by attractive growth dynamics Letica: Strong positions in attractive markets
Source: Letica Management information
Notes
1. Stated financials and percentage of sales by end market as of FY ended 30 June 2016 (Letica); end market sales figures rounded and exclude Letica’s distribution business (<1% Letica sales)
End Market
Share of Sales FY 20161
Total Reported Sales: $450m
Representative Customers
Selected Products
Main Sub-segments
Foodservice
29%
● Paper cups and trays
● Plastic cups
● Lids and drink sleeves
● Beverage and foodservice
distribution
● Quick service and fast
casual restaurants
● Convenience stores
Food
14%
● Round containers
● Non-round containers
● Lightweight containers
● Lids
$60m
● Food storage
● Pet food
● Spices and seasonings
● Condiments
Chemical
7%
● UN containers
● Lids
$30m
● Lubricants
● Pool and specialty
chemicals
● Pesticides
Retail
and Other
11%
● Round containers
● Non-round containers
● Lids
$50m
● Big box stores
● Sport goods
● Distribution
Building and
Construction
40%
● Round containers
● Non-round containers
● Lids
● Gypsum
● Paint and coatings
● Adhesives
● Asphalt
● Sealants
$180m $130m
RPC Group Plc
Acquisition of Letica and Fully-underwritten Rights Issue
121
Deep relationships with broad and diversified customer base Letica: Strong positions in attractive markets
Customer Diversification (2016)1
Top 20
62%
#112%
#2 - 1034%
#11 - 2016%
Other38%
● Broad portfolio of c. 750 customers
distributed across a range of end
markets and channels
− c. 600 Rigid Packaging
− c. 150 Foodservice Packaging
● Balanced mix of large, blue-chip
companies and smaller, regional
relationships
● Primary supplier to its largest customers
● Dedicated salesforce and customer
service representatives at each plant
● Average top-ten Rigid Packaging
customer tenure of >20 years
● Average top-ten Foodservice Packaging
customer tenure of >14 years
Customer Classifications (2016)
National 64%
Regional26%
Distributor10%
Source: Letica Management information
Notes
1. Stated financials and percentage of sales as of FY ended 30 June 2016, excludes Letica’s distribution business (<1% Letica sales)
RPC Group Plc
Acquisition of Letica and Fully-underwritten Rights Issue
122
● Injection Moulding
● In-mould Labeling
● Heat Transfer Labeling
● Thermoforming
● Sheet Extrusion
Production and
Design Capabilities
● Flow-in-Gasket
● Offset Printing
● Paper Forming
● Flexographic Printing
Technology, process and manufacturing expertise across a broad product portfolio Letica: Strategic platform for continued growth and investment
Representative
Products
Source: Letica Management information
Number of Product
Configurations
Products and Sizes
● Round Containers and Lids: 4 - 7 gallon
● Non-round Containers and Lids: 1 quart - 3.5 gallon
● UN Containers: 4 - 7 gallon
● Lightweight Containers: 8 - 160 ounce
● Paper Cups: 4 - 44 ounce
● Plastic Cups: 7 - 64 ounce
● Paper Food Containers: 5 - 32 ounce
● Plastic Food Containers: 6 - 160 ounce
● Lids: 4 - 160 ounce
Rigid Packaging Foodservice Packaging
100+ 150+
RPC Group Plc
Acquisition of Letica and Fully-underwritten Rights Issue
123
● Network of 13 owned, non-union,
manufacturing facilities in 11 states
− Strategically located near key
customers and end markets
● Approximately 1.7 million sq. ft.
manufacturing (40%) and warehouse
(60%) footprint
● Over $110 million (£88m1) dedicated
to capital equipment and tooling
purchases over the last 10 years
● High degree of automation
● Integrated distribution network
handles c. 80% of deliveries to
customers
− 400+ fleet of tractors and trailers
− 122 non-unionised drivers
− 99.6% on-time delivery rate
− 48-state authority
Well-capitalised footprint with capacity to grow
Letica: Manufacturing footprint in the U.S.
Letica
Existing RPC
Letica Manufacturing Footprint Enlarged RPC
N.A. Sales by destination1
Today With Letica
c. $280m
c. $730m
● Expected to more than double
RPC’s N.A. revenues
● Continued opportunities for organic
growth in both rigid and foodservice
segments
● Complementary to RPC’s current
injection and blow moulding
operations in N.A.
Letica Operations
Source: Letica Management information
Notes
1. FX rate: £1.00 = $1.25; 2015/16 sales by destination, to include a full year of announced acquisitions
% of
RPC Sales c. 8% c. 18%
Letica HQ/Tech Center
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