Post on 26-Dec-2015
; it is not to be relied on by any 3rd party without yyy's prior written consent
1Deck_v02NDL
Project Eureka
xxxxxx Industries Ltd
; it is not to be relied on by any 3rd party without yyy's prior written consent
2Deck_v02NDL
Note: Acquisition revenue excludes stretch case revenue; revenue from organic growth of priority crops is reduced in case of acquisition, accounted for in acquisition revenue; USD:INR exchange rate of 40 assumed
Source: Client data; yyy analysis
0
1,000
2,000
3,000
FY08
318
ECT
151
Priority
crops
187
Other
crops
217
FY13 ECT
184-268
Other
18-73
18-25
~117
80-120
Domestic acq.
~461
CMO
VAD
460-640
Intl. acquisition
680-800
Indofil ABD revenues ( Rs. cr. )
859-905
Select
Mz branded
Corporate
Portfolio
expansion
FY13 -
Organic sales
1,275-1,508
Transformational
growth FY13
2,900-3,400
CAGR(08-13)
59%
M&A is a key strategic imperative for xxx to achieve Rs.XXX aspiration
Domestic - organic
Int’l - organic
Domestic - inorganic
Int’l - inorganic
EBITDA ~19%~22%
; it is not to be relied on by any 3rd party without yyy's prior written consent
3Deck_v02NDL
XXXis a INRXXX diverse company, DAS contributes 9% of overall
Source: LIT search, Cap IQ financials
PRELIMINARY
Agrosciences is ~9% of Dow global business
0
20
40
60
80
100%
Dow
Chemicals
Performance
systems
Coatings &
infrastructure
Basic
plastics
Electronic &
specialty mat'l
Basic
chemicals
Agrosciences
Hydrocarbons
and energy
$44.3B
Agrosciences
by product
Insecticides
Herbicides
Seeds/traits
Other
Fungicides
$4.5B
Agrosciences
by geography
EMEA
North
America
AsiaPac
Latin
America
$4.5B
Mancozeb
Asia
Pacific
Europe
Latin
America
MEA
North
America
31K MT
Share of global sales (2009 )
Performance
products
Large European presence in multiple businesses
DAS Product portfolio• Crop protection
• Seeds, traits & oils
• Vegetation management
• Turf & Ornamentals
• Pest management
• Post harvest protection
• Innovative agro products
• Presence in most European countries
• Large number of registration and labels
Presence within Europe
“Major growth opportunities in Europe exist in Infrastructure (construction, automotive, plastics, performance material, Consumerism (packaging, home care, personal care, Energy (next generation insulation, wind energy.”
Annual Report, 2010
; it is not to be relied on by any 3rd party without yyy's prior written consent
4Deck_v02NDL
Why is DAS divesting its EU Mancozeb business – our hypotheses
• Mancozeb is non-core business for DAS
-Seeds, insecticide and herbicides constitute the core businesses
• Mancozeb’s profitability is lower than internal thresholds, driven by structural challenges
-Divestment of France plant (2008) has led formulation to be outsourced to Bayer (Germany) at a significant cost (>€1/kg)
-Higher RM procurement cost (from UPL) due to absence of low cost manufacturing base
-Dow unable to consistently command a price premium in generics market
• Dow has history of divesting under-performing assets
-E.g. Zoxamide (2008), Thifluzamide (2010), etc
PRELIMINARY
; it is not to be relied on by any 3rd party without yyy's prior written consent
5Deck_v02NDL
• Exclusive license to utilize DAS’s Dithane NT technology and fungicide trademarks in EU
• Immediate access to ~13 countries and ~24 new crops across EU
->80 fungicide registrations/ labels
• Access to all DAS-owned data (hard copies of data can be negotiated) – including registration support and formulation manuals, and product defence data (Annex I)
• Access to DAS’ customer lists and to their distribution network
• Inventory currently on DAS EU books
What is being sold by DAS
What is being sold What is not being sold
• Manufacturing base, factories etc
• Human capital
• Chemical composition, patents etc.
• Accounts Receivables and Accounts Payables are not part of the deal
; it is not to be relied on by any 3rd party without yyy's prior written consent
6Deck_v02NDL
EU Mancozeb is constant at ~$30KT market; XXXto become market leader post DAS deal
0
20
40
60
80
100%
2009
Bu
lkB
ran
ded
32KT
2010
27KT
2011 (E )
30KT
2016F
31KT
-8%
0%
3%
0%
Mancozeb European Market
-3%
(09-
11E )
CAGR
1%
(11E-
16F )
EU Mancozeb market is ~30KT in 2011, expected to grow back at ~1% with bulk share increasing
DAS is the biggest player in the market, XXX + Eureka to become market leader post deal
0
20
40
60
80
100%
2009
UPL
Indofil
DAS
$155M
2010
$126M
2011 (E )
$138M
2016F
UPL
Indofil
Eureka
$137M
-15%
8%
-5%
-3%
0%
-1%
Mancozeb European Market (by sellers )
New
player
(09-
11E )
CAGR
(11-
16F )
Source: XXX data, DAS data
PRELIMINARY
; it is not to be relied on by any 3rd party without yyy's prior written consent
7Deck_v02NDL
This deal is primarily predicated upon cost benefits from moving production to India
XXX’s cost advantages over DAS are the key
drivers of tangible value in
this deal
This deal also has substantial strategic value
for XXX
• Last Mancozeb asset available; market has already consolidated
• Deal will likely make XXX the leader in a two player Mzb market -Potential RMS of 1.8 compared to 0.88 otherwise (by volume)
• Will add a strong European brand to XXX’s portfolio; can potentially become a launch pad to expand EU presence
• Will bring XXX into the deal flow from MNCs and help build M&A and integration capabilities
• Significant cost savings estimated from moving production to India compared to DAS’ current cost position
-From Eureka + synergies estimated GM of 28% to our estimates of ~33% in 2012
• Working capital expected to be significantly below DAS’
• Capex requirements expected to be less than $15M
• Estimated cost savings outweigh the estimated loss in topline -Greater than >3x uptick in EBITDA ($16.8M estimated in 2013 from $5.6M in 2011) despite a potential drop of ~9% in topline
• Transition is expected to be manageable; DAS is open to being a distributor for ~1 year to avoid disruption to sales
; it is not to be relied on by any 3rd party without yyy's prior written consent
8Deck_v02NDL
DAS Eureka
$M 2009 2010 2011 2012 2013 2014 2015 2016 Comments
Revenue 66.6 52.0 48.6 41.9 44.1 44.3 45.6 43.6
• Decrease distributor margin in branded, bulk margin to DAS and hit on business plan
COGS 49.1 37.5 34.9 28.1 25.7 26.1 27.8 26.5• Driven by XXX’s lower cost
structure
Gross Margin 17.5 14.5 13.7 13.8 18.4 18.2 17.8 17.1 •Increase driven by XXX’s lower cost structure, scale benefits and higher NRV for XXX bulkGross Margin % 26.3% 27.9% 28.2% 33.0% 41.7% 41.0% 39.1% 39.2%
SG&A 3.6 3.2 2.9 0.8 1.0 2.0 1.1 0.9• Based on bottom-up build
of costs
Logistics & Distribution
4.3 4.5 4.2 0.0 0.0 0.0 0.0 0.0
• As per XXX’s accounting norms, distributor margins taken out from NRV (~$4.8M)
R&D 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 • Assumed constant
EBIT 8.6 5.8 5.6 12.0 16.4 15.2 15.7 15.2
EBIT % 12.9% 11.2% 11.5% 28.7% 37.3% 34.3% 34.5% 34.8%
Eureka + Synergies: Overall P&L per XXX accounting norms
* COGS includes incremental D&A for incremental capex, as per XXX practiceSource: Eureka Commercial model
; it is not to be relied on by any 3rd party without yyy's prior written consent
9Deck_v02NDL
Post closeImplement
XXX will have 3-4 months of pre-close time to plan for Day 1
Pre close
Mobilize
PRELIMINARY
Mobilize
• Set up the Program office
• Set up the XXX integration team
• Set up the “Clean” team- 3rd party to ensure better preparedness for transition without DAS disclosing
confidential data to XXX
•Setup legal team to supervise transfer process
•Setup Europe org based on recommended structure
Prioritize and Design
•Manufacturing expansion - Upgrading XXX manufacturing facilities to absorb DAS bulk/NT volumes
- Vendors for additional RM etc. particularly NT additives
•Sales and Distribution organization- Plan for engagement with national distributers/DAS current dealers
- Warehousing plan - # of warehouses, where, potential names, final contracts
- Logistics plan – How much volume directly from India vs from Europe
- Invoicing – How much from India vs from Europe, tax implications
•Detailed marketing plan – pricing, branding etc.
•Hiring plan for full-time employees, advisors etc.
• Commercial diligence
• Deal financing and
structuring- XXX Bank
• Accounting diligence
• Legal diligence
• Post-diligence
Negotiations
Deal announcement Deal closed
~3-4 months
Due diligence & Negotiations Prioritize and Design
1 2 3
A B
A
B
• Day 1
XXX manages acquired business