Intrum Justitia and Lindorff to Combine
November 14, 2016
Creating the industry leading provider of credit management services
Disclaimer
IMPORTANT INFORMATION
This presentation is not and does not form a part of any offer for sale of securities. Copies of this presentation are not being made and may not be
distributed or sent into the United States, Australia, Canada, Japan or any other jurisdiction in which such distribution would be unlawful or would require
registration or other measures. Nor may the information in this presentation be forwarded, reproduced or disclosed in such a manner that contravenes such
restrictions or would require such additional prospectuses, other offer documentation, registrations or other actions.
This is not a prospectus for the purposes of Directive 2003/71/EC (together with any applicable implementing measures in any Member State, the
“Prospectus Directive”) but a presentation of a proposed combination between Intrum Justitia and Lindorff.
The securities referred to in this presentation have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities
Act”), and accordingly may not be offered or sold in the United States absent registration or an exemption from the registration requirements of the
Securities Act and in accordance with applicable U.S. state securities laws.
Matters discussed in this presentation may constitute forward-looking statements. Forward-looking statements are statements that are not historical facts
and may be identified by words such as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “will,” “may,” “continue,” “should” and similar expressions. The
forward-looking statements in this presentation are based upon various assumptions, many of which are based, in turn, upon further assumptions. Although
Intrum Justitia believes that these assumptions were reasonable when made, these assumptions are inherently subject to significant known and unknown
risks, uncertainties, contingencies and other important factors which are difficult or impossible to predict and are beyond its control. Such risks, uncertainties,
contingencies and other important factors could cause actual events to differ materially from the expectations expressed or implied in this presentation by
such forward-looking statements. The information, opinions and forward-looking statements contained in this presentation speak only as at its date, and are
subject to change without notice.
The combined financial information set out in this presentation is only an aggregation of financial information taken from each company's financial reporting
in order to provide an indication of the new group's sales, earnings, etc. under the assumption that the activities had been included in the same group from
the beginning of each period. The aggregation is based on a hypothetical situation and should not be viewed as pro forma since adjustments for the effects
of future acquisitions analyses, various accounting standards and transaction costs have not yet been possible to make. Future synergies have not been
taken into account. The financial information has not been audited or otherwise reviewed by the companies’ auditors.
Today’s presenters
1
Lars Lundquist
Chairman of Intrum Justitia
Kristoffer Melinder
Managing Partner at
NC Advisory AB, advisor to
the Nordic Capital Funds
Today’s presenters (cont’d)
2
Mikael Ericson
President and CEO
Intrum Justitia
Klaus-Anders Nysteen
President and CEO
Lindorff
Table of contents
Transaction Highlights
Overview of Intrum Justitia and Lindorff
Strategic Rationale
Synergies and Financial Impact
Timetable
Appendix
Conclusion
Intrum Justitia and Lindorff - a highly compelling combination…
Industry leader with unparalleled scale and diversification
Excellent strategic fit with a well-balanced business mix and
integrated service offering
Complementary geographical footprint, sector expertise and
debt purchasing platforms
Strong cultural fit based on Nordic heritage and longstanding
commitment to fair collection
Ideally positioned for growth through investments in new asset
classes, segments and geographies
Significant shareholder value creation from cost and revenue
synergies
3
Considerable
synergies
Significant financial
benefits
Capital structure
optimization
● Estimated SEK 0.8bn of cost
synergies per annum to be
fully phased in 3-4 years from
closing of the transaction
● Cost synergies arising mainly
from consolidation of
operations in overlapping
countries and IT
● Revenue synergies from
combination of databases,
cross-selling and improved
cross-border offering
● Transaction accretive to
Intrum Justitia’s EPS from first
year (excluding non-recurring
items1)
● Intrum Justitia’s EPS
estimated to grow in excess of
75% on a cumulative basis in
3-4 years as synergies are
fully realised
● Combined entity to benefit
from greater scale,
diversification and cash flow
visibility
● Transaction allows both
parties to achieve a more
optimal capital structure
● Pro-forma net debt/cash
EBITDA as of 30 September
2016 is 3.6x and is expected
to reach around 3.0x over the
medium term
…creating significant value for shareholders
Note: (1) Mainly transaction costs and synergy implementation costs.
4
Snapshot of the combined entity
Source: Company information.
Note: The combined financial information on this slide is not financial pro forma information, and has not been audited or otherwise reviewed by the companies’ auditors.
(1) LTM Q3’16 figures. Lindorff‘s net revenue and EBITDA converted using EURSEK average FX rate of 9.357 for the LTM Q3’16 period. Lindorff’s portfolio carrying value converted using EURSEK FX rate of 9.626 for the LTM Q3’16 period end;
(2) Based on Lindorff’s LTM Q3’16 net revenue and EBITDA excluding non-recurring items and pro forma for acquisitions; (3) Based on YTD Q3’16 net revenues. Geographical breakdown for illustrative purposes only and not consistent with the
companies’ existing reporting. Northern Europe includes Denmark, Estonia, Finland, Latvia, Lithuania, Netherlands, Norway, Poland and Russia. Central and Eastern Europe includes Austria, Czech Republic, Germany, Hungary, Switzerland and
Slovakia. Western Europe includes Belgium, England, France, Ireland and Scotland. Southern Europe includes Italy, Portugal and Spain; (4) Based on LTM Q3’16 net revenues. Aktua consolidated since 1 June 2016.
Key financial
metrics1
Geographical
mix3
● Net Revenue: SEK 5.8bn
● EBITDA: SEK 2.0bn
● Portfolio Carrying Value: SEK 8.1bn
● Net Revenue: SEK 6.4bn2
● EBITDA: SEK 2.9bn2
● Portfolio Carrying Value: SEK 10.4bn
Northern Europe Central and Eastern Europe Western Europe Southern Europe
Purchased Debt Debt Collection Other
47%
30%
16%
7%
62% 11%
27%
5
Business
mix4
44%
54%
2%
49%
47%
4%
● Net Revenue: SEK 12.2bn
● EBITDA: SEK 4.9bn
● Portfolio Carrying Value: SEK 18.5bn
54%
20%
8%
18%
46%
51%
3%
|
Transaction summary
Note: (1) Lindorff’s implied EV of EUR 4.1bn based on Lindorff’s EUR 2,291m net debt as of 30 September 2016, Intrum Justitia's closing share price of SEK 278.30 on 11 November 2016 at Nasdaq Stockholm and ECB EURSEK FX rate of 9.861 as
of 11 November 2016. Lindorff’s EUR 310m LTM Q3’16 EBITDA excluding non recurring items and pro forma for acquisitions.
6
Consideration
Ownership
● Intrum Justitia and Lindorff shareholders to own approximately 53% and 47%, respectively
● Nordic Capital Fund VIII to become the largest indirect shareholder in the combined entity and to remain a supportive
shareholder post-transaction
● All stock transaction – Lindorff shareholders to receive 64.2m newly issued shares in Intrum Justitia
● Transaction implies an enterprise value of Lindorff of SEK 40.5bn, representing an EV/EBITDA multiple of 13.2x1
Governance
● Combined entity to be listed on Nasdaq Stockholm with legal headquarters in Stockholm and centres of excellence in
both Oslo and Stockholm
● Combined entity to have eight board members of which entities controlled by Nordic Capital Fund VIII expects to
nominate three
● CEO of the combined entity to be appointed at the latest upon closing
Timetable ● Intrum Justitia EGM to be held on December 14th to approve the transaction
● Closing expected in Q2 2017 subject to competition and regulatory authority approvals
Benefits for all stakeholders
7
Shareholders ● Expected significant value creation from cost and revenue synergies
● Ability to drive long-term shareholder value through a unique position in an attractive market
Debt investors ● Attractive risk profile with unparalleled scale and diversification
● High earnings visibility and stable cash flows
Clients ● Strengthened collection performance
● Significant investments in IT, product development and compliance infrastructure
Customers ● Commitment to highest ethical standards and fair collection practices
● Investments in digitalization and simplified customer service
Employees ● Enhanced career opportunities through better positioned pan-European platform and multiple growth initiatives
Regulators ● Best-in-class compliance framework and collection practices
Table of contents
Transaction Highlights
Overview of Intrum Justitia and Lindorff
Strategic Rationale
Synergies and Financial Impact
Timetable
Appendix
Conclusion
8
Snapshot of Intrum Justitia
Intrum Justitia highlights
● Founded in Sweden in 1923 and listed on Nasdaq Stockholm since
2002
● A European leader offering a complete range of credit management
services
● Operating across 20 European countries with approximately 4,000
employees and 75,000 clients
Purchased Debt portfolio carrying value mix1
EBITDA evolution (SEKm)
Note: (1) As of 31 December 2015.
Key financials
SEKm LTM Q3’16
Net revenues 5,765
Cash EBITDA 3,554
EBITDA 1,967
EBIT 1,804
Portfolio carrying value (PD) 8,059
678 759 880 833 902 1,041 1,066 1,364
1,601 1,787 1,967
'06A '07A '08A '09A '10A '11A '12A '13A '14A '15A LTMQ3'16
59% 18%
11%
12%
Financial Institutions Telecom Retail Other
Snapshot of Lindorff
9
SEKm LTM Q3’16
LTM Q3’16
Pro forma3
Net revenues 5,708 6,416
Cash EBITDA 3,902 4,370
EBITDA 2,442 2,904
EBIT 1,488 2,365
Portfolio carrying value (PD)5 10,425 N/A
Key financials2
Purchased Debt portfolio carrying value mix1 Lindorff highlights
● Founded in Oslo in 1898 with over 100 years of growth and
value creation
● A leading integrated credit management partner for financial
institutions in Europe
● Operating across 13 European countries with over 4,400 employees
and 20,000 clients
Note: (1) As of 31 December 2015; (2) Converted using EURSEK average FX rate of 9.357 for the LTM Q3’16 period; (3) Converted using the exchange rate for the period and excluding non recurring items and pro forma for acquisitions. Other period
figures converted at constant exchange rate; (4) LTM Q3’16 EBITDA and EBIT excluding non recurring items and pro forma for acquisitions of EUR 310m and EUR 253m, respectively; (5) Converted using EURSEK FX rate of 9.626 as of 30 September
2016; (6) CAGR calculated for comparable IFRS basis financials since 2011. Prior period accounted under local GAAP.
Cash EBITDA evolution (SEKm)
'06A '07A '08A '09A '10A '11A '12A '13A '14A '15A LTMQ3'16
4,3702,3
88%
5%
Financial Institutions Telecom Retail Other
2% 5%
4
4
Lindorff – a journey of growth and value creation
Note: (1) Entered into long term strategic partnership with large portfolio acquisition and subsequent forward flow; (2) Full time equivalents on-boarded in last 5 years through carve-outs.
Founded by
Eynar
Lindorff
Co-investments
2015–2016
Secured servicing
2015–2016
Nordic
expansion European expansion European leadership
2007–2013 2013–2016
Growth drivers
Organic
M&A
New market
entries
Carve-outs
2003–2007
2012 2014 2015 2016 1898 2001 2013 2005 2003 2010 2011 2007 2009
1
x3 x3
Unique track
record
● 10 large transactions in last 5 years
● 1,350 FTEs2 on-boarded
Strong client
relationships
● Trusted and preferred relationship
● IT integration and operation
● SLA execution
● Integrated operations with clients
● KPI reporting
Strong
pipeline
Existing markets New markets
10
16% 15% 15% 17%
2013 2014 2015 LTM Q3'16
Return on Purchased Debt (per Lindorff's definition)
Lindorff – proven financial performance
11
Strong performance from Purchased Debt portfolios…
…driving steady growth in Debt Collection revenues2 (SEKm)
Note: (1) Based on top 10 clients in every market; (2) Financials, as reported, converted using the average EURSEK FX rate for the respective periods.
Long standing client relationships…
…with attractive returns
3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16
Average Actual Collection as % of Forecast
105%
1,972 2,165
2,320 2,695
2013 2014 2015 LTM Q3'16
~ 9 years
Avg. Debt Collection client relationship age1
~ 7 years
Avg. carve-out remaining contract life
Table of contents
Transaction Highlights
Overview of Intrum Justitia and Lindorff
Strategic Rationale
Synergies and Financial Impact
Timetable
Appendix
Conclusion
Combined group uniquely positioned to capture market opportunity Strong NPL sale growth primarily driven by banks’ continued deleveraging
12
145–150 150–160 155–170
48
95
191
11
36 46
84 91
122 140
195
250
353
2010 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E
Source: Consulting company report; Company information.
Note: (1) Asset Quality Review; (2) Effective for annual periods beginning on or after Jan 1, 2018 (if not voluntarily applied earlier).
European NPL sale scenarios (EURbn)
Base case Deleveraging scenario
Acceleration of Banks’ NPL sales drivers
● AQR1 driven increase in
bank provisioning
• Ability to recognise
potential gain on sale
• Higher stock of NPLs
from reclassification
● Higher capital requirements
against NPLs
● IFRS 92 – Expected loss
accounting driving banks to
dispose of NPLs earlier in
credit cycle
● Reduction in earnings
volatility from provisioning
and losses
Accounting Regulatory
Combined group uniquely positioned to capture market opportunity (cont’d) Set to capture a market >5x larger than historical core target market
Source: Company information.
13
Significant potential from large untapped market segments
126
284
324
324
323
734
B2Cunsecured
B2Csecured
B2BSME & corporate
TotalEurope
European stock of NPLs (EURbn) as of 2015
647 1,058
Expanded capabilities in the NPL market
B2C
B2B
Further
expansion
(Aktua core)
Opportunistic
Intrum Justitia /
Lindorff historical
core
Potential
extension
Unsecured Secured
B2C & SME Corporate
European market leader with increased scale and range of services
14
Source: Company information; Financials converted using the following average FX rates for the relevant entities and respective periods: EURSEK = 9.357; EURPLN = 4.319; EURUSD = 1.116; EURNOK = 8.987; EURGBP = 0.861.
Note: (1) LTM Financials as of Q3’16. LTM financials as of Q2’16 for Lowell GFKL. Combined EBITDA figure for Intrum Justitia and Lindorff based on Lindorff’s EBITDA LTM Q3’16 excluding non-recurring items and pro forma for acquisitions;
(2) Facts and figures for PRA and Encore relate to their global operations; (3) Criterion: more than 10% DC revenue as a percentage of total net revenue; (4) Includes countries with portfolios, as disclosed.
Largest CMS player… …with the broadest service offering
4.9
2.8
2.6
1.6
1.1
1.0
0.6
0.5
EBITDA LTM1 (SEKbn) Value Add Services Product Expertise Solutions
# of
Countries
Information
Services
Payment
Services
Debt
Purchase
Debt
Collection3
Real Estate
Services
BPO /
Carve-out Co-
investments
23
- - - - - 14
- - - - 17
- - - 6
- - - 5
- - - - - 11
- - - - - 7
- - - - - - 154
|
2
2
54%
20%
8%
18%
A truly pan-European credit management services platform
Revenue split by region1 (%) Complementary pan-European presence
Note: (1) Based on YTD Q3’16 net revenues. Geographical breakdown for illustrative purposes only and not consistent with the companies’ existing reporting. Northern Europe includes Denmark, Estonia, Finland, Latvia, Lithuania, Netherlands, Norway,
Poland and Russia. Central and Eastern Europe includes Austria, Czech Republic, Germany, Hungary, Switzerland and Slovakia. Western Europe includes Belgium, England, France, Ireland and Scotland. Southern Europe includes Italy, Portugal and Spain.
47%
30%
16%
7%
62% 11%
27%
Intrum Justitia and Lindorff
Intrum Justitia only
Lindorff only
15
|
Northern Europe Central and Eastern Europe
Western Europe Southern Europe
Strong strategic fit maintaining a balanced business model…
Business mix by revenue1 (%)
46%
51%
3%
44%
54%
2%
49% 47%
4%
Net Revenue:
SEK 5.8bn
Net Revenue:
SEK 12.2bn
Net Revenue2:
SEK 6.4bn
Purchased Debt Debt Collection Other
Note: (1) Based on LTM Q3’16 net revenues. Aktua consolidated since 1 June 2016 for revenue split calculations; (2) Lindorff’s LTM Q3’16 net revenue pro forma for acquisitions converted using an EURSEK average FX rate of 9.357 for the LTM
Q3’16 period.
16
|
…and enhancing synergies between Purchased Debt and Debt Collection
17
High complementarity between PD and DC… …resulting in tangible benefits
Flexibility
Origination
strength
● Full service offering to meet clients’ evolving needs
● Large portion of portfolio purchases originated
from existing Debt Collection clients
Operational
efficiencies
● Combined scale with more than SEK 5bn of
monthly collections
Data analytics ● More than SEK 680bn of debt under management
Financial benefits ● Capital light earnings from Debt Collection create
capacity for portfolio purchases
Origination
Operational scalability
Database and analytics
Collection strategies
Standardised processes
76%
10%
6%
8%
Highly complementary Purchased Debt portfolios and capabilities
Purchased Debt by vendor1 (%)
59%
18%
11%2
12%
88%
5%
2% 5%
Average Ticket Size:
c. SEK 9.3k
Average Ticket Size:
c. SEK 15.4k
Average Ticket Size:
c. SEK 28.9k
Financial Institutions Telecom Retail Other
PD Carrying Value:
SEK 7.0bn
PD Carrying Value:
SEK 16.8bn
PD Carrying Value:
SEK 9.8bn
Note: (1) Purchased Debt carrying value as of 31 December 2015. Lindorff’s financials converted using EURSEK FX rate of 9.198. Breakdown according to companies’ respective internal classifications.
18
|
Combined group uniquely positioned to drive profitable growth
Payment
solutions
● Leverage competences at ByJuno, Avarda and Lindorff Payment to benefit from fast growing online payments
● Partnership with Bambora in the Nordic region to benefit from combined capabilities
Secured market ● Deploy secured market and valuation expertise (incl. from Aktua) across combined geographic footprint
● Large untapped market – well suited for co-investments
Real estate
services (RES) ● Leverage unique competence (incl. from Aktua) in markets with a need for RES (eg. Italy, Netherlands and France)
SME ● Ongoing momentum at both companies to develop largely untapped profitable segment
● Capitalise on Intrum Justitia’s recent acquisitions
New geographies ● Assess new markets with attractive return potential
● Follow existing clients across expanded footprint and to new countries
Accretive
bolt-on M&A
● Continue strategy of selectively consolidating highly fragmented European market
● Focus on small, accretive bolt-on acquisitions
19
Co-investments ● Accelerated growth in Debt Collection revenues driven by full servicing of large assets acquired together with co-investors
● Ability to address the entire breadth of the NPL market and to execute on larger transactions providing data benefits
Table of contents
Transaction Highlights
Overview of Intrum Justitia and Lindorff
Strategic Rationale
Synergies and Financial Impact
Timetable
Appendix
Conclusion
Significant cost and revenue synergies to accelerate earnings growth
Note: Actual synergies and other cost savings, including the costs required to achieve these synergies and savings, may differ materially from the current expectations, and neither Intrum Justitia nor Lindorff can assure investors that they will achieve
the full amount of these estimated synergies on schedule or at all.
Cost synergies Revenue synergies
● Combination of datasets and business
intelligence driving improved collection
performance
● Improved cross-border offering
● Cross-selling of complementary offerings to
existing customers
● Strengthened Purchased Debt capabilities
20
● Estimated SEK 0.8bn of cost synergies per annum, fully
phased in 3-4 years following closing of the transaction
• Consolidation of administrative and support functions
• Optimisation of operations center network
• Harmonization of IT systems and IT infrastructure as
well as application development/maintenance
• Increased scale in procurement volumes
● Estimated implementation costs of SEK 1.0bn incurred
over the first two years following closing of the
transaction
Significant financial benefits
EPS
growth
● Transaction is accretive to Intrum Justitia’s EPS from the first year after closing, excluding synergy implementation and
transaction costs1
● Intrum Justitia’s EPS is estimated to grow in excess of 75% on a cumulative basis in three to four years as the
synergies are fully realized
Dividend
● Intrum Justitia’s board intends to propose an ordinary dividend for 2016 to the current shareholders of Intrum Justitia,
in line with the current dividend policy
• New shares issued to Lindorff shareholders are not entitled to the dividend for 2016
● Existing Intrum Justitia dividend policy to be maintained post-closing
Optimised
capital
structure2
Note: (1) Transaction costs including financing, legal, advisory and other fees (excluding take out costs for existing financing structures) amount to approximately 1.5% of the combined entities’ enterprise value implied by Intrum Justitia’s share price
as of November 11, 2016 ; (2) Net debt/cash EBITDA based on LTM Q3’16 financials, Lindorff cash EBITDA excluding non-recurring items and pro forma for acquisitions.
2.0x
4.9x
~3.6x
~3.0x
Medium term
21
|
Fully underwritten financing providing certainty and financial flexibility
● All share transaction
● New financing structure will be put in place to partially refinance existing debt structures1
● EUR 3.4bn bridge facility and EUR 850m super senior revolving credit facility (RCF)2 fully
underwritten by Goldman Sachs, J.P. Morgan and Morgan Stanley
• Bridge facility has a tenor of 5 years, providing certainty of long-term financing – however expected
to be taken out by issuance of new unsecured bonds
• RCF to support combined entity's liquidity requirements and to facilitate pursuing future investment
opportunities
● Combined entity’s financing costs expected to be substantially lower post-refinancing compared to
the pro-forma financing cost based on current capital structures3
22
Note: (1) Including substantially all of Lindorff’s financial indebtedness including its senior secured and senior notes and RCF; (2) RCF tenor of 4.5 years; (3) The refinancing of Lindorff's existing bonds will result in certain redemption costs, the size of
which depends on timing of the refinancing. The redemption costs are expected to be more than offset by the value of lower interest expenses on the new bonds relative to Lindorff's existing outstanding bonds.
Table of contents
Transaction Highlights
Overview of Intrum Justitia and Lindorff
Strategic Rationale
Synergies and Financial Impact
Timetable
Appendix
Conclusion
Indicative timetable
14-Nov
Announcement
15-25 Nov
Investor
Roadshow
14-Dec
Intrum Justitia
EGM
Q2 2017
Closing
Note: The anticipated completion of the transaction is dependent on the timing of decisions from the relevant competition and regulatory authorities and is therefore subject to change.
Nov-2016 Dec-2016 Jan-2017 Jun-2017
23
Table of contents
Transaction Highlights
Overview of Intrum Justitia and Lindorff
Strategic Rationale
Synergies and Financial Impact
Timetable
Appendix
Conclusion
Intrum Justitia and Lindorff - a highly compelling combination
Industry leader with unparalleled scale and diversification
Excellent strategic fit with a well-balanced business mix and
integrated service offering
Complementary geographical footprint, sector expertise and
debt purchasing platforms
Strong cultural fit based on Nordic heritage and longstanding
commitment to fair collection
Ideally positioned for growth through investments in new asset
classes, segments and geographies
Significant shareholder value creation from cost and revenue
synergies
24
Table of contents
Transaction Highlights
Overview of Intrum Justitia and Lindorff
Strategic Rationale
Synergies and Financial Impact
Timetable
Appendix
Conclusion
● A leader in Northern European private equity, established in 1989
● Lead investor in 90 acquisitions with a consistent track record of successful investments
• Over EUR 10bn invested in 90 portfolio companies and 150+ material add-on acquisitions
● Currently investing Nordic Capital Fund VIII of EUR 3.5bn
• Current portfolio comprises 31 companies with more than EUR 12bn of aggregated revenues
● Nordic Capital is committed to responsible ownership which is critical to creating long-term business success
• Established model for working with governance and ownership in portfolio companies, including a separate
model for publicly listed entities
● Nordic Capital has consistently supported value creation in its portfolio companies
● Creation of new and industrially sound combinations is a recurring investment theme
● Nordic Capital has been one of the most active financial sponsors when it comes to IPOs and has to date listed
sixteen companies on Nordic and international stock exchanges with solid aftermarket performance
• Since 2014, seven companies have been listed with Nordic Capital retaining a significant shareholding in each
listed entity
● Significant experience of investments in Financial Services
• Current portfolio companies in Financial Services include Lindorff, Resurs Holding, Itiviti and Bambora
Overview of Nordic Capital
Note: Nordic Capital refers to Nordic Capital Fund VIII and/or all, or some, of its predecessor funds.
25