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Strategic Alternatives Discussion
R.R. Donnelley & Sons Company
Team SevenHeather Jiang, Bryan Koch,, Jake Mattison, Austin Pritchett, Steve Tabor
Strictly Private and Confidential
May 4, 2015
Table of Contents
I. RR Donnelley Strategic Overview
II. Industry Overview
III. Potential U.S. M&A Candidates
IV. Proposal and Strategic Rationale
V. Transaction Rationale and Summary
VI. St Ives Group Overview
VII. Financial Highlights
VIII. St Ives Business Strategy
IX. Valuation – Accretion – Comps
Appendix
A. Consolidated Pro-Forma Financials
B. Comps
1
2
Summary Financial Performance (1)
Source: Company Filings, Bloomberg
(1) Bloomberg, EBITDA is adjusted for 2012 Impairment Charge
RR Donnelley Strategic Overview
Leverage Overview (1)
2.62.4
4.34.1
3.33.5 3.7
3.43.9
3.6
1.7x 1.5x2.3x 2.1x
3.1x 2.8x
5.2x
2.8x 2.8x 3.1x
11.8x
10.2x
7.7x 7.9x
3.8x4.7x
2.4x
4.6x3.7x 3.4x
0.0
1.0
2.0
3.0
4.0
5.0
0.0x
3.0x
6.0x
9.0x
12.0x
15.0x
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Th
ou
san
ds
Total Debt Net Debt/EBITDA EBITDA to Interest Expense
$Bn
11.6
9.9 10.010.6 10.2 10.5
11.6
1.80.9 1.1 1.3 1.2 1.0 1.0
15.4%
9.4%10.9%
12.1% 12.0%
9.7%8.5%
0%
4%
8%
12%
16%
20%
0.0
3.0
6.0
9.0
12.0
15.0
2008 2009 2010 2011 2012 2013 2014
Revenue EBITDA EBITDA Margin (T12M)
$Bn
Date Target Name Value Type EV/EBITDA Status
1/27/2015 Courier Corp $293.9 Cash or Stk 8.0x Pending
2/27/2014 Multicorpora R&D Inc 5.5 Cash - Done
1/6/2014 Operations of Esselte 96.5 Cash and Stk - Done
10/24/2013 Consolidated Graphics 690.8 Cash and Stk 6.1x Done
5/22/2012 EDGAR Online Inc 36.5 Cash - Done
2/23/2010 RR Donnelley Financial 451.4 Cash 9.8x Done
5/13/2009 Quad/Graphics Canada $1,532.0 Cash and Stk - Term.
Average $443.8 8.0x
RR Donnelley (“RRD”), is the leading North American commercial
printing and information services company. However, RRD must adapt to
the changing environment by pivoting towards data analytics, content
optimization, and multi-channel marketing capabilities
EBITDA margins have steadily declined over the years and currently
stand at a multi-year low 8.5%
Given RRD’s target leverage ratio of 2.25x – 2.75x on a long term
basis, an extremely large M&A transaction would be unsuitable
However, RRD can utilize the $1.3B credit facility or utilize stock to
fund a modest transformative transaction
Our team has extensive experience with multinational transactions and
prior M&A experience in the Media, Marketing and Print space. We have
identified an ideal candidate that operates in data, content optimization,
book publishing and multi channel marketing
In 2011, this U.K. firm undertook a radical transformation to go from
commercial printing to multi-channel marketer
We believe the employees, business lines, and client connections of this
firm would be invaluable to RRD
U.K. takeover law is challenging, our U.K. takeover Managing Director
Bruce Horton-Gabell, has decades of experience
Small/Midsize M&A is a better fit
3
Key points within the industry
There has been mass movement within the media and advertising
industry towards digital
Print media and advertising expected to continue to shrink year over
year for the foreseeable future, to be replaced with digital
Big data and analytics in advertising has been growing tremendously
across the globe over the past four years and we expect that it will
continue to grow at a rapid rate
Spending on digital advertising has been growing at a steady pace as
companies are able to better understand how to target their customers
through data and analytics tools
Businesses continue to struggle with understanding and utilizing big
data. RR Donnelly is ideally positioned to capitalize on this shift from
traditional print to integrated data and marketing
Global Big Data Market SizeSpending on Digital Advertising
Allocation of Advertising Budgets
Source: eMarketer via Statistica, Wikibon via Statistica
Industry Overview
38.4% 38.3% 39.1% 38.8% 38.1%
17.1% 20.2% 22.3% 25.2% 28.2%
14.8% 13.1% 11.5% 10.2% 9.3%9.9% 9.6% 9.2% 8.8% 8.4%9.9% 9.6% 9.3% 8.9% 8.6%5.8% 5.2% 4.5% 4.0% 3.5%
0%
20%
40%
60%
80%
100%
2010 2011 2012 2013 2014
TV Digital Newspapers Magazines
Madio Directories Outdoor
104.6121.5
146.4
170.5
0
40
80
120
160
200
2012 2013 2014 2015
2.8 4.4 6.210.14.5
7.3
12.5
18.4
0
6
12
18
24
30
2011 2012 2013 2014
Services Other
$Bn
7.3
11.7
18.7
28.5
$Bn
4 Source: Bloomberg, Capital IQ
(1) LTM Gross and EBITDA Margins are latest FY for SIV
Potential U.S. M&A Candidates
Financial Data LTM Operating Statistics (1) Trading MultipleTotal
Enterprise
Value
Equity
Value
LTM Total
Revenue
LTM Net
Debt
Gross
Margin
EBITDA
Margin
EBIT
Margin
NI
Margin
TEV/Total
Revenues
LTM
TEV/
EBITDA
LTM
NTM TEV/Fwd
Total Revenue
Paycom Software 1,865.6 1,863.8 150.9 1.8 83.6% 14.6% 10.4% 3.7% 12.4x 84.9x 9.4x
Zendesk, Inc. 1,758.3 1,873.8 127.0 115.5 63.8% -46.9% -52.1% -53.0% 13.8x NM 9.3x
Box, Inc. 1,752.1 2,040.6 216.4 -288.6 78.2% -64.9% -76.7% -77.7% 8.1x NM 6.1x
Marketo, Inc. 1,153.7 1,251.0 163.7 -99.1 65.7% -31.9% -37.9% -36.6% 7.0x NM 5.1x
HubSpot, Inc. 1,138.2 1,261.7 115.9 -123.5 68.0% -40.4% -41.9% -41.6% 9.8x NM 7.0x
Constant Contact 706.1 885.2 343.2 -179.1 72.7% 11.8% 6.7% 4.9% 2.1x 18.9x 1.8x
Q2 Holdings, Inc. 676.3 764.6 79.1 -88.4 41.8% -18.9% -24.1% -24.8% 8.5x NM 6.4x
OPOWER, Inc. 384.4 509.0 128.4 -124.6 65.6% -29.7% -31.8% -32.5% 3.0x NM 2.6x
SciQuest, Inc. 312.6 440.0 102.5 -127.3 68.6% 4.6% -1.2% -0.4% 3.1x 60.7x 2.8x
Five9, Inc. 238.8 269.4 103.1 -30.6 47.0% -28.2% -34.5% -36.6% 2.3x NM 1.9x
Amber Road, Inc. 191.3 229.0 64.8 -37.8 57.6% -35.2% -39.8% -42.7% 3.0x NM 2.4x
Mean 925.2 1,035.2 145.0 -110.2 64.7% -24.1% -29.3% -30.6% 6.7x 54.9x 5.0x
Median 706.1 885.2 127.0 -115.5 65.0% -29.7% -34.5% -36.6% 7.0x 60.7x 5.1x
St Ives plc (LSE:SIV) 416.1 341.6 511.4 65.1 31% 15% 8.0% 1.3% 0.8x 5.2x 0.7x
Takeaway…Valuations are at an Extreme in the U.S.
Despite it’s focus on data analytics, Paycom Software’s business line concentrates on cloud-based human capital management (HCM) software
solutions, with minimum extension in either printing or marketing segments, posing challenges in integration and realizing synergies
HubSpot, Inc. provides a cloud-based inbound marketing and sales software platform for businesses globally, which fits into RRD’s transforming
strategy; when compared to SIV, acquiring HubSpot has several shortcomings:
– Acquiring HubSpot would require significant capital raising, either diluting current shareholder value or significantly increasing RRD leverage
– Extensive integration is required post-acquisition to improve HubSpot’s operation, postponing synergy realization
– 11% of FY2014 revenue was from outside of U.S., from Australia and Ireland only; lack of diversified geographic footprints and posts
challenge in integrating on a global platform
Constant Contact provides online marketing tools that are designed for small organizations worldwide which excludes printing or medical industries,
posing challenges to transferring industry knowledge
SciQuest’s cloud-based business solution focuses on internal optimization, such as spending management and contract lifecycle management, with no
business operation in marketing segment
In general, U.S. candidates demonstrate less favorable operating statistics and higher trading multiples, less favorable compared to SIV
5
Why This U.K. Company
Source: Company filings, Capital IQ
Proposal and Strategic Rationale
Strong market position fortified by
diversified product & service portfolios, but
margin remains flat in low growth industry
Steady cash generation from printing
business can be used to fund acquisitions
with higher growth and margin
Pursuing goal of 2.25x- 2.75x Leverage
due to low margins and high sensitivity to
macro economic environment
Relationships with Fortune 500 provide
access to knowledge and data which can
be utilized in data analytics and marketing
services, capturing the fast growing digital
advertising and big data market
U.K. based printing company successfully
entered marketing consultancy in 2011
Completed extensive restructuring activity
by divesting low margin printing divisions
and focused on becoming an integrated
communication company
Possess data marketing solution and
consultancy platforms and teams; and
provide a full cycle of marketing service; all
can be scaled up
Management successfully integrated
acquired businesses to deliver
collaboratively with established platform
both domestically and internationally
Without significantly raising leverage or
extending printing capacity, acquiring
SIV provides RRD with:
A successful business
transformation model that is
applicable to the RRD U.S. and global
business
An established full marketing service
platform that is readily restructurable
and scalable
An experienced management,
marketing and consulting team
Further fortified position in
commercial printing segment
Overlap in client base and SIV’s historical growth through acquisition
minimizes post-acquisition integration
Suitable candidates in U.S. are overvalued or require RRD to raise
significant amount of debt to fund a potential acquisition, SIV is a
manageable mid-sized acquisition target
Given its strong position in commercial printing in U.S., the international
market provides more space for growth and diversification; meanwhile, U.K.
market echoes with U.S. enough so the industry experience can be easily
transferred
Favorable tax treatment due to U.K. 21% rate. Should management wish
headquarters and non-fixed assets can move to the U.K. in a tax inversion
The current USD/GBP exchange rate provides for a favorable cross border
M&A environment
St Ives’ $419m in 2015E Marketing Sales will be valued at 3-6X: adding greater than $1bn in value to RRD
0.45
0.55
0.65
0.75
0.85
0.95
Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15
USD/EURO USD/GBP
UD $ / European Currency FX Rates
Equity Value (30% Premium) $447.4m
Enterprise Value: $519.3m
FY15E Revenue: $531.5m
FY15E EBITDA: $67.6m
FD Shares: 129.4M
EV/ 2015E Revenue: 0.7x
EV/ 2015E EBITDA: 4.9x
$387
$535
$304
$465
$450
$405
$250 $300 $350 $400 $450 $500 $550 $600 $650
TV/LTM Sales
TV/LTM EBITDA
EV/2015E Sales
EV/LTM EBITDA
EV/2015E EBITDA
DCF
6
Deal Headlines
Transaction Multiples
LTM Stock Performance
Transaction Rationale and Summary
Deal Value: $519.3m
Deal Announced: 5/15/15
Nature of Bid: Friendly
Premium: 30%
Price Per Share: $3.46
Consideration:
100% Stock Floating Exchange Ratio
0.1855 exchange ratio at Announce
Accretion 5.9% FY15 5.0% FY16
Estimated Synergies: $25m cost synergies
With a lack of suitably valued U.S. targets operating in data, ecommerce and
direct marketing, SIV provides RRD the opportunity to enter into a fast
growing and premium margin business. Wall Street currently places extreme
value on business operating in the marketing and big data space
With $419m in 2015E sales derived from data and marketing, Wall Street
will place a value of 3x - 6x sales on this line of business
With access to a deeper pool of capital, the SIV business units can
meaningfully accelerate top line revenue growth, this translates to a new
growth story to show analyst
EU markets have traded down based on EU debt and currency concerns,
now is an ideal time to diversify internationally and get in at the bottom of the
cycle
The U.S. Dollar is currently strong vs. the GBP, making this an even more
attractive time to pursue M&A in Europe
British tax law prescribes an effective tax rate of 21%, far below the U.S.
Federal rate, RRD can conduct operations through the UK to reduce tax
expense
SIV Valuation Range
Tra
ns
acti
on
Tra
din
gD
CF
$548
$500
$557
$450
$635
$487
SIV EV: $519.3m
Headquarters
Founding
IPO
Employees
Customers
Geographic Mix
Product Offering
One Tudor Street, London
1964 as a Print Business
SIV 1985 on the LSE
2,943
Recently added Johnson & Johnson and HSBC
Burberry, BT, Google, Lloyds, Unilever, Coca-
Cola, Lexus, Chanel, Lego, Levi, Calvin Klein
Over 25% of Marketing revenue is derived from
outside U.K., firm continues to focus
increasingly on international organic growth and
acquisitions
Strategic Marketing – Provides Data for “data
driven direct marketing”
Digital services for ecommerce, online search
and digital marketing
Consulting services provide consumer insight
and market research for retail, consumer and
healthcare markets
Marketing Activation – Provides Marketing
print services for point of sale retail
communications
Print Management and high impact visual
communications.
Field Marketing provides clients with services to
raise customer awareness in store and drive
sales
Books – Market leader in Monochrome
production, multi year agreement with Penguin
Random House
7
Summary Financial Performance (1)
Source: Company Website and 2015 Interim Report
(1) Bloomberg
(2) CapIQ
St Ives Group Overview
52 Week Trading Overview (2)
70
80
90
100
110
120
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr
St Ives MSCI Europe Index
88
95
$m Except Per Share
2012 2013 2014 2015E 2016E 2017E
Sales 520.6 496.1 538.5 581.6 631.0 684.7
% Growth 9.8% -4.7% 8.5% 8.0% 8.5% 8.5%
EBITDA 59.0 72.9 79.7 85.5 94.0 103.4
% Margin 11.3% 14.7% 14.8% 14.7% 14.9% 15.1%
CAPEX 9.7 9.2 16.8 11.6 12.6 13.7
% Sales 1.9% 1.9% 3.1% 2.0% 2.0% 2.0%
Share Price 2.66$ FY15E
Fully Dil Shares (m) 129.4 Revenue 581.6 0.7x
Equity Value 344.2 EBITDA 85.5 4.9x
Plus: Debt 92.6 FY16E
Less: Cash -20.8 Revenue 631.0 0.7x
Fully Diluted EV $416.1 EBITDA 94.0 4.4x
Projection Period
55.850.8
59.0
72.9
79.7 80.485.5
94.0
0.0
20.0
40.0
60.0
80.0
100.0
2010 2011 2012 2013 2014 LTM 2015E 2016E
27%
22%
26%28% 28% 29%
31%
15%
8%
12%11%
11%15% 15%
0%
10%
20%
30%
40%
2008 2009 2010 2011 2012 2013 2014
Gross Margin
EBITDA Margin
8
Historical Revenues
St Ives Group (“SIV”), is an international marketing services group.
Together, the Group’s businesses serve leading brands internationally,
with offices in the UK, North America, China and Singapore
Industries of focus include retail & consumer products, healthcare &
pharmaceutical, financial services, media, technology, automotive and
charity
Since 2011, SIV has focused on shifting from a pure play printing
company to a data and marketing services group
The shift in strategy has resulted in a 11.1% EBITDA CAGR over the
last 4 years
Management has successfully grown the business over the past five
years by pursuing a combination of organic growth and bolt on
acquisitions. Each acquired business seeks to complement and not
compete with existing SIV business units
Recent acquisitions have included:
May 2015 - The Hive Group (Healthcare Consulting, $31.7m)
March 2015 - Solstice Consulting LLC (Mobile solutions $37.4m)
Revenue Mix
$m
Historical Margins
Historical EBITDA
Source: Research, St Ives 2014 Annual Report and Bloomberg
Financial Highlights
Strategic Marketing
Segment 29%10%
10%
9%
48%
2%
21%Data
Digital
Consulting
Marketing Print
Field Marketing
Books
St Ives Business Strategy Overview
9
Shanghai office for Incite, the consumer and market research
consultancy
Approach is based on cross-thinking
Acquire complementary,
ambitious and growing Strategic Marketing
Businesses
The St Ives Strategy
Is Centered Around Three Key Priorities…
SIV’s successful implementation of the strategy outlined below can be applied by RR
Donnelley (“RRD”) to successfully expand into direct marketing and data services
SIV is already expanding to the United States, RRD can leverage existing U.S. relationships to
drive growth even further
Existing management team and all employees of SIV will prove valuable in transitioning RRD
to a premier data driven international marketing services group
International
Marketing Services
Group made up of
individual market
leading businesses
Greater than 25% of Marketing Revenue from
Outside the UK
Internationalism AcquisitionsCollaboration
Over 90% of our clients work with more than one business across the group
Group Businesses:
Operate as
Individual Brands
Complement One
Another
Foster a Common
Culture
Provides investment
and U.S. Leadership
to accelerate growth
Supports
Collaboration
2015 Interim
Revenue
% Group
Revenue
Data
Digital
Consulting
Marketing Print
Field Marketing
Books
Mark
eti
ng
Acti
vati
on
Str
ate
gic
Mark
eti
ng
$25.2m 10%
$27.0m 10%
$24.3m 9%
$125.6m 48%
$7.2m 2%
$54.8m 21%
Source: St Ives 2014 Annual Report and Bloomberg
We anticipate $90m is total synergies arising from the transaction
$25m in cost synergies
$65m in revenue synergies
This transaction will extend the product suite for R.R. Donnelly into the
faster growing sectors of consulting, digital marketing and data driven
marketing
• The additional products will enable R.R. Donnelly to capitalize their
existing strong relationships within large U.S. corporate clients
• The marketing segment within St Ives is growing at over 12% annually
• St Ives management has experience in turning around a printing firm
• St. Ives has a proven track record of acquiring companies in the
growing arena of digital marketing products
10
St Ives has made the transition RRD is attempting
Combined Product Mix The St Ives Capabilities that RRD can invest in
Cost and Revenue Synergies
Source: Research, St Ives 2014 Annual Report and Bloomberg
Synergies
St Ives has spent the last 6 years reinventing itself from a sleeping
printing company to an integrated communication firm.
Automated Marketing
Management Tools
CRM Consulting
Consumer Insight Consulting
Data Capture, Cleansing,
Management and Analysis
Full Service Digital Marketing
Strategic and Creative Services
Campaign Design and Build
Ecommerce Consulting
Online Marketing
Marketing Campaign
Management
Media Sales
Strategic Branding and
Marketing Strategy
Consumer Insights
Retail & Consumer Markets
Consultancy
Healthcare strategic consulting
Field and Sales Marketing
POS and Exhibition
We now have a profitable cash-generative Print Services
business, and a substantial Marketing Services proposition
which has been successfully expanded and strengthened
through acquisition over the past year.“
"Our Strategy since 2009 has been to restructure our print
business while repositioning the group so that it can take
advantage of new growth markets within the services markets
within the marketing services sector“
-Richard Stidwell
St Ives Chairman
Field Marketing
Consulting Services
Digital Marketing
Data Marketing Combined
Logistics $1,160 $1,160
Financial 1044 1044
Sourcing 232 232
Creative & Marketing 232 148 380
Marketing Printing 580 245 825
Trad. Printing 3270 3270
Office Products 580 580
Labels 464 464
Statement Printing 348 348
Forms 232 232
Books 841 103 943.5
Directories 144 144
Total $9,127 $496 $9,623
Accretion / Dilution30% Premium to Last Close
11
140
160
180
200
220
240
May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
Target Price Current Offer Price 52W High
52W Average 20d Average 20 Day VWAP
Offer Premium
EPS $1.00 $1.25 $1.56 $1.87 $2.25 $2.70
15.4% -31.6% -15.6% 4.4% 24.4% 48.4% 77.2%
19.2% -31.9% -15.9% 4.1% 24.1% 48.1% 76.9%
24.0% -32.2% -16.2% 3.8% 23.8% 47.8% 76.6%
30.0% -32.6% -16.6% 3.4% 23.4% 47.4% 76.2%
36.0% -33.0% -17.0% 3.0% 23.0% 47.0% 75.8%
43.2% -33.4% -17.4% 2.6% 22.6% 46.6% 75.4%
51.8% -34.0% -18.0% 2.0% 22.0% 46.0% 74.8%
EPS $1.00 $1.25 $1.56 $1.87 $2.25 $2.70
15.4% -31.3% -15.4% 4.6% 24.6% 48.6% 77.3%
19.2% -31.6% -15.6% 4.4% 24.4% 48.3% 77.1%
24.0% -31.8% -15.9% 4.1% 24.1% 48.1% 76.8%
30.0% -32.2% -16.2% 3.8% 23.7% 47.7% 76.5%
36.0% -32.6% -16.6% 3.4% 23.4% 47.4% 76.1%
43.2% -33.0% -17.0% 3.0% 23.0% 46.9% 75.7%
51.8% -33.5% -17.5% 2.5% 22.4% 46.4% 75.2%
Pre
miu
m P
rem
ium
EPS $1.00 $1.25 $1.56 $1.87 $2.25 $2.70
15.4% -31.6% -15.6% 4.4% 24.4% 48.4% 77.2%
19.2% -31.9% -15.9% 4.1% 24.1% 48.1% 76.9%
24.0% -32.2% -16.2% 3.8% 23.8% 47.8% 76.6%
30.0% -32.6% -16.6% 3.4% 23.4% 47.4% 76.2%
36.0% -33.0% -17.0% 3.0% 23.0% 47.0% 75.8%
43.2% -33.4% -17.4% 2.6% 22.6% 46.6% 75.4%
51.8% -34.0% -18.0% 2.0% 22.0% 46.0% 74.8%
EPS $1.00 $1.25 $1.56 $1.87 $2.25 $2.70
15.4% -31.3% -15.4% 4.6% 24.6% 48.6% 77.3%
19.2% -31.6% -15.6% 4.4% 24.4% 48.3% 77.1%
24.0% -31.8% -15.9% 4.1% 24.1% 48.1% 76.8%
30.0% -32.2% -16.2% 3.8% 23.7% 47.7% 76.5%
36.0% -32.6% -16.6% 3.4% 23.4% 47.4% 76.1%
43.2% -33.0% -17.0% 3.0% 23.0% 46.9% 75.7%
51.8% -33.5% -17.5% 2.5% 22.4% 46.4% 75.2%
Pre
miu
m P
rem
ium
Sensitivity Impact to Combined EPS – 2016 (100% Cash)
Sensitivity Impact to Combined EPS – 2015 (100% Cash) Accretion Dilution (100% Stock)
16% premium over
52W VWAP
EV/EBITDA
Diluted EPS
CY 2015E [US$] +5.9% 1.65
P/E to Achieve Share Price
Add'l Synergies to break even
CY 2016E [US$] +5.0% 1.80
P/E to Achieve Share Price
Add'l Synergies to break even
(Net Debt/TTM EBITDA) -0.3x 2.9x
Aquirer
416.0 6,888.7
1.56
Target
Target@ Deal Price Target
Equity Value (in M USD) 447.4
PE - Multiple
129.4m 201.8m
$2.66 $18.62
344.2 3,757.5
Diluted Shares 129.4m
9.1x 11.9x
10.4x
-23.7
Aquirer
0.29
Enterprise Value (in M USD) 519.3
Price [USD] $3.45
Pro Forma Acquirer
Accretion
8.5x 10.8x
11.5x
-25.2
0.31 1.73
CY 2015E 8.8x 4.9x 5.7x
-0.2x 3.1x
Assumes a 7.32% cost of cash based on RRD WACC
-25%
0%
25%
50%
75%
100%
Elanders AB-BSHS
Communis PLC F.E. Bording A/S RR DONNELLEY& SONS CO
ST. IVES PLC De La Rue PLC Quad Graphics Inc Dai NipponPrinting LTD
GrafenIi PLC
Trading Statistics of Selected Companies
12
$7,306.1 $6,899.5
$2,480.2
$1,051.1$323.4 $268.5 $233.0 $65.4 $11.1
-
1,500
3,000
4,500
6,000
7,500
Dai NipponPrinting LTD
RR DONNELLEY& SONS CO
Quad GraphicsInc
De La Rue PLC ST. IVES PLC Elanders AB-BSHS
Communis PLC F.E. Bording A/S GrafenIi PLC
$1,140.0$989.9
$477.7
$168.8$80.4 $48.2 $41.3 $9.3 $4.3
0
250
500
750
1000
1250
Dai NipponPrinting LTD
RR DONNELLEY& SONS CO
Quad Graphics Inc De La Rue PLC ST. IVES PLC Elanders AB-BSHS
Communis PLC F.E. Bording A/S GrafenIi PLC
7.5x 7.1x6.3x
5.7x 5.5x 5.3x 4.9x 4.8x
2.7x
0.0x
2.0x
4.0x
6.0x
8.0x
De La Rue PLC Dai NipponPrinting LTD
F.E. Bording A/S RR DONNELLEY& SONS CO
ST. IVES PLC Elanders AB-BSHS
Communis PLC Quad Graphics Inc GrafenIi PLC
En
terp
rise V
alu
eL
TM
EB
ITD
A
Source: Bloomberg
(1) 5.5x multiple is high based on low EBITDA estimates per 3rd party equity research
EV
/ N
TM
EB
ITD
A1 Y
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Graphics Data , Marketing Oriented Commercial / Industrial Print Oriented Other
(1)
Pro-Forma Financial Statements
Comps
Appendix
13
A. Consolidated Balance Sheet
14
Standalone
SIV LN Equity RRD US Equity Adjustments Pro Forma
2015:S1 2014:Q4 + - 2014:Q4
Cash and Cash Equivalents 18.1 527.9 - 546.0
Short-Term Investments - - -
Accounts Receivable 115.3 2,033.8 2,149.1
Inventories 8.7 586.2 594.9
Prepaids and Other Current Assets 0.0 225.4 225.4
Total Current Assets 142.1 3,373.3 3,515.4
Property, Plant and Equipment, net 71.7 1,515.5 - 1,587.2
Long-Term Investment & Long-Term Receivables - - -
Goodwill 186.5 1,706.6 534.2 -186.5 2,240.8
Other Intangible Assets 58.7 423.7 - 482.4
Other Assets 0.6 620.2 620.8
Deferred Financing Fees - -
Total Assets 459.6 7,639.3 8,446.6
Accounts Payable 107.4 1,296.6 1,404.0
Short-Term borrowings 0.0 203.4 203.4
Other Current Liabilities 111.9 867.3 979.2
Total Current Liabilities 219.4 2,367.3 2,586.7
Revolver 446.8 446.8
Long-Term Borrowings - 3,429.1 3,429.1
Other Long-Term Liabilities 56.5 1,222.5 1,279.0
Total Liabilities 275.8 7,018.9 7,741.5
Total preferred equity - - -
Noncontrolling Interest - 26.6 26.6
Shareholders' Equity 99.1 3,365.2 - -99.1 3,365.2
Retained earnings & Other Equity 84.7 -2,771.4 -2,686.7
Total Shareholders' Equity 183.7 620.4 705.1
Total Liabilities and Equity 459.6 7,639.3 8,446.6
Source: Bloomberg
A. Consolidated Condensed Income Statement
15
LTM CY 2015E CY 2016E
SIV RRD Combined SIV RRD Combined SIV RRD Combined
Sales 552.6 11,603.4 12,156.0 532.6 11,725.8 12,258.3 542.8 11,911.8 12,454.6
% growth NA NA NA -3.6% 1.1% 0.8% 1.9% 1.6% 1.6%
COGS 369.3 9,052.8 9,422.1 - 2,579.7 - - 2,626.5 -
% sales 66.8% 78.0% 77.5% - 22.0% - - 22.1% -
Gross Profit 183.3 2,550.6 2,733.9 - 9,146.1 - - 9,285.2 -
% margin 33.2% 22.0% 22.5% - 78.0% - - 78.0% -
EBITDA 80.4 989.9 1,070.3 63.2 1,204.3 1,267.5 69.8 1,222.0 1,291.8
EBITDA Unadjusted 80.4 989.9 63.2 1,204.3 69.8 1,222.0
- - -
% margin 14.5% 8.5% 8.8% 11.9% 10.3% 10.3% 12.9% 10.3% 10.4%
EBIT 55.4 515.9 571.3 51.6 737.5 789.1 54.0 759.5 813.5
% margin 10.0% 4.4% 4.7% 9.7% 6.3% 6.4% 9.9% 6.4% 6.5%
Net Income 7.6 245.1 225.8 37.6 314.8 325.6 40.4 348.7 362.2
% margin 1.4% 2.1% 1.9% 7.1% 2.7% 2.7% 7.4% 2.9% 2.9%
Source: Bloomberg
Comparable Company Selection
B. Comparable Company
16 Source: Bloomberg; FactSet; company filings
Market Valuation LTM Financial Statistics LTM Profitability Margins Growth
Gross Net Sales EBITDA
Equity Enterprise Gross Net Profit EBITDA EBIT Income Hist. Hist.
Company Ticker Value Value Sales Profit EBITDA EBIT Income (%) (%) (%) (%) 5Yr CAGR 5Yr CAGR
St Ives plc SIV $ 357.0 $ 428.8 $ 552.6 $ 183.3 $ 80.4 $ 68.1 $ 7.3 33.2% 14.5% 12.3% 1.3% 3.0% 18.7%
Quad/Graphics QUAD 1,086.9 2,480.7 4,862.4 645.4 545.0 208.6 18.3 13.3% 11.2% 4.3% 0.4% 22.1% 11.9%
Chime Communications CHW 462.1 545.4 642.8 329.6 47.1 31.4 15.6 51.3% 7.3% 4.9% 2.4% 5.3% 5.4%
Elanders AB ELAN-B 157.1 266.7 532.3 115.0 44.3 27.9 13.6 21.6% 8.3% 5.2% 2.6% 17.9% 12.3%
Communisis CMS 185.9 241.8 564.8 92.5 43.7 24.7 (24.9) 16.4% 7.7% 4.4% -4.4% 12.5% 10.1%
Mean 25.6% 8.6% 4.7% 0.2% 14.5% 9.9%
Median 19.0% 8.0% 4.6% 1.4% 15.2% 11.0%
Operating Statistics Overview
B. Comparable Company Valuation
17 Source: Bloomberg; FactSet; company filings
General Return on Investment Leverage Ratios LTM Coverage Ratios
Implied Net Debt / Net Debt / EBITDA / EBIT /
Company Ticker FYE Beta ROIC ROE ROA Div. Yield EBITDA (EBITDA - CapEx) Int. Exp. Int. Exp.
St Ives plc SIV Jun-30 0.36 3.1% 3.4% 1.6% 4.1% 1.0x 1.2x 21.2x 13.5x
Quad/Graphics QUAD Dec-31 1.16 0.7% 1.5% 0.4% 5.2% 2.6x 3.4x 5.9x 2.3x
Chime Communications CHW Dec-31 1.01 3.8% 5.1% 2.5% 3.0% 1.9x 2.3x 9.1x 6.1x
Elanders AB ELAN-B Dec-31 0.88 5.9% 8.0% 2.9% 2.4% 3.0x 3.4x 8.2x 5.1x
Communisis CMS Jun-30 0.67 -8.4% -11.8% -5.2% 4.0% 1.4x 3.1x 11.0x 6.2x
Mean 0.93 0.5% 0.7% 0.2% 3.6% 2.2x 3.1x 8.5x 4.9x
Median 0.95 2.2% 3.3% 1.5% 3.5% 2.2x 3.2x 8.6x 5.6x
Current % of Enterprise Value / LTM Total Price /
Share 52-wk. Equity Enterprise LTM 2015E LTM 2015E LTM 2015E EBITDA Debt / LTM 2015E
Company Ticker Price High Value Value Sales Sales EBITDA EBITDA EBIT EBIT Margin EBITDA EPS EPS
St Ives plc SIV $ 2.64 68.8% $ 344.2 $ 416.1 0.8x 0.7x 6.3x 4.9x 9.8x 5.9x 12.4% 0.0% 44.0x 14.7x
Quad/Graphics QUAD 22.27 92.3% 1,086.9 2,480.7 0.5x 0.5x 4.6x 4.8x 11.9x 12.5x 11.2% 2.5% 58.6x 16.3x
Chime Communications CHW 4.61 71.8% 462.1 545.4 0.7x 1.6x 11.6x 8.1x 17.4x 8.9x 7.3% 2.6% 30.7x 11.8x
Elanders AB ELAN-B 5.92 85.4% 157.1 266.7 0.5x 0.5x 6.0x 5.5x 9.6x 8.1x 8.3% 8.0% 13.2x 8.5x
Communisis CMS 0.90 76.9% 185.9 241.8 0.4x 0.4x 5.5x 5.0x 9.8x 7.8x 7.7% 2.3% 12.9x 9.0x
Mean 0.5x 0.8x 6.9x 5.8x 12.2x 9.3x 8.6% 3.8% 28.8x 11.4x
Median 0.5x 0.5x 5.8x 5.3x 10.8x 8.5x 8.0% 2.5% 21.9x 10.4x
Multiples
Enterprise Value / Price /
LTM 2015E LTM 2015E LTM 2015E LTM 2015E
Sales Sales EBITDA EBITDA EBIT EBIT EPS EPS
Mean 0.5x 0.8x 6.9x 5.8x 12.2x 9.3x 28.8x 11.4x
Median 0.5x 0.5x 5.8x 5.3x 10.8x 8.5x 21.9x 10.4x
Implied Enterprise Value
Low 279.4 281.6 464.8 450.0 738.1 615.0 178.0 253.4
High 298.2 417.0 556.6 499.5 827.5 673.5 234.0 277.1
Implied Enterprise Value
EV/2015E Sales, EV/LTM EBITDA and EV/2015E
EBITDA are given extra weight in valuating SIV, given
that:
– SIV’s business transformation has radically
altered margins, the growth profile and nature
of the business
– SIV has much higher EBIT margin that
comparable companies