December 2018 Atocongo Plant, Lima Executive Summary On November - - PowerPoint PPT Presentation

Atocongo Plant, Lima

December 2018

‘Proyecto de Fusion’ Transaction overview

Executive Summary

• On November 30th, UNACEM announced that the Independent Committee of its Board of Directors (“BoD”) had approved the merger with

Sindicato de Inversiones y Administración S.A. (“SIA”), Inversiones Andino S.A (“IASA”) and Inmobiliaria Pronto S.A (“Pronto”), in which UNACEM will act as the absorbing entity (the “Transaction”)

• The Transaction was presented to UNACEM’s Board of Directors by the ‘Grupo de Trabajo’, conformed by 4 members of the controlling group and

the 4 CEO’s of the AFPs 1, created by approval at a shareholders’ meeting on July 24, 2018, to provide a proposal over SIA and IASA’s services contracts

• An Independent Committee was designated by the BoD to analyze the Transaction, and retained Morgan Stanley to provide a Fairness Opinion on

the Transaction

• UNACEM retained Estudio Miranda & Amado to conduct a legal due diligence on the assets to be contributed in the Transaction
• As a result of the Transaction, SIA, IASA and Pronto will be extinguished and their resulting stake in UNACEM will be held by their shareholders

as of December 31st, 2018, Inversiones JRPR S.A (”JRPR”) and Nuevas Inversiones S.A (“NISA”), entities that will hold together a controlling

• wnership on UNACEM, with 26.55% and 25.25% stake, respectively
• The resulting free float of UNACEM will be increased by incorporating minority shareholders of SIA and IASA, totaling 48.20% of UNACEM capital

(increased from 31.68% pre transaction)

• The transaction is subject to the approval of SIA, IASA and Pronto, and UNACEM’s shareholders meetings to be held on December 27th and 28th,

2018, respectively

• J.P. Morgan acted as financial advisor to SIA and IASA, and CAPIA acted as financial advisor to the AFPs

2

July 2018 August 2018 November 2018 December 2018

July 24th, 2018 ‘Grupo de Trabajo’ is created by approval at a shareholders’ meeting to provide a proposal

• ver SIA and IASA’s services

contracts August 15th, 2018 ‘Grupo de Trabajo’ initiates work on the proposal November 6th, 2018 ‘Grupo de Trabajo’ presented its proposal to the Board of Directors of UNACEM November 7th, 2018 UNACEM’s Independent Committee was designated by the BoD to analyze the Transaction and retained Morgan Stanley to assess the fairness of the proposal December 6th, 2018 The Board of Directors of SIA, IASA and Pronto approved the Transaction November 29th, 2018 Morgan Stanley presented its Fairness Opinion indicating the Transaction is ‘fair’ from a financial point of view November 30th, 2018 The Board of Directors of UNACEM approved the Transaction and called for a shareholders’ meeting

Note: 1 AFPs include AFP Integra, Profuturo AFP, Prima AFP and AFP Habitat

December 26, 27 and 28th, 2018 Pronto, SIA, IASA and UNACEM’s Shareholders Meetings to approve the Transaction

Transaction rationale

Key objectives of the Transaction

✓ Simplification of UNACEM’s shareholder structure ✓ Increase UNACEM’s EBITDA and Cash Flows, potentially improving its leverage ratios ✓ Consolidation at UNACEM of the knowledge, strategy, experiences, specialization, among other expertise developed, and operations managed,

by the absorbed entities

✓ Incorporation of SIA and IASA’s minorities to UNACEM’s float, potentially originating an increase in liquidity (daily trading volume) and faster

market reaction to UNACEM’s performance

✓ Elimination of Management Contracts with SIA and IASA and consolidation of related-party outflows to ARPL and Vigiandina

UNACEM LTM 3Q18 EBITDA buildup (US$mm)1 Increase share of public float

Current

• wnership structure

Resulting

• wnership structure

Controlling Group: SIA, NISA, IASA,

• Inv. JRPR

Controlling Group: NISA, Inv. JRPR 1,173 806 10.9 4.2 352 Revenues Operating expenses SIA

• mgmt. fee

IASA

• mgmt. fee

EBITDA

Management contracts would cease to exist

Float 31.7% Controlling Group 68.3% Float 48.2% Controlling Group 51.8% +16.5%

Transaction would also allow UNACEM to capture ARPL and Vigiandina’s EBITDA in its consolidated financial statements

Note: 1 Foreign Exchange USD/PEN of 3.259 based on the average of the period

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SIA

• Holding company owned by NISA (58.9%),

Inversiones JRPR (18.6%) and other minority shareholders (22.5%)

• In addition to the 43.4% stake in UNACEM, it
• perates a management contract with UNACEM

and owns a minority stake in Skanon Investments, UNACEM’s subsidiary, among other assets IASA

• Holding company owned by Inversiones JRPR

(60.6%) and other minority shareholders (39.4%)

• In addition to the 24.3% stake in UNACEM, it
• perates a services agreement with UNACEM,
• wns a stake in Vigilancia Andina S.A, a stake in

Ferrovias Central Andina S.A, and real estate properties, among other assets

Overview of corporate structure before the Transaction

Inversiones JRPR NISA SIA IASA

61.9% 58.9% 43.4% 24.3% 60.6%

Public float

31.7% 18.6% 0.6%

Inmobiliaria Pronto

100.0%

Current corporate structure

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B C A

Inmobiliaria Pronto

• Holding company fully owned by Inversiones JRPR

(100.0%)

• Owns 100.0% of ARPL, a company that provides

technical and engineering services to UNACEM, a stake in Vigilancia Andina S.A, and real estate properties, among other assets

A B C

Others Skanon Investments Inc. (1.21%) Real Estate Others Real Estate Others

Assets to be merged into Unacem in the Transaction

SIA, IASA and Pronto would contribute their assets into UNACEM as part of the Transaction

Vigiandina (55.5% stake) Ferrovias (15.0% stake) Management contract with UNACEM ARPL (100.0%) Vigiandina (44.5% stake)

• SIA and IASA’s management contracts with UNACEM – contracts would cease to exist on January 1st, 2019
• Ferrovias Central Andina S.A (15.0% stake), an operational company that owns a railway concession in Peru
• Vigilancia Andina S.A (100.0% stake), an operational company that provides security services to UNACEM and other companies in Peru
• ARPL Tecnologia Industrial S.A (100.0% stake), an operational company that provides technical assistance and engineering consulting services to

UNACEM and its subsidiaries

• Skanon Investments Inc. (1.21% stake), a holding company that owns a majority interest in Drake Cement, LLC, a cement company in Arizona,

USA, and other related investments. Skanon Investments is a subsidiary and is majority-owned by UNACEM

• Real Estate assets, direct ownership in the properties and in the subsidiaries that own UNACEM’s headquarter offices, among other properties
• Others, cash and outstanding loans to Skanon that will be held by each holding at Transaction closing

1 2 3 4 5 Services contract with UNACEM

Operating assets Real estate assets

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Others

Pronto IASA SIA

7 6 A B C 1 2 3 4 1 3 5 7 6 7 7 6

UNACEM shares received by the Holdings UNACEM shares attributable to the capital increase Holding Shares % of UNACEM shares1 Shares SIA 779,187,892 42.9% 64,876,584 IASA 456,281,363 25.1% 56,302,355 Pronto 50,445,265 2.8% 50,445,264

Transaction structure

• The Transaction approved by UNACEM’s BoD considers the following

two steps that will happen simultaneously:

• Merger of SIA, IASA and Pronto (the “Holdings”) into UNACEM
• Capital increase by contributing various assets from the Holdings to

UNACEM

• SIA, IASA and Pronto’s shareholders will receive UNACEM shares in

exchange for their respective shares in each of the Holdings

• Shares received are attributable to their current stake in UNACEM

and the capital increase at UNACEM

• The exchange ratio agreed considers PEN 2.20 / UNACEM share2
• Inv. JRPR

NISA Public float

48.20% 26.55% 25.25% 61.85% Note: 1 Total UNACEM shares of 1,818,127,611 post capital increase; 2 Share price as of November 6th, 2018 (date when ‘Grupo de Trabajo’ proposal was presented to UNACEM Board of Directors);

3 Considers UNACEM’s share price at PEN 2.20 and a USD/PEN exchange rate of 3.332

Corporate structure Post Transaction

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Overview

Drake / Skanon UNICON CELEPSA UNACEM Ecuador ARPL Vigiandina Ferrovias 86.3% 93.4% 90.0% 98.9% 100.0% 100.0% 15.0%

New UNACEM’s subsidiaries

• As a result of the Transaction, SIA, IASA and Pronto would extinguish

and the resulting shareholders of UNACEM will be:

• JRPR (26.55%)
• NISA (25.25%)
• Public Float (48.20%)
• ARPL, Vigiandina and a minority stake in Ferrovias will be absorbed by

UNACEM as new subsidiaries

Preansa Chile Preansa Peru / Colombia 50.0% 51.0%

UNACEM share price performance

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1.50 1.70 1.90 2.10 2.30 2.50 2.70 2.90 3.10 3.30 3.50 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Price (PEN)

November 30, 2018 Announcement of Proyecto de Fusion July 24, 2018 Creation of “Grupo de Trabajo” November 6, 2018 Grupo de Trabajo proposal is presented

Market has reacted positively to the Transaction’s announcement

Source: Factset as of December 7 2018

Next steps

• The Transaction would be executed through a public deed that should be registered by SUNARP1

approximately 30 days after the 3rd publication, after which UNACEM would issue the respective new shares to SIA, IASA and Pronto’s shareholders 8

Date Event December 26th, 2018 Pronto’s shareholders meeting takes place to vote on the Transaction December 27th, 2018 SIA and IASA’s shareholders meeting takes place to vote on the Transaction December 28th, 2018 UNACEM’s shareholders meeting takes place to vote on the Transaction December 30th, 2018 1st publication of the Transaction January 1st, 2019 Transaction Effective Date for accounting purposes January 5th, 2019 2nd publication of the Transaction January 11th, 2019 3rd publication of the Transaction

1 Superintendencia Nacional de Registros Publicos

Appendix

Overview of assets to be contributed to UNACEM

Vigilancia Andina S.A (“Vigiandina”) ARPL Tecnologia Industrial S.A (“ARPL”)

• Founded in 1991, Vigiandina provides surveillance, control and

security services for all types of buildings and facilities, as well as security services to individuals

• Vigiandina provides security services mainly in regions of Lima,

Junin and Ica in Peru and serves clients in various industries including mining, energy, commerce, and education

• Business segments:
• Private vigilance: Surveillance and various related security

services for buildings and facilities (i.e. companies, schools, etc.)

• Personal security: Security services for individuals
• Founded in 1949, ARPL provides technical assistance and

engineering consulting services to UNACEM and its subsidiaries

• The Company operates through four different business segments:
• Technical assistance & consulting services
• Project development and management
• Information Technology support services
• Laboratory testing and analysis
• ARPL focuses on developing and executing industrial projects and

expansions across UNACEM and subsidiaries' industrial operations Main sources of income

• Permanent monitoring of UNACEM’s operations,

helping manage cost, plant productivity and product quality over time

• ARPL prepares economic, technical and quality

reports on UNACEM’s plant operations periodically

• Provides advisory on topics related to performance,

equipment and technology, among others Technical Assistance Project development and management

• ARPL develops and manages various industrial

projects across UNACEM and its subsidiaries, assuming the following responsibilities:

• Feasibility reports (technical and economic)
• Environmental impact analysis
• Basic and detailed engineering services
• Procurement (supplier selection)
• General project management

2017 revenue breakdown, by client-type

Note: 1 Includes services to UNACEM and subsidiaries, SIA, IASA, ARPL, among others

UNACEM & related entities 71% Third parties 29%

1

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Lima /Callao

Overview of assets to be contributed to UNACEM (cont’d)

Ferrovias Central Andina S.A. (“Ferrovias”) Real estate assets

• Founded in 1999, Ferrovias owns the concession to operate the

Ferrocarril del Centro railway, the only railway system connecting Lima/Callao with the central region of Peru

• The Ferrocarril del Centro has a total extension of 535km and

is used to transport cargo mainly for mining companies

• The concession was originally awarded to Ferrovias in 1999 for

a duration of 30 years by Peru’s Ministry of Transportation and Communication

• The concession currently expires in 2039, but with the potential
• f being extended to 2059

Ferrocarríl del Centro

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IASA:

• Direct ownership in the offices located at Carlos Villaran No. 508,

La Victoria, Lima, Peru (UNACEM and subsidiaries’ headquarters)

• 90.9% stake in Inversiones Nacionales y Multinacionales S.A.

(“INMA”),

• INMA owns a real estate property located at Carlos Villaran 400,

La Victoria, Lima, Peru (adjacent to Carlos Villaran No. 508)

• 8.85% stake in Compañia de Inversiones Santa Cruz S.A.
• Santa Cruz owns real estate properties located at Carlos Villaran
• No. 300 and No. 200 (adjacent to Carlos Villaran No. 400)

Pronto:

• Direct ownership in the offices located at Carlos Villaran 508, La

Victoria, Lima, Peru (UNACEM and subsidiaries’ headquarters)

• 9.1% stake in INMA

Atocongo Plant, Lima

December 2018

‘Proyecto de Fusion’ Transaction overview