Partnership for Polymer Intermediates & Composite Resins Invest - - PowerPoint PPT Presentation

DS M in motion: driving focused growth

Partnership for Polymer Intermediates & Composite Resins

Invest or Presentat ion 16 March 2015

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S afe harbor statement

This present at ion may cont ain forward-looking st at ement s wit h respect t o DSM’ s fut ure (financial) performance and position. S uch st atements are based on current expect ations, estimates and proj ections of DS M and informat ion current ly available t o t he company. DS M caut ions readers t hat such st at ements involve cert ain risks and uncert aint ies t hat are difficult t o predict and t herefore it should be underst ood t hat many fact ors can cause act ual performance and posit ion to differ mat erially from t hese st at ement s. DS M has no obligat ion t o updat e t he st at ement s cont ained in t his present at ion, unless required by law. A more comprehensive discussion of the risk factors affect ing DS M’ s business can be found in t he company’ s lat est Annual Report , which can be found on t he company’ s corporate websit e, www.dsm.com

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Highlights of the transaction

• Royal DS

M and CVC Capital Partners (CVC) have announced an agreement for a partnership for DS M’ s act ivit ies in Polymer Int ermediat es (Caprolactam and Acrylonit rile) and Composite Resins through the formation of a new company, provisionally called NewCo

• NewCo will be 65%
• wned by CVC and 35%

by DS M, with 1,950 employees

• Pro-forma third-party sales of NewCo in 2014 amounted to €2.1 billion wit h a 2014

EBITDA of €106 million

• The ent erprise value of t he t ransact ion is €600 million plus an earn-out of up t o €175

million

• Financing of NewCo will primarily be t hrough an equit y cont ribut ion from bot h

shareholders, third part y financing and a €100 million bridge loan provided by DS M

• Estimated net cash proceeds at closing to DS

M of €300-350 million

• DS

M will recognize an initial book loss of approximately €130 million after tax and non- cont rolling int erest s, as an except ional it em in Q1 2015

• Closing, subj ect to cust omary condit ions and approvals, is expect ed in Q3 2015

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Further details of the deal

• DS

M will cont ribut e its global caprolactam business (Europe, North America, its 60% stake in DNCC (China) and the caprolactam licensing business), DS M’ s acrylonitrile business and DS M’ s Composite Resins business including its 75% st ake in JDR (China)

• DS

M’ s 65% stake in the service organizat ion S itech S ervices held via it s caprolact am and acrylonit rile businesses will also be transferred

• NewCo will cont inue to supply at least 80%
• f DS

M Engineering Plastics’ caprolact am needs in Europe and Nort h America for t he coming 15 years via a drawing rights cont ract , effect ively maint aining DS M Engineering Plast ics’ backward int egrat ion. In China DS M Engineering Plastics will cont inue to be supplied by NewCo as t oday. This secures an ongoing strat egic and competit ive position for the polyamide 6 business in which DS M is a global leader

• NewCo will operat e as an independent company wit h t hree business unit s:

caprolactam, acrylonitrile and composite resins. Pro-forma t hird party sales of NewCo amount ed to €2.1 billion in 2014 wit h an EBITDA of €106 million (excluding non cont rolling int erest ), including EBITDA from Sit ech Services of €19 million and caprolact am licensing income

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S trategic rationale for DS M

• Delivers on the strategic actions DS

M announced for these businesses and is a decisive st ep in furt her opt imizing DSM’ s port folio and reducing our cyclicalit y

• We have found a good part ner in CVC after a careful process in which we evaluated all
• pt ions. We believe t he part nership wit h CVC is t he best way forward for t hese

businesses

• This partnership secures a long-t erm competitive supply position of caprolactam for

DS M Engineering Plastics

• As a 35%

shareholder in NewCo, DS M will be able to benefit from any improvements in the businesses that will become part of NewCo

• DS

M can now fully focus on improving t he operat ional performance of it s Nut rit ion and Performance Mat erials businesses, complemented by accelerat ed actions to improve efficiencies and reduce costs

• This transaction is geared towards value creation for these businesses and is consist ent

wit h our commit ment t o cont inue t o generat e value for our st akeholders and deliver

• n our st rat egy

Page 4

DS M delivers on the strategic actions it announced for these businesses

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• NewCo’s businesses at a glance
• Impact on DS

M’s financials

• CVC at a glance
• DS

M’s strat egy

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S ites & employees in scope of NewCo

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US / Georgia

DCNA Augusta ~350 employees

The Netherlands

Caprolactam, Acrylonit rile (Sittard-Geleen) Composit e Resins (Schoonebeek, Zwolle) ~575 employees

Italy

Composite Resins Filago ~ 85 employees

France

Composit e R esins Compiegne ~75 employees

~ 1,950 employees worldwide will be transferred from DS M to NewCo

China

Head office DFI/ Caprolactam in Shanghai DNCC Nanjing Composite Resins Nanjing ~850 employees

Germany / Switzerland

Composite Resins Bruchsal, Head office Composite Resins in Schaffhausen ~35 employees

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Caprolactam business at a glance

Page 7

• Total t hird party sales of ~€1.3bn (2014)
• Key locations:

DNCC: 400kt in Nanj ing (China ); 40%

• wned by S

inopec

270kt in Sit t ard – Geleen (The Net herlands) DCNA: 250kt in August a (US

), incl. 45kt drawing right s Shaw

Headoffice in Shanghai (China)

• DS

M’s caprolact am business holds a 19% share in S itech Netherlands

• Including licensing of t echnology
• Main product is caprolact am (920kt ), by-product is ammonium sulfat e (1.7Mt )
• Main applications are: text iles, floor coverings (carpet s), engineering plastics, industrial

yarns and film

Augusta, Georgia (US) S ittard-Geleen (NL) Nanj ing (China)

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Acrylonitrile business at a glance

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• S

ales of ~€450m (2014)

• Manufact uring locat ion: a 280kt plant wit h t wo lines,

and head office, based in S itt ard - Geleen (The Net herlands)

• DS

M Acrylonit rile holds a 46% share in S itech Net herlands

• Main product s are acrylonit rile, ammonium sulfat e,

hydrogen cyanide, sodium cyanide and acet onit rile

• Main applicat ions are:

Acrylic fibers mainly for textiles ABS

/ S AN for aut omot ive, domest ic

Acrylamide for water treatment and enhanced

• il recovery

S

ynthet ic rubber copolymers

Carbon fiber precursors for aircraft, windturbines,

aut omot ive

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Composite Resins business at a glance

Page 9

• S

ales of ~ €250m (2014)

• Includes Composit e Resins Europe and Composit e Resins

Asia, Jinling DS M Resins, a 75% partnership with S inopec in Nanj ing

• 4 production locations:

Schoonebeek, The Net herlands Compiegne, France Filago, Italy Nanj ing, China

• Head office in S

chaffhausen (S wit zerland)

• Main product s are unsat urat ed polyest er resins, vinyl

est er, gelcoat s and sizing & binders

• Main applicat ions are:

Building & infrast ruct ure Transport at ion, marine Tanks, pipes

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• NewCo’s businesses at a glance
• Impact on DS

M’s financials

• CVC at a glance
• DS

M’s strat egy

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Impact on DS M’ s financials

• Estimated net cash proceeds at closing t o DS

M of €300-350 million, which DS M will use for net debt reduct ion

• This cash amount result s from t he Ent erprise Value of €600m (excluding t he earn-out
• f up t o €175 million) minus:

A bridge loan of €100 m which DS

M will provide to Newco

DS

M’s equit y reinvestment for the 35% stake in Newco

The usual cash adj ust ment s relat ed t o working capit al and debt -like it ems

• An init ial book loss of approximat ely €130 million, aft er t ax and non-cont rolling

int erest s, will be recognized as an except ional it em in Q1 2015. This reflect s t he est imat ed valuat ion of the assets on a fair value less cost to sell basis, t aking int o account t he specific t erms of t he t ransact ion including t he drawing right s

• DS

M’s caprolactam, acrylonit rile and composit e resins businesses will be classified as asset s held for sale in Q1 2015

• From t he closing dat e onwards, DS

M will present t he invest ment in NewCo as an associat e, account ed in accordance wit h t he equit y met hod

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Pro-forma impact on 2014 P&L*

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• DSM Sales will decline by ~€2.1bn (2014 t hird-part y sales of businesses in scope)
• EBITDA t o be deconsolidat ed due t o t his part nership will be €125m at 100%

base; including €19m EBITDA equivalents for non-controlling interests (DNCC, JDR and Sitech)

• Indicative rest at ed figures aft er deconsolidat ion of NewCo, Euroresins and S

ynres are presented in t he t able below* 2014 (€ m) Sales EBITDA Report ed

Restated*

Report ed

Restated*

Nutrition 4,335

4,335

850

850

Performance Materials 2,792

2,460

343

323

Polymer Int ermediat es 1,727 83 Innovat ion Center 154

154

• 18
• 18

Corporat e Act ivit ies 173

102

• 90
• 117**

Continuing Operations 9,181

7,051

1,168

1,038

Discont inued: NewCo

• 2,055***
• 125

Discont inued: Euroresins / S ynres

• 125
• 5

* Indicative numbers, final re-stat ed figures will be made available in due course ** Impact on Corporate Activities due to deconsolidation of Sitech *** Including ~€50m of “ internal supplies” that have become third-party sales after divestment of Euroresins

CVC at a glance

Page 13

Slide provided by CVC Capital Partners, see their website for legal disclaimers

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Leading Global Private Equity Firm

• Generated positive

returns across sector, geography and cycles

Positive Returns

169

Investment Professionals

$80bn

A loyal & diversified investor base

Funds Committed

• Leverage our global

network to access proprietary deal flow

• Focus on transactions

where CVC can bring added value, ranging from an enterprise value

• f between €500m to

€5bn

• 320 total professionals

from over 30 nations

• 54 partners with an

average tenure of 11 years with CVC

Experienced and Cohesive Team

• Global presence with 22
• ffices on 3 continents
• One of the market

leaders in Europe and Asia Pacific buyouts

Leading Global Franchise Conservative Investment Strategy Proven record of Private Equity investment success

33

Years

>300

Since 1981

Investments

Page 14 Page 14

Slide provided by CVC Capital Partners, see their website for legal disclaimers

15

Small Locally-Rooted Teams

Jersey Paris Madrid Amsterdam Brussels Zurich Luxembourg Milan Frankfurt London Copenhagen Stockholm New York Operations FIG FIG TMT Operations Financing Bangkok Hong Kong Singapore Beijing Shanghai Tokyo Seoul Financing Operations FIG Operations

22 Offices Globally

CEE Jakarta San Francisco

Page 15

Slide provided by CVC Capital Partners, see their website for legal disclaimers

16

CVC Private Equity Europe – Overview

CVC Private Equity Europe

Coverage People Portfolio

Established in 1981 7 Funds: $50bn raised 14 offices in Europe and US 10 geographic teams, 4 specialist teams 33 partners with an average tenure of 12 years 79 investment professionals 20 nationalities Capital Invested: €24bn >130 investments Current Portfolio Company Revenues: €80bn Current Portfolio Company Employees: ~240,000

Trademark Investments

CVC manages capital on behalf of over 300 investors with c.80% coming from public & private pension funds & fund

• f funds

Page 16

Slide provided by CVC Capital Partners, see their website for legal disclaimers

Page Page 17

• NewCo’s businesses at a glance
• Impact on DS

M’s financials

• CVC at a glance
• DS

M’s strat egy

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DS M in motion: driving focused growth

Creating sustainable value along all growth drivers for our stakeholders

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Another significant step in DS M’ s transformation

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Continuous shift to higher quality portfolio with reduced cyclicality

* 2014 numbers are indicative numbers: sales adj usted for deconsolidation of Polymer Int ermediates, Composit e Resins, S itech, S ynres and Euroresins; Final restat ed figures will be made available in due course

2000 2005 2010

Polymer Intermediates & Composite Resins

Performance Materials

Pharma

Nutrition Proportion of DS M sales (% )

Ot hers Pet rochemicals Energy Engineering Plastic Products Base Chemicals & Materials Ot hers Base Chemicals & Materials Energy Ot hers

2014 pro-forma* 1995

Petrochemicals Energy Engineering Plastic Products Curver Base Chemicals & Materials Ot hers

EBAs

Pharma Polymer Interm. & Comp. R esins

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Impressive progress made on strategy

• DS

M significantly transformed

Increased global reach; stronger presence High Growt h Economies Capit al allocat ion st rongly focused on Nut rit ion t hrough t arget ed acquisit ions Value creat ion t hrough sust ainable innovat ion and new business plat forms (EBAs) Pharma JVs est ablished Part nership in Polymer Int ermediat es and Composit e Resins announced

• DS

M is now well posit ioned wit h at t ract ive port folio:

High qualit y, Nut rit ion and Performance Mat erials businesses wit h a good growt h

and ret urn profile

At t ract ive emerging business areas est ablished (Innovat ion Cent er) providing

significant fut ure value

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Priority is driving operational performance

• Focused strategy to improve financial performance:

Drive improved performance of Nutrit ion, Performance Materials and Innovat ion

act ivit ies,

Complet e accelerat ed actions to improve efficiencies and reduce costs Unlock hidden pocket s of value in Pharma and Innovat ion asset s Focus on cash generation S

trict capital allocation

No large M&A contemplated for now;

current focus is on int egrat ion of Nut rit ion acquisit ions of recent years

Commit ted to policy of stable, preferably rising, dividend

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DS M actively generating shareholder value