121205 bbi presentation - pd ports
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OFFER FOR PD PORTS PLC (PDP)
December 2005
Photos Source: PD Ports p lc
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Summary
BBI has made an offer to acquire all of the ordinary shares and
convertible notes in PD Ports plc (PDP), at 148.5 pence plus 1.5p
dividend for the ordinary shares, and 154.1 pence for convertiblebonds which has been unanimously recommended by the PDP Board
BBI has also secured irrevocable undertakings from PDP institutional
shareholders (47.8%) and bondholders (53.3%) that commit 51.9% ofthe issued share capital of PD Ports on a diluted basis.
purchase price represents a 12.6 EV/EBITDA multiple (based on
broker forecasts for FY06). Attractive price when compared to recent
market comparables in the industry
PD Ports generates strong, stable and reliable long term cash flows
with sustainable measured growth opportunities from core operations.
The PDP acquisition meets BBIs key investment criteria.
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About PD Port s
PD Ports is the second largest port in the UK by volume and is listed
on the London Stock Exchange
PD Ports owns the Port of Tees and Hartlepool (Teesport) and acts
as its statutory harbour authority as well as undertaking key
stevedoring activities. PD Ports also operates a series of small ports
and related transport logistics businesses in the UK PD Ports also controls a significant property portfolio of over 900 ha
throughout the UK which encompasses both operational and general
land holdings. Of significant note is the 117 acre Victoria Harbour
development in Hartlepool which has the potential to deliver a steady
boost to cash flow over the course of the next 15 years
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About PD Port s
The PD Ports acquisition will be via take-over offer recommended by
the PDP directors for all issued shares and all issued convertible
bonds
PD Ports shareholders and convertible bond holders have shown their
support for the bid by BBI by providing irrevocable undertakings to
accept the offer BBI has received
47.8% irrevocable undertakings from PDP shareholders; and
53.3% irrevocable undertakings from convertible bond holders With call options over 33.9% of the convertible bonds this equates to
51.9% irrevocable undertakings of the issued share capital of PD Ports
on a diluted basis (assuming conversion of the bonds that BBI has call
rights over).
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Inves tm ent Charac t e ri st i cs
Investment criteria
STRATEGICPD Ports represents essential infrastructure for the Tees Valley region and in particular the multitude ofextensive industrial businesses along the banks of the Tees. The company is located in a strategic
region of the UK in terms of an entry point for trade to and from northern UK and its proximity toindustrial development and the north sea oil fields.
SECURITY HOLDER WEALTHThe acquisition price, earnings and funding structure of PD Ports will contribute positively to BBISecurity Holder wealth on the back of strong, secure, long-life core conservancy and rental incomesupported by a variety of value adding stevedoring and transport logistics activities.
APPROPRIATE RISK/RETURNPD Ports is an asset of top tier quality and condition with proven management and low market andregulatory risk characteristics. The ports business exhibits sound long term contractualarrangements with key customers and has strong barriers to entry to competitors supported by thenaturally deep water of the Tees and the level of customer capital investments at the port. Against
the backdrop of strongly stable underlying returns from conservancy and rental activities, PD Portshas considerable upside potential in terms of the growth of new ports business supported bymiscellaneous property sales to offset future capital expansion and investment.
ABILITY TO OPTIMISE CAPITAL STRUCTUREPD Ports is appropriately leveraged to balance the investment risk profile with the potential tooptimise returns to BBI. BBI sees significant potential to further optimise the capital structure as thecompany grows its revenue base.
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PD Por t s
Business attributes
High revenue certainty: High revenue certainty through
contracted customers or those who use the port because of theirlevel of infrastructure investment along the banks of the Tees.
Low operating risks: Relatively low levels of capital expenditure
required to support current operations and short term growth in
the companys key port and product streams.
Growth prospects: Growth in medium term via growth in traffic
port revenue and creating value from the land bank.
Experienced management team: Quality management team
who have been committed to the business. It is our intention to
retain key management team
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PD Port s Business Ac t iv i t ies
Teesport
PD Teesport is the statutory harbour authority for Teesport.
Located in the north-east of England, it handled 53.7m tonnes inthe year to March 2005. Its principal activities include:
Bulk cargo handling and storage
Operation of two Lo-Lo container terminals at Tees Dock
Operation of a major steel export terminal used by Corus, currently contractedunder a 10 year off-take agreement
Ro-Ro ferry facilities used by inter alia P&O, Renault and General Motors
Has a significant land bank and is continuing to optimise spare
land capacity. Has recently signed an agreement with Wal-Martfor the development of a 20m import terminal, construction of
which is currently underway.
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PD Port s Business Ac t iv i t ies
PD Port Services
provides a range of services including:
Stevedoring ,Warehousing Road haulage, Container handling
Shipping and inspection
On the Humber River it operates Lo-Lo container terminals on
behalf of Associated British Ports (ABP) whilst also providing
various services at the short sea ports of Howden and Keadby.
PD Logistics
offers a wide range of services to a customer base which, to
large degree, is common with Port Services. Traditionally working
with the chemical, automotive and steel sectors, PD Logistics is
looking to increase its exposure to supply chain managementactivities.
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PD Port s Business Ac t iv i t ies
Property
Income from property is generated in one of two principal ways:
Rental income derived from customers under long-term leases atTeesside (PD Ports owns approximately 2,000 acres)
Identification and disposal of non-operating property has historicallygenerated a regular income stream for the Group. Victoria Harbour,a 117 acre brownfield site in Hartlepool, the development of which
has the support of both the Tees Valley Regeneration body andHartlepool Borough Council, is currently awaiting planningpermission. If successful, the development will take place over 15 20 years and it is expected that plots will be released for sale overtime.
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Valuat ion Met r ic
EV / EBITDA
PD Ports (based on BBI offer price)
Actual FY 05 (Year Ending March 2005)
Actual FY05 (Year ending 30 September 05)
Consensus Broker Forecasts FY06 (y/e March 06)
13.4 times
13.2 times
12.6 times
Industry Comparables
P&O
CSX Terminals
Toll Holdings
Patrick Corp
Tauranga (NZ)
Between 16.0 and 16.6 times
15.0 times
Toll trading at 13.5 to 14 times
Patrick trading at > 14 times
Trading at 13.0 to 13.5 times
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