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Equity Markets and Alternative Investments Teaching Program 2017-2018 Week 4 – October 3, 2017
Equity Capital Markets: the GIMA TT and Poste Italiane Case Studies
Marco Morelli – Chief Executive Officer, Banca Monte dei Paschi di Siena SpA - Italy
Gianluca Iuliano – Managing Director, BAML
The GIMA TT IPO
1
Key Highlights Transaction Summary
GIMA TT up to €424m/$498m IPO
Pre-Deal Investor Education (“PDIE”) started on 4th September and lasted for two weeks, with over 230 institutions met in nine locations across Europe and the US, resulting in a price range announcement of €9.60 to €12.50 per share on Thursday 14th September
Books opened on 18th September and were covered on the full deal size after one day of bookbuilding. After the first week, further guidance was given on pricing expected towards the upper end of the price range
As part of the Roadshow meetings, the company’s management met with over 100 institutions, mainly across the UK, Italy, US, Germany and France
The transaction priced at the top end of the range or €12.50 per share, with the book eight times oversubscribed at that level
Pricing implies a P/E multiple of c.40x and an EV/EBIT of c.27x based on 2016 reported financials
Italy
Initial Public Offering
Joint Global Coordinator & Joint Bookrunner
Up to €424m/$498m
September 2017 On 28th September 2017, GIMA TT priced its up to €424m IPO (assuming full exercise of the greenshoe), with a listing on Borsa Italiana
GIMA TT S.p.A. is a company within the IMA Group which engineers and assembles electronic-based automatic machines for the packaging of tobacco products, including the new generation ones (e.g. reduced-risk products such as IQOS of Philip Morris International)
BofAML acted as Joint Global Coordinator and Joint Bookrunner, and was the only international bank on the offering
Issuer GIMA TT/GIMA IM/Borsa Italiana
Selling Shareholders
IMA S.p.A. (6.4% or 9.9% of the company including greenshoe)
Maestrale Investimenti (28.6% of the company)
Offer Size/Structure
100% Secondary offering to institutional investors only
Base deal size: 30.8m shares/€385m (representing a 35% free float)
Greenshoe: up to 3.1m shares/€39m
Full deal size assuming full exercise of the greenshoe: up to 33.9m shares/€424m (representing a 38.5% free float)
Implied equity value at listing of c.€1.1bn
Pricing Price Range: €9.60–€12.50 per share
Offer price: €12.50 per share
Timetable
One round of early look meetings in July
Investor Education: 04 September 2017 – 15 September 2017
Roadshow and Bookbuilding: 18 September 2017 – 28 September 2017
Pricing and Allocations: 28 September 2017
First Day of Trading: 02 October 2017
Lock-up 180 days for GIMA TT and IMA and 365 days for certain managers of
GIMA TT, subject to customary exceptions and waiver by the Joint Global Coordinators
BofAML Role Joint Global Coordinator and Joint Bookrunner
2
GIMA TT Overview
Shareholding & Management Business Description
Financial Highlights Key Products and Services
GIMA TT engages in engineering, assembly and installation of electronic machines for tobacco packaging
Born in 2009, invents “flexible”, “open architecture” machines for packaging in the tobacco sector
Since 2009 GIMA TT has been also pioneering the New Generation Products (NGP) packaging market:
Closed and open vaping system (e.g. e-cig, tank systems)
Heated Tobacco Products – “HTP” (e.g. IQOS for PMI)
GIMA TT established as first supplier to PMI, BAT and JT for HTP packaging machinery
Main product offer includes: standard machines for conventional tobacco (wrapping, stamp applicators, overwrapped/cartoner, etc.) and special machines for NGP (highly customized tobacco powder capsule filler, liquid capsule filler, e-cigarette assembly lines), including relevant aftersales services
Headquarter & Production Site: Ozzano dell’Emilia, Bologna (Italy); Employees: 116 + 131 contractors
Rest of
Euro…
Italy
APAC RoW
43%
37%
19% 1%
Original Equipme
nt
Aftersales
78%
22%
By Clients
45% 55%
€100m +65% CAGR 2014A–2016A
Revenue
€40m +82% CAGR 2014A–2016A
EBITDA
40% EBITDA Margin
99% (3) Cash Conversion
Backlog €89m €132m order
intake in 2016A
____________________ Source: Company Information, Factset as of August 23, 2017, PMI press release. (1) Maestrale Investimenti is 69.40% owned by Alva S.p.A., which is controlled by Alberto Vacchi (53.33% stake plus additional 46.55% in bare ownership). (2) Others include Massimo Ferioli (1.85%), Massimo Marchesini (1.85%), Fiorenzo Draghetti (1.80%), Ipercubo S.r.l. (1.30%), Sergio Marzo (1.04%), Annamaria Draghetti (0.46%). (3) Defined as EBITDA – Capex as % of EBITDA.
Fiorenzo Draghetti CEO
>35 years of experience
Stefano Cavallari General Manager
>35 years of experience
Marco Savini
CFO >20 years of experience
Sergio Marzo Chairman IMA CFO
Engineering, assembly and installation of machine and lines for tobacco packaging
Selling of additional and customized machinery accessories
Complete range of After-Sales service as change parts, technical assistance, improvement kits, spare parts
Complete Packaging Line Others
56% 18%
15%
12%
By Products
By Geography
GIMA TT SpA
70.0% 21.7% 8.3%
IMA SpA Others (2) Maestrale Investimenti (1)
NGP
Conventional
55% 45%
GIMA TT Co-Founder
Leader in the design and manufacturing of automatic machines for packaging of cosmetics, pharma, food, tea and coffee (€3.2bn Market Cap)
€100m €100m
€100m €79m
Leading Innovator in the Packaging Machinery for Tobacco Industry
Picture
Embed ____
3
Selling GIMA TT to the Investors Community GIMA TT Equity Story
Resilient and profitable end-market with young and fast-growing “New Generation Product” (“NGP”) segment 1
Innovative flexible machinery solutions for conventional tobacco and NGP, setting new industry benchmarks
2
Solid business model anchored to established and well-preserved relationships 3
Unique combination of exceptional growth, profitability and cash flow generation 4
Untapped market potential offering multiple growth opportunities 5
Orchestrated by long standing, experienced and committed management team, exploiting a solid know-how in industrial automation
92% 90% 80%
8%
10% 14%
2011A 2016A 2021E
Cigarettes Other Tobacco Products
4
…Generating ~€3bn Capex (1)(2) and ~€1bn R&D (1)(3) p.a. Sector Characterized by Profitable Players (1) …
NGP Emerging as Fast Growing Segment Tobacco Sector Growing in Value
Resilient and Profitable End-market with Young and Fast-growing “New Generation Product” (“NGP”) Segment
____________________ Source: Euromonitor International, companies’ annual reports. Note: New Generation Products includes open and closed vaping systems and heated tobacco products. (1) Includes: Philip Morris International, British American Tobacco, Japan Tobacco, Imperial Brands aggregate figures based on publicly available companies’ annual reports. (2) Includes: last 10 years average Capex of Philip Morris International, British American Tobacco, Japan Tobacco and Imperial Brands. (3) Includes: last 10 years average R&D expenses of Philip Morris International, British American Tobacco and Japan Tobacco; excluding Imperial Brands due to unavailable disclosure.
1
11
32
2011A 2016A 2021E
(€bn)
0
1
2
3
4
5
2006A 2007A 2008A 2009A 2010A 2011A 2012A 2013A 2014A 2015A 2016A
EBITDA Margin (Median)
(€bn)
0
5
10
15
20
25
30
35
2006A 2007A 2008A 2009A 2010A 2011A 2012A 2013A 2014A 2015A 2016A
37% 38% 37% 38%
41% 42% 41%
42% 43%
42% 42%
0
10
20
30
40
50
60
70
80
18
29
11
18
(€bn)
GIMA TT End-market
~€540bn
~€690bn ~€780bn
2.8 3.1
0.7 1.0
CapEx R&D EBITDA Net Income
Picture
Embed ____
5
____________________ Source: Company Information.
…Enabling customers to better address fast-changing and evolving needs of final consumers
…In Terms of Fast Complete Changeover and Extended Format
Range
FAST
Complete size change over on Flex Line
MIN
L 45m W 28.4m H 17.6m
MAX
L 103m W 80m H 38m
Extended packet range
Electronic-based 1
Highly customizable 2
Flexibility 3
Successfully created a new segment in the packing market, gaining an unparalleled and focused competitive positioning
Changing longstanding industry paradigms: from “Performance Only” to “Flexibility”…
Flex Line is Setting New Industry Benchmarks…
Innovative Flexible Machinery Solutions for Conventional Tobacco and NGP, Setting New Industry Benchmarks GIMA TT Products Offering
6
134 Worldwide factories run by
top-4 customers
128 Patents registered since foundation
>75 Engineers at customers’ service
and tier-1 commercial partners
22%
After-Sales Revenue contribution in 2016A
strengthening customers’ relationship through highly skilled team
Faster installation at customers’ site vs.
competitors
>100 FTE
Mechanical and electrical assemblers
Supply chain
GIMA TT Key Competitive Advantages Winning and Solid Business Model Anchored to Established and Well-protected Relationships
1
2
3
4
5
6
+ CUSTOMER
____________________ Source: Company Information.
Idea
Engineering and Know How
Research & Development department was created in order to design new innovative solutions
Sales and Customers
Intense interaction with customers since early stage development in order to find innovative and highly customized solutions
Supply Chain
The Company has strong relationships with the main suppliers and with IMA Group, so the organizational structure is extremely thin and agile
Assembly and Quality Control
The production structure is based on highly skilled employees
3–6 months 2 months 4 months 8–10 weeks
Testing and Installation
The Company conducts two tests: 1) Factory Acceptance Test (FAT) at GIMA TT facilities and 2) Site Acceptance Test (SAT) after installation at client premises
> 15 years
After Sale
Leading to service throughout the entire machine life-cycle
Exam
ple
of
Clie
nt
Re
qu
est
Pro
cess
7
____________________ Source: Company Information. (1) Defined as EBITDA – Capex. (2) Defined as EBITDA – Capex as % of EBITDA. (3) FY2016A.
11,7
22,5
39,7
56,8
96,6% 97,6%
98,8%
96,4%
2014A 2015A 2016A LTM 1H 2017
37,0
69,3
100,4
137,1
2014A 2015A 2016A LTM 1H 2017
12,1
23,1
40,2
58,9
32,6% 33,3%
40,1%
43,0%
2014A 2015A 2016A LTM 1H 2017
High Revenue Growth Strong Profitability Cash Generative Business
Revenue (€m) EBITDA (€m) and EBITDA Margin (%) Cash generation (1) (€m) and Conversion (2) (%)
Asset light business model (~0.5%(3) Capex as % of Revenue) with customer-funded Working Capital (~21%(3) Advances from customers as % of Backlog) supported by high visibility (€89m Backlog as of Dec-16 and €132m order intake in 2016A)
Unique Combination of Exceptional Growth, Profitability and Cash Flow Generation
GIMA TT Financial Profile
Native Excel
Picture
Embed ____
8
GIMA TT Further Upside Potential
____________________ Source: Companies presentations. (1) Revision of the Tobacco Products Directive.
Conventional tobacco
1
NGP
2
Regulatory evolution
3
Increased Differentiation & Premiumization Innovative packaging as key marketing
and solution tool
Increasing restrictions on packets/ advertising leading to creative marketing solutions
Integrated packaging machinery solutions and "automation" scale
Significant focus from all majors
New platforms/ conversion of existing capacity
Greenfield investments
NGP favourable fiscal treatment vs. conventional tobacco
FDA potential approval for PMI’s IQOS to be game changer in the US
Unexplored geographies
Continuous production process upgrade
“The tobacco industry gets its
Silicon Valley”
Bloomberg, Businessweek
March, 2017
Key NGP Technologies
Pmi’s IQOS Pending FDA Approval for the Us
Pending E-cig Regulation in China
EU TPD2 (1) Impact on Packaging
Convenience
Minimize odors Improved smoking Resalable pack
24H
Additive free Environmental
Friendly
Sustainability
Capsule New tastes
Personalization
Slimmer Lighter
Pleasure
Untapped Market Potential Offering Multiple Growth Opportunities
9
Overview of Early Look Investor Meetings
Investor Name StyleIMA
ShareholderContact name
Azimut Capital Management LO F. Artoni - A. Baldin
Arca LO S. Stigliano
Eurizon LO F. De Astis
Fideuram LO L. Degrada
Fidelity - FIL Investment LO A. Chiandetti
Generali Investment LO G. Gasparet - L. Fina
Kairos Partners HF F. Cavallo - M. Trabattoni
Investor Name StyleIMA
ShareholderContact name
GLG HF I. Rachev
Artisan LO C. Hamker
Blackrock LO C. Stephens - D. Patel
Capital World LO P. Gusev
Columbia Threadneedle LO P. Dicken
Fidelity - FMR LO A. Welham - S. Simnegar
Janus Henderson LO O. Beckett
Marshall Wace HF F. Fredella
Monashee HF R. Osmond - J. Browne
Montanaro LO M. Rogers - S. Fischerfeier
Otus Capital LO R. Casoni
Schroders LO H. Piper
TT International HF J. Hobson
Investor Name StyleIMA
ShareholderContact name
American Century LO F. Laffan
Bluemar HF N. Dewan
Castle Hook HF M. Cascante
Epoch LO W. Huang
Highbridge HF J. Dorfman
Key Square HF J. Jackson
TimesSquare HF D. Hirsh
Investor Name StyleIMA
ShareholderContact name
Alyeska HF J. Berger
Columbia Wanger HF S. Pigeon - A. Waldburg-Wolfegg
Driehaus Capital HF A. Bidwill
Harris LO M. Quigley
William Blair LO T. Cope
Milan - 17 July
London - 18-19 July
New York - 20 July
Chicago - 21 July
Key Statistics
32 investors met
19 Hedge Funds / 13 Long Only
16 disclosed IMA shareholders
Overview of Schedule
As part of the early look investor meetings in July, GIMA TT met with 32 institutions (7 in
Milan, 13 in the UK and 12 in the US) across 5 days
The schedule consisted of a high quality mix of blue chip long only funds and global hedge
funds who are regular participants in IPOs
The Banks have collected feedback and key questions from investors after the meetings.
While the feedback is more qualitative in nature (as expected at the Early Look meeting
stage), investors met are engaged and will need time to form a final view on business and
valuation
Milan
London
New York
Chicago
7
13
7
5
17 Jul
18-19 Jul
20 Jul
21 Jul
Early Look
Meetings
Investor Education
Roadshow Pricing &
Allocation
17-21 Jul-17 1 week
4-15 Sept-17 2 weeks
18-28 Sept-17 2 weeks
Price Range Announcement
10
Meetings scheduled from 13th to 15th September
Overview of PDIE Meetings
UK
Italy
US
Switzerland
France
Other Countries
32%
24%
19%
11%
6%
8%
Geographic Split
Overview of Investor Education Activity
As part of the Pre-Deal Investor Education meetings held so far, research analysts met with over 230
institutions, mainly across the UK, Italy, US, Switzerland and France
The majority of investors met until the 12th of September were long only funds (c. 67%), mixed with
a good panel of global hedge funds (c. 33%) who are regular participants in IPOs
The Banks have collected feedback and key questions from investors after the analysts meetings:
Investors’ engagement continues to be high, with the majority of names interested in getting
deeper into the story. Feedback is getting more granular as funds are running their numbers
and models after having received research reports. This results in more people starting to talk
about valuation metrics and positioning
Italy
UK US
Denmark
France Switzerland
69
84
50 8
5
38
23
9 Germany
Bel./Lux.
Meetings held from 4th to 12th September
UK
Italy
US
France
Other Countries
22%
24%
13%
33%
8%
Early Look
Meetings
Investor Education
Roadshow Pricing &
Allocation
17-21 Jul-17 1 week
4-15 Sept-17 2 weeks
18-28 Sept-17 2 weeks
Price Range Announcement
Main Investor Feedback Themes
11
Open Questions Considerations Positives
Feedback Split
Widespread interest in GIMA, both from sector experts and generalists
Asset recognised as high quality
Investors clearly appreciate the solid numbers, both in terms of growth and high margins / cash generation
Asset light business model
High level of know-how resulting in a clear technical advantage
Good level of visibility over the next few years growth
The fast growing NGP segment is seen by some as potentially doubling in the next few years
Potential growth-kicker from China and US
Low liquidity seen as one of the main risks
Some sensitivity displayed to margin sustainability in the longer run
Barriers to entry (how long before a competitor joins the market)
Customer concentration risk
Key man risk
Questions around corporate governance / relationship with IMA
Some investors struggling to model growth in such a new segment and unpredictable markets (i.e. China and US)
Selected comments and questions on potential peak in growth in the coming years
Rationale and timing of the IPO and selling by material shareholders
How big is the addressable market
How big is GIMA production capacity
Great relationships with the major players but uncertainty on timing for incumbents to start competing on price, given demand greater than supply
Dividend policy
UK
France
Italy
US
Switzer-
land
Germany
41%
13% 17%
11%
6%
5%
19%
Long-only
Hedge
Fund
65%
35%
Early Look
Meetings
Investor Education
Roadshow Pricing &
Allocation
17-21 Jul-17 1 week
4-15 Sept-17 2 weeks
18-28 Sept-17 2 weeks
Price Range Announcement
Frankfurt
Days: 1 1x1 Meetings: 4
12
Europe United States
LO
HF
70%
30%
Summary of Roadshow Activity Summary of Roadshow Activity
Overview of Management Roadshow
As part of the Roadshow meetings, the company’s management met with over 50 institutions in 1x1 meetings/Conf calls, mainly across the UK, Italy, US, Germany and France
The majority of investors met were long only funds (c. 70%), mixed with a good panel of global hedge funds (c. 30%) who are regular participants in IPOs
Investors’ engagement were highly reflected in the book, with c.88% of the meetings converting into an order. Several investors increased their orders both in size and price after their meetings
Chicago New York
New York/Chicago
Days: 2 1x1 Meetings: 9 1x1 Conf Calls: 1
Group Attendees: 4
Rest of the World
1x1 Conf Calls: 3
US
FR
UK
IT
RoW
20%
12%
37%
18%
14%
London
Frankfurt
Paris
Milan
Paris
Days: 1 1x1 Meetings: 5
Group Attendees: 21
London
Days: 3 1x1 Meetings: 18 1x1 Conf Calls: 3
Group Attendees: 34
Milan
Days: 2 1x1 Meetings: 7
Group Attendees: 28
Early Look
Meetings
Investor Education
Roadshow Pricing &
Allocation
17-21 Jul-17 1 week
4-15 Sept-17 2 weeks
18-28 Sept-17 2 weeks
Price Range Announcement
13
[CELLRANGE]
18-Sep 19-Sep 20-Sep 21-sep 22-Sep 25-Sep 26-Sep 27-Sep 28-Sep
Demand @ €9.60 Demand @ €11.00 Demand @ €12.50
Daily Evolution of Total Demand
Total Offer Size: 33.9m shares = 1x
“Books covered on full deal size”
“Books covered throughout the range”
“Orders not at €12.50 risk
missing”
Shares (m)
Early Look
Meetings
Investor Education
Roadshow Pricing &
Allocation
17-21 Jul-17 1 week
4-15 Sept-17 2 weeks
18-28 Sept-17 2 weeks
Price Range Announcement
14
Price (€)
Review of First Day of Trading
____________________ Source: Bloomberg, public available information.
Volume (m shares)
Very Strong Aftermarket Performance
0,0
0,2
0,4
0,6
0,8
1,0
12
12,5
13
13,5
14
14,5
15
15,5
16
09:00 10:21 11:21 12:21 13:21 14:21 15:21 16:21
Volume (m shares) GIMA TT Share Price
15.30
+22.4%
IPO Price €12.5
14.25
Open: €14.25 Close: €15.30 High: €15.59 Low: €14.25
Share Price
Value Weighted: €173.7m Shares: 11.7m % Float 38.0% % Company 13.3%
Volumes
+14%
17:30
GIMA TT, debutto da Star
“Debutta col botto la nuova matricola di Piazza Affari, GIMA TT [...] Le azioni sono già state sospese per eccesso di rialzo dopo l'upside del 19,2%. E questo nonostante il fatto che la quotazione sia avvenuta a un valore, 12,5 euro, che rappresenta la parte alta della forchetta di prezzo”
Milano Finanza, 2 October 2017
GIMA TT: Jerusalmi, Operazione di grande successo
"«L'operazione di Ipo di Gima TT "ha avuto un grande successo, con una 'oversubscription' di 8 volte e un pubblico di investitori che hanno richiesto le azioni molto ampio». Lo ha detto l'a.d. di Borsa Italiana, Raffaele Jerusalmi, nel corso della cerimonia di debutto a piazza Affari di Gima TT”
Milano Finanza, 2 October 2017
GIMA TT vola all'esordio sul listino. Pronti a shopping in Europa
“Esordio con immediato exploit per GIMA TT […] «Siamo soddisfatti della quotazione - ha detto ancora il presidente di Gima TT - speriamo di confermare le aspettative del mercato. Siamo un'azienda giovane, ma l‘Ipo rappresenta per noi una nuova partenza» […]”
Il Sole 24 Ore, 2 October 2017
Gima TT debutta in forte rialzo su Star, balza di oltre 20%
“«Gima TT rappresenta un‘operazione di successo paragonabile in anni recenti solo a Moncler per livello e qualità della domanda generata», sottolinea Stefano Rangone, Direttore Centrale di Mediobanca […] «E’ stato un successo notevole, era da qualche anno che non si vedeva questo livello di domanda, al massimo della forchetta», conferma Luca Domina, co-head equity capital markets Italy di Unicredit. […] «Gli investitori hanno apprezzato in particolare il posizionamento, gli alti tassi di crescita e l‘elevata profittabilità di Gima TT» […]”
Reuters, 2 October 2017
15
Analysis at Various Prices
____________________ Source: Company Information, Factset as of September 2017. Note: GIMA TT shares outstanding: 88,000,000; 1H 2017 Net Debt (Cash): €(16.8)m; Metrics based on Equity Research consensus median of BAML, Equita, Mediobanca and UniCredit Kepler Cheuvreux.
Price p/s (€) 9,60 9,75 10,00 10,25 10,50 10,75 11,00 11,25 11,50 11,75 12,00 12,25 12,50
Implied Equity Value (€m) 845 858 880 902 924 946 968 990 1.012 1.034 1.056 1.078 1.100
Implied Enterprise Value (€m) 828 841 863 885 907 929 951 973 995 1.017 1.039 1.061 1.083
Implied Multiple Metrics
EV/EBIT 17E (x) 60.5 13.7x 13.9x 14.3x 14.6x 15.0x 15.4x 15.7x 16.1x 16.4x 16.8x 17.2x 17.5x 17.9x
EV/EBIT 18E (x) 72.6 11.4x 11.6x 11.9x 12.2x 12.5x 12.8x 13.1x 13.4x 13.7x 14.0x 14.3x 14.6x 14.9x
P/E 17E 43.4 19.5x 19.8x 20.3x 20.8x 21.3x 21.8x 22.3x 22.8x 23.3x 23.8x 24.3x 24.9x 25.4x
P/E 18E 51.5 16.4x 16.7x 17.1x 17.5x 17.9x 18.4x 18.8x 19.2x 19.7x 20.1x 20.5x 20.9x 21.4x
EV/EBITDA 17E 61.1 13.6x 13.8x 14.1x 14.5x 14.8x 15.2x 15.6x 15.9x 16.3x 16.6x 17.0x 17.4x 17.7x
EV/EBITDA 18E 73.8 11.2x 11.4x 11.7x 12.0x 12.3x 12.6x 12.9x 13.2x 13.5x 13.8x 14.1x 14.4x 14.7x
Free Float at 38.5%
IPO Base Deal (€m) 296 300 308 316 323 331 339 347 354 362 370 377 385
IPO Base Deal + 10% GS (€m) 325 330 339 347 356 364 373 381 390 398 407 415 424
The Poste Italiane IPO
Key Facts of Poste Italiane IPO
16
Transaction Highlights Key Terms
Offering Structure
Issuer / Listing Poste Italiane SpA / Borsa Italiana
Selling Shareholder
Pricing and Valuation
Offering Size
Execution Timetable
Lock-up
Secondary shares: 453m Greenshoe: 45.3m (10% of the offer), 100% secondary Institutional offering (70% of the offer) outside the U.S. under Reg S, in
the U.S. to QIBs only pursuant to Rule 144A Retail offer in Italy (30% of the offer) through local Italian syndicate,
including ability for retail to subscribe at Company’s post office branches “Bonus Share” incentive for employees and retail investors who
subscribe at IPO and retain stock for at least 12 months post-IPO
BofAML Role
Company / Selling shareholder: 180 days (subject to customary exceptions and waiver by the Joint Global Coordinators)
Italian Ministry of Economy and Finance
Offer price: €6.75 vs. initial range of €6.00 – 7.50 per share Implied equity value: €8.8bn Implied Dividend Yield: ~5% (1)
Investor education: 28 September – 9 October 2015 Price range announcement: 8 October Management roadshow: 12-22 October Pricing and allocations: 23 October First day of trading: 27 October
Base offer size: 453m shares, €3.1bn Full offer size: 498m shares, €3.4bn Free float: up to 38.2% post greenshoe
Italy Oct 2015
Joint Global Coordinator & Joint Bookrunner
IPO
€3.1bn
Joint Global Coordinator and Joint Bookrunner
The transaction represents a milestone for the Italian Government in the context of a wave of reforms
Poste Italiane is the largest IPO completed in Italy since BofAML-led Enel in 1999 and one of the largest global IPOs of the year; the stock is expected to be a constituent of the Italian large cap index FTSE MIB
Offer launched capitalizing on increasingly positive sentiment for Italian macro; Poste Italiane revenues are almost entirely generated in Italy
Books opened on October 12th, and were covered after two full days of bookbuilding. The offer priced at the mid-point of the price range, with a total oversubscription of 3.3x
Early-stage investor meetings, including some of the most prominent SWFs, were organised to familiarize investors early with the Poste Italiane business model and to gather feedback ahead of launch
Poste Italiane represents BofAML’s fifth landmark IPO of a European issuer just in October, following the Covestro, Schaeffler, Worldpay and Ferrari offerings
Moreover, it cements BofAML leadership in the Italian IPO market, having executed the highest number of IPOs among international banks in the past 10 years (2)
In addition, Poste Italiane IPO demonstrates BofAML strong relationship with the Italian Ministry of Economy and Finance and extends its long-term track record of leading privatizations across the globe
BofAML acted as a Joint Global Coordinator and Joint Bookrunner on the up to €3.4bn IPO of Poste Italiane
Poste Italiane is the historical postal services operator in Italy and runs a diversified business model including financial, insurance and mobile services
The Company relies on the scale and proximity of its network to serve households. In addition, the Group offers a wide range of activities to corporations and is the main channel for payment collection and communication between the public administration and households / companies
____________________ (1) Based on mean of syndicate research analyst estimates for 2015 net income from Il Sole 24 Ore dated October 13th: “L’AD Caio: nel piano-Poste crescita dell'utile”, and 80% payout ratio as stated in the Prospectus. Refers
to dividend to be paid in 2016. As per usual IPO black-out period practice, BofAML research has not published and will not publish further research updates until 40 days after the closing date. (2) Source: Dealogic.
66%
19%
15%
Insurance
Financial Services
Postal
An Integrated Service Infrastructure With Distinctive Competitive Assets
17
Brand
#33m Customers
€28.5bn Revenues2
#1.5m Customers
Served Daily1
€469bn Client Assets
Mail & Parcels
Transaction Banking &
Asset Gathering
Insurance & Asset
Management
Retail Network 13.2k Post Offices
Web / Mobile IT Platforms
____________________ Note: data as of June 2015 ,unless otherwise stated. (1) Related to post offices only. (2) FY 2014.
Business Contribution
EBIT Margin
2.2%
14.3%
n.m.
18
Investment Highlights
A combination of strategic and financial levers to deliver value growth
Financial
Strategic
Brand Synonymous of Trust, Reliability and Customer Retention
1
Leading Positioning across Markets Served
4
Uniquely Positioned to Capture Macro Growth Trends
5
High Visibility on Top Line
6
Robust Balance Sheet with Solid Capital Structure
8
Solid Cash Generation to Support Dividend Policy and
Investments for Transformation
9
Broad Range of Products Targeting Diversified Customer Needs
Potential Upside from New Regulation and Reorganization
7
Vast, Capillary and Integrated Multichannel Network
2
3
Well Balanced Organization with Highly
Experienced Management
10
Execution Timetable
19
H1 2015 Results Filings with Consob
April May June July August September October
Week [...] [...] 1 8 15 22 29 6 13 20 27 3 10 17 24 31 7 14 21 28 5 12 19 26
Onboarding of Advisor
Business Due Diligence
Legal Due Diligence
Drafting of Prospectus /IOC
Filing with Borsa/ Consob ●Consob Istruttoria
Admission to listing & Nulla Osta Consob ●Prospectus/IOC Publication ●Contratto di Collocamento Signature ●Underwriting Agreement Signature ●
Analyst Presentation Drafting
Analyst Presentation Based on 2014A Financials ●Update to Analysts on H1 2015 Drafting
Update to Analysts on H1 2015 ●Research Report Preparation
Research Report Publication ●Pre-marketing
Price Range Definition ●
Meetings with Selected Investors
Roadshow
Institutional Offer
Retail Offer
Bookbuilding
Pricing and Allocations ●First Day of Trading ●
Pre
par
atio
nR
esea
rch
Ro
adsh
ow
20
Investors Met Throughout the Early Look Process
New York
Boston London
Milan
Rome
Italy
Azimut
Eurizon
Generali
Kairos
Pioneer
United Kingdom
Amber
BlackRock
Capital Research
Capital World
Fidelity International
Fidelity M&R
JP Morgan AM
Paulson
Peninsula
Schroders
TCI
Threadneedle
TT International
United States
Artisan
Citadel
Discovery
Fir Tree
Highbridge
KKR
Lazard
Mason
Neuberger Berman
Soros
Wellington
Zimmer
SWFs Meetings / Calls
ADIA
BTG Pactual
CPPIB
Fosun
GIC
KIO
Norges
QIA
SAFE
Temasek
Over half then provided an order in the offer period
21
Summary of Management Roadshow Activity
UK
5 (10%)
IT
22 (9%)
6 (12%)
FR
29 (12%)
14 (29%)
US
63 (25%)
1 to 1 meetings (incl. conference calls)
Investors met in group meetings
24 (49%)
136 (54%)
New York
Boston London
Paris Milan
Rome
Investors met 299
49
250
Roadshow activity details in 4 countries and 6 different locations:
Investors meet during group meetings
1 to 1 meetings
Italy 18 7%
Cont. Europe 60
22%
UK 111 42%
US 53
20%
RoW 23 9%
Long Only 107 43%
SWF 5
2%
Hedge Fund 135 55%
Tier 1 71
29%
Tier 2 80
32%
Tier 3 91
37%
SWF 5
2%
By geography By type By tier
Roadshow Feedback details: 510 lines from 247 different investors
____________________ Note: Feedback as of 20 October.
Summary of Management Roadshow Activity and Order Conversion
Milan London London Boston NYC
Investor Investor Investor Investor Investor
Azimut Blackrock Alken Adage Appaloosa
Eurizon Capital World Artemis Grantham Mayo Citadel
Generali FMR Caxton Hardvard Mgmt Franklin
Pioneer GLG Egerton Capital Highfields Mason Capital
Henderson FIL Pioneer Soros
Paris JPM AM GIC Wellington Zimmer
Investor Lansdowne Marshall Wace
Amundi Lazard AM Pelham
AXA Millennium Pictet
DNCA New Peak TCI
Generali Norges Threadneedle
Verrazzano Och Ziff TT Int
Hit ratio - One-to-one meetings(1)
Hit ratio - Group meetings
Hit Ratio 78%
Hit ratio - Early-look meetings
Investors met 40
21 Investors in the book
Hit Ratio 53%
Investors met 250
115 Investors in the book
Hit Ratio 46%
22 ____________________ Note: As of 21 October feedback. (1) Physical meetings only, excluding conference calls
Main Investor Feedback Themes
Unparalleled Company distribution network and client reach
Clear national brand leader with a profile and history that is part of the
“fabric of Italy”
BancoPosta seen as a unique asset gatherer, with a capital light, highly
profitable and sound leverage ratio model
Insurance services, with PosteVita at its core, is an extremely attractive
growth engine for the Group
Expansion into asset management (via Anima partnership) and welfare
seen as credible and attractive, also given past successes
The offering plays well to market receptivity to domestically focused
European financial institutions
Acknowledgment that restructuring of Mail & Parcels is supported by a
robust regulatory framework and plan to transition into parcels
Perception of finally improving macro backdrop in Italy, to which Poste is
highly levered
Universal appreciation of management, a first-class team having been
assembled to lead the Company
Investor reaction has been positive, with universal appreciation of the Poste story, prospects and management
23
• Volatile equity markets condition not very supportive for IPOs
• Execution risk on the Mail & Parcel division restructuring plans, given
also potential socio-political considerations
• Pace of structural decline in Mail & Parcel
• The need to understand better the net impact of Mail & Parcel division
price increases (J+1, other products etc.) vs. volumes
• Consistency between dividend policy and Free Cash Flow in the mid/long
term
• Future sustainability of the Net Interest Margin on the banking book in a
low interest rate environment and given a rollover scenario of the BTP
portfolio
• Complexity of the group and inter-division flows
• Limited of visibility on management incentive schemes
Key Investor Highlights Primary Investor Discussion Points
0.4x
0.9x
1.0x
1.8x
2.4x
2.7x
3.0x
3.6x
3.8x
0.2x
0.4x0.5x
0.7x
1.3x
1.5x
1.7x
2.7x
3.6x
0.1x
0.3x0.5x
0.7x
1.1x
1.2x
1.3x
1.7x
3.1x
0.1x
0.3x0.4x
0.6x
0.9x
1.0x
1.1x
1.4x
1.8x
0.1x
0.3x 0.4x
0.6x
0.8x
0.9x
1.1x
1.3x
1.7x
0
100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
1,300
1,400
1,500
1,600
1,700
1,800
1,900
2,000
12-Oct 13-Oct 14-Oct 15-Oct 16-Oct 19-Oct 20-Oct 21-Oct 22-Oct
Dem
an
d (
m s
hare
s)
@6.00 @6.50 @6.75 @7.00 @7.50
Daily Evolution of Total Demand
24
____________________ Note: Based on end of each day, syndicate wide book.
No. of Shares
Base Deal Size 453,000,000
Full Deal Size 498,300,000
Greenshoe 45,300,000
Coverage Evolution on Full Deal Size (Including greenshoe)
Full deal size (498.3m shares)
387 387 387 387 387 387 387
1,5141,389
1,171 1,139 1,147
519460
1,901
1,776
1,558 1,526 1,534
906847
0
100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
1,300
1,400
1,500
1,600
1,700
1,800
1,900
2,000
@6.00 @6.50 @6.60 @6.70 @6.75 @7.00 @7.50
Dem
an
d (
m s
hare
s)
Share Price (€)
Retail Demand Institutional Demand
Total Demand Waterfall at Various Prices
25
____________________ Total Offer Size: 498.3m shares. Note: Based on end of each day, syndicate wide book.
Total Demand
Coverage on Full Deal Size
€11.4bn €11.5bn €10.3bn €10.2bn €10.4bn
3.8x 3.6x 3.1x 3.1x 3.1x
2.9x Coverage
at 30%
€6.3bn
1.8x
€6.4bn
1.7x
(303k Retail Investors)
Overview of Book Concentration
Allocation Overview
Demand Overview at €6.75 per Share
37%
53%
85%
97%
Top 10 Top 20 Top 50 Top 100
18%
34%
63%
81%
Top 10 Top 20 Top 50 Top 100
25%
33%
18%
8%
11% 4%
27%
34%
12%
10%
11%
6%
27%
45%
27%
25%
33%
41%
26
____________________ (1) As proportion of total institutional demand / allocation.
Retail
UK US
Italy
RoE
RoW
Italian Retail
UK
US
Italy
RoE
RoW
Italian Retail
Italian Retail
LO
LO
HF
HF
Institutional Order Concentration (1)
Institutional Order Concentration (1)
Geographic Split Split of Investor Type
Geographic Split Split of Investor Type
14
,5x
13
,8x
11
,8x
9,9
x
9,6
x
9,6
x
7,9
x
7,5
x
6,5
x
13
,0x
12
,8x
11
,0x
9,5
x
8,6
x
9,3
x
7,4
x
7,1
x
6,1
x
19
,7x
15
,7x
13
,8x
18
,1x
13
,9x
12
,8x
16
,9x
13
,6x
13
,0x
12
,9x
12
,7x
6,2
x
16
,3x
13
,2x
11
,9x
12
,7x
11
,7x
6,0
x
14
,7x
12
,3x
Valuation Benchmarks
27
____________________ Source: Bloomberg and Factset as of October 21st , 2015. Note: dividend yield based on cash dividend paid in 2016 and 2017. (1) Based on mean of syndicate research analyst estimates for net income 2015 - 2017, and 80% payout ratio as stated in the Prospectus.
As per usual IPO black-out period practice, BofAML research has not published and will not publish further research updates until 40 days after the closing date.
P/E 2016E P/E 2017E
Mail and Parcel Financial Services Insurance Services Poste
(1)
Pee
rs P
/E 2
01
6-1
7E
Pee
rs D
ivid
en
d Y
ield
20
16
-17
E
6,1
%
5,7
%
5,0
%
4,9
%
4,9
%
4,8
%
4,7
%
4,4
%
4,1
%
6,1
%
6,1
%
5,4
%
5,3
%
5,3
%
5,2
%
5,0
%
4,7
%
4,5
%
4,6
%
4,4
%
3,9
% 5
,2%
4,7
%
4,3
%
6,2
%
5,8
%
5,1
%
5,1
%
3,7
%
2,3
%
6,4
%
6,0
%
5,3
%
5,4
%
4,0
%
7,2
%
4,8
%
5,4
%
(1)
Dividend Yield 2016E Dividend Yield 2017E
Book of Demand – Allocation Principles
28
Allocation process rewarding those accounts who helped support successful execution of the Poste IPO and were most able to guarantee long term support and a productive aftermarket for the Company
General Allocation
Criteria
Objectives
Maximize the level of sustainable valuation to be achieved at IPO (taking into consideration prevailing market conditions and investor demand)
Create a long-term ‘core’ base of shareholders for Poste whilst seeking a positive aftermarket performance for the shares post-IPO
Facilitate sufficient post-IPO liquidity to allow for potential secondary sell-downs should they ever by required or desired by the MEF
Factors taken into consideration in the allocation process included:
Overall subscription levels
Price sensitivity of orders and general support
Participation in the marketing (e.g. investors that have put in a significant amount of time and effort into analysing the company, as evidenced by attendance at pre-launch meetings, roadshow meetings, analyst meetings and feedback provided)
Timing of the order, relative to the final management meeting for that investor
Quality of feedback provided during the marketing process
Holding in comparable companies, behaviour in precedent IPOs and potential order inflation
Concentration (e.g. top 20 investors allocation in the offering)
Investor type (e.g. balance between SWFs, Long Only and Hedge Fund accounts)
Investor tiering (to reflect previous discussions on the subject between the MEF, Poste management, the advisers and the banks)
Geography (e.g. allocation to any particular country or region)
Retail treatment considerations
i
ii
Book of Demand – Allocation Principles (Cont'd)
29
Quantitative Allocation Principles
In light of the institutional demand received, and in line with best market practice for similar transactions, the Global Coordinators suggested the following quantitative allocation principles:
Splitting the total institutional demand in four main buckets, namely
1) "Super long only investors", i.e. top quality and supportive long only investors and global SWFs
2) Italian high quality investors, which have demonstrated limited price sensitivity early-on in the bookbuilding process
3) Other high quality long only investors
4) Supportive hedge funds which have provided early momentum and constructive feedback
other investors
Suggested indicative allocation as percentage of demand:
Super long only investors: c. 70%
Italian high quality investors: c. 60%
Other high quality long only investors: c. 40–50%
Supportive hedge funds: c. 30%
Individual exceptions were contemplated to allow for specific investor feedback or circumstances, discussed with the MEF's advisors
Indicative target splits of institutional allocation were as follows:
by type: long only vs. hedge funds: c. 65% vs. 35%
by region: Italy, UK, US and others respectively c. 10–15%, 45–50%, 15–18% and 20–25%
iii
Process
The banking syndicate made an allocation proposal to the MEF, Poste management and their respective advisers shortly following formal closure of the IPO bookbuild
The MEF, Management and syndicate of advisers went through this suggestion in detail to discuss rationale and strategic scope based on the final order book
MEF (and Poste management) ultimately had final sign-off on the allocations
iv
0
800
1.600
2.400
3.200
4.000
4.800
5.600
6.400
7.200
8.000
6,60
6,65
6,70
6,75
6,80
6,85
6,90
6,95
7,00
08:00 09:12 10:24 11:36 12:48 14:00 15:12 16:24
Mig
liaia
30
Price (€)
Day One Aftermarket Trading Confirming Fairness of Offer Price
____________________ Source: Bloomberg, public available information.
Open: €6.95
Close: €6.70
High: €6.95
Low: €6.65
Share Price
Volume (k shares)
Value Weighted: €719.5m
Shares: 106.5m
% Float 21%
% Company 8%
Volumes
Poste, 300,000 Retail Investors Participate to Offering
“It has been a great success, which confirms market’s support of the transaction” said the Italian Ministry of Finance Pier Carlo Padoan. […] It is clear that the Poste Italiane privatisation has been a successful credibility test for the Government. Poste Italiane will start trading at the IPO price of €6.75 on Tuesday, which has been defined as ‘in line’ by several research analysts of the syndicate.”
Corriere della Sera, 27 October 2015
Caio: Market Confirms IPO Price, Great Transaction
“Poste Italiane’s listing has been a “great transaction - the market confirmed the IPO price, with performance stabilising around the issue price”, said Caio, CEO of Poste Italiane.”
Il Sole 24 Ore Radiocor, 27 October 2015
Jerusalmi: One of the biggest European transactions of 2015
“Raffaele Jerusalmi, CEO of Borsa Italiana commented “we are very proud to welcome on our exchange Poste Italiane, one of the biggest European IPOs of 2015. The listing has been a great success, ending up more than three times oversubscribed, with a highly diversified and international investor base.”
Il Sole 24 Ore Radiocor 27 October 2015
Volume ('000 shares) Eurostoxx 50 Ftse Mib Poste
IPO Price
Poste: (0.74)%
FTSE MIB: (1.15)%
EuroStoxx 50: (0.98)%
Performance
Poste experienced low volatility, outperforming the market on its first day of trading
European IPOs test investors’ risk appetite
“Poste Italiane, the Italian post office and bank that priced last week and began trading on Tuesday, barely moved, with its share price falling 0.5 per cent after the start of trading. The company priced at €8.8bn, which was below the figure of €10bn reported in the Italian press as a potential valuation of the company, although a market participant dismissed that valuation as “aspirational”.
While initial shareholders got no return on the first day of trading, the fact that Poste Italiane’s share price did not jump avoided the political controversy that surrounded the privatisation of Britain’s Royal Mail. [...]
British share registrar Equiniti’s share price fell about 8.5 per cent in the first day of trading on the London stock market after pricing at the bottom of its range in its initial public offering. The company, was priced at £1.65 a share [the bottom end of price range], but by the close of trading had fallen to £1.51 — the latest example of what has been a difficult few months for initial public offerings. [...] IPOs have been pulled or repriced across Europe and the US. Financial Times, 27 October 2015
Italy to launch biggest privatisation in more than a decade
“Italy will this week launch its biggest privatisation in more than a decade with the partial sale of Poste Italiane — an initial public offering on which the government of prime minister Matteo Renzi has staked its reformist reputation.”
Financial Times, 11 October 2015