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Presentation to Manhattan Atlantic CapitalDiscussion Material
CONFIDENTIAL | October 2012
This presentation was prepared by Santander and the content herein is of a strictly confidential nature. This presentationcannot be reproduced, distributed or published by the recipient or used for any purpose whatsoever without the prior writtenconsent of Santander. Although the information contained in this presentation was obtained from sources considered reliable, Santander cannot guarantee the accuracy and truth of the same. The opinions presented herein represent those of Santander at the present time, and are, therefore, subject to amendment and alteration. Santander is not responsible for any direct losses or reduced profits that may result from the use of the information contained herein.
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p.1M&A TransactionsSantander is one of the leading M&A houses in Brazil and LatAm
M&A Brazil Announced TransactionsThomson ONE (12/2011)
M&A LATAM Announced TransactionsThomson ONE (12/2011)
Leadership in M&A and Delisting Tender Offers in Previous Years
Rank Advisor Value (US$ MM) # Transactions
1 Banco BTG Pactual SA 24,615 49
2 Credit Suisse 24,580 42
3 Itau Unibanco 24,112 39
4 Citi 21,485 32
5 Goldman Sachs & Co 28,138 30
6 JP Morgan 11,749 24
7 Santander 15,275 23
8 Banco Bradesco SA 12,213 229 UBS 20,903 18
10 Morgan Stanley 12,127 18
Rank Advisor Value (US$ MM) # Transactions
1 Banco BTG Pactual SA 24,615 49
2 Itau Unibanco 22,002 31
3 Credit Suisse 17,541 24
4 Banco Bradesco SA 12,213 22
5 Goldman Sachs & Co 17,068 19
6 Santander 13,253 14
7 BR Partners 1,355 13
8 Morgan Stanley 3,735 129 JP Morgan 8,789 11
10 Citi 10,846 10
2M&A Completed Transactions (Value)Thomson Financial2007
1M&A Announced Transactions (Value)Thomson Financial2007
1M&A Completed Transactions (Value)
ANBID2007
1M&A Completed Transactions (Value)Bloomberg2007
1M&A Announced Transactions (Value)Bloomberg2009
M&A Announced Transactions (Value)Bloomberg2007
1 2Delisting Tender Offer (Value)
ANBID2008
2Delisting Tender Offer (Value)
ANBID2007
2M&A Completed Transactions (Number)Thomson Financial2008
Sources: ANBID, Bloomberg and Thomson
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TransactionsSuccessfully
Closed bySantander
TransactionsLapsed thatSantanderWorked on
Santander Brazils M&A Experience in FIG Sector Significant experience in M&A transactions in the FIG sector with an aggregate transaction value ofapproximately US$ 24 billion
R$3,167,000,000
Sale of 51% of Santander Seguros Brasil to
February 2011
Financial Advisor to the Seller
US$2,719,000,000
Sale of 5% stake of Banco
Santander S.A. to Qatar HoldingLLC
October 2010
Financial Advisor to the Seller
R$2,000,000,000
Acquisition of 100% stake ofGRV Solutions S.A.
December 2010
Financial Advisor to the Buyer
R$678,000,000
Acquisition of 50% of Real TokioMarine Vida e Previdncia
September 2009
Financial Advisor to the Buyer
67,100,000
Sale of ABN AMRO Bank N.V.Sucursal Paraguay to Banco
Regional
October 2008
Financial Advisor to the Seller
12,000,000,000
Acquisition of
November 2007
Financial Advisor to the Buyer
US$1,191,000,000
Sale of its 3.64% stakein Serasa S.A
June 2007
Financial Advisor to the Seller
US$142,500,000
Sale of its Private Bankingbusinesses operated from Miami
and Montevideo
June 2007
Financial Advisor to the Seller
Undisclosed
Creation of Fidelity Processadorae Servios S.A., one of the
largest credit card processors inBrazil
April 2006
Financial Advisor
~R$ 100 MM
Potential Acquisition of a SaoPaulo State-based Mid-size
Health Insurance Player
2007
Financial Advisor to the Buyer
~R$ 600 MM
Potential Acquisition of Medial Sade
2008
Financial Advisor to the Buyer
FINANCIAL SPONSOR
~R$ 1 billion
Potential Acquisition of Intermdica
2009
Financial Advisor to the Buyer
FINANCIAL SPONSOR
~R$ 1 billion
Potential Acquisition of Intermdica
2011
Financial Advisor to the Buyer
FINANCIAL SPONSOR
R$1,664,000,000
Sales of Santanders participation
in Companhia Brasileira deSolues e Servios S.A. andCielo S.A.
April 2010
Financial Advisor to the Sellers
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p.3Index
Health Care and Dental Care Market Overview
Selected Brazilian Dental Plan Operators
Clinical Analysis Market Overview
Selected Brazilian Clinical Analysis Players
1
2
3
4
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Health Care and Dental Care Market Overview
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Fonte: Companhia e informaes pblicas
Top-20 GDP countries per capita total expenditure on health (1) (2010)
Breakdown of beneficiaries of healthcare plans (2011) Healthcare plans coverage in Brazil (% of population)
Main characteristics of the Brazilian health insurance market
-10% 10% 30% 50% 70%
2005
2006
2007
2008
2009
2010
2011
Beneficiair ies of dental plan Beneficiar ies of health plan
77,2%
20,4%
2,4%
Collective Individual Not available
8.362
5.394 5.0384.404 4.332 4.021 3.480 3.441 3.204 3.027 3.022
2.023 1.476 1.029 1.028 998 959379 132 112
U S
S w
i t z e r l a n
d
N
e t h e r l a n
d s
C a n a
d a
G e r m a n y
F r a n c e U
K
A u s t r a
l i a
J a p a n
S p a
i n
I t a
l y
S o u
t h K o r e a
P o
l a n
d
T u r k e y
B r a z i
l
R u s s
i a
M e x i c o
C h i n a
I n d i a
I n d o n e s i a
Current USdental plan
coverage
Current UShealthcareplan
coverage
Although Brazil is the largest healthcare insurance market in LatAm, private healthcare still presentsrelatively low penetration (25%) compared to OECD countries and is dominated by collective plans
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p.6The growing Brazilian market of health insuranceThe healthcare market has presented consistent double-digit growth rates in terms of revenues(BRL 84.4bn in 2011) and and number of beneficiaries (c. 64.5m in 2011)
Source: ANS
Evolution of total sector revenues (BRLm)
Evolution of number of beneficiaries (millions)
1.920 2.149 2.772 3.229 9.488 10.468 10.626 12.03713.23810.752 12.326 14.058 16.505
18.280 21.366 23.24126.496 30.085
9.369 10.62712.524 14.141
15.82717.795 19.538
22.02624.377
6.701 7.5237.912 8.750
8.60811.054 12.404
14.09616.706
2003 2004 2005 2006 2007 2008 2009 2010 2011
Others Medical cooperatives Medical groups Private health insurers
CAGR: 14.4%
CAGR 03-11
+27.3%
+13.7%
+12.7%
+12.7%
31,8 33,735,0 37,0
38,9 40,942,3 45,3
47,6 47,9
4,4 5,5 6,1 7,38,9 10,4
12,7 14,8 16,8 17,3
Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Mar-12
Healthcare plan Dental plan
CAGR 03-11
+5.2%
+18.1%
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The Brazilian health insurance market is expected to grow significantly stillThe upward trend in number of members of both healthcare and dental plans is expected tomaintain
Source: ANS, Santander estimates
Evolution of healthcare plans membership (millions)
Evolution of dental plans membership (millions)
45,3 47,649,8 51,8 53,7
64,9
23,6% 24,6% 25,4%26,1% 26,9%
31,0%
2010 2011 2012e 2013e 2014e 2022e
Number of members Total population coverage
14,8 16,818,8
21,324,2
45,4
7,6% 8,6% 9,6% 10,8%
21,1% 21,7%
2010 2011 2012e 2013e 2014e 2022e
Number of members Total population coverage
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p.8Geographic footprint of the Brazilian health insurance marketBrazil offers significant upside potential for coverage, in particular in certain regions
Source: ANS, IBGE
Coverage of healthcare plans by region (March 12) Coverage of dental plans by region (March 12)
Up to 5%
From 5% to 10%
From 10% to 20%
From 20% to 30%
More than 30%
Up to 5%
From 5% to 10%
From 10% to 20%
From 20% to 30%
More than 30%
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5,8
1,61,3
0,6 0,6 0,5 0,5 0,4 0,3 0,3 0,2 0,1 0,1
O d o n t o p r e v
A m
i l
I n t e r o
d o n
t o
O d o n
t o s y s
t e m
T e m p o D
e n
t a l
P r o
d e n
t
S u
l A m
r i c a
M
e t l i f e
U n
i o d o n
t o C u
r i t i b a
U n i o
d o n
t o
C a m p
i n a s
I n p a o D
e n
t a l
B e
l o D
e n
t e
U n
i o d o n
t o B
e l m
13Largest
Operators12,1
~72%
OtherOperators4,7
~28%
Dental Market and Competitive Landscape
1 Source: ANS Tabnet, IBGE, Odontoprev, Amil, Tempo , Sul Amrica 2Q12 Press Releases2 Source: IBGE / Indicators on Population, In United Nations Statistics Division, Demographic and Social Statistics Products and Databases. Social
Indicators, 2011
Lives MarketMM of lives
Key players in Brazilian Dental Market
Total Dental Market17.6 MM participants, representing 9.0% of total population
Possible targets
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Selected Brazilian Dental Plan Operators
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Fonte: Companhia e informaes pblicas
Interodonto
Founded in 1993, Interodonto has over than 9,200 licensed clinics located
in more than 1,400 Brazilian cities
Over t 1,313 clients, which embraces approximately 1,3 million members
Interodonto is present in all Brazilian states
Over the years, Interodonto has been awarded with quality certifications
and recognitions, such as ISO 9001 and Top of Mind Company award.
Interodonto is part of Intermdica Group, which also offers health plans to corporate clients
Company Overview Shareholder Structure
Main Clients Financial Highlights
Barros Family(Intermdica)
100%
BRL M 2009 2010
Net Revenue 110.9 123.7
EBITDA 34.5 41.0
% EBITDA 31.1% 33.1%Net Income 24.5 28.9
Net Debt n.a n.a
Net Debt/EBITDA n.a n.a
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Fonte: Companhia e informaes pblicas
OdontoSystemBrazils 4th largest dental plan company in number of members in Brazil (600 thousand members)
Overview
Market leader in the northeast of Brazil
Odontosystem focuses mainly on corporate clients, although the company
also offers dental plans to individuals and government employees
Over 4.000 corporate clients
Over 1.000 professionals associated in all of Brazil
Odontomovl is a mobiletreatment center with equipmentand professionals for preventiontreatments
Fidelity program with theredemption of points according tothe use of the dental plan
Shareholder Strucutre
Financial Highlights
Antonilda VerasColares Aquino
Rosania Sousade Assis
50% 50%
BRL M 2009 2010
Net Revenue 69.4 81.0
EBITDA 1.4 (0.2)
% EBITDA 2% Neg
Net Income (1.7) n.a
Net Debt n.a n.a
Net Debt/EBITDA n.a n.a
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Fonte: Companhia e informaes pblicas
Tempo Dental A company belonging to Tempo Assist, listed company with a market cap of R$ 577 million
Overview
According to the ANS, Tempo is a leading provider of dental benefits in Brazil, in
terms of number of lives covered and revenues to employers, associations and
affinity groups
Tempo Dental is part of the group Tempo Assist, a listed brazilian player of
healthcare administration services.
Approximately 833 thousand members enrolled in Tempos dental plans
provides
National network of nearly 14 thousand providers covers 1,058 cities across
Brazil and all Brazilian states, mostly in the southeast region of the country
Main Brands
Shareholders Structure
TemposManagement Treasury
Free Float
17.4% 8.2% 74.4%
Financial Highlights
R$ MM 2009 2010 2011
Net Revenues 99.7 92.7 71.5
Gross Profit 54.6 53.2 35.7G r os s M arg i n % 54,8% 57.4% 49.9%
EBITDA 18.7 15.2 5.5
EBITDA Marg in % 18.8% 16.4% 7.7%
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Source: Financial Information
ProdentWith 500 thousand members, Prodent is one of the largest independent dental plan companies in Brazil
Overview
Founded in 1989, Prodent is between the 10 largest dental plan companies in
Brazil
The company is focused on corporate clients, mainly small and medium size
companies
Prodent offers dental plans for companies with less than 49 individuals (PME
Plan) and dental plans for companies with over than 49 individuals
(Corporate Plans)
Over 17.000 treatment options
Recent Awards
TOP OF MIND Human Resources Suppliers
Awarded in 2004 l 2005 l 2006 l 2008 l 2009 l 2010
100 Best Human Resources Suppliers
Awarded in 2009 l 2010 l 2011
EXAME 2010 PRE Award
Positioned in 37th place between the 200 Companies thatmost grow in Brasil
X Insurance Market Award 2010Best dental plan company
IX Insurance Market Award 2009Growth and productivity in dentistryDentistry executive
Financial Highlights
BRL M 2010 2011
Net Revenue 73.1 64.9
EBITDA 7.2 7.1
% EBITDA 9.5% 10.7%
Net Income 4.1 2.6
Net Debt n.a n.a
Net Debt/EBITDA n.a n.a
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Clinical Analysis Market Overview
16
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Others67,3%
DASA16,4%
Fleury8,3%
H Pardini3,2%
HIAEMD2,7%
Alliar 2,1%
Clinical Analysis Brazilian Market
1Source: ANS
The Brazilian diagnostic market is expected to grow at approximately 10.0% a.a. in the next 5 years
Market Share of the Clinical Analysis Brazilian Market
Private Equity Invested
Listed Company
1 Albert Einstein, one of the largest private hospitals in Bazil
The largest clinical analysis companies in Brazil already havefinancial sponsors or are listed in the Brazilian equity markets
Market Share per Region and LabsSizes
North4.1%
Midwest9.1%
Northeast18.2%
Southeast
47.6%South21.0%
20 126 8342.311
8.709
XL L M S XS
Brazilian labs landscape is still very fragmented, incentivizing for M&A transactions
XL= Extra LargeL= Large
M= MediumS= Small
XS= Extra SmallLabSizes
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p.17The choice of specialization in a determined market segment has been adoptedas strategy to fence off the consolidation process of larger players
Sources: Companies, Santander Equity Research
Diversificationwith National
Focus
Capillarity: increase in number of unitsIncrease of the portfolio of services
Diversification of operations to hospitals and lab-to-labSpecial Services (ex. Fleury: preventive and therapeutic medicine)Focus on private sector (Fleury) / public and private (DASA)
Market share 2011 ~16.4% ~8.3% ~3.2% ~1.7%Net Revenues 11 (R$ millions) 2,180 1,126 389 230% Revenues from Units 73% 85% 45% N/A# Total Units (11) 522 200 32 70
# States (11) 13 7 1 6
Footprint
1 2 3
Specializationand
Regionalization
Regional focus: Effort to establish itself as regional reference (Hermes Pardini) Focus on the expansion of the network to all Brazilian regions (Lab. Sabin) Growth in new segments: image, vaccine and preventive medicine
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p.18Players of medium size in sectors with high growth and consolidation tend toadopt growth strategies based on strategic / financial partnerships
PotentialAlternativesto Support
Growth
Acquisitions1
Private placement:Financial Player 2
IPO or Follow-on3
Footprint and services mixPossibility to speed up the business plan of the
combined companyStronger position between market leadersPotential synergiesDoes not impact possible future IPO
Possibility to speed up business plan: player in themarket consolidation
Greater flexibility of financial proceedsGain of financial/strategy and governance know howFocus on medium and long term financial resultsLess independence for management
Possibility to speed up business plan: player in themarket consolidation
Available financial resourcesImprovement of corporate governanceFocus on medium to long term financial resultsMore exposure to market and economy
1999: Ptrias investment
2011: Gveas Investment
IPO: 2003
IPO: 2009
47 transactions in the last
10 years
27 transactions in the last10 years
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Trading Multiples (1) M&A Transaction Multiples )
8.7x
11.2x
DASA Fleury
7.7x
Average Transactions in Brazil
EV/EBITDA 12E
The aging population and greater penetration of health insurance drives the demand for clinical examinations, making room for the growth of laboratories, which willdemand heavy investments to meet this demand
The growth of the companies in the sector together with the market fragmentation, has developed a strong movement toward industry consolidation in recent years,led primarily by DASA and Fleury
The strong momentum of M & A is supported by the significant increase in EV / EBITDA multiples of the two largest consolidators in the market, Dasa (8.7 x) and Fleury(11.2 x), which were up 33.8% and 100% respectively, since the beginning of 2010
(1) Bloomberg, 4th October, 2012Sources: Companies, Bloomberg, Public Information
EV/EBITDA
IPO Proceeds:R$ 630 million
IPO Proceeds:R$ 437 million # Total transactions since 2010: 7
Moment of intense consolidation and strong M&A activity
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Selected Brazilian Clinical Analysis Players
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Source: Companies and Public Information
Companies positioning and strategies
Diversification Operating units + Vaccines
Middle-West regionGeographical Focus
# units 71
# tests / year 15.6 MM
Strategy Cover all Brazilian territory until 2020
Estimated Revenues ~R$ 230 MM(2011)
Shareholders
SandraSantana S.
Costa
50%50%
Janete AnaRibeiro
City of So Paulo(3% of So Paulo market)
Operating units + Image diagnostics
5
9.2 MM
Larger penetration in the premiumsegment by providing differentservices
~R$ 100 MM(2011)
Paulo Zoppi
50%50%
LuisSalomoVera LuciaSzejnfeld
50%50%
JacobSzejnfeld
City of So Paulo
Operating units + Image diagnostics
3
n.a.
Provide premium services in welllocated areas of So Paulo
~R$ 24 MM(2010)
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Source: Company and Public Information
Laboratrio SabinSabin is a leading laboratory in Distrito Federal; focused in the expansion of its lab network throughout theBrazilian territory
Overview Geographical Footprint
Focused on the Middle-West region, Sabin is positioned as the largestlaboratory in the region
Sabin has almost 30 years of experience in the diagnostic medicinemarketIn 2011, the company had estimated revenues of R$ 230 MMCurrently, counts with approximately 1,600 collaborators in 71 unitsProduces approximately 1.3 m illion tests per month, covering 130,000peopleThe company intends to cover all Brazilian territory until 2020,implementing a fast-growth business planLaboratrio Sabin offers services in diverse areas, such as: Hematology Hormones Immunology Mycology Microbiology
Shareholding Structure
State # Units 2011
Distrito Federal 52
Gois 6
Tocantins 3
Minas Gerais 8
Bahia 1
Amazonas 1
Total 71
Units Lab. Sabin
Expansion in 2012
Lab. Santa Luclia /Uberaba - MG
PHD Lab. Clnico /Palmas - TO
New Unit / Manaus - AM
Partnership withLaboratrio Santa Luclia
Lab Santa Luclia isstrategically located in theSoutheast region, situatedin technical-scientific hub
Merger with PHDLaboratrio Clnico
PHD`s three units earn aportfolio with 3,000different tests, increasingits client base significantly
Investments ofapproximately R$ 1 million
Inauguration of the first unit inthe State of Amazonas
Amazonas unit serves 4,000clients and makes 3,000 typesof tests per month
Investments of R$ 1.5 millionduring the next two years
Sandra Santana S.Costa
50%50%
Janete Ana Ribeiro
Parasitology Urinalysis Molecular biology
Cytogenetic
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Source: Copmany and Public Information
Overview
Founded in 1981, by the doctors Luis Salomo and Paulo Zoppi, originally
performed pathological testsWith the company`s growth in the 1980 s, SalomoZoppi increased itsoperating scope, performing several types of tests, such as:
Cytology Colonoscopy Ultrasonography Imunohistochemistry, Hibridization
In October of 2007, SalomoZoppi Diagnsticos built an advanced technicaloperational center to perform a wide range of clinical analysis tests, with acapacity of 8 MM tests per yeas
Operational Highlights Geographical Location
Shareholding Structure
5 units located in city of So PauloAnnual Test Capacity (MM)
Patology 0.18
Cytology 0.25
Clinical Analysis 8.00
Images 0.80
Total 9.23
Paulo Zoppi
50%50%
Luis Salomo
Morumbi Araguari Panamby
Paraso Ibirapuera
SalomoZoppi DiagnsticosWith focus on A/B classes, SalmooZoppi concentrates its operations in the city of So Paulo through5 large units located in premium areas
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Source: Company and Public Information
Overview
Founded in 1977 by Jacob Szenjnfeld, initially implemented ultrasonography tests inHospital So Luiz, one of the largest hospitals in the city of So PauloThroughout the 1990 decade Cura aggregated several different tests to its portfolio, beingpioneer in many of themIn 2002, Cura implemented its clinical analysis services, creating Cura Lab, offering testssuch as: Molecular Biology Cytology Hematology Hormones
Counts with one unit that exclusively serves women, with specialized services and testsIn 2012, started a robotization process, in order to gain efficiency and productivity
Shareholding Structure
Vera LuciaSzejnfeld
50%50%
Jacob Szejnfeld
Cura Imagem e DiagnsticoWith three units in the city of So Paulo, Cura offers premium services to its clients
3 units located in the city ofSo Paulo
R$ MM 2008 2009 2010
Net Revenues 24.9 28.8 23.6
EBITDA 4.4 2.1 4.9
EBITDA Marg in % 17.6% 7.2% 20.8%
Net Income 1.9 0.8 3.4Net Marg in % 7.5% 2.9% 14.5%
Net Debt (2.8) (0.5) 4.4
Net Debt / EBITDA neg . n eg . 0.9x
Geographical Location Financial Highlights
Imunology Microbiology Parasitology