1 May 2014
RPC Group Plc
Proposed acquisition of ACE Corporation
RPC Group Plc
Acquisition of ACE
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2
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RPC Group Plc
Acquisition of ACE
Transaction highlights
3
RPC Group Plc
Acquisition of ACE
INTRODUCTION
A COMPELLING ACQUISITION IN LINE WITH OUR VISION 2020
4
● RPC will acquire ACE for an upfront consideration of US$301m (£178m) on a cash-free, debt-free basis,
equating to multiple of 7.4x December 2013 EBITDA of US$41m (£24m)
– Maximum additional earn-out of up to US$129m (£76m) would become payable in stages up to May 2018
– Subject to ACE achieving EBITDA CAGR of at least 15.6% from December 2013 to 2017
Transaction
● ACE is one of the Far East’s industry leaders in the manufacture of plastic-injection moulded components and
injection moulding tools for niche segments
– Strategic opportunity to establish platform from which to create a meaningful presence in Asia
– Scope to enhance ACE’s attractive standalone growth strategy through leveraging RPC network
● Acquisition is in line with Vision 2020, building on successful acquisition history
● Meets RPC’s strict acquisition criteria
● EPS accretive in the first full year of ownership and pro forma ROCE ahead of WACC
● Estimated annual cost savings of £1m in relation to tooling procurement fully realisable from the first full year of ownership
Strategic
rationale
Note
1. Based on £1 = US$1.69
Financing
● US$89m (£53m) of new RPC shares issued to ACE shareholders
● Cash consideration balance of US$212m (£126m) funded via equity placing of c.£75m and part utilisation of
new RCF
● Pro-forma leverage of 1.8x Net debt / EBITDA as at 31 March 2014
RPC Group Plc
Acquisition of ACE
Overview of ACE
5
RPC Group Plc
Acquisition of ACE 6
ACE is a China-based and Hong Kong headquartered award-winning manufacturer of complex plastic-injection
moulding components and moulding for five key market divisions:
− Packaging (14% sales)
− Lifestyle (50% sales)
− Medical (6% sales)
− Power (10% sales)
− Automotive (20% sales)
● ACE is one of the industry leaders in the Far East
● Operates five technologically advanced production facilities in Shenzhen (2), Shanghai, Zhuhai and Hefei
● 2013 revenues were US$175m (£104m), of which tool sales were £31m, with total EBITDA of US$41m (£24m)
● In 20131 revenues by destination were approximately split across the following geographies: Americas 38%, China
30%, Europe 19%, and rest of the world 13%
● As of December 2013 the company employed approximately 3,300 employees
● ACE is currently owned by its founders and management, established in 1988
ACE has a successful track record and strong standalone growth strategy
PROFILE OF ACE INTERNATIONALLY WELL RECOGNISED INJECTION MOULDER AND TOOL MAKER WITH STRONG GROWTH
Note
1. Based on the unaudited information for the year ended 31 December 2013
RPC Group Plc
Acquisition of ACE 7
OVERVIEW OF BUSINESS SEGMENTS
EXPOSED TO ATTRACTIVE END MARKETS THAT ARE COMPLEMENTARY TO RPC
Power Group
Share of sales
FY2013
£104m
Services offered
Products offered
Lifestyle
£52m
Complete services from
design and tooling through
manufacturing and
assembly
• Consumer electronics
• Water proof iPad cases
• Bi-injection moulding
• Sanitary products
Automotive
£21m
Works with big automotive
OEMs and tier 1 suppliers
and produces customised
structural and decorative
parts
• Remote control keys
• Engine components
• Chrome plated plastic
Packaging
£15m
Complete service including
concept design, prototype
and tooling
• Food packaging
• Cosmetics packaging
• Consumer packaging
mould
£10m
Full service engineering
expertise in
micromachining / metal
insert moulding
• Connectors
• Power switches
• Metal insert moulding
Medical
£6m
Medical device solutions
for respected medical
OEMs
• Glucose meters
• Syringes
Main customers*
Sample products
Source Management information
14%
50%
6% 10%20%
*Top 10 customers
represent 55% of total
2013 sales
**ACE has been
supplying Superfos (now
part of RPC) since 2008
**
RPC Group Plc
Acquisition of ACE 8
ACE has presence
across China
through five
manufacturing
facilities
Additionally, ACE
has sales agents
in the UK and the
USA
PRODUCTION SITES
STATE OF THE ART MANUFACTURING FACILITIES ACROSS CHINA
Production facilities and headquarters
Sales by site 2013A1
Factory location
Production facilities
Production site
Headquarters
Shanghai
Hefei
Shanghai Employs c.600 people Established in 2003
Hefei Employs c.330 people Established in 2013
Shenzhen (Gonghe) Employs c.1,100 people Established in 1997
Shenzhen (Shatou) Employs c.610 people Established in 1992
Zhuhai Employs c.630 people Established in 2008
Green Arburg machines 5 axis robots
Electroplating plant HPH automation plant HPH automation plant
Clean room moulding
Source Management information
Note
1. Before inter-company eliminations
Zhuhai
Hong Kong
Shenzhen
(Shatou)
Shenzen
(Gonghe)
21%
40%
18%
18%
3%
Shenzen (Shatou) Shenzen (Gonghe) Shanghai Zhuhai Hefei
RPC Group Plc
Acquisition of ACE
ACE MANAGEMENT TEAM
EXTENSIVE EXPERTISE IN PACKAGING SPACE
9
Horton Zhang
General Manager of Ace Mould Shanghai and Ace Mold Hefei
● Certificate Program on Industrial
Management (2002)
● Board Member of ACE (2013)
● General Manager of ACE Mold Hefei
(2013)
● VP of Automotive and Medical (2011)
● Established ACE Classic medical
Component Company (2010)
● General Manager of ACE Mold
Shanghai (2004)
● Senior Sales Engineer (2000)
● Project Manager (1999)
● Project Engineer (1996)
● Joined ACE as Engineering Trainee
(1994)
Nelson Fu
Chief Information Officer
VP - Automotive
● VP Automotive (2011)
● Chief Information Officer of ACE (2009)
● VP overseeing Management Operation
(2009)
● General Manager of ACE Plastics
(1998)
● Joined ACE to lead 3D design and
Pro-E system (1994)
Dr. Jack Yeung
Chief Executive Officer
● BSc in Environmental Engineering,
University of Windsor, Canada (1996)
● Honorary PhD Business Administration
– Northern University California (2013)
● CEO since 2007, previously VP –
Business Development and Sales
Manager
● Chairman - Young President
Organization – Pearl River Delta
Chapter (2010)
● Committee Member - VTC Technologist
Training (2011-13)
● Chairman - Hong Kong Mould & Die
Council (2011-15)
● Council Member - Hong Kong
Productivity Council (2011-15)
● Winner of the World Outstanding
Chinese Award (2013)
● Winner of the Prestigious Hong Kong
Young Industrialist Award (2010)
RPC Group Plc
Acquisition of ACE
Key historic financials
£m, Dec y/e 2011A 2012A 2013A CAGR (11-13)
Sales 57.7 82.8 103.6 34%
Growth 43.4% 25.2%
EBITDA 11.4 17.4 24.0 45%
Margin 19.8% 21.1% 23.2%
Growth 52.6% 37.7%
EBIT 7.2 13.1 18.7 62%
Margin 12.4% 15.8% 18.1%
Growth 82.1% 43.4%
Financial development of the Group (Dec y/e)
10
HISTORICAL TRADING
SIGNIFICANT ORGANIC GROWTH ACHIEVED
● ACE has existing capacity to accommodate further
growth
● Q1 2014 sales have grown strongly albeit with
automotive sales impacted by severe weather in US
● Profitability in line with comparable period in 2013
58
83
10419.8%21.1%
23.2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
22%
24%
26%
0
30
60
90
120
2011A 2012A 2013A
Sales EBITDA margin
£m
Note
1. Based on £1 = US$1.69
2. Based on US$ = HK$7.75
RPC Group Plc
Acquisition of ACE 11
KEY STRENGTHS AND ACE CREDENTIALS
ACE HAS WON MULTIPLE AWARDS
Key strengths
High quality injection moulding and mould making specialist serving China and export markets
Strong and experienced professional management team
Good corporate governance environment
Business geared for growth with scalable manufacturing platform at Zhuhai and Hefei plants
Supplier Award from Rockwell Automation (2013)
Supplier Excellence Award from Tyco (2010-12)
Philips Global Award (2007)
Mould Design Award (6 times) and Mould Maker of the Year Award (3 times)
World Outstanding Chinese Award (2013) Jack Yeung, CEO of ACE
Numerous awards from the Chinese government1
Top 100 Excellent Enterprises of Harmonious Relationship between Labours and Management (2013)
Accreditations: ISO9001, ISO13485, ISO14001, ISO27001, TS16949, OHSAS18001
ACE credentials
Note
1. “Caring Company” (2010-11), “Happiness at Work Label” (2012), “Safety Production” (2013), “Advance Labour Management Enterprise”, “Caring Company Scheme” (2009-2014), “Clean Production
Program” (2013-2014), “Corporate Responsibility Award” (2014)
RPC Group Plc
Acquisition of ACE
Group strategy and acquisition
rationale
12
RPC Group Plc
Acquisition of ACE 13
ACQUISITION RATIONALE
VISION 2020 – FOCUSED GROWTH
Focused
growth
Continuing focus on organic growth
Selective consolidation in Europe
Creating a meaningful
presence outside
Europe
● Rigid plastic packaging market forecast to grow by
5.5% globally in the next five years with 2.7% growth
in Europe
● Plastic packaging – whilst concentrated in selective
niches – remains a largely fragmented market
● Rigid plastic packaging is forecast to grow by
6.5% outside Europe whilst 94% of RPC’s sales
are currently in Europe
Source PIRA 2013
RPC Group Plc
Acquisition of ACE 14
ACQUISITION RATIONALE
VISION 2020 – CREATING A MEANINGFUL PRESENCE OUTSIDE EUROPE
Strategic rationale
● Higher growth rates outside
Europe
● International customer base
would like RPC to follow them
outside Europe
● Opportunity to leverage leading
innovation capabilities
In Vision 2020 RPC set out the key elements of the creation of a meaningful presence outside of Europe:
Focus
● Leveraging RPC’s competitive
advantages:
− Strong customer relationships
− Innovation capabilities
− Extensive product range
− Operational excellence
● Focus geographies:
− North America
− BRIC countries
Implementation
● Further organic growth in US
● Engage with multi-national
customers
● Target local packaging
companies via various
co-operation / investment modes
RPC Group Plc
Acquisition of ACE 15
ACQUISITION RATIONALE
FITS WITH VISION 2020 FOCUSED GROWTH STRATEGY
Platform to
create a
meaningful
presence in Asia
Enhance ACE
attractive
standalone
growth strategy
● High quality, modern manufacturing platform
− Critical mass and capacity to grow higher-added value packaging volumes in Asia
● Leverage RPC’s relationships with global customers calling for RPC to have a manufacturing presence
in China
● Platform to accelerate acquisitive growth in the region
● Synergy opportunities:
− Cost savings from increased in-sourcing of existing RPC tooling requirement
− Potential for general purchasing savings for enlarged group
● Enhanced export sales for ACE through the RPC sales network
● Increased value offering for European tools through the support of a dedicated service tool centre
● Best practice transfer to ACE – complex moulding, automation, multi-part assembly
RPC Group Plc
Acquisition of ACE
ACE
16
ACQUISITION RATIONALE
ACE IS COMPLEMENTARY TO RPC EXISTING PORTFOLIO
RPC Enlarged group + =
Sales of injection moulding and moulds
Number of employees
Number of facilities
49
Number of employees
Number of facilities
Sales by origin (Dec-13)1
5
c. 3,300 c. 8,000
Number of employees
Number of facilities
Sales by origin
54
c. 11,300
Sales by origin (Mar-13)
China100%
Notes
1. 30% of sales made in China
2. 2% moulds is typical for RPC
£104m
United Kingdom
22%
Germany31%
France14%
Other33%
£1,051m
United Kingdom
20%
Germany28%
France13%
Other30%
China9%
£1,155m
Moulds2%
Injection moulding
98%
Sales of injection moulding and moulds Sales of injection moulding and moulds
Moulds5%
Injection moulding
95%
Moulds30%
Injection moulding
70%
RPC Group Plc
Acquisition of ACE
Rigid plastic packaging consumption in Asia
17
ACQUISITION RATIONALE
ASIAN PACKAGING STRATEGY – A HIGH GROWTH MARKET
Asian packaging market*
● Asia is the largest rigid plastic packaging consumer –
2013 global volume share estimated at 30%
● Consumption continued to grow in China and India
during 2008-2013 despite global recession
● Rigid plastic packaging consumption projected to
grow at a CAGR of 9.8% 2013-2018
● Growth fuelled by rising disposable incomes, growing
urbanisation and developing retail infrastructures
RPC packaging strategy for Asia
● Provide international customer base with packaging
of European standards in China
● Lever leading technical and innovative capabilities
supported by the strong ACE manufacturing platform:
− Target growth in segments where the opportunity exists to differentiate from the local competition
− Respond to the increasing demands of the consumer for high quality, functional packaging
● Key packaging segments currently identified:
− High end personal care
− Multi-layer / barrier food packaging
− Pharmaceutical devices
− Paint containers
CAGR: 6.9%
CAGR: 9.8%
*Source PIRA 2013
(‘000 t
onnes)
9,723
13,553
21,618
-
5,000
10,000
15,000
20,000
25,000
2008A 2013E 2018E
RPC Group Plc
Acquisition of ACE
Cluster Managers
Executive Board Members
Pim
Vervaat
6 years*
Superfos
UKIM
Bramlage – Wiko
Blow Moulding
BEBO
Chief Executive Group Finance Director Group Purchasing Business Improvement
Corporate
Development
18
Simon
Kesterton
1 year*
Alfons
Böckmann 38 years*
Thomas
Wahlmeyer 32 years*
* Years of experience in the
plastic packaging industry
Darin
Evans
16 years*
Frank
Doorenbosch
24 years*
Tom
Saunderson
3 years*
Alistair
Herd 26 years*
International management team with over 200 years’
experience in the plastic packaging industry
Bruce
Margetts 26 years*
René
Valentin 22 years*
ACE
Jack
Yeung 14 years*
New cluster
RPC ORGANISATIONAL STRUCTURE
ACE REPRESENTS A NEW CLUSTER FOR RPC
RPC Group Plc
Acquisition of ACE 19
ACQUISITION RATIONALE
ACQUISITION CRITERIA & VISION 2020 FINANCIAL METRICS
RPC acquisition criteria
● Strategic fit
● Strong incumbent management
● Financial track record
● Financial criteria:
− ROCE > WACC of RPC
− Quantifiable synergies
− Earnings accretion
− Impact on Group KPIs
Vision 2020 financial metrics
● RONOA of at least 20%
● Return on sales of at least 8%
Clear acquisition rationale and strategy
Professional management team to be retained
Strong profitability and growth achieved
Pro forma ROCE ahead of WACC
Asian packaging growth and moulds procurement
EPS accretive in first full year post acquisition
See below
ACE RONOA at 31% in 2013
ACE return on sales at 18% in 2013
RPC Group Plc
Acquisition of ACE 20
INTEGRATION PLAN
CLEARLY DEFINED INTEGRATION PLAN IN PLACE
● ACE existing business model to be continued in order to achieve standalone growth strategy
● RPC to support ACE business model by:
− Enhancing sales network of ACE outside China
− Transferring manufacturing know-how to ACE plants
− Providing European service support for ACE moulds
● RPC to immediately follow through current customer demands for China-based manufacturing
● RPC to implement Asian packaging strategy
● RPC to enhance the already strong corporate governance environment of ACE
RPC Group Plc
Acquisition of ACE
Transaction structure and timetable
21
RPC Group Plc
Acquisition of ACE
Deferred cash consideration
● Maximum additional earn-out of up to US$129m (£76m)
− Subject to ACE achieving at least 15.6% EBITDA CAGR between 31 December 2013 and 2017
− Payable in May 2018
− Amount payable determined on “straight-line” basis should EBITDA CAGR be less than 15.6%
● Equal stage payments in total of up to $43m (£25m)
− Based on ACE’s financial performance as at 31 December 2014, 2015, and 2016
− Subject to achieving 15.6% EBITDA CAGR at respective periods compared to 31 December 2013
− Subject to claw-back based on the future financial performance up to 31 December 2017
− Any payments made are deductible / refundable based on the final earn-out payment
22
TRANSACTION STRUCTURE AND TIMETABLE
ACQUISITION FINANCING STRUCTURE
Financing of upfront consideration
● Equity placing of approximately £75m
− Carry same rights as existing ordinary shares including future dividend
− Joint Bookrunners: Deutsche Bank and Panmure Gordon
− Not conditional on completion of the Acquisition
● US$89m (£53m) payable in a form of approximately 8.5
million new RPC shares issued to ACE shareholders
● Balance funding drawn from new 5-year £350m RCF
− New RCF also used to refinance the existing £200m RCF maturing in September 2015
● Pro-forma leverage of 1.8x Net debt / EBITDA as at 31
March 2014
Note
1. ISC = Issued Share Capital
2. On cash-free/debt-free basis, subject to customary adjustments
Sources £m Uses £m
Placing (c. 7.5% of existing ISC1) c.75 Acquistion cost
2 178
EBITDA 2013 of 7.4x
RPC shares issued to ACE 53 Fees 7
Debt 57
Total sources 185 Total uses 185
RPC Group Plc
Acquisition of ACE 23
TRANSACTION STRUCTURE AND TIMETABLE
TIMETABLE
Announcement of the Acquisition and Placing 1 May 2014
Placing books closed and Placing pricing announced 1 May 2014
Publication of the Prospectus / Class 1 Circular and Form of Proxy 1 May 2014
Admission of and commencement of dealing in Placing Shares 7 May 2014
General Meeting 19 May 2014
Expected date of Completion (subject to competition approval in Germany) Early June 2014
Admission of Consideration Shares At the same time as Completion
RPC Group Plc
Acquisition of ACE
RPC current trading
24
RPC Group Plc
Acquisition of ACE 25
RPC CURRENT TRADING
● In line with 27 March 2014 Pre close trading statement
“The performance for the year is anticipated to be in line with our expectations. We are
pleased with the progress we have made towards the strategic goals set out in our Vision
2020 focused growth strategy and we are confident that further progress will be made
going forward against the backdrop of more encouraging macro-economic conditions.”
RPC Group Plc
Acquisition of ACE 26
SUMMARY
A COMPELLING ACQUISITION IN LINE WITH OUR VISION 2020
● Excellent platform for packaging growth of RPC in the Far East
− Opportunity to develop broader relationships with existing customers
− Access to complementary mould capabilities
− A platform for further acquisition opportunities in the Far East
− Scope to realise a number of additional operating benefits
● Current successful ACE growth strategy to be enhanced by RPC
− Enhanced export sales for ACE through the RPC sales network
− Increased value offering for European tools
− Best practice transfer to ACE
● Estimated annual cost savings of £1m in relation to tooling procurement fully realisable from the first full year of ownership
● EPS accretive in the first full year of ownership
RPC Group Plc
Acquisition of ACE
Q&A
27
RPC Group Plc
Acquisition of ACE
Appendix
28
RPC Group Plc
Acquisition of ACE 29
APPENDIX: ACQUISITION RATIONALE
RPC CURRENT GEOGRAPHIC PRESENCE
Where we manufacture
Where we sell
Opportunities to expand outside Europe in higher growth markets
Currently c.6% of
RPC’s sales are
outside Europe
RPC Group Plc
Acquisition of ACE
Rigid plastic consumption (‘000 tonnes) per market CAGR
'08-'13
CAGR
'13-'18
15% 14%
11% 11%
12% 12%
13% 13%
12% 11%
10% 10%
11% 11%
30
APPENDIX: ACQUISITION RATIONALE
ASIAN PACKAGING STRATEGY – FOCUS ON CHINA
Key trends / market drivers
● 12.7% overall CAGR in rigid plastic packaging 2008-2013;
12.0% projected CAGR for 2013-2018
● Fresh food: Growing presence of multinational brands and
retailers leading to increasing sales of packaged fresh food
● Chilled, frozen & processed food: Demand growing rapidly as
urban lifestyles spread and disposable incomes rise
● Cosmetics & toiletries: Continuing growth in demand for body
and hair care; male grooming the fastest growing category
● Household care: Surface care, liquid laundry detergents and
dishwashing products experiencing the fastest rates of growth
within this category
● Healthcare: General increase in availability of healthcare
products – supported by government plans to provide access to
basic medical care across the country – driving particularly
strong projected growth
● Industrial containers: All paints currently packaged in metal
containers
123 244 459 84
141 232
498
890
1,569
205
386
711
427
739
1,245
263
422
680
349
594
1,002
-
1,000
2,000
3,000
4,000
5,000
6,000
2008A 2013E 2018E
Fresh Food Chilled, frozen, processed foodDairy products HealthcareCosmetics Household careIndustrial/other
Trends in packaging in China demonstrate continued strong growth together with an increasing consumer
requirement for higher added value packaging
Source PIRA 2013
RPC Group Plc
Acquisition of ACE
596.8
686.3
789.2
907.6
1043.8
0
200
400
600
800
1,000
1,200
2013 2014 2015 2016 2017
31
APPENDIX: STRONG GROWTH DRIVERS
CHINA INJECTION MOULDING PRODUCTION VALUE
(RM
B b
illio
n)
Source National Bureau of Statistics of the PRC, the Ipsos Report