Translation for information purposes only. In case of discrepancy between the French and the English version, the French version shall prevail.

Transcription

1 RESPONSE DOCUMENT prepared by: advised by IN RESPONSE TO THE TENDER OFFER INITIATED BY Pursuant to article L of the French Monetary and Financial Code and to article of the General Regulations of the Autorité des marchés financiers (the "AMF"), the AMF has issued visa No on October 16, 2012 relating to this response document. This response document has been prepared by CFAO under the responsibility of the persons having signed this response document. Pursuant to article L I of the French Monetary and Financial Code, the visa was granted after the AMF had verified that whether the document was complete and understandable, and whether the information contained in it was consistent. The visa does not imply approval of the opportunity of the transaction nor the authentification of the accounting and financial information presented. The report of Ricol Lasteyrie, acting as independent expert pursuant to article of the AMF General Regulations, is included in this response document. This response document is available on the website of the AMF ( and the website of CFAO ( and is made available, free of charge, to the public at the registered office of CFAO 18, rue de Troyon, Sèvres, France or at Société Générale, CORI / COR/ FRA, Paris Cedex 18, France. In accordance with the provisions of article of the AMF General Regulations, the information relating to legal, financial, accounting and other information about CFAO will be filed with the AMF and made available to the public no later than the day preceding the opening of the tender offer.

2 TABLE OF CONTENT 1 PRESENTATION OF THE OFFER Description of the Offer Number and type of shares covered by the Offer Summary of the main terms of the Offer Condition of the Offer Background of the Offer Data-Room procedure Existing links between the Company and the Offeror REASONED OPINION OF THE SUPERVISORY BOARD REPORT OF THE INDEPENDENT EXPERT AGREEMENTS THAT MAY HAVE AN IMPACT ON THE ASSESSMENT OF THE OFFER OR ITS OUTCOME RISK FACTORS The market for shares of the Company may become less liquid TTC will control the Company The change of control of the Company could have an impact on the Company s business The Company s financing could lead to a dependency on TTC INFORMATION ABOUT THE COMPANY Share capital structure Direct or indirect holdings in the Company s share capital disclosed pursuant to the crossing of a threshold or a transaction on securities Restrictions on the exercise of voting rights and share transfers List of holders of any securities carrying special control rights and a description of such rights Control mechanism provided for in an eventual employee participation scheme, when control rights are not exercised by the latter... 40

3 6.6 Agreements entered into by the Company which will be amended or terminated in the event of a change of control of the Company Rules applicable to the appointment and replacement of members of the Management Board and to the amendment of the Company s articles of association Powers of the Management Board relating in particular to the issuance and repurchase of shares Members of the Management Board Agreements providing for indemnity to the Management Board members or employees if they resign or are dismissed without just or serious ground or if their employment ceases because of the public offer ADDITIONAL INFORMATION RELATING TO THE COMPANY PERSON RESPONSIBLE FOR THE RESPONSE DOCUMENT... 45

4 1 PRESENTATION OF THE OFFER 1.1 Description of the Offer Pursuant to Title III of Book II, and in particular, articles et seq. of the AMF General Regulations, Toyota Tsusho Corporation, a company incorporated under the Japanese law, whose registered office is located at 9-8, Meieki 4-chome, Nakamura-Ku, Nagoya , Japan, and registered with the registry of Nagoya under number (the "Offeror" or TTC ) and whose shares are admitted to trading on the Tokyo Stock Exchange and the Nagoya Stock Exhange, has filed with the AMF on September 14, 2012 a draft tender offer pursuant to which it has irrevocably undertaken to offer to all of the shareholders of CFAO SA, a French société anonyme with a Management Board (Directoire) and a Supervisory Board (Conseil de surveillance) with a share capital of 10,254,310, divided in 61,525,860 shares, whose registered office is located at 18, rue Troyon, Sèvres, France, registered with the Trade and Companies Registry of Nanterre under number ("CFAO" or the "Company") and whose shares are admitted to trading on the Euronext Paris (compartment A) of NYSE Euronext under code ISIN FR , with the mnemonic code CFAO, to purchase all of their shares of CFAO at a price of per share (the Offer ). Pursuant to the provisions of article I of the AMF General Regulations, Crédit Agricole Corporate and Investment bank ("Crédit Agricole CIB") and Rothschild & Cie Banque, acting as presenting banks of the Offer, filed the draft Offer (including the draft offer document) with the AMF on behalf of the Offeror on September 14, 2012, it being specified that Crédit Agricole CIB alone guarantees the tenor and the irrevocable nature of the commitments made by the Offeror in connection with the Offer. 1.2 Number and type of shares covered by the Offer It is reminded that the Offeror holds, as of this date, 18,334,706 CFAO shares representing 29.80% of the share capital and 29.80% of the theoretical voting rights based on the total number of 61,525,860 shares representing as many voting rights (pursuant to article of the AMF General Regulations). The Offer covers all the existing CFAO shares not directly or indirectly held by the Offeror on this date, that is, to the knowledge of the Company, and as at October 3, 2012, a maximum of 43,191,154 CFAO shares (the Shares ). It is specified that: The Offer does not cover the underlying shares of the 963,875 stock options allotted by the Company (the Options ) since such options cannot be exercised before the closing date of the Offer or the closing date of the Re-Opened Offer (as defined in section 1.3 of this response document); and 429,104 free shares have been granted by the Company (the Free Shares ) as at October 3, 2012, and are, at that date, in their vesting period, and as such have not been delivered to their beneficiaries. 87,500 of these shares will be delivered to their beneficiaries by CFAO on December 3, 2012, and deducted from the treasury shares (which are covered by the Offer), and will remain in their holding period (and thus nondisposable) for a two years period in accordance with their terms. The free shares granted cannot be tendered into the Offer or into the Re-Opened Offer. In addition, the Company has undertaken to the Offeror not to tender the treasury shares into the Offer (which amount to 119,600 shares as of October 3, 2012). 1

5 There is no right, security or other financial instrument giving access, immediately of in the future, to the share capital or the voting rights of the Company, other than the Shares, the Options and the Free Shares in their vesting periods mentioned above. 1.3 Summary of the main terms of the Offer Within the scope of the Offer which will be carried out pursuant to the normal process in accordance with the provisions of articles et seq. of the AMF General Regulations, the Offeror irrevocably undertakes to acquire the Shares at a price of per share (the Offer Price ) The Offer Price will be reduced by the amount per share of any distribution made by the Company for which the record date would be prior to the settlement date of the Offer. Any adjustment of the Offer Price will be subject to the prior approval of the AMF and be announced by a press release. Prior to the opening of the Offer, the AMF and NYSE Euronext will publish a notice of opening of the Offer. The Offer will be open for at least twenty-five (25) trading days, provided that the closing date of the Offer will be decided by the AMF pursuant to its General Regulations. It will be centralized by NYSE Euronext. Pursuant to article of the AMF General Regulations, the Offer will be re-opened within ten trading days following the publication of the results if the Offer has been successful. The Offer will however not be re-opened if the Offeror files for the implementation of a squeeze-out procedure pursuant to articles et seq. of the AMF General Regulations within ten trading days as from the publication of the results of the Offer. In the event the Offer is re-opened, the terms of the re-opened offer (the Re-Opened Offer ) will be identical to those of the Offer. The AMF will publish a Re-Opened Offer timetable, which will last at least ten trading days. The tender process as well as the indicative timetable of the Offer have respectively been described in sections 2.3 and 2.7 of the Offeror s Information Document (as defined in section 1.5 of this response document). Participation to the Offer and distribution of this response document may be restricted by law in certain jurisdictions outside France. These restrictions are described in more detail in section 2.10 of the Offeror's Information Document. 1.4 Condition of the Offer The Offer is subject to only one condition precedent which is to obtain the authorization to carry out this transaction by the European Commission in accordance with article 6(1)(b) of the EC Regulation No.139/2004 (the Competition Authority s Approval Phase I ). If the Offeror does not obtain the Competition Authority s Approval Phase I, the Offer will automatically lapse, pursuant to the provisions of article of the AMF General Regulations. The Offeror has indicated that certain regulatory authorizations, required in certain African countries, will be notified but do not constitute condition precedents to which the Offer is subject. It is contemplated that TTC, and as the case may be CFAO, will notify the transaction in Kenya, Malawi, Tanzania, Zambia and Mauritius in order to obtain authorization of the Offer by the competition authorities of the above-mentioned countries. 2

6 Pursuant to applicable regulations, some of these authorizations have a suspensive effect and should be obtained before the settlement of the Offer. If these authorizations were not obtained before the settlement of the Offer, the Offeror has indicated to the Company that it intended to offer to the applicable authorities to make certain commitments in order to manage the interim period between the settlement of the Offer and the grant of said authorizations. This commitments could have a significant adverse effect on the activities of the entities of the Group in the relevant countries. Further, those authorizations could be subject to certain conditions or undertakings which could have a significant adverse effect on the activities, profits, financial situation and the perspectives of the Group in the relevant countries. In addition, the Offer is not subject to the condition that a number of Shares representing a minimum percentage of the share capital or voting rights of the Company be tendered into the Offer. 1.5 Background of the Offer PPR and its subsidiaries Discodis, Sapardis and Prodistri (together referred to as the PPR Group ), TTC and CFAO entered into a share purchase agreement on July 25, 2012, pursuant to which TTC has acquired on August 2, 2012 from the PPR Group, 18,334,706 shares (the Initial Block ) representing, as of this date, 29.80% of the share capital of CFAO, at a price of per share (the Share Purchase Agreement ). In accordance with the terms of the Share Purchase Agreement and what has been indicated in the press releases published on July 26, 2012 by PPR and TTC, TTC conducted after the completion of the share purchase a due diligence on the non-automotive business activities of the CFAO group in order to confirm its intention to file a voluntary tender offer on the Shares of CFAO no later than September 15, The publication of these press releases has led to the publication by the AMF, on July 26, 2012, of a notice opening the pre-offer period (AMF notice No. 212C0966). Pursuant to articles et seq. of the AMF General Regulations and to articles L et seq. of the French Commercial Code, the Offeror disclosed, by letters dated July 31, 2012 to the AMF and to CFAO, that it had crossed upwards on July 25, 2012 the 5%, 10%, 15%, 20% and 25% thresholds of the share capital and voting rights of the Company pursuant to the execution of the Share Purchase Agreement, these shares being treated as shares owned by the reporting person itself pursuant to article L I 4 of the French Commercial Code. Moreover, the Offeror filed on August 3, 2012 a second notification with the AMF and to CFAO for the sake of clarity, following the closing of the transaction and the effective acquisition of the Initial Block on August 2, Following these disclosures, the AMF published a notice on August 3, 2012 (notice No. 212C1006). In addition to the crossing of the above-mentioned thresholds required under French law, the Offeror disclosed to the Company, the crossing of the 3% shareholding threshold set forth by the articles of association of the Company and also every multiples of 0.5% thresholds up to 29.5%. By a letter received by the AMF on August 3, 2012, PPR disclosed that it had indirectly crossed down on August 2, 2012, the 1/3, 30%, 25%, 20% and 15% thresholds of share capital and voting rights of the Company and was holding 7,499,176 CFAO shares representing as many voting rights, i.e % of the share capital and voting rights of the Company (AMF notice No. 212C1008). 3

7 On that occasion, PPR disclosed to the Company, in addition to the crossing of shareholding thresholds required under French law, the crossing down of the shareholding thresholds of also every multiples of 0.5% down to 12.5%. In a press release dated August 28, 2012, TTC has confirmed its intention to file a voluntary tender offer on the Shares of CFAO no later than September 15, CFAO s Supervisory Board, during its meeting held on September 4, 2012, acknowledged TTC s confirmation of its intention to file a voluntary tender offer on the share capital of CFAO for a cash consideration of per share and has, pursuant to article of the AMF General Regulations, appointed Ricol Lasteyrie, represented by Mrs. Sonia Bonnet-Bernard, as independent expert. On September 14, 2012, Rothschild and Crédit Agricole CIB acting as presenting banks for the Offeror, filed a draft tender offer on the Shares at a price of per Share. The AMF published a filing notice on September 14, 2012, under No. 212C1181, and the Offeror s draft offer document was published on the websites of the AMF ( and of the Offeror ( The College of the AMF, during its meeting of October 16, 2012, declared the Offer compliant with applicable laws and regulations and issued visa No on October 16, 2012 relating to the offer document of the Offeror (the Offer Document ). With respect to the proposed Offer, the Offeror has indicated that it was key to maintain CFAO s autonomy and entrepreneurship spirit and consequently, that it will maintain and preserve, subject to the paragraph below, the Company listing on Euronext Paris. In the event that, upon the closing of the present Offer or of the Re-opened Offer, the number of shares not tendered into the Offer by the minority shareholders would represents less than 5% of the share capital and voting rights of CFAO, the Offeror reserves the right to request the AMF, within three months following the closing of the Offer (reopened, as the case may be) to implement a mandatory squeeze-out procedure, pursuant to articles et seq. of the AMF General Regulations, resulting in the delisting of CFAO shares from Euronext Paris. The Offeror has indicated that it had no intention to question the autonomy of CFAO and thus does not intend to implement a merger with CFAO during the next twelve months. The Offeror has indicated that it reserves the right to request, after closing of the Offer, the appointment of new members to CFAO s Supervisory Board in order to reflect the new shareholding structure of CFAO in compliance with applicable corporate governance practices consistent with the AFEP-MEDEF recommendations. The intentions of the Offeror for the coming twelve months are set out in detail in section 1.2 of the Information Document. 1.6 Data-Room procedure The Offeror had access to a data room containing certain information regarding CFAO. The Company considers that it has not provided the Offeror with information relating, directly or indirectly, to CFAO which would need to be disclosed in this response document pursuant to the AMF position-recommendation No

8 1.7 Existing links between the Company and the Offeror Except for the Share Purchase Agreement mentioned in paragraph 4 of this response document, the Company is not party to any agreement with the Offeror. Mr. Yasuhiko Yokoi and Mr. Takashi Hattori, who are related to the Offeror, have been appointed members of CFAO s Supervisory Board during the meeting of July 25, These appointments were effective on August 2,

9 2 REASONED OPINION OF THE SUPERVISORY BOARD In accordance with the provisions of article of the AMF s General Regulations, the members of the Supervisory Board met on October 3, All of the members were present or represented at this meeting, it being specified that Messrs. Yasuhiko Yokoi and Takashi Hattori, the representatives of the group TTC (Toyota Tsusho Corporation), reported a conflict of interest and indicated that they would abstain from participating in the deliberations and from voting on any deliberation of the Supervisory Board the purpose of which would be to take a position on TTC s proposed public tender offer for the securities of the Company. The Supervisory Board reminds that pursuant to an agreement concluded on July 25, 2012, TTC acquired a stake representing 29.80% of the share capital of the Company from companies within the PPR group for the price of per share on August 2, In this agreement, TTC indicated that it envisaged the possibility of initiating a voluntary public cash tender offer for the remainder of the Company s share capital, for the same price per share as was paid to acquire the block of %, i.e., per share. TTC was supposed to conduct an additional due diligence review of the CFAO group s non-automotive business, after which the Board of Directors of TTC was to confirm its intention to file the offer by September 15, 2012 at the latest, which was done by the Board of Directors of TTC of August 28, Under the terms of this agreement, PPR and the companies within its group that held shares of the Company undertook to tender their remaining 12.19% stake to the offer. This undertaking may be revoked if a competing offer is filed. The Supervisory Board acknowledged the terms of the Offer filed by TTC with the Autorité des marchés financiers on September 14, 2012 in connection with the foregoing, as well as the intentions and commitments undertaken by TTC in the offer document (note d information) transmitted by TTC to the Company on that date. Société Générale, in its capacity as the financial advisor of the Company and of the Supervisory Board, presented the conclusions of its analysis of the terms of the Offer. The firm Ricol-Lasteyrie, represented by Mrs. Sonia Bonnet-Bernard, appointed by the Supervisory Board during the meeting that took place on September 4, 2012 as an independent expert charged with assessing the fairness of the financial terms of the Offer proposed to the Company s shareholders (the Independent Expert ), presented the conclusions of her works to the members of the Supervisory Board. The Chairman of the Management Board presented the draft of the response offer document (note en réponse) to the Supervisory Board. After having heard the conclusions of the works of Société Générale and the report of the Independent Expert, and having reviewed the draft of the response offer document prepared by the Management Board, and after having discussed all of these items, the Supervisory Board noted that: i. from a financial perspective The price of the Offer is equal to the price paid by TTC to PPR for the acquisition of the block of 29.8% of the Company s share capital which was completed on August 2, 2012 and to which PPR undertook to tender the 12.19% of the Company s share capital that it still holds, directly or indirectly, at the end of a competitive bidding process; The report of the Independent Expert: 6

10 o reminded that the price of the Offer includes premiums of 5.2%, 14.6% and 22.9% compared to the average of the trading prices of the CFAO share during the 3 months, 6 months and 12 months prior to July 25, 2012 (date on which the conclusion of the agreement between PPR and TTC was announced), respectively; o o o provided a DCF analysis based on various sensitivities resulting in a price range comprised between 34.3 and 40.2, with a central point at 37.1 per CFAO share; included, for information purposes, a reference to an analysis of multiples applicable to comparable companies which displayed valuations significantly lower than that price of the Offer; and concluded that, in the context of the Offer which is optional for the minority shareholders of the Company, the price of per CFAO share was fair from a financial perspective; The Offer triggers immediate liquidity for all of the shareholders at a price per share that is equal to the price paid to PPR, while allowing the shareholders who choose to do so to retain their shareholding; ii. from an industrial perspective This is a friendly Offer, since TTC has confirmed its intention to support the growth strategy of the Company s main businesses in Africa and in the Overseas Departments and Territories, as well as in Vietnam, with the objective of pursuing the consolidation of the Company s positions within its key markets; TTC has, among others, expressed its intention: o o o o With respect to CFAO Automotive, to reinforce and develop the presence of the Company in the countries in which it is present and to support its geographic expansion in its markets by relying on a multi-brand distribution strategy; to ensure, if necessary, that adapted internal management and governance procedures maintain the necessary conditions for the growth of this multi-brand strategy with a view to maintaining relationships with the car manufacturers; with respect to the Eurapharma business, to support the organic growth and the development strategy of the Company in Africa and in the Overseas Departments and Territories; with respect to the Industry, Equipment and Services Business, to support the development of the Company s new businesses such as the recent activities of CFAO Equipement and Loxéa; the two groups are complementary with regard to their geographic positions and their respective growth strategies; the Company could therefore be able to benefit from the possible complementarities that may arise from future cooperation with the TTC group; in connection with of the change of governance upon closing of the Offer, TTC undertook to respect the applicable standards of good practices in accordance with the AFEP- MEDEF recommendations; 7

11 TTC expressed its wish to maintain the autonomy and the entrepreneurial spirit of the Company and, therefore, to maintain and preserve the Company s listing on Euronext Paris, provided that there is no less than 5% floating share capital upon closing of the Offer; iii. from an organizational and human resources perspective TTC has expressed the following intentions in the offer document (note d information): o o o o o retain and develop the skills and talents of the Company s employees; not to modify the Company s current strategy with regard to employment; maintain the Company s existing decision-making centers and operational centers in France; given the coherence of the Company s activities in the markets in which the Group operates and its complementarity with the activities of TTC, not to plan to make any significant changes in the way that the Company carries out its activities; and in the event that new elements would justify a revision of the Company s activities portfolio in the interest of the latter, to discuss the opportunity with the Company s management; discuss with the Company s management the opportunity of implementing a liquidity mechanism in favor of the holders of free shares and share subscription options, with respect to the corresponding shares that were not or could not be tendered to the Offer, in application of the provisions of the plan or the regulatory, tax or labor provisions; TTC does not anticipate any reduction of the workforce as a result of the combination of the Company with TTC and indicates that the individual and collective status of the Company s employees and of its subsidiaries will not be affected by the realization of the Offer. In light of the foregoing, given the elements set forth in the draft response offer document prepared by the Management Board, the Independent Expert s conclusions and the analysis of the terms of the Offer presented by Société Générale, the Supervisory Board, after discussions, has considered that the proposed Offer is in the best interest of the Company, its employees and its shareholders, and, at the unanimity of its voting members, decided to approve the proposed Offer described in TTC s draft offer document, and to recommend that the shareholders who wish to do so to tender their shares to the Offer. The Supervisory Board, at the unanimity of its voting members, approved the draft of the Company s response offer document. Messrs. Jean-Charles Pauze and Pierre Guénant and Mrs. Nathalie Delapalme and Mrs. Sylvie Rucar, expressed their intent to retain the 250 shares that they each hold and that they are required to hold pursuant to the rules the Supervisory Board as a result of their positions as members of the Supervisory Board. As of October 3, 2012 the Company, directly or indirectly, holds 119,600 treasury shares representing 0.20% of its share capital; the Supervisory Board, at the unanimity of its voting members, approved the decision not to tender these treasury shares to the Offer. 8

12 3 REPORT OF THE INDEPENDENT EXPERT Pursuant to article of the AMF General Regulations, Ricol Lasteyrie, represented by Mrs. Sonia Bonnet-Bernard, has been appointed on September 4, 2012 by CFAO s Supervisory Board as independent expert in order to prepare a report on the financial terms and conditions of the Offer, as reproduced below. Independent appraiser s report As part of the takeover bid ( Offering ) initiated by Toyota Tsusho Corporation ( TTC or the Initiator ) for shares of CFAO (the Company ), in our capacity as independent appraiser appointed by the Company s Supervisory Board at its September 4, 2012, meeting, we were given the assignment, of assessing the fairness of the financial terms offered by the Initiator to Company shareholders. Our appointment was made in accordance with article of the General Regulations of the French Financial Markets Authority (Autorité des marchés financiers AMF). Our final report was presented to the Supervisory Board meeting on October 3, The price offered to CFAO shareholders comes to per share. We performed our due diligence in accordance with the provisions of article of the AMF s General Regulations and its July 25, 2006, application order No relating to independent appraisals (itself complemented by the AMF s recommendations of September 28, 2006, amended on October 19, 2006, and July 27, 2010). Our due diligence efforts are described in point 3 and detailed in appendix 5 below. Our assignment does not constitute an audit or a limited review. It is therefore not intended to allow us to formulate an opinion on the financial statements nor to conduct special verifications with respect to compliance with corporate law. Hence we did not perform any audit work aimed at verifying the reliability of the historical data used, and instead relied on the statutory auditors report that includes an unqualified certification for the financial statements for the year ending December 31, 2011, and the interim financial statements as of June 30, 2012, which were subjected to a limited review that also did not give rise to any reservations. Our assignment is not comparable to due diligence performed for a lender or buyer and does not include all of the work required for such a task. In general, in accordance with our assignment letter, the documents submitted to us were considered reasonably accurate and exhaustive and were not subject to any special verification. 1. Presentation of the transaction 1.1 Companies involved in the transaction Presentation of the initiating company Toyota Tsusho Corporation is a listed company in Japan, whose two principal shareholders are Toyota Motor Corporation (21.6%) and Toyota Industries Corporation (11.1%). The Initiator is a Japanese conglomerate with activities in the automobile distribution, energy, healthcare, chemicals, capital equipment and consumer goods sectors. The Group has some 31,000 employees around the world and generated JPY 5,917 billion in revenues (approximately 54.4 billion) in its fiscal year. 1 Any issuer or offeror carrying out a takeover bid may appoint an independent appraiser who will apply the provisions of this title. 9

13 1.1.2 Presentation of the Company targeted by the Offering CFAO is a limited liability company with a Supervisory Board and Management Board and share capital of 10,254,310 divided into 61,525,860 shares. CFAO shares have been listed since December 2, 2009 on Euronext Paris Compartment A (ISIN code: FR ) and the company has been part of the SBF 120 index since March 22, 2010 and the new CAC Mid 60 index since March 21, The Company operates primarily in the automotive distribution and pharmaceuticals sectors in Africa (excluding South Africa) and in the French Overseas Collectivities and Territories. The Group also has activities in the production and distribution of consumer goods, the distribution of capital equipment and the leasing and integration of IT products and solutions. The various activities are grouped into three main divisions: CFAO Automotive, Eurapharma and CFAO Industries, Equipment and Services. Since its initial public offering, the Group has pursued its strategy of geographic expansion and business portfolio extension. It currently has a substantial presence in Africa, where it operates in 32 countries (more than 70% of revenues), and in seven French Overseas Collectivities (Collectivités territoriales françaises d outre-mer - CTOM) as well as Vietnam. The Group has a leadership position in its main activities and a vertically integrated business model that enables it to have good control over the supply chain and aggregate margins at each step of the process, an essential attribute in order to operate in small-scale markets. The Group s growth is sustained by the economic growth of the leading African countries in which it does business and by the development of a middle class in these countries that generates strong consumer demand. In 2011, CFAO generated revenues of 3.1 billion and had 10,100 employees CFAO Automotive CFAO launched its automotive distribution activity in 1913 in West Africa. The Company purchases, stocks and distributes new vehicles (passenger cars, light vehicles and motorcycles) produced by around 30 manufacturers. Points of sale are dedicated to a single brand or multiple brands depending on the country. The Group also sells spare parts and tires and offers vehicle repair services. The principal brands sold by the Company are Toyota in French-speaking sub-saharan Africa, Nissan in English-speaking sub-saharan Africa and Morocco and General Motors (Chevrolet and Opel) in the Maghreb region and Nigeria. Together, these three manufacturers accounted for 29.9% of the Group s revenues in Even though most of these agreements do not include any exclusivity clause, the Group is typically the sole distributor of the brand in the country. In 2011, the division generated 1.9 billion in revenues, a 23.8% increase (including 11.2% in organic growth), and accounted for 60% of consolidated revenues. Unit sales increased by 27%, with particularly sustained growth in Algeria and Morocco, where 41,000 vehicles were sold (50% of the total) and in the Overseas Collectivities, where the Group benefited from recently completed acquisitions. Unit sales remained below the all-time high of 2008, although revenues reached a new historical high thanks to the increase in average prices. The division has several growth sources: continued expansion of the brand portfolio, the development of trucks sales (15% of revenues in 2011) and increased revenue contributions from after-sales services (12% in 2011). The two main risks involve currency trends affecting purchases (notably for the yen), which can weigh on the competitive pricing of vehicles sold, and heightened competition that can lead to erosion in margins and market share and even the loss of contracts. 10

14 Strengths - Longstanding partnerships with the leading international manufacturers - An extensive geographic presence thanks to a high-quality distribution network, which is mostly owned by the Group - High market share in French speaking Africa and the French Overseas Collectivities - Experienced teams with an excellent knowledge of the market - Excellent logistics control Opportunities - Vehicle ownership levels that are still very low - The emergence of a middle class, which supports demand for passenger cars - The development of the business in the existing and new territories Weaknesses - Limited presence in the low-cost and SUV segments - Strong dependency on three main manufacturers Threats - Exposure to political and security uncertainties - Significant sensitivity of supply costs to exchange rates - The possible shift by manufacturers to direct distribution Eurapharma As the leading importer/distributor in Africa and the French Overseas Territories, the Group is present in 14 countries. In 2011, CFAO added pharmaceutical production by acquiring a 49% stake in the Algerian company Propharmal. The division s activity is built around the following three business lines: - Importer-wholesaler/distributor: using upstream logistics based in Rouen, the Group contracts with 450 pharmaceutical manufacturers and distributes to 5,000 pharmacies through its distribution subsidiaries. In 2011, this activity generated revenues of million, or 78.6% of the total for the division. In order to secure the activity, the Group enables pharmacists to buy stakes in the local subsidiaries in order to ensure their loyalty. - Pre-wholesale: the Group offers more than 30 manufacturers the possibility of outsourcing their order-taking and product deliveries to wholesalers in French-speaking Africa and Algeria. In 2011, revenues totaled million, or 16.2% of Eurapharma s total sales. - Distributor agent: CFAO enables manufacturers to outsource the import, promotion and distribution of their products in English- and Portuguese-speaking Africa. This activity represents 5.2% of the division s revenues. In 2011, the 865 million in revenue growth was generated primarily by activities in Frenchspeaking Africa (+15.9%), as sales in English-speaking Africa were negatively affected by devaluations in Kenya and Ghana. Revenues in the French Overseas Collectivities also declined for the same reasons as they did in metropolitan France (decline in administered prices, limits on insurance reimbursements and the development of generics). The division has several growth drivers: continued expansion in the pre-wholesale and agency business lines with new manufacturers, the development of new business lines (production in Algeria, sales to NGOs with the acquisition of Missionpharma) and regional development (Nigeria in 2012). The main risk is regulatory in nature and involves pricing and margin trends in the French Overseas Collectivities. 11

15 Strengths - Integrated and centralized upstream and downstream logistics - Longstanding and strong ties to pharmaceutical manufacturers and pharmacists - A leadership position in many countries Opportunities - The anticipated development of the manufacturing activity in Algeria - The development of new business lines (acquisition of MissionPharma) - Market penetration in new territories Weaknesses - The weight of the French Overseas Collectivities (38% of revenues), a structurally declining market Threats - A decline in administered prices in the French Overseas Collectivities - The arrival of generic drug producer/distributors - Direct sales by pharmaceutical manufacturers, notably Chinese and Indian CFAO Industries, Equipment and Services With 2011 revenues of 367 million, the Industries, Equipment and Services division accounted for 12% of the Group s total revenues through the following activities: Beverages The Group owns and operates the only two breweries in the Republic of the Congo through a partnership established in 1994 with Heineken, which owns 50% of this activity. CFAO produces and bottles local and international brands of beers and non-alcoholic beverages, notably Coca-Cola, for the local market. In 2010, a second bottling line was launched at the Pointe-Noire plant in order to satisfy the increase in demand. With 2011 revenues of 187 million, the Group is by far the leading distributor of non-alcoholic beverages, and in particular Coca-Cola, in the country. The Company benefits from its very substantial share of the beer market, which is regulated (prices are set by the government) and has promising growth prospects given the country s demographic trends and improved living standards. The operating margin is high and the Group has been granted tax exemptions through 2016 in return for investment commitments. The main growth engine is the development of the country s central and northern regions, which are currently not well covered. The risks include the entry of a new competitor (always the subject of recurring rumors) and any price increases for raw materials, which would affect margins. CFAO Technologies CFAO Technologies, which generated 2011 revenues of 75 million, focuses on the integration of high-value-added IT, networking and telecommunications products and solutions, notably the facilities management of workstations and bank teller machines, and the business of radiocommunications operator. Facilities management and radio-communications are new activities launched in The company is also looking to expand into infrastructure audit consulting and non-business-line application software. The strength of this activity is its large portfolio of services and strong relations established with the leading banking and telecommunications sector participants. One of the main challenges in the years ahead will be to improve the contribution of recurring revenues. 12

16 CFAO Equipment / Loxea CFAO Equipment is a B-to-B network dedicated to the sale and maintenance of equipment and capital goods, rounded out by a line of leasing products (earth-moving equipment, handling equipment, farm machinery, generators and elevators). In the earthmoving equipment and farm machinery activity, which is more recent, the company believes it has strong growth potential thanks to its partnerships with well-established brands. Loxea is active in the short- and long-term vehicle leasing market. The Group manages a fleet of some 3,000 leased vehicles in Gabon, Cameroon, Côte d Ivoire, Senegal and Congo. The growth is driven primarily through long-term leasing, which is generally operated through partnerships with financial institutions. This unit generated revenues of 67 million in Plastic products CFAO manufactures and distributes BIC brand products (pens and razors) through a partnership with the brand in more than 16 countries. The Company also manufactures and distributes a packaging product line for the agribusiness and oil industries. In this activity, which generated revenues of 38 million in 2011, the Group s growth is driven by higher living standards and broader educational participation. Developments in new countries may also be considered Analysis of the Company s performances Margin trend The revenue trend over the past five years demonstrates the Group s ability to take advantage of the dynamic growth in African markets while absorbing the political and security uncertainties in the countries where it does business. The Group s focus on Africa and its development in more than 30 countries enable it to take advantage of the continent s growth opportunities while limiting country risk effects. The Company s growth was generated both organically and through acquisitions by expanding its business portfolio and geographic presence, notably with new sites in Morocco, Algeria and English- and Portuguese-speaking Africa. The Company s ability to control a substantial portion of the value chain in each of its business lines enabled it to record profitable growth and maintain a relatively stable 10% EBITDA margin. For the automotive division, the unfavorable impact of currency trends on purchasing costs was contained. The EBIT margin contracted, however, as a result of the substantial volume of recent investments. CFAO - Revenue, EBIT and EBITDA margin trends 2,538 CAGR : +5.3 % 2, % % 2, % 2, % 3, % 8.9% 10.7% 9.4% 9.7% 10.0% 9.8% 8.2% 8.3% 8.2% Revenue EBITDA Margin EBIT Margin Source : CFAO 2011 Registration Document 13

17 Financial structure and working capital management The Company carries a net debt of 192 million as of December 31, This represents 26% of shareholders equity and less than one year s EBITDA. The Company s debt has one distinguishing feature in that it is carried locally by the Group s subsidiaries and therefore denominated in the local currencies. Consequently, less than one-third of the Company s debt is denominated in euros. Moreover, given the high cost of long-term financing in the countries where CFAO does business, the debt consists mainly of short-term unconfirmed credits. As of June 30, 2012, overdraft facilities made up approximately 80% of the total borrowings and financial debt. Working capital requirement averaged 14.2% of revenues during the past five years, with a peak in at a time of weak business activity. According to management, WCR is expected to remain within a range of 13% to 17% of revenues. Interim results The consolidated financial statements as of June 30, 2012 show the following: - with revenues up 17.3% in the first half of 2012 (11.9% excluding Côte d Ivoire), the Group generated an 8.3% recurring operating income margin, up from 7.6% in the first half of 2011; - net financial debt as of June 30, 2012, totaled million, compared with million as of December 31, 2011, and million as of June 30, 2011; - working capital requirement totaled 14.2% of revenues, down slightly relative to June 30, 2011 when it was 15.7%. Earnings forecast The Group does not provide the market with any earnings forecasts. At the time of the initial public offering in 2009, the only guidance given involved the target of approximately 10% growth in sales over the period and an EBIT margin ranging between 8.2% and 9.8% over the medium term. 1 In its 2011 Reference Document, the Group reiterated this objective, noting that its ability to achieve the EBIT margin will rely heavily on that of the Automotive division, which remains itself highly dependent on the exchange rates of purchasing currencies. Each year, the Group prepares a Medium-Term Strategic and Financial Plan (Plan stratégique et financier à Moyen Terme - PMT) with a three-year outlook. The plan, which is prepared at the central level under the responsibility of the Management Board, is presented to the Supervisory Board for review during the fourth quarter of each year. The 2014 PMT covering the period was prepared by the Management Board at its October 21, 2011, meeting and reviewed by the Supervisory Board at its October 27, 2011, meeting. This plan was updated by the Management Board in early September 2012 and reviewed by an adhoc committee 2 of the Supervisory Board on September 28, Context and terms of the Offering On July 26, 2012, PPR and the Japanese company TTC announced that they had signed a sale agreement under which TTC would acquire 29.8% of CFAO s shareholders equity (held by Discodis SAS, a wholly owned subsidiary of PPR) at a price of 37.5 per share (reflecting a value of 2.3 billion for 100% of the equity). The sale of the share block took effect on August 2, Subject to due diligence on CFAO s non-automotive activities, TTC announced its intent to launch a voluntary offer to purchase the balance of CFAO s shares at a price of 37.5 per share. PPR agreed to contribute the balance of its holding, a 12.2% stake. 1 This range corresponds to the margin level observed during the period, before the fee paid to PPR Group and up until the initial public offering. 2 The ad-hoc committee comprises the Chairman and independent members of the Supervisory Board. 14

18 The proposed offering was filed on September 14, Pursuant to articles et seq. of the AMF s General Regulations, TTC made an irrevocable offer to CFAO shareholders to purchase all of their CFAO shares at a price of 37.5 per share. The Offering covers all shares issued by CFAO that will not be held by the Initiator, or 43,191,154 shares (it being understood that the 119,600 treasury shares will not be contributed to the Offering). The Offering does not apply to the shares underlying the 963,875 options to subscribe shares (locked up between now and the Offering closing) nor the 429,104 bonus shares that may not be sold by the beneficiaries between now and the Offering closing. CFAO decided to retain an independent appraiser in accordance with article of the AMF s General Regulations. 1 CFAO s Supervisory Board accepted the principle of the Offering launched by TTC subject to the findings of the independent appraiser s report. The Initiator, which has several activities in Africa, including automotive distribution, indicated in the Offering Memorandum that the acquisition of CFAO is part of an expansion strategy that consists of developing a balanced business portfolio among its three main activities of Mobility, Life & Community and Earth & Resources through an international presence. CFAO s three main activities (Automotive, Europharma and Industries, Equipment and Services) therefore mesh well with its business portfolio. 2. Statement of independence Ricol Lasteyrie has no legal or ownership ties with the companies involved in the Offering or their advisors and has no financial interest in the success of the Offering, nor any claims or liabilities with any of the companies involved in the Offering or any entity controlled by these companies within the meaning of article L of the French Commercial Code. Ricol Lasteyrie has no conflicts of interest with the companies involved in the Offering or their advisors, notably with respect to articles 1.1 to 1.4 of AMF order No of July 25, 2006, related to independent appraisals. The assignment we were given does not require us to interact repeatedly with the institutions presenting the transaction, as defined by article I of the AMF s General Regulations. The list of independent appraisals performed by Ricol Lasteyrie in the past two years appears in Appendix 2, with the presenting institutions for the transactions duly noted. Ricol Lasteyrie attests that it knows of no past, present or future links to people involved in the proposed Offering and their advisors that might compromise its independence or the objectivity of its judgment under its current assignment. 3. Diligence work performed Our diligence work consisted mainly of: - reviewing the terms for the sale by the main shareholder of shares representing 29.8% of CFAO s equity; - implementing a multi-criteria valuation approach for CFAO; - analyzing the factors used to assess the Offering price that appears in the Offering Memorandum. As part of our assignment, we examined accounting and financial information (financial statements, disclosures, etc.) published by the Company for the year ending December 31, Any issuer or offeror carrying out a takeover bid may appoint an independent appraiser who will apply the provisions of this title. 15

19 We also examined the interim financial statements through June 30, 2012, which were subjected to a limited review by the statutory auditors and for which no reservations were made. We performed due diligence work on the legal documentation made available to us for the sole purpose of gathering information that would be useful for our assignment. We met on several occasions with the managers of the target company and its legal and financial advisors as well as with the Initiator and its advisors in order to assess the context of the Offering and to understand the business outlook and financial forecast resulting from it. These conversations focused mainly on: - the context of the acquisition by TTC of the initial 29.8% block; - the Company s business, its changes and medium- and long-term growth outlooks. As the transaction comes after a significant transaction involving the Company s shares, we analyzed the July 25, 2012, protocol agreement (Share Purchase Agreement, hereafter SPA ) signed by the controlling shareholder and the Initiator. We spoke with PPR s Deputy Chief Executive Officer in order to understand the process that led to the sale of its stake in CFAO. We also spoke with the current Chairman and the independent members of CFAO s Supervisory Board. With respect to the peer group and market valuation methods, we reviewed the publicly available information on comparable companies and transactions using our databases. Finally, we reviewed the work of Rothschild & Cie Banque and Crédit Agricole Corporate & Investment Bank, the presenting institutions for the Offering, as presented in the appraisal report of the price offered and summarized in the Initiator s draft Offering Memorandum. In this context we spoke with the banks representatives on several occasions. Our due diligence work is presented in detail in Appendix 5 below. 4. Valuation of CFAO shares In accordance with the provisions of article of the AMF s General Regulations, we conducted our own company valuation. On that point, we should note that the work of the presenting institutions summarized in the Offering Memorandum was submitted to us during our assignment. 4.1 Excluded valuation methods Our work led us to eliminate the following valuation methods: Consolidated book value We don t consider this method as relevant since the value of the Group s intangible assets is only partially reflected on CFAO s consolidated balance sheet. The consolidated book value attributable to equity holders of the parent was million as of June 30, 2012, with 61.5 million shares outstanding, or a value of 9.08 per share. Adjusted book value The adjusted book value method consists of valuing a company s shareholders equity on the basis of the fair value of its assets and liabilities. This method does not seem well suited to CFAO, a distribution company whose assets are mainly its distribution network and contracts with suppliers and inventories. This type of asset is more properly valued using the discounted cash flow method used elsewhere. 16