Advantages of partnership with private equity investors October 2012
Review of VTB Capital Private Equity Brief overview Private Equity Group is a division of VTB Capital, an investment group which is 100%-owned by VTB Group VTB Capital Private Equity is one of the largest long-term investors in Russia: USD 2 billion have been attracted and invested since its establishment in 2008 11 companies under management High return on invested capital One team working on due diligence, portfolio management and exit Offices in Moscow, London, Dubai, Singapore, Hong Kong and New York Strategy Investments in fast-growing companies Partnership with an experienced management team Potential to create value using VTB Capital's expertise Management and reporting transparency Creative approach to deal structuring VTB Capital Private Equity's approach is to partner with fast-growing companies led by strong management teams Slide 2
VTB Capital Private Equity Investment criteria Strong growth Alignment of Deal size potential interests 1 2 3 4 Corporate governance Investment has strong growth potential Long-term investment horizon 3+ years Investment deal size varies from USD 20 million to USD 1 billion Opportunities for attracting leading international investors Aligned view on strategy and business targets Acquisition of a controlling or large minority stake and board representation Growth, deal size, agreed understanding of the company's strategy and approach to corporate governance are the main investment criteria of VTB Capital Private Equity Slide 3
Capital raising as a competitive advantage Russian economy is becoming more competitive Companies target growth through attracting external financing rather than just relying on internal resources Choice of optimal amount of capital raised and the type of financing can become one of the major competitive advantages Especially relevant for those markets undergoing consolidation (e.g. e- commerce) Capital raising for growing Russian companies is not a luxury, but a way to survive and strengthen market positions Slide 4
Capital raising options for growing companies Pros Debt financing Low cost Retaining operational control Tax shield Equity financing IPO Strategic investor Financial investor Publicity (+) Long-term capital Lower funding costs Share option schemes for management Business development High entry price due to synergies Long-term capital Long-term capital Retaining operational control and reducing risk for shareholders Business development, including IPO preparation Flexible approach to deal structuring Contras Collateral Lack of interest in business development Short-term capital Publicity (-) IPO preparation Investor demand volatility Low liquidity Fair entry price Loss of independence Non-financial interest Subsequent sale of interest Fair entry price (to achieve target return for investor) Optimal for companies Credit story and solid reputation Sustainable cash flow Tangible assets Clear-cut equity story Large company Transparency "Right" industry Company where shareholders plan to exit the business High level of synergies Retaining operational control Mid-size and large companies Growth opportunities (organic growth and M&A) IPO in 3-5 years Depending on the development stage and shareholder plans, companies need different mechanisms to finance their growth Slide 5
Key tasks of financial investors Provide financing for growth or provide partial exit for existing shareholders Operational support Improving the company's operational and financial performance is a financial investor's key task Slide 6
How can the VTB Capital Private Equity help portfolio companies? Business development Equity financing / IPO Debt financing Improve Improve corporate corporate governance governance and reporting and reporting Portfolio company M&A support Government relations Interaction with portfolio companies VTB Capital Private Equity brings companies to another level of development Slide 7
VTB Capital Private Equity s capabilities Business development Debt financing Equity financing / IPO M&A support Extensive network of contacts in the Russian business community allows for finding new clients, partners, suppliers and key employees Presence in the markets throughout the world and developed network of contacts outside of Russia Recommendations on optimal capital structure and assessment of approaches to financing on a regular basis Access to debt financing on market terms Experience in bringing companies public through an IPO process, including international IPOs VTB Capital as a shareholder is a mark of quality for capital markets Attracting equity financing, including strategic and international financial investors M&A support: Searching for targets; financial, tax and legal due diligence; deal financing and closing Government relations Improve corporate governance and reporting Interaction with portfolio companies Establishing contacts with government authorities Introducing international best practices in corporate governance Implementing IFRS reporting Developing long-term incentive plans for management Unique access to management of VTB Capital Private Equity portfolio companies We believe that VTB Capital Private Equity has extensive international expertise, network of contacts and a unique ability to optimise capital structure, thereby allowing us to significantly increase value of the companies under management Slide 8
Ongoing Ownership Pre-Transaction Systematic approach to creating value Engage management Joint work by VTB Capital Private Equity and management to design growth strategy Build Value Roadmap Determining key metrics, tasks and timing for each stage of the growth Execution Monitoring Integrating growth stages into the planning and budgeting process Level of VTB Capital's involvement in implementing the development strategy depends on management's preferences and type of challenges company is facing May vary from working in the company to participating in short-term projects Regular progress monitoring is integrated into the company's operating process Alignment of management and shareholders interests, including remuneration-related issues VTB Capital Private Equity has a systematic approach to creating value and may undertake a more active operational role in case invited by the management Slide 9
Examples of operating initiatives Date Company Description Operating initiatives of VTB Capital Private Equity June 2009 Pulkovo Airport Third largest airport in Russia Monitoring project development stages Oct. 2009 / Aug. 2011 Lenta Debt financing, top management selection, long-term incentive scheme for management, analysis of potential M&A, interaction with Largest Russian chain of hypermarkets with $3 billion revenue other portfolio companies, search of sites for new hypermarkets April 2010 EPAM No. 1 offshore software developer in Russia and Eastern Europe, listed on NASDAQ Preparing for IPO on NASDAQ May 2010 Forest Plaza Class A office building in downtown Moscow Operational management of the building, market repositioning, improvement plan development, debt financing December 2010 Brunswick Rail Major railway car operator in Russia Debt financing, analysis of potential M&A White Square/White Debt financing, pre-sale preparation, search for tenants, business May 2011 Gardens A-class office business centre in downtown Moscow process improvement July 2011 News Outdoor Major outdoor advertising operator in Russia and Ukraine Debt financing, long-term incentive scheme for management, analysis of potential M&A, GR April 2012 Western Gold Mining Independent Russian gold mining company June 2012 Burger King Russia A major fast food brand worldwide Leading Russian company in software development and IPO preparation, business process improvement, GR Top management selection, search of sites for new points of sale, improvement of financial and management reporting, interaction with other portfolio companies, business process improvement June 2012 Luxoft export of IT-services IPO preparation VTB Capital Private Equity has invested and attracted USD 2 billion and managed 11 portfolio companies since its establishment in 2008 Slide 10
VTB Capital Private Equity s team Investment experience Over 130 years of combined experience and US$ 5bn invested in over 70 transactions International experience Significant international experience in global markets and access to the best Western management resources and know-how Successful adaptation of international best practices to Russian environment Operational value-add Team s ability to implement in-depth operational improvements to empower companies seeking to strengthen market positions Exit Sale to a strategic investor, restructuring and IPO of companies under management VTB Capital Private Equity has an experienced team committed to grow value of assets under management Slide 11
Thank you! Evgeny Kudryavtsev VTB Capital Tel.: +7 (495) 287 6894 E-mail: Evgeny.Koudryavtsev@vtbcapital.com