June 2018 IMC: Merger with Sapore
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IMC + Sapore: Key Takeaways On June 15 th, 2018, IMC signed a Association Agreement with Sapore s shareholders for a potential merger of both companies 1 Creation of a leading company in the food services and retail market with R$3.1 billion in revenues, counting with over 1.4k points of sale spread across 5 countries 2 Larger and diversified platform in the food service market 3 Relevant G&A and COGS synergies 4 Potential benefits from best practices implementation 5 Cross-selling opportunities 3
Sapore at a Glance Founded by Daniel Mendez in Campinas in 1992, Sapore became one of the largest Corporate Food Service companies in Brazil, supplying ~1.2mm meals per day in its more than 1,100 Client Restaurants Company Description Shareholder Structure Company Description Founded in 1992 by Daniel Mendez in Campinas, São Paulo First Brazilian multinational in the Corporate Food Service segment Holds a diversified portfolio of well recognized clients Daniel Mendez 100% Largest Corporate Food Service company in Brazil Company also operates an Events Division, that was recently responsible for the food operations in the World Cup and the Olympics Abanzai Representações SA Presence Across 3 Countries Current strategy is focused in Corporate Restaurants in clients sites and in B2C business lines such as Events Division and the Retail Division 100% 2017 Net Revenues of ~R$1.6bn Sapore Recent Market Share Increase 1......Consolidated its Leadership Position in the Segment 1 +2.8 p.p 10.2% 1º In the Corporate Food Service Market 9.8% 10.2% 9.8% 9.6% 7.4% 7.7% 1.4% 1.3% 1.0% 0.9% 0.6% 0.5% 0.4% 2014 2015 2016 2017 E Sapore gained 2.8 p.p in market share from 2014 to 2017, being well positioned to capture the upside of a segment that is starting to recover from the country s recent economic crisis Note: 1 Market share based on revenues, according to Sapore s estimates 2 3 4 5 6 7 8 9 10 Sapore is the leader in the Brazilian Corporate Food Service market even though it started operating in the segment several years after its main competitors 4
Sapore: Leadership Position in the Corporate Food Service Market Over the past 2 years, Sapore was able to greatly increase its market share in the segment, consolidating itself as the largest Company in the Corporate Food Service Segment Number of Meals per Day (#mm) Number of Client Restaurants (#) Number of Employees (#) 1.2 million Meals per Day 1,061 Client Restaurants 14,293 Employees Note: 1 Does not consider effects from the 2016 Olympics 5
Combined Company: Main Highlights Combination of the two Companies would result in the creation of a unique player in the Food Service Segment in Brazil and LatAm with R$3.1 billion in revenues Main Transaction Merits Geographic Footprint Leadership and Scale Leading company in the Brazilian food services market Combined revenues of more than R$3 billion +1,400 points of sale in 5 countries Unique Business Model Partner of Choice Outstanding Value Creation Retail Restaurants and Corporate Food Service operations with strong brands, as well as expansion into Events Segment Vehicle of choice for international food retail brands to explore the region Greater bargaining power of combined company, optimized kitchen operations, logistics know-how, cross-selling and expansion opportunities Relevant Costs and Expenses synergies IMC Operations Sapore Operations IMC and Sapore Operations Combined Financials Summary¹ 2017 2017 Pro-forma after VTO Combined Net Revenues 3,059.5-1,495-1,565 - Combined EBITDA 1 224.8-120.8-104 - Combined EBITDA Margin 7.3% - 8.1% - 6.6% - Combined Net Debt 96 483 22-74 483 Combined Net Debt / EBITDA 0.4x 2.2x 1 0.2x - 0.7x - Source: Companies Note: 1 Does not consider any potential synergies 6
Combined Company: Considerations on Synergies A combination has the potential to generate significant synergies Sinergies Rationale Food cost reduction due to contract terms optimization with main suppliers Cost Synergies Centralization of procurement Purchase intelligence / menu planning Gains in logistics and distribution Labor Costs Direct labor cost reduction through processes optimization in kitchen s operations Lower back of the house staff (pre-preparation done centrally and/or with suppliers) G&A Expenses Streamlining of NewCo s administrative structure, closing redundant structures of both companies Other G&A expenses reduction Expansion speed-up: team and supply-chain optimized Additional Potential Opportunities IMC s brands/restaurants where Sapore Operates Sapore s Coporate Catering where IMC Operates Menu improvements and better pricing due to purchase intelligence Source: Companies 7
Transaction Overview Step 1: Voluntary Tender Offer ( VTO ) Step 2: Merger of Sapore into IMC Free-float Sapore s Shareholders Free Float 25% 41.79% 58.21%¹ 75% Sapore will launch a voluntary tender offer to acquire up to 25% of IMC, equivalent to 41.632.900 shares Following the VTO, Sapore will be merged into IMC at an exchange ratio of 65% IMC / 35% Sapore (excluding the shares acquired in the VTO) Voluntary Tender Offer will be launched at a price of R$9.30 / share Upon conclusion of the transaction, Sapore s controlling shareholder could end with a final stake of up to 41.79% of the combined company Sapore or its controlling shareholder will leverage the company to pursue VTO (R$387 mm) If Sapore doesn t acquire the full amount on the VTO (25%), IMC will do a capital reduction in order for Sapore to reach the envisaged stake (41.79%) Note: 1 Stake considering 100% adherence on the VTO 8
Implied Valuation Exchange Ratio Tender Offer Post Tender Offer 3 Exchange Ratio (%) 65.0% 35.0% % of NewCo 58.2% 41.8% Price per Share 9.30 1 9.30 Price per Share 9.30 1 9.30 x x x x # of Shares (mm) 166.5 89.7 (41.6) 3 # of shares # of Shares (mm) 124.9 89.7 Implied Equity Value (R$ mm) = = 1,548.7 833.9 + + (387.2) R$ mm Implied Equity Value (R$ mm) = = 1,161.6 833.9 + + Net Debt 17A 2 30.0 74.4 = = +387.2 R$ mm Net Debt 17A 2 417.1 74.4 = = Implied EV (R$ mm) 1,578.7 908.2 Implied EV (R$ mm) 1,578.7 908.2 EV/EBITDA 17A 13.1x 8.7x EV/EBITDA 17A 13.1x 8.7x Notes: 1 R$9.30/share implying a premium of 17% to the 60 day VWAP (VWAP prior to media publishing regarding the merger, on June 12 th, 2018) 2 Net Debt calculation includes minorities 3 Assumes that IMC re-buys and cancels the shares acquired in the tender offer 9
Governance Overview NewCo s corporate governance will follow the Novo Mercado standards Board of Directors of the NewCo IMC Indication IMC Indication IMC Indication Daniel Mendez Chairmen of the Board Sapore Indication Sapore Indication Sapore Indication Main Considerations Corporate governance according to the Novo Mercado standards, the highest in the market Newton Maia to continue as CEO of the NewCo IMC Management to remain in the NewCo Voting rights limited to 15% of total outstanding shares for a period of 36 months 10
Next Steps Transaction should be completed in 90-120 days Timetable Signature of Association Agreement - Completed (D) Confirmatory Due Diligence - 50 days - Pending Call IMC and Sapore Shareholders Meeting and Release VTO "Edital" - D+60 - Pending IMC and Sapore Shareholders Meeting - D+90 - Pending VTO Auction - D+95 - Pending CADE and Others CADE revision process should occur in parallel to confirmatory due diligence process The transaction must be submitted to CADE for approval, which should be evaluated with the other legal advisors and may change the deadlines set in this schedule Itaú BBA acted as IMC's exclusive financial advisor and Riza Capital as Sapore s financial advisor 11
APPENDIX Additional Information
IMC: Additional Information Relevant company in the food service business with presence in Brazil, the USA, Colombia and Panama Geographic Footprint Company Highlights 2017 (R$M) (as of March, 2018) 237 Points of Sale (R$ million %) 8.2% margin Brasil 170 EUA 22 1,495 121 48% cash conversion Colombia 24 58 Panama 21 Catering Operations 14 Net Revenue Adj. EBITDA Net Revenues OCF Caribbean1 13% 30% Roads EUA 25% Brazil: 62% 16% 16% Malls AIR Note: 1 Caribbean operations are composed of Colombia and Panama 13
IMC: Additional Information (Cont d) IMC has a portfolio of traditional brands with traditional history among consumers Roads Frango Assado Malls 93 stores Airports 52 stores Viena Coffee Olive Garden Batata Inglesa Hospitals Guarulhos Brasilia Confins 25 stores 41 stores 24 stores 2 stores 16 stores 10 stores 27 stores 11 stores 14 stores Express Delicatessen Snacks 251 stores US 22 stores Panama 21 stores Colombia 24 stores Catering 14 Airports Margaritaville Landshark Others Malls Airports Malls Airports Malls Airports 16 stores 3 stores 3 stores 8 stores 13 stores 15 stores 9 stores 6 stores 8 stores Others Others Source: Company 14
Sapore: Additional Information Sapore consolidated itself as the largest player in the Corporate Food Service Segment in Brazil, being present in 3 countries and having plans to further expand its international presence in the near future Key Numbers Geographic footprint Corporate Restaurants + 1.2 mm Meals / day +1,100 Client restaurants +25 Years of experience +15 thousand Employees +450 Clients 95% Client retention Events Main Events in the Past R$24,1 mm Events Segment Revenues in 2017 Current Clients Sapore Current Operations 15
Next Steps Tentative Timeline Transaction should be completed in 120 160 days Acts performed by IMC Acts performed by Sapore/Abanzai Acts performed by both Signing of Association Agreement Material Fact announcing the Deal Finalization of the Definitive Documents (to be negotiated and elaborated during due diligence) IMC s Shareholders Meeting Tender Offer Liquidation Period for opposition by IMC creditors Conclusion of the Transaction with the implementation of the Merger and issuance of new shares by IMC D+0 D+5 D+50 D+60 D+90 D+95 D+98 D+100 D+160 Legal and financial due diligence Signing of the Merger Protocol Call IMC s Shareholders Meeting Tender Offer Auction IMC Capital Reduction Sapore s Shareholders Meeting to approve the merger Public Notice of the Tender Offer The dates indicated herein are tentative and also be subject to changes due to the implementation of certain conditions, legal or regulatory terms and procedures. The transaction must be submitted to CADE (Administrative Council for Economic Defense) for approval, which may change the deadlines set in this schedule. 16