M&A Index Poland Report, 2Q 2016 - Stabilization of the M&A market in Poland

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Published on July 7, 2016


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1. M&A Index Poland 2Q 2016 Prepared by Navigator Capital & FORDATA www.fordata.pl/en Experts’ comments to the 20 edition of the report can be found on the website: blog.fordata.pl www.en.navigatorcapital.pl

2. Introduction The second quarter of 2016 on Polish M&A market was better than the previous one. During this period, there were completed 53 transactions, which was 7 more than in the previous quarter. This means that the first half of 2016 in Poland was quite intensive and closed with 99 transactions, comparing to 95 completed in the first half of 2015. M&A Index Poland, 2Q 2016 by Navigator Capital & FORDATA | July 2016 Selected transactions Total number of transactions* 53 (2Q 2016) The largest transaction** EUR 276m (Acquisition of Bank BPH by Alior Bank) * based on public data ** among transactions with disclosed prices About the report: The M&A Index Poland report is a position that has become a permanent fixture in the calendar of the industry summaries in Poland. The reports are prepared quarterly by a consul- ting firm Navigator Capital and FORDATA, a leader in the field of IT solutions which support M&A transactions. These reports are created to monitor the dynamics of Polish M&A market and to demon- strate the most interesting transactions. For the past nine editions we are also focusing on the frequency of use of the Virtual Data Room during M&A processes in Poland. (14th April) Innova Capital, a private equity fund, has recently purchased 48% stake in Netsprint Group from Dirlango, company controlled by Łukasz Wejchert and Maciej Żak. Netsprint is the leader of the technological marketing and big data markets. The Group includes two companies, Netsprint and LeadR, which specialize in online marketing solutions. 48% of Netsprints’ marketing revenues come from mobile marketing. Innova Capital should provide funding necessary to accelerate new products’ development, improve sales and allow expansion into foreign markets and make possible Netsprint Group to acquire other companies. TARGET BIDDER SELLER VALUE [EUR] Grupa Netsprint Innova Capital Dirlango Undisclosed (1st April) Alior Bank agreed to purchase 87.2% stake in the core business of Bank BPH from GE Capital Group for a consideration of ca. EUR 290m. Alior will pay for BPH with new shares, which will be issued with pre-emptive rights for the current shareholders. PZU – the Alior’s largest shareholder announced that it will acquire an amount of shares proportional to their current engagement in the Bank. After the deal, Alior Bank’s asset base will amount to ca. EUR 13.6b which will rank it 9th among the Polish banks. The number of customers will rise to 3.3 million. The Bank expects that the yearly synergy effect will amount to EUR 68m on a pre-tax basis. TARGET BIDDER SELLER VALUE [EUR] Bank BPH Alior Bank GE Capital 276 m (6th April) Groclin, WSE-listed car parts and accessories manufacturer agreed to purchase 51% stake in CADM Automotive. The company paid EUR 2.3m for the majority stake. Groclin plans to further increase the engagement in the company and intends to acquire 100% of CADM Automotive’s shares. After the financial statement for 2017 is approved, the second phase of the deal will take place. The total value of the deal will amount to no less than EUR 4.7m. This deal will increase Groclin’s competences in R&D activities and expand the company’s product mix. Groclin aims at expanding at a two-digit yearly rate. TARGET BIDDER SELLER VALUE [EUR] CADM Automotive Groclin Private investor Ca. 4.7 m

3. By sector Transactions with the participation of Polish companies grouped by sectors (by number of transactions) SELLER (%) TARGET (%) BIDDER (%) M&A Index Poland, 2Q 2016 by Navigator Capital & FORDATA | July 2016 (28th April) WSE-listed pastry manufacturer Colian Holding acquired Elizabeth Shaw Ltd, a portfolio company of a private equity fund Imagine Capital. Elizabeth Shaw is a manufac- turer of chocolate products, which are sold under Elizabeth Shaw and Famous Names brands. The value of the deal was equal to EUR 3m, 2.25m of which was paid in cash. The rest of the amount was blocked on the escrow for a period of 18 months and should serve as a collateral for any claims. This transaction is in line with Colian Holding’s strategy of expansion into foreign markets. TARGET BIDDER SELLER VALUE [EUR] Elizabeth Shaw Ltd Colian Holding Imagine Capital Ca. 3 m (6th May) Ineos Enterprises, a part of the Swiss Group Ineos, agreed to sell its subsidiary, Ineos Styrenics to WSE-listed Synthos S.A. for a consideration of EUR 80m. Ineos Styrenics operates in Great Britain and is the world’s largest manufacturer of expanded polystyrene (EPS). Synthos is the largest European producer of synthetic rubbers and one of the largest producers of EPS. Ineos Styrenics has 3 manufacturing plants, two of which are located in France and one in the Netherlands. The company currently employs ca. 250 people. Its EPS manufacturing capacity of 310 thousands of tons represents 20% of the European production capacity. TARGET BIDDER SELLER VALUE [EUR] Ineos Styrenics Synthos S.A. Ineos Enterprises 80 m (3rd June) Meat processing company and a part of Bruno Tassi Group, Peklimar has submitted an application to Polish Antimonopoly Authorities (Office of Competition and Consumer Protection) due to the acquisition of Zakłady Mięsne Unimięs. Bruno Tassi Group plans to take over Unimięs by purchasing 100% of its shares. This deal will increase both companies’ distribution capacity and expand their product range. Both companies mostly operate in Poland with only a small share of revenue derived from exports. In 2014 Peklimar generated revenue of EUR 60m and net profit of EUR 2m. TARGET BIDDER SELLER VALUE [EUR] Unimięs Peklimar - Undisclosed INDUSTRY MEDIA/IT/TELECOM FINANCIAL SERVICES ENERGY FINANCIAL SERVICES MEDIA/IT/TELECOM INDUSTRY PE/VC PRIVATE INVESTOR FINANCIAL SERVICES PE/VC REAL ESTATE 19% 17% 11% 8% 19% 17% 9% 9% 26% 17% 13% 9%

4. Authorised Adviser Business Partners Navigator Capital Navigator Capital along with Dom Maklerski Navigator (Navigator Brokerage House) is the leading independent financial adviser, specializing in mergers and acquisitions and public and private issues of stocks and bonds. During the last ten years Navigator has completed over 60 transactions. Navigator Partners’ market experience includes deals worth over PLN 6b (EUR 1.5b). Through cooperation with international network of advisory firms associated in the Pandion Partners, Navigator Capital effectively handles international transactions. Navigator Capital and Dom Maklerski Navigator create a strategic alliance with Biuro Maklerskie Banku BPH (Brokerage Office of Bank BPH) concerning services related to shares (IPO & SPO) and debt instruments (bonds) public issues. FORDATA FORDATA is a pioneer on the Polish capital market. Based on Virtual Data Room technology, we support our clients in managing documents and communica- tion during complex transactional processes. We support the largest M&A, IPO transactions, private equity investments, restructurings, projects associated with obtaining financing and privatizations in Poland and other countries of Central and Eastern Europe. FORDATA systems increased safety and efficiency of hundreds of different types of transactions with a total value of over PLN 32 billion. FORDATA services are used by the industry leaders in Poland and abroad, including largest advisory companies, banks, legal advisors or Private Equity/Venture Capital funds, ie. Enterprise Investors, Enea SA, Home.pl, Grupa LOTOS, PZU SA, Grant Thornton, NFI Empik, ZELMER, Bank DNB, BOŚ Bank, Polimex Mostostal, Budimex, DM PKO Banku Polskiego, Deloitte Advisory, EY, KPMG Advisory, JSW, HAITONG and many others. Contact Jan Kospin Director e: jan.kospin@navigatorcapital.pl t: +48 22 202 68 80 Navigator Capital S.A. ul. Twarda 18, 00-105 Warszawa, Poland t: +48 22 630 83 33 f: +48 22 630 83 30 e: biuro@navigatorcapital.pl www.en.navigatorcapital.pl Alicja Kukla-Kowalska Key Account Manager e: alicja.kukla@fordata.pl t: +48 533 354 054 Fordata Sp. z o.o. Taczaka 24, 61-819 Poznań, Poland t: +48 61 660 15 10 e: biuro@fordata.pl www.fordata.pl/en M&A Index Poland, 2Q 2016 by Navigator Capital & FORDATA | July 2016 (16th June) Listed Polish construction group Erbud sold 100% stake in Budlex to Holdinvest1, Poland-based investment holding company, for a consideration of EUR 10m. Prior to the transaction, Budlex will pay a EUR 3.8m dividend to Erbud. The capital raised from the sale of Budlex will enable Erbud to strengthen its presence in its strategic markets, i.e. volume construction, energy sector and services and engineering for the industry. Navigator Capital was the financial adviser for Erbud. TARGET BIDDER SELLER VALUE [EUR] Budlex Holdinvest 1 Erbud 10m (7th June) Media Development Investment Fund, a non-profit investment fund financially supported by George Soros, has acquired minority stake in Agora, the publisher of Gazeta Wyborcza. The fund purchased 11.22% of shares which represent 8.26% of votes in the Annual General Meeting. The value of the transaction has not been disclosed but the purchased block of shares is valued by the market at EUR 15.5m. Nationale Nederlanden PTE S.A. announced about the reduction of its share in the total number of votes of Agora to less than 10%. Media Development Investment Fund operates since 1995 and since 1996 has invested about USD 134m in 108 businesses in 38 countries. TARGET BIDDER SELLER VALUE [EUR] Agora Media Development Investment Fund - 15.5m (8th June) Wirtualna Polska Group (WP) has agreed to acquire 75% stake in Nocowanie.pl, an accommodation booking website. The value of the deal amounted to EUR 5m. This is yet another acquisition made by the WP Group on the travel e-commerce market. In December 2015 the Company acquired Enovatis, an owner of Wakacje.pl, Easygo.pl and Wypoczynek.pl, portals which offer holidays abroad. According to the CEO of Wirtualna Polska, Jacek Świderski, e-commerce grows faster than the online advertising market. It is also less vulnerable to changes in the economic conditions. Furthermore, Poles tend to get richer which and spend more on travels and thus on hotels. Nocowanie.pl is the largest accommodation booking website on the Polish market. The company recorded revenues of EUR 1.8m and EBITDA of EUR 0.8m over the last 12 months ended April 2016. Nocowanie.pl Grupa Wirtualna Polska - 5m TARGET BIDDER SELLER VALUE [EUR]

5. Alicja Kukla-Kowalska Key Account Manager, FORDATA sp. z o.o. The results of the second quarter of 2016 suggest a stabilisation on the Polish M&A market. From April to June 53 transactions were closed, 7 more than in the previous quarter and only three less than in the second quarter of 2015. On the contrary, in the first half of this year, the global M&A market recorded significant declines, both in terms of quantity and the value of the transaction. The situation is similar in Western Europe. In the Polish market summary, investors were mainly representing financial services (19%) and Media/IT/Telecom industry (17%). The most popular targets were companies from Media/IT/Telecommunications (19%) and industrial sector (17%). Private investors (26%) were dominant on the sell-side, while PE/VC funds were selling much less than in Q1 (in Q2 PE/VC represent only 13% of the sellers). Since the beginning of 2015, the decline in the value of the transactions has continued. Available data shows that among transactions with disclosed price only 2 exceeded value of EUR 100 million. On the other hand in the group of transactions with value lower than PLN 100 million, we observe an increase in the number of transac- tions. In Q2 2016 - 19were recorded. In Poland the most valuable transaction was the acquisition of 87.2% shares of Bank BPH SA by Alior Bank SA GE Capital for PLN 1.225 billion (EUR 276 million). To compare, in Q2 last year the largest acquisition of a controlling stake of Alior Bank by PZU was worth EUR 396 million. On the international scene the biggest transaction in Q2 2016 was the acquisition of Syngenta by ChemChina for USD 43 billion. Poland is one of the strongest capital markets in the region with the record number of Sellers. Recent transactions indicate that it will remain a leader among CEE marketplaces and maintain upward trend in 2016. There is a growing trend among leading Polish companies who plan foreign expansion, in particular to other EU countries. The greater involvement of private equity funds and strategic investors in the commercial real estate sector is visible - especially in warehouses and offices. We expect that 2016 will also prove an increase in the number of transactions in the sector of Telecommunications, IT and healthcare. Using the technology of the Virtual Data Room, which simplifies the flow of confidential documents and stream- lines communication between parties of transaction, has become synonymous with professional approach to the implementation of transactional processes. Not only do transactional advisors benefit from this technology, but also more and more providers as well as private investors, who care on maintaining information security. Our customers acknowledge, that thanks to this tool transactions close quicker. Available data shows that in this quarter the VDR was used in 8 transactions. Market observation can lead to an assumption that the number of transactions arranged with the VDR was at least twice higher, but unfortunately not all companies decided to inform the market about that fact. Experts' comments M&A Index Poland, 2Q 2016 by Navigator Capital & FORDATA | July 2016

6. Jan Kospin Director Navigator Capital S.A. Experts' comments M&A Index Poland, 2Q 2016 by Navigator Capital & FORDATA | July 2016 The second quarter of 2016 on Polish M&A market was better than the previous one. During this period, there were completed 53 transactions, which was 7 more than in the previous quarter. This means that the first half of 2016 in Poland was quite intensive and closed with 99 transactions, comparing to 95 completed in the first half of 2015. The biggest transaction in the second quarter of 2016 was an acquisition of 87,2% stake in the core business of BPH Bank (without mortgage credits and BPH TFI SA) by Alior Bank SA from GE Capital Group for a consideration of PLN 1.225m. This is another splitting of BPH Bank that was partly acquired by Pekao Bank in 2007. Then, a full takeover was blocked by polish antimonopoly authorities – Office of Competition and Consumer Protection. After the deal, Alior Bank’s assets base will amount to ca. PLN 60b which will rank it 9th among the Polish banks. The transaction is another step on way to make banks in Poland more Polish-owned again. Let us remind that one year ago state-owned PZU bought 26% stake in Alior Bank. In the last quarter of 2016, one of the most interesting territorially transaction completed by polish entity was the full acquisition of the British supplier of chocolate products - the Elizabeth Shaw Limited Company by listed on the Warsaw Stock Exchange Colian Holding SA from the Norwegian fund Imagine Capital AS. Transaction price amounted to GBP 2.25m. The target’s side (acquired companies) was again dominated by companies from media/IT/telecom sector and industrial one’s. On the bidder’s side, the most active were financial services and media/IT/telecom compa- nies. Among sellers, in the lead were private investors. In the last quarter of 2016, the number one topic on the European stage was the referendum in the UK regarding it’s exit from the EU. A result of voting was surprising, even for the bookmakers. Eventually, 52% of voters were in favor of Brexit, which resulted in strong declines on the stock exchanges around the world. Since the beginning of April 2016, WIG index lost 200 points and reached the outcome worse than, among others, the German DAX. In the same period, PLN depreciated against EUR and USD. The impact on that depreciation had an outflow of foreign capital in relation to a perceived deterioration of the investment climate in Poland and an anxiety associated with Brexit. On the one hand, because of the Brexit it is possible that the European economies will slow down, which may negatively influence on the number of the M&A transactions in the coming months. On the other hand, the outflow of foreign capital and the declining activity of investors on the WSE cause the decrease in market valuations of the companies – this could activate the transactional demand from bidders (particularly in case of the companies and investment funds with substantial amount of cash). Moreover, please also note that investors from developing economies, from regions such as South America, Southeast Asia and the RSA have different sensibility to regulatory risk than the investors who have been investing in Poland until now like the USA or the EU’s countries.

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