AssiDomän-Carnegie case study.PPT

1 May 2023 CARNEGIE INVESTMENT BANKING 1

III Case Study – AssiDomän


Problem with strategic focus– Insufficient market shares except within the

Forestry-division– SEK 24 billion invested in tangible assets

and acquisitions without acceptable returns Operational problems

– Failure to meet earnings expectations– Low morale within the organization – lack of

self-confidence Organizational changes during the

autumn of 1998 made analysis more difficult and reduced transparency

Gradually falling confidence in management and board

Falling share price and low valuation

Loss of confidence – The stock

market– Potential

merger partners

Case Study – AssiDomänBackground – Strategy Reached an Impasse 1997–1999


Stock Performance Since the Flotation 1994

0

50

100

150

200

250

300

Apr-9

4Jul

-94Oct-

94Jan

-95Ap

r-95Jul

-95Oct-

95Jan

-96Apr-

96Jul

-96Oct-

96Jan

-97Apr-

97Jul

-97Oct-

97Jan

-98Apr-

98Jul

-98Oct-

98Jan

-99Ap

r-99Jul-

99Oct-

99Jan

-00Apr-

00Jul-

00Oct-

00Jan

-01Apr-

01Jul-

01Oct-

01

Pric

e

ASSIDOMAN W:ASDO SK VECKANS AFFARER PULP &PAPER - PRICE INDEX

Reorganization and increased

uncertainty

Case Study – AssiDomän

Bad investment in Russia is revealed

Ahlgren resigns


The Principal Owner Takes Action New board was nominated in May 1999 New CEO takes charge August 1, 1999 Objective to develop and accomplish new

strategy Considerable value potential

– Hidden values in assets– Operational turn-around

Time is precious – constant acquisition threat and unsatisfied owners

Decision to engage one financial and strategic advisor

Carnegie presents a preliminary analysis and an action plan

Objectives– Shareholder

value focus– Recover

market confidence

Swift and coordinated action of vital importance



Estimate of Value October 1, 1999

In October 1999, Carnegie was mandated by the Board to estimate potential value which could be created through restructuring AssiDomän. The potential value was estimated to SEK 263–313 per share (before redemption), depending on the outcome of the considered transactions. The final outcome was within this range

0

1,000

2,000

3,000

4,000

5,000

Forestry Timber &Wood

Products

Carton-board

Container-board/

Corrugated

KraftProducts/

Sacks

BarrierCoating

Parentcompany

(incl. other)

TotalEnterprise

value

MEUR263 SEK/share

0

1,000

2,000

3,000

4,000

5,000


Products

Carton-board

Container-board/

Corrugated

KraftProducts/

Sacks

BarrierCoating

Parentcompany

(incl. other)

TotalEnterprise

value

MEUR

0

1,000

2,000

3,000

4,000

5,000


Products

Carton-board

Container-board/

Corrugated

KraftProducts/

Sacks

BarrierCoating

Parentcompany

(incl. other)

TotalEnterprise

value

MEUR263 SEK/share263 SEK/share

0

1,000

2,000

3,000

4,000

5,000

6,000


Products

Carton-board

Container-board/

Corrugated

KraftProducts/

Sacks

BarrierCoating

Parentcompany

(incl. other)

TotalEnterprise

value

MEUR

313 SEK/share

0

1,000

2,000

3,000

4,000

5,000

6,000


Products

Carton-board

Container-board/

Corrugated

KraftProducts/

Sacks

BarrierCoating

Parentcompany

(incl. other)

TotalEnterprise

value

MEUR

0

1,000

2,000

3,000

4,000

5,000

6,000


Products

Carton-board

Container-board/

Corrugated

KraftProducts/

Sacks

BarrierCoating

Parentcompany

(incl. other)

TotalEnterprise

value

MEUR

313 SEK/share313 SEK/share


Value ”Stand-alone” Value Including Synergies


Broad Mandate – Financial and Strategic Focus

One financial and strategic advisor with a comprehensive view crucial for swift and coordinated actions


Project management and

discussion partner

Strategic analysis and

valuation

Transactions execution

Capitalstructure

Communication

Shareholder focus Recover market

confidence

Board

Management

Market


Scope of the Mandate Approximately 15 persons from Carnegie Investment Banking Approximately 25 transaction processes, leading to 8 transactions

– Divestment– Merger– Defence– Acquisition– IPO/dividend– Decapitalization– Incentive program for management

Management– Continuous and close dialogs– Strategic analysis and valuation based on a value-approach, in cooperation with management– Execution of transactions and decapitalization including all types of M&A and ECM situations– Continuous evaluation of different alternatives to secure value-maximizing decisions– Stock market related communication

Board– Production of material for the Board (decision-making/information)– Attendance / participation in all the Board meetings from October 1999– Contacts/collaboration with Board members

International perspective



0

50

100

150

200

250

300

May-99 Aug-99 Nov-99 Feb-00 May-00 Aug-00 Nov-00 Feb-01 May-01 Aug-01 Nov-01

Pric

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ASSIDOMAN W:ASDO SK VECKANS AFFARER PULP & PAPER - PRICE INDEX

Share Price Development since Nomination of the New BoardCase Study – AssiDomän

Frantschach-transaction

Analysis Redemption Iis announced

Billerud

Kappa-transactionand redemption II

Sveaskog’sbid

Billerudlisted


Order is Important 1(2) Started with the perceived most difficult transactions: Sacks, Dynäs and Sepap

– Few buyers– Low profitability and weak outlook– Succeeded to receive high cash bid – beat market expectations– Barrier Coating was also included and well priced

The entire amount from the Frantschach transaction was distributed to the shareholders – confidence building

Frövi was viewed as a simpler divestment and was next on the agenda– Frövi’s operations developed considerably worse than planned, precluding making positive

forecasts credible– Negative share price development in spring 2000 had a negative impact on potential buyers– After a lengthy period the process was discontinued– Tough decision that created market confidence – ”nothing shall be sold cheap here”

In fall 2000 Billerud was recreated through the merger of the AssiDomän’s paper plant Karlsborg and Skärblacka and StoraEnso’s Gruvön

– Very successful packaging of three plants which were perceived as underperformers– Complicated exit mechanism which resulted in a successful listing in November 2001



Order is Important 2(2) A transaction including AssiDomän Packaging – the largest asset after forestry in terms

of value – was consciously executed late in the restructuring process– Desire to wait until after the expected turnaround of the business– Desire to make a transaction from a stronger position– A transaction was prepared carefully – data room, management presentations etc.– After a number of discussions on alternative structures a decision concerning a controlled auction

process with a tight time schedule was taken – Attractive divestment price, paid in cash just before the recession in spring

Substantially more than the entire consideration was planned to be distributed to the shareholders as a result of a capital structure adapted to a pure forestry company

The government's bid came unexpected (timing-wise)



Outcome of AssiDomän’s Time as a Listed Company


The internal rate of return on investment in AssiDomän from the listing to the government’s bid amounts to

15,7 percent, based on Billerud’s share price of SEK 71

Time of Number of Change in the Payment PaymentPayment Event shares number of shares flow/share flow, total

1994 Listing 1,000 -138.00 -138.001995 Dividend 1994 1,000 3.25 3.251996 Dividend 1995 1,000 5.00 5.001997 Dividend 1996 1,000 5,25 5,251998 Dividend 1997 2,000 5,50 5,501999 Dividend 1998 1,000 5,50 5,501999 Sveaskog 1,000 0,300 0,00 0,002000 Dividend 1999 1,300 6,00 7,802001 Redemption 1,300 -0.260 38,00 49,402001 Dividend 2000 1,040 6,50 6,762001 The govtnment's bid 1,040 -1.040 294,66 306,45

"Payment flow, total" regards flow per original AssiDomän share

Billerud's share price SEK 71.00

Documents

AssiDomän-Carnegie case study.PPT