GEORGE WIMPEY PLC Acquisition of McAlpine Homes 14 August 2001.
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Transcript of GEORGE WIMPEY PLC Acquisition of McAlpine Homes 14 August 2001.
GEORGE WIMPEY PLC
Acquisition of McAlpine Homes
14 August 2001
Programme
• Introduction John Robinson
• Acquisition benefits andtransaction structure Peter Johnson
• Price, financing andstructure Andrew Carr-Locke
• Integration plan Keith Cushen
• Concluding comments John Robinson
Disclaimer Any statement regarding earnings enhancement contained in this presentation does not constitute a
profit forecast and should not be interpreted to mean that the earnings per share for any period
following the acquisition will necessarily be greater than that for the relevant preceding financial period.
No reliance may be placed for any purpose on the information contained in this presentation or on its
completeness. No representation or warranty by any person, express or implied, is made or given as
to the accuracy of the information or opinions contained in this presentation and liability is excluded for
any such information or opinions.
This presentation does not constitute or form part of any offer or invitation to purchase or subscribe, or
any solicitation of any offer or invitation to purchase or subscribe, nor does it constitute or form part of
any offer or invitation to sell or issue, or any solicitation of any offer or invitation to sell or issue, any
securities, nor should this presentation or any part of it form the basis of what will be relied on in
connection with any contract therefor.
Acquisition benefits and transaction structure
Peter Johnson
Acquisition of McAlpine Homes• Acquisition price of £461 m represents a premium
of ~9% to net asset value• Deferred consideration arrangement allows Wimpey
continuing operational flexibility• Private transaction has allowed Wimpey to perform
full due diligence and plan for integration• Accelerates the process of re-focussing Wimpey on
higher priced markets and products• Earnings enhancing from completion*
*this statement should not be interpreted to mean that future earnings per share of Wimpey following the proposed acquisition will necessarily be higher than historical earnings per share
Agenda
• Background to the proposed acquisition• Rationale for the acquisition• Benefits of the acquisition
° strategic benefits° financial benefits° risk management
• Summary business plan• The impact on Wimpey
Background to the proposed acquisition
Commitment to deliver shareholder value
• New executive team in last nine months• Balances experience and new ideas• This team has:
° established a new business culture° delivered on first stage of improvement plan° achieved momentum for change
Background to the proposed acquisition
• Stage 1 - integrate existing UK businesses Deliver £20 m overhead savings: achieved
• Stage 2 - gain benefits of scaleDeliver £15 m of build cost savings: in hand
• Stage 3 - shift business mix towards higher priced markets and products: begun
McAlpine Homes enables Wimpey to accelerate its progress and secure immediate
financial benefits
Rationale for the proposedacquisition
An attractive opportunity
• Accelerates implementation of Wimpey’s strategy to improve margins in UK housing
• Gives immediate positive benefit to margins and earnings per share
• Acquire better located landbank in one-step at a sensible price
• Involves low execution risk
Summary business plan
• Combined business to run at reduced number of annual completions
• McAlpine businesses in Hampshire and the North-West to form new Wimpey regions
• Cumbria unlikely to be retained• Other businesses to be fully integrated into
existing Wimpey regions• Solihull Head Office to be closed• Reduced land spend over next twelve months
Strategic benefits
Improves product and geographic mix
• Higher average selling price: McAlpine £145k* vs Wimpey £118k
• Higher future selling prices on current landbank: McAlpine ~£160k vs Wimpey ~£130k
• Improved regional mix: McAlpine 52% of sales in south vs Wimpey 34%
• Provides presence in good primary locations
*excluding Cumbria
Strategic benefits
Improves landbank
• Short-term landbank rises to ~3.2 years after geographical re-focussing and reduced land spend
• ~56% of McAlpine’s* short-term landbank is in the south vs ~34% for Wimpey
• McAlpine landbank contains more prime locations • Strategic landbank contains high potential margin
sites; ~50% is in southern England
*excluding Cumbria
Financial benefits
Enhances earnings and margins
• EPS enhancing from completion*, even after fair value adjustments and discounted interest
• £18 m annual cost savings from integration of head office and regions into Wimpey
• Potential for further cost savings from procurement and benchmarking
• Existing sites with planning support profitable volume growth for Wimpey in 2001 and 2002
* this statement should not be interpreted to mean that future earnings per share of Wimpey following the proposed acquisition will necessarily be higher than historical earnings per share
Risk management
• Business risk low: through due diligence and warranties
• Execution risk low: recent experience and detailed business plan
• Market risk low: good national spread, limited exposure to Central London, national affordability remains good
• Financial risk managed: through deferred payments, year-end gearing stays below 50%
South East 24% 27% £144k £170k ~25%
South West 10% 25% £110k £120k ~15%
Midlands 24% 20% £130k £240k ~25%
North 29% 28% £100k £115k ~25%
Scotland 13% 0% £90k n/a ~10%
UK Total 10,226 2,708 £116k £145k ~12,500
Regional Offices 21 10 23
NB Existing mix and price data refer to 12 months to June 2001
* excluding Cumbria **these are indicative numbers only and not a forecast
WimpeyMcAlpineHomes*
Wimpey
InitialTarget**
Geographic Mix
McAlpineHomes*
Indicative asp
Impact on Wimpeyregional mix and ASP
South East 26% 37% 20% 52% ~3.0
South West 8% 19% 18% 7% ~3.0
Midlands 21% 19% 20% 13% ~3.3
North 27% 25% 11% 28% ~3.2
Scotland 18% 0% 31% 0% ~3.2
UK Total 31,920 7,819 10,700 5,800 ~3.2
NB 1. Existing landbank data refers to position at June 2001
2. McAlpine strategic landbank after assumed success factor
*excluding Cumbria **These are indicative numbers only and not a forecast
WimpeyMcAlpineHomes*
Wimpey
Short-termPlots
McAlpineHomes*
StrategicAcres
Impact on Wimpeylandbank
Target Short term
Life (years) **
LondonBristol
Birmingham
Manchester
Leeds
Liverpool
Newcastle
Combined geographiccoverage(excluding Scotland)
LondonBristol
Birmingham
Manchester
Leeds
Liverpool
Newcastle
LONDON
Chelmsford
Basingstoke
Southampton
Slough
Guildford
Colchester
Ipswich
St Albans
Cambridge
MiltonKeynes
Maidstone
Rochester
Norwich
South East
George Wimpey
Sites
Improved South East presence
McAlpine
LondonBristol
Birmingham
Manchester
Leeds
Liverpool
Newcastle
LONDON
Chelmsford
Basingstoke
Southampton
Slough
Guildford
Colchester
Ipswich
St Albans
Cambridge
MiltonKeynes
Maidstone
Rochester
Norwich
South East
George Wimpey
Sites
George Wimpey
5 Bed Det. Sites
McAlpine
LONDON
Chelmsford
Basingstoke
Southampton
Slough
Guildford
Colchester
Ipswich
St Albans
Cambridge
MiltonKeynes
Maidstone
Rochester
Norwich
McAlpineLONDON
Chelmsford
Basingstoke
Southampton
Slough
Guildford
Colchester
Ipswich
St Albans
Cambridge
MiltonKeynes
Maidstone
Rochester
Norwich
Improved South East Product Mix
McAlpineGeorge Wimpey
Sites
MANCHESTERLiverpool
Chester
Southport Blackburn
Improved North West Presence
McAlpine
George Wimpey
5 Bed Det. Sites
LondonBristol
Birmingham
Manchester
Leeds
Liverpool
Newcastle
GCHQSite
CheltenhamTown
78 AcresGross Area
52 AcresNet Area
CHELTENHAM
GCHQ, Cheltenham - Strategic Potential
LondonBristol
Birmingham
Manchester
Leeds
Liverpool
Newcastle
CambourneTown
Nr CambridgeCounty
1045 AcresGross Area
117 AcresMcAlpine Share
809Expected Plots
Net Area 350 Acres
Cambourne, Cambridge
Price, financing and structure
Andrew Carr-Locke
Terms of proposedacquisition
• Acquisition price is book value plus £50 m premium
• Estimated book value at completion is £411 m• Premium likely to be fair valued to land - unlikely
to be goodwill on the balance sheet• Deferred consideration includes interest of
£12 m – half in 2001, half in 2002• After netting off discounted interest, premium to
book value is ~9%
Transaction multipleattractive
NetAssets (1)
McAlpine Homes £411m
Consideration 461 1.12 x
Less: Deferred interest element (12)
449 1.09 x
• Premium to book value attractive
(1) Net asset multiples exclude intra-group debt
Enterprise Value £m
Deferred terms
• £150 m cash paid on completion• Remaining ~£311 m paid in instalments:
£50 m 31 Dec 2001
£50 m 2 Jan 2002
£50 m 4 Mar 2002
£51 m* 7 Jul 2002
£110 m 30 Aug 2002• Interest cover comfortable• Year-end gearing expected to remain below 50%
*subject to any adjustment of the consideration
Financing the acquisition
• Financing from two main sources:° new loan facilities of £285 m° Wimpey to reduce the combined expenditure
on land by c£200 m by the end of 2002• Reduced spend on land reflects re-focussing of
geographic presence, rather than steps to reduce debt level
Firm cost savings andsynergies
• £18 m annual overhead savings to be achieved by 2002
• Estimated headcount savings of c450• One-off exceptional cost of £14 m • Synergy benefits to come from:
° reduction in central overheads° rationalisation of regional office structure° decentralisation of operational head office
functions such as design and procurement
Financial effects
• Volumes will be reduced from combined levels • Reductions will be mainly in lower asp markets• Substantial overhead cost savings will be
achieved• Operating margins will improve
• Landbank will grow in both life and value - 3.2 years compared to current 3.0 years
• Plot cost will also rise due to higher square footage and better locations
Integration plan
Keith Cushen
Business plan
• Targeting a reduction in number of annual completions by c1,000 from 2000 level
• Combined business to operate from 23 regional offices (combined total 32)
• Two new Wimpey regions to be created:° southern regions to be restructured° new City Centre business in North-West
• Cumbria unlikely to be retained• Solihull Head Office to be closed• Reduced land spend to the end of 2002
South East 24% 27% £144k £170k ~ 25%
South West 10% 25% £110k £120k ~15%
Midlands 24% 20% £130k £240k ~25%
North 29% 28% £100k £115k ~25%
Scotland 13% 0% £90k n/a ~10%
UK Total 10,226 2,708 £116k £145k ~12,500
Regional Offices 21 10 23
NB existing mix and price data refer to 12 months to June 2001
* excluding Cumbria **these are indicative numbers only and not a forecast
WimpeyMcAlpineHomes*
Wimpey
InitialTarget**
Geographic Mix
McAlpineHomes*
Indicative asp
Impact on Wimpey:regional mix and asp
Integration plan
• Fully integrate as rapidly as possible• Maintain new “decentralised” business model• Appoint third regional chairman• Retain transitional staff to support integration
and achievement of build cost benefits• Strengthen business with key McAlpine staff• Regional landbanks better balanced• Southern regions still have capacity to grow
Critical mass achieved across all regions
OfficesCompletions
per OfficeTarget
completionsLandbank
(units)Landbank
(years)
Strategic Landbank
(acres)
South/S West 3 ~1,800 ~600 5,800 ~3.0 2,500
South East 6 ~3,100 ~510 9,200 ~3.0 4,900
Midlands 5 ~2,500 ~500 8,300 ~3.3 2,600
North 7 ~3,700 ~530 12,000 ~3.2 2,500
Scotland 2 ~1,300 ~650 4,200 ~3.2 2,500
Total 23 ~12,500 ~540 39,500 ~3.215,000
Source: Wimpey estimates
Due diligence completed
• Detailed due diligence carried out• Landbank and forecast margins reviewed• Team comprised over 40 management from
regional offices as well as Head Office• Head Office processes reviewed• McAlpine management helpful and supportive• Assisted detailed integration planning:
reduces execution risk
Firm cost savings andsynergies
• £18 m annual overhead savings to be achieved by 2002
• Estimated headcount savings of c450• One-off exceptional cost of £14 m • Synergy benefits to come from:
° reduction in central overheads° rationalisation of regional office structure° decentralisation of operational head office
functions such as design and procurement
Potential further integration benefits• Productivity and build cost improvements through
benchmarking and transfer of best practices• Improved procurement and strengthened
purchasing power• Focus on increasing value per customer through
upgrade options• Strengthened operational / regional management
teams• Offers significant further potential financial upside
Concluding comments
John Robinson
Concluding comments
• An excellent deal for Wimpey and its shareholders
• Terms and transaction structure financially attractive
• Accelerated the geographical and product re-positioning of Wimpey
• Execution risk managed by full due diligence process and integration planning
Timetable and approvals
• Proposed Acquisition conditional on acceptance by Wimpey and McAlpine shareholders
• Proposed Acquisition is recommended by the Boards of Wimpey and McAlpine
• Completion expected to take place on 1 October
GEORGE WIMPEY PLC
Acquisition of McAlpine Homes
14 August 2001