Bevo Agro Take Private ProposalOptimum Ventures
1. Business Overview
2. Industry Overview
3. Financial Performance
4. Value Drivers
5. Exit Strategy
6. Valuation
7. Risk Factors
8. Recommendation
Agenda
• Product Offering• Greenhouse crop seedlings• Field food crop seedlings• Bedding Plants and other flowers
• Business Model• Fulfillment based sales contracts• Flexible product specs based on needs• Markets to established growers, farms and
nurseries
Bevo Agro is a supplier of propagated plants to farmers and nurseries focused on high quality product offerings
47%53%
Sales Distribution
CanadaUSOthers
Security InformationTicker TSX-V: BVOSector Agriculture
IndustryOrnamental nursery products,
Vegetables and melons
Market Cap. 3.58M
Company NameDay Close Price Latest
Shares Outstanding Latest
Market Capitalization Latest
LTM Net Debt
LTM Tangible Book Value/Share
Total Enterprise Value
PRT Growing Services Ltd. (TSX:PRT) 3.3 9.76 32.2 -3.3 4.15 28.88
S&W Seed Company (NasdaqCM:SANW) 5.86 5.8 33.99 -6.8 2.58 27.2
Village Farms International, Inc. (TSX:VFF) 1.32 38.71 51.09 55.1 1.03 108.41
Bevo Agro Inc. (TSXV:BVO) 0.14 25.54 3.58 21.7 0.5 24.77
Plant propagation market has increasing economies of scale with downward pressure on prices
Bevo Agro is a price taker in this competitive industry where decreasing volume growth and high capital costs are driving consolidation as major international players control the lion’s share of the market
1400
318 232 175 95 34
Key Producers (by Acres) in Canada and US
High sales volatility, poor ROA, and significant debt burden have resulted in -2.6% CAGR for past 3 years
Revenue
Leverage
Return on
Assets
EBITDA margin
2007 2008 2009 2010 2011 -
5
10
15
20
25
-15.00%
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
Other United States CanadaGrowth
2007A 2008A 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F
-3%
-2%
-1%
0%
1%
2%
3%
4%
2007A2008A
2009A2010A
2011A2012F
2013F2014F
2015F2016F
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
0%
10%
20%
30%
40%
50%
60%
70%
2007A 2008A 2009A 2010A 2011A 2012F 2013F 2014F 2015F 2016F
-5%
0%
5%
10%
15%
20%
EBITDA Margin EBIT MarginNet Income Margin
Restructuring management, increasing sales, and restructuring debt will drive investor value
Management
Jack Benne, CEO
Leo Benne, VP and GM • Refinance organization to reduce debt load and interest payments
•Reduce debt load to increase organization attractiveness to acquiring company
•40% target gearing
•Hire VP Marketing to build organization brand, develop sales strategy, and manage sales force
•Hire 3 sales staff to secure contracts
•Focus sales efforts on: • higher margin products• longer term contracts• larger customers• Less price-sensitive nurseries
Replace CEO with external leadership
•Strong horticulture capabilities•Poor strategic leadership in expanding company growth •Poor ability to drive sales
•Strong general management capabilities•Historically effective COGS management
2007A
2008A
2009A
2010A
2011A2012F
2013F
2014F
2015F
2016F0
5
10
15
20
25
0%
10%
20%
30%
40%
50%
60%
70%
Debt Debt / Assets
Maintain as General Manager
Sales force Financial engineering
20072008
20092010
20112012
20132014
20152016
-
5
10
15
20
25
-15%
-10%
-5%
0%
5%
10%
15%
Other United States CanadaGrowth
Exit investment in 5 years through company acquisition
Target buyer Exit expectation Return sensitivity
Gordon growth sale
Exit multiple
Change in exit value
Time to exit -30% -20% -10% 0% 10% 20% 30%
3 Years -25% -20% -15% -25% -4% 1% 6%
4 Years -17% -11% -5% -17% 8% 14% 20%
5 Years 23% 31% 40% 48% 57% 65% 74%
6Years 0% 21% 31% 11% 51% 61% 71%
•Exit valuation driven heavily by time to exit; 5 year exit horizon is critical to strong return
•Low sensitivity to large changes in exit value provides significant buffer to revenue and debt projections
Five year investment horizon maximizes expected return
Expect to sell Bevo Agro to a large Agricultural conglomerate interested in expanding their seedling portfolio• Strong IP and technology
capacity creates attractive opportunity for large Agro-business
• De-leveraging will reduce risk for buyer
• Industry trend towards consolidation increases opportunity for competitive exit value offers
• Terminal growth rate: 2%• Exit value: 6.08M
• EV/EBITDA: 2.8X (2016)• Exit value: 5.61M
Average exit valuation
• Exit value: 5.85M
Presedent Transactions
2011 EV/Revenue
2011 EV/EBITDA
2011 BV/Share
APV (+/- 15% in sales)
APV (+- 20% in exit)
$- $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 $1.60 $1.80 $2.00
Min PointAverageMax
Per Share Price
Offer for Bevo Agro is $0.21 a share indicating a $5,362,560 valuation with a 50% premium
APV - $0.29 EV/EBITDA - $0.36 Precedent - $1.00
Bid Range: $0.21 - $0.31 per share-
Current Share Price: $0.14
ExpectedReturn
48%
RisksCompetitors may find better, more efficient ways of operating and producing crops
Cash flows decreasing - may prove difficult for Bevo Agro to meet interest obligations, could face bankruptcy
Product prices are variable, market driven
Five year exit goal may prove unobtainable
Very capital intensive business; growth is expensive
Using key mitigations, Bevo Agro risk will be hedged against
Mitigations
Increasing R+D
Debt refinanced; current, ineffective management team replaced; new sales team/strategy hired/implemented ($550,000 increase in Year One)
New sales team will work to secure long term contracts at fixed price
Alternative growth/consolidations strategies can be pursued
Contracts secured before growth pursued
Amount of Investment
Price (Per Share) $0.21
Per Share Premium $50%
Recommendation: Tender offer of $0.21/share
Per Share Valuation of the Company
Price Per Share $0.31
Capitalization of the Company 25,536,000
Pre-Money Valuation $5.36 MM
Post-Money Value $7.94 MM
Estimated Exit Value $10.1 MM
Expected Return: 48%Investment Horizon: 5 years
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