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Asia Business Forum

Asia Business Forum. M&A by Asian Companies May 22, 2012. New successful Japanese business model for assisting international expansion : If you just build it, they won’t come. Real Estate (office & industrial park) + Human Resource, General Admin., Accounting , Tax, Legal,

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Asia Business Forum

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  1. Asia Business Forum M&A by Asian Companies May 22, 2012

  2. New successful Japanese business model for assisting international expansion: If you just build it, they won’t come.

  3. Real Estate (office & industrial park) + Human Resource, General Admin., Accounting, Tax, Legal, Customs (import/export) --Often by Japanese-speaking staff.

  4. Japanese restaurant • Japanese bank • Convenience store • DVD rental • Travel agency • Hospital & clinic

  5. Vocational & Japanese language school • Police & fire station • Post office. Shipping & freight • Condo, hotel, apartment, dormitory • Gym • Golf course

  6. Question 1: Will it make sense for American/local developers operating in Asia to offer comprehensive packages to American companies?

  7. Question 2: To entice Asian companies to invest in the US, will it make sense to offer comprehensive packages to them?

  8. The Politics of Water: Too Much? Not Enough? Who Decides? Ambassador Darryl Johnson

  9. Most great civilizations have controlled water and organized access to water as one of their primary obligations. 7 billion people now inhabit our globe and all need water to survive. • Southeast Asia: Droughts, floods intensify political and economic conflictsThe Role of Water in Myanmar/Burma:2007 Cyclone Nargis brought huge damageGovernment did not permit outside aid; now more open to such contactRecent Dispute between China and Myanmar over IrrawaddiRiver dam that China wants to build on border • Mekong River: Starts in China, forms border between Thailand and Laos, and empties through Cambodia and VietnamChina wants water for hydropower and irrigationCambodia and Vietnam depend on waters for irrigation and fishing

  10. Key Questions Q&A • What is effective mechanism to resolve differences among six parties? • What are the implications for business? • What are the opportunities to address these challenges with new solutions? • Micro Irrigation / Drip Irrigation? • Water Filtration Systems (PATH example)? • Singapore example – sewage to drinking water system

  11. Asia Business Forum Roundtable Discussions

  12. Asia Business Forum Cross-Border M&A May 22, 2012

  13. Recent Cross-Border Activity with Asian Buyers 18

  14. Deal Volume by Country • Cross-border transactions involving Asian countries are generally opaque in terms of data availability • China, Japan, Singapore and South Korea offer the largest amount of insight into the US target, cross-border market Selected Asian Country Annual Deal Count Source: Capital IQ

  15. Cross-border Transaction Volume Data Table • In assessing countries such as Indonesia, Malaysia, and Thailand, transaction data is extremely sparse • These limited available insights require intimate and closed door knowledge of the markets when transacting Cross-border Transaction Count (US target) Note: Transaction count calculated as US target cross-border transactions with corporate headquarters determining country of the buyer Source: Capital IQ

  16. Recent Chinese – US Cross-Border M&A Activity • China acquisitions of US companies have made a strong return • Deal count is generally a more meaningful measurement of activity due to the lack of reported data on transaction dollar volume • Despite a sluggish Q1 2012, recent activity has been robust • EBITDA multiples have generally trended positively over the last 13 quarters however the opacity of transaction data causes Q1 2009, Q2 2009, and Q1 2012 to be deemed “Not Meaningful” China – US Cross-Border M&A Volume China – US Cross-Border EBITDA Multiples Source: Capital IQ Source: Capital IQ, Excludes multiples >25x 21

  17. China – US Cross-Border M&A Activity by Industry • China acquisitions of US companies segmented by industry in the last 13 quarters indicates that Consumer Discretionary, Financial, and Industrial businesses are garnering the greatest foreign interest • Q1 2012 displays similar results with the Consumer Discretionary, Industrials, Financials, and Information Technology industries hosting about 78% of activity Last 13 Quarters Deal Count by Industry Q1 2012 Deal Count by Industry Source: Capital IQ

  18. China – US Selected Cross-border Transactions • Acquired in May, 2012, AMC Entertainment, operates as a theatrical exhibition company managing movie and show theaters. • EV reported to be $2.6 billion at a 1.0x Revenue and 9.8x EBITDA multiple. Acquired • Acquired in May, 2012, EcoTimber, Inc., a flooring company, supplies harvested and reclaimed wood products in North America. • Portfolio company of Greenmont Capital Partners, no transaction details disclosed. Acquired • Acquired February, 2012, Goss International Corporation manufactures Web offset presses and print finishing systems for the printers and publishers. • EV reported to be $90 million. Acquired

  19. China – US Selected Cross-border Transactions • In November, 2011, Yangfeng acquired the Visteon Corp., Global Interiors Business which manufactures interior products such as cockpit systems and panels for vehicle manufacturers. • No transaction details disclosed. Acquired Assets • Acquired November, 2011, Northern Engraving designs, manufactures, and sells metal and plastic nameplates, panels, overlays, and trims for appliance, automotive, and nameplate OEMs. • $92 million EV and 0.9x Revenue multiple. Acquired China Auto Parts and Accessories Capital Holding • Acquired in July, 2011, Century Automotive MFG, Inc. manufactures auto parts for original equipment and after market manufacturers. • CAPACH is a state owned Chinese investment holding firm; no transaction details disclosed. Acquired

  20. China – US Selected Cross-border Transactions • Acquired December, 2010 Continental Motors, Inc. develops and supplies aviation products for customers globally. • EV reported to be $186 million. Acquired • Announced in December, 2009, Volvo designs and manufactures cars for markets in Sweden and internationally. • EV reported to be $1.8 billion. Acquired

  21. Japan – US Selected Cross-border Transactions • Acquired in April, 2012, IBM’s Point-of-Sale Terminal Business comprises cash registers and related devices that facilitate retail transactions and collect data from stores. • No transaction details disclosed. Acquired Assets • Acquired in March, 2012, NEXX engages in the design, manufacture, sale, installation, and servicing of semiconductor process equipment. • $249 million EV, 3.9x Revenue, 36.0x EBITDA. Acquired • Acquired in February, 2012, Silver Springs Citrus, Inc. engages in producing, processing, and packaging orange and grapefruit juices. • EV reported to be $47 million. Acquired

  22. Korea – US Selected Cross-border Transactions • In June, 2011, Hyosung acquired the Global Wire Business of Goodyear Tire which manufactures tire reinforcement wire. • The business segment was valued at $50 million. Acquired Assets • Acquired in May, 2011, Acushnet Company, manufactures and markets golf balls, clubs, shoes, and accessories. • $1.25 billion EV, 1.0x Revenue. Acquired • Acquired in January, 2011, Unidym, engages in the development, manufacture, and application of carbon nanotubes for various industries. • EV reported to be $145 million. Acquired

  23. Asia – Pacific Northwest Selected Cross-border Transactions • Acquired in December, 2011, SonoSite, Inc. develops hand-carried ultrasound systems for use in various medical specialties and in a range of treatment settings at the point-of-care. • $855.9 EV, 2.8x Revenue, 23x EBITDA Acquired Toyko, Japan Bothell, WA • Acquired in June, 2011, Westwood Shipping Lines provides cargo transportation services moving paper and forest products, containerized products and oversized heavy machinery. • $66.15 EV and 0.3x Revenue multiple Acquired Federal Way, WA Osaka, Japan • Acquired in April, 2011, Otak, Inc. provides architecture, construction management, planning, survey and mapping, urban design, and water and environmental services. • $17.9 EV, .03x Revenue Acquired Seoul, South Korea Lake Oswego, OR

  24. Asia – Pacific Northwest Selected Cross-border Transactions • Acquired in September, 2011, eat.shop guides publishes city guides. It covers Atlanta, Austin, Boston, Chicago, New York, Paris, Kansas City, Portland, and Denver cities. • No transaction information disclosed Acquired Singapore, Singapore Portland, OR

  25. Examples of Acquisitive Chinese Companies • China Petroleum and Chemical Corporation • Strategic Rationale: Secure oil supplies to feed growing domestic demand and fulfill ambitions to become major global player • Total Number of Deals, Last 5 Years: 23 • Total Value of Deals, Last 5 Years: $19.9B USD • China National Offshore Oil Corp (CNOOC) • Strategic Rationale: Grow revenues through overseas acquisitions • Total Number of Deals, Last 5 Years: 20 • Total Value of Deals, Last 5 Years: $18.49B USD • China Resources Snow Breweries • Strategic Rationale: Strengthen its presence in key markets and consolidate beer • market in China. Has sights on international markets. • Total Number of Deals, Last 5 Years: 21 • Total Value of Deals, Last 5 Years: $1.54B USD

  26. 2012 Trends and Challenges for Chinese Cross-Border M&A 31

  27. Five Trends for Cross-Border M&A with China • Manufacturing assets in the US will become a focus of acquirers in China • Labor costs rose 22% in China in 2011, wages will double in five years, and hourly • wages will be at 2/3’s the level of wages in the US by 2020 • Exacerbating the issue , manufacturing productivity has been outpaced by salary • Increases according to the National Statistics Bureau • Trade sales will be much more viable exit option than IPO’s • The continued decrease of IPO activity across China’s three boards and drastic decline in stock prices since 2010-now, will drive more M&A activity • 2012 will see a rise of a seller market in China • Historically, China has been a net buyer of strategic assets around the world, which wont change. However, expect to see more Chinese enterprises actively pursuing trade sales to gain liquidity as IPO markets are drying up. • Consumption growth in China will continue to drive outbound M&A to the Western world • Consumption levels being relatively low at 36% of GDP, Chinese corporations will pursue luxury brands, retail assets, and consumer product companies. • Increased scrutiny by the US government can decrease appetite for US deals from China • Recent tit-for-tat between regulating authorities has dealmakers concerned

  28. Main Challenge for Chinese Buyers Need to Embrace the Process • Stop being reactive and be proactive – engage a US based IB • Provide better coverage of strategic candidates that are actually for sale • Understand valuation metrics, especially for private companies • Minimize wasted effort on dead end discussions • “US Style” of doing a deal • Move too slowly, will be left behind in a process-be prepared beforehand • Add credibility regarding interest by retaining professional advisors • Be advised on what are customary business terms and negotiating tactics • Receive guidance on obtaining appropriate protections • A process will yield a better result

  29. Questions and Answers 34

  30. Contact:Paul LouieManaging DirectorCascadia Capital LLC701 Fifth Ave., Suite 2600Seattle, WA 98104T: 206-436-2548C: 626-374-8856plouie@cascadiacapital.comwww.cascadiacapital.com 35

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