Separation Plan Announcement
Friday, December 2, 2011
Friday, December 2, 2011
Alexander & Baldwin Separation Plan Announcement ● December 2, 2011
Statements in this call and presentation that set forth expectations or
predictions are based on facts and situations that are known to us as of
today, December 2, 2011.
predictions are based on facts and situations that are known to us as of
today, December 2, 2011.
Actual results may differ materially, due to risks and uncertainties, such
as those described in our December 1 press release announcing the
separation plan and on pages 17-25 of our 2010 Form 10-K and our
other subsequent filings with the SEC. Statements in this call and
presentation are not guarantees of future performance. We do not
undertake any obligation to update our forward-looking statements.
as those described in our December 1 press release announcing the
separation plan and on pages 17-25 of our 2010 Form 10-K and our
other subsequent filings with the SEC. Statements in this call and
presentation are not guarantees of future performance. We do not
undertake any obligation to update our forward-looking statements.
Disclosure
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Alexander & Baldwin Separation Plan Announcement ● December 2, 2011
A New Chapter in Alexander & Baldwin’s History
Alexander & Baldwin’s Board of Directors has approved a plan to
pursue the separation of the Company creating two companies better
positioned to enhance long-term shareholder value. The separate
companies will continue to reliably serve our customers and the
Hawaii community
pursue the separation of the Company creating two companies better
positioned to enhance long-term shareholder value. The separate
companies will continue to reliably serve our customers and the
Hawaii community
§ A&B: A Hawaii-based real estate and agricultural company with high-
quality assets and operations that are well positioned for growth
quality assets and operations that are well positioned for growth
§ Matson: A Hawaii-based transportation company with a prominent
brand, a superior fleet, complementary logistics services
and the financial and operating capability to grow in other markets
brand, a superior fleet, complementary logistics services
and the financial and operating capability to grow in other markets
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Alexander & Baldwin Separation Plan Announcement ● December 2, 2011
Call Agenda
Business Evolution and Transaction Summary -
S. Kuriyama
1
4
5
A&B Overview and Strategic Outlook - C. Benjamin
Matson Overview and Strategic Outlook - M. Cox
Transaction Overview - J. Wine
2
Transaction Strategic Rationale - J. Wine
7
Concluding Remarks - S. Kuriyama
6
Q&A
3
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Alexander & Baldwin Separation Plan Announcement ● December 2, 2011
Real Estate (1949)
Agribusiness (1870)
§Sugar plantation served as the foundation of the Company, eventually leading to energy
production, property development, commercial real estate and shipping
production, property development, commercial real estate and shipping
Alexander & Baldwin: The Evolution of Our Business
Transportation (1969)
§Matson founded in 1882
§Sugar transport to the West Coast was the beginning of the core Hawaii trade
§Matson became a wholly-owned subsidiary of A&B in 1969
§Expansion to Guam and China followed
§Logistics business began in 1987 in response to customer demand for coordination of
transportation activities across multiple modes, including rail and highway
transportation activities across multiple modes, including rail and highway
§Development of homes for plantation workers evolved into residential and commercial
development across the state
development across the state
§Commercial property experience commenced with commercial properties on Maui to service
the local community, and through tax-deferred (1031) exchanges, has grown into a
substantial portfolio of commercial properties in Hawaii and on the Mainland
the local community, and through tax-deferred (1031) exchanges, has grown into a
substantial portfolio of commercial properties in Hawaii and on the Mainland
Successful track
record of
strategically
entering and
exiting industries
over the years,
including:
record of
strategically
entering and
exiting industries
over the years,
including:
Retail
Insurance
Container
Leasing
Hospitality
Oil Refining
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Alexander & Baldwin Separation Plan Announcement ● December 2, 2011
Operating Profit Mix*
LTM Revenue and
Operating Profit*
Operating Profit*
Leadership Team
Key Business Lines
Operating Profit $102M
Operating Profit $104M
Premier Hawaii Real Estate and
Agricultural Company
Agricultural Company
Two Independent, Publicly Traded Companies
A&B
Matson
* Based on LTM segment performance for the Real Estate and Agribusiness segments (A&B) and the Transportation segments (Matson) as of
9/30/2011. Revenue and operating profit for A&B includes the results from income properties that were sold and classified as discontinued
operations. Operating profit for Matson excludes losses from CLX2. Segment operating profit also excludes corporate overhead expenses not
allocated to the segments.
9/30/2011. Revenue and operating profit for A&B includes the results from income properties that were sold and classified as discontinued
operations. Operating profit for Matson excludes losses from CLX2. Segment operating profit also excludes corporate overhead expenses not
allocated to the segments.
Chairman & CEO - Stan Kuriyama
President & COO - Chris Benjamin
CFO - Paul Ito
Chairman - Walter Dods
President & CEO - Matt Cox
CFO - Joel Wine
Market Leading Ocean
Transportation and Logistics
Company
Transportation and Logistics
Company
Focus
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Alexander & Baldwin Separation Plan Announcement ● December 2, 2011
34%
39%
62%
Real Estate and
Agribusiness Five-
Year Operating Profit
Agribusiness Five-
Year Operating Profit
(Millions)
Transportation Segments
Five-Year Operating Profit
Five-Year Operating Profit
(Millions)
Transportation Segments Assets
(Millions)
Real Estate and Agribusiness
Assets
Assets
(Millions)
41%
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Alexander & Baldwin Separation Plan Announcement ● December 2, 2011
Enhanced Strategic Direction and Focus | § Each company is now of sufficient scale to independently establish and achieve strategic priorities, growth strategies and financial objectives § Board and management of each company will be able to focus exclusively on the operation and strategic direction of each business with more direct alignment of incentives |
Growth Oriented Capital Structure | § Each company will be able to allocate capital in a manner best tailored to its business and have more direct access to capital to fund future growth |
Separate Stock | § Each company will have its own separate stock, which can be used to facilitate acquisition opportunities and equity-based compensation arrangements |
Greater Transparency | § Separation will allow for greater visibility into relative financial and operating performance |
Sector-Specific Investors and Research Coverage | § Each company will appeal to a more focused shareholder base attracted to the particular business profile of that company and the specific industries in which it operates § Each company expects to attract coverage by additional industry-specific analysts, providing the public and investment community with more information and perspectives on the two companies |
Timing | § Relatively stable point in each business’ investment cycle § Businesses are poised for further growth |
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Alexander & Baldwin Separation Plan Announcement ● December 2, 2011
§ 88,000 acres of land in Hawaii
§ Fourth-largest private land-owner in the State
§ Portfolio of 44 commercial properties in
Hawaii and 8 Mainland states
(7.9 million square feet with 2010 NOI of $56M)
Hawaii and 8 Mainland states
(7.9 million square feet with 2010 NOI of $56M)
§ Resort, primary residential and commercial
development portfolio (2,500 units)
development portfolio (2,500 units)
§ Largest agricultural operation in Hawaii
§ Significant producer of renewable energy
Both Companies’ Unique Assets Position Them Well to
Deliver Shareholder Value
Deliver Shareholder Value
A&B
§ 17 Jones Act Vessels
§ 47,000 company-owned containers and
equipment
equipment
§ Dedicated terminal facilities in Hawaii
§ 35 percent ownership in SSA Terminals
§ Top 10 domestic logistics company
Matson
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Alexander & Baldwin Separation Plan Announcement ● December 2, 2011
Hawaii: Poised for Growth
§ Positive economic trends in the State are
expected to support future growth for both
A&B and Matson
expected to support future growth for both
A&B and Matson
‒ Visitor expenditures on near-record pace
‒ Unemployment of 6.4 percent is well below
the national average
the national average
§ International tourism, especially from China
and Korea, presents a huge growth
opportunity for Hawaii tourism and the
economy generally
and Korea, presents a huge growth
opportunity for Hawaii tourism and the
economy generally
‒ Hawaii is among the world’s most desirable
vacation destinations
vacation destinations
‒ Experience catering to Asian tourists
§ Real estate has bottomed and is poised
for recovery
for recovery
§ Infrastructure projects, like the planned
$5 billion rail project for Honolulu, are
expected to support expansion of Hawaii’s
construction industry
$5 billion rail project for Honolulu, are
expected to support expansion of Hawaii’s
construction industry
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Alexander & Baldwin Separation Plan Announcement ● December 2, 2011
A&B: Deep Knowledge and Expertise in Hawaii Real Estate
Competitive Advantages
Strategy
§ Focus on entitlement / development of core
Hawaii lands
Hawaii lands
§ Position portfolio of pipeline projects for
market recovery
market recovery
§ Investment in high-returning real estate
opportunities across Hawaii
opportunities across Hawaii
§ Targeted investment in complementary
Hawaii markets
Hawaii markets
§ Optimize returns from diversified Hawaii commercial
portfolio with targeted Mainland commercial assets
portfolio with targeted Mainland commercial assets
§ Leverage joint venture opportunities to maximize risk
adjusted return
adjusted return
§ Grow renewable energy operations
§ Extensive expertise in entitling and developing
Hawaii real estate
Hawaii real estate
§ Established track record of working with
communities and government agencies to meet
Hawaii’s needs
communities and government agencies to meet
Hawaii’s needs
§ Over a century of farming and renewable
energy expertise
energy expertise
§ Strong investment discipline embedded in culture
§ Wide range of in house resources with full
spectrum of development capabilities
spectrum of development capabilities
§ Strong balance sheet
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Alexander & Baldwin Separation Plan Announcement ● December 2, 2011
§ Original developer in the early 1970s
§ Sold in 1989, repurchased 270 acres in 2003
§ Sold/developed 100 acres, recapturing
investment
investment
§ 170 remaining acres fully zoned for
residential and commercial uses with a plan
for up to 700 units
residential and commercial uses with a plan
for up to 700 units
§ 27 acres in active development
A&B: Successful Development Track Record
Wailea
§ Completed in 2008
§ 352 residential units
§ Located near downtown Honolulu
Urban Oahu Condos
§ Completed in 2005
§ 100 two-bedroom units
§ Located in the heart of Waikiki
§ First condo development in
Waikiki in 10 years
Waikiki in 10 years
§ Completed in 2006
§ 347 luxury residential units
§ Overlooks Ala Moana Beach Park
Lanikea
Hokua
Keola La’i
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Alexander & Baldwin Separation Plan Announcement ● December 2, 2011
A&B: Development Pipeline
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Alexander & Baldwin Separation Plan Announcement ● December 2, 2011
A&B: Value Creation Drivers and Metrics
Key Metrics | ||
Business | Statistical Drivers | Performance Measures |
Commercial Real Estate | § Occupancy § “Same Store” performance | § Net operating income § Funds from operations |
Property Development | § Acres entitled and/or permitted § Development inventory § Development sales (Lot/unit closings) | § Sales margin § Long-term returns on development capital |
New Growth Initiatives | § Opportunities evaluated and investments made | § Earnings and returns on new growth investments |
Agribusiness and Land Stewardship | § Pricing § Sugar/power production/sales § Sugar yields (TSA) § New energy initiatives | § Operating profit § Operating cash flow |
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Alexander & Baldwin Separation Plan Announcement ● December 2, 2011
A&B: A Unique and Differentiated Investment in a
Hawaii-Focused Real Estate Company
Hawaii-Focused Real Estate Company
§ “Hawaii Play”: public real estate company
positioned to capitalize on Hawaii upside
positioned to capitalize on Hawaii upside
§ Strong track record in creating shareholder
value from real estate investments and deep
understanding of Hawaii
value from real estate investments and deep
understanding of Hawaii
§ Irreplaceable asset base
§ Large and diversified commercial
real estate portfolio
real estate portfolio
§ Substantial embedded internal growth
opportunities with a pipeline of over a dozen
development projects
opportunities with a pipeline of over a dozen
development projects
§ Growth-oriented capital structure with healthy
balance sheet and strong liquidity
balance sheet and strong liquidity
§ Experienced management team with
aligned incentives
aligned incentives
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Alexander & Baldwin Separation Plan Announcement ● December 2, 2011
Matson:
A Premier Ocean Transportation and Logistics Company
A Premier Ocean Transportation and Logistics Company
Competitive Advantages
Strategy
§ Focus on world class customer service
§ Position to grow faster than the overall
Hawaii economy
Hawaii economy
§ Pursue growth in Guam routes through the
upcoming U.S. military realignment toward Asia
upcoming U.S. military realignment toward Asia
§ Pursue other expansion
§ Capitalize on global trade growth through SSA
Terminals joint venture
Terminals joint venture
§ Organic expansion of highway brokerage,
intermodal and warehousing services
intermodal and warehousing services
§ Develop international freight forwarding and
consolidation offerings with a focus on China
consolidation offerings with a focus on China
§ Powerful brand name
§ Leading position in two domestic markets—Hawaii
and Guam
and Guam
§ Outstanding reputation in China
§ Excel at serving niche markets
§ Strategically located terminals in Hawaii
§ Dedicated West Coast terminals through ownership
in one of the largest West Coast terminal operators
in one of the largest West Coast terminal operators
§ Strong operating discipline
§ Strong cash flows, balance sheet, and liquidity
§ Integrated top-tier logistics capability to meet
customer needs
customer needs
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Alexander & Baldwin Separation Plan Announcement ● December 2, 2011
Matson: Connecting the Pacific Unlike Anyone Else
Reserve Vessels - 4 Ships & 1 Barge |
SS Kauai |
SS Lihue |
SS Lurline |
SS Matsonia |
Mauna Kea |
Hawaii / Guam / China Service - 5 Ships |
MV Manukai |
MV Manulani |
MV Maunalei |
MV Maunawili |
MV RJ Pfeiffer |
Inter-Island Barge Network |
Haleakala |
Mauna Loa |
Waialeale |
Hawaii Turnaround Service - 4 Ships |
MV Mahimahi |
MV Manoa |
MV Mokihana |
SS Maui |
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Alexander & Baldwin Separation Plan Announcement ● December 2, 2011
Matson: Value Creation Drivers and Metrics
Key Metrics | ||
Business | Statistical Drivers | Performance Measures |
Ocean Transportation | § Vessel on-time performance § Capacity utilization § Freight rates and volumes | § EBITDA § Operating profit § Operating margin § Return on invested capital § EPS |
Logistics | § Volumes § Gross profit margin | § Revenue growth § Operating profit § Operating margin § Return on invested capital |
SSAT | § Lifts § Profit by terminal § Stevedoring productivity | § Interest in joint venture earnings |
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Alexander & Baldwin Separation Plan Announcement ● December 2, 2011
Matson: A Premier Transportation Company Poised to
Deliver Value
Deliver Value
§ Leading shipping company in the Pacific with strong
brand reputation
brand reputation
§ Unmatched customer service and best-in-class
on-time delivery
on-time delivery
§ Competitive advantage in premium
China-Long Beach service
China-Long Beach service
§ Well-positioned for market recoveries in core trades
and military build up in Guam trade
and military build up in Guam trade
§ Superior asset quality - fleet (18-year average age of
active fleet) and harbor infrastructure
active fleet) and harbor infrastructure
§ Logistics creates a strong, viable growth platform
§ Highly strategic 35 percent ownership in
SSA Terminals joint venture
SSA Terminals joint venture
§ Attractive dividend to complement core business growth
§ Experienced management team with aligned incentives
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Alexander & Baldwin Separation Plan Announcement ● December 2, 2011
Transaction Overview
Structure | § As of the record date, shareholders of Alexander & Baldwin will own one share of A&B stock and one share of Matson stock for each existing share § Tax-free spin |
Timing & Approvals | § Expect transaction to close in the 2H of 2012 § Receipt of favorable IRS ruling and tax opinion § Filing and effectiveness of registration statement with the SEC § Final approval by board of directors |
Capital Structures & Financial Policies | § Approximately 40 percent of debt will be allocated to A&B § Approximately 60 percent of debt will be allocated to Matson § Both companies will retain strong credit metrics and balance sheets § Matson will pay an attractive dividend at or above market averages, currently project to be in the range of 50 to 70 cents per share annually § A&B will not pay a dividend, consistent with other real estate development peers, in order to maximize investment potential in new, high-returning opportunities § Until the separation is completed, the Company expects to maintain its regular quarterly dividend |
Business Impact | § Both companies will be incorporated and headquartered in Hawaii, and thus, will remain a driving force in the Hawaii economy § No interruption in operations or service to our communities, our customers, vendors or government officials § The general public will not experience any changes in the way we do business or the people they do business with § As the land and transportation businesses already perform their day-to-day functions independently, there will be very little change to each business’ organizational structure § No net loss in jobs |
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Separation Plan Announcement
Friday, December 2, 2011
Friday, December 2, 2011