This presentation is for informationalpurposes only and is not an offer to buy or the solicitation of an offer to sell any shares. The solicitation and the offer to buy La Senza shares will only be made pursuant to an offer to purchase and relatedmaterials that will be mailed to shareholders of La Senza shortly.Shareholders should read these materialscarefullybecause they containimportantinformation,including the terms and conditions of the offer. Shareholders will be able to obtain the offer to purchase and relatedmaterials with respect to the tender offer free from GeorgesonCanada, 100 UniversityAvenue, 11th Floor, South Tower,Toronto, ON M5J2Y1, 1-866-288-1537.
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SAFEHARBORSTATEMENTUNDER THE PRIVATESECURITIESLITIGATIONREFORM ACT OF 1995: LimitedBrandscautions that any forward -lookingstatements (as such term is defined in the PrivateSecuritiesLitigationReform Act of 1995) contained in this press release or the third quarterearnings call or made by LimitedBrands or management of LimitedBrandsinvolve risks and uncertainties and are subject to change based on variousimportantfactors, many of which are beyond our control. Accordingly,LimitedBrands’ future performance and financialresults may differ materially from those expressed or implied in any such forward -lookingstatements. Words such as “estimate,” “project,” “plan,” “believe,” “expect,” “anticipate,” “intend,” “planned,” “potential” and similarexpressions may identifyforward -lookingstatements. The followingfactors,amongothers, in some cases have affected and in the future could affect LimitedBrands’ financialperformance and actual results and could cause actual results to differ materially from those expressed or implied in any forward -lookingstatementsincluded in this press release or the third quarterearnings call or otherwise made by LimitedBrands or management: risks associated with generaleconomicconditions,consumerconfidence and consumerspendingpatterns; the potentialimpact of national and internationalsecurityconcerns on the retail environment,including any possiblemilitaryaction,terroristattacks or other hostilities; risks associated with the seasonality of LimitedBrands’ business; risks associated with severeweather and changes in weatherpatterns; risks associated with the highly competitivenature of the retail industrygenerally and the segments in which we operateparticularly; risks related to consumeracceptance of LimitedBrands’ products and LimitedBrands’ ability to keep up with fashiontrends,develop new merchandise,launch new product lines successfully, offer products at the appropriate price points and enhanceLimitedBrands’ brand image; risks associated with LimitedBrands’ ability to retain, hire and train key personnel and management; risks associated with the possibleinability of LimitedBrands’ manufacturers to deliverproducts in a timely manner or meet qualitystandards; risks associated with LimitedBrands’ reliance on foreignsources of production,including risks related to the disruption of imports by labor disputes, risks related to politicalinstability, risks associated with legal and regulatorymatters, risks related to duties, taxes, other charges and quotas on imports, risks related to local businesspractices,potentialdelays or disruptions in shipping and relatedpricingimpacts and politicalissues and risks related to currency and exchange rates; risks associated with the dependence on a high volume of mall traffic and the possible lack of availability of suitable store locations on appropriateterms; risks associated with increases in the costs of mailing, paper and printing; risks associated with our ability to service any debt we incur from time to time as well as the requirements the agreementsrelated to such debt impose upon us; risks associated with LimitedBrands’ reliance on informationtechnology,including risks related to the implementation of new informationtechnologysystems and risks related to utilizing third parties to provideinformationtechnologyservices; risks associated with naturaldisasters, risks related to acquisitions,including the proposedacquisit ion of La Senza describedabove,including risks associated with integrationactivities and strategic goals and risks associated with rising energy costs. LimitedBrands is not under any obligation and does not intend to make publiclyavailable any update or other revisions to any of the forward -lookingstatementscontained in this press release or the third quarterearnings call to reflect circumstancesexisting after the date of this report or to reflect the occurrence of future events even if experience or future events make it clear that any expectedresultsexpressed or implied by those forward -lookingstatements will not be realized.
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- Purchase price of C$48.25 per share for an Enterprise Value of US$568 million(C$642 million), including US$47 million (C$53 million) of net cash as of July 29,2006
| | – | 47.8% premium based on La Senza’s closing stock price on November 14 of C$32.65 |
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| | – | The Enterprise Value implies a multiple of 10.7x La Senza’s LTM EBITDA (thru Q2 2006) of $53 million (C$60 million) |
- Principals holding 48% of La Senza’s stock have entered into a hard lock-upagreement by which they agree that they will not sell their shares or encourage orsupport any other offer for the shares through June 30, 2007
- The transaction is expected to be financed with cash on hand and new debt
- The transaction is expected to close in mid-January 2007
- The transaction is expected to be modestly accretive to Limited Brands earningsper share beginning in fiscal 2007, subject to final purchase price allocation
- La Senza’s management team will continue to run the business
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An acquisition of La Senza should provide us with a robust platform for growth in Canada and internationally
- La Senza is one of the leading intimate apparel retailers in Canada by market share and one ofthe top intimate apparel specialty retailers in the world.
- A combination of Limited Brands and La Senza will create a global intimate apparel companywith significant opportunities for value creation
| | – | La Senza is a solid, profitable business with significant opportunity for further profitable growth in Canada and internationally. |
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| | – | La Senza has a management team with a proven track record in the Canadian retail lingerie market. |
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| | – | La Senza has an international infrastructure and an internationally recognized brand. |
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La Senza is a founder-led, publicly traded business with characteristics very similar to LimitedBrands
- La Senza was founded in 1966 as Suzy Shier by Stephen Gross and IrvTeitelbaum, who are still with the business
- The business is headquartered in Montreal, Canada and is publicly traded on theToronto Stock Exchange. La Senza’s market capitalization was approximatelyUS$410 million (C$465 million) as of November 14, 2006.
- Sales for the year ended January 28, 2006 were C$411 million (~US$364 millionat current exchange rates) and EBITDA was C$52 million (US$46 million), 13% ofsales.
- La Senza’s four major business selling channels are:
| | – | La Senza Lingerie which sells bras, sleepwear, panties, and accessories through 234 Canadian mall and power center stores |
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| | – | La Senza Girl which sells fashion apparel and accessories for girls ages 8 to 14 through 84 Canadian mall and power center stores |
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| | – | La Senza International, which has 327 licensed stores in 34 countries |
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| | – | Web-based sales |
Memo: Store count as of November 14, 2006
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| LaSenza’sCoreAssetsandCapabilities |
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La Senza bringsstrong,complementary assets andcapabilitiesspecifically ininternationalinfrastructure and storeoperations
Founder led, strong
management team | | | | |
| | • | | Top 6 executives have an average tenure of 20+ years |
| | • | | Strong operating and financial track record |
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Brand equity with
customers | | • | | Distinctive brand positioning targeting a younger customer with |
| | | | fashionable merchandise at mid-tier prices |
| | | | – | Leading share of the lingerie market in the core 15-29 |
| | | | | demographic |
| | | | | – | Growing share in the 30-44 demographic |
Real estate footprint
and relationships | | | | |
| | • | | Currently in 318 locations |
| | | | – | Store presence in 171 of the 217 fashion oriented shopping |
| | | | | centers in Canada |
| | | | | – | Growing presence in power centers |
| Store operations | | | | |
| | • | | Average store size is 3,000 square feet in Canada with even smaller |
| | | | international stores |
| | • | | Track record of 4-wall profitability across store base |
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International
infrastructure | | | | | |
| | • | | Licensees in 34 countries and growing |
| | • | | International web site with language translation |
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La Senza has demonstratedconsistentRevenue,EBITDA and OperatingIncome growth over the past three years.
| Financial Highlights | | | | | | |
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| La Senza | | 2005 | | 2004 | | 2003 |
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| Financial Results | | | | | | |
| Sales | | $411 | | $355 | | $331 |
| EBITDA | | $52 | | $40 | | $35 |
| Operating income | | $30 | | $18 | | $17 |
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| Earnings from continuing operations before | | | | | | |
| income taxes | | $31 | | $10 | | $10 |
| Income taxes | | $11 | | $2 | | $7 |
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| Earnings from continuing operations | | $20 | | $8 | | $2 |
| Discontinued operations, net of income | | | | | | |
| taxes | | ($2) | | ($8) | | ($15) |
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| Net Earnings (Loss) | | $18 | | $0 | | ($13) |
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| Financial Position and Cash Flow | | | | | | |
| Working capital | | $96 | | $77 | | $52 |
| Current ratio | | 2.76:1 | | 2.51:1 | | 1.94:1 |
| Total assets | | $233 | | $216 | | $223 |
| Shareholders' equity | | $143 | | $128 | | $129 |
| Long-term debt and obligations under capital | | | | | | |
| leases (current and non-current) | | $38 | | $40 | | $41 |
| Cash flow from operations | | $47 | | $47 | | $24 |
| Capital expenditures | | ($17) | | ($23) | | ($8) |
| Stores in operation at year-end | | 305 | | 296 | | 288 |
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Source: La Senza public filings
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The transaction terms include a price of C$48.25 per share for a tender offer of 100% of the company’s stock, or a US$568 million enterprise value.
| (millions, except share price) | | | | | | |
| | | | C$ | | | US$ |
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| Current Share Price (as of November 14, 2006) | | $ | 32.65 | | $ | 28.90 |
| Equity Premium | | | 48% | | | 48% |
| Share Purchase Price | | $ | 48.25 | | $ | 42.70 |
| Shares Outstanding (fully diluted) | | | 14.7 | | | 14.7 |
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| Equity Purchase Price | | $ | 710 | | $ | 628 |
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| Debt outstanding (as of July 29, 2006) | | $ | 37 | | $ | 33 |
| Balance sheet cash and securities (as of July 29, 2006) | | $ | (90) | | $ | (80) |
| Estimated Cash from Options Exercise | | $ | (15) | | $ | (13) |
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| Enterprise Value | | $ | 642 | | $ | 568 |
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| Estimated Transaction Costs | | $ | 14 | | $ | 12 |
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| Enterprise Value (incl. Estimated Transaction Costs) | | $ | 656 | | $ | 580 |
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Exchange rate as of November 10, 2006
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| SourcesandUsesTransactionCosts |
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Includingtransaction costs and the estimated cash from the exercise of options, we expect a total enterprise value of US$580 million and a transactionfundingrequirement of US$640 million.
| Sources | | C$ | | US$ | | Uses | | C$ | | US$ |
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| LBI Debt Offering | | $453 | | $400 | | Purchase of Maple shares | | $710 | | $628 |
| LBI Cash Balances | | $271 | | $240 | | Estimated Transaction Costs | | $14 | | $12 |
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| Total | | $724 | | $640 | | Sub-Total | | $724 | | $640 |
| | | | | | | Maple Net Debt (Cash) | | ($53) | | ($47) |
| | | | | | | Estimated Cash from Options Exercise | | ($15) | | ($13) |
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| | | | | | | Enterprise Value incl. Transaction Costs | | $656 | | $580 |
Exchange rate as of November 10, 2006
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| FinancingStructureandTerms |
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- Our estimated funding need is US$640 million (C$724 million)
- We expect to use US$400 million debt and US$240 million cashon hand to fund the transaction
| | – | Debt |
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| | | - We have a signed commitment for a US$400 million bridge loan
- We will arrange a long-term financing takeout
- We intend to convert the debt to Canadian dollars
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| | – | Cash On Hand |
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| | | - We will use US$240 million of cash on hand to fund the remainder of the transaction
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