“Creating the Leading Media Services Company” July 6, 2006 Exhibit 99.1 |
Safe Harbor Statement - Valassis Certain statements found in this document constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks and uncertainties and other factors which may cause the actual results, performance or achievements of Valassis to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: price competition from Valassis' existing competitors; new competitors in any of Valassis' businesses; a shift in customer preference for different promotional materials, strategies or coupon delivery methods; an unforeseen increase in Valassis' paper costs; economic disruptions caused by terrorist activity, armed conflict or changes in general economic conditions; changes which affect the businesses of Valassis customers and lead to reduced sales promotion spending; the ability and timing for the closing conditions to be satisfied in connection with Valassis' merger agreement with ADVO; and the ability for Valassis to achieve synergies in connection with the merger and the integration of ADVO successfully into its business. Valassis disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. |
Safe Harbor Statement - ADVO This press release may contain certain statements regarding ADVO's business outlook, prospects, future economic performance, anticipated profitability, revenues, expenses or other financial items, future contracts, market opportunities and other statements that are not historical facts, such statements are “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, each as amended. Such forward looking statements are based on current information and expectations and are subject to risks and uncertainties which could cause ADVO's actual results to differ materially from those in the forward looking statements. ADVO's business is promotional in nature, and ADVO serves its clients on a “just in time” basis. As a result, fluctuations in the amount, timing, pages, weight, and kinds of advertising pieces can vary significantly from period to period, depending on its customers’ promotional needs, inventories, and other factors. In any particular period these transactional fluctuations are difficult to predict, and can materially affect ADVO's revenue and profit results. ADVO’s business contains additional risks and uncertainties which include, but are not limited to: general changes in customer demand and pricing; the possibility of consolidation in the retail sector; the impact of economic or political conditions on advertising spending and ADVO's distribution system; postal and paper prices; possible governmental regulation or legislation affecting aspects of ADVO's business; the efficiencies achieved with technology upgrades; fluctuations in interest rates; the ability and timing for the closing conditions to be satisfied in connection with ADVO's merger agreement with Valassis and other general economic factors. |
I. Transaction Overview II. Strategic Rationale III. Integration Strategy & Synergies IV. Financials V. Summary and Questions Agenda |
Transaction Overview • $37 cash per ADVO share (approx. 32 mil. diluted shares) • Enterprise value of $1.3 billion; Equity value of $1.2 billion • Estimated $40 mil. in annual cost synergies beginning in 2007 • Purchase price implies ~8.3x FYE 9/30/06 EBITDA pro forma for $40 mil. in cost synergies • Accretive in 2007 on a cash EPS basis • Fully committed bank facility • Expected to close in three to four months; subject to regulatory and ADVO shareholder approvals 1 Excludes estimated amortization of intangibles arising from purchase accounting 1 |
Transaction Overview • Combination to form leading media services company – Newly combined company will share talents and best practices – Al Schultz will serve as Chairman, President and CEO of the combined company – ADVO CEO, Scott Harding, will serve as a consultant of the combined company – Bob Recchia will serve as CFO of the combined company • Board Composition – The Valassis Board of Directors will remain intact |
Combination of Industry Leaders • Creates diversified company with complementary capabilities, product and service offerings and clients • Provides most complete solution for advertisers and marketers to reach consumers – Unmatched reach and scale – Flexible targeting capabilities – Optimization of multiple distribution methods – Measurability and optimization of ROI • Positioned to capture growth across the expanded product portfolio by anticipating needs in the marketplace • Expected to significantly enhance shareholder value |
• Shared mail wrap • Co-op newspaper inserts (free-standing insert) • On-page newspaper advertising (ROP) • Canadian operations • Solo direct mail • List services • Shared mail inserts • ADVO targeting zones • Preprinted inserts • Newspaper-delivered product sampling • Newspaper polybag advertising • Door hanger sampling/advertising • Direct mail sampling/advertising • Loyalty marketing software • Internet-delivered promotions • Coupon and promotion clearing • European and Canadian operations • Sweepstakes/ security consulting • In-store capabilities Strategic Fit International & Services Household Targeted Neighborhood Targeted Market Delivered |
Complementary Customers Misc. Services 3% Auto Services 3% Retail Drug 6% Other 23% Specialty Stores 3% Grocery 26% Food Service 14% Home Furnishings 8% Telecom/Satellite 7% Discount Stores 7% Specialty Retail 15% Telecom 16% Consumer Packaged Goods 43% Food Service 9% Other 1% Financial 2% Direct Marketers 6% Consumer Services 6% Grocery, Mass and Drug 2% Misc. Services 2% Consumer Packaged Goods 19% Auto Service 2% Other 13% Specialty Stores 8% Financial 1% Direct Marketers 3% Grocery, Mass and Drug 18% Discount Stores 4% Telecom/Satellite 11% Home Furnishings 4% Consumer Services 3% Food Service 12% Combined Based on 2005 Revenues |
Targeted Scale Over 700 sales executives Shared mail distribution in 140 markets, penetrating up to 114 mm (90%) of U.S. homes Relationships with more than 13,000 newspapers nationwide Newspaper weekly distribution to over 60 mm households Leading buyer of newspaper media, paper and postage Extensive production and delivery network Relationships with approx. 20,000 customers |
Integration Strategy • Joint Integration Team led by senior executives of both companies • Expect to yield $40 million in annual cost synergies beginning in 2007 – Printing and paper – Distribution costs – Operational efficiencies – SG&A • Significant capital expenditure reductions |
® Substantial Growth Opportunities Current • Cross-selling and up-selling existing products and solutions to existing customers • Selling existing products and solutions to new customers • Improving media optimization – extended reach and ROI • Utilizing ADVO’s unused postage No revenue synergies in base assumptions |
® Substantial Growth Opportunities Future • Extending the reach of our combined savings-oriented content to a digital platform • Providing more in-store media solutions to our customers • Continuing international expansion |
® Financials 2007 COMBINED Revenue Cash EPS* (Before amortization of intangibles) $2,630 - $2,680 4% - 6% $305 - $315 14% - 18% $1.65 - $1.75 7% - 9% (Figures in millions) EBITDA* EXPECTED CAGR 2007 - 2009 *Pro forma for $40 million in cost synergies |
® A Compelling Investment Opportunity Stock Price (7/5/06) $23.22 $25.11 $28.01 Equity Value $1,111 $2,082 $1,313 Enterprise Value $2,568 $2,115 $1,347 ‘07 Revenue $2,650* $1,285 $490 ‘07 EBITDA $310* $247 $162 ‘07 Cash EPS** $1.70* $1.61 $1.56 EV/Revenue 0.97x 1.65x 2.75x EV/EBITDA 8.3x 8.6x 8.3x P/E 13.7x 15.6x 17.9x Note: Harte Hanks and Catalina Marketing figures are per First Call consensus estimates *Represents the midpoint of the 2007 estimated range provided on previous slide **Excludes amortization of intangibles Long-term Cash EPS Growth 14% - 18% 9% 12% Pro Forma |
® Pro Forma Capitalization • Pro forma capital structure leverages diverse earnings power of combined company to materially reduce Valassis’ cost of capital • Valassis has fully underwritten $1.4 billion bank financing commitment to fund the acquisition and to repay existing ADVO debt • Expected borrowing cost of approximately 7.75% - 8.0% • Existing Valassis convertible securities and 6.625% senior notes to remain in place |
® Pro Forma Capitalization • Expected pro forma leverage of 4.9x Debt/EBITDA at closing and interest coverage of 2.9x EBITDA (including $40 million of cost synergies) • Ability to rapidly de-lever given strong pro forma cash flow • Additional funding options to further reduce leverage will be evaluated prior to closing |
Transaction Summary- Building Shareholder Value • Positioned to capture growth opportunities • Enhanced diversification in product portfolio, customer base and distribution • Ability to quickly recognize cost, revenue and capital expenditure synergies • Best of both management teams and capabilities • More efficient capital structure and continued strong cash flow |
Questions? |