Contact information
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UBS Corporate Finance Italia S.p.A
Via Santa Margherita, 16
20121 Milan
www.ubs.com
UBS Corporate Finance Italia is a subsidiary of UBS AG
[LOGO] UBS
[LOGO] UBS
STRICTLY PRIVATE AND CONFIDENTIAL
Fila Holding S.p.A.
Presentation to the Board of Directors
June 23, 2003
JUNE 2003
Contents
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SECTION 1 Introduction__________________________________________________ 1
SECTION 2 The offer_____________________________________________________ 4
SECTION 3 Analysis______________________________________________________ 9
SECTION 4 Summary of the analysis and conclusions ______________________ 17
APPENDIX A Pro-Forma Financial position
[LOGO] UBS
Disclaimer
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The accompanying material was compiled on a confidential basis for use solely by
the Board of Directors of Fila Holding S.p.A. ("Fila" or the "Company") in
evaluating the proposed transaction described herein, and should not be relied
upon, is not on behalf of, and shall not confer rights or remedies upon any
holder of securities of the Company or any other person. This material was
prepared for a specific use by specific persons and was not prepared to conform
with any disclosure standards under applicable securities laws or otherwise.
This document may not be used for any other purpose or reproduced (other than
for the Board of Directors and its advisers), disseminated or quoted at any time
and in any manner without the prior written consent of UBS Corporate Finance
Italia S.p.A ("UBS"). UBS has assumed and relied upon, without independent
verification, the accuracy and completeness of the information that was publicly
available or furnished to it by the Company or otherwise reviewed by it for the
purposes of this document. Neither UBS nor any of its respective officers,
directors, employees, affiliates, advisors, agents or representatives warrants
the accuracy or completeness of any of the material set forth herein. Nothing
contained in the accompanying material is, or shall be relied upon as, a promise
or representation as to the past or the future. This document is based on the
economic, regulatory, market and other conditions as in effect on and the
information made available to UBS as of the date hereof. It should be understood
that subsequent developments may affect this document, which UBS is under no
obligation to update, revise or reaffirm. UBS has relied upon the management of
the Company as to the strategic rationale and the perceived benefits of the
transaction and as to the reasonableness and achievability of the financial and
operating forecasts (and the assumptions and bases therefore) provided to us by
the Company, and with the Company's consent UBS has assumed that such forecasts,
reflect the best currently available estimates and judgements of the management
of the Company and that such projections and forecasts will be realised in the
amounts and time periods contemplated thereby.
This document does not purport to be a complete or accurate description of UBS's
fairness opinion. Accordingly, no reliance should be placed upon it and it is
qualified in its entirety by reference to the full text of the final fairness
opinion.
It should be understood that any estimates, valuations and/or projections
contained in the accompanying material were prepared or derived from information
supplied by the Company or from public sources without assuming responsibility
for any independent verification thereof by UBS. Accordingly, no representation
or warranty can be or is made by UBS as to the accuracy or achievability of any
such valuations, estimates and/or projections.
[LOGO] UBS
Introduction
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SECTION 1
[LOGO] UBS
Introduction
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o As a result of the announcement by RCS MediaGroup S.p.A. ("RCS") on March
7, 2003 in which it stated its intention to offer to purchase all of the
outstanding ordinary shares of Fila Holding S.pA. ("Fila" or the
"Company") including those in the form of American Depositary Shares (the
"Fila ADSs") not owned by RCS (the "Offer") at a price of US$1.12 in cash,
without interest per Fila ADS/share ("the Consideration"), the members of
the Board of Directors of Fila are considering whether the Consideration
is fair from a financial point of view
o The Board of Fila engaged UBS on May 12, 2003 to provide the Board of Fila
with an opinion as to the fairness of the Consideration from a financial
point of view
o On June 10, 2003 (the "Closing Date"), Fila completed the sale of
substantially all of its business and operations to Sport Brands
International LLC ("Sport Brands") for a total consideration of US$351
million and repaid all its financial debt towards the banks and RCS (the
"Transactions"). Following such Transactions Fila has no substantial
ongoing business and has some cash and working capital
o We have not been requested to address and our opinion does not address,
the Transactions, the Company's underlying business decision to effect the
Transactions or the Board's decision whether to recommend the Offer
[LOGO] UBS Section 1: Introduction 2
Instruments and scope of the work
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o In order to assess the value of Fila, UBS has performed a number of
different tasks:
- reviewed the draft of the Offer to Purchase from RCS dated June 20,
2003 (the "Offer to Purchase") and prior drafts
- reviewed certain publicly available business and historical
financial information relating to the operating activities and the
financial condition of the Company, including the Company's
financial statements as of December 31, 2002, Company's annual
report on Form 20-F for the year ended December 31, 2002 and certain
communications to shareholders
- reviewed the Stock Purchase Agreement ("SPA") among Sport Brands,
Holding di Partecipazioni Industriali S.p.A. (subsequently re-named
RCS MediaGroup S.p.A.) and Fila relating to the purchase by Sport
Brands of 100% of the capital stock of Fila Nederland BV, Fila Sport
S.p.A., Ciesse Piumini S.r.l. and 5% of Fila U.S.A. Inc. shares,
dated March 7, 2003
- reviewed the letter agreement dated June 10, 2003 ("Letter of
Agreement") relating to the SPA
- reviewed current and historical market prices of the ADSs of the
Company
- reviewed certain financial information and other data relating to
the remaining assets and liabilities of the Company, including
estimates prepared by management of the Company and not publicly
available
- reviewed the Company's tax position
- conducted discussions with the management of the Company and with
the members of the Board of Directors concerning the post-sale
business of the Company, and
- conducted such other financial studies, analyses, and
investigations, and considered such other information as we deemed
necessary or appropriate
o We have considered Fila on the basis of the draft pro-forma financial
position as of June 10, 2003 ("Pro-Forma Financial position") as adjusted
for all the adjustments which the Company has considered appropriate to
define the pro-forma financial position of Fila as of June 23, 2003 ("Date
of Reference")
[LOGO] UBS Section 1: Introduction 3
The offer
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SECTION 2
[LOGO] UBS
Indicative terms of the offer
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Target of the o All 8,598,776 outstanding Fila shares, in the form of Fila ADSs or shares, not already owned by RCS
Offer o RCS has announced its intention to delist Fila ADSs from the NYSE
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Offeror o RCS, owner of 91.09% of Fila outstanding shares/ADSs
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o Two separate, but concurrent and related, offers:
- a public tender offer in the US
Structure of - a private offer made only to 7 individuals who are Italian residents
the offer
o Terms and conditions of the two offers are substantially the same (the only material
difference being that Italian holders can be paid in Euros)
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o RCS will pay US$1.12 net per each Fila ADS or share in cash, without interest. The maximum
Offer price transaction consideration will be US$9.6m
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o The offer is not conditional upon any specific number of Fila shares, in the form of Fila ADSs or
Conditions shares, being tendered, the availability of financing or the approval of the Board of Directors of Fila
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Financing o The transaction will be entirely financed by RCS internal funds
structure
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Timing o Within September 7, 2003 as announced in RCS press release
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[LOGO] UBS Section 2: The offer 5
Share price performance
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[LINE CHART OMITTED]
SOURCE: Datastream
o In December 2002 RCS subscribed its share of Fila's capital increase for a
total of (euro)105.5m through the cancellation of an outstanding financial
receivable. In February 2003 the other shareholders subscribed a part of
their capital increase ((euro)0.03m)
o On December 5, 2002 RCS announced its intention to sell Fila's operating
activities by the end of the year
o On March 7, 2003 Fila announced it had reached an agreement for the sale
of all of its operating businesses to Sport Brands. On the same date, RCS
announced that after the closing of the Transactions (and in any event
within 6 months from that date) it would offer to purchase all the
shares/ADSs not already owned by RCS at a price of US$ 1.12 per share/ADS
o Since March 7, 2003 the stock market price has closely tracked the offer
price
[LOGO] UBS Section 2: The offer 6
Premium analysis
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o In the table below we have reported the average price of Fila ADSs and the
premium/(discount) of the offer price over the average share price in the
periods (1 week, 1 month, 3 months and 1 year) prior to the announcement
of the offer (March 7, 2003)
Average price Premium/(discount)
prior to of the offer price
announcement over the average
Period (US$) share price
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1 week 1.028 8.95%
1 month 0.960 16.61%
3 months 1.135 (1.33%)
1 year 2.547 (56.03%)
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SOURCE: Datastream
[LOGO] UBS Section 2: The offer 7
Current Shareholding structure
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No. of
Shareholders shares/ADSs (%)
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RCS 87,912,536 91.09
Harris Associates L.P. 3,252,430 3.37
Fidelity 1,293,015 1.34
BPI Global Asset Management 158,500 0.16
Boston Private Value Investors 33,000 0.03
Deutsche Asset Management 30,650 0.03
World Asset Management 5,780 0.01
Veritas SG 5,000 0.01
Italian shareholders 45 0.00
ADSs held by former subsidiaries 112,400 0.12
for stock option purposes
Others 3,707,956 3.84
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Total shares/ADSs 96,511,312 100.00
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SOURCE: Carson, Company
o RCS currently owns 87,912,536 Fila shares representing approximately
91.09% of the outstanding shares/ADSs
o The total Fila ADSs owned by identified institutional investors that have
communicated their investments are 4,778,375 (4.95% of share capital)
o Italian shareholders are 7 individuals holding 45 shares
o According to the Letter of Agreement, after the closing of the
Transactions, Sport Brands will hold approximately 112,400 Fila ADSs that
were previously held by some operating subsidiaries, formerly controlled
by Fila, for stock option purposes. Such ADSs will be transferred to an
escrow account and pursuant to the agreement between the parties cannot be
tendered. In the event of delisting and termination of the ADS programme
of Fila, Sport Brands may within one year convert its ADSs into ordinary
shares
o There are no third party rights to underwrite newly issued shares/ADSs, or
obligations by the Company to issue any further shares/ADSs
[LOGO] UBS Section 2: The offer 8
Analysis
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SECTION 3
[LOGO] UBS
Analytical approach
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o With effect from the Closing Date, Fila has effectively transferred all of
its operating business to Sport Brands. The transaction proceeds of
US$351m have been used by the Company to repay its outstanding debt
towards the banks and RCS
o Given the non-operating nature of the assets and liabilities left in Fila
the Net Asset Value ("NAV") method is the most appropriate analytical tool
o The NAV method measures the current value of a company's assets net of its
outstanding liabilities
o In our view, other commonly used methodologies are not applicable to
determine the value of Fila:
- Discounted Cash Flow: Fila does not have any operating cash flow
stream
- Comparable companies analysis: Fila could not validly be compared
with any other listed company on the basis of a sector/market
rationale
- Most recent "going private" transactions are not meaningfully
comparable with the Fila transaction because they generally refer to
companies that have significant business and operations and the
offer price reflects the offerors' view on the future performance of
such business and operations
o We have assumed a US$/(euro)exchange rate of 1.1623 (as of close of
business on June 20, 2003)
o We have assumed a discount rate of 3% equal to the Company average cash
interest yield (pre-tax)
[LOGO] UBS Section 3: Analysis 10
Analytical approach (continued)
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o To determine Fila's NAV at the Date of Reference we started our analysis
from the draft Pro-Forma Financial position as of June 10, 2003 and
provided to us by the Company. The Company informed us that its financial
position at the Date of Reference would not have any substantial
differences from the Pro-Forma Financial position as of June 10, 2003
except for the adjustments below
o We have identified with the management of the Company the assets and
liabilities included in the Pro-Forma Financial position
o The management of the Company confirmed that:
- The value of the assets and liabilities in the Pro-Forma Financial
position represents the current value of such assets and liabilities
- There are no assets and/or liabilities not included in the Pro-Forma
Financial position other than:
- Costs related to the disposal of operating assets (management
severance payments/indemnities, legal fees) and the ordinary
activity of the Company (Board compensation, internal
auditors' compensation and external auditor's fees) and costs
related to the Company's tax amnesty
- Fila's tax loss carry-forwards
- Potential liabilities for Fila deriving from any claim for
indemnification pursuant to the SPA
o All costs have been discounted to the Date of Reference
[LOGO] UBS Section 3: Analysis 11
Adjustments to pro-forma NAV
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Severance
payment funds Transactions
Pro-Forma Financial transfer payment costs and other Tax amnesty Adjusted financial
((euro)'000) position (06/10/03) to Fila Sport costs liability position (06/23/03)
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Fixed assets (net) 20 20
Net equity investments 3 3
Other non current assets 230 230
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Total fixed assets 253 253
Other receivables 19,855 19,855
Net cash 33,365 (337) (891) (515) 31,622
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Total current assets 53,220 51,477
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Total assets 53,473 51,730
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Severance payment funds 337 (337) 0
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Medium and Long term liabilities 337 0
Accounts payable 2,218 2,218
Other current liabilities 1,790 1,790
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Current liabilities 4,008 4,008
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Shareholders' Equity (NAV) 49,128 (891) (515) 47,722
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NAV per ADS/share (US$) 0.5916 0.5747
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Total equity and liabilities 53,473 51,730
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SOURCE: Company
NOTE:
Adjustments are in the amounts that the Company has deemed appropriate
[LOGO] UBS Section 3: Analysis 12
Adjustments to pro-forma NAV (continued)
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o The adjustments that have been made to take into account the assets and
liabilities identified by the Company and not included in the Pro-Forma
Financial position are the following:
- The severance payment funds indicating in the Pro-Forma Financial
position have been transferred to Fila Sport at closing of the SPA,
creating a debt for the same amount towards Fila Sport
- The Present Value of Transactions costs and other costs refers to:
- Board compensations ((euro)0.28m) equal to the total amount
forecasted in the 2003 budget net of any payment
- management incentives ((euro)0.42m) equal to an estimate,
provided by the Company and prepared by the management of the
Company, of the potential liabilities for severance
indemnities towards Fila employees
- internal auditors compensations ((euro)0.04m) equal to the
total amount forecasted in the 2003 budget net of any payment
- external auditors' fees ((euro)0.05m) equal to the amount to
be paid for the 2003 accounts auditing
- legal fees ((euro)0,05m) for the work done in relation to the
Offer
- outstanding lease and administrative services outsourcing
agreements ((euro)0.05m). These costs represent the
consideration for the year 2003 (period from June 11, 2003 to
December 31, 2003)
- The tax amnesty liability related to the fiscal year 2002 (equal to
(euro)0.5 million) represents the present value of the planned
payments not included in the Pro-Forma Financial position
[LOGO] UBS Section 3: Analysis 13
Hedge activity on the foreign exchange risk
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o The Company had some hedging positions to neutralise the exchange rate
risk related to the debt towards operating companies and to the
Consideration
o The positions were related of forward agreements for the purchase of
foreign currency and have been almost completely closed before the Date of
Reference, originating a profit of (euro)20m
o The only current open position is equal to (euro)6.6m and will be closed
on June 30, 2003. To consider this position we used the spot exchange rate
as of June 20, 2003 (US$/(euro)1.1623)
[LOGO] UBS Section 3: Analysis 14
Potential value of Fila's tax loss carry forwards
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o According to the information received from the Company, at the Date of
Reference, Fila's tax losses amount to approximately (euro)234m
o Approximately (euro)154m of such losses stem from previous years taxable
write-offs of the investments in the operating companies that become
deductible with the sale of the operating activities to Sport Brands
o A further approximately (euro)71m represents the estimated tax loss for
the period from January 1, 2003 until June 10, 2003 and are mainly
attributable to the capital loss from the sale of operating companies
o The Company believes that as a stand-alone entity, given its lack of
revenues and taxable income, Fila will not be able to materially benefit
from such tax losses; if the Company invested its net cash position in 5
year Italian Government bonds, the Net Present Value of the total tax
savings, related to the use of the Company's tax loss carry forwards for 5
years, that could be achieved would be approximately (euro)1.5m (US$0.02
per ADS/share)
o On March 7, 2003 RCS announced that immediately after completion of the
Offer, it intends to delist the Fila ADSs from the NYSE and to turn Fila
to new activities and investments within the group strategic sectors
o Based on the Board's assessment that no opportunity exists for the Company
to realise a material value through the use of such tax loss
carry-forwards, we have assumed that the value of tax loss carry-forwards
is not material to the Company
Analysis of Fila's tax losses
((euro)'000)
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2002 tax losses 5,762
Estimated tax loss (01/01/03 - 10/06/03) 71,166
2003 write-off provisions 2,540
Previous years' write-off provisions 153,931
Additional 2003 losses 891
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Estimated tax losses(1) 234,290
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SOURCE: Company estimates
NOTE:
(1) The maximum theoretical potential Italian tax savings implied in the
estimated tax losses would amount to approximately (euro)80m (losses are
deductible only for IRPEG tax purposes) and could be carried forward for 5
years only
Potential tax savings due to investments in the money market
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Net cash post adjustments ((euro)'000) 31,622
Interest rate(1) (%) 2.85%
Full year interest income ((euro)'000) 901
Full year tax savings ((euro)'000) 306
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NPV of 5 year tax savings(2) ((euro)'000) 1,540
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NOTE:
(1) 5 year Italian Government bond yield (as of June 17, 2003)
(2) For the year 2003 the interest were calculated on 6 months
SOURCE: Bloomberg
[LOGO] UBS Section 3: Analysis 15
Potential liabilities arising from the SPA
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o In accordance with the provisions of the SPA and the Letter of Agreement,
Fila is potentially liable for an aggregate amount not exceeding 15% of
the purchase price (the "Cap") except for claims of breaches of certain
representations, covenants, and certain litigation described in the SPA,
for which Fila would be liable for the full amount
o Any claims for indemnification made by Sport Brands will generally be paid
by Fila only to the extent that individual claims or series of related
claims exceed (euro)30,000 and the aggregate amount of all such claims
exceed (euro)5 million, at which point Fila shall be liable for the
portion in excess of that amount
o The Company management's best estimate is that liabilities for any claims
for indemnification made by Sport Brands under the SPA will not exceeds
the (euro)5 million threshold indicated in the SPA. Therefore we have not
adjusted the Company NAV for the liabilities deriving from such potential
claims for indemnification
[LOGO] UBS Section 3: Analysis 16
Summary of the analysis and conclusions
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SECTION 4
[LOGO] UBS
Summary of the analysis and conclusions
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Summary of the analysis(1)
Pro-forma NAV ((euro)'000) 49,128
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Pro-forma NAV (June 10, 2003) per ADS/share (US$) 0.5916
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Total adjustments to pro-forma NAV ((euro)'000) (1,406)
Adjusted NAV ((euro)'000) 47,722
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Adjusted NAV (June 23, 2003) per ADS/share (US$) 0.5747
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Estimated liabilities incurred as a consequence of the SPA ((euro)'000) (0)
NAV ((euro)'000) 47,722
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NAV per ADS/share (US$) 0.5747
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NOTE:
(1). All amounts exclude any potential value arising from the Company's tax
loss carry-forwards
o Based on the Board's assessment that no opportunity exists for the Company
to realise a material value through the use of such tax loss
carry-forwards, we have assumed that the value of tax loss carry-forwards
is not material to the Company
o Based on our analysis as outlined in this presentation Fila Adjusted NAV
is US$0.5747 per ADS/share
o According to the terms indicated in our fairness opinion letter to which
you should refer in full, the Consideration to be received by the holders
of Fila ADSs is fair from a financial point of view
[LOGO] UBS Section 4: Summary of the analysis and conclusions 18
Pro-Forma Financial position
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APPENDIX A
[LOGO] UBS
Pro-Forma Financial position
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Pro-forma Adjustments(1)
financial
position
((euro)'000) 5/31/2003 1 2 3 4 5 6
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Fixed assets (net) 20
Net Equity investments 3
Other non current assets 230
Equity investments intercompany 150,967 (150,967)
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Total fixed assets 151,220
Other receivables 134,304 (20,000) 103,658 (263) 323
Net cash 13 82,123 106,523 (106,523) (500) (653)
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Total current assets 134,317
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Total assets 285,537
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Severance payment funds 337
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Medium and Long term liabilities 337
Accounts payable 2,218
Other current liabilities 162,688 106,523 (2,865) (390) (653)
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Current liabilities 164,906
Shareholder funds 120,294 (20,000) (68,845) (373) 323
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Total equity and liabilities 285,537
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Adjustments(1) Pro-Forma
Financial
position
((euro)'000) 7 8 9 10 6/10/2003
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Fixed assets (net) 20
Net Equity investments 3
Other non current assets 230
Equity investments intercompany 0
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Total fixed assets 253
Other receivables (198,167) 19,855
Net cash 198,167 (263,514) 20,604 (2,875) 33,365
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Total current assets 53,220
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Total assets 53,473
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Severance payment funds 337
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Medium and Long term liabilities 337
Accounts payable 2,218
Other current liabilities (263,514) 1,790
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Current liabilities 4,008
Shareholder funds 20,604 (2,875) 49,128
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Total equity and liabilities 53,473
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SOURCE: Company
NOTE:
(1) Each adjustment is described in the following page
[LOGO] UBS Appendix A: Pro-Forma Financial position 20
Adjustments
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1. Write-off of a receivable of Fila Holding towards Fila Nederland
2. Sale of shares of Fila Sport, Fila U.S.A., Fila Nederland and Ciesse with
the accounting of the capital loss on investments
3. Loans granted by RCS to Fila Holding
4. Loans granted by Fila Holding to Fila Sport and Fila Nederland to allow
them to repay their financial debts
5. Costs for UBS advisory services and interest incomes on loans granted to
Fila Sport and Fila Nederland (accrued as of June 10, 2003)
6. Interests paid on bank debts (accrued as of June 10, 2003)
7. Cash inflow from financial receivables relating to loans granted to Fila
Sport and Fila Nederland
8. Cash outflow to repay financial debts
9. Income from closing of hedging positions
10. Costs relating to advisory services for the sale of the operating
activities
[LOGO] UBS Appendix A: Pro-Forma Financial position 21