M&A in the retail and consumer products industry - ey.com · Telepizza Group 455 - Naturhouse...

M&A in theretail and consumer products industryValuation multiplesMay 2017

2 | EY mergers and acquisitions in the retail and consumer products industry

Introduction 3

Main conclusions 4

Scope of our analysis 6

Industry and macroeconomic highlights 8

M&A valuation multiples 12

Listed company valuation multiples 22

Equity market sentiment in Spain 30

Appendices 31

Contents

3EY mergers and acquisitions in the retail and consumer products industry |

IntroductionEY is pleased to present the fourth edition of its global analysis of the valuation multiples trend for the 2005—16 period in the retail and consumer products industry (R&CP) industry, with special emphasis on the Spanish market.

Our report analyzes, by subindustry and geographic location, the deal volumes, EBITDA valuation multiples paid, and stock prices for 2005—16, as well as current equity analyst recommendations.

Our R&CP industry analysis for 2005—16 covers:

• In Spain: 1,395 transactions

• In Europe: 15,201 transactions

• In North America (US and Canada): 8,569 transactions

• In Spain, Europe and North America, a total of 219 listed companies


Executive summary• The year 2016 was characterized by a volatile climate as a result

of several factors, including uncertainty in the general elections in Spain, the result of the referendum on the United Kingdom’s withdrawal from the European Union, the impact of the United States presidential election and the persistence of geopolitical tensions.

• Despite these events, consumption growth remained positive in 2016. We predict this upward trend will continue in 2017, supported by favorable economic sentiment and expectation indicators, and economic and employment recovery.

• Given the turnaround in industry fundamentals and valuation multiples, we expect a gradual rise in deal volumes in the medium term, supported by current market fragmentation and the ever-present competitive pressure caused by private labels.

• Spanish M&A transaction prices within the R&CP sector continue to rise. In 2016, the enterprise value paid for R&CP companies averaged 11.4x EBITDA, up from 11.1x EBITDA in 2015. These results incorporate the prior leap from the 2011 average of 8.0x EBITDA and places prices during 2016 above the pre-crisis years (2004—07).

• The slowdown in deal volume (measured in euros) in 2016

in the prior year by major transactions such as Anheuser-Busch InBev, Coca-Cola and Koninklijke Ahold.

Main conclusions


M&A valuation multiples(1)

• In Europe, the 2016 average valuation multiple was 9.0x, somewhat lower than the 2005—16 historical average of 9.9x enterprise value to EBITDA ratio (EV/EBITDA), standing at similar levels to the average multiple of 9.3x EV/EBITDA observed during the crisis period of 2009—12.

• In North America, the average valuation multiple during 2016 was 10.2x EV/EBITDA, higher than the 2005—16 average multiple of 9.6x, showing a gradual increase from 8.5x EBITDA in 2011.

• In Spain, the historical average valuation multiple (2005—16) is 10.1x EV/EBITDA. In 2016, the average valuation multiple was 11.4x, slightly higher than the 2015 average valuation multiple of 11.1x.

• valuation multiples can be observed, with higher multiples on the larger deals.

• The number of transactions in the various markets in 2016 compared with the previous year highlights the degree of reduction within the three geographic locations analyzed. The

2016, reverting to normalized levels observed during 2012—14. The decrease is primarily attributable to the lower number of transactions in the food and beverage industry compared to 2015, in which there was an atypically high number of

(1)

Listed company valuation multiples• At the end of 2016, R&CP public companies in Spain traded at

11.7x EV/EBITDA, similar to their North American (11.9x) and European (11.6x) counterparts.

• Nevertheless, in the three geographic locations, valuation multiples of R&CP companies traded above the historical average. For 2016, Spain’s multiple was 11.6x EV/EBITDA vs. the 11.2x average for 2005—16; Europe’s multiple was 11.7x vs. the 10.6x average for 2005—16; and North America’s was 12.4x vs. 10.6x.

• Among the 16 Spanish companies analyzed, only 11 were followed by equity research analysts, without a clear consensus recommendation on wether to buy, sell or hold the stock. At the

share prices at the end of 2016.


The purpose of this report is to analyze the R&CP industry in Spain from a valuation perspective, covering multiples paid in transactions that took place between 2005 and 2016, as well as the trend in the listed companies’ valuation multiples during the same period.

A similar valuation analysis has been performed for the European and North American (US and Canada) markets for comparison.

Our analysis is broken down into the following subindustries:

• Food and beverage

• Household and personal care products

• Retail (food, clothing and apparel)

• Restaurants

M&A valuation multiples

• Our analysis covers transactions that took place in the Spanish market between 2005 and 2016 in the R&CP industry. We

subindustries listed.

• industry for 2005—16, and 8,569 transactions in North America during the same period.

• estimate the valuation multiple for more than 1,000 deals, distributed in the three geographic locations analyzed.

Listed company valuation multiples

• For the listed companies’ valuation multiples analysis, we covered 16 Spanish R&CP listed companies, although it is important to note the limited presence of these companies on the Spanish stock market. Important companies, such as El Corte Inglés or Mercadona, are not listed, whereas others (e.g., Carrefour) are listed outside of Spain. In addition, there are some subindustries (restaurants and household and personal care products) that have no presence on the Spanish stock market.

• Due to the size of the European and North American markets, we covered a greater number of listed companies for these regions (92 in Europe and 111 in North America).

Scope of our analysis


Source: EY analysis based on Capital IQ.

Selected listed companies in the Spanish market for valuation purposes

Subindustry Number of selected companies 2016

Number of selected companies 2015 Criteria for the selection of companies

Food and beverages 11 10 Selection of companies included in the Bolsas and Mercados Españoles stock exchange (BME) food and beverage subindustry and EY selection

Retail (food, clothing and apparel)

5 5 Selection of companies included in the BME's apparel and retail subindustry and EY selection

Household and personal care products

- - There are no listed companies in this subindustry

Restaurants - - There are no listed companies in this subindustry

Total 16 15

Selected listed companies in the European market for valuation purposes



Food and beverages 21 22 Companies included in the STOXX Europe 600 Food & Beverage Index Retail (food, clothing and apparel)

29 31 Companies included in the STOXX Europe 600 Retail Index


36 33 Companies included in the STOXX Europe 600 Personal & Household Goods Index

Restaurants 6 9 EY selection from main companies in this subindustry

Total 92 95

Selection of listed companies in Spain and market capitalization as of 31 December 2015 and 31 December 2016 (based on the

Food and beverages Market capitalization Market capitalization

Coca-Cola European Partners 14.502 - Ebro Foods 3.063 2.793 Viscofan 2.183 2.593 Baron de Ley 514 477 Telepizza Group 455 - Naturhouse Health 285 - Deoleo 266 266 Borges Agricultural & Industrial Nuts

65 13

Natra 32 15 Bodegas Riojanas 22 22 Bodegas Bilbaínas 19 18

Retail (food, clothing Market capitalization 31 Market capitalization 31

Inditex 100.959 98.656

DIA 2.865 3.389 Dogi International Fabrics 280 65 Adolfo Domínguez 30 32 Liwe Española 21 19

Selected listed companies in the North American market for valuation purposes



Food and beverages 27 26 Companies included in the STOXX North America 600 Food & Beverage Index Retail (food, clothing and apparel)

43 43 Companies included in the STOXX North America 600 Retail Index


32 33 Companies included in the STOXX North America 600 Personal & Household Goods Index

Restaurants 9 26 EY selection from main companies in this subindustry

Total 111 128

Source: EY analysis based on Capital IQ.


After exceeding 600 basis points (bp) in July 2012, and largely as a result of the expansionary monetary policy promoted by the European Central Bank (ECB), the sovereign risk premium stood at 116bp at the end of December 2016. However, 2016 has been characterized by a volatile climate due to various factors, including uncertainty in the general elections in Spain, the result of the referendum on the United Kingdom’s withdrawal from the European Union, the impact of the United States presidential election and the persistence of geopolitical tensions.

The Spanish gross domestic product (GDP) growth in 2016 was

data as at December 2016, according to the Spanish Ministry of Economy, Industry and Competitiveness). This highlights the continuity of the Spanish economic recovery, which began in 2013. This recovery has been driven mainly by the national demand, which is motivated by private consumption and productive

in disposable income and the availability of new credit in a lower interest rate environment. Consumption experienced a continual

from the previous year (latest revised data as at December 2016). Also, in the same month, the average occupancy rate in the retail

100.7 points, the index maximum during 2016, although below the historic maximum reached in 2015 (6.7 points below December 2015). This slight improvement is due to a better valuation of

the present situation, and despite the 0.9-point decrease in the Expectations Index in December 2016. The CCI recovered and, in December 2016, exceeded the decrease experienced, closing with the highest values of the year. On the other hand, the Present Situation and the Expectations indices register an interannual

The Present Situation Index was 92.2 points in December 2016,

evolution is a consequence of the decrease in the perception of the employment conditions and the general economy of 3 and 6.1

valuation of family income has remained steady, with no change in the year.

The Expectations Index shows unfavorable evolution in interannual terms, reaching 109.3 points in December 2016, 10.3 points below the previous year in absolute terms. This is the result of an aggregate annual decline in expectations for the general economy, employment conditions and family income economic situation of

It should be noted that the Spanish economy expansion has been

reforms carried out in previous years. With respect to the Eurozone, this has meant an improvement in competitiveness coupled with

prices decrease has led to a lower level of tax revenues.

Industry and macroeconomic highlights


Real GDP, private consumption growth and unemployment rate in Spain

Source: EY analysis based on IMF, INE and EY Eurozone Forecast as of December 2016.

15%

0

4%

3%

2%

6%

5%

1%

-1%

-2%

-3%

-4%

-5%

-6%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Rea

l GD

P a

nd p

riva

te c

onsu

mpt

ion

grow

th

Une

mpl

oym

ent

rate

20%

28%

30%

10%

5%

Real GDP growth (%) Private consumption growth (%) Unemployment rate (%)

Source: EY analysis based on IMF and EY Eurozone Forecast as at December 2016.

4.5%

4.0%

3.0%

2.0%

1.0%

3.5%

6.0%

5.5%

5.0%

2.5%

1.5%

0.5%

-0.5%

0.0%

-1.0%

-2.0%

-1.5%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

CPI growth (%)


Private consumption growth and consumer sentiment index in Spain

Source: EY analysis based on Ministry of Economy, Industry and Competitiveness and Centro de Investigaciones Sociológicas (CIS), as of 2016.

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%6%

4%

2%

-2%

-4%

-6%

0%

Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17 Jan 18 Jan 19

Pri

vate

con

sum

ptio

n gr

owth

Con

sum

er s

enti

men

t in

dex

Private consumption growth (%) Consumer sentiment index. Annual variation (%)

Source: EY analysis based on CIS.

0%

120%

100%

80%

60%

40%

20%

Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17

CCI Present situation index Expectations index


Consumer spending in Spain is mainly driven by the home and supplies, hotels and restaurants, food and beverages, transportation, and other goods and services subindustries.

Since 2006, average expenditure per household has been increasing, reaching its maximum level in 2008. Since then and until 2014, the average expenditure decreased gradually. This decline was followed by an increase in average expenditure per household in 2015, reaching the maximum seen in the past three years. Despite the trend change, the average expenditure

The year 2015 shows an improvement in the average

2008. Increases in the average expenditures are measured in both current and constant terms.

Regarding the structure and the different groups of expenditure, education has experienced the greatest growth since 2006,

supplies is where households have increased their proportion

group whose weight has been mostly reduced since 2006 (from

Final consumption growth at current prices

Real GDP

Source: EY analysis based on INE.

Source: EY analysis based on Eurostat. Source: EY analysis based on INE.

Alcohol and tobaccoApparel and footwear

Home renovation Health care

Transportation

Communications

Leisure and culture

Education

Hotels and restaurants

Other goods and services

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

-6% -5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5% 6%

Hou

seho

ld c

onsu

mpt

ion

(€ m

illio

n)

CAGR 06-15 (%)

Food and non-alcoholicbeverages

21,000

21,500

22,000

22,500

23,000

23,500

24,000

24,500

25,000

25,500

23,30023,200

22,900

22,20021,900

22,300

23,000

2013 2014 20152012201120102009575,000

580,000

585,000

590,000

595,000

600,000

605,000

610,000

615,000

595,010

607,981 608,153

600,532

587,697

597,918

613,760

2013 2014 20152012201120102009

Real GDP per capita


M&A valuation multiples in the European market

during 2005—16 in the following subindustries:

• �

• �

• �

• �

data to calculate valuation multiples for 569 deals. Outliers have been excluded in order to avoid distortions in our analysis.

In Europe, the EV/EBITDA average multiple during the 2005—16 period was 9.9x. In 2016, the average multiple experienced a decline to 9.0x. This implies an end to the three-year period of average

multiples above 10.0x and reverts back to those observed in the 2009—12 period.

seen, with larger transactions showing greater multiples from 2013 to 2015.

The following graph shows completed R&CP deals from 2005 to 2016, as well as reported deal volume. Figures are shown for the industry as a whole, as well as by subindustries. There is a greater number of transactions in the food and beverage subindustry, which

of the total amount in the period from 2005 to 2016. The number of transactions has decreased in all the subindustries compared with the previous year, with the exception of retail, which increased in the last two years.

M&A valuation multiples

498

867999

827

577698 757 688

559 570

61

79

105

78

65

7771

78

62 69257

306

343

311

308

344348

328

223

134

202

212

191

206

283300

227

183 183

614

97

260

194

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Vol

ume

(€m

)

Num

ber

of t

rans

acti

ons

950 1,454 1,659 1,407 1,156 1,402 1,0271,3211,476 1,059 1,165 1,125

237

608

71

273

173

Food and beverages Household and personal care products Retail Restaurants Total volume (€m)

Number and reported volume of R&CP transactions in Europe

(1) Volume correponds to transactions with public available information.

Source: EY analysis based on Capital IQ and Bloomberg.


The following graphs show the annual average EV/EBITDA multiple for the deals considered (i.e., those with available information, excluding outliers) for 2005—16. Figures are also shown for the industry as a whole as well as by the subindustries analyzed. The highest multiple of the analyzed subindustries in 2016 is retail at 10.7x, despite being the subindustry with the lowest multiple the previous year. The lowest multiple is household and personal care products at 8.3x.

9.2x

10.1x

11.4x10.7x

9.2x 9.0x9.7x 9.5x

8.7x

11.3x10.0x 10.1x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20160.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

Total R&CP Historical average

EV/EBITDA transactions in Europe Total R&CP

EV/EBITDA transactions in Europe Total R&CP

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Transactions > 1,000 €m 10.9x 11.4x 12.6x 11.8x 15.6x 16.6x 11.3x 8.4x 11.9x 11.0x 11.6x 7.7x

Transactions < 1,000 €m 9.1x 9.9x 11.2x 10.7x 9.0x 9.3x 9.3x 8.7x 11.2x 9.8x 10.0x 8.9x




0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

2014 2015 2016201320122011201020092008200720062005

9.5x10.2x

10.8x 11.0x

9.0x 8.8x 8.7x9.3x

8.4x

12.0x

10.0x 10.2x

Food and beverages

9.0x9.5x

10.3x

13.7x

6.5x

14.7x

11.5x12.7x

8.3x

10.6x 10.2x9.7x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

20142013 2015 201620122011201020092008200720062005


9.2x10.2x

12.9x

10.7x 10.7x10.1x

8.7x 8.5x9.4x 9.3x 9.0x

12.1x

Retail

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

20142013 2015 201620122011201020092008200720062005

8.2x

9.9x10.7x

9.7x9.3x

10.2x9.4x 9.4x 9.5x

11.0x

10.0x

8.9x

Restaurants

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

20142013 2015 201620122011201020092008200720062005

(1) 2012 multiple is the same as 2011, since there were no transactions available.(1) 2009 multiple is not meaningful (related to one single transaction).

EV/EBITDA transactions in Europe Food and beverages

EV/EBITDA transactions in Europe Household and personal care products

EV/EBITDA transactions in Europe Retail

EV/EBITDA transactions in Europe Restaurants


Source: EY analysis based on Capital IQ and Bloomberg. Source: EY analysis based on Capital IQ and Bloomberg.



M&A valuation multiples in the North American market

industry between 2005 and 2016, which can be broken down into the following subindustries:

• �

• �

• �

• �

calculate valuation multiples for 393 deals. Outliers have been excluded in order to avoid distortions in our analysis.

The average EV/EBITDA multiple for the transactions completed in North America in 2016 is 10.2x, above the historical average during 2005—16 of 9.6x.

seen, with larger transactions exhibiting greater multiples since 2012.

The following graph shows completed R&CP deals from 2005 to 2016 as well as reported deal volume. Data is shown for the aggregate industry as well as the four analyzed subindustries. The North American market decreased its activity (in volume) for the

continues with the downward trend of the last three years, as

compared with the previous year. The food and beverages, and household and personal care subindustries remain stable and increase their relative percentage of the total number of transactions.

Number and reported volume of R&CP transactions in North America

230 278 304 268199

259 306 304348

63

7676

59

80 93 6797

125

156177

110

149163

21479

142156

155

131

140184

197248

244

352

108

205

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

0

100

200

300

400

500

600

700

800

900

1,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Num

ber

of t

rans

acti

ons

497 659 713 624 499 626 811810723 871 895 841

Vol

ume

(€m

)

353

163

215

83 78

125192

182

230

110

296


(1) Volume corresponds to transactions with public available information.(2) Voume in 2015 increases because of transactions bigger than the ones of the historical years.



For the period 2005—16, the following graphs show the annual average EV/EBITDA multiple for the deals considered (i.e., those with available information, excluding outliers). Data is also shown for the aggregate industry and the four analyzed subindustries.

In 2016, the North American market showed a different growth trend from the European market, with retail showing the lowest multiple (at 6.8x). Household and personal care products was the subindustry with the largest multiple (at 11.5x), despite the fact that, together with retail, it is a subindustry with decreasing multiples.

9.6x10.1x 10.2x 10.2x

9.4x8.6x 8.5x

9.8x 9.7x

10.9x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

9.2x 8.9x


2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Transactions > 1,000 €m 10.9x 11.1x 11.6x 11.4x 9.9x 9.7x 6.9x 10.3x 10.6x 12.1x 10.9x 12.3x

Transactions < 1,000 €m 9.2x 9.9x 9.9x 8.7x 9.0x 8.2x 8.8x 8.6x 9.3x 9.7x 9.1x 9.9x

EV/EBITDA transactions in North America Total R&CP

EV/EBITDA transactions in North America Total R&CP




(1) 2011 multiple is not meaningful (related to a single transaction).

(2) 2015 multiple is not meaningful (related to a single transaction).

(1) 2013 multiple is not meaningful (related to one single transaction).

(2) In 2015, there are only two multiples of 7x whereas in 2014, there were seven multiples.

(1) 2016 multiple is affected by a multiple 4x transaction (Coinstar, LLC).

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

20142013 2015 201620122011201020092008200720062005

11.7x

10.5x 10.5x10.9x

9.4x10.2x

8.8x9.3x

9.7x

11.7x 11.9x

8.2x

Food and beverages

8.5x

10.2x

9.3x

8.2x

6.8x7.5x

9.2x

7.4x

9.3x 9.5x9.1x

10.1x

Retail

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

20142013 2015 201620122011201020092008200720062005

EV/EBITDA transactions in North America Food and beverages

9.0x

9.9x10.3x 10.5x

11.0x

7.9x 7.7x 7.5x 7.3x7.9x

4.4x

9.4x

Restaurants

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

20142013 2015 201620122011201020092008200720062005

EV/EBITDA transactions in North America Restaurants

EV/EBITDA transactions in North America Retail

18.0x

9.2x

11.8x 11.5x

10.0x8.8x

9.6x

19.1x

9.3x 9.6x

13.0x14.8x


0.0x

5.0x

10.0x

15.0x

20.0x

20142013 2015 201620122011201020092008200720062005

EV/EBITDA transactions in North America Household and personal care products


Source: EY analysis based on Capital IQ and Bloomberg. Source: EY analysis based on Capital IQ and Bloomberg.



M&A valuation multiples in the Spanish market

from 2005 to 2016 in the following subindustries:

• �

• �

• �

• �

From the total of completed transactions, we obtained information for calculating valuation multiples for 149 operations. Outliers have been excluded in order to avoid distortions in the conclusions of the analysis.

what happened in 2015, when the number of transactions reached

the pre-crisis levels (period 2005—07), in 2016, the number of transactions fell back to the levels observed during 2012—14. This was explained by the competition of the sector due to a rise in private labels and industry fragmentation, which resulted in the consolidation of operators of a certain size.

The historical average multiple for completed transactions in 2005—16 is 10.1x EV/EBITDA and, for 2016, it is 11.4x, the highest data from the period 2005—16.

The following graph presents completed R&CP deals from 2005—16 as well as the reported deal volume. Data is shown for the aggregate industry and the four analyzed subindustries. As

to 2015. Deals in the food and beverages subindustry exhibited the largest multiple in 2016 (13.5x).

02005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Vol

ume

(€m

)

Num

ber

of t

rans

acti

ons

92 169 176 141 125 121 8568104 73 160 81

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000


9

0

20

40

60

80

100

120

140

160

180

200

52

2

29

9

130

8489 82

7661

6

6

9 66

2

96

3

4721

33 23 28

21

20

1010

19

118

11

1615

7 5

5

8

12 13

13

47 48

15

103

49

2

Number and reported volume of R&CP transactions in Spain

(1) Volume corresponds to transactions with publicly available information.(2) Volume in 2015 increases because of bigger transactions than those of the historical years.

Source: EY analysis based on Capital IQ, Capital & Corporate, Mergermarket and Bloomberg.


The following graphs show the annual average EV/EBITDA multiple for the deals considered (i.e., those with available information, excluding outliers) for 2005—16. Data is also shown for the aggregate sector as well as for the four analyzed subindustries. Transactions in 2016 in Spain are subjected to special circumstances, and those limitations should be considered when comparing by subindustries (see notes in subindustries graphs).

Note: in Spain, the transactions breakdown by size has been carried out assuming the €500m limit (instead of €1,000m), due to the smaller size of the market.

9.7x10.8x 10.6x

8.0x

10.4x

11.7x11.1x 11.4x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

8.3x

10.8x

9.3x 9.4x


2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Transactions > 500 €m 10.6x 15.5x 19.0x 10.5x na 9.4x na 13.7x 9.5x na 17.4x na

Transactions < 500 €m 9.5x 10.1x 10.1x 9.2x 8.3x 9.4x 8.0x 10.3x 10.6x 11.7x 8.7x 10.5x

EV/EBITDA transactions in Spain Total R&CP

EV/EBITDA transactions in Spain Total R&CP




10.2x

12.6x 12.5x11.9x

5.3x

9.4x 9.4x 9.4x

8.0x

9,3x

9.3x 9.1x

17.1x

Retail

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

18.0x

20142013 2015 201620122011201020092008200720062005

11.4x 11.4x

8.7x

10.7x 10.9x

7.0x6.5x 6.4x

8.6x 8.6x 8.6x 8.3x

Restaurants

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

20142013 2015 201620122011201020092008200720062005

9.5x 9.5x 9.5x

6.0x

11.0x9.9x 9.9x

8.7x 8.7x

13.7x 13.7x

9,3x

19.9x


0.0x

5.0x

10.0x

15.0x

20.0x

20142013 2015 201620122011201020092008200720062005

EV/EBITDA transactions in Spain Household and personal care products

9.6x

10.5x 10.6x

9.3x 9.0x9.6x

7.9x

10.3x11.0x 11.3x

13.5x

9.9x

Food and beverages

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

20142013 2015 201620122011201020092008200720062005

EV/EBITDA transactions in Spain Food and beverages

EV/EBITDA transactions in Spain Retail

EV/EBITDA transactions in Spain Restaurants

Source: EY analysis based on Capital IQ, Capital & Corporate, Mergermarket, Sabi and Bloomberg.


(1) In the years with no transaction multiple available, the previous year’s multiple has been used.(2) Multiple analysis for 2014 and 2015 is limited, since there was only one transaction.


(1) In the years with no transaction multiple available, the previous year’s multiple has been used.(2) 2015 multiple is due to two transactions with higher multiple than previous years.(3) Multiple analysis for 2016 is limited, since there was only one transaction.



When comparing Spanish listed companies with international R&CP listed companies (measured by their corresponding indices), we see that North American companies outperformed European and Spanish companies.

70

75

80

85

90

95

IBEX 35 EUROSTOXX 50 S&P 500

31 Dec 15

30 Jan 16

30 March 16

29 April 16

29 May 16

28 June 16

28 July 16

27 Aug 16

26 Sept 16

26 Oct 16

25 Nov 16

25 Dec 16

29 Feb 16

100

105

110

115

Stock market indices performance

Source: EY analysis based on Bloomberg.

Listed company valuation multiples


IBEX 35 vs. selected listed R&CP companies in Spain

International R&CP indices vs. selected listed R&CP companies in Spain

70

80

90

100

110

120

130

31 Dec 15

30 Jan 16

31 March 16

30 April 16

31 May 16

30 June 16

31 July 16

31 Aug 16

31 Sep 16

30 Oct 16

30 Nov 16

31 Dec 16

28 Feb 16

Selected listed R&CP companies in Spain STOXX North America 600 Retail

STOXX North America 600 Food & Beverage STOXX North America 600 Personal & Household Goods

STOXX Europe 600 Retail STOXX Europe 600 Food & Beverage

STOXX Europe 600 Personal & Household Goods


60

70

80

90

100

110

120

130

140

31 Dec 15

30 Jan 16

30 March 16

29 April 16

29 May 16

28 June 16

28 July 16

27 Aug 16

26 Sep 16

26 Oct 16

25 Nov 16

25 Dec 16

29 Feb 16

IBEX 35 Selected listed R&CP companies



Listed companies historical multiples

Analyzing the period 2005—16, the 2016 LTM’s EV/EBITDA multiple in the last 12 months (LTM) for the selected Spanish R&CP companies is higher than the historical average. The same occurs in the European and North American markets.

5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

11.0x

12.0x

13.0x

14.0x

Jan 05Jan 06

Jan 07Jan 08

Jan 09Jan 10

Jan 11Jan 12

Jan 13Jan 14

Jan 15Jan 16

Jan 17

EV/EBITDA LTM — Europe Historical average

EV/EBITDA LTM for listed R&CP companies in Europe

Source: EY analysis based on Bloomberg and Capital IQ.

10.6x historical average


5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

11.0x

12.0x

13.0x

14.0x

15.0x

Jan 05Jan 06

Jan 07Jan 08

Jan 09Jan 10

Jan 11Jan 12

Jan 13Jan 14

Jan 15Jan 16

Jan 17

EV/EBITDA LTM — Spain Historical average

5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

11.0x

12.0x

13.0x

14.0x

Jan 05Jan 06

Jan 07Jan 08

Jan 09Jan 10

Jan 11Jan 12

Jan13Jan 14

Jan 15Jan 16

Jan 17

EV/EBITDA LTM — North America Historical average

EV/EBITDA LTM for listed R&CP companies in North America

EV/EBITDA LTM for listed R&CP companies in Spain






Listed companies vs. M&A multiples

Based on a comparative analysis between listed companies and M&A multiples from 2005 to 2016, the trading multiples paid for listed companies are higher than those paid in private acquisitions. The conclusion we drew from this analysis is that the theoretical control premium underlying transactions is often outweighed by the illiquidity

The European R&CP industry has, on average, traded in 2016 at 11.7x EV/EBITDA, very similar to the annual average trading multiple in the Spanish market, which is 11.6x EV/EBITDA.

5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

11.0x

12.0x

13.0x

20142013 2015 201620122011201020092008200720062005

9.2x

9.8x 10.1x10.7x

11.4x 11.2x10.7x

9.0x 9.0x9.2x8.7x

9.7x 9.8x9.5x

9.6x

8.7x

9.9x

11.3x 11.2x

10.0x 10.1x

12.3x11.7x

11.1x

EV/EBITDA transactions EV/EBITDA listed companies Average transactions Average listed companies

Annual average EV/EBITDA LTM listed companies vs. transactions in Europe

9,9x average transactions 10.6x average listed companies

Source: EY analysis based on Capital IQ, Mergermarket and Bloomberg.


Annual average EV/EBITDA LTM listed companies vs. transactions in North America

Annual average EV/EBITDA LTM listed companies vs. transactions in Spain

5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

11.0x

12.0x

13.0x

20142013 2015 201620122011201020092008200720062005

10.5x 10.1x 10.3x 10.2x10.8x

8.9x8.5x 8.6x

9.3x

8.5x

9.6x8.9x

10.2x

9.8x 9.7x

10.2x

11.4x10.9x

12.0x

12.6x 12.4x

9.6x 9.4x9.2x

EV/EBITDA transactions EV/EBITDA listed companies Average transactions Average listed companies

5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

11.0x

12.0x

13.0x

20142013 2015 201620122011201020092008200720062005

11.7x10.8x

11.9x

10.6x

12.2x 12.4x

11.6x11.2x 10.8x

9.4x

10.0x

8.0x

9.4x

10.8x

10.5x 10.4x

10.8x11.7x11.4x 11.1x 11.4x

9.7x 9.3x

8.3x

EV/EBITDA transactions EV/EBITDA average listed companies Average transactions Average listed companies

9,6x average transactions 10,6x average listed companies

10,1x average transactions 11,0x average listed companies

Source: EY analysis based on Capital IQ, Mergermarket and Bloomberg.



Current trading multiples for R&CP companiesThe selected R&CP companies in Spain traded, on average, at 11.7x EV/EBITDA and 18.1x price-to-earnings ratio (P/E) in 2016. By subindustry, retail traded at a premium compared with food and beverages (12.9x vs. 11.3x EV/EBITDA), mainly due to the inclusion of the high Inditex multiple (18.9x).

After its best performance in 2016, the North American industry trades, on average, at a small premium compared with the European market (12.4x on annual average and 11.9x at the year end).

EV/ sales 2016

EV/ sales 2017

EV/ sales 2018

EV/EBITDA

2016

EV/EBITDA

2017

EV/EBITDA

2018

EV/ EBIT 2016

EV/ EBIT 2017

EV/ EBIT 2018

P/E 2016

P/E 2016

P/E 2017

CAGR EBITDA 2016—18

EBITDA margin 2016

Food and beverages 2.1x 2.0x 2.0x 11.3x 11.1x 10.5x 16.2x 14.2x 13.2x 15.8x 14.9x 14.2x

Retail na na na 12.9x 11.2x 10.1x 17.0x 15.2x 13.7x 21.7x 19.3x 17.0x

R&CP Spain 2.1x 2.0x 2.0x 11.7x 11.8x 11.0x 17.1x 15.0x 13.8x 18.1x 16.4x 15.5x 29.3% 10.3%


Retail 1.9x 1.6x 1.5x 10.6x 9.5x 8.7x 13.9x 13.0x 12.1x 18.2x 15.8x 15.3x


1.8x 1.7x 1.7x 11.7x 10.0x 9.3x 14.1x 12.6x 11.5x 21.0x 17.2x 15.5x

Restaurants 1.4x 1.4x 1.3x 10.5x 9.3x 9.9x 14.2x 13.4x 12.5x 17.7x 16.5x 15.2x

R&CP Europe 1.8x 1.7x 1.7x 11.6x 10.1x 9.5x 14.6x 13.2x 12.3x 19.6x 16.7x 15.6x 15.5% 13.4%


Retail 1.6x 1.4x 1.3x 10.3x 9.1x 8.6x 12.5x 11.8x 11.4x 17.8x 16.3x 15.7x


2.0x 1.8x 1.8x 12.5x 10.6x 10.4x 13.7x 12.5x 12.1x 18.2x 16.5x 15.6x

Restaurants 2.0x 1.8x 1.7x 11.9x 10.6x 11.0x 15.8x 14.4x 13.7x 22.4x 18.8x 18.1x

R&CP North America 1.9x 1.8x 1.7x 11.9x 10.5x 10.1x 14.1x 12.9x 12.4x 19.3x 17.3x 16.5x 14.5% 14.0%

(1) Outliers have been excluded in order to avoid distortion.

Source: EY analysis based on Capital IQ as at 31 December 2016.


Of the 16 companies listed on the Spanish stock market, only 11 are actively covered by analysts.

recommended to buy, while the remaining recommendations were to

Analyzing the evolution of the recommendations over the past

recommendation, i.e., buy), we see that there has been a slight increase in the average recommendation from 3.14 to 4.

closing price as at 31 December 2016 (based on the median of the selected companies with active coverage).

Premium target price vs. current price

Food and beveragesRetail

Total R&CP 18.6%

Source: EY analysis based on Bloomberg as of December 2016.

Source: EY analysis based on Bloomberg.(1)

Equity market sentiment in Spain

Buy56%

Hold29%

Sell15%

Analysts’ recommendations

1.50

2.00

2.50

3.00

3.50

4.00

4.50

January 2015

January 2016

April 2015April 2016

July 2016October 2016

July 2015October 2015


BME Bolsas y Mercados Españoles

b.p. Basis points

CAGR Compound annual growth rate

CIS Centro de Investigaciones Sociológicas

CCI

CPI Consumer Price Index

€ Euro

EBITDAEarnings before interest, taxes, depreciation and amortization

EBITDA margin

EBITDA / sales

ECB European Central Bank

e.g. Exempli gratia (for example)

EV Enterprise value

EY Ernst & Young Servicios Corporativos S.L.

i.e. Id Est (for example)

GDP Gross domestic product

IMF International Monetary Fund

INE Instituto Nacional de Estadística

LTM Last 12 months

M&A Mergers and acquisitions

m Million

na not available

P/E Price to earnings ratio

R&CP Retail and consumer products

US United States

vs. versus

Appendices


Source: EY analysis based on Bloomberg, Capital IQ and Mergermarket.

Selected main R&CP transactions in the European market

A selection of the main transactions that took place in 2016 in the European market:

EuropeDate Acquiror Acquiree Industry Deal value

2016 InvestIndustrial Artsana, S.p.A. Household and personal care products

1,200

2016 J Sainsbury, P.C.L. Home Retail Group, P.C.L. Retail 1,138

2016 Steinhoff International Holdings, N.V. Darty, P.C.L. Retail 1,066

2016 Sumitomo Co. Fyffes, P.C.L. Food and beverages 876

2016 Steinhoff International Holdings, N.V. Poundland Group, P.C.L. Household and personal care products

563

2016 Leonard Green & Partners, L.P. Signet Jewelers Ltd. Retail na 554

2016 KL-Kepong International, Ltd. M.P. Evans Group, P.C.L. Food and beverages na 535

2016 Cott Co. Eden Springs (Europe), S.A. Food and beverages 470

2016 Wesfarmers, Ltd. Homebase, Ltd. Household and personal care products

445

2016 Finaccess México, S.A. de C.V. AmRest Holdings, S.E. Restaurants na 430

2016 Amplify Snack Brands Inc. Tyrrells Potato Crisps, Ltd. Food and beverages 354

2016 PATRIZIA Immobilien AG Real estate portfolio with 21 specialized stores (Edeka Zentrale A.G. & Co.,

& Co., K.G.;Bauhaus International Holdings, Ltd.)

Food and beverages 250

2016 Bridgepoint Advisers, Ltd. Smyk Sp z oo of Empik Media & Fashion, S.A. Retail 247

2016 D'ieteren, S.A./N.V. Moleskine, S.p.A. Retail 209

2016 Caisse de dépôt et placement du Québec Elior S.C.A. Restaurants n.d. 200

2016 Ningbo Joyson Electronic Co. Automobile information branch of TechniSat Digital GmbH

Retail 180

2016 Shanghai Jahwa (Group) Co., Ltd. Mayborn Group, Ltd. Retail 174

2016 Ascendis Health, Ltd. Scitec International, S.a.r.l. Food and beverages 170

2016 Lenta, Ltd. Food retail stores (Kesko Oyj) Food and beverages 166

2016 Vivendi, S.A. Groupe Fnac, S.A. Retail 159

2016 JD Sports Fashion, P.C.L. GO Outdoors Topco, Ltd. Retail 150

2016 Caledonia Investments, P.C.L./ Management Group (fund)

Liberation Group, Ltd. Restaurants 144

2016 Famous Brands, Ltd. Gourmet Burger Kitchen Limited Restaurants 143

2016 Marshall Motor Holdings, P.C.L. Ridgeway Garages Newbury, Ltd. Retail 140

2016 na Grieg Seafood, A.S.A. Food and beverages 122

2016 Lerøy Seafood Group, A.S.A. Food and beverages na 99

2016 B.S.A. International, S.A. S.C. Albalact, S.A. Food and beverages 92

2016 Cherokee Inc. Hi-Tec Sports, Ltd. Retail 90



Selected main R&CP transactions in the North American market

A selection of the main transactions that took place in 2016 in the North American market:

United States and CanadaDate Acquiror Acquiree Industry Deal value

2016 Danone, S.A. The WhiteWave Foods Company

Food and beverages 11,333

2016 Steinhoff International Holdings, N.V. Mattress Firm Holding Co. Household and personal care products

3,379

2016 Henkel Consumer Goods Inc. The Sun Products Co. Household and personal care products

3,238

2016 Wal-Mart Stores Inc Jet.com Inc/NJ Household and personal care products

2,979

2016 Johnson & Johnson Consumer Companies Inc. Vogue International, L.L.C. Household and personal care products

2,958

2016 McKesson Canada Co. Rexall Pharma Plus , Ltd. Household and personal care products

2,057

2016 Lowe's Cos Inc. RONA Inc. Household and personal care products

1,864

2016 Mott's, L.L.P. BAI Brands, L.L.C. Food and beverages 1,602

2016 The Estée Lauder Companies Inc. Too Faced Cosmetics, L.L.C. Household and personal care products

1,352

2016 Apollo Global Management, L.L.C. The Fresh Market Inc. Food and beverages 1,252

2016 Onex Corporation Moran Foods, L.L.C. Food and beverages 1,241

2016 Apollo Global Management, L.L.C. Coinstar, L.L.C. Retail 1,212

2016 JAB Holding Co., S.a.r.l. Krispy Kreme Doughnuts Inc. Restaurants 1,138

2016 L'Oreal, S.A. It Cosmetics, L.L.C. Household and personal care products

1,093

2016 Charoen Pokphand Foods Public Co., Ltd. Bellisio Foods Inc. Food and beverages 1,008

2016 Thai Union Group, P.C.L. Red Lobster Seafood Co. Restaurants n.d. 516

2016 Empresas COPEC, S.A. MAPCO Express Inc. Food and beverages 479

2016 Cara Operations, Ltd. Groupe St-Hubert Inc. Restaurants 364

2016 Vista Outdoor Inc. Action Sports division of Easton-Bell Sports, L.L.C. Retail 362

2016 Seven & i Holdings Co, Ltd. Stores operations (CST Brands Inc.) Retail 358

2016 MTY Food Group Inc. Kahala Brands, Ltd. Restaurants 268

2016 Clorox Co. Renew Life Formulas Inc. Food and beverages 252

2016 Caleres Inc. Allen Edmonds Co. Retail 240

2016 Hudson's Bay Co. Gilt Groupe Holdings Inc. Retail 230

2016 Private investor; Harvest Partners, L.L.C. (Fund: Harvest Partners Structured Capital Fund, L.P.)

Otg Management Inc. Restaurants 223

2016 CT Real Estate Investment Trust Distribution center (OH of Canadian Tire Co., Ltd.)

Retail 213



Selected main R&CP transactions in the Spanish market

A selection of the main transactions that took place in 2016 in the Spanish market:

SpainDate Acquiror Acquiree Industry Deal value

2016 Vente-Privee.com, S.A. Privalia Venta Directa, S.A. Retail 500

2016 Carrefour, S.A.36 supermarkets (Eroski Sociedad Cooperativa Limitada De Consumo)


2016 JUST EAT, P.L.C. Hellofood Brasil; La Nevera Roja; Pizzabo.it; Hellofood Mexico; Hellofood Italia


2016 Investcorp Bank B.S.C. Agromillora Catalana, S.A. Food and beverages 125

2016 Ibersol, S.G.P.S., S.A. The Eat Out Group, S.L. Restaurants 117

2016 Private investor Blancoshop, S.L. Retail 83

2016 Shanghai Kaichuang Marine International Co., Ltd. Hijos de Carlos Albo, S.L. Food and beverages 69

2016 Nazca Capital, S.G.E.I.C., S.A. Biogran, S.L. Food and beverages 67

2016 Esprinet, S.p.A. Vinzeo Technologies, S.A.U. Retail 58

2016 Private investor; O'Hara Financial Services, Ltd. Play Hawkers, S.L. Retail 50

2016 Carnicas Toni Josep, S.L. Piensos Costa, S.A. Food and beverages 41

2016 ProA Capital de Inversiones, S.G.E.I.C., S.A. Go Fruselva, S.L.U. Food and beverages 40

2016 Patron Capital, Ltd. 43 retail units in Spain (The Blackstone Group, L.P.)

Retail 35

2016 Black Toro Capital, L.L.P. Marypaz of Indushoes, S.L. Retail 30

2016 Grupo Vips Sigla, S.A. Starbucks Coffee Espana, S.L.

Restaurants 28

2016 Arenal Perfumerias, S.L. Household and personal care products

21

2016 Grupo Empresarial Palacios Alimentación, S.A. Elore Enterprises, L.L.C. Food and beverages 19

2016 ProA Capital de Inversiones, S.G.E.I.C., S.A. Grupo Vips Franchising, S.L. Restaurants 13

2016 Dogi International Fabrics, S.A. Generos de Punto Treiss, S.L. Retail 12

2016 General de Relojeria, S.A. Eurocrono, S.L. Retail 8

2016 Dcoop S.Coop.And. Antequera facilities (Deoleo, S.A.)


2016 Industrias Cárnicas Tello, S.A. Embutidos Frial, S.A. Food and beverages 7

2016 Ebro Foods, S.A. Santa Rita Harinas, S.A. Food and beverages 5

2016 Private investor Festa Moda, S.L. Retail 3

2016 Axon Partners Group, S.L. Grupo Coco & Lola, S.L. Retail n.d. 1

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