Creating a Pan-European leader in Investment Services - BNP Paribas

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Creating a Pan-European leader in Investment Services - BNP Paribas

The TransactionBNP Paribas Securities Services acquires* 100% of Cogent InvestmentOperations Limited from the AMP groupThe total consideration** paid in cash is € 363 million, of which a maximum of € 272 million down-payment based on Cogent H1 2002budgeted revenues and a maximum of € 91 million deferred payment subject to price revisionmechanismAMP and its fully-owned investment management subsidiary HendersonGlobal Investors have committed to continue using the Cogent and BP2Scombined service offering for not less than 5 years at mutually agreedconditions* Subject to regulatory approvals and final due diligences** In addition, BNP Paribas will take over AMP subordinated loan to Cogent, amounting to c. € 13 million3


Creating a Pan-European leaderin Investment Services The transaction BNP Paribas Securities Services and Cogent Strategic rationale and Industrial Project Deal structure, consideration assessment elements , and impact for BNPParibasAppendix4


BP2S within BNP Paribas groupBNP Paribas GroupRetailPrivate BankingAsset ManagementPBAMBP2SInsuranceBNP Paribas Securities Services◗Strong and growingcontributor to PBAMdivision results◗No 1 in EuropeCorporate &InvestmentBankingInsurance5


BP2S : a European leader in Securities ServicesOver € 2 trillion of assets undercustodyMore than 2,000 funds underadministrationGlobal Custody networkcovering 70+ marketsbnEIn € bn25002000150010005002.13Assets under custody (end of period)Number of transactions5.110.314.9in millions oftransactions22.42520151052,200 people dedicated tosecurities services world-wide01996 1997 1998 1999 2000 20010BP2S ambition is to be the ‘Premier pan-European Securities Services Bank forFinancial Institutions’7


Cogent : one of the majorfund administration companies in the UKFully owned subsidiary of AMP, leading international financial servicescompanyEstablished as AMP global investment operations platform after being spun offHenderson Global Investors Providing "one-stop-shop" for fundmanagers :◗◗◗Value added "middle office" functionalityFull range of fund accounting and pricingfacilitiesInnovative, customer centric solutions toretail investors+52%71A dynamic growth+32%142In € m1083199920002001+27%11 14◗Administration of retail saving plansTotal IncomeOperating profit afterincome tax8


Cogent : one of the majorfund administration companies in the UKFunds under Administration : € 229 bn●Strong UK focus (72% of revenues)■Largest administrator of UK investment trusts & 6th largest administrator of UKunit trusts■Leading player in Personal Equity Plans (PEP) and Individual Savings Accounts (ISA)in the UK■Provider of the 1st comprehensive total outsource solution for a UK investmentmanager■A leading provider of offshore 3rd-party fund administration9


Creating a Pan-European leaderin Investment Services The transaction BNP Paribas Securities Services and Cogent Strategic rationale and Industrial Project Deal structure, consideration assessment elements , and impact for BNPParibasAppendix10


Extending BP2S products and services breadth forEuropean Institutional clientsGlobalCustodyBP2SCogentTrustee /DepositoryBankFundServicesFinancingStockLendingBP2S +CogentOtherValue addedservices** Performancemeasurement,attribution,value at riskand cashmanagement• Acquisition allows BP2S to provide true ‘one-stop shop’ solution withcomplementary product and geography mix (limited overlap)• BP2S gains access to UK investment services market and extends its serviceoffering to a broader client base• BP2S provides Cogent clients with a variety of services throughout Europe• BP2S benefits from an enlarged basis of assets and clients for securities lending13


Combined businesses will create scale and valuefor BP2S as a whole (1/3)Local presence in 17 countriesGlobal Custody in more than 70 countriesBP2S◗◗◗COGENTUKJerseyAustralasiaDublinLux◗ContinentalEurope14


Combined businesses will create scale and valuefor BP2S as a whole (2/3)A combined diversity for a better enhancement of productsBP2S◗◗◗Multi-Direct Clearing andCustodyInvestor services◗ Global Custody◗ PerformanceMeasurementGlobal LiquidityManagement◗◗COGENTFundAdministrationRetail ServiceAdministration• Mastercustody◗Global Issuer Services andCorporate ManagementResulting in a more balanced portfolio of activities and clientsBetween custody /non-custody related activitiesBetween broker-dealers/global custodians and Institutional Investors15


Combined businesses will create scale and valuefor BP2S as a whole (3/3)COGENT+BP2SGeographyUnited KingdomEuropean offshoreAustralasiaContinental EuropeEuropean offshore=Expanded European coverageA major player in Luxembourg andDublin Funds industryAn Australasian platformProductsMiddle Office outsourcingInstitutional and RetailAdministration ServicesSecurities lendingas agentGlobal CustodyTrustee / DepositoryPerformance MeasurementCash/ Securities financingRetail Transfer Agency=Greater depth of product rangeand new services, greater valueproposition for clients and true‘one-stop shopping’ClientsLargeUK client base +Privileged relationshipwith AMP GroupPrivileged relationshipwith BNP Paribas +large internationalclient base=Potential of 600 institutional clientrelationshipsAn organisation whose success results from a client-focusedculture and strong multicultural profile16


Industrial Project Objectives The Industrial Project aims at : generating € 31 million synergies before tax in 2005In € millionTotal synergies before tax2003 200420051125 31of which revenues synergies92127of which cost synergies244 creating further synergy momentum after 2005 building additional Assets under Custody of € 100 bn over the next 3years project assumes integration costs before tax of € 30 million from 2002to 200417


Revenue & Cost Synergies Revenue synergies before tax : € 27 million in 2005 Extended geographic coverage for current clients : no overlap on clientsportfolio with Cogent New clients Diversified products/ services coverage Custody and net interest earnings on idle cash Cost synergies before tax : € 4 million in 2005 Mostly on support functions18


Integration ProjectFocus on client delivery and business continuityA well defined integration management projectTop ManagementWorking GroupsProject ModeIntegrate the management teamDefine integration principlesDefine responsibilitiesfor the next phaseDetailed communicationto clients and to staffDetailed integration processIntegration projectsImplement the Projects:• Facilities• Product development• IT migration or roll-outPhase 1 : 8 days Phase 2 : 8 weeks Phase 3 : 8 months19


Creating a Pan-European leaderin Investment Services The transaction BNP Paribas Securities Services and Cogent Strategic rationale and Industrial Project Deal structure, consideration assessment elements , and impact for BNPParibasAppendix20


Deal Structure Price € million Goodwill 327 Net Asset Value estimated as at 30/06/02 36 Total price* 363Payment structure NAV and a maximum of 72% of goodwill paid cash at completion date Remainder of goodwill paid cash 12 months after completion subject toprice revision mechanism based on targeted revenues (retention ofclients) for 2002Acquisition totally financed through BNP Paribas own resources*Maximum price assuming no downward price revision in June 200321


Price assessment elements Total maximum price paid corresponds to 25.7 times Cogent 2001operating profit after income taxCurrent 2002 P/E ratios of fund management services providers Bisys33x DST Systems 28x Fiserv31x22


Financial Impact for BNP ParibasIn € millions2002200320042005Impact on BNP Paribas attributablenet income before goodwill amortization-5 +6 +23 +32Impact on BNP Paribas attributablenet income after goodwill amortization-16 -16 +1 +10EPS dilution/ accretionImpact on ROEImpact on Cooke ratio-0.39% -0.35% +0.03%-6 bps -5 bps +2 bps-10 bps -10 bps -9 bps* Based on payment of maximum goodwill and assumed amortization over 15 years23


A value-creative transaction forBP2S and BNP Paribas BP2S has a proven track record for making of the transaction a success : 1995-1996 JP Morgan Europe 1999 BNP merger with Paribas 2000-2001 Securities Services activity incorporated (BP2S) 2001 Gain of AXA’s custody and depositary business 2002 Cogent !The Cogent transaction is fully consistent with BNP Paribas policy asregards strategic external growth Fast growing markets European leadership Strong and sustainable profitability24


Creating a Pan-European leaderin Investment Services The transaction BNP Paribas Securities Services and Cogent Strategic rationale and Industrial Project Deal structure, consideration assessment elements , and impact for BNPParibasAppendix25


Matrix of combined service offering / countriesUKDomesticCustodyGlobalCustodyFundAccountingTransfer AgencyRegistrarCorporateSecretaryPerformanceMeasurementComplianceMonitoringRetail SavingsAdministrationFinancingMasterCustodyBelgiumDublinFranceGreeceGermanyItalyEuropeJerseyLuxembourgNetherlandsPortugalSpainSwitzerlandAustraliaAustralasiaNew ZealandJapanAmericasUS(New York)CogentBP2S26

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