Independent Financial Advisor Report

96 Pages·2016·1.57 MB·English

Attachment 2

Independent Financial Advisor Report

Opinion of the Independent Financial Advisor
regarding the acquisition of the charter capital of Holcim (Vietnam) Company Limited

By

Siam City Cement Public Company Limited

Presented to

Shareholders of Siam City Cement Public Company Limited

Prepared by

Bualuang Securities Public Company Limited

14 November 2016
Opinion of the Independent Financial Advisor regarding Asset Acquisition Transaction

Table of Contents

Page

Executive Summary

1. Characteristics and Details of the Transaction

1.1. Objective and characteristic of the Transaction Section 1 page 1
1.2. Counterparties and Relationships Section 1 page 3
1.3. Type and Size of the Transaction Section 1 page 3
1.4. Value of the Acquired Assets, Basis Used to Determine the Consideration Section 1 page 6
and Source of Fund to Finance the Transaction
1.5. Details of the Assets Acquired Section 1 page 8
1.6. Summary of Key Contracts Section 1 page 8

2. Appropriateness of the Transaction

2.1. Objective of entering into the Transaction Section 2 page 1
2.2. Advantages and Disadvantages of entering into the Transaction Section 2 page 1
2.3. Risk of entering into the Transaction Section 2 page 5

3. Fairness of the Acquisition Price and Conditions

3.1. Fairness of the Acquisition Price Section 3 page 1
3.2. Fairness of the Transaction Conditions Section 3 page 22

4. Summary of the Opinions by the Independent Financial Advisor Section 4 page 1

Appendix 1 General Information of Holcim (Vietnam) Limited

1.1 Company Background Appendix 1 page 1
1.2 Board of Directors Appendix 1 page 3
1.3 Dividend Policy Appendix 1 page 4
1.4 Summary of Financial Statement and Operating Performance Appendix 1 page 4
in the past 3 years
1.5 Industry Review Appendix 1 page 8

Appendix 2 General Information of Siam City Cement Public Company Limited

2.1 Company Background Appendix 2 page 1
2.2 Board of Directors Appendix 2 page 10
2.3 Shareholders Appendix 2 page 11
2.4 Dividend Policy Appendix 2 page 11
2.5 Summary of Financial Statement and Operating Performance Appendix 2 page 12
in the past 3 years
2.6 Industry Review Appendix 2 page 18
Opinion of the Independent Financial Advisor regarding Asset Acquisition Transaction

Glossary

Key Terms Definition
β : Beta
Advisers : SCCC’s other advisers related to the Transaction, namely, financial adviser,
strategic consultant, accounting and tax adviser, and legal adviser
Amended ERC : An amended Enterprise Registration Certificate
ATIGA : ASEAN Trade in Goods Agreement
BLS : Bualuang Securities Public Company Limited
BOT : Bank of Thailand
BTMU : Bank of Tokyo-Mitsubishi UFJ, Ltd.
CB : Cemex Cement (Bangladesh) Limited
CCTA : Contributed Capital Transfer Agreement for the sale and purchase of the
charter capital of Holcim (Vietnam) Limited dated 4 August 2016
Cemasco Loan : The existing shareholder loan between LafargeHolcim Limited’s Group and
Holcim (Vietnam) Limited
Cemex transactions : The acquisition of 100 percent interest in Cemex (Thailand) Company
Limited and Cemex Cement (Bangladesh) Limited
Central Vietnam : A region comprising of the following provinces collectively: Nghe An, Ha
Tinh, Quang Binh, Hue, Da Nang, Quang Na, and Quang Ngai
Company : Siam City Cement Public Company Limited
Conwood : Conwood Company Limited and PT. Conwood Indonesia
CT : Cemex (Thailand) Company Limited
D/E : Total liabilities to total shareholders’ equity
DPI : Department of Planning and Investment of Ho Chi Minh City
EBITDA : Earnings Before Interest, Taxes, Depreciation and Amortization
EV/EBITDA : Enterprise Value to Earnings Before Interest, Taxes, Depreciation and
Amortization
EV/Ton : Enterprise Value to Ton
FDI : Foreign Direct Investment
g : Long-term growth rate
GDP : Gross Domestic Product
Globe Cement : Globe Cement Co., Ltd.
HLCM : Holcim Philippines Inc.
HLL : Holcim (Lanka) Limited and its subsidiaries
Holcim : Holcim Limited
Holderbank : “Holderbank” Financiere Glaris Limited
HT I : Ha Tien 1 Cement Company
HT1 : Ha Tien 1 Cement JSC
HVL : Holcim (Vietnam) Limited
IFA : Independent Financial Advisor
Opinion of the Independent Financial Advisor regarding Asset Acquisition Transaction

Key Terms Definition
IFA Report : Independent Financial Advisor Report regarding reasonableness and fairness of
the Transaction
IFRS : International Financial Reporting Standard
IMF : International Monetary Fund
INSEE Ecocycle : INSEE Ecocycle Co., Ltd.
INTP : PT Indocement Tunggal Prakarsa Tbk
JVC : The Joint Venture Contract between Vietnam Cement Industry Corporation
and LafargeHolcim Limited
Initial Price : EUR 460 million or equivalent to THB 17,957 million (or USD 503 million)
INSEE Superblock : INSEE Superblock Co., Ltd.
Kd : Cost of Debt
Ke : Cost of Equity
Kg : Kilogram
Late Filing : SCCC failed to submit the Circular, including the IFA Report, to the SEC
within the timeframe contemplated by the CCTA
LCV : Lafarge Cement Limited Liability Company
LH : LafargeHolcim Limited
Linklaters : Linklaters LLP
LMC : Lafarge Malaysia Berhad
Locked Box Account Date : 31 May 2016
m3 : Cubic meters
Major Acquisition Rule : The Notification of the Capital Market Supervisory Board No. TorJor. 20/2551
Re: Rules concerning the Material Transactions in the Acquisition and
Disposition of Assets dated 31 August 2008 (as amended) and the Notification
of the Board of Governor of the Stock Exchange of Thailand Re: Disclosure of
Information and other Acts of Listed Companies concerning the Acquisition and
Disposition of Assets B.E. 2547 dated 29 October 2004 (as amended)
Management ; Mr. Charin Satchayan, Independent Director of the Company, and Mr. Siva
Mahasandana, Director and Chief Executive Officer of the Company
Net IBD/E : Net interest bearing debt to total shareholders’ equity
Northern Vietnam : A region comprising of the following provinces collectively: Hai Phong,
Hung Yen, Hai Duong, Quang Ninh, Thai Binh, Ha Nam, Nam Dinh, Ninh
Binh, Thanh Hoa, Hanoi, Hoa Binh, Bac Ninh, Bac Giang, Thai Nguyen, Bac
Kan, Vinh Phuc, Phu Tho, Son La, Dien Bien, Lai Chau, Ha Giang, Cao
Bang, Lang Son, Lao Cai, Yen Bai, and Tuyen Quang
OECD : The Organization for Economic Cooperation and Development
Opinion : the Independent Financial Advisor’s opinion regarding fairness and
appropriateness of the Transaction
P/BV : Price to Book Value
P/E : Price to Earnings
Opinion of the Independent Financial Advisor regarding Asset Acquisition Transaction

Key Terms Definition
Pre-Closing Date : No later than 3 business days after all condition precedents in CCTA have
been fulfilled
PP&E : Property, plant and equipment
Rf : Risk Free Rate
Rm : Market Return
RMX : Ready-Mixed Concrete
ROFR : Right of First Refusal
SCC : Siam Cement Public Company Limited
SCCC : Siam City Cement Public Company Limited
SCCC (Bangladesh) : Siam City Cement (Bangladesh) Ltd.
SCCC (Lanka) : Siam City Cement (Lanka) Ltd. (Previously known as “Holcim (Lanka) Limited”)
SCCO : Siam City Concrete Co., Ltd.
SCP : Siam City Power Co., Ltd.
SEC : The Securities and Exchange Commission
Seller : LafargeHolcim Limited
SET : The Stock Exchange of Thailand
SMBR : PT Semen Baturaja (Persero) Tbk
SMCB : PT Holcim Indonesia Tbk
SMGR : PT Semen Indonesia Persero Tbk
Southern Vietnam : A region comprising of the following provinces collectively: Binh Dinh,
Khanh Hoa, Phu Yen, Ninh Thuan, Binh Thuan, Gia Lia, Dak Nong, Dak
Lak, Kon Tum, Lam Dong, HCM, Long An, Dong Nai, Binh Duong, Binh
Phuoc, Tay Nihn, Ba Ria Vung Tau, Tien Giang,Tra Vinh, Dong Thap, Can
Tho, Hau Giang, Soc Trang, Ben Tre, An Giang, Kien Giang, Ca Mau, Bac
Lieu, and Vinh Long
T : Corporate Income Tax
Target : Holcim (Vietnam) Limited
THB : Thai Baht
Transaction : The acquisition of charter capital of 65 percent of the total charter capital of
Holcim (Vietnam) Limited by Siam City Cement Public Company Limited
from LafargeHolcim Limited
TSA : Transactional Services Agreement
tpa : Tonnes per annum
TV : Terminal Value
USD : United States Dollar
Valence : Valence Corporation Limited
VICEM : Vietnam Cement Industry Corporation
VND : Vietnam Dong
WACC : Weighted average cost of capital
Opinion of the Independent Financial Advisor regarding Asset Acquisition Transaction

14 November 2016

Subject Independent Financial Advisor’s Opinion
regarding the Asset Acquisition of Siam City Cement Public Company Limited
To Shareholders of Siam City Cement Public Company Limited
Reference is made to the resolution of Board of Directors of Siam City Cement Public Company
Limited (the “Company” or “SCCC”) No. 141 and No. 143, which was held on 22 July 2016 and 3
August 2016, respectively, approving the Company to proceed with an acquisition of 65 percent of the
total charter capital of Holcim (Vietnam) Limited (“HVL”) from LafargeHolcim Limited (the “Seller” or
“LH”). The Company subsequently entered into the Contributed Capital Transfer Agreement (the
“CCTA”) for the sale and purchase of the charter capital of HVL dated 4 August 2016 with the Seller,
under which the Company will acquire 65 percent of the total charter capital of HVL from the Seller (the
“Transaction”).
The Transaction is considered as an acquisition of assets in accordance with the Notification of the
Capital Market Supervisory Board No. TorJor. 20/2551 Re: Rules concerning the Material Transactions in the
Acquisition and Disposition of Assets dated 31 August 2008 (as amended) and the Notification of the Board
of Governor of the Stock Exchange of Thailand Re: Disclosure of Information and other Acts of Listed
Companies concerning the Acquisition and Disposition of Assets B.E. 2547 dated 29 October 2004 (as
amended) (collectively, the “Major Transaction Rule”). The highest comparative value derived from the
calculation of the transaction size, taking into account the value of the acquisition transactions entered into
by the Company and/or its subsidiaries during the past six months, is equivalent to not more than 82.12
percent on a total value of consideration basis. The Transaction is, therefore, categorized as a Type-1
transaction according to the Major Transaction Rule.
In accordance with the Major Transaction Rule, the Company is required to (1) disclose information
memorandum regarding the Transaction to the Stock Exchange of Thailand (the “SET”), (2) send a notice to
attend the Shareholders’ Meeting together with the opinion of independent financial advisor regarding the
reasonableness and fairness of the Transaction (“IFA Report”) to shareholders no less than 14 days prior
to the date of the Shareholders’ Meeting, and (3) obtain an approval from the Shareholders’ Meeting for
entering into the Transaction with the votes of not less than three fourths of the total votes of shareholders
present at the meeting and having the right to vote.
The Board of Director’s Meeting of the Company no. 143 held on 3August 2016, therefore, approved
in principal for Mr. Charin Satchayan, Independent Director of the Company, and Mr. Siva
Mahasandana, Director and Chief Executive Officer of the Company (together called “Management”), to
engage Independent Financial Advisor (“IFA”) to provide the opinion regarding fairness and appropriateness
of the Transaction to the Company’s shareholders (the “Opinion”) in making a decision regarding the
Transaction. Management subsequently engaged Bualuang Securities Public Company Limited (“IFA”) to act
as IFA regarding the Transaction.
In rendering the Opinion, IFA has relied on information gathering from interviews and site visit
with the Company’s management, employees and advisors, documents provided by the Company, and other
publicly disclosed information, as well as the IFA’s assessment of current economic conditions. Any
significant changes of the aforementioned information and documents in the future may alter the Opinion
on the Transaction accordingly. Information and documents used in preparing the Opinion included but are
not limited to the following:
Opinion of the Independent Financial Advisor regarding Asset Acquisition Transaction

1. The resolution of the Board of Directors of Siam City Cement Public Company Limited
No. 141, No. 143 and No. 144, which was held on 22 July 2016, 3 August 2016 and 27 October
2016
2. Disclosure of Information Memorandum concerning the acquisition of the charter capital of
Holcim (Vietnam) Limited of Siam City Cement Public Company Limited dated 8 August
2016 and as amended
3. Disclosure of Information Memorandum concerning the acquisition of shares in Holcim (Lanka)
Limited of Siam City Cement Public Company Limited dated 29 July 2016 and as amended
4. Disclosure of information concerning the acquisition of some part of business of Valence
Corporation Limited dated 5 April 2016 and report on the progress of the purchase of some
part of assets and business of Valence Corporation Limited dated 2 June 2016
5. Disclosure of information concerning the share purchase in Cemex (Thailand) Company Limited
and Cemex Cement (Bangladesh) Limited dated 10 March 2016
6. Report on the completion of the purchase of the shares in Cemex (Thailand) Company Limted
dated 4 May 2016
7. Report on the completion of the sale and purchase of the shares in Cemex Cement
(Bangladesh) Limited dated 27 May 2016
8. Annual Information Form (Form 56-1) for the year 2015 of Siam City Cement Public Company
Limited
9. Audited Financial Statements for the year 2013 to 2015, Reviewed Financial Statement for the
second quarter ended 30 June 2016 of Siam City Cement Public Company Limited and Reviewed
Financial Statement for the nine-month ended 30 September 2016 of Siam City Cement Public
Company Limited
10. Separated Audited Financial Statements for the year 2013, Combined Financial Statements
using management accounts for the year 2013 – 2015 and Interim Consolidated Financial
Statement for 5-month period ended 31 May 2016 of Holcim (Vietnam) Company Limited
11. Confidential Information Memorandum of Holcim (Vietnam) Company Limited as of June
2016
12. Agreements and draft agreements related to the Transaction
13. Due Diligence Reports and draft Due Diligence Reports related to the Transaction
• Draft Debt & Debt Like Analysis dated 2 August 2016 prepared by
PricewaterhouseCoopers Limited
• Draft Financial and Tax Red Flag Report dated 24 July 2016 prepared by
PricewaterhouseCoopers Limited
• Legal Due Diligence Report dated 24 June 2016 and 9 August 2016 prepared by Linklaters
LLP
• Legal Due Diligence Report dated 27 June 2016 and 8 August 2016 prepared by Vietnam
International Law Firm (VILAF)
14. Information from interviews with the Company’s management and employees
15. Other information and documents provided by the Company related to the Transaction
Opinion of the Independent Financial Advisor regarding Asset Acquisition Transaction

As IFA has limited access to the information of HVL, IFA has prepared the Opinion based on the
accessible and publicly disclosed information of HVL and information and documents provided by the
Company and/or other relevant parties. In this regards, IFA had no opportunity to interview HVL’s
management regarding the future business plan, therefore, the information received from the Company may
not be as complete as information directly provided by HVL. However, IFA believes that such limitation
is not materially affecting the IFA’s ability to conduct its duty in preparing the Opinion.
The Opinion is based on the assumptions that (1) all information and documents provided by the
Company and interviews with management, employees and advisors of the Company were reliable, complete
and accurate at the issuance date of the IFA Report, (2) no past events or imminent events or impending
events would create significant negative impacts on HVL’s operating performance and its financial position,
and (3) all business contracts relating HVL were legal and binding, with no amendments, revocation or
cancellation of the laws underlying contracts.
BLS hereby certify that we have studied, analyzed and prudently performed our duties as IFA,
complying with the generally accepted professional standard and rendered our Opinion based on the
unbiased analysis with regards to the best benefit of the shareholders. The Opinion is based on the
information and documents received from the Company and other publicly available information. The IFA
assumes that such information is accurate and reliable at the issuance date of the IFA Report. If there is any
significant change on and/or inaccuracy of the aforementioned information or documents, it may have
material effect on the Opinion.
The objective of this IFA Report is specifically to provide an opinion on the Transaction to the
Company’s shareholders only. The decision making of approving or not approving the Transaction is to
be made at the shareholder’s own discretion. The shareholders are advised to study the information
and consider reasons, advantages, disadvantages, risk factors and opinions on the factors relating to
the entering into Transaction attached hereto before casting a vote to ensure that you are able to
consider and approve the entering into Transaction in an appropriate manner. The IFA shall not be
responsible for any adverse impacts on the Company and its shareholders resulting from the Transaction
and the IFA has no obligation to update, revise or reaffirm the Opinion stated herein.
Opinion of the Independent Financial Advisor regarding Asset Acquisition Transaction

Executive Summary
The Board of Directors held meetings No. 141 and No. 143 on 22 July 2016 and 3 August 2016,
respectively, to approve the Company to proceed with an acquisition of 65 percent of the total charter
capital of HVL from the Seller. Consequently, the Company entered into the Contributed Capital Transfer
Agreement (the “CCTA”) with the Seller, under which the Company will acquire charter capital of VND
1,975.62 billion (or equivalent to approximately THB 3,160.98 million1) or 65 percent of the total charter
capital of HVL from the Seller at approximately EUR 479 million or THB 18,694 million (at the exchange rate
of one EUR per THB 39.0152 according to the average of the selling and buying rate available on the BOT’s
website on 3 August 2016), under assumption that the Pre-Closing Date2 is on 31 December 2016. The Closing
Price comprises of the Initial Price of EUR 460 million plus incremental amount less leakage. The Closing Price
depends on the Pre-Closing Date and conditions stated in the
CCTA – please see detail of the acquisitions price in Section 1 Characteristic and Details of the Transaction.
The Transaction will be completed once these following conditions precedent are fulfilled.
(1) VICEM, being 35 percent shareholder of HVL, does not exercise its right of first refusal to
purchase the Capital in relation to HVL pursuant to the Joint Venture Contract between VICEM
and the Seller (“JVC”). In this regard, VICEM had a period of 60 days from the date that it has
been notified by the Seller, which was 7 September 2016, to exercise its right of first refusal
which shall be expired on 6 November 2016. As of the date of the IFA Report, the ROFR
period had been expired. In this regard, VICEM did not exercise its rights. Thus, according
to JVC, it shall be deemed to have given VICEM’s written consent to LH’s assignment of the
charter capital to the Company;
(2) the resolution of the shareholders’ meeting of the Company of not less than three-fourths of the
total votes of shareholders present at the meeting and having the right to vote, approving entry
into the Transaction having been obtained by the Company; and
(3) consent and approval from Vietnamese authorities, which is Department of Planning and
Investment of Ho Chi Minh City (“DPI”), having been obtained by the Seller for the acquisition
approval.
In this regard, if the Company and the Seller cannot fulfill the second and third condition abovementioned
within 180 days (or the latest of approximately 210 days) from the expiration of ROFR period, the CCTA shall
automatically terminate without any breakup fee. In addition, the period of 180 days and approximately 210 days
from the expiration of ROFR period (“Effective Date”), which is 6 November 2016, is on 5 May 2017 and 5
June 2017, respectively. According to the CCTA, the date that is 1 business day after the second and third
condition are fulfilled is the Unconditional Date.
As of the date of the IFA Report, the Company expects the Transaction to be completed in the first quarter
of 2017, which shows in the figure below about the key milestone of the Transaction.

1 Calculated using the average of the selling rate and buying rate determined by the Bank of Thailand (“BOT”) as of 3 August 2016 equal to
THB 0.0016 per VND 1.
2 Pre-Closing Date is the date that (1) the following conditions have been fulfilled (i) the Company obtains approval from shareholders’ meeting
and (ii) the Company obtains acquisition approval from DPI, (2) the Company transfers the Closing Price to escrow account as agreed and (3) the
Seller submits the application for the Amended ERC to DPI. In this regard, the Pre-Closing Date shall take place no later than 3 business days
after the Unconditional Date, which is 1business day after the condition (1) has been fulfilled.
Opinion of the Independent Financial Advisor regarding Asset Acquisition Transaction

The Key Milestone of the Transaction

Note: 1 Amended Enterprise Registration Certificate (Amended ERC) is a document to be issued by DPI to HVL, reflecting, among others:
(1) the Company as the legal owner of the transfer capital of HVL; and (2) the change of the name of HVL to adopt the new name which
does not consist of or incorporate the word “Holcim” or “Lafarge” or any name which is substantially or confusingly similar. In this
regard, the Seller will submit the application the Amended ERC to DPI once the escrow agent receives the Closing Price from the
Company
2 The conditions will be fulfilled once (1) the Company obtains approval from shareholders’ meeting and (2) the Company obtains
acquisition approval from DPI
3 Conditions in CCTA state that (1) shareholders’ meeting approval and (2) acquisition approval from DPI must be obtained within 180
days from Effective Date or this may be deferred for one month (Deferred Long Stop Date) at sole discretion of the Seller. In this regard,
if the abovementioned conditions cannot be fulfilled within the stated timeline, the CCTA shall automatically terminate. Please see more
information in Section 1.6.1 Summary of Joint Venture Contract
Nonetheless, the Pre-Closing Date (equivalent to not more than 3 business days after the Unconditional
Date according to the CCTA) may occur later than when the Company has expected, which is the end of 2016,
to end of the first quarter of 2017, or possibly until 8 June 2017. This will result in the Company paying for the
incremental amount from the Initial Price. Therefore, the IFA has prepared sensitivity analysis to present the
impact of timing of the Pre-Closing Date on the Closing Price (and assuming no leakage). If the Pre-Closing
Date occurs at the end of December 2016 to 8 June 2017, the Closing Price for 65 percent of the total charter
capital of HVL will be in the range of EUR 479 million to EUR 493 million (or equivalent to THB 18.68 billion
to THB 19.23 billion3).
Closing Price
Initial Price Pre-Closing Date
31Dec 16 31Jan 17 28Feb 17 31Mar 17 30 Apr 17 31May 17 8Jun 17
EUR 460 million 479 482 484 487 489 492 493
THB 17.95 billion1 18.68 18.79 18.89 18.99 19.10 19.20 19.23
Note: 1 Calculated at the exchange rate of EUR 1 per THB 39.0152 according to the average of the selling and buying rate available on the
BOT’s website on 3 August 2016

3 The exchange rate used in the calculation is the selling rate and buying rate determined by the BOT as of 3 August 2016 equal to THB 39.0152 per
EUR 1