ASIA BUSINESS FORUM

M&A by Asian Companies

May 22, 2012

New successful Japanese business model for assisting international expansion:

If you just build it, they won’t come.

Real Estate (office & industrial park)

+ Human Resource, General

Admin.,Accounting, Tax, Legal, Customs (import/export)

--Often by Japanese-speaking staff.

Japanese restaurant

Japanese bank Convenience store DVD rental Travel agency Hospital & clinic

Vocational & Japanese language school

Police & fire station Post office. Shipping &

freight Condo, hotel, apartment,

dormitory Gym Golf course

Question 1:Will it make sense for American/local developers operating in Asia to offer comprehensive packages to American companies?

Question 2:To entice Asian companies to invest in the US, will it make sense to offer comprehensive packages to them?

THE POLITICS OF WATER: TOO MUCH? NOT ENOUGH?

WHO DECIDES?

Ambassador Darryl Johnson

Most great civilizations have controlled water and organized access to water as one of their primary obligations. 7 billion people now inhabit our globe and all need water to survive.

Southeast Asia: Droughts, floods intensify political and economic conflicts

The Role of Water in Myanmar/Burma:2007 Cyclone Nargis brought huge damageGovernment did not permit outside aid; now more open to such contact

Recent Dispute between China and Myanmar over Irrawaddi River dam that China wants to build on border

Mekong River: Starts in China, forms border between Thailand and Laos, and empties through Cambodia and VietnamChina wants water for hydropower and irrigationCambodia and Vietnam depend on waters for irrigation and fishing

Key Questions Q&A

What is effective mechanism to resolve differences among six parties?

What are the implications for business?

What are the opportunities to address these challenges with new solutions?

– Micro Irrigation / Drip Irrigation?– Water Filtration Systems (PATH example)?– Singapore example – sewage to drinking water system

ASIA BUSINESS FORUM

Roundtable Discussions

Columbia Center701 5th Ave, Ste 2600

Seattle, WA 98104

w w w . c a s c a d i a c a p i t a l . c o m

Expertise. Discipline. Results.

Member FINRA/SIPC

Asia Business ForumCross-Border M&A

May 22, 2012

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Recent Cross-Border Activity with Asian Buyers

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Deal Volume by Country

Selected Asian Country Annual Deal Count

Source: Capital IQ

–

10

20

30

40

50

60

70

80

2009 2010 2011 Q1 2012

China Japan Singapore South Korea

Cross-border transactions involving Asian countries are generally opaque in terms of data availability

China, Japan, Singapore and South Korea offer the largest amount of insight into the US target, cross-border market

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Cross-border Transaction Volume Data Table

Cross-border Transaction Count (US target)

Source: Capital IQ

In assessing countries such as Indonesia, Malaysia, and Thailand, transaction data is extremely sparse

These limited available insights require intimate and closed door knowledge of the markets when transacting

Coutry 2009 2010 2011 Q1 2012

China 36 70 60 12Indonesia – – 3 –Japan 29 31 47 15Malaysia 3 1 5 –Singapore 5 11 13 5South Korea 14 20 24 6Taiwan 7 5 6 3Thailand – 2 2 2Grand Total 94 140 160 43Note: Transaction count calculated as US target cross-border transactions with corporate headquarters determining country of the buyer

Recent Chinese – US Cross-Border M&A Activity

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China acquisitions of US companies have made a strong return – Deal count is generally a more meaningful measurement of activity due to the

lack of reported data on transaction dollar volume– Despite a sluggish Q1 2012, recent activity has been robust

EBITDA multiples have generally trended positively over the last 13 quarters however the opacity of transaction data causes Q1 2009, Q2 2009, and Q1 2012 to be deemed “Not Meaningful”

China – US Cross-Border M&A Volume China – US Cross-Border EBITDA Multiples

33

64

56 59 64

74

57 51

36

46

30

19 20

–

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

–

10

20

30

40

50

60

70

80

Total Transaction $ Value Transaction Count

–

10.7x 11.1x

17.5x

10.3x

8.4x

15.5x

11.6x

8.5x 10.2x

4.3x

–––

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

18.0x

20.0x

Source: Capital IQ, Excludes multiples >25xSource: Capital IQ

China – US Cross-Border M&A Activity by Industry

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Last 13 Quarters Deal Count by Industry

Q1 2012 Deal Count by Industry

China acquisitions of US companies segmented by industry in the last 13 quarters indicates that Consumer Discretionary, Financial, and Industrial businesses are garnering the greatest foreign interest

Q1 2012 displays similar results with the Consumer Discretionary, Industrials, Financials, and Information Technology industries hosting about 78% of activity

Consumer Discretionary

16.3%

Consumer Staples2.7%

Energy4.3%

Financials25.4%

Healthcare6.7%

Industrials19.9%

Information Technology

16.7%

Materials5.9%

Telecom Services0.7%

Utilities1.6% Consumer

Discretionary16.1%

Consumer Staples6.5%

Energy3.2%

Financials22.6%

Industrials19.4%

Information Technology

19.4%

Materials12.9%

Source: Capital IQ

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China – US Selected Cross-border Transactions

Acquired

Acquired in May, 2012, AMC Entertainment, operates as a theatrical exhibition company managing movie and show theaters.

EV reported to be $2.6 billion at a 1.0x Revenue and 9.8x EBITDA multiple.

Acquired

Acquired in May, 2012, EcoTimber, Inc., a flooring company, supplies harvested and reclaimed wood products in North America.

Portfolio company of Greenmont Capital Partners, no transaction details disclosed.

Acquired

Acquired February, 2012, Goss International Corporation manufactures Web offset presses and print finishing systems for the printers and publishers.

EV reported to be $90 million.

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China – US Selected Cross-border Transactions

Acquired

In November, 2011, Yangfeng acquired the Visteon Corp., Global Interiors Business which manufactures interior products such as cockpit systems and panels for vehicle manufacturers.

No transaction details disclosed.

Acquired

Acquired November, 2011, Northern Engraving designs, manufactures, and sells metal and plastic nameplates, panels, overlays, and trims for appliance, automotive, and nameplate OEMs.

$92 million EV and 0.9x Revenue multiple.

China Auto Parts and

Accessories Capital Holding

Acquired

Acquired in July, 2011, Century Automotive MFG, Inc. manufactures auto parts for original equipment and after market manufacturers.

CAPACH is a state owned Chinese investment holding firm; no transaction details disclosed.

Assets

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China – US Selected Cross-border Transactions

Acquired

Acquired December, 2010 Continental Motors, Inc. develops and supplies aviation products for customers globally.

EV reported to be $186 million.

Acquired

Announced in December, 2009, Volvo designs and manufactures cars for markets in Sweden and internationally.

EV reported to be $1.8 billion.

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Japan – US Selected Cross-border Transactions

Acquired

Acquired in April, 2012, IBM’s Point-of-Sale Terminal Business comprises cash registers and related devices that facilitate retail transactions and collect data from stores.

No transaction details disclosed.

Acquired

Acquired in March, 2012, NEXX engages in the design, manufacture, sale, installation, and servicing of semiconductor process equipment.

$249 million EV, 3.9x Revenue, 36.0x EBITDA.

Acquired

Acquired in February, 2012, Silver Springs Citrus, Inc. engages in producing, processing, and packaging orange and grapefruit juices.

EV reported to be $47 million.

Assets

27

Korea – US Selected Cross-border Transactions

Acquired

In June, 2011, Hyosung acquired the Global Wire Business of Goodyear Tire which manufactures tire reinforcement wire.

The business segment was valued at $50 million.

Acquired

Acquired in May, 2011, Acushnet Company, manufactures and markets golf balls, clubs, shoes, and accessories.

$1.25 billion EV, 1.0x Revenue.

Acquired

Acquired in January, 2011, Unidym, engages in the development, manufacture, and application of carbon nanotubes for various industries.

EV reported to be $145 million.

Assets

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Asia – Pacific Northwest Selected Cross-border Transactions

Acquired

Acquired in December, 2011, SonoSite, Inc. develops hand-carried ultrasound systems for use in various medical specialties and in a range of treatment settings at the point-of-care.

$855.9 EV, 2.8x Revenue, 23x EBITDA

Acquired

Acquired in June, 2011, Westwood Shipping Lines provides cargo transportation services moving paper and forest products, containerized products and oversized heavy machinery.

$66.15 EV and 0.3x Revenue multiple

Acquired

Acquired in April, 2011, Otak, Inc. provides architecture, construction management, planning, survey and mapping, urban design, and water and environmental services.

$17.9 EV, .03x Revenue

Toyko, Japan Bothell, WA

Osaka, Japan Federal Way, WA

Seoul, South Korea Lake Oswego, OR

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Asia – Pacific Northwest Selected Cross-border Transactions

Acquired

Acquired in September, 2011, eat.shop guides publishes city guides. It covers Atlanta, Austin, Boston, Chicago, New York, Paris, Kansas City, Portland, and Denver cities.

No transaction information disclosed

Singapore, Singapore Portland, OR

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China Petroleum and Chemical Corporation Strategic Rationale: Secure oil supplies to feed growing domestic demand

and fulfill ambitions to become major global player Total Number of Deals, Last 5 Years: 23 Total Value of Deals, Last 5 Years: $19.9B USD

China National Offshore Oil Corp (CNOOC) Strategic Rationale: Grow revenues through overseas acquisitions Total Number of Deals, Last 5 Years: 20 Total Value of Deals, Last 5 Years: $18.49B USD

China Resources Snow Breweries Strategic Rationale: Strengthen its presence in key markets and consolidate beermarket in China. Has sights on international markets. Total Number of Deals, Last 5 Years: 21 Total Value of Deals, Last 5 Years: $1.54B USD

Examples of Acquisitive Chinese Companies

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2012 Trends and Challenges for Chinese Cross-Border M&A

32

Manufacturing assets in the US will become a focus of acquirers in China Labor costs rose 22% in China in 2011, wages will double in five years, and

hourly wages will be at 2/3’s the level of wages in the US by 2020

Exacerbating the issue , manufacturing productivity has been outpaced by salaryIncreases according to the National Statistics Bureau

Trade sales will be much more viable exit option than IPO’s The continued decrease of IPO activity across China’s three boards and drastic

decline in stock prices since 2010-now, will drive more M&A activity 2012 will see a rise of a seller market in China

Historically, China has been a net buyer of strategic assets around the world, which wont change. However, expect to see more Chinese enterprises actively pursuing trade sales to gain liquidity as IPO markets are drying up.

Consumption growth in China will continue to drive outbound M&A to the Western world

Consumption levels being relatively low at 36% of GDP, Chinese corporations will pursue luxury brands, retail assets, and consumer product companies.

Increased scrutiny by the US government can decrease appetite for US deals from China

Recent tit-for-tat between regulating authorities has dealmakers concerned

Five Trends for Cross-Border M&A with China

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Main Challenge for Chinese Buyers

Need to Embrace the Process

Stop being reactive and be proactive – engage a US based IB Provide better coverage of strategic candidates that are actually for sale Understand valuation metrics, especially for private companies Minimize wasted effort on dead end discussions “US Style” of doing a deal Move too slowly, will be left behind in a process-be prepared beforehand Add credibility regarding interest by retaining professional advisors Be advised on what are customary business terms and negotiating tactics Receive guidance on obtaining appropriate protections A process will yield a better result

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Questions and Answers

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Contact:

Paul LouieManaging DirectorCascadia Capital LLC701 Fifth Ave., Suite 2600Seattle, WA 98104T: 206-436-2548C: 626-374-8856plouie@cascadiacapital.comwww.cascadiacapital.com