Equity Markets and Alternative Investments Teaching ... · 2 GIMA TT Overview Business Description Shareholding & Management Key Products and Services Financial Highlights GIMA TT

Equity Markets and Alternative Investments Teaching Program 2017-2018 Week 4 – October 3, 2017

Equity Capital Markets: the GIMA TT and Poste Italiane Case Studies

Marco Morelli – Chief Executive Officer, Banca Monte dei Paschi di Siena SpA - Italy

Gianluca Iuliano – Managing Director, BAML

The GIMA TT IPO

1

Key Highlights Transaction Summary

GIMA TT up to €424m/$498m IPO

Pre-Deal Investor Education (“PDIE”) started on 4th September and lasted for two weeks, with over 230 institutions met in nine locations across Europe and the US, resulting in a price range announcement of €9.60 to €12.50 per share on Thursday 14th September

Books opened on 18th September and were covered on the full deal size after one day of bookbuilding. After the first week, further guidance was given on pricing expected towards the upper end of the price range

As part of the Roadshow meetings, the company’s management met with over 100 institutions, mainly across the UK, Italy, US, Germany and France

The transaction priced at the top end of the range or €12.50 per share, with the book eight times oversubscribed at that level

Pricing implies a P/E multiple of c.40x and an EV/EBIT of c.27x based on 2016 reported financials

Italy

Initial Public Offering

Joint Global Coordinator & Joint Bookrunner

Up to €424m/$498m

September 2017 On 28th September 2017, GIMA TT priced its up to €424m IPO (assuming full exercise of the greenshoe), with a listing on Borsa Italiana

GIMA TT S.p.A. is a company within the IMA Group which engineers and assembles electronic-based automatic machines for the packaging of tobacco products, including the new generation ones (e.g. reduced-risk products such as IQOS of Philip Morris International)

BofAML acted as Joint Global Coordinator and Joint Bookrunner, and was the only international bank on the offering

Issuer GIMA TT/GIMA IM/Borsa Italiana

Selling Shareholders

IMA S.p.A. (6.4% or 9.9% of the company including greenshoe)

Maestrale Investimenti (28.6% of the company)

Offer Size/Structure

100% Secondary offering to institutional investors only

Base deal size: 30.8m shares/€385m (representing a 35% free float)

Greenshoe: up to 3.1m shares/€39m

Full deal size assuming full exercise of the greenshoe: up to 33.9m shares/€424m (representing a 38.5% free float)

Implied equity value at listing of c.€1.1bn

Pricing Price Range: €9.60–€12.50 per share

Offer price: €12.50 per share

Timetable

One round of early look meetings in July

Investor Education: 04 September 2017 – 15 September 2017

Roadshow and Bookbuilding: 18 September 2017 – 28 September 2017

Pricing and Allocations: 28 September 2017

First Day of Trading: 02 October 2017

Lock-up 180 days for GIMA TT and IMA and 365 days for certain managers of

GIMA TT, subject to customary exceptions and waiver by the Joint Global Coordinators

BofAML Role Joint Global Coordinator and Joint Bookrunner

2

GIMA TT Overview

Shareholding & Management Business Description

Financial Highlights Key Products and Services

GIMA TT engages in engineering, assembly and installation of electronic machines for tobacco packaging

Born in 2009, invents “flexible”, “open architecture” machines for packaging in the tobacco sector

Since 2009 GIMA TT has been also pioneering the New Generation Products (NGP) packaging market:

Closed and open vaping system (e.g. e-cig, tank systems)

Heated Tobacco Products – “HTP” (e.g. IQOS for PMI)

GIMA TT established as first supplier to PMI, BAT and JT for HTP packaging machinery

Main product offer includes: standard machines for conventional tobacco (wrapping, stamp applicators, overwrapped/cartoner, etc.) and special machines for NGP (highly customized tobacco powder capsule filler, liquid capsule filler, e-cigarette assembly lines), including relevant aftersales services

Headquarter & Production Site: Ozzano dell’Emilia, Bologna (Italy); Employees: 116 + 131 contractors

Rest of

Euro…

Italy

APAC RoW

43%

37%

19% 1%

Original Equipme

nt

Aftersales

78%

22%

By Clients

45% 55%

€100m +65% CAGR 2014A–2016A

Revenue

€40m +82% CAGR 2014A–2016A

EBITDA

40% EBITDA Margin

99% (3) Cash Conversion

Backlog €89m €132m order

intake in 2016A

____________________ Source: Company Information, Factset as of August 23, 2017, PMI press release. (1) Maestrale Investimenti is 69.40% owned by Alva S.p.A., which is controlled by Alberto Vacchi (53.33% stake plus additional 46.55% in bare ownership). (2) Others include Massimo Ferioli (1.85%), Massimo Marchesini (1.85%), Fiorenzo Draghetti (1.80%), Ipercubo S.r.l. (1.30%), Sergio Marzo (1.04%), Annamaria Draghetti (0.46%). (3) Defined as EBITDA – Capex as % of EBITDA.

Fiorenzo Draghetti CEO

>35 years of experience

Stefano Cavallari General Manager

>35 years of experience

Marco Savini

CFO >20 years of experience

Sergio Marzo Chairman IMA CFO

Engineering, assembly and installation of machine and lines for tobacco packaging

Selling of additional and customized machinery accessories

Complete range of After-Sales service as change parts, technical assistance, improvement kits, spare parts

Complete Packaging Line Others

56% 18%

15%

12%

By Products

By Geography

GIMA TT SpA

70.0% 21.7% 8.3%

IMA SpA Others (2) Maestrale Investimenti (1)

NGP

Conventional

55% 45%

GIMA TT Co-Founder

Leader in the design and manufacturing of automatic machines for packaging of cosmetics, pharma, food, tea and coffee (€3.2bn Market Cap)

€100m €100m

€100m €79m

Leading Innovator in the Packaging Machinery for Tobacco Industry

Picture

Embed ____

3

Selling GIMA TT to the Investors Community GIMA TT Equity Story

Resilient and profitable end-market with young and fast-growing “New Generation Product” (“NGP”) segment 1

Innovative flexible machinery solutions for conventional tobacco and NGP, setting new industry benchmarks

2

Solid business model anchored to established and well-preserved relationships 3

Unique combination of exceptional growth, profitability and cash flow generation 4

Untapped market potential offering multiple growth opportunities 5

Orchestrated by long standing, experienced and committed management team, exploiting a solid know-how in industrial automation

92% 90% 80%

8%

10% 14%

2011A 2016A 2021E

Cigarettes Other Tobacco Products

4

…Generating ~€3bn Capex (1)(2) and ~€1bn R&D (1)(3) p.a. Sector Characterized by Profitable Players (1) …

NGP Emerging as Fast Growing Segment Tobacco Sector Growing in Value

Resilient and Profitable End-market with Young and Fast-growing “New Generation Product” (“NGP”) Segment

____________________ Source: Euromonitor International, companies’ annual reports. Note: New Generation Products includes open and closed vaping systems and heated tobacco products. (1) Includes: Philip Morris International, British American Tobacco, Japan Tobacco, Imperial Brands aggregate figures based on publicly available companies’ annual reports. (2) Includes: last 10 years average Capex of Philip Morris International, British American Tobacco, Japan Tobacco and Imperial Brands. (3) Includes: last 10 years average R&D expenses of Philip Morris International, British American Tobacco and Japan Tobacco; excluding Imperial Brands due to unavailable disclosure.

1

11

32

2011A 2016A 2021E

(€bn)

0

1

2

3

4

5

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

EBITDA Margin (Median)

(€bn)

0

5

10

15

20

25

30

35

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

37% 38% 37% 38%

41% 42% 41%

42% 43%

42% 42%

0

10

20

30

40

50

60

70

80

18

29

11

18

(€bn)

GIMA TT End-market

~€540bn

~€690bn ~€780bn

2.8 3.1

0.7 1.0

CapEx R&D EBITDA Net Income

Picture

Embed ____

5

____________________ Source: Company Information.

…Enabling customers to better address fast-changing and evolving needs of final consumers

…In Terms of Fast Complete Changeover and Extended Format

Range

FAST

Complete size change over on Flex Line

MIN

L 45m W 28.4m H 17.6m

MAX

L 103m W 80m H 38m

Extended packet range

Electronic-based 1

Highly customizable 2

Flexibility 3

Successfully created a new segment in the packing market, gaining an unparalleled and focused competitive positioning

Changing longstanding industry paradigms: from “Performance Only” to “Flexibility”…

Flex Line is Setting New Industry Benchmarks…

Innovative Flexible Machinery Solutions for Conventional Tobacco and NGP, Setting New Industry Benchmarks GIMA TT Products Offering

6

134 Worldwide factories run by

top-4 customers

128 Patents registered since foundation

>75 Engineers at customers’ service

and tier-1 commercial partners

22%

After-Sales Revenue contribution in 2016A

strengthening customers’ relationship through highly skilled team

Faster installation at customers’ site vs.

competitors

>100 FTE

Mechanical and electrical assemblers

Supply chain

GIMA TT Key Competitive Advantages Winning and Solid Business Model Anchored to Established and Well-protected Relationships

1

2

3

4

5

6

+ CUSTOMER

____________________ Source: Company Information.

Idea

Engineering and Know How

Research & Development department was created in order to design new innovative solutions

Sales and Customers

Intense interaction with customers since early stage development in order to find innovative and highly customized solutions

Supply Chain

The Company has strong relationships with the main suppliers and with IMA Group, so the organizational structure is extremely thin and agile

Assembly and Quality Control

The production structure is based on highly skilled employees

3–6 months 2 months 4 months 8–10 weeks

Testing and Installation

The Company conducts two tests: 1) Factory Acceptance Test (FAT) at GIMA TT facilities and 2) Site Acceptance Test (SAT) after installation at client premises

> 15 years

After Sale

Leading to service throughout the entire machine life-cycle

Exam

ple

of

Clie

nt

Re

qu

est

Pro

cess

7

____________________ Source: Company Information. (1) Defined as EBITDA – Capex. (2) Defined as EBITDA – Capex as % of EBITDA. (3) FY2016A.

11,7

22,5

39,7

56,8

96,6% 97,6%

98,8%

96,4%

2014A 2015A 2016A LTM 1H 2017

37,0

69,3

100,4

137,1

2014A 2015A 2016A LTM 1H 2017

12,1

23,1

40,2

58,9

32,6% 33,3%

40,1%

43,0%

2014A 2015A 2016A LTM 1H 2017

High Revenue Growth Strong Profitability Cash Generative Business

Revenue (€m) EBITDA (€m) and EBITDA Margin (%) Cash generation (1) (€m) and Conversion (2) (%)

Asset light business model (~0.5%(3) Capex as % of Revenue) with customer-funded Working Capital (~21%(3) Advances from customers as % of Backlog) supported by high visibility (€89m Backlog as of Dec-16 and €132m order intake in 2016A)

Unique Combination of Exceptional Growth, Profitability and Cash Flow Generation

GIMA TT Financial Profile

Native Excel

Picture

Embed ____

8

GIMA TT Further Upside Potential

____________________ Source: Companies presentations. (1) Revision of the Tobacco Products Directive.

Conventional tobacco

1

NGP

2

Regulatory evolution

3

Increased Differentiation & Premiumization Innovative packaging as key marketing

and solution tool

Increasing restrictions on packets/ advertising leading to creative marketing solutions

Integrated packaging machinery solutions and "automation" scale

Significant focus from all majors

New platforms/ conversion of existing capacity

Greenfield investments

NGP favourable fiscal treatment vs. conventional tobacco

FDA potential approval for PMI’s IQOS to be game changer in the US

Unexplored geographies

Continuous production process upgrade

“The tobacco industry gets its

Silicon Valley”

Bloomberg, Businessweek

March, 2017

Key NGP Technologies

Pmi’s IQOS Pending FDA Approval for the Us

Pending E-cig Regulation in China

EU TPD2 (1) Impact on Packaging

Convenience

Minimize odors Improved smoking Resalable pack

24H

Additive free Environmental

Friendly

Sustainability

Capsule New tastes

Personalization

Slimmer Lighter

Pleasure

Untapped Market Potential Offering Multiple Growth Opportunities

9

Overview of Early Look Investor Meetings

Investor Name StyleIMA

ShareholderContact name

Azimut Capital Management LO F. Artoni - A. Baldin

Arca LO S. Stigliano

Eurizon LO F. De Astis

Fideuram LO L. Degrada

Fidelity - FIL Investment LO A. Chiandetti

Generali Investment LO G. Gasparet - L. Fina

Kairos Partners HF F. Cavallo - M. Trabattoni



GLG HF I. Rachev

Artisan LO C. Hamker

Blackrock LO C. Stephens - D. Patel

Capital World LO P. Gusev

Columbia Threadneedle LO P. Dicken

Fidelity - FMR LO A. Welham - S. Simnegar

Janus Henderson LO O. Beckett

Marshall Wace HF F. Fredella

Monashee HF R. Osmond - J. Browne

Montanaro LO M. Rogers - S. Fischerfeier

Otus Capital LO R. Casoni

Schroders LO H. Piper

TT International HF J. Hobson



American Century LO F. Laffan

Bluemar HF N. Dewan

Castle Hook HF M. Cascante

Epoch LO W. Huang

Highbridge HF J. Dorfman

Key Square HF J. Jackson

TimesSquare HF D. Hirsh



Alyeska HF J. Berger

Columbia Wanger HF S. Pigeon - A. Waldburg-Wolfegg

Driehaus Capital HF A. Bidwill

Harris LO M. Quigley

William Blair LO T. Cope

Milan - 17 July

London - 18-19 July

New York - 20 July

Chicago - 21 July

Key Statistics

32 investors met

19 Hedge Funds / 13 Long Only

16 disclosed IMA shareholders

Overview of Schedule

As part of the early look investor meetings in July, GIMA TT met with 32 institutions (7 in

Milan, 13 in the UK and 12 in the US) across 5 days

The schedule consisted of a high quality mix of blue chip long only funds and global hedge

funds who are regular participants in IPOs

The Banks have collected feedback and key questions from investors after the meetings.

While the feedback is more qualitative in nature (as expected at the Early Look meeting

stage), investors met are engaged and will need time to form a final view on business and

valuation

Milan

London

New York

Chicago

7

13

7

5

17 Jul

18-19 Jul

20 Jul

21 Jul

Early Look

Meetings

Investor Education

Roadshow Pricing &

Allocation

17-21 Jul-17 1 week

4-15 Sept-17 2 weeks


Price Range Announcement

10

Meetings scheduled from 13th to 15th September

Overview of PDIE Meetings

UK

Italy

US

Switzerland

France

Other Countries

32%

24%

19%

11%

6%

8%

Geographic Split

Overview of Investor Education Activity

As part of the Pre-Deal Investor Education meetings held so far, research analysts met with over 230

institutions, mainly across the UK, Italy, US, Switzerland and France

The majority of investors met until the 12th of September were long only funds (c. 67%), mixed with

a good panel of global hedge funds (c. 33%) who are regular participants in IPOs

The Banks have collected feedback and key questions from investors after the analysts meetings:

Investors’ engagement continues to be high, with the majority of names interested in getting

deeper into the story. Feedback is getting more granular as funds are running their numbers

and models after having received research reports. This results in more people starting to talk

about valuation metrics and positioning

Italy

UK US

Denmark

France Switzerland

69

84

50 8

5

38

23

9 Germany

Bel./Lux.

Meetings held from 4th to 12th September

UK

Italy

US

France

Other Countries

22%

24%

13%

33%

8%

Early Look

Meetings

Investor Education

Roadshow Pricing &

Allocation

17-21 Jul-17 1 week




Main Investor Feedback Themes

11

Open Questions Considerations Positives

Feedback Split

Widespread interest in GIMA, both from sector experts and generalists

Asset recognised as high quality

Investors clearly appreciate the solid numbers, both in terms of growth and high margins / cash generation

Asset light business model

High level of know-how resulting in a clear technical advantage

Good level of visibility over the next few years growth

The fast growing NGP segment is seen by some as potentially doubling in the next few years

Potential growth-kicker from China and US

Low liquidity seen as one of the main risks

Some sensitivity displayed to margin sustainability in the longer run

Barriers to entry (how long before a competitor joins the market)

Customer concentration risk

Key man risk

Questions around corporate governance / relationship with IMA

Some investors struggling to model growth in such a new segment and unpredictable markets (i.e. China and US)

Selected comments and questions on potential peak in growth in the coming years

Rationale and timing of the IPO and selling by material shareholders

How big is the addressable market

How big is GIMA production capacity

Great relationships with the major players but uncertainty on timing for incumbents to start competing on price, given demand greater than supply

Dividend policy

UK

France

Italy

US

Switzer-

land

Germany

41%

13% 17%

11%

6%

5%

19%

Long-only

Hedge

Fund

65%

35%

Early Look

Meetings

Investor Education

Roadshow Pricing &

Allocation

17-21 Jul-17 1 week




Frankfurt

Days: 1 1x1 Meetings: 4

12

Europe United States

LO

HF

70%

30%

Summary of Roadshow Activity Summary of Roadshow Activity

Overview of Management Roadshow

As part of the Roadshow meetings, the company’s management met with over 50 institutions in 1x1 meetings/Conf calls, mainly across the UK, Italy, US, Germany and France

The majority of investors met were long only funds (c. 70%), mixed with a good panel of global hedge funds (c. 30%) who are regular participants in IPOs

Investors’ engagement were highly reflected in the book, with c.88% of the meetings converting into an order. Several investors increased their orders both in size and price after their meetings

Chicago New York

New York/Chicago

Days: 2 1x1 Meetings: 9 1x1 Conf Calls: 1

Group Attendees: 4

Rest of the World

1x1 Conf Calls: 3

US

FR

UK

IT

RoW

20%

12%

37%

18%

14%

London

Frankfurt

Paris

Milan

Paris


Group Attendees: 21

London

Days: 3 1x1 Meetings: 18 1x1 Conf Calls: 3

Group Attendees: 34

Milan


Group Attendees: 28

Early Look

Meetings

Investor Education

Roadshow Pricing &

Allocation

17-21 Jul-17 1 week




13

[CELLRANGE]

18-Sep 19-Sep 20-Sep 21-sep 22-Sep 25-Sep 26-Sep 27-Sep 28-Sep

Demand @ €9.60 Demand @ €11.00 Demand @ €12.50

Daily Evolution of Total Demand

Total Offer Size: 33.9m shares = 1x

“Books covered on full deal size”

“Books covered throughout the range”

“Orders not at €12.50 risk

missing”

Shares (m)

Early Look

Meetings

Investor Education

Roadshow Pricing &

Allocation

17-21 Jul-17 1 week




14

Price (€)

Review of First Day of Trading

____________________ Source: Bloomberg, public available information.

Volume (m shares)

Very Strong Aftermarket Performance

0,0

0,2

0,4

0,6

0,8

1,0

12

12,5

13

13,5

14

14,5

15

15,5

16

09:00 10:21 11:21 12:21 13:21 14:21 15:21 16:21

Volume (m shares) GIMA TT Share Price

15.30

+22.4%

IPO Price €12.5

14.25

Open: €14.25 Close: €15.30 High: €15.59 Low: €14.25

Share Price

Value Weighted: €173.7m Shares: 11.7m % Float 38.0% % Company 13.3%

Volumes

+14%

17:30

GIMA TT, debutto da Star

“Debutta col botto la nuova matricola di Piazza Affari, GIMA TT [...] Le azioni sono già state sospese per eccesso di rialzo dopo l'upside del 19,2%. E questo nonostante il fatto che la quotazione sia avvenuta a un valore, 12,5 euro, che rappresenta la parte alta della forchetta di prezzo”

Milano Finanza, 2 October 2017

GIMA TT: Jerusalmi, Operazione di grande successo

"«L'operazione di Ipo di Gima TT "ha avuto un grande successo, con una 'oversubscription' di 8 volte e un pubblico di investitori che hanno richiesto le azioni molto ampio». Lo ha detto l'a.d. di Borsa Italiana, Raffaele Jerusalmi, nel corso della cerimonia di debutto a piazza Affari di Gima TT”

Milano Finanza, 2 October 2017

GIMA TT vola all'esordio sul listino. Pronti a shopping in Europa

“Esordio con immediato exploit per GIMA TT […] «Siamo soddisfatti della quotazione - ha detto ancora il presidente di Gima TT - speriamo di confermare le aspettative del mercato. Siamo un'azienda giovane, ma l‘Ipo rappresenta per noi una nuova partenza» […]”

Il Sole 24 Ore, 2 October 2017

Gima TT debutta in forte rialzo su Star, balza di oltre 20%

“«Gima TT rappresenta un‘operazione di successo paragonabile in anni recenti solo a Moncler per livello e qualità della domanda generata», sottolinea Stefano Rangone, Direttore Centrale di Mediobanca […] «E’ stato un successo notevole, era da qualche anno che non si vedeva questo livello di domanda, al massimo della forchetta», conferma Luca Domina, co-head equity capital markets Italy di Unicredit. […] «Gli investitori hanno apprezzato in particolare il posizionamento, gli alti tassi di crescita e l‘elevata profittabilità di Gima TT» […]”

Reuters, 2 October 2017

15

Analysis at Various Prices

____________________ Source: Company Information, Factset as of September 2017. Note: GIMA TT shares outstanding: 88,000,000; 1H 2017 Net Debt (Cash): €(16.8)m; Metrics based on Equity Research consensus median of BAML, Equita, Mediobanca and UniCredit Kepler Cheuvreux.

Price p/s (€) 9,60 9,75 10,00 10,25 10,50 10,75 11,00 11,25 11,50 11,75 12,00 12,25 12,50

Implied Equity Value (€m) 845 858 880 902 924 946 968 990 1.012 1.034 1.056 1.078 1.100

Implied Enterprise Value (€m) 828 841 863 885 907 929 951 973 995 1.017 1.039 1.061 1.083

Implied Multiple Metrics

EV/EBIT 17E (x) 60.5 13.7x 13.9x 14.3x 14.6x 15.0x 15.4x 15.7x 16.1x 16.4x 16.8x 17.2x 17.5x 17.9x

EV/EBIT 18E (x) 72.6 11.4x 11.6x 11.9x 12.2x 12.5x 12.8x 13.1x 13.4x 13.7x 14.0x 14.3x 14.6x 14.9x

P/E 17E 43.4 19.5x 19.8x 20.3x 20.8x 21.3x 21.8x 22.3x 22.8x 23.3x 23.8x 24.3x 24.9x 25.4x

P/E 18E 51.5 16.4x 16.7x 17.1x 17.5x 17.9x 18.4x 18.8x 19.2x 19.7x 20.1x 20.5x 20.9x 21.4x

EV/EBITDA 17E 61.1 13.6x 13.8x 14.1x 14.5x 14.8x 15.2x 15.6x 15.9x 16.3x 16.6x 17.0x 17.4x 17.7x

EV/EBITDA 18E 73.8 11.2x 11.4x 11.7x 12.0x 12.3x 12.6x 12.9x 13.2x 13.5x 13.8x 14.1x 14.4x 14.7x

Free Float at 38.5%

IPO Base Deal (€m) 296 300 308 316 323 331 339 347 354 362 370 377 385

IPO Base Deal + 10% GS (€m) 325 330 339 347 356 364 373 381 390 398 407 415 424

The Poste Italiane IPO

Key Facts of Poste Italiane IPO

16

Transaction Highlights Key Terms

Offering Structure

Issuer / Listing Poste Italiane SpA / Borsa Italiana

Selling Shareholder

Pricing and Valuation

Offering Size

Execution Timetable

Lock-up

Secondary shares: 453m Greenshoe: 45.3m (10% of the offer), 100% secondary Institutional offering (70% of the offer) outside the U.S. under Reg S, in

the U.S. to QIBs only pursuant to Rule 144A Retail offer in Italy (30% of the offer) through local Italian syndicate,

including ability for retail to subscribe at Company’s post office branches “Bonus Share” incentive for employees and retail investors who

subscribe at IPO and retain stock for at least 12 months post-IPO

BofAML Role

Company / Selling shareholder: 180 days (subject to customary exceptions and waiver by the Joint Global Coordinators)

Italian Ministry of Economy and Finance

Offer price: €6.75 vs. initial range of €6.00 – 7.50 per share Implied equity value: €8.8bn Implied Dividend Yield: ~5% (1)

Investor education: 28 September – 9 October 2015 Price range announcement: 8 October Management roadshow: 12-22 October Pricing and allocations: 23 October First day of trading: 27 October

Base offer size: 453m shares, €3.1bn Full offer size: 498m shares, €3.4bn Free float: up to 38.2% post greenshoe

Italy Oct 2015

Joint Global Coordinator & Joint Bookrunner

IPO

€3.1bn

Joint Global Coordinator and Joint Bookrunner

The transaction represents a milestone for the Italian Government in the context of a wave of reforms

Poste Italiane is the largest IPO completed in Italy since BofAML-led Enel in 1999 and one of the largest global IPOs of the year; the stock is expected to be a constituent of the Italian large cap index FTSE MIB

Offer launched capitalizing on increasingly positive sentiment for Italian macro; Poste Italiane revenues are almost entirely generated in Italy

Books opened on October 12th, and were covered after two full days of bookbuilding. The offer priced at the mid-point of the price range, with a total oversubscription of 3.3x

Early-stage investor meetings, including some of the most prominent SWFs, were organised to familiarize investors early with the Poste Italiane business model and to gather feedback ahead of launch

Poste Italiane represents BofAML’s fifth landmark IPO of a European issuer just in October, following the Covestro, Schaeffler, Worldpay and Ferrari offerings

Moreover, it cements BofAML leadership in the Italian IPO market, having executed the highest number of IPOs among international banks in the past 10 years (2)

In addition, Poste Italiane IPO demonstrates BofAML strong relationship with the Italian Ministry of Economy and Finance and extends its long-term track record of leading privatizations across the globe

BofAML acted as a Joint Global Coordinator and Joint Bookrunner on the up to €3.4bn IPO of Poste Italiane

Poste Italiane is the historical postal services operator in Italy and runs a diversified business model including financial, insurance and mobile services

The Company relies on the scale and proximity of its network to serve households. In addition, the Group offers a wide range of activities to corporations and is the main channel for payment collection and communication between the public administration and households / companies

____________________ (1) Based on mean of syndicate research analyst estimates for 2015 net income from Il Sole 24 Ore dated October 13th: “L’AD Caio: nel piano-Poste crescita dell'utile”, and 80% payout ratio as stated in the Prospectus. Refers

to dividend to be paid in 2016. As per usual IPO black-out period practice, BofAML research has not published and will not publish further research updates until 40 days after the closing date. (2) Source: Dealogic.

66%

19%

15%

Insurance

Financial Services

Postal

An Integrated Service Infrastructure With Distinctive Competitive Assets

17

Brand

#33m Customers

€28.5bn Revenues2

#1.5m Customers

Served Daily1

€469bn Client Assets

Mail & Parcels

Transaction Banking &

Asset Gathering

Insurance & Asset

Management

Retail Network 13.2k Post Offices

Web / Mobile IT Platforms

____________________ Note: data as of June 2015 ,unless otherwise stated. (1) Related to post offices only. (2) FY 2014.

Business Contribution

EBIT Margin

2.2%

14.3%

n.m.

18

Investment Highlights

A combination of strategic and financial levers to deliver value growth

Financial

Strategic

Brand Synonymous of Trust, Reliability and Customer Retention

1

Leading Positioning across Markets Served

4

Uniquely Positioned to Capture Macro Growth Trends

5

High Visibility on Top Line

6

Robust Balance Sheet with Solid Capital Structure

8

Solid Cash Generation to Support Dividend Policy and

Investments for Transformation

9

Broad Range of Products Targeting Diversified Customer Needs

Potential Upside from New Regulation and Reorganization

7

Vast, Capillary and Integrated Multichannel Network

2

3

Well Balanced Organization with Highly

Experienced Management

10

Execution Timetable

19

H1 2015 Results Filings with Consob

April May June July August September October

Week [...] [...] 1 8 15 22 29 6 13 20 27 3 10 17 24 31 7 14 21 28 5 12 19 26

Onboarding of Advisor

Business Due Diligence

Legal Due Diligence

Drafting of Prospectus /IOC

Filing with Borsa/ Consob ●Consob Istruttoria

Admission to listing & Nulla Osta Consob ●Prospectus/IOC Publication ●Contratto di Collocamento Signature ●Underwriting Agreement Signature ●

Analyst Presentation Drafting

Analyst Presentation Based on 2014A Financials ●Update to Analysts on H1 2015 Drafting

Update to Analysts on H1 2015 ●Research Report Preparation

Research Report Publication ●Pre-marketing

Price Range Definition ●

Meetings with Selected Investors

Roadshow

Institutional Offer

Retail Offer

Bookbuilding

Pricing and Allocations ●First Day of Trading ●

Pre

par

atio

nR

esea

rch

Ro

adsh

ow

20

Investors Met Throughout the Early Look Process

New York

Boston London

Milan

Rome

Italy

Azimut

Eurizon

Generali

Kairos

Pioneer

United Kingdom

Amber

BlackRock

Capital Research

Capital World

Fidelity International

Fidelity M&R

JP Morgan AM

Paulson

Peninsula

Schroders

TCI

Threadneedle

TT International

United States

Artisan

Citadel

Discovery

Fir Tree

Highbridge

KKR

Lazard

Mason

Neuberger Berman

Soros

Wellington

Zimmer

SWFs Meetings / Calls

ADIA

BTG Pactual

CPPIB

Fosun

GIC

KIO

Norges

QIA

SAFE

Temasek

Over half then provided an order in the offer period

21

Summary of Management Roadshow Activity

UK

5 (10%)

IT

22 (9%)

6 (12%)

FR

29 (12%)

14 (29%)

US

63 (25%)

1 to 1 meetings (incl. conference calls)

Investors met in group meetings

24 (49%)

136 (54%)

New York

Boston London

Paris Milan

Rome

Investors met 299

49

250

Roadshow activity details in 4 countries and 6 different locations:

Investors meet during group meetings

1 to 1 meetings

Italy 18 7%

Cont. Europe 60

22%

UK 111 42%

US 53

20%

RoW 23 9%

Long Only 107 43%

SWF 5

2%

Hedge Fund 135 55%

Tier 1 71

29%

Tier 2 80

32%

Tier 3 91

37%

SWF 5

2%

By geography By type By tier

Roadshow Feedback details: 510 lines from 247 different investors

____________________ Note: Feedback as of 20 October.

Summary of Management Roadshow Activity and Order Conversion

Milan London London Boston NYC

Investor Investor Investor Investor Investor

Azimut Blackrock Alken Adage Appaloosa

Eurizon Capital World Artemis Grantham Mayo Citadel

Generali FMR Caxton Hardvard Mgmt Franklin

Pioneer GLG Egerton Capital Highfields Mason Capital

Henderson FIL Pioneer Soros

Paris JPM AM GIC Wellington Zimmer

Investor Lansdowne Marshall Wace

Amundi Lazard AM Pelham

AXA Millennium Pictet

DNCA New Peak TCI

Generali Norges Threadneedle

Verrazzano Och Ziff TT Int

Hit ratio - One-to-one meetings(1)

Hit ratio - Group meetings

Hit Ratio 78%

Hit ratio - Early-look meetings

Investors met 40

21 Investors in the book

Hit Ratio 53%

Investors met 250

115 Investors in the book

Hit Ratio 46%

22 ____________________ Note: As of 21 October feedback. (1) Physical meetings only, excluding conference calls

Main Investor Feedback Themes

Unparalleled Company distribution network and client reach

Clear national brand leader with a profile and history that is part of the

“fabric of Italy”

BancoPosta seen as a unique asset gatherer, with a capital light, highly

profitable and sound leverage ratio model

Insurance services, with PosteVita at its core, is an extremely attractive

growth engine for the Group

Expansion into asset management (via Anima partnership) and welfare

seen as credible and attractive, also given past successes

The offering plays well to market receptivity to domestically focused

European financial institutions

Acknowledgment that restructuring of Mail & Parcels is supported by a

robust regulatory framework and plan to transition into parcels

Perception of finally improving macro backdrop in Italy, to which Poste is

highly levered

Universal appreciation of management, a first-class team having been

assembled to lead the Company

Investor reaction has been positive, with universal appreciation of the Poste story, prospects and management

23

• Volatile equity markets condition not very supportive for IPOs

• Execution risk on the Mail & Parcel division restructuring plans, given

also potential socio-political considerations

• Pace of structural decline in Mail & Parcel

• The need to understand better the net impact of Mail & Parcel division

price increases (J+1, other products etc.) vs. volumes

• Consistency between dividend policy and Free Cash Flow in the mid/long

term

• Future sustainability of the Net Interest Margin on the banking book in a

low interest rate environment and given a rollover scenario of the BTP

portfolio

• Complexity of the group and inter-division flows

• Limited of visibility on management incentive schemes

Key Investor Highlights Primary Investor Discussion Points

0.4x

0.9x

1.0x

1.8x

2.4x

2.7x

3.0x

3.6x

3.8x

0.2x

0.4x0.5x

0.7x

1.3x

1.5x

1.7x

2.7x

3.6x

0.1x

0.3x0.5x

0.7x

1.1x

1.2x

1.3x

1.7x

3.1x

0.1x

0.3x0.4x

0.6x

0.9x

1.0x

1.1x

1.4x

1.8x

0.1x

0.3x 0.4x

0.6x

0.8x

0.9x

1.1x

1.3x

1.7x

0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

1,700

1,800

1,900

2,000

12-Oct 13-Oct 14-Oct 15-Oct 16-Oct 19-Oct 20-Oct 21-Oct 22-Oct

Dem

an

d (

m s

hare

s)

@6.00 @6.50 @6.75 @7.00 @7.50

Daily Evolution of Total Demand

24

____________________ Note: Based on end of each day, syndicate wide book.

No. of Shares

Base Deal Size 453,000,000

Full Deal Size 498,300,000

Greenshoe 45,300,000

Coverage Evolution on Full Deal Size (Including greenshoe)

Full deal size (498.3m shares)

387 387 387 387 387 387 387

1,5141,389

1,171 1,139 1,147

519460

1,901

1,776

1,558 1,526 1,534

906847

0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

1,700

1,800

1,900

2,000

@6.00 @6.50 @6.60 @6.70 @6.75 @7.00 @7.50

Dem

an

d (

m s

hare

s)

Share Price (€)

Retail Demand Institutional Demand

Total Demand Waterfall at Various Prices

25

____________________ Total Offer Size: 498.3m shares. Note: Based on end of each day, syndicate wide book.

Total Demand

Coverage on Full Deal Size

€11.4bn €11.5bn €10.3bn €10.2bn €10.4bn

3.8x 3.6x 3.1x 3.1x 3.1x

2.9x Coverage

at 30%

€6.3bn

1.8x

€6.4bn

1.7x

(303k Retail Investors)

Overview of Book Concentration

Allocation Overview

Demand Overview at €6.75 per Share

37%

53%

85%

97%

Top 10 Top 20 Top 50 Top 100

18%

34%

63%

81%

Top 10 Top 20 Top 50 Top 100

25%

33%

18%

8%

11% 4%

27%

34%

12%

10%

11%

6%

27%

45%

27%

25%

33%

41%

26

____________________ (1) As proportion of total institutional demand / allocation.

Retail

UK US

Italy

RoE

RoW

Italian Retail

UK

US

Italy

RoE

RoW

Italian Retail

Italian Retail

LO

LO

HF

HF

Institutional Order Concentration (1)

Institutional Order Concentration (1)

Geographic Split Split of Investor Type

Geographic Split Split of Investor Type

14

,5x

13

,8x

11

,8x

9,9

x

9,6

x

9,6

x

7,9

x

7,5

x

6,5

x

13

,0x

12

,8x

11

,0x

9,5

x

8,6

x

9,3

x

7,4

x

7,1

x

6,1

x

19

,7x

15

,7x

13

,8x

18

,1x

13

,9x

12

,8x

16

,9x

13

,6x

13

,0x

12

,9x

12

,7x

6,2

x

16

,3x

13

,2x

11

,9x

12

,7x

11

,7x

6,0

x

14

,7x

12

,3x

Valuation Benchmarks

27

____________________ Source: Bloomberg and Factset as of October 21st , 2015. Note: dividend yield based on cash dividend paid in 2016 and 2017. (1) Based on mean of syndicate research analyst estimates for net income 2015 - 2017, and 80% payout ratio as stated in the Prospectus.

As per usual IPO black-out period practice, BofAML research has not published and will not publish further research updates until 40 days after the closing date.

P/E 2016E P/E 2017E

Mail and Parcel Financial Services Insurance Services Poste

(1)

Pee

rs P

/E 2

01

6-1

7E

Pee

rs D

ivid

en

d Y

ield

20

16

-17

E

6,1

%

5,7

%

5,0

%

4,9

%

4,9

%

4,8

%

4,7

%

4,4

%

4,1

%

6,1

%

6,1

%

5,4

%

5,3

%

5,3

%

5,2

%

5,0

%

4,7

%

4,5

%

4,6

%

4,4

%

3,9

% 5

,2%

4,7

%

4,3

%

6,2

%

5,8

%

5,1

%

5,1

%

3,7

%

2,3

%

6,4

%

6,0

%

5,3

%

5,4

%

4,0

%

7,2

%

4,8

%

5,4

%

(1)

Dividend Yield 2016E Dividend Yield 2017E

Book of Demand – Allocation Principles

28

Allocation process rewarding those accounts who helped support successful execution of the Poste IPO and were most able to guarantee long term support and a productive aftermarket for the Company

General Allocation

Criteria

Objectives

Maximize the level of sustainable valuation to be achieved at IPO (taking into consideration prevailing market conditions and investor demand)

Create a long-term ‘core’ base of shareholders for Poste whilst seeking a positive aftermarket performance for the shares post-IPO

Facilitate sufficient post-IPO liquidity to allow for potential secondary sell-downs should they ever by required or desired by the MEF

Factors taken into consideration in the allocation process included:

Overall subscription levels

Price sensitivity of orders and general support

Participation in the marketing (e.g. investors that have put in a significant amount of time and effort into analysing the company, as evidenced by attendance at pre-launch meetings, roadshow meetings, analyst meetings and feedback provided)

Timing of the order, relative to the final management meeting for that investor

Quality of feedback provided during the marketing process

Holding in comparable companies, behaviour in precedent IPOs and potential order inflation

Concentration (e.g. top 20 investors allocation in the offering)

Investor type (e.g. balance between SWFs, Long Only and Hedge Fund accounts)

Investor tiering (to reflect previous discussions on the subject between the MEF, Poste management, the advisers and the banks)

Geography (e.g. allocation to any particular country or region)

Retail treatment considerations

i

ii

Book of Demand – Allocation Principles (Cont'd)

29

Quantitative Allocation Principles

In light of the institutional demand received, and in line with best market practice for similar transactions, the Global Coordinators suggested the following quantitative allocation principles:

Splitting the total institutional demand in four main buckets, namely

1) "Super long only investors", i.e. top quality and supportive long only investors and global SWFs

2) Italian high quality investors, which have demonstrated limited price sensitivity early-on in the bookbuilding process

3) Other high quality long only investors

4) Supportive hedge funds which have provided early momentum and constructive feedback

other investors

Suggested indicative allocation as percentage of demand:

Super long only investors: c. 70%

Italian high quality investors: c. 60%

Other high quality long only investors: c. 40–50%

Supportive hedge funds: c. 30%

Individual exceptions were contemplated to allow for specific investor feedback or circumstances, discussed with the MEF's advisors

Indicative target splits of institutional allocation were as follows:

by type: long only vs. hedge funds: c. 65% vs. 35%

by region: Italy, UK, US and others respectively c. 10–15%, 45–50%, 15–18% and 20–25%

iii

Process

The banking syndicate made an allocation proposal to the MEF, Poste management and their respective advisers shortly following formal closure of the IPO bookbuild

The MEF, Management and syndicate of advisers went through this suggestion in detail to discuss rationale and strategic scope based on the final order book

MEF (and Poste management) ultimately had final sign-off on the allocations

iv

0

800

1.600

2.400

3.200

4.000

4.800

5.600

6.400

7.200

8.000

6,60

6,65

6,70

6,75

6,80

6,85

6,90

6,95

7,00

08:00 09:12 10:24 11:36 12:48 14:00 15:12 16:24

Mig

liaia

30

Price (€)

Day One Aftermarket Trading Confirming Fairness of Offer Price

____________________ Source: Bloomberg, public available information.

Open: €6.95

Close: €6.70

High: €6.95

Low: €6.65

Share Price

Volume (k shares)

Value Weighted: €719.5m

Shares: 106.5m

% Float 21%

% Company 8%

Volumes

Poste, 300,000 Retail Investors Participate to Offering

“It has been a great success, which confirms market’s support of the transaction” said the Italian Ministry of Finance Pier Carlo Padoan. […] It is clear that the Poste Italiane privatisation has been a successful credibility test for the Government. Poste Italiane will start trading at the IPO price of €6.75 on Tuesday, which has been defined as ‘in line’ by several research analysts of the syndicate.”

Corriere della Sera, 27 October 2015

Caio: Market Confirms IPO Price, Great Transaction

“Poste Italiane’s listing has been a “great transaction - the market confirmed the IPO price, with performance stabilising around the issue price”, said Caio, CEO of Poste Italiane.”

Il Sole 24 Ore Radiocor, 27 October 2015

Jerusalmi: One of the biggest European transactions of 2015

“Raffaele Jerusalmi, CEO of Borsa Italiana commented “we are very proud to welcome on our exchange Poste Italiane, one of the biggest European IPOs of 2015. The listing has been a great success, ending up more than three times oversubscribed, with a highly diversified and international investor base.”

Il Sole 24 Ore Radiocor 27 October 2015

Volume ('000 shares) Eurostoxx 50 Ftse Mib Poste

IPO Price

Poste: (0.74)%

FTSE MIB: (1.15)%

EuroStoxx 50: (0.98)%

Performance

Poste experienced low volatility, outperforming the market on its first day of trading

European IPOs test investors’ risk appetite

“Poste Italiane, the Italian post office and bank that priced last week and began trading on Tuesday, barely moved, with its share price falling 0.5 per cent after the start of trading. The company priced at €8.8bn, which was below the figure of €10bn reported in the Italian press as a potential valuation of the company, although a market participant dismissed that valuation as “aspirational”.

While initial shareholders got no return on the first day of trading, the fact that Poste Italiane’s share price did not jump avoided the political controversy that surrounded the privatisation of Britain’s Royal Mail. [...]

British share registrar Equiniti’s share price fell about 8.5 per cent in the first day of trading on the London stock market after pricing at the bottom of its range in its initial public offering. The company, was priced at £1.65 a share [the bottom end of price range], but by the close of trading had fallen to £1.51 — the latest example of what has been a difficult few months for initial public offerings. [...] IPOs have been pulled or repriced across Europe and the US. Financial Times, 27 October 2015

Italy to launch biggest privatisation in more than a decade

“Italy will this week launch its biggest privatisation in more than a decade with the partial sale of Poste Italiane — an initial public offering on which the government of prime minister Matteo Renzi has staked its reformist reputation.”

Financial Times, 11 October 2015

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