CORPORATE FINANCE
Natura Cosméticos S.A.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd.
(F
(Free
translation
t
l ti from
f
the
th original
i i l iissued
d iin P
Portuguese
t
iin
February 3, 2014)
Advisory
February 4, 2014
ABCD
KPMG Corporate Finance Ltda.
Av. Nove de Julho, 5109 - 6º andar
01407-905 - São Paulo, SP - Brasil
Caixa Postal 2467
01060-970 - São Paulo, SP - Brasil
Central Tel
Fax
Internet
55 (11) 3245-8000
55 (11) 3245-8309
www.kpmg.com.br
p g
To
The Board of Directors of
Natura Cosméticos S.A.
São Paulo,, S
S
SP,, Brazil
February 4, 2014
Attention: Directors of Natura Cosméticos S.A.
D
Dear
Si
Sirs:
Under the terms of our proposal for the provision of services dated January 23, 2013 and subsequent discussions, we have carried out the procedures specifically
related to the Purchase Price Allocation in respect of the acquisition of Emeis Holdings Pty Ltd., in accordance with CPC-15/IFRS 3 and on the base date of February
28, 2013, whose report is attached hereto.
We consider that within the delivery of this report,
report the service,
service which is the subject of our proposal,
proposal is fully concluded.
concluded
We remain at your disposal for any further clarification and appreciate this opportunity to provide services to you.
Yours Sincerely,
Luis Augusto Motta
Partner
Marcos de Oliveira R. Coelho
Director
KPMG Corporate Finance Ltda., uma sociedade simples brasileira,
de responsabilidade limitada, e firma-membro da rede KPMG de
firmas-membro independentes e afiliadas à KPMG International
Cooperative (“KPMG International”), uma entidade suíça.
KPMG Corporate Finance Ltda., a Brazilian limited liability company
and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity.
Contents
Page
1. Introduction
3
2. Description of the Company
3. PPA Analysis Framework
4. Identification of intangible assets
5. Valuation of intangibles assets
6. Valuation of tangible assets
7. Discount Rate
8. Results and conclusions
Appendices
I.
Summary of values and WARA
II.
Valuation of the trade-mark
III. Valuation of the client portfolio - wholesalers
IV Assembled
IV.
A
bl d Workforce
W kf
V. Contributory assets
VI. Proportional PPA
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
2
1. Introduction
Introduction (Source: Client and Company)
–
Economic/Financial valuation of Aesop prepared by KPMG;
•
On February 28, 2013, Natura Cosméticos S.A. (“Natura” or “Client”) acquired
65% of Emeis Holdings Pty Ltd. (“Aesop” or “Company”). The amount paid by
Natura was AU$ 71,1 million (R$ 143,7 million).
–
“Financial and tax due diligence” report prepared by KPMG Financial Advisory
Services (Australia) Pty Ltd;
•
–
Aesop was
as founded
fo nded in Australia
A stralia in 1987,
1987 focusing
foc sing on the manufacture
man fact re of
personal care products aimed at the retail market (high level). On the date of the
acquisition, Aesop operated in over 60 points of sale in 11 countries. The
products include care of skin, body and hair. The Company´s products are
available “online” and in over 50 stores in some of the world´s main cities
including Paris, Tokyo and New York and are also present in some of the
world´s major department stores.
Information obtained through interviews with the Management of Natura and
Aesop and
Aesop;
–
Market data and information regarding the sector of the market in which the
Company operates.
•
Scope

As a result of this transaction (“Transaction”), the Management of Natura
(“Management”) requested KPMG Corporate Finance Ltda. (“KPMG”) to carry
out a job entailing procedures specifically related to a Purchase Price Allocation
(“PPA”) relative to the acquisition of Aesop in accordance with CPC-15/IFRS 3
and on the base date of February 28, 2013.
Objective
•
The objective of our job was to carry out the specific procedures described in the
scope of the job in respect of the PPA of Aesop, in accordance with CPC15/IFRS 3 and on the base date of February 28, 2013.
Basis of the information
•
W list,
We
li t below,
b l
th bases
the
b
off information
i f
ti used
d in
i the
th execution
ti off our job:
j b
–
Purchase and Sale Agreement dated December 20, 2012;
–
The Company´s Audited Financial Statements as at June 30, 2010, 2011 and
2012;
–
Balance Sheet as at February 28, 2013 made available by Natura;
–
Internal documents made available by the Management of Natura in the
context of the Transaction;
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
•
Our job included the following principal procedures:
−
Analysis of the asset and liability accounts shown in the company´s
accounting statements on the base-date (excluding inventories, fixed assets
and contingencies);
−
Identification of tangible assets and liabilities for which it is expected that
there is a difference between fair value and book value (excluding
inventories, fixed assets and contingencies);
−
An estimate of the fair value of these tangible assets and liabilities (excluding
inventories, fixed assets and contingencies);
−
Analysis and identification of the Company´s relevant intangible assets and
liabilities;
−
Valuation of intangible assets and estimate of the remaining useful life; and
−
Estimated calculation of the initial value of goodwill.
In order to estimate the fair value of the intangible assets, we used generally
accepted valuation methods (described in the report).
Important information and scope limitations
•
Our work was substantially based on assumptions and information provided by
the Client´s Management, which were discussed with KPMG.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
3
1. Introduction (cont.)
•
We must emphasize that the determination of the economic value of eventual
contingencies as well as inventories and fixed assets are not within the scope of
this job. Thus, in respect of such items, we based ourselves on the information
and analyses which were placed at our disposal by the Client´s Management
p
auditors, lawyers
y
and/or other advisors.
and/or its respective
•
During the course of our job, we carried out analysis procedures which we
deemed appropriate within its context. However, KPMG is not responsible for
the information it has been provided and will not be made responsible under any
circumstance, nor will bear losses or damages resulting or arising from the
omission of any data or information by the Client´s Management. We would
further stress that this job did not constitute an audit according to generally
accepted auditing procedures and must not be interpreted as such.
•
In this same sense, on carrying out the job, KPMG does not express any formal
opinion or any other form of guarantee in relation to the financial statements.
•
The processing of information by KPMG does not imply any type of affirmation
that these are true and also must not be interpreted as proof of authenticity of
the information collected and consequently does not correspond to an opinion or
any other form of assurance as to their in entirety.
•
The scope of the job now carried out does not contemplate the specific and
determined obligation on the part of KMPG of detecting any fraud in the
operations, processes, records and documents of the Company.
•
We do not give the Client any assurance of success is respect of
implementation of any proposed operation, neither do we give any assurance
that this may occur at any given time, neither do we answer for any eventual
opportunities which may not have been identified, presented or explored,
independently of the motives or reasons for such occurrences.
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
•
The work was carried out by KPMG under technical guidance and in an
independent manner. However, the analysis of the various data to be considered
for the purpose of valuation, due to their nature, demand a subjective approach
so that the work may be effectively carried out, which also makes it possible that
y
were to be carried out byy other p
professionals, these could
if the same analyses
express points of view which differ from those expressed by KPMG.
•
KPMG does not issue any opinion regarding the probability of the assumptions
to be used in the work materializing. Any counseling, opinion or recommendation
made by us in respect of the services covered by this report must not be taken
as a guarantee of the establishment or forecasting of future events and
circumstances
circumstances.
•
We must stress that it is the nature of financial valuation models that every or
any assumption alters the value obtained for the Company which is being
valued. Such possibilities do not constitute errors of valuation and are
recognized by the market as part of the nature of the valuation process of a
company. Thus, it is impossible for KPMG to be responsible or to be made
responsible for eventual differences between the projected future results and
those which are later effectively obtained, due to changes in market conditions or
in the business of the company which is being valued.
•
Furthermore, the market knows that every valuation contains a significant level
of subjectivity since it is based on expectations regarding the future which may
g
that there are no g
guarantees
or mayy not be confirmed. Therefore,, it is recognized
that any or all of the assumptions, estimates, projections, results or conclusions
used or presented in our report will be effectively reached or may come to be
totally or partially achieved. The final actual results may be different from the
projections and these differences can be significant.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
4
1. Introduction (cont.)
•
•
The services provided are based on legal norms and regulations and, in this
context, we stress that our legislation is complex and often the same legal
provision can have more than one interpretation. KPMG seeks to be up to
date with all the various lines of interpretation so that it may be possible to
evaluate the alternatives and risks involved.
involved
Consequently it is certain that there may be interpretations of the law which
differ from ours. Under such circumstances, neither KPMG nor any other firm
can give the client total assurance that it will not be questioned by third
parties, including tax inspectors.
•
We
e wish
s to po
pointt out tthat
at we
e ca
cannot
ot gua
guarantee
a tee tthat
at tthe
e restructuring
est uctu g o
of tthe
e
proposed transaction, including its taxation aspects, will be fully accepted by
the corresponding authorities in Brazil or overseas. Therefore our work has
the sole and exclusive objective of attending to a specific request made by
the Client´s Management.
•
The services informed and/or backed by legal norms and regulations were
rendered based on laws and regulations in force at the time the services
were performed. The scope of this job does not include updating the services
and/or resulting reports in the event of changes in legislation or regulations
which took effect after the conclusion of the job.
Subsequent events
•
The current study used as a basis the net equity position as at February 28,
2013.
•
We would point out that relevant facts which may have occurred between the
base-date of the valuation and the date of issue of this report were not taken
into account considering the nature and objective of this job.
•
KPMG was not responsible for updating this report following its date of issue.
Free translation
•
This summary reportt is
Thi
i a free
f
t
translation
l ti into
i t English
E li h (requested
(
t d by
b Natura)
N t )
of the report issued in Portuguese. If there are any discrepancies or
differences between the versions, the version in Portuguese, dated
February,3 2014, will prevail.
Use and disclosure of the report
•
This report was prepared to be used exclusively by the Management of
Aesop and therefore must not be disclosed to third parties, that is, legal
entities or individuals who are not members, employees or shareholders of
the Company.
•
Nevertheless, this report may be disclosed to the independent auditors of
Aesop and tax authorities when requested.
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
5
Contents
Page
1. Introduction
2. Description of the Company
7
3. PPA Analysis Framework
4. Identification of intangible assets
5. Valuation of intangibles assets
6. Valuation of tangible assets
7. Discount Rate
8. Results and conclusions
Appendices
I.
Summary of values and WARA
II.
Valuation of the trade-mark
III. Valuation of the client portfolio - wholesalers
IV Assembled
IV.
A
bl d Workforce
W kf
V. Contributory assets
VI. Proportional PPA
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
6
2. Description of the Company
Source: Aesop and Natura
Description of the Company
•
Aesop is an Australian company that operates in the cosmetics segment, with
products in Skin Care, Body Care and Hair Care lines amount others, including
products for men, for the household and domestic animals.
p
•
The Aesop brand is recognized in the market for its high quality as well as its
use botanical natural ingredients.
•
The Company was founded in 1987 in the city of Melbourne - Australia, initially
offering only products for hair treatment.
•
Over the years Aesop has expanded its presence into new markets; launching in
United States in 1990, followed by its arrival in Europe and Asia.
•
Currently, its products are sold in over 50 signature stores in major cities around
the world including Paris, Tokyo and New York.
•
The Company also has a strong presence in department stores. This business
model, with department stores and its signature stores has been achieving
success in various countries in which Aesop operates.
•
It is also worth highlighting that Aesop´s products are manufactured by third
parties and it does not carry out its own manufacture.
Principal historical events of the Company
1987
1990
1995
2000
2005
Aesop was founded
by Dennis Paphitis in
Melbourne, Australia.
Launch in EUA.
Launch of the Body
Care e Skin Care lines.
Launch in the UK,
Japan, Malaysia,
France and Hong
Kong.
Launch in the EU, first
signature stores
inaugurated, UK
subsidiary was
established.
Signature stores
opened in Hong Kong,
Sydney, Taiwan,
Singapore, Paris and
Canberra.
2006
2008
2009
2010
2011
Hong Kong and US
subsidiarys
established, signature
stores opened in
Tokyo Paris,
Tokyo,
Paris
Melbourne and
Singapore.
New signature stores
opened in the US and
departament
p
stores
point of sale
expansion.
French and Japanese
subsidiary established,
three signature
g
stores
opened in Australia.
Singapore subsidiary
established, signature
stores opened
p
in
London and Australia.
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Four signature stores
opened in Australia.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
7
2. Description of the Company (cont.)
Source: Aesop and Natura (cont.)
Regional Distribution
Europe
Regional Hub in London
Participation in revenue: 13,9%
Responsible for management, marketing, retail operations and
p
in Europe
p
development
APAC (excl. Australia)
Regional Hub in Hong Kong
Participation in revenue: 39,3%
Responsible for management, marketing, retail operations and
p
in Asia and Pacific
development
Americas
Regional Hub in New York
Participation in revenue: 3,7%
Responsible for management, marketing, retail operations and
development in the United States
Australia
Global Head Office
Participation in revenue: 40,6%
Responsible for the trade-mark, marketing and distribution
strategies, finance and treasury and R&D
Note: The participations in revenue by Region are based of management data from July 2011 to June 2012 (12 months).
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
8
2. Description of the Company (cont.)
Source: Aesop and Natura (cont.)
Product Portfolio
•
Participation of product ranges in total revenues (July 2011 – June 2012):
The Company´s product portfolio is made up of the following segments:
Others
15%
•
Skin Care: Aesop´s Skin Care products are
formulated with high concentrations of scientifically
tested botanical ingredients. They also contain antioxidants, vitamins and vegetable extracts of the
highest quality.
•
Body Care: This segment is made up of soaps, gel
soaps, ointments and oils all of which are delicate
but highly effective for the skin.
•
Hair Care: The products in this segment were
developed to attend to the needs for all types of hair.
•
Others: Segment of complementary products which
includes deodorants, fragrances, shaving products,
travel and gift packs, domestic animal care and
household items.
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Hair Care
5%
Skin Care
50%
Body Care
30%
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
9
2. Description of the Company (cont.)
Source: Aesop and Natura (cont.)
•
Distribution channels
•
Below, a description of the Company´s distribution channels:
•
•
•
Signature stores: Present in
the four continents,
continents they focus
on offering a uniform, high
standard of customer attention
so as to maximize the brand´s
experience.
Architecturally
planned for speedy launching
and low cost, the size of the
store varies from 25m2 to 80m2
both at street level and inside
shopping malls.
Number
of
stores:
54
(June/2012)
Department stores: For over
ten years, Aesop has had a
strong presence in the principal
department stores in Europe,
Australia and Asia. The main
partners are: Liberty, Lane
Crawford,, Isetan,, David Jones,,
Mitsukoshi, Lotte and Le Bom
Marchè.
•
The spaces are planned so as to combine especially designed counters with a
more basic finish, both optimized for local conditions. The design is unique and
clearly differentiates the brand from its competitors as the aesthetics reflect, on a
reduced scale, the structure of its signature stores with water, music and oil
burners. This appeals to consumers who are open to new ideas.
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
With the exception of only two department stores located in Australia,
Aesop does not sell directly to these stores but only uses their structure as a
distribution channel treating them as partners. The relationship with these
stores is not exclusive and so competing brands also operate alongside.
• Number of stores: 63 (June/2012)
•
Wholesale: Aesop has always
defended a firm, premium
position
in
the
wholesale
segment so as to enhance the
recognition of its brand by the
target public.
•
The main wholesalers selected by Aesop are: drugstores, apothecaries or
perfumeries, premium multi-brand stores with similar brands inside art
galleries, wine cellars and bookstores, hotels, restaurants and airline
companies.
• Number of stores: 355 (June/2012)
•
Digital: This segment has
been recently introduced by
the Company (2012). It permits
expanding global presence,
providing a simple introduction
to new clients.
clients
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
10
2. Description of the Company (cont.)
Source: Aesop and Natura (cont.)
Distribution channels (cont.)
•
Shown, below, the participation in total revenue by distribution channel in 2012:
Department
Stores 23,5%
Wholesalers
9,4%
Retail/signature
stores (*)
67,1%
(*) Includes Distributors.
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
11
2. Description of the Company (cont.)
Source: Aesop and Natura (cont.)
Consolidated Balance Sheet
•
We show, below, the Net Equity position of the Company on the base-date of the acquisition, as informed by the Management of Natura:
Consolidated Balance Sheet ((in 02/28/2013))
Emeis Holdings Pty Ltd. (AU$ mil)
Current Assets
Cash and equivalents
Clients
Other receivables
Inventory
16.440
5.388
2.623
2.483
5.946
Current Liabilities
Short-Term Debt
Taxes Payable
Payroll Expense
Provisions
Other payables
Fixed Assets
Deferred Tax
Others
Fixed Assets
11.172
1.510
1.944
7.718
Long term Liabilities
Accrued Expenses
Accrued Taxes
6.056
2.183
136
575
686
2.476
437
356
81
Equity
Total Asset
21.119
27.612 Total Liabilities + Equity
27.612
Note 1: This Consolidated balance sheet management is a pro-forma that includes no debts of Aesop, as indicated in the purchase agreement.
Note 2: The exchange rate on February 28, 2013 - R$/AU$ was 2,0215.
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
12
Contents
Page
1. Introduction
2. Description of the Company
3. PPA Analysis Framework
14
4. Identification of intangible assets
5. Valuation of intangibles assets
6. Valuation of tangible assets
7. Discount Rate
8. Results and conclusions
Appendices
I.
Summary of values and WARA
II.
Valuation of the trade-mark
III. Valuation of the client portfolio - wholesalers
IV Assembled
IV.
A
bl d Workforce
W kf
V. Contributory assets
VI. Proportional PPA
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
13
3. PPA Analysis Framework
Basic procedures
•
We present, below, the basic procedures used in the valuation of intangible assets:
Identification

Analyze industry sector and
business model.

Collect
historical
C ll t and
d review
i
hi
t i l
information.

Identify potential intangible
assets.
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Reporting
Analysis and calculation

Select valuation approach:

Analyze consistency with the
information provided.
 Income approach

Review
the results
R i
th
lt with
ith client.
li t
 Cost approach

Finalize report and analysis.
 Market approach

Estimate intangibles value.

Analyze and project life and
amortization profile for intangible
assets.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
14
3. PPA Analysis Framework (cont.)
Criteria for recognition
•
The criteria for recognition are summarized in the flowchart below:
Analysis

Business model

Business
Planning


Definition of Intangible Assets
Existing Licenses
and Rights
Value Drivers
Yes
Are the economic
benefits achieved
contractually or
legally?
Yes
Is there sufficient
control over the
resources?
No
Are there future
economic benefits ?
Can they be
separated?
No
Yes
No
Goodwill
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Yes
Can the future
economic benefits
be recognized
separately and
reliably?
No
Yes
Estimate the value
of the intangible
assets
Is the economic
useful life
f
?
indefinite?
Sim
No
Do not
amortize
Amortize
over the
economic
useful life
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
15
3. PPA Analysis Framework (cont.)
Criteria for recognition (cont.)





To value intangible assets, the first step was to identify acquired company’s
potential intangible assets. Therefore, the Company’s business model was
analyzed, as well as long-term planning and value elements comprising it. This
information was made available to and discussed with Management and
analyzed in light of our experience in similar projects and of market practices.
An intangible asset is recognized separately from goodwill if it meets intangible
assets definition and its fair value may be reasonably measured.
The definition of intangible assets determines that it needs to be clearly
differentiated from goodwill and that it is controlled by the company that is the
object of analysis. A company controls an asset if it has the power to obtain
future economic benefits flowing from this asset or from underlining resources
and may restrict access of other entities to these benefits. A company’s capacity
to control future economic benefits from an intangible asset would normally
derive from legal rights that are enforceable by courts. In the absence of legal
rights, it is more difficult to demonstrate such control. However, legal
enforceability of the right is not a sine qua non condition for control, as the
company
p y may
y be able to control corresponding
p
g future economic benefits in
some other manner.
Intangible assets that meet recognition criterion are measured at fair value on
acquisition date. Fair value is the amount for which this asset could be
exchanged between knowledgeable, willing parties in an arm’s length
transaction.
Recognition criteria should be verified for intangible assets that are already
separately accounted for and those that have not been accounted apart from
goodwill. For PPA purposes, assembled workforce should not be recognized as
intangible assets apart from goodwill, as a company normally does not have
sufficient control on future economic benefits deriving from a team of qualified
staff.
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
16
3. PPA Analysis Framework (cont.)
Application of approaches and criteria
•
The flowchart below presents a summary of the various approaches and criteria for a valuation which are explained in more detail in the following pages:
HIERARQUY OF VALUATION CRITERIA
Similar operations
available on the market
NO
Cash Generation of the
Intagible Assets
YES
Market approach
A
Approach
h
Methods
NO
Cost approach
YES
Income approach
M k t i t d approach
Market-oriented
h
I
Income-oriented
i t d approach
h
C t i t d approach
Cost-oriented
h
Market prices in an active
market
Relief from royalties
y
Replacement Cost
Comparable transactions
Incremental cash flow
Reproduction Cost
Multi-period excess earnings
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
17
3. PPA Analysis Framework (cont.)
Methods of Valuation - Fundamentals
Method of Valuation
Description
Market approach

The market approach estimates the fair value by comparing recent sales of similar assets. The available information is adjusted based on factors like age,
condition or type of sale, to reflect the specific characteristics of the intangible asset.

In the market approach, a variety of factors is considered by the market. However, the market does not necessarily value the contribution of the specific
i t
ibl assett to
t the
th value
l off an ongoing
i
t
i
Th market
k t approach
h reflects
fl t currentt market
k t perceptions,
ti
diti
d transactions.
t
ti
H
intangible
enterprise.
The
conditions
and
However,
sales or market prices of intangible assets are seldom available. This is due to the fact that intangible assets typically are transferred only as part of a
business, and not in a single transaction. A comparison between intangible assets is difficult and thus a market approach is seldom feasible, because
intangible assets are rather unique to each enterprise.

The income approach estimates the fair value from the future cash flows which the intangible asset will generate over its remaining useful life. The
application of this approach involves projecting the cash flows which the intangible assets are generating, based on current expectations and assumptions
g that synergistic
y g
g benefits in excess of those to be realized byy regular
g
p
about future states. It should be noted though,
or strategic
market p
participants
have to
be removed from the projected cash flows. Then, these cash flows generated by the asset have to be converted to a present value by discounting them
with the appropriate discount rate. The discount rate reflects the time value of money and the relevant risk associated with the cash flows and the intangible
asset.

The income approach can be further distinguished according to the way the cash flows generated by the intangible asset are calculated. The most
important methods are:
Income approach

Multi-period excess earnings
g method;

Relief from royalty method; and

Incremental cash flow method.
Multi-period excess earnings method

The multi-period excess earnings method calculates the cash flows based on a detailed forecast of cash inflows, cash outflows and pro forma charges for
economic returns of and on the tangible
and intangible
assets employed.
The cash inflows and outflows are in g
general derived from p
projected
financial
g
g
p y
j
information provided by management.

Since intangible assets normally only generate cash flows in combination with other tangible or intangible assets, notional payments for these contributory
assets are taken into consideration for the determination of the relevant cash flows. The charges for the economic returns are computed based on the
assets utilized by the intangible asset. The resulting net cash flows are also termed multi-period excess earnings.

It is presumed that the contributory assets were leased from a third party in the scope necessary for the generation of cash flows. All considerations refer to
pp
g take into account the return of the asset ((wear and tear))
contributoryy asset charges
the attributable fair value of the relevant contributoryy asset. The applied
and the return on the asset (a reasonable interest on the capital invested). Asset charges have to be calculated for the value of the assembled workforce,
although the workforce itself cannot be recognized as an independent asset apart from goodwill.
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
18
3. PPA Analysis Framework (cont.)
Methods of Valuation - Fundamentals (cont.)
Method of Valuation
Description
Income approach
(continuation)
Relief from royalty method

The relief from royalty method assumes that the intangible asset has a fair value based on royalty income attributable to it. This royalty income represents
the cost savings of the owner of the asset – the owner does not have to pay royalties to a third party for the license to use the intangible asset. The
d i ti off the
th royalty
lt income
i
i comprised
i d off two
t
b i steps:
t
derivation
is
basic

the estimation of revenues attributable to the asset; and

the estimation of the appropriate royalty rate.
Incremental cash flow method (or “with and without”)
Cost approach

The incremental cash flow method compares the future estimated cash flows from the enterprise including the intangible asset being valued with the cash
flows
from
a fictitious
comparable
fl
f
fi titi
bl company excluding
l di the
th asset.
t

The difference in the cash flows per period between the two companies is reflected in the incremental cash flow attributable to the intangible asset to be
valued. To calculate the fair value of the asset, these additional cash flows are discounted to the valuation date using the weighted cost of capital rate
specific to the asset (post-tax calculation). These additional cash flows may arise if additional cash receipts are generated by the intangible asset
concerned or cash payments are saved.

The application of the incremental cash flow method presupposes that the future cash flows of the theoretical comparable enterprise can be reliably
estimated
ti t d without
ith t this
thi asset.
t Another
A th alternative
lt
ti that
th t can be
b applied
li d is
i the
th calculation
l l ti off incremental
i
t l cash
h flow
fl
generated
t d directly
di tl by
b a particular
ti l assett (or
(
group of assets), and compare this flow with that of another asset (or group of assets) to serve as a reference.

The cost approach estimates the value of an asset based on the current cost to purchase or replace that asset. The cost approach reflects the idea that the
fair value of an asset should not exceed the cost to obtain a substitute asset of comparable features and functionality. However, there may be little
correlation between the cost incurred and the fair value created by an intangible asset.
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
19
Contents
Page
1. Introduction
2. Description of the Company
3. PPA Analysis Framework
4. Identification of intangible assets
21
5. Valuation of intangibles assets
6. Valuation of tangible assets
7. Discount Rate
8. Results and conclusions
Appendices
I.
Summary of values and WARA
II.
Valuation of the trade-mark
III. Valuation of the client portfolio - wholesalers
IV Assembled
IV.
A
bl d Workforce
W kf
V. Contributory assets
VI. Proportional PPA
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
20
4. Identification of intangible assets
•
The lists below show categories and examples of possible intangible assets:
Related to the market

Trade-marks

Certifications

Domains on the internet

Non-compete agreements
Related to clients
Related to contracts

Backlog of orders from
clients

Contracts and contractual
relationships with clients

Non-contractual
relationships with clients
Related to technology

Rental contracts

Software licenses

Building permits

Own software

Agreements and franchises


Operating and transmission
licenses
Business secrets (formulas,
processes and recipes)

Patented technology

Contracts with employees

Non-patented technology

Publicity, construction,
management, service or
supply contracts

Operational contracts
Related to art

Compositions,
advertisements jingles
advertisements,

Paintings, photographs

Visual and audio-visual
material
Expansion/Development Projects in Progress
•
In the following chapter we comment on the intangible assets identified/valued.
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
21
Contents
Page
1. Introduction
2. Description of the Company
3. PPA Analysis Framework
4. Identification of intangible assets
5. Valuation of intangibles assets
23
6. Valuation of tangible assets
7. Discount Rate
8. Results and conclusions
Appendices
I.
Summary of values and WARA
II.
Valuation of the trade-mark
III. Valuation of the client portfolio - wholesalers
IV Assembled
IV.
A
bl d Workforce
W kf
V. Contributory assets
VI. Proportional PPA
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
22
5. Valuation of intangible assets
General considerations
•
The intangible assets considered and discussed with the Managements of Natura and Aesop were as follows:
Potential Intangible Asset
Identified
Softwares, Technologies
and Licenses
Client Portfolio –
Wholesalers
Backlog of orders from
clients
Trade-mark
To be
Valued
Discussion/Rationale
X
Due to the nature of its business, the Company does not detain any software and/or any specific technology and/or licenses
which could be considered potential intangible assets. In addition, as we were informed by the Company Management, Aesop
does not have any ingredients or exclusive methods for the preparation of its products which could create a differential in
relation to any other market participant.
n/a

The Company operates through three distribution channels: (i) signature stores (“retail”), (ii) department stores, and (iii)
wholesalers:
(i)
In
stores,
the
sales
mostly
I its
it signature
i
t
t
th principal
i i l distribution
di t ib ti channel
h
l off Aesop,
A
l are made
d directly
di tl to
t the
th public
bli att large,
l
tl
made up of individual people. The Management of Aesop does not have an identification and recurrence control of its
customers, due to the nature of the business.
(ii)
In relation to department stores, with the exception of two department stores located in Australia, these are only one
distribution channel for Aesop (partners) in which the Company uses the structure of the department store to promote
and sell its products. In this case Aesop sells its products inside the department store through its own employees,
running the risk of stocks and paying a percentage on sales. Its end clients are also the general public made up of
individual persons. Furthermore, Aesop does not have any advantage and/or benefit in these stores in relation to its
competitors
tit
– in
i mostt cases the
th competitors’
tit ’ products
d t are displayed
di l
d alongside.
l
id The
Th two
t
d
department
t
t stores
t
i Australia
in
A t li
are end clients (they purchase from Aesop) however, the Company does not have any exclusive relationship with them
and they also sell the competitors´ products and for this reason this client relationship was not considered a potential
intangible asset.
(iii) On the other hand, with respect to wholesalers, there are historic and recurrent relationships. These relationships
provide Aesop with new sales orders generating revenue and profitability. In the period 2011/2012 wholesalers
represented about 10% of total sales.
In this context and taking into account the characteristics of the Company´s business, the client portfolio associated
l i l with
ith the
th wholesalers
h l
l
l d as an intangible
i t
ibl asset.
t
exclusively
was valued
Income Approach:
Excess Earnings
Method
According to the Management on the base-date there was no relevant backlog of clients’ orders which needed to be valued.
n/a
The right of use of the “Aesop” trade-mark is guaranteed by law and this mark was acquired as part of the process of
acquiring the company.
company The trade-mark was valued since it has been present on the market for over 25 years and is a strong
and recognized name, also internationally, in the market in which the Company operates. According to the Management of
Natura the strength of the mark was one of the principal drivers behind the acquisition.
Income Approach:
Relief from Royalty
Method
X

© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Probable Method of
Valuation
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
23
5. Valuation of intangible assets (cont.)
General considerations (cont.)
Potential Intangible Asset
Identified
To be
Valued
Discussion/Rationale
X
According to the Management of Aesop, the rental contracts existing on the date of the acquisition are at market value. The
vast majority of contracts is of short duration (approx. 5 years) and have been signed recently. Furthermore, when negotiating
a new rental contract, it is the Company practice to contract a consultancy specialized in real estate to analyze if the value
being asked is consistent with the values being charged in that particular region. Finally, new contracts are submitted to
approval and internal analysis.
n/a
X
According to the Management of Natura although the purchase and sale agreement contains a non-compete clause in
respect of the sellers, the strong entry barriers to the business (among them the trademark and the extensive chain of streetlevel stores around the world) in themselves hinder any threat of competition. Replicating such a business would be very
difficult. Furthermore, the sellers will continue to have a participation in the company, in the Management and on the Board of
Directors.
n/a
Key money payments
X
On the base-date of the transaction there were only 5 contracts in which there was key money, amounting to a net book value
off AU$ 180 thousand.
th
d (The
(Th gross value
l was AU$ 430 thousand).
th
d) According
A
di to
t the
th Management
M
t off Aesop,
A
th
these
payments
t
are unusual, the payments were small and were made recently (of the 5 payments, 4 were made in the last 2 years). In
addition, due to their location and the scenario of a world economic crisis, the Management of Aesop does not believe that
there would be any market adjustment to these payments.
n/a
Assembled workforce

Although this asset cannot be separated from goodwill, according to IFRS 3/CPC-15, the value of this asset was estimated so
that this amount may be taken into account in the calculation of the value of other intangible assets valued using the excess
earnings method.
Cost Approach
Rental contracts
Non-compete agreements
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Probable Method of
Valuation
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
24
5. Valuation of intangible assets (cont.)
Trade-mark
Recognition
•
The right to use a trademark is considered an intangible asset related to
marketing, which is classified as an asset used in the advertising and
identification of products and services
•
The Aesop brand is recognized in the market in which it operates, having been
present since 1987 in addition to being a highly consolidated brand in the world
market for cosmetics.
•
In order to value the right of use of the trade-mark we used the Income
Approach and the Relief from Royalties Method due to the possibility of
calculating the value of the royalties which would theoretically be paid if this
trade-mark were to be licensed.
Assumptions
p
made
•
In order to measure this intangible asset we researched royalties in the
cosmetics and beauty products market, in other words, an average percentage
rate of net income charged by comparable companies on licensing the use of
their trade-marks. Having established this benchmark, we calculated the value
of the royalty to be paid on the basis of projected revenues net of income tax.
Since these values were based on the flow of receipts
p of future royalties,
y
, it was
necessary to adjust the value in question by applying a previously calculated
discount rate.
•
The financial projections used to value the Aesop trade-mark were prepared in
Australian Dollars (AU$) in nominal terms, that is, taking inflation into account.
•
The valuation of this intangible asset was based on Aesop´s projected revenues
i accordance
in
d
with
ith the
th assumptions
ti
i the
in
th economic-financial
i fi
i l valuation
l ti
off the
th
Company prepared by KPMG in order to justify the price paid.
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Since Aesop markets 100% of their products with the Aesop brand name, the
royalties were calculated over the Company´s total business range.
Royalty Rate
•
The Royalty Rate used was estimated based on information obtained from
R
RoyaltySource,
lt S
which
hi h publishes
bli h the
th royalty
lt rates
t used
d in
i licensing
li
i agreements
t
in the market.
•
The percentage of royalty fee defined was based on an independent research of
transactions involving comparable companies in the industry in which the
Company operates and on discussions with the Management regarding the
contribution which the trade-mark makes to the Company´s total business.
•
IIn order
d to
t select
l t information
i f
ti comparable
bl with
ith the
th Company
C
´s sector,
t
we used
d
information from companies in the sector of cosmetics and beauty products.
•
As a result of the survey, we obtained an average rate of 5% of net income for
licensing a trade-mark.
The right to use the “Aesop” brand is guaranteed by law and this brand was
acquired as part of the process of acquiring the Company.
Approach used in the valuation
•
•
Discount rate
•
In order to discount the resulting cash flows we used a rate of 12,71%
12 71% which
corresponds to our discount rate (detailed in the next chapter), plus a spread of
0,5% to cover the additional risk specific to this asset, thus totaling 13,21%.
Useful life
•
Considering that the brand has been in the market since 1987, the useful life of
this intangible asset was considered at around 25 years, that is, until December
2037
2037.
Estimated value
•
As a result of the above calculations, the value of the Aesop trade-mark was
estimated at AU$ 39,4 million.
•
Details of the projections regarding the valuation of this intangible asset can be
found in Appendix II of this report.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
25
5. Valuation of intangible assets (cont.)
Client portfolio - Wholesalers
Recognition




According to CPC-15, the relationships which a company maintains with its
clients through a formal contract or recurrent relationships, are considered an
intangible asset since they generate an economic benefit for the company and
they can be controlled by legal or contractual means.
CPC 15 requires that these intangible assets be recognized separately from
goodwill even if contractual confidentiality provisions or other provisions prohibit
the sale or transfer of these contracts and/or relationships separately from the
entity acquired.
A relationship between an entity and its clients exists if (a) the entity has
information about the client and has regular contact with the client; and (b) the
client is capable of making direct contact with the entity. Relationships with
clients can result from contracts (such as supply agreements and service
contracts) or through other non-contractual means such as regular contacts with
the client made by salesmen or service representatives or through regular
purchases.

Considering that, since the company does not retain 100% of its client portfolio
for a lengthy period of time, the projected cash flows must be multiplied by an
attrition factor to reflect that the net revenue attributed to the existing client
portfolio will reduce as a percentage of the businesses´ total income over time.
•
The client portfolio was projected based on an attrition factor which reflects the
retention
i off clients
li
( h l
(wholesalers)
l ) over time.
i
Assumptions made
Projected revenues and Operating Cash Flows
•
The Company´s revenue derives from three distribution channels: retail,
department stores and wholesalers and for the calculation of the client portfolio
only the revenues from the wholesaler channel were used (as previously
described, the other channels sell directly to individuals). The 2012 sales mix
was used to project the revenues from wholesalers. It was considered that sales
through wholesalers represent about 10% of total sales.
•
For the existing client portfolio (wholesalers), we analyzed the rates of retention
and the behavioural characteristics in order to determine the attrition rate. In
order to estimate the attrition rate, we used historical retention data for
wholesalers over the last 3 years. Based on our calculations and information
provided by the Management of Aesop, the annual loss of clients was estimated
at approximately 11,5%.
•
After applying the attrition factor we took into account the cost of goods sold and
operating expenses consistent with the business projections.
•
We then took into account the taxes applicable to operating profit.
Aesop has historic and recurrent relationships with various clients (wholesalers).
On account of this, we carried out a valuation of Aesop´s wholesaler client
portfolio.
Approach used in the valuation

•
In order to value client relationships, we used the Income Approach under the
Multi-period Excess Earnings Method due to the possibility of attributing the
cash flow generated directly to the asset identified.
The approach used to value the client portfolio foresees that the income from
products supplied under the terms of agreements in force, as from the valuation
date, are projected throughout the useful life of the contract deducting the
corresponding costs and expenses incurred to finalize their delivery.
.
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
26
5. Valuation of intangible assets (cont.)
Client portfolio – Wholesalers (cont.)
Cost of contributing assets


When calculating the value of each intangible, the contributing assets or
“Contributory Capital Asset Charges” are deducted as applicable. This is done
so as to calculate the opportunity cost of acquiring and maintaining certain
assets which contribute towards the intangible assets having a value.
value The costs
of these assets were calculated jointly since these assets contribute towards the
company´s activities as a whole.
In the case of valuing the intangible asset “Client portfolio - Wholesalers” the
following contributing assets and their respective opportunity costs were taken
into account:
 Net Working Capital: 5,6%
5 6% p.a.
p a (US Corporate Retail BB+ p/ Australian AAA
rate + 1% p.a. spread, after-tax);
 Fixed Assets: 5,2% p.a. (US Corporate Retail BB+ p/ Australian AAA rate +
0,5% p.a. spread, after-tax);
 Trade-mark: 3,5% of net income (Royalty Rate after-tax); and
 Assembled Workforce: 13,21% p.a. (Company´s WACC, plus 0,5% p.a.
spread, after-tax).

Details of the projections relative to contributing assets can be seen in
Appendix VI of this report.
Discount Rate

In order to discount the resulting cash flows, we used a rate of 12,71% which in
it composition
its
iti
was increased
i
d by
b a spread
d off 0,5%
0 5% as a premium
i
f the
for
th
additional risk specifically associated with this intangible asset.
Useful life

We estimated the useful life of the client portfolio at approximately 9 years.
Estimated value


As a result of the above calculation, the value of Aesop´s client portfolio was
estimated at AUD$ 0,6 million.
Details of the projections regarding this intangible asset are shown in Appendix
IV of this report.
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
27
5. Valuation of intangible assets (cont.)
Assembled workforce
Summary



Although the workforce has been identified and valued in order to estimate the
value of the asset which contributes towards the other intangible assets, IAS 38
does not permit that it be separated from goodwill. Therefore, it was segregated
for the purpose of allocation and only used as a contributing asset in the
valuation of other intangibles,
intangibles when applicable.
applicable
Conclusion

Based on the information provided and our own analysis, the fair value of the
Company´s workforce is estimated at AU$ 0,8 million. Details of the projections
relative to the valuation of this intangible asset can be found in Appendix V of
this report.
Its value is estimated based on how much a purchasing entity would save if it
had to form a new workforce. This estimate can be found in Appendix V of this
report.
The client provided us with data about the workforce which was attributed to the
Company.
Approach used in the valuation


We used the Cost Approach to value the workforce. In this approach the value
of the existing workforce is calculated based on the costs which have been
avoided by the buyer in respect of the acquisition of an efficient and already
trained team, as opposed to training and forming a new team.
The calculation of income tax took into account an average rate of 30%.
Recruitment and Training costs avoided


Aesop avoided the costs of having to identify, recruit and train an adequate
team, by having already purchased one with these requisites. Based on
discussions with the client, we identified the costs related to recruitment and
training of new employees.
These rates
Th
t
were applied
li d to
t the
th number
b off employees
l
acquired
i d in
i order
d to
t
estimate the value of the net-of-tax costs avoided by Aesop.
Loss of productivity avoided

New employees require a certain amount of adaptation time before becoming
fully productive and therefore they are not as efficient as more experienced
employees. This period represents an implicit cost of training a workforce. We
considered
id d that
th t on average, employees
l
reach
h maximum
i
productivity
d ti it 4 months
th
after entering the Company.
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
28
Contents
Page
1. Introduction
2. Description of the Company
3. PPA Analysis Framework
4. Identification of intangible assets
5. Valuation of intangibles assets
6. Valuation of tangible assets
30
7. Discount Rate
8. Results and conclusions
Appendices
I.
Summary of values and WARA
II.
Valuation of the trade-mark
III. Valuation of the client portfolio - wholesalers
IV Assembled
IV.
A
bl d Workforce
W kf
V. Contributory assets
VI. Proportional PPA
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
29
6. Valuation of tangible assets
Tangible assets

Based on our analysis of the Company´s assets and liabilities on the base-date of
the job, excluding fixed assets, inventories and contingencies, and on discussions
with the Managements of Natura and Aesop, we concluded that due to their
nature and balances, eventual adjustments to the value would be nil or
i
immaterial.
i l
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
30
Contents
Page
1. Introduction
2. Description of the Company
3. PPA Analysis Framework
4. Identification of intangible assets
5. Valuation of intangibles assets
6. Valuation of tangible assets
7. Discount Rate
32
8. Results and conclusions
Appendices
I.
Summary of values and WARA
II.
Valuation of the trade-mark
III. Valuation of the client portfolio - wholesalers
IV Assembled
IV.
A
bl d Workforce
W kf
V. Contributory assets
VI. Proportional PPA
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
31
7. Discount rate
Method of calculating the discount rate
•
The calculation of the discount rate is a fundamental step in the valuation process. This factor reflects aspects of a subjective and variable nature which vary from
investor to investor, such as the opportunity cost and the particular perception of the risk of the investment.
Cost of capital
p
We used the Weighted Average Cost of Capital (WACC) which is
an appropriate parameter to determine the discount rate to be
applied on the Company's free cash flows. The WACC considers
the several types of financing, including debt and equity, which are
used by companies to meet their funding needs, and is calculated
through the following formula:
Cost of capital
p
((Ke))
The cost of capital can be calculated using the Capital Assets Pricing
Model (CAPM). Considering that the company being valued is located
in Australia, the cost of capital is calculated using the following
formula:
Ke
Cost of Capital
=
Rf
+
ß x (E[Rm] – Rf)
+
Rs
WACC
Weighted Average Cost of Capital
=
D / (D+E)
x
Kd x (1-t)
+
E / (D+E)
x
Where:
Ke
Where:
D
E
t
Kd
Ke
=
=
=
=
=
Total third party capital
Total own capital
Rate of Income Tax and Social Contribution
Cost of third party capital
Cost of capital
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Rf
= Average risk-free return based on the return on 15 year
fixed
ed income
co e bo
bonds
ds o
of tthe
e Australian
ust a a Go
Government
e
e t
β
= Beta (coefficient of risk specific to the company being
valued)
E[Rm]
= Average long-term return obtained on the North-American
stock market
E[Rm] - Rf = Market risk premium
Rs
= Risk Premium associated to the size of the Company
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
32
7. Discount rate (cont.)
Cost of capital
TUPPERWARE BRANDS CORP
Beta
levered
1,34
Debt to
Equity
72,8%
NU SKIN ENTERPRISES INC - A
1,10
34,5%
34,5%
0,90
BEIERSDORF AG
0,41
62,2%
62,2%
0,33
ORIFLAME COSMETICS SA-SDR
0,82
17,3%
17,3%
0,72
L'OREAL
0,52
1,3%
28,5%
0,51
ESTEE LAUDER COMPANIES-CL A
1,04
7,2%
30,2%
0,99
ELIZABETH ARDEN INC
1,40
63,1%
23,9%
0,94
REVLON INC-CLASS A
1,18
18,7%
38,3%
1,06
Comparables
Risk-free rate
•
In order to quantify the average risk-free return (Rf) we considered the
return on the base-date (31st January 2013) for 15-year fixed income
bonds of the Australian Government, which was 3,35% (Source:
Bloomberg).
Calculation of Beta


Beta is the specific risk coefficient of the shares of a company compared to
a market index, representing the stock market as a whole. In the case of
valuations of companies that are listed and have significant negotiations on
the stock exchange, the share Beta is calculated by the correlation of
weekly returns of their own stocks compared to the selected market index
during a certain period prior to the valuation date.
In the case of companies that are not listed on the stock exchange, or
which
hich do not have
ha e significant trading volumes,
ol mes the company’s
compan ’s Beta can be
represented using the average beta for the sector in which the company
operates. Thus, the average Beta for the sector is calculated based on the
average correlations of weekly returns of several companies from the same
sector, in relation to the weekly returns of the market index during a certain
period.
•
In order to estimate the Company’s Beta, the average Beta of comparable
companies from the cosmetics sector was used. This Beta was obtained by
averaging the unlevered Betas of comparable companies shown in the
following table, with the value of 0,73.
•
This Beta was then re-leveraged according to the capital structure of the
Company and at the current basic rate of income tax and social contribution
incurred on the Company's operations. As a result the beta utilized was
0,99.
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Beta unlevered
0,73
Effective
tax rate
30,5%
Beta
unlevered
0,89
Debt to Equity
Effective tax rate
Beta relevered
35%
30%
0,99
Source: Bloomberg
Market risk premium
•
For the long term stock market risk premium (E[Rm] – Rf), we used the
average return above the Treasury Bond rate provided by investing in the
Australian stock market, which was of 5,80% (Source: Prof Aswath
Damodaran website).
Size premium
•
For the premium for company size (Rs) was considered the rate of 6,36%,
according to information released by Ibbotson Associates, for comparablesized companies (Source: Ibbotson Associates).
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
33
7. Discount rate (cont.)
•
We present, below, the calculation of the cost of the Company´s capital:
Cost of capital - Ke
Risk-free rate
3,5%
Re-leveraged Beta
0,985
Market risk premium
5,80%
Risk for size of Company
6,36%
Cost of capital (Nominal in AU$) - Ke
15,42%
Cost of third party capital
•
For purposes of the cost of third party capital, was considered the nominal
cost of an American corporate bond in the retail segment rated BB + of
7,0%. After the effect of taxes (we used the rate of Aesop) the cost of debt
is 4,90%.
Cost of third party capital (Nominal in AU$)
Cost of third party capital
7,00%
Effective long term rate of tax
Cost of third party capital after tax (Nominal in AU$) - Kd
30%
4,90%
Capital structure
•
The capital structure used was defined based on the target capital structure
observed in comparable companies.
companies Based on this criteria,
criteria the capital
structure used was of 74,3% of own capital and 25,7% of third party capital.
Calculation of the discount rate
•
Based on the capital structure used and the costs of capital and third party
capital,
cap
ta , tthe
ed
discount
scou t rate
ate was
as ca
calculated
cu ated at 12,71%
, % pe
per a
annum.
u
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
34
Contents
Page
1. Introduction
2. Description of the Company
3. PPA Analysis Framework
4. Identification of intangible assets
5. Valuation of intangibles assets
6. Valuation of tangible assets
7. Discount Rate
8. Results and conclusions
36
Appendices
I.
Summary of values and WARA
II.
Valuation of the trade-mark
III. Valuation of the client portfolio - wholesalers
IV Assembled
IV.
A
bl d Workforce
W kf
V. Contributory assets
VI. Proportional PPA
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
35
8. Results and conclusion
•
•
The acquisition value of 65% of Aesop was AU$ 71,1 million (see Appendix I).
The trade-mark and the client portfolio (wholesalers) were valued as relevant
intangibles for the purposes of this study. Thus, considering an acquisition of
100%, we estimate the value of the trade-mark at approximately AU$ 39,4
million and that of the client portfolio (wholesalers) at approximately AU$ 0,6
million,
illi
as shown
h
b l
below:
Fair Value
Deferred Tax
Net Fair Value
AU$ '000
Trade-mark - 100% value
Clients - Wholesalers - 100 % value
39.408
636
(11.822)
(191)
27.586
445
•
The detailed calculations carried out can be found in Appendices II and III
respectively.
•
Regarding
g
g the relevant assets and liabilities existing
g on the base-date, excluding
g
fixed assets, inventories and contingenvies, we did not find the need to make
any adjustment to fair value. The adjustment to market value of the fixed assets,
inventories and contingencies was not within the scope of this job
•
Concerning to the balances of fixed assets, inventories and contingencies, we
took the Management´s assumption that there was no need to make eventual
adjustments to market value of these accounts on the base-date.
•
On February 28, 2013, according to the procedures applied and the scope
limitations already described, the value of goodwill considering an acquisition of
100% was estimated initially at AU$ 60,2 million (See Appendix I).
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
•
We wish to stress that the present valuation is substantially based on
assumptions provided by the Managements of Natura and Aesop.
•
Therefore we cannot, as the Management of Aesop also cannot, guarantee
that the Company´s results after February 2013 were or will be effectively
achieved
ac
e ed in acco
accordance
da ce with
t tthe
e p
projected
ojected results,
esu ts, ssince
ce tthe
e e
events
e ts
foreseen may not occur due to various exogenous conjunctional and
operational factors resulting therefore in relevant variations.
•
KPMG was not requested to update this valuation following its date of
issue.
•
During the course of our work we carried out analysis procedures which we
considered appropriate
pp p
in the context of the valuation. However,, KPMG is
not responsible for the information it has been provided and will not be
made responsible under any circumstance, nor will bear losses or
damages resulting or arising from the omission of any data or information
by the Client´s Management. We would further stress that this job did not
constitute an audit according to generally accepted auditing procedures
and must not be interpreted as such.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
36
Contents
1. Introduction
2. Description of the Company
3. PPA Analysis Framework
4. Identification of intangible assets
5. Valuation of intangibles assets
6. Valuation of tangible assets
7. Discount Rate
8. Results and conclusions
Appendices
I.
Summary of values and WARA
II.
Valuation of the trade-mark
III. Valuation of the client portfolio - wholesalers
IV Assembled
IV.
A
bl d Workforce
W kf
V. Contributory assets
VI. Proportional PPA
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
37
Appendix I
Summary of values and WARA
Emeis Holdings Pty Ltd.
WARA - Weighted Average Return on Assets
Base Date: 2/28/2013
´in AUD 000
Values and WARA Calculations
Average
tax rate
BEV
Deferred tax
Purchase price (65%)
Minority interests (35%)
BEV
Fair Value
% Purchase
Price
Expected return
before taxes
Expected
return after
taxes
WARA
71.104
38.287
109 391
109.391
PPA
Working Capital
Long term assets and liabilities
Fixed Assets
Intangible - Trade-mark
Intangible - Customer relationship - Wholesalers
Estimated Goodwill (including workforce)
Total
WARA
WACC
30%
30%
30%
30%
30%
39.408
636
(11.822)
(191)
10.384
3.017
7.718
27.586
445
60.241
9,5%
2,8%
7,1%
25,2%
0 4%
0,4%
55,1%
109.391
100,0%
8,0%
8,0%
7,5%
5,6%
5,6%
5,2%
13,21%
13 21%
13,21%
15,11%
(*)
(*)
(**)
(***)
((***))
0,53%
0,15%
0,37%
3,33%
0 05%
0,05%
8,32%
12,71%
12,71%
12,71%
(*) US Corporate Retail BB+ p/ Australian AAA rate + spread 1,0 %
(**) US Corporate Retail BB+ p/ Australian AAA rate + spread 0,5 %
(***) WACC + spread 0,5 %
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
38
Appendix II
Valuation of the Trade-mark
Em eis Holdings Pty Ltd.
Trade m ark
Base Date: 2/28/2013
´in AUD 000
1
2
3
4
5
6
7
8
9
10
11
12
Em eis Holdings Pty Ltd.
Trade-m ark
Proj.
2013
Proj.
2014
Proj.
2015
Proj.
2016
Proj.
2017
Proj.
2018
Proj.
2019
Proj.
2020
Proj.
2021
Proj.
2022
Proj.
2023
Proj.
2024
64.045
30,7%
85.944
34,2%
106.486
23,9%
116.316
9,2%
127.442
9,6%
139.770
9,7%
153.046
9,5%
158.498
3,6%
164.144
3,6%
169.992
3,6%
176.048
3,6%
182.320
3,6%
5,0%
5,0%
5,0%
5,0%
5,0%
5,0%
5,0%
5,0%
5,0%
5,0%
5,0%
5,0%
Net Revenues
% of growth
Royalty rate
Relief-from -royalties (pre taxes)
3.202
4.297
5.324
5.816
6.372
6.989
7.652
7.925
8.207
8.500
8.802
9.116
% tax rate
29,4%
29,9%
30,0%
30,0%
30,1%
30,2%
30,3%
30,3%
30,3%
30,3%
30,3%
30,3%
Relief-from -royalties (post taxes)
2.260
3.014
3.728
4.068
4.452
4.877
5.335
5.525
5.722
5.925
6.137
6.355
1
10,17
3,53
1
11,17
4,00
1.738
1.590
WACC
Spread
Adopted WACC - Brand
Discount Period
Period
Discount factor
DCF
12,71%
0,5%
13,21%
0,33
0,17
1,02
2.214
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
1
1,17
1,16
2.608
1
2,17
1,31
2.850
1
3,17
1,48
2.747
1
4,17
1,68
2.655
1
5,17
1,90
2.569
1
6,17
2,15
2.482
1
7,17
2,43
2.271
1
8,17
2,75
2.077
1
9,17
3,12
1.900
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
39
Appendix II
Valuation of the Trade-mark (cont.)
Em eis Holdings Pty Ltd.
Trade m ark
Base Date: 2/28/2013
´in AUD 000
13
14
15
16
17
18
19
20
21
22
23
24
25
Em eis Holdings Pty Ltd.
Trade-m ark
Proj.
2025
Proj.
2026
Proj.
2027
Proj.
2028
Proj.
2029
Proj.
2030
Proj.
2031
Proj.
2032
Proj.
2033
Proj.
2034
Proj.
2035
Proj.
2036
Proj.
2037
188.815
3,6%
195.541
3,6%
202.508
3,6%
209.722
3,6%
217.193
3,6%
224.931
3,6%
232.944
3,6%
241.243
3,6%
249.837
3,6%
258.737
3,6%
267.955
3,6%
277.501
3,6%
287.387
3,6%
5 0%
5,0%
5 0%
5,0%
5 0%
5,0%
5 0%
5,0%
5 0%
5,0%
5 0%
5,0%
5 0%
5,0%
5 0%
5,0%
5 0%
5,0%
5 0%
5,0%
5 0%
5,0%
5 0%
5,0%
5 0%
5,0%
Net Revenues
% of growth
R
Royalty
lt rate
t
Relief-from -royalties (pre taxes)
9.441
9.777
% tax rate
30,3%
30,3%
30,3%
30,3%
30,3%
30,3%
30,3%
30,3%
30,3%
30,3%
30,3%
30,3%
Relief-from -royalties (post taxes)
6.582
6.816
7.059
7.310
7.571
7.840
8.120
8.409
8.709
9.019
9.340
9.673
WACC
Spread
Adopted WACC - Brand
10.125
10.486
10.860
11.247
11.647
12.062
12.492
12.937
13.398
13.875
14.369
30,3%
10.018
12,71%
12
71%
0,5%
13,71%
Discount Period
Period
Discount factor
1
12,17
4,52
1
13,17
5,12
1
14,17
5,80
1
15,17
6,56
1
16,17
7,43
1
17,17
8,41
1
18,17
9,53
1
19,17
10,78
1
20,17
12,21
1
21,17
13,82
1
22,17
15,65
1
23,17
17,71
1
24,17
20,05
DCF
1.455
1.331
1.217
1.114
1.019
932
852
780
713
653
597
546
500
Ʃ of DCF's
39.408
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
40
Appendix III
Valuation of the Client Portfolio - Wholesalers
Emeis Holdings Pty Ltd.
Customer relationship - wholesalers
Base Date: 2/28/2013
´in AUD 000
Emeis Holdings Pty Ltd.
Customer Relationship - Wholesalers
Net Revenues
% growth
1
Proj.
2013
2
Proj.
2014
3
Proj.
2015
4
Proj.
2016
5
Proj.
2017
6
Proj.
2018
7
Proj.
2019
8
Proj.
2020
9
Proj.
2021
64.045
30,7%
85.944
34,2%
106.486
23,9%
116.316
9,2%
127.442
9,6%
139.770
9,7%
153.046
9,5%
158.498
3,6%
164.144
3,6%
6.030
9,4%
30,7%
8.092
9,4%
34,2%
10.027
9,4%
23,9%
10.952
9,4%
9,2%
12.000
9,4%
9,6%
13.161
9,4%
9,7%
14.411
9,4%
9,5%
14.924
9,4%
3,6%
15.456
9,4%
3,6%
88,5%
94,3%
77,0%
82,8%
Retail
% of total revenues
Department stores
% of total revenues
Wholesalers
% of total revenues
Net Revenues - Client Accounts - Wholesalers
% of net revenues
% growth
Churn rate
Average
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
11,50%
65,5%
71,3%
54,0%
59,8%
42,5%
48,3%
31,0%
36,8%
19,5%
25,3%
8,0%
13,8%
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
0,0%
4,0%
41
Appendix III
Valuation of the Client Portfolio – Wholesalers (cont.)
Emeis Holdings Pty Ltd.
Customer relationship - wholesalers
Base Date: 2/28/2013
´in
in AUD 000
Emeis Holdings Pty Ltd.
Customer Relationship - Wholesalers
Adjusted income from Customer Relationship - Wholesalers
Proj.
2013
Proj.
2014
Proj.
2015
Proj.
2016
Proj.
2017
Proj.
2018
Proj.
2019
Proj.
2020
Proj.
2021
618
5.684
6.696
7.144
6.544
5.790
4.837
3.639
2.052
(922)
16,2%
(1.076)
(1
076)
16,1%
(1.144)
(1
144)
16,0%
(1.038)
(1
038)
15,9%
(909)
15,7%
(759)
15,7%
(560)
15,4%
(316)
15,4%
4.762
5.621
6.000
5.506
4.881
4.077
3.078
1.736
( - ) Operating expenses
% of income from Customer Relationship - Wholesalers
(4.076)
71,7%
(4.723)
70,5%
(4.862)
68,1%
(4.448)
68,0%
(3.924)
67,8%
(3.277)
67,8%
(2.461)
67,6%
(1.388)
67,6%
(418)
67,6%
( - ) Depreciation
% of income from Customer Relationship - Wholesalers
(341)
6,0%
(408)
6,1%
(400)
5,6%
(259)
4,0%
(236)
4,1%
(156)
3,2%
(87)
2,4%
(34)
1,6%
(10)
1,6%
345
489
738
799
721
644
530
314
( - ) COGS
% of income from Customer Relationship - Wholesalers
Gross Margin
EBT
( - ) Taxes
% of EBT
NOPAT
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
(101)
29,4%
29
4%
243
(146)
29,9%
29
9%
343
(221)
30,0%
30
0%
517
(240)
30,0%
30
0%
559
(217)
30,1%
30
1%
504
(195)
30,2%
30
2%
449
(161)
30,3%
30
3%
370
(95)
30,3%
30
3%
219
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
(95)
15,4%
523
95
(29)
30,3%
30
3%
66
42
Appendix III
Valuation of the Client Portfolio – Wholesalers (cont.)
Emeis Holdings Pty Ltd.
Customer relationship - wholesalers
Base Date: 2/28/2013
´in AUD 000
Emeis Holdings Pty Ltd.
Customer Relationship - Wholesalers (cont'd)
Proj.
2013
Proj.
2014
Proj.
2015
Proj.
2016
Proj.
2017
Proj.
2018
Proj.
2019
Proj.
2020
243
343
517
559
504
449
370
219
66
(305)
(344)
(358)
(322)
(274)
(223)
(166)
(94)
(28)
Working Capital
% of income from Customer Relationship - Wholesalers
(56)
0,98%
(58)
0,87%
(59)
0,83%
(55)
0,84%
(47)
0,82%
(38)
0,78%
(28)
0,76%
(17)
0,81%
(5)
0,81%
Fixed Assets
% of income from Customer Relationship - Wholesalers
(42)
0,74%
(46)
0,68%
(45)
0,63%
(36)
0,55%
(24)
0,41%
(16)
0,33%
(11)
0,29%
(5)
0,27%
(2)
0,27%
Trade mark
% of income from Customer Relationship - Wholesalers
(199)
3,50%
(234)
3,50%
(250)
3,50%
(229)
3,50%
(203)
3,50%
(169)
3,50%
(127)
3,50%
(72)
3,50%
(22)
3,50%
Work Force
% of income from Customer Relationship - Wholesalers
(9)
0,15%
(6)
0,09%
(4)
0,05%
(2)
0,03%
(0)
0,01%
0,00%
0,00%
0,00%
0,00%
(62)
(1)
NOPAT
Contributory Assets Expenses
Excess Earnings (Profit)
Discount rate
Spread
Adopted Discount rate
Discount Period
Period
Discount Factor
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
159
237
230
226
204
125
38
12,71%
0,50%
13,21%
DCF
% of NPV
Ʃ of DCF's
Proj.
2021
0,33
0,17
1,02
1
1,17
1,16
1
2,17
1,31
1
3,17
1,48
1
4,17
1,68
1
5,17
1,90
1
6,17
2,15
1
7,17
2,43
1
8,17
2,75
(61)
-10%
(1)
-10%
122
9%
160
35%
137
56%
119
75%
95
90%
52
98%
14
100%
636
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
43
Appendix IV
Valuation of the Assembled workforce
Emeis Holdings Pty Ltd.
Assembled workforce
Base Date: 2/28/2013
´in AUD 000
Work force valuation
Training cost per
employee
Full time Employees
Part Time Employees
739
369
Opportuinity costs per
employee
2.133
1.600
Aggregated cost per
employee
2.872
1.969
Number of employees
343
98
Total
984.971
192.966
1.177.937
Total costs aggregated
1.177.937
Taxes
(353.381)
Cost after texes
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Total Cost
824.556
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
44
Appendix V
Contributory asset charge
Emeis Holdings Pty Ltd.
Contributory asset charge
Base Date: 2/28/2013
´in AUD 000
Emeis Holdings Pty Ltd.
Ltd
Cost of contributory assets
Proj.
Proj
2013
Net Revenues
Working Capital
Inicial Balance sheet
Change
Ending Balance sheet
Average
Demanded Return on Contributory Assets
10.384
5,60%
Fixed Assets
Inicial Balance sheet
( + ) Investiments
( - ) Depreciation
Ending Balance sheet
Average
Demanded Return on Contributory Assets
Work force
Inicial Balance sheet
Remaining useful life
Ending Balance sheet
Average
Demanded Return on Contributory Assets
7.718
5,25%
825
5
13,21%
Demanded Return over Contributory Assets (% Net Revenue)
g Capital
p
Working
Fixed Assets
Trade mark
Work force
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Proj.
Proj
2014
Proj.
Proj
2015
Proj.
Proj
2016
Proj.
Proj
2017
Proj.
Proj
2018
Proj.
Proj
2019
Proj.
Proj
TV
64.045
85.944
106.486
116.316
127.442
139.770
153.046
158.498
10.384
1 715
1.715
12.099
11.242
629
12.099
2 484
2.484
14.583
13.341
747
14.583
2 379
2.379
16.962
15.773
883
16.962
1 077
1.077
18.039
17.501
979
18.039
1 219
1.219
19.258
18.649
1.044
19.258
510
19.769
19.514
1.092
19.769
2 278
2.278
22.046
20.908
1.170
22.046
1 636
1.636
23.682
22.864
1.280
7.718
6.460
(3.843)
10.335
9.026
474
10.335
6.995
(5.242)
12.087
11.211
588
12.087
7.210
(5.966)
13.331
12.709
667
13.331
2.347
(4.602)
11.075
12.203
640
11.075
2.970
(5.196)
8.849
9.962
523
8.849
4.502
(4.502)
8.849
8.849
464
8.849
2.870
(3.677)
8.041
8.445
443
8.041
2.609
(2.609)
8.041
8.041
422
825
(165)
660
742
98
660
(165)
495
577
76
495
(165)
330
412
54
330
(165)
165
247
33
165
(165)
82
11
-
-
-
0,98%
,
0,74%
3,50%
0,15%
0,87%
,
0,68%
3,50%
0,09%
0,83%
,
0,63%
3,50%
0,05%
0,84%
,
0,55%
3,50%
0,03%
0,82%
,
0,41%
3,50%
0,01%
0,78%
,
0,33%
3,50%
0,00%
0,76%
,
0,29%
3,50%
0,00%
0,81%
,
0,27%
3,50%
0,00%
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
45
Appendix VI
Proportional PPA
Emeis Holdings Pty Ltd.
Proporcional PPA
Base Date: 2/28/2013
´in AUD 000
Estimated PPA
Total Value
Deferred tax
Net Fair Value (% of
the purchased
capital by Natura)
Total Paid (65%) - (A)
71.104
Allocation
Working Capital
Long term assets and liabilities
Fixed Assets
Net Assets Book Value - (B)
10.384
3.017
7.718
21 119
21.119
Intangible trade-mark
Intangible - Customer relationship - Wholesalers
Intangible Assets Identified and Evaluated - (C)
Identified Net Asset - Fair Value - (D) = (B) + (C)
Minority interests - (E) = 35% * (D)
39.408
636
(11.822)
(191)
27.586
445
28.031
49.150
(17.202)
Intangible Assets Identified and Evaluated - Fair Value - (F) = (D) + (E)
31.947
Estimated Goodwill (G) = (A) - (F)
39.157
© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro
independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Puchase Price Allocation procedures related to
the acquisition of Emeis Holdings Pty Ltd
46
© 2014 KPMG Corporate Finance, a Brazilian company and a member-firm of the KPMG network of independent member-firms affiliated with KPMG International
Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Brazil.
This p
proposal
p
was p
prepared
p
by
y KPMG Corporate
p
Finance,, a Brazilian company
p y and a member-firm of the KPMG network of independent
p
member-firms affiliated with
KPMG International Cooperative (“KPMG International”), a Swiss entity. KPMG International does not provide services to clients. The present proposal is strictly
confidential and was prepared exclusively for internal use by Aesop, so as to provide sufficient information to take a decision of contracting or not the services of KPMG
Corporate Finance. This document must not be disclosed, commented or copied either partly or in total without our prior written consent. Any disclosure in excess of that
permitted may prejudice the commercial interests of KPMG Corporate Finance. KPMG detains property of this document, including the property of the copyright and all
other rights of intellectual property.
Th name KPMG
The
KPMG, the
th logo
l
and
d “cutting
“ tti through
th
h complexity”
l it ” are registered
i t d or commercial
i l ttrade-marks
d
k off KPMG International
I t
ti
l