Marshall & Ilsley Corporation Investor Conference Call

Transcription

1 Investor Conference Call statements Forward-Looking Statements This presentation contains certain forward-looking statements based on current management expectations. Those forwardlooking statements include all statements other than those made solely with respect to historical fact. Numerous risks, uncertainties and other factors may cause actual results to differ materially from those expressed in any forward-looking statements. These factors include, but are not limited to, (1) the occurrence of any event, change or other circumstances that could give rise to the termination of the investment agreement; (2) the outcome of any legal proceedings that may be instituted against and others following announcement of the investment agreement; (3) the inability to close the transactions contemplated by the investment agreement due to the failure to obtain shareholder approval or the failure to satisfy other closing conditions contemplated by the investment agreement; (4) the failure to obtain the necessary debt financing arrangements; (5) risks that the proposed transaction disrupts current plans and operations and the potential difficulties in employee retention as a result of the transactions contemplated by the investment agreement; (6) the inability to recognize the benefits of the transactions contemplated by the investment agreement; (7) the amount of the costs, fees, expenses and charges related to the transactions contemplated by the investment agreement and the actual terms of certain financings that will be obtained for such transactions; and (8) the impact of the substantial indebtedness incurred to finance the consummation of the transactions contemplated by the investment agreement; and other risks that are set forth in the "Risk Factors," "Legal Proceedings" and "Management Discussion and Analysis of Results of Operations and Financial Condition" sections of 's SEC filings. Many of the factors that will determine the outcome of the subject matter of this press release are beyond 's ability to control or predict. undertakes no obligation to revise or update any forwardlooking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise. Additional Information About the Proposed Transactions and Where to Find It This communication is not a solicitation of a proxy from any security holder of. In connection with the proposed transactions, a registration statement of Metavante Corporation, which will contain a proxy statement/prospectus, will be filed with the Securities and Exchange Commission ( SEC ). Investors are urged to carefully read the proxy statement/prospectus and any other relevant documents filed with the SEC when they become available because they will contain important information. Investors will be able to get the proxy statement/prospectus and all relevant documents filed by or Metavante Corporation with the SEC free of charge at the SEC s website or, with respect to documents filed by, from Investor Relations at (800) Participants in the Solicitation The directors, executive officers and other members of management and employees of may be deemed to be participants in the solicitation of proxies from its shareholders in favor of the proposed transactions. Information concerning persons who may be considered participants in the solicitation of s shareholders under the rules of the SEC is set forth in public filings filed by with the SEC and will be set forth in the proxy statement/prospectus when it is filed with the SEC. Information concerning s participants in the solicitation is contained in s Proxy Statement on Schedule 14A, filed with the SEC on March 13,

2 Executive summary and Metavante separate into two public companies through a sponsored-spin transaction Warburg Pincus buys 25% of Metavante for cash Tax-free transaction Expected to result in pro forma New tangible equity ratio of 9.4% and $1.8 billion of incremental tangible capital at closing Both companies better positioned for future growth 3 Strategic rationale Unlocks Metavante s value for shareholders Tax-efficient transaction Shareholders retain ownership in both businesses Warburg Pincus strong and knowledgeable partner Provides dedicated sources of capital for growth New receives substantial capital infusion Metavante will have direct access to capital markets Sharpens organizational focus on core businesses and aligns employee incentives 4

3 Transaction summary Transaction description Metavante becomes independent publicly traded company 75% owned by current shareholders and 25% by Warburg Pincus Transaction economics Warburg Pincus pays $625 million for 25% ownership in Metavante (implied equity value of $2,500 1 million) Metavante dividends $1,040 million to and repays $1.0 billion existing debt (1) Based on pro forma debt of $1,750 million, resulting in enterprise value of $4.25 billion 5 Overview of separation Pre-separation Post-separation shareholders shareholders Warburg Pincus 100% 100% 75% 25% New Metavante Bank Metavante Bank Metavante becomes independent publicly traded company; 75% owned by current shareholders, 25% by Warburg Pincus 6

4 Metavante valuation Warburg Pincus will pay $625 million for 25% ownership in Metavante Enterprise value 1 $4,250 shareholders receive the remaining 75% ownership in a tax-free distribution of Metavante shares ($1,875 million) Metavante will dividend $750 million to New at separation (funded by new debt) Pro forma debt 2 Implied equity value $2,500 shareholders (75%) WP (25%) $1,750 $1,875 $625 (1) Implied by Warburg Pincus purchase price of $625 million for 25% of Metavante and $1,750 million of debt; actual shares may trade at a different price (2) Metavante currently has $982 million in debt Value $M 7 Components of value to shareholders Total cash components ($1,665 million) $625 million from sale of 25% to Warburg Pincus $750 million incremental dividend Value to Cash $3,540 $1,665 $290 million of excess cash Implied ownership value of 75% stake in Metavante ($1,875 million) Implied ownership value 1 (1) Implied by Warburg Pincus purchase price of $625 million for 25% of Metavante and $1,750 million of debt; actual shares may trade at a different price $1,875 Value $M 8

5 Timetable Key dates Announcement SEC registration and shareholder vote IRS private letter ruling Bank regulatory approvals Target closing 4Q07 9 Metavante revenue growth $ Millions $1,800 $1,500 CAGR = 25% 1, ,504.2 $1,200 1,015.4 $ $600 $300 $

6 Metavante EBITDA growth $ Millions $500 $400 CAGR = 26% $ $ $100 $ Note: See Appendix A for reconciliation of EBITDA to GAAP Net Income 11 Metavante cash net income growth $ Millions $200 $160 CAGR = 47% $ $ $40 $ Note: See Appendix A for reconciliation of Cash Net Income to GAAP Net Income 12

7 Metavante GAAP net income margin 12% 10.6% 10% 9.3% 8% 6% 6.7% 7.6% 4% 2% 0% Metavante product / services profile Banking and Trust Solutions Commercial Treasury Solutions Image Solutions Risk and Compliance Solutions EFT Solutions Payment Network Solutions epayment Solutions Healthcare Payment Solutions 14

8 Metavante key competitors CheckFree (CKFR) Fidelity National Information Services (FIS) First Data (FDC) Fiserv (FISV) Jack Henry (JKHY) 15 Metavante core strengths Single technology platform Provides scale and leverage Breadth of product mix Full service or single-solution approach Financial strength Strong cash flow 16

9 Earnings contribution New Pro forma net income contribution mix (2006 Q4) Pre-Separation Post-Separation Non-Wisconsin Banking Wisconsin 27% Banking 40% National Metavante Consumer Corres. 19% Wealth 5% Management 3% 6% Wisconsin Banking 48% Non-Wisconsin Banking 34% Wealth Management National Consumer 7% Corres. 4% 7% Note: Post separation earnings contribution includes United Heritage and Excel Bank 17 Core strengths New Banking Relationship banking model Solid loan and deposit growth Consistent credit quality Good expense control Strong capital base Wealth management 18

10 Growth strategy New Continue to invest in existing franchise Expand into growth markets Target mid-sized cities with attractive demographics Acquire incomplete franchises; add new product offerings Disciplined branch expansion to increase presence Grow outside bank footprint through national businesses Support wealth management growth initiatives 19 Strategic redeployment of excess capital Transaction expected to result in pro forma New tangible equity ratio of 9.4% and $1.8 billion of incremental tangible capital at closing Capital management strategy Organic growth Disciplined, value-creating acquisitions Share repurchases Dividends 20

11 Excess tangible capital creation 12.0% New tangible equity ratio 10.0% 8.0% 6.0% 5.82% 9.4% Est. $1.8 billion incremental tangible capital 4.0% 2.0% 0.0% 12/31/06 (Actual) Est. Transaction Date Transaction significantly improves s capital position providing $1.8 billion incremental tangible capital 21 Dividend payout ratio 50% 45% Pro forma New 40% Select Peers 39.5% 35% 30% 25% Note: Select peer group represents 16 financial institutions with market cap $4B - $26B; amounts as originally reported 22

12 Corporation dividend history $1.25 Annual dividends per share $1.00 $0.75 $0.50 $0.25 $ Appendix A Additional Information

13 pro forma balance sheet MARSHALL & ILSLEY CORPORATION PRO FORMA CONSOLIDATED BALANCE SHEET December 31, 2006 Consolidated Pro Forma ( $ Billions ) 2006 Actual 2006 Cash and investments $9.0 $8.9 Net loans and leases Intangible assets Other assets Total Assets $56.2 $53.8 Total deposits $34.1 $34.3 Short-term borrowings Long-term borrowings Other liabilities Total liabilities Shareholders' equity Total Liabilities and Shareholders' equity $56.2 $53.8 pro forma represents the historically reported consolidated balance sheet excluding the accounts of Metavante. The pro forma reflects the following: - Cash received of $1.665B. - Repayment of approximately $1B of Metavante intercompany loan. - Use of approximately $2.65B cash to pay down short term borrowings. 25 pro forma income statement MARSHALL & ILSLEY CORPORATION PRO FORMA CONSOLIDATED INCOME STATEMENT - OPERATING December 31, 2006 Consolidated Pro Forma ( $ Millions ) 2006 Actual 2006 Net Interest income $1,490 $1,589 Provision for loan and lease losses Net Interest income after provision for loan & lease losses 1,440 1,539 Total other income 1, Total other expense 2,160 1,079 Income before income taxes 1,214 1,057 Provision for income taxes Net Operating income $820 $714 Average shares Earnings per share $3.22 $2.80 pro forma represents the historically reported consolidated income statement excluding the accounts of Metavante. The pro forma reflects the following: Note: See reconciliation of Net (Core) Operating Income to GAAP - - Cash received of $1.665B. Repayment of approximately $1B of Metavante intercompany loan. Net Income found in the Corporation 4 th Quarter Supplemental Financial Information report on the Corporation website. - Use of approximately $2.65B cash to pay down short term borrowings. 26

14 pro forma key ratios MARSHALL & ILSLEY CORPORATION PRO FORMA KEY RATIOS - OPERATING December 31, 2006 Consolidated Pro Forma 2006 Actual 2006 Return on Assets 1.56% 1.42% Return on Equity 14.58% 11.53% Margin (FTE) / Earning Assets 3.27% 3.48% 1 Efficiency Ratio 62.61% 48.79% pro forma represents the historically reported operating ratios excluding the accounts of Metavante. The pro forma reflects the following: - Cash received of $1.665B. - Repayment of approximately $1B of Metavante intercompany loan. - Use of approximately $2.65B cash to pay down short term borrowings. (1) Excludes impact of potential share repurchase likely to be financed with debt. 27 pro forma capital ratios MARSHALL & ILSLEY CORPORATION PRO FORMA CAPITAL RATIOS Consolidated New 2006 Actual Pro Forma Tangible Equity / Tangible Assets 5.82% 9.4% Tier 1 Capital / RWA 7.88% 11.6% Total Capital / RWA 11.17% 14.6% Equity / Assets 10.94% 12.0% New pro forma reflects the projected capital ratios at the time of the transaction. 28

15 Metavante pro forma balance sheet METAVANTE PRO FORMA CONSOLIDATED BALANCE SHEET December 31, ( $ Millions ) 2006 Actual Pro Forma Cash and investments - unrestricted $344.2 $49.7 Other current assets Capitalized software / conversions Intangible assets 1, ,639.2 Other assets Total Assets $3,015.3 $2,743.3 Current liablitities $571.1 $571.1 Debt ,750.0 Other liabilities Total liabilities 1, ,508.4 Minority equity Shareholder's equity 1, Total Liabilities & Shareholder's equity $3,015.3 $2,743.3 Metavante pro forma consolidated balance sheet reflects the following: - New debt issuance of $1.750B. Debt proceeds will be used to repay approximately $1B intercompany debt and $750M cash dividend. - Cash dividend payment of $290M. 29 Metavante pro forma income statement METAVANTE PRO FORMA CONSOLIDATED INCOME STATEMENT - OPERATING December 31, ( $ Millions ) 2006 Actual Pro Forma Revenue $1,504.2 $1,497.6 Operating expenses 1, ,234.8 Earnings before interest and taxes Interest income (14.7) (1.4) Interest expense Net interest expense Income before taxes Provision for income taxes Segment Income $160.1 $100.4 Add: Net interest expense $28.6 $121.8 Income tax expense Depreciation and amortization Acquisition intangible amortization EBITDA $413.6 $407.3 EBITDA Margin 27.5% 27.2% Metavante pro forma consolidated income statement reflects the following: - New debt issuance of $1.750B. Debt proceeds will be used to repay approximately $1B intercompany debt and $750M cash dividend. - Cash dividend payment of $290M. 30

16 Metavante pro forma key ratios METAVANTE PRO FORMA KEY RATIOS - OPERATING December 31, Actual Pro Forma Return on Average Assets 5.6% 3.5% Cash Net Income Margin 12.1% 8.1% EBITDA Margin 27.5% 27.2% Debt / EBITDA 2.40x 4.30x EBITDA / Net interest expense 14.40x 3.34x Metavante pro forma operating ratios reflect the following: - New debt issuance of $1.750B. Debt proceeds will be used to repay approximately $1B intercompany debt and $750M cash dividend. - Cash dividend payment of $290M. 31 Metavante reconciliation METAVANTE Reconciliation of EBITDA and Cash Net Income to GAAP Net Income FY FY 2006 and 2006 Pro Forma ( $ Millions ) Pro Forma EBITDA $ $ $ $ $ Subtract: Depreciation & Amortization Net Interest Expense Provision for Taxes Net Income (GAAP) $ 51.2 $ 76.8 $ $ $ Cash Net Income $ 57.3 $ 88.0 $ $ $ Subtract: Acquisition Intangibles Amortization, Net of Tax Stock Based Compensation, Net of Tax Net Income (GAAP) $ 51.2 $ 76.8 $ $ $

17 Metavante executive management Name Title Age Frank R. Martire President & CEO 59 Michael D. Hayford Senior E.V.P., Chief Operating Officer and 47 Chief Financial Officer Frank G. D Angelo Senior E.V.P., Payment Solutions Group 61 Paul T. Danola Senior E.V.P., Financial Solutions Group 55 Brian C. Hurdis Senior E.V.P., Chief Information and Privacy Officer 47 Donald W. Layden Senior E.V.P., Corporate Development Metavante governance Board of Directors composition Dennis J. Kuester, Chairman - Metavante Corp. Frank R. Martire, President & CEO - Metavante Corp. Michael D. Hayford, Sr. EVP, COO & CFO - Metavante Corp. Three Warburg Pincus directors David Coulter, Managing Director - Warburg Pincus Jim Neary, Managing Director - Warburg Pincus To be named Five independent directors Expected to include Ted D. Kellner, Chairman & CEO, Fiduciary Management, Inc. & Director 34

18 Warburg Pincus highlights Warburg Pincus has been a leading private equity investor since The firm currently has approximately $20 billion in assets under management. Warburg Pincus is an experienced partner to management teams seeking to build durable companies with sustainable value. The firm has an active portfolio of more than 100 companies. Significant current and past investments include: Neiman Marcus, Knoll, Bharti, Nova Information Systems, Aramark, Mellon Financial, Neustar, BEA Systems and WNS Global Services. Since inception, Warburg Pincus has sponsored 12 private equity funds which have invested approximately $25 billion in more than 550 companies in 30 countries. 35