fo spin overview

8/4/2019 FO Spin Overview

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SunRift Capital Partners-engineered for the investor-



Fortune Brands (FO) - Post Spin (BEAM) and (FBHS)

52-Week Ran e $46.58 - $65.48Mkt. Cap./Shares $8,555m/156.6m (2/3 BEAM & 1/3 FBHS)

Golf Business sold - $1.1b used to pay down debtBEAM maintains $0.76/share dividend

-

$500m tax-free dividend to BEAM to pay down debtRecord Date October 20th – Begin Trading October 4th

Recommend Bu

in Prior to S in $54 - u side from the mid $60’s to around $80




A Word on Special Situations - SpinoffsApply Joel Greenblatt frame work Insiders – Bill Ackman Activist Track Record

Bit off more than he could chew –ala Target?anagement as een cooperat ve

Understandable Businesses79% Institutionally owned - selling pressure on FBHSSpinoffs in General Beat the Market - Pick Your Spots

,(brand appeal/pricing power) and is being unyoked from alow margin, low moat, downtrodden & housing dependent

more capital intensive business FBHSEntrepreneurial Forces & Management Incentives more positively aligned(Generally) Acquisitions good for CEO’s – Divestitures good for shareholders

Rumor Mill - Takeover interest in BEAM & Private Equity Interest in FBHS

Catalyst/Event Driven – likely to see play out in shorter time framethan other value positions –Time Arbitrage




BEAM Pure-Play Spirits Industry Leader




BEAM2nd Largest U.S. spirits company – behind Diageo

4th Largest spirits company globally

Multi le market leadin brands includin Jim Beam & Maker’s Mark

A word on moral dilemmaValid arguments by some - I won’t quarrel with that

Not illegal to be stupid, ultimately more the person than the product

“ ” “ ’ ”-

Certain Brand, Expectation, Experience - not just cheapest

People will continue to drink & tech won’t change it

Bill Ackman is smarter than me

Wildcard – Attractive takeover target (Diageo needs a good bourbon)




BEAMFreed from lower margin spinoff




BEAMGrowing Market and Market Share




FBHS Fortune Brands Home & Security





‘Fortunes’ intimately linked to the housing market & cycles

Not a commodity like oil, but also less likely to brag about your new

- .

Can streamline & align incentives – at end of day still squeezed by competition – headwinds

How to kill the business – been playing out in real time

Still around, worst is over, likely slow drawn out recovery

Leader in many of its products

Established distribution channels





This too shall pass…




FBHS Fortune Brands Home & SecurityA orse t at can count s a smart orse, ut pro a y not a goo mat teac er…

Having said that, they have a good position in their industry.




So – How do you play it?Post S in Bu BEAM immediatel and wait for tar et ran e or takeover

Buy FBHS if indiscriminate selling drives artificially low

Pre Spin Buy FO

Bill Ackman smarter than me – track record

oug more recen y

Parent is attractive – ride out forced selling in spin - wait for ‘normal’

Management is cooperative – history of spin offs




ValuationBEAM after tax EBIT $544.3m

EBIT rowth 11.2% FV 5yr = $642mDiscount Rate 6%PV 5yr = $479m14x multiple = $6,706m/156.9m shares = $43(Note: 0.76 dividend)

Takeover multiple 18-20 = $55

FBHS after tax EBIT $155.4m

7x multiple = $1,088m/156.9m shares = $7

EBITDA =$291.9m9x = $2 627m/156.9m shares = $17

Golf $1,100m/156.9 shares = $7

Current $54-$55

ow rea even – not muc owns eMid $67High $79 Includes Takeover of BEAM




DISCLAIMERS Not an Offer – Confidential This document is confidential and may not be distributed without the consent

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Past

results are no guarantee of future results and no representation is made that

an investor will or is likely to achieve results similar to those shown. All

investments involve risk including the loss of principal.

Forward Looking Statements The information contained here is provided solely for information purposes.

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expectations, estimates, opinions, and assumptions of the manager that are

subject to uncertainty and should not be considered a promise or guaranty

regarding future events or future performance.


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