** For Italian & European wine classification see: http://en.wikipedia.org/wiki/Italian_wine: Italian appellation system: DOCG, DOC, IGT, Table Wine

Arkios Italy

Blind Profile – Leading & Historic Italian Winery

Transaction Outline

Our Client is an Italian historic & well established, but modernly organized winery, ranking among the Top-5 Producers of High-Quality Lambrusco, a Semi-Sparkling Red Wine.

Lambrusco Wine is nowadays one of the most interesting and dynamic Italian Wines on the worldwide scenario, due to its peculiar characteristics.

Thanks to new viticultural and wine-making techniques and attention to quality, Lambrusco Wine is today a top-quality wine (up to $ 50/bottle), as recognized by the market, by major wine critics* and the numerous awards won.

It is the most exported Italian Wine, among more than 520 Italian wine varieties**, both in traditional markets (USA, Japan, France, UK, Spain, etc.) and emerging markets (China, Asia, Brazil, Russia), with still enormous potentialities to exploit.

In this “distinctive niche” - unique in the world - with 6 players counting for more than 90% production, the Target Company is a leading player active for more than 100 years, with a well known brand recognized worldwide, positioned in the high-end segment.

The Company appoints Arkios Italy in the role of Advisor in order to find an Industrial Player/Financial Investor, interested in partnering with the Company , to support it in further growth and development, by exploiting the significant and increasing potentialities of Lambrusco Wine on the worldwide scenario, starting from a modernly organized business, a worldwide well appreciated Quality of Products and Brand Image, an interesting worldwide market positioning, beside excellent Economic & Financial results.

Shareholders are ready to evaluate a majority investor and a stable partner in sustaining company growth.

Company Profile

The Company – established in the XIX siècle, and listed in the National Register of Historic Enterprises – is managed in an effective way by the 4th generation of the Family. It is focused on the production of Lambrusco Wine of excellent and superior quality, by supplying best grapes directly from its own vineyards (60 hectares) located in the Middle of Italy.

Today, Company's superb vintages can be found on the Wine Lists of the world's most prestigious Restaurants (up to $ 40-50/bottle), as well as in top-class Wine bars, and the numerous awards won by the labels have earned them a well-deserved place among Italy's finest products. ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- *See for example: Eric Asimov, New York Times’ Wine Critic:

http://www.nytimes.com/2012/08/01/dining/reviews/lambrusco-a-perfect-warm-weather-wine-wants-you-back.html?pagewanted=1 (2013); http://www.nytimes.com/2007/07/18/dining/18pour.html?pagewanted=all&_r=0 (2008), http://dinersjournal.blogs.nytimes.com/2006/07/26/lambrusco-no-joke/?_r=0 (2006)

** For Italian & European wine classification see: http://en.wikipedia.org/wiki/Italian_wine: Italian appellation system: DOCG, DOC, IGT, Table Wine

Arkios Italy

The Company counts for about 10 Million bottles (Lambrusco counting for more than 90% of the production). It exports 72% of its production in over 70 countries, being the most appreciated Lambrusco Brand all over the world.

In addition to Lambrusco DOC and IGT**, the product portfolio includes also other regional wines, such as:

Sangiovese DOC

Bonarda DOC

Malvasia DOC and IGT

Rubicone IGT

Colli Piancentini;

Others DOC and IGTs

Besides being a Historic Winery, the company has a clear and effective marketing strategy and product portfolio positioning, a well structured distribution and commercial policy, continuous investments in R&D, Quality Brand Image, and Marketing.

Products portfolio is distributed under the Company’s 3 Brands, according to a well-defined and distinctive market positioning, ranging from “Cru-Top-Range” (Max. production per hectare: tons 9-10- 50% less than “disciplinary”), to “Classical”, (Max. production per hectare: tons 14-20) with a portfolio of about 50 wines well-known and appreciated both in Domestic and in International markets.

The company has been able to stand out among its competitors thanks to continuous investments in R&D, Quality of Bottles, Brand Image and Facilities, in search of a knowledgeable wine, (A) maximizing the quality of its wines, - with a yield per hectare lower by 30-50% compared to the specification of the DOC disciplinary [18 tons/hectare], a sign of an excellent quality of wines produced –and a particular attention to entire process, starting from grape selection to fermentation process. The entire production is carried out through collaboration 3 winemakers who constantly supervise the quality standards of the wine produced.

Thanks to a distinctive Commercial Policy, the Company exports 72% of its production in more than 70 countries, particularly in USA, Japan, Brazil, UK, France, Spain, Russia, China, covering all the distribution channels: Ho.Re.Ca, Specialized Wine-shops, Large Retailers, On-line distribution, with an average price/bottle 30% higher than competitors.

According to marketing strategy, its ‘Flagship’ wines (Cru), have been awarded with many international and Italian prestigious prizes.

Thanks to these efforts and strategy today, the company is the most dynamic and solid player in its ‘unique’ niche, with a distinctive Quality and Brand Image, a sophisticated marketing and a worldwide leadership on the most important international markets.

The company's success is demonstrated - in numbers - by its increasing turnover (2009-2013 CAGR = 10%), a high margin (average EBITDA 9%), and for the significant cash flow generated. The Company has a positive Net Financial Position (+2.5 million cash in 2013) and does not depend from the Banks, unlike its competitors.

** For Italian & European wine classification see: http://en.wikipedia.org/wiki/Italian_wine: Italian appellation system: DOCG, DOC, IGT, Table Wine

Arkios Italy

Main Economics & Financial

The Company’s success is confirmed by excellent economic and financial results.

Actually, the Company sees its turnover increasing by 10% per year (CAGR 2009-2013), by reaching a turnover of 14.5 Mio Euro in 2013. Efficient management is proved by EBITDA% margin as well - 9% on average- which is above the average among competitors (4%).

In addition, the Company succeeds in the financial management as well: in 2012 it generated an Unlevered cash flow equal to 1.4 Mio Euro circa. Such a Cash Flow is perceptively used in profitable investments in Plants & Machineries and especially in R&D.

The financial health is further reflected in the total independence on Banks: indeed the Company has no bank exposure thanks to its continuous cash generation. Hence, unlike its competitors, it is cash positive for an amount of 2.5 Mio Euro at the end of 2013 (in 2012, cash was 2.2 Mio Euro).

Reference Market - Lambrusco Wine Market

Lambrusco Wine - a semi-sparkling red wine from Emilia Romagna - is one of the most interesting and dynamic Italian Wines on the worldwide scenario, due to its peculiar characteristics.

Actually, Lambrusco Wine is the Most Exported Italian Wine, among more than 520 Italian wine** varieties, both in traditional markets (USA, Japan, France, UK, Spain, etc.) and emerging markets (China, Asia, Brazil, Russia). In particular, in Asia Lambrusco Wine grows by double digit.

It is experiencing an increasing attention from consumers and wines critics, all around the world thanks to its own particular and unique taste and easy drinking characteristics.

As mentioned above, thanks to new viticultural and wine-making techniques and attention to quality (and strict regulations imposed by the Italian DOC & IGT** ‘Disciplinary’ [procedural guidelines]), Lambrusco Wine is today a top-quality wine (up to $ 50/bottle), as recognized by the market, by the major wine critics and the numerous awards won.

Year 2012 Competitor 1 Competitor 2 Target Competitor 3 Competitor 4

Turnover 38 Mio 28 Mio 14.5 Mio ¹ 18 Mio 497 Mio (Group)

CAGR (2009-2012) 6% 6% 10% N.A.* 9%

avg EBITDA% 2% 4% 9% 5% 6%

Working Capital/Sales% 16% 23% 17% 9% 29%Working Capital 6 Mio 6.5 Mio 2.2 Mio 1.7 Mio 143 MioLiquidity Ratio 1.05 0.87 1.88 0.52 0.59

Bank Debt/Sales % 7% 20% 0% 10% 37%

NFP 2.2 Mio 5 Mio 2.2 Mio CASH 1 Mio 178 Mio

ROE** 0% 1% 8% 0% 3%ROA** 1% 2% 5% 1% 2%ROI** 1% 5% 11% 1% 3%

Total Assets 24 Mio 22 Mio 10 Mio 29 Mio 566 Mio

Equity/Tot.Assets

Financial Independence34% 27% 46% 0.21 17%

Sales/Tot.Assets 1.57 1.28 1.29 0.62 0.88

Export 43% 55% 72% 20% 43%

** calculated on Net Income ¹ 2013 Turnover * merger of 2 wineries in 2012

Family-Owned Companies Cooperative Companies

** For Italian & European wine classification see: http://en.wikipedia.org/wiki/Italian_wine: Italian appellation system: DOCG, DOC, IGT, Table Wine

Arkios Italy

o The wine comes from flamboyantly juicy grapes autochthone from 5 areas of Emilia Romagna, and gives birth to 5 DOC and 1 IGT, semi-sparkling red wines, that can vary from dry to amabile (semi-dry) and sweet, with a variety of tastes, mainly dry finish, full of dark berry flavour and some hints of earthiness (tannin).

Its enormous success is mainly due to the fact that that is a unique wine, with an easy drinking appeal, low alcoholic content (11°), fresh and “vivace”, thus representing the ‘prototype’ of the ‘Easy-Drinking – Semi-Sparkling’ wines, the fastest growing segment of wines in this moment.

It is a “distinctive niche” - unique in the world - with 6 player counting for more than 90% production.

o Easy drinking appeal: it can be perfectly combined with a variety of cuisines;

o Excellent level of quality, thanks to new viticultural/wine-making techniques, and strict “disciplinary”;

o Unique and Not Replicable Wine in the fastest growing Italian Niche of ‘easy drinking semi-sparkling/spritzy wines’: Italian Lambrusco represents a non-replicable unique wine in this fast growing segment (Prosecco, Pinot Gris, Moscato, Lambrusco, the only red in this category);

o Young and Cool Image, Renewed Image;

o Quality/Price Ratio.

Indeed, Lambrusco is experiencing a rebirth and receiving higher and higher attention from consumers, wine critics and Multinationals.

Thanks to such appreciated characteristics, Lambrusco presents very interesting figures in terms of quantity produced and turnover, as well as growth potentialities. Indeed:

1. Lambrusco Market is worth more than € 110 Mio in 2012, with a production of c.a. 180 Mio bottles (over 1.5 Mio hectoliters), around 3.5-4% on total Italian Wine production. Exports count for 80-85% of production;

2. Growth: despite a slight drop of Wine consumption in general (particularly of the so-called SuperTuscany) Lambrusco is upstream, experiencing an incredible worldwide growth rate;

3. Lambrusco is the most exported Italian Wine, dragging the entire Italian Wine Sector. In 2012, 80-85% on total Lambrusco production is exported (+12% Vs. 2011);

4. Very concentrated market: 6 Producers counts for 90% of production.

% Export of European Wines, Italian Wines, and Lambrusco Variation of Export % 2011-2012 (Italian Wines Vs. Lambrusco)

As a matter of fact, Large Wine Corporations are evaluating to enter in the “Easy-Drinking – Semi-Sparkling” segment due to the growing attention this segment is receiving from the market (either by creating with ‘new’ wines, or by acquisitions).

** For Italian & European wine classification see: http://en.wikipedia.org/wiki/Italian_wine: Italian appellation system: DOCG, DOC, IGT, Table Wine

Arkios Italy

Key Investment Rationale

1. A way to enter in the fast-growing ‘Easy-Drinking – Semi-Sparking’ market with a consolidated player with an Historic and Italian Brand Image and a complete portfolio.

The Company is a Well Established, Structured and Consolidated Player in the fast-growing segment of ‘Easy-Drinking – Semi-Sparking’ wines, where Large Wine Corporations are considering to enter.

- Classical top brand International wines (from Gallo Turning Leaf to Yellow Tail and Jacob’s Creek) are slowing their sales and appeal, like major so-called ‘SuperTuscany’

- The world of wine is changing and rapidly turning into new and easy-drinking wines, with large corporations chasing this trend.

The company thus can be a very interesting target, in order to enter in this growing segment, starting from a structured business, with a ‘ready-to-use’ platform which embrace a traditional and historic Image, with a modern and market-oriented product portfolio, and the “made in Italy” image.

2. The Company owns an extremely interesting product portfolio of quality wines that Large

Corporations generally lack.

Product Portfolio of the Company is the right mix of Tradition (established in XIX siècle), Modernity and Italian Style, with the finest Cru leading sales and Brand Image of the entire portfolio (50 quality wines).

This should add value to any (actual) Portfolio of brands owned by any Large Corporation (which generally lacks a little bit the presence of Italian Wines and Italian Style, which – actually- is the first exporter of wines in the world).

3. The company can act as a solid (and remunerative) base in order to exploit the enormous

potentialities of Lambrusco Wine all over the world, and Company’s quality product portfolio.

In other words, a valuable option to directly enter in the attractive market of ‘‘Easy-Drinking – Semi-Sparking’ market, starting from a well-established base.

The company has a consolidate Market Position, and a notable Brand Image, despite the relatively small dimension, selling its products in more than 70 countries, thanks to the right mix of Quality, R&D, Marketing & Branding and Commercial Policy.

- Level of penetration in Traditional (but receptive) markets such as USA, Japan, Europe, Australia and Chile is good, but still limited;

- Enormous potentialities of new markets are still to be exploited: e.g. China and Asia.

4. The Company has a considerable Economic & Financial Model with Excellent Economic & Financial results, able to continuously generate Cash-Flow, and a Cash Position (+2,5 Mio Euro) able to finance internally its development and exploit the enormous potentiality of its market.

The company with its financial ratios may be – even relatively small - an opportunity to improve financial ratios of Large Corporations.

** For Italian & European wine classification see: http://en.wikipedia.org/wiki/Italian_wine: Italian appellation system: DOCG, DOC, IGT, Table Wine

Arkios Italy

For further information, please contact:

Paolo Cirani

Monica Barzaghi

Hong Hong

CEO & Founder Principal Analyst +39 335.68.40.737 paolo.cirani@arkios.it www.arkios.it www.arkios.co.uk

+39 335.12.29.146 monica.barzaghi@arkios.it

www.arkios.it www.arkios.co.uk

+39 380.290.10.34 hong@arkios.it www.arkios.it www.arkios.co.uk