Acquisition Opportunity of an Italian Mineral Water Business

The company is located in the Alps and owns various quality certificates. Its owners are willing to sell the firm's majority share to fund its growth and expansion.

This is a Mineral Water Group located in the Italian part of the Central Alps, at the boundary with Switzerland and 90 minutes far from Milan in a favorite geographical area (the best market in Italy) and barycentric towards Europe. The company’s shareholders are willing to sell the majority stake in its Mineral Water Division to fund its growth and expansion plans.

The company has the following certifications and registrations:

• ISO 9001-2000
• International Food Standard, IFS
• Registration at FDA, USA

There is an immense high quality spring flow that could be managed by the Company. 2004 those huge assets were valued in a convertible loan deal set up between Deloitte Financial Services (advisor of the Company) and Unicredit Bank (advisor of convertible loan subscriber). The value of transaction was fixed at €1.8 Mill for optional conversion in to 3% of the Company’s shares (equivalent to €60 Mill worth of 100% of Frisia Spa’s shares).

At that time the turnover of the company was about €3.8 Mill. The reason of the above valuation was the potential cash flow&capital gain emerging from a commodity as drinkable water (top quality and Alpine origin in our case) named as “blue gold” in several conventions from Kyoto to Johannesburg etc.

This potential source of profitability needed, and still needs, a suitable investment in promotion worldwide since the Italian market is saturated and controlled by an oligopoly of few bottlers.

The Company is owned by a family and not by a financial group. Despite the skilled management the Family did not have enough capital to develop an international commercial organization and to finance the factory upgrade and the needed advertising campaign.

Therefore the Shareholders’ main task was to find a Partner for sustaining International expansion contributing by both financial resources and commercial introduction in the more interesting export markets.

The springs operated by the Company are the only springs in the Valtellina Region. The neighbouring Group San Pellegrino (Group Nestlè), owing the Levissima label (best seller in Italy) is located in the next sub-Alps valley.

Levissima label is a top rank seller (1 billion liter per year) jointly with Western Alpine SantAnna. This water is a twin of our water Bernina.
The spring water bottled by Frisia SpA is among the lightest and purest sodium free waters in the Italian and European markets.

None of the other Italian mineral water bottlers have the same level of quality (extra-light pure and sodium free) and quantity compared to the water from the springs in concession by Frisia SpA.

The dominant position of few groups on the Italian market and their protective oligopolistic strategy have limited Frisia’s expansion but the success obtained by new market entrants such as “Rocchetta/Uliveto” and “S.Anna” waters was achieved and well sustained through advertising and promotional campaigns based on the “Health Factor”. This proves that Frisia can obtain a bigger market share by advertising its water’s high health benefits and capitalizing on the logistic positioning towards the main market. Therefore a new Shareholders Group has to invest in the Company's development and leverage in the winning industrial/logistics plan.

The Shareholders are making a proposal for the sale of 80% of the Company (my family would like to keep 20% of the shares looking ahead for the future recover of part of price reduction of this offer) as follows:

A) Insertion (by Investor only) of "capital-in" increasing the Nominal Equity of Frisia SpA by (10+5) = €15 Mill entering cash in 2 steps (1st step €10 Mill cash and 2nd step €5 Mill) to be addressed to:

• Write off critical debts: €1.7 Mill
• Write off financial debt: €4.7 Mill* or replacement of guarantees
• Write off commercial debts: €1.7 Mill**
• Repayment to Shareholders of bridge financing to the Company: €2.3 Mill
• For a total up to €10.4 Mill that could be reduced or delayed ** in negotiation with creditors both in amount or extension of repayment or replacing * guarantees to Banks

• The 2nd step of Equity increase (€5 Mill) could be considered as basis for the next step of expansion Investment both commercial and/or Industrial at appropriate time: Business Plan available upon request.

Note: minority Shareholders would be exempted to insert their 20% of equity.

B) Purchase from present Shareholders of 80% of the Company's shares (Mineral Water Division only after spin-off of Real Estate and Energy Divisions) as follows:

• Replacement or repayment to Banca Popolare di Sondrio of mortgages over Shareholders Family properties given in favour of Frisia Spa about 4 Mill€
• Payment to Shareholders: €XX (to be discussed) for the sale of 80% of the shares of the Mineral Water Division

This offer is related to:
• 80% of the Company's shares with Mineral Water Division only - Concessions in hand for about 1,9 Billion litre per year of extra light sodium free alpine water
• Further concessions are in progress (in the same basin) for additional 900 Mill litre/year of spring water flow

Please refer to the file concerning the company's liabilities (attached below).

• B/S 2011 and August 2012 formally approved by Shareholders Meeting: Dec 2012 B/S are approximate and not yet approved
• Figures are as per accounting registration and do not include worth of Spring Concessions and Hydro Power project Authorization