GP Investments : 4Q16 Earnings Release

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4Q16 Earnings Release - GP Investments

Fourth Quarter of 2016

Earnings Release

March 29, 2017

HIGHLIGHTS OF 2016

GP Investments is pleased to announce net income of US$15.6 million for the full year of 2016, despite the challenging macroeconomic environment in Brazil during the period. The highlights of the year were:

1. On June 28, GP Investments announced the acquisition of additional shares in Spice Private Equity for a total of US$50.5 million, increasing GP's stake in the company to 58.48%. The transaction creates a permanent capital vehicle controlled by GP which now focuses on co-investment opportunities where the investor group can exercise influence in the portfolio and the corporate governance of its components. Since GP's stake increase, Spice has been able to significantly increase its liquidity position from US$76.5 million in June, 2016 to US$103.8 million in December, mostly due to the partial sale of the portfolio completed at the end of the year. Finally, this transaction incurred one-off expenses totaling US$2.5 million relating to certain adjustments in the size of GP Advisors. These will lead to significant cost reductions for GP going forward.

2. On May 11, 2016, GP Investments announced that it had successfully completed the tender offer to acquire shares issued by BR Properties, representing 70.0% of that company's total capital (including the stake initially acquired in December 2015). The acquisition totaled an equity check of R$2.2 billion and was funded mainly by an international co-investor. It represents a total of US$610 million in additional assets under management that are already generating recurring management fees for GP. While we believe that the transaction is very accretive for all parties involved, BR Properties posted negative share performance for the year because the price at the beginning of 2016 reflected the premium at which our offer was completed.

3. On March 31, 2016, GP Investments successfully completed the divestment of Tempo, after more than nine years as a portfolio company of GP Capital Partners III (a fund managed by a subsidiary of GP Investments). The divestment was structured through two tender offers completed in November 2015 and March 2016, which together generated a total of R$79 million in proceeds to GP. The investment returned a total of 2.9x the cash invested in the company, generating an IRR of 14.3%, both measured in Brazilian reais.

4. On October 5, 2016, GP Investments made it known that Magnesita, a portfolio company within investment funds managed by GP and its affiliates, had announced a transaction to combine its operations with those of RHI AG, so creating a leading company ("RHI Magnesita") in the global refractory solutions sector. The transaction valuation represents an implied value for the entire share capital of Magnesita of €451 million, 18% above Magnesita's market capitalization on December 31, 2016. Following completion of the transaction, GP will become a significant shareholder of RHI Magnesita and will be represented on the board of directors of the new company, which will be listed in the UK.

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5. As of December 31, 2016, GP Investments reported total NAV of US$333.7 million (US$3.06 per share). This represented an increase of 8.1% over the year. However, as of the same date the company continued to trade at a significant 30% discount to NAV.

6. GP Investments' standalone liquidity position (excluding Spice) ended the year at US$97.7 million, which is more than enough for GP to honor all of its current obligations and evaluate other strategic uses for its cash. Spice ended the year with a total of US$103.8 million in cash. The combined cash availability for GP and Spice to invest in Brazil and abroad is therefore US$201.4 million.

SUBSEQUENT HIGHLIGHTS

1. On March 2, 2017, GP Investments informed the market that BHG and Accor executed an agreement that regulates, among other items, the acquisition by Accor of the management contracts of 26 hotels in several regions of Brazil, whose management is currently performed by BHG. The total price is R$200 million, subject to adjustments determined in the agreement. BHG will retain its ownership stakes in all the properties involved in the transaction and Accor will be responsible exclusively for the management of the hotels. The capital generated by this transaction will be reinvested in the renovation and repositioning of BHG's owned hotels, thus reinforcing its position as the largest owner of hotel real estate in Brazil.

2. On March 17, 2017, GP Investments announced that it had prepaid 100% of the total outstanding amount of the loan contracted in April 2008 with Itaú BBA. The total amount was U$47.7 million (equivalent to approximately R$150.8 million) including applicable break funding fee and interests. Following the prepayment made on this date, the Itaú BBA loan is fully paid and settled.

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2.4 Price / Share

2.2

2.0

1.8

1.6

LTM: +8.3%

USD

2.14

Share Price December 31, 2016

USD

3.06

NAV Per Share

30%

NAV Discount

GP:

GP + Spice:

Company Profile

GP Investments is a leader in alternative investments in Latin America. Since its inception, the company has raised approximately US$5.0 billion from international investors and has acquired 54 companies in 16 sectors. In May 2006, GP Investments concluded its initial public offering (IPO), becoming the first listed private equity firm in Brazil. For more information, please see GP Investments' web site (www.gp-investments.com) or contact the IR department.

¹ Cash & Cash Equivalents and Financial Investments (trading securities)

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