REG - Renold PLC - Acquisition of MAC Chain Company

RenoldAnnouncement

10/09/2024 07:00

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RNS Number : 5049D  Renold PLC  10 September 2024

10 September 2024

 

Renold plc

("Renold", the "Company" or the "Group")

 

Acquisition of MAC Chain Company Limited (USA and Canada)

 

Renold, a leading international supplier of industrial chains and related
power transmission products, is pleased to announce that it has acquired the
trade and net assets of MAC Chain Company Ltd (U.S.) and the entire issued
share capital of MAC Chain Company Limited (Canada), (together, "MAC Chain" or
the "Acquisition") for a total cash consideration of US$31.4 million.

 

Highlights

 

·      With operations in the Pacific Northwest of the USA, British
Columbia, and Quebec, MAC Chain is a manufacturer and distributor of high
quality conveyor chain ("CVC") and ancillary products, with a significant
presence in the forestry and broader industrial markets.

 

·      The Acquisition substantially increases the Group's access to the
Western US and Canadian CVC markets, particularly forestry, which we have
identified as a significant opportunity for the Group to expand into.

 

·      When combined with Renold's existing US and Canadian operational
footprint, the Acquisition presents opportunities for significant
manufacturing synergies on integration into the enlarged Group.

 

·      The MAC Chain management team, which brings many years of
industry and market knowledge, will transfer to the Group following completion
of the Acquisition, and continue to lead the MAC Chain business, joining
Renold's North American management team.

 

·      Following completion, the Acquisition is expected to immediately
enhance Group adjusted earnings per share, as well as be accretive to the
Group's operating margin.

 

·      ROIC is expected to be above Renold's WACC in the first year of
ownership.

 

The Acquisition and Financial Considerations

 

MAC Chain is being acquired on a cash free debt free basis, and will consist
of an initial cash consideration of US$28.26 million, followed by two further
cash payments of US$1.57 million, payable 12 months and 24 months from the
anniversary of completion of the Acquisition. The total consideration for the
Acquisition of US$31.4 million represents an acquisition multiple of c.7.5x
twelve months to June 2024 EBITDA. Realising the initially identified hard
synergies will result in the multiple reducing to 6.9x, in the initial year of
ownership, reducing to well below 6.0x in subsequent years.

 

The Acquisition was funded utilising the Group's existing borrowing
facilities. As at 31 March 2024, the Group's net debt to EBITDA multiple was
0.6x and following completion of the Acquisition, it is expected to be below
1.2x. With continuing expected strong cash generation, and following
completion of the Acquisition, there remains sufficient facility headroom to
execute the identified pipeline of further bolt-on opportunities.

 

MAC Chain reported revenue of US$ 25.8m for the twelve months ended June 2024,
generating an EBITDA of US$4.2 million, and a PBT of US$3.5m. Tangible net
assets acquired, are anticipated to be US$11.5m.

 

Commenting on the Acquisition, Robert Purcell, Group Chief Executive of
Renold, said:

"We are delighted that MAC Chain is to join the Renold Group and that not only
are we buying an excellent business, but also retaining the services of a very
talented group of managers and employees. The acquisition of MAC Chain
considerably expands and strengthens our North American Conveyor chain
offering.

"MAC Chain is our third CVC acquisition in a little over 2 years and builds
our momentum as we execute our deal pipeline. Reduced leverage has been driven
by strong operational performance over recent periods, leading to a strong
balance sheet and a conservative level of debt, allowing us to accelerate the
growth of the business through complementary bolt-on deals."

Certain information contained in this announcement would have constituted
inside information (as defined by Article 7 of Regulation (EU) No 596/2014),
as it forms part of domestic law by virtue of the European Union (Withdrawal)
Act 2018) ("MAR") prior to its release as part of this announcement and is
disclosed in accordance with the Company's obligations under Article 17 of
those Regulations.

Over recent periods,

 

ENQUIRIES:

 

 Renold plc                           IFC Advisory Limited
 Robert Purcell, Chief Executive      Tim Metcalfe
 Jim Haughey, Group Finance Director  Graham Herring
                                      renold@investor-focus.co.uk (mailto:renold@investor-focus.co.uk)

 0161 498 4500                        020 3934 6630

 

 

 Nominated Adviser and Joint Broker  Joint Broker
 Peel Hunt LLP                       Cavendish Capital Markets Limited
 Mike Bell                           Ed Frisby (Corporate Finance)
 Ed Allsopp                          Andrew Burdis / Harriet Ward (ECM)

 020 7418 8900                       020 7220 0500

NOTES FOR EDITORS

 

Renold is a global leader in the manufacture of industrial chains and also
manufactures a range of torque transmission products which are sold throughout
the world to a broad range of original equipment manufacturers and
distributors. The Company has a well-deserved reputation for quality that is
recognised worldwide. Its products are used in a wide variety of industries
including manufacturing, transportation, energy, steel and mining.

 

Further information about Renold can be found on the website at:
www.renold.com (http://www.renold.com)

 

Further information about MAC Chain can be found on its website at:
www.macchain.com (http://www.macchain.com)

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