Industrial supplies company Coventry Group (ASX: CYG) is all set to acquire 100% of the shares of Steel Masters Auckland, or Steelmasters Group, a supplier of industrial and specialty fasteners. The acquisition will include subsidiaries Galvmasters, Profast and Boltmasters. It will be funded with a combination of debt through a new NAB debt facility and a $25 million fully underwritten Placement.
In FY23, Steelmasters achieved sales revenue of $37.2 million and EBITDA of $6.7 million. The acquisition, including synergies, is projected to boost pro forma FY24 earnings per share by approximately 31%. The combined CYG and Steelmasters entity is forecasted to generate pro forma FY24 Revenue of $400.22 million and EBITDA of $27.5 million.
Coventry Group’s Managing Director and CEO, Robert Bulluss, said, “The acquisition of Steelmasters represents an exciting leap forward in the expansion of Coventry Group and is fully aligned with our stated acquisition criteria.
“We are delighted to welcome such a highly complementary business into the Coventry Group and I am excited about the significant benefits the acquisition will bring for our shareholders, customers, suppliers and employees.”
Coventry Group specialises in providing industrial services and solutions to various sectors, including mining and resources, roofing, and cladding. Operating under two key business segments, Trade Distribution (TD) and Fluid Systems (FS), Coventry Group has a presence across 86 locations in Australia and New Zealand. For FY24, unaudited sales revenue is estimated to range from $357.5 million to $367.5 million, with forecasted NPAT (unaudited and before one-off/significant items) of $9.2 million to $10.2 million.
Steelmasters Group, operating under brands Steelmasters, Galvmasters, Boltmasters and Profast, anticipates FY24 sales revenue of $36.9 million, with 54% from Australia and 46% from New Zealand and normalised EBITDA of $6.7 million.
The Company is expecting multiple benefits from this acquisition. It is expected to increase Coventry Group’s customer base and industry exposure. Plus, it will broaden the TD segment’s scale and reach through an additional 12 locations (8 in Australia and 4 in New Zealand). It will expand the specialised fastener product range and add manufacturing capability.
The acquisition is forecasted to deliver pro forma FY24 EPS accretion of approximately 31% (including synergies) and cost synergies from procurement savings (improved trading terms) and logistics savings (leveraging CYG’s import capability and freight consolidation). It will deliver revenue synergies from accelerated growth, cross-selling opportunities, and an expanded product range and accelerate the utilisation of tax losses.
The acquisition’s funding includes approximately $18.44 million from a new NAB debt facility and a $25 million fully underwritten Institutional Placement. Additionally, CYG is undertaking a $2 million non-underwritten Share Purchase Plan for eligible shareholders, with proceeds aimed at reducing net debt.
To minimise integration risk, Coventry Group will operate Steelmasters Group as a separate division of TD, and the division will continue to be run by Steelmasters Group’s existing management team. The acquisition is scheduled to be completed on 30 April 2024.
Alinda is a Business Reporter for The Sentiment
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1 Comment
Shraddha13
Thank you for sharing! To explore further
Replyhttps://www.360iresearch.com/library/intelligence/industrial-fasteners