Renold plc (LON:RNO), a leading international supplier of industrial chains and related power transmission products, has announced that it has acquired the entire issued share capital of Industrias YUK S.A., for a total cash consideration of €24 million.
|•||Established in 1964, YUK is a Valencia-based, manufacturer and distributor of high quality conveyor chain (“CVC”) and ancillary products.|
|•||YUK’s well invested CVC manufacturing facility, based near Valencia, Spain, adds a high quality European based CVC manufacturing capability to Renold’s current transmission (“TRC”) and tooth chain manufacturing capability in Europe.|
|•||The acquisition substantially increases the Group’s access to the Iberian Chain market, where historically it has been under represented.|
|•||Opportunities exist for meaningful manufacturing synergies between YUK and Renold’s current international operations.|
|•||The Acquisition will allow Renold to leverage YUK’s strong CVC market position in Spain and Portugal to expand sales of the Group’s existing range of premium European TRC products, and enable sales of YUK products throughout Renold’s extensive European sales network, beyond Iberia.|
|•||The YUK management team, which brings many years of industry and market knowledge, will transfer to the Group on completion of the Acquisition, and continue to lead YUK, joining Renold’s European management team.|
|•||The Acquisition is expected to be immediately enhancing to Group earnings per share, as well as accretive to the Group’s operating margin.|
|•||ROIC is expected to be in line with management’s targets.|
The Acquisition and Financial Considerations
YUK is being acquired, subject to normal completion accounts adjustments, on a cash free, debt free basis, and will consist of an initial cash consideration of €20.0 million, followed by two further cash payments of €2.0 million each, payable 12 months and 24 months from the date of completion of the Acquisition.
The total consideration for the Acquisition of €24.0 million represents an acquisition multiple of c. 7.6x June 2022 LTM EBITDA. Identified cost synergies will reduce the multiple comfortably below 7.0x, with additional benefits to be expected through commercial collaboration.
The Acquisition will be funded utilising the Group’s existing borrowing facilities. As at 31 March 2022, the Group’s net debt to EBITDA multiple was 0.6x and following completion of the Acquisition, is expected to remain below 1.5x. This allows the Group to retain sufficient headroom to execute on an identified pipeline of further bolt-on opportunities.
YUK delivered revenue of €18.6m for the 12 month period ended June 2022, generating an EBITDA of €3.1m million.
Commenting on the Acquisition, Robert Purcell, Group Chief Executive of Renold plc, said:
“We are delighted that YUK 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 YUK considerably expands and strengthens our European Conveyor Chain offering, while also allowing us to grow within the Iberian market. YUK has a long-established track record of manufacturing and supplying high quality chain products which fit well with our own premium product offering.
“The acquisition is expected to be earnings enhancing from year one and gives rise to considerable business synergies. We are delighted to welcome the YUK team as part of the Renold family of companies.”