Strix Group plc (LON:GHE) Chief Executive Officer Mark Bartlett caught up with DirectorsTalk for an exclusive interview to discuss the recent acquisition of LAICA, the rationale behind this and what it adds to the company.
Q1: First off, congratulations on your recent acquisition of LAICA, can you tell us a bit more about what LAICA does?
A1: LAICA is a specialist company based over in Italy and it’s focused on water purification and the sale of small domestic appliances for personal health and wellness applications. It was established back in 1974 with its head office and main manufacturing base over in Vicenza, where they produce the products on what are fully automated lines. Today, it really has a truly international footprint with specialist skills in both the water and the appliance categories.
Q2: Can you tell us more about the rationale behind the acquisition?
A2: Coupled with our existing Aqua Optima brand and the acquisition we made of HaloSource back in 2019, LAICA will significantly enhance our position, both within our water category, but also within our small domestic appliance category.
Both of these have been a key focus for Strix Group since we listed back in 2017 and we continue to diversify our product portfolio, both of these are very strong growth markets. LAICA also have a very advanced new product roadmap, and that will really strengthen our portfolio products which means we’ll be able to further exploit those products with our combined global coverage.
Of course, with any acquisition, the key is the people and LAICA have a highly experienced and energised management team who are specialists within their sectors. The current owners who have provided exceptional vision for the company over the years will remain with the business for a period of time to help us reach the potential of those new products, but also to help deliver on the upside synergies available to us as a group.
The acquisition is earning enhancing, and even prior to synergies that we’ve already identified, with leverage on completion expected to be around 1.4 times net debt to the adjusted EBITDA. The acquisition also fits very well with both M&A and our ESG commitments, providing a range of filters and products that will enhance our product offerings into the health and wellness sectors.
Q3: Mark, can you tell us the terms behind the acquisition and I guess, for investors, they’ll also want to note when will the acquisition be complete?
A3: The initial consideration will be around €19.6 million, which is about 6.8 times the adjusted EBITDA in 2019 and it’s €31.6 million if you include an earnout, which is operating over the next two years. That initial consideration is funded by around €11.6 million in cash and €8 million in the company’s ordinary shares which really ensures we’ve got a strong alignment with the group’s long term objectives. Up to a further €12 million is payable in cash subject to certain measures being achieved and these include the company’s financial targets for both 2020 and 2022.
Completion of this particular acquisition is subject to consent from the Council of Ministers in Italy, as for any companies that are making or selling products relating to COVID at this period of time, we would expect to receive consent probably before December of this year and that’s when completion would occur.
Q4: So, I guess the final question is what will this acquisition add to Strix Group as a company?
A4: Historically, the company’s revenue has been primarily around our kettle control business, since listing we’ve been working hard to diversify and expand into our other categories of water and small domestic appliances, both of which are very attractive growth markets.
LAICA really is the perfect fit as an acquisition for the company and it would allow us to accelerate our growth in both of these categories with a very complimentary product set, as well as expanding our geographic reach. LAICA provides an established European manufacturing footprint, which coupled with our existing operations in the Isle of Man and China, will also enhance our global footprint and provide opportunities to optimise our supply chain.
With the acquisition, coupled with the acquisition of HaloSource previously, will significantly strengthen our position within the water category, providing the skills and resources to really maximise the growth opportunities globally.
So, we’re really excited about the future of this particular acquisition.