Strix Group launches £38m acquisition, and £10m share placing

Strix, the AIM-listed kettle controls, appliances, and water purification and disinfection solutions group, has unveiled a £38m bid for an Australian business, funded by a new long term loan and a £10m share placing.

Billi is a leading brand supplying premium filtered and non-filtered instant boiling, chilled and sparkling water systems, with operations across Australia and New Zealand.

In the 12 months ending December 31, 2022, Billi is expected to generate revenue of around £43.7m and adjusted EBITDA of approximately £10.2m.

Billi has a successful history of growth, with double digit revenue compound annual growth rate over the past five years and is highly cash generative, delivering cash conversion of approximately 88%.

Isle of Man-based Strix says the acquisition materially accelerates the trajectory of, and is accretive, to its medium term targets with these targets now expected to be reached ahead of the initial 2025 timeframe.

The Strix board expects the acquisition to be mid single digit earnings accretive in the first full year of ownership and around 10% accretive in the second, in advance of any synergies.

Billi is benefitting from structural market and ESG tailwinds including increasing focus on water filtration, a reduction in single use plastics and a focus on energy consumption from heating water which is aligned with Strix’s sustainability goals.

The deal will add well developed and premium products in the high growth and strategically important hot tap market and increases Strix’s position and portfolio of water dispenser systems.

It will also provide the opportunity for further organic growth driven by increased residential sales, new product development, particularly in sparkling, internationalising Billi’s revenue stream through Strix’s global footprint, cross selling Strix products into commercial applications and growing aftermarket sales.

Strix says it has identified efficiencies across Billi’s product lifecycle through utilising Strix’s Chinese operation to improve procurement, using Strix filters in Billi products, consolidating the marketing group and rationalising the store estate.

The deal is being proposed on a debt free, cash free basis, for a fixed cash consideration and is conditional on approvals of the Australian Competition and Consumer Commission, the UK Competition and Markets Authority and the New Zealand Commerce Commission.

Completion of the acquisition is expected before year end, subject to regulatory approvals, and the key management of Billi will remain in place and participate in the Strix Group Long Term Incentive Plan.

Strix has, today, announced a debt refinancing with new facilities consisting of a refinance of its current £80m revolving credit facility, with a new tenor of three years plus two one-year extension options, and a new £49m amortising term loan with a tenor of three years.

The share placing, to raise approximately £10m, involves the issue of 8,695,652 new ordinary shares at 115p per placing share, to new and existing eligible investors. The placing price represents a discount of 10% to the closing mid market price on October 4, 2022. The placing shares represent 4.2% of the issued share capital of Strix.

The placing will be conducted through an accelerated bookbuild process being managed jointly by Zeus Capital and Stifel Nicolaus Europe acting as joint bookrunners.

Five Strix directors are participating in the placing, including chief executive, Mark Bartlett, who has committed to £15,000 of new placing shares, and Gary Lamb, who is purchasing £200,000-worth of placing shares. Raudres Wong is buying £100,000-worth.

Mark Bartlett said: “Billi accelerates our strategy within our water and appliances categories which is core to Strix’s five year plan. We look forward to welcoming the Billi team to the Strix Group and working together to grow our combined businesses.”