Chain maker Renold logs North American acquisitions for forestry push
Long-established industrial chain manufacturer Renold has been true to its acquisition ambitions with the purchase of two North American chain makers for a total of US$31.4 million.
Renold’s board told the stock market this morning (10 September 2024) that the acquisition of MAC Chain Company Ltd (U.S.) and MAC Chain Company Limited (Canada) which between them have operations in the Pacific Northwest of the USA, British Columbia, and Quebec, will give the Manchester-headquartered business greater access to the lucrative forestry markets in the Western US and Canada.
The MAC Chain management team will join Renold’s existing North American management team.
Separately, in a trading update for the five months ended 31 August 2024, ahead of the AGM later this morning, revenue for the Period was reported as £102.3m (FY24: £104.7m), a 0.9% reduction at constant exchange rates, and a year-on-year decrease of 2.3% at reported rates due to the impact of adverse foreign exchange movements.
Renold announced a large military contract for the Canadian Navy on 1 May 2024 and boasts an order book as at 31 August 2024 of £85.5m (FY24: £85.4m) which remains close to a record high level.
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 deal has been funded by Renold’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.
Robert Purcell, CEO, Renold
Commenting on the Acquisition, Robert Purcell, Group Chief Executive of Renold, said: “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.”
