Strix Group PLC Conditional acquisition of LAICA S.p.A (8105Z)

TIDMKETL

RNS Number : 8105Z

Strix Group PLC

23 September 2020

THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY THE COMPANY TO CONSTITUTE INSIDE INFORMATION STIPULATED UNDER THE MARKET ABUSE REGULATION (EU) NO. 596/2014. UPON THE PUBLICATION OF THIS ANNOUNCEMENT VIA THE REGULATORY INFORMATION SERVICE, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN

Strix Group Plc

("Strix", the "Group" or the "Company")

Conditional acquisition of LAICA S.p.A

Strix seeks to enhance its position in the Water market

Strix Group Plc (AIM:KETL), the AIM quoted global leader in the design, manufacture and supply of kettle safety controls and other complementary water temperature management components, is pleased to announce that it has entered into a conditional agreement to acquire, through its newly incorporated indirect subsidiary, Strix Italy S.r.l., the entire share capital of LAICA S.p.A ("LAICA") (the "Acquisition") for an initial consideration of approximately EUR19.6 million, comprising approximately EUR11.6 million in cash and EUR8.0 million in Strix ordinary shares, with up to a further EUR12.0 million payable in cash subject to certain conditions being met, including threshold financial targets for the financial years ending 31 December 2021 and 2022.

LAICA is an Italian company focussed on water purification and the sale of small household appliances for personal health and wellness.

In the 12 months ending 31 December 2019, LAICA generated revenue of EUR20.4m, Adjusted EBITDA of EUR2.9m and Adjusted Profit Before Tax of EUR2.6m. Similarly to Strix, LAICA has shown strong resilience against the adverse headwinds created by the global pandemic and has seen significant demand for its products given its focus on health and wellness markets. Strix expects that LAICA's strong track record of organic growth and cash generation will continue.

Following completion, the Acquisition will expand Strix's water category, enhance its presence in the health and wellness market and enable Strix to capitalise on the double-digit growth of global sales (in 2019) for both the small domestic appliance and water markets, driven by increased consumer demand. LAICA has a considerable global presence, an established product range and an advanced new product roadmap. The Acquisition will also provide some consolidation of the water treatment range, driving efficiencies and providing a comprehensive portfolio of products for the Group.

The Acquisition is expected to be up to mid-single digit earnings enhancing, in the first full year of ownership, before the benefit of any synergies.

The Acquisition is being funded through a combination of cash and shares, payable to Maurizio and Anna Maria Moretto (the "Vendors"), who are the current LAICA shareholders. Strix has extended its existing debt facilities in order to satisfy the initial cash consideration and improve the liquidity of the enlarged group. Net debt(1) to Adjusted EBITDA(2) is expected to be c.1.4x on completion and is forecasted to reduce to approximately 1.2x by 31 December 2021.

(1) Net debt includes the EUR7.1m earn-out which is subject to financial performance measures in FY21 and FY22

(2) Adjusted EBITDA includes proforma LTM of Laica S.p.A.

Maurizio Moretto, LAICA's CEO, will remain with the business until at least March 2023 to continue to execute LAICA's current growth strategy and drive synergies between Strix and LAICA. Anna Maria Moretto will remain with the business in the short to medium term in order to assist with the orderly handover of day-to-day management.

The LAICA business

LAICA is based in Vicenza, Italy and has been operating for over 40 years. The business has developed from a small domestic appliances business (predominately kitchen scales in the earlier years) in Italy, into an internationally renowned water treatment and small appliances company.

Over the last ten years, LAICA has expanded in Europe and Asia and created an international sales network with products now being sold on five continents. LAICA has a manufacturing site at its base in northern Italy and additional manufacturing capabilities in China. It currently employs 50 staff. LAICA's current product range comprises two main areas:

- Water treatment: Water jug filters, filter replacements, water dispensers, bottle filters and filters for coffee machines; and

   -     Health and wellness appliances: Personal care, vacuum sealers and kitchen appliances. 

In 2018, LAICA signed a joint venture agreement with XINBAO as a partner for distribution of LAICA's entire filter device range to the China domestic market.

Transaction Rationale

The Directors believe that the Acquisition will significantly expand Strix's water category and bring a number of strategic benefits to the Group which are summarised below:

-- Considerably augment Strix's position within the water market, providing a global platform to facilitate future organic and inorganic growth

   --    Earning enhancing in the first full year of ownership, in advance of synergy benefits 

-- Combining complementary product and geographic offerings, capitalising on Strix's global footprint and LAICA's in-depth product expertise, underpinned by an extensive patent portfolio

   --    Multiyear organic growth opportunities from: 

o Bringing new products to market, including 2020 scheduled product launches delayed by Covid-19 restrictions

o Internationalising LAICA's revenue mix by utilising Strix's existing global sales and marketing infrastructure

o Cross-selling and up-selling opportunities from a deepening of relationships with large, global brands spanning multiple product categories

-- Acquisition of an experienced management team who will be incentivised through certain performance targets in the first two years following completion

-- Opportunity for cost synergies arising from optimising manufacturing facilities and utilising Strix's R&D capabilities

-- Supports Strix's medium term targets and enhances the Group's long-term growth potential, aligned with the Group's capital allocation framework and stated acquisition policy

   --    The Acquisition is in line with Strix's ESG strategy which is a core driver of the business 

Terms of the Acquisition

The principal terms of the Acquisition are as follows:

-- Conditional acquisition of 100% of the share capital of LAICA S.p.A for a total consideration of up to EUR31.6 million.

-- Completion of the Acquisition is subject to approval from the Council of Ministers in Italy, which is expected to be received by December 2020 . With respect to the period prior to Completion, the Vendors have given customary undertakings to operate the LAICA business in the ordinary course, save as otherwise agreed with Strix.

-- The initial consideration, payable to the Vendors at Completion, is approximately EUR19.6 million, with up to a further EUR12.0 million of additional cash consideration payable, as follows:

o EUR4.9 million payable in two instalments on 31 December 2021 and 31 December 2022, contingent on Maurizio Moretto remaining with the LAICA business; and

o up to EUR7.1 million payable to the Vendors contingent on LAICA meeting certain financial performance conditions in the financial years ending 31 December 2021 and 2022.

-- The initial consideration payable at Completion represents an EV / Adj. EBITDA multiple of 6.8x and if all performance conditions are met and the maximum consideration paid to the Vendors, the total consideration will represent an EV / Adj. EBITDA multiple of 10.9x.

-- The initial consideration payable at Completion is to be part satisfied by an issue of 3,192,236 new ordinary shares in the capital of the Company to the Vendors totalling EUR8.0 million (based on an exchange rate of GBP:EUR1.0896 and the closing share price on 21 September 2020). The initial cash consideration of approximately EUR11.6 million payable at Completion will be subject to a customary post-completion adjustment with respect to the net debt and working capital of LAICA.

-- At Completion, the Vendors will enter into a customary lock-up arrangement in relation to their consideration shares, which will restrict any disposal of those shares for a period of six months from the date of Completion.

-- A further announcement will be made by the Company in due course and in any event upon completion of the Acquisition.

Mark Bartlett, CEO of Strix Group Plc, commented:

"We are very pleased to enter into this agreement to acquire LAICA, which will be our largest acquisition to date. LAICA continues our strategy of growing our small domestic appliance (SDA) and water categories which support Strix's core competencies. We are acquiring LAICA, which has a long-established track record of supplying high quality products, at a time when it is well-positioned to exploit a range of growth opportunities. We look forward to welcoming the business and all its employees to Strix."

 
 
  For further enquiries, please contact: 
 
Strix Group Plc                                                   Tel: [phone] 
Mark Bartlett, CEO 
Raudres Wong, CFO 
 
Zeus Capital Limited (Nominated Advisor and Joint Broker)         [phone] 
Nick Cowles / Jamie Peel / Jordan Warburton (Corporate Finance) 
 
Stifel Nicolaus Europe Limited (Joint Broker)                     [phone] 
Matthew Blawat / Francis North 
 
IFC Advisory Limited (Financial PR and IR)                        [phone] 
Graham Herring / Tim Metcalfe / Florence Chandler 
 
 

ABOUT STRIX GROUP PLC

Isle of Man based Strix, is a global leader in the design, manufacture and supply of kettle safety controls and other components and devices involving water heating and temperature control, steam management and water filtration.

Strix's core product range comprises a variety of safety controls for small domestic appliances, primarily kettles. Kettle safety controls require precision engineering and intricate knowledge of material properties in order to repeatedly function correctly. Strix has built up market leading capability and know-how in this field since being founded in 1982.

Strix is admitted to trading on the AIM Market of the London Stock Exchange (AIM: KETL).

Market Abuse Regulation (EU) NO. 596/2014

This announcement contains inside information. The person responsible for arranging the release of this announcement on behalf of the Company is Mark Bartlett, Chief Executive Officer.

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September 23, 2020 02:01 ET (06:01 GMT)