Rosebank Industries PLC on Friday confirmed plans to raise £1.14 billion to fund the acquisition of US company, Electrical Components International.
The London-based acquisitions vehicle said the cash deal places an enterprise value of $1.9 billion on St Louis, Missouri-based ECI, which is a manufacturer of electrical systems.
Rosebank is run by former senior management figures at Melrose Industries PLC and is pursuing the same ‘buy, improve, sell’ model of acquisition as the FTSE 100 listing.
On Monday, Rosebank said it was in talks to buy ECI.
Rosebank said the price paid represents 9 times expected 2025 adjusted earnings before interest, tax, depreciation and amortisation.
The company is targeting 5 percentage points of operating margin improvement through ‘untapped’ cost saving and restructuring initiatives, which would take adjusted operating margin to at least 18% and adjusted Ebitda margin to ‘at least’ 20%, ‘unlocking the additional potential of the business,’ it said in a statement.
Rosebank also intends to ‘significantly’ improve ECI’s cash generation through profit improvement, working capital optimisation and reducing leverage to a 2.5 times to 3x Ebitda range, more than halving the current debt service costs.
‘Through the execution of these performance improvement measures, we intend to double shareholders’ investment in a 3 to 5 year time period,’ Rosebank said.
The deal will be funded through a £1.14 billion fundraise at 300 pence per share.
Shares in Rosebank remain suspended at 660.00p each in London.
The fundraise comprises an institutional placing in the UK and elsewhere and a private placement to a limited number of institutional investors in the US, plus $900 million of new debt facilities split across a $400 million term loan and a $500 million revolving credit facility.
Rosebank also intends to raise up to €8 million through an open offer.
Rosebank said the deal represents the ‘first step in Rosebank’s journey and management has identified numerous further acquisition targets for its ’Buy, Improve, Sell’ model.’
Chief Executive Simon Peckham said: ‘We are grateful for the strong support from shareholders. This is the first step on the journey and we are very confident that we can help ECI to fully realise its potential for the benefit of its employees, customers and our shareholders.’
Completion of the acquisition is subject to certain regulatory conditions, as well as approval of Rosebank shareholders, which will be sought at a general meeting on July 1.
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