REG - Compagnie St-Gobain - Acquisition

Compagnie de Saint Gobain SAAnnouncement

27/06/2024 07:00

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RNS Number : 1202U  Compagnie de Saint-Gobain  27 June 2024

 

SAINT-GOBAIN FURTHER STRENGthENS ITS worldwide presence IN CONSTRUCTION
CHEMICALS BY SIGNING A DEFINITIVE AGREEMENT TO ACQUIRE FOSROC, a leading
player in asia and emerging markets

 

Saint-Gobain announces that it has entered into a definitive agreement to
acquire FOSROC, a leading privately owned global construction chemicals player
for $1,025 million (approximately €960 million) in cash.

 

Following the acquisitions of Chryso in 2021, GCP in 2022 and 33 additional
acquisitions since 2021, this move is a new strategic step in establishing
Saint-Gobain's worldwide presence in construction chemicals, which will have
combined sales of €6.2 billion across 73 countries following the acquisition
(pro forma).

 

FOSROC is a global construction chemicals player with a strong geographic
footprint in India, the Middle East and Asia-Pacific in particular. The
company is expected to generate $487 million of sales and to achieve an
EBITDA margin of 18.7% in 2024E. With 20 manufacturing plants and around 3,000
employees, FOSROC provides a wide range of technical solutions for the
construction industry, including admixtures and additives for concrete and
cement, adhesives and sealants, waterproofing solutions, concrete repair
solutions and flooring.

 

The purchase price represents an acquisition multiple (before synergies) of
approximately 11.3x FOSROC's 2024E EBITDA of $91 million, and a multiple of
approximately 7.1x when including run-rate synergies of approximately $54
million in year 3.

 

This acquisition will be fully financed in cash. The Group will maintain a
strong balance sheet with net debt / EBITDA remaining at the low end of the
target range (1.5x to 2.0x) including the recently announced Bailey and CSR
Limited acquisitions. Closing of the transaction is subject to customary
conditions and is expected in first-half 2025.

 

 

A COMPELLING STRATEGIC RATIONALE

 

·    A unique opportunity, fully aligned with Saint-Gobain's strategy to
strengthen its worldwide presence in construction chemicals, supported by
solid macroeconomic factors including the transition towards low-carbon
concrete. It will complement the Group's worldwide growth platform in
construction chemicals.

 

·    A highly complementary geographic profile strengthening
Saint-Gobain's presence in high-growth emerging markets, notably India and the
Middle East. FOSROC's positions in the Middle East and Asia perfectly
complement Chryso's positions mostly in Europe, Turkey and Africa and GCP's in
North America, Latin America and Asia-Pacific. FOSROC is a leading player in
India, one of the most attractive countries in construction chemicals
worldwide with growth supported by an ambitious infrastructure plan for the
coming decades.

·    A comprehensive range of solutions with a renowned brand and strong
technical competencies. FOSROC's capabilities are supported by its trusted
brand and its recognized technical expertise, entrepreneurial spirit and high
level of service.

 

·    A strong track record of highly profitable growth and significant
outperformance of its underlying markets. FOSROC has a strong growth track
record with c. 11% sales growth per year (2021-2024E). The company delivers a
superior EBITDA margin - more than 18% - thanks to a highly experienced
management team with a proven history of success.

 

·    A value-creative acquisition for Saint-Gobain's shareholders and
customers, with strong synergy potential. $54 million expected synergies in
year 3 following transaction close, of which $39 million are cost synergies
which are expected to be captured through economies of scale in purchasing
(including on raw materials and vertical integration of polymers production),
footprint optimization, SG&A savings and manufacturing and logistics cost
optimization. Saint-Gobain expects to benefit from at least $15 million of
growth synergies thanks to cross-selling opportunities, combining the Group's
innovation capabilities with Fosroc's strength in infrastructure, and to its
customer relationships. These synergies will be achieved across Saint-Gobain's
worldwide platform in construction chemicals and will leverage Saint-Gobain's
existing strong presence in the wider light and sustainable construction
sector in India and the Middle East. The acquisition will create value by
year 3 following the closing of the transaction and will be EPS (Earnings Per
Share) accretive from year 1.

 

The integration will be led by Thierry Bernard, Chief Executive Officer of
Construction Chemicals, with the experienced team who developed the Chryso
business over many years, managed its integration within Saint-Gobain and who
has piloted its successful combination with GCP since 2022, providing a high
level of confidence in the integration of FOSROC. It will be consolidated into
the High Performance Solutions segment.

 

Benoit Bazin, Chairman and Chief Executive Officer of Saint-Gobain, commented:

"The acquisition of FOSROC is perfectly aligned with our "Grow & Impact"
strategic plan: it is a unique opportunity for Saint-Gobain to further
reinforce its worldwide presence in construction chemicals, and to strengthen
its presence in high-growth emerging markets, in particular in India and the
Middle East. I am very impressed with FOSROC's leadership, its strategy and
its impressive development, as well as the team's track record of excellent
execution and profitable growth. The combination of the two groups will allow
us to expand our profitable growth platform in construction chemicals. I am
looking forward to warmly welcoming the FOSROC teams into the Group and I am
very confident about the combination of our joint forces."

 

Jim Hay, Chairman of FOSROC, commented:

"Today marks the beginning of an exciting new chapter in the history of
FOSROC. Our focus on delivering the best solutions and satisfaction to our
customers has enabled us to become a leading player in construction chemicals.
I want to thank all our teams for their outstanding work over many years."

 

Rob Bonnici, Chief Executive Officer of FOSROC, added:

"The opportunity to join Saint-Gobain, worldwide leader in light and
sustainable construction and a global player in construction chemicals is the
perfect next step to enhance our offer by leveraging Saint-Gobain's innovation
and technology in construction chemicals. I look forward to continuing our
growth journey within Saint-Gobain."

Analyst/Investor Conference Call on June 27, 2024 at 8:00 am Paris time

Dial-in: +33 1 70 91 87 04 or +44 12 1281 8004 or +1 718 705 8796

Please dial in 5 to 10 minutes prior to the scheduled start time.

Replay: +39 02 802 0987 then press 700755# and 755# from 10:00 am Paris time
until

 July 27, 2024.

A presentation will be available before the conference call on
Saint-Gobain’s website
at: https://www.saint-gobain.com/en/finance/financial-events
(https://www.saint-gobain.com/en/finance/financial-events)

 

Morgan Stanley is acting as financial advisor, and Freshfields is acting as
legal counsel to Saint-Gobain in connection with the transaction.

 

About Saint-Gobain
Worldwide leader in light and sustainable construction, Saint-Gobain designs, manufactures and distributes materials and services for the construction and industrial markets. Its integrated solutions for the renovation of public and private buildings, light construction and the decarbonization of construction and industry are developed through a continuous innovation process and provide sustainability and performance. The Group's commitment is guided by its purpose, "MAKING THE WORLD A BETTER HOME".
 
€47.9 billion in sales in 2023
160,000 employees, locations in 76 countries

Committed to achieving net zero carbon emissions by 2050

 
For more information about Saint-Gobain, visit
www.saint-gobain.com (http://www.saint-gobain.com/)
 and follow us on X
@saintgobain (https://twitter.com/saintgobain)

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