REG - discoverIE Group plc - Acquisition of Magnasphere Corporation

DiscoverieAnnouncement

22/12/2022 07:00

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RNS Number : 5409K  discoverIE Group plc  22 December 2022

7.00am, 22 December 2022

 

 

discoverIE Group plc

 

Acquisition of Magnasphere Corporation

 

 

discoverIE Group plc (LSE: DSCV, "discoverIE" or the "Group"), a leading
international designer and manufacturer of customised electronics to industry,
today announces the acquisition of Magnasphere Corporation ("Magnasphere").

 

Magnasphere, a US-based designer and manufacturer of magnetic sensors and
switches for industrial electronic applications, is being acquired, subject to
certain vendor shareholder approvals, for a cash consideration of $22m
(£19.1m) on a debt free, cash free basis, before expenses, which will be
funded from the Group's existing debt facilities.

 

Vendor shareholder approvals for the transaction are expected to be received
during the final quarter of this financial year. Once completed, the
acquisition is expected to be immediately accretive to Group underlying
earnings and underlying operating margin.

 

Magnasphere, founded in 2002, designs and manufactures high performance
magnetic sensors and switches for industrial electronic markets including
access control, data centres and specialist vehicles. The business, which is
currently majority owned by management(1), is based in Waukesha, Wisconsin,
with manufacturing facilities in Goshen, Indiana. The business will operate
within the Group's Variohm cluster of specialist sensor businesses as part of
the Sensing & Connectivity division whilst retaining its distinct brand
identity. Under succession plans, management shareholders will transition
leadership to existing ongoing management over a period of up to twelve
months.

 

Revenues for the year ended 31 December 2021 were $6.8m (£5.7m) with a
reported pre-tax profit of $1.9m (£1.6m), and an operating margin of 28%.
Gross assets at 31 December 2021 were $5.9m (£5.1m). The business has
continued to grow well in 2022.

 

Following completion of the acquisition, the Group's proforma gearing(2) as at
30 September 2022, the Group's most recent six month period end, increases
from 0.8x to 1.1x, remaining below our long term target range of between 1.5
and 2.0x, leaving capacity for further acquisitions. The pipeline of
acquisition opportunities in development remains strong.

 

 

Nick Jefferies, Group Chief Executive of discoverIE plc, said:

 

"This acquisition of Magnasphere continues our strategy of building a
differentiated, international, growth focused electronics Group with strong
operating margins. The transaction brings another high quality business into
discoverIE, which is accretive to both underlying earnings and margins, and
strengthens our US footprint.

 

Magnasphere has a long-established track record of manufacturing and supplying
high quality custom sensors across the US. Operating within our Variohm
cluster of sensor businesses, Magnasphere will gain access to our wider base
of customers and with it, new sales opportunities in our target markets. We
are delighted to welcome the Magnasphere team into discoverIE Group."

 

 

For further information please contact:

discoverIE Group
plc
01483 544 500

Nick Jefferies, Group Chief Executive

Simon Gibbins, Group Finance Director

Lili Huang, Head of Investor Relations

 

Buchanan
020 7466 5000

Chris Lane, Toto Berger, Jack Devoy

discoverIE@buchanan.uk.com

 

Notes

 

1.     Magnasphere has approximately 70 individual shareholders of whom
Jim McHugh, Rick Kirschman, Francis Corby and Randall Woods hold in aggregate
a majority of the equity.

 

2.     Gearing ratio is defined as net debt divided by underlying EBITDA
(annualised for acquisitions, excluding IFRS16)).

 

3.     The information contained within this announcement is deemed by the
Group to constitute inside information as stipulated under the Market Abuse
Regulation, Article 7 of EU Regulation 596/2014. Upon the publication of this
announcement via Regulatory Information Service, this inside information is
now considered to be in the public domain.

 

 

Notes to Editors:

 

About discoverIE Group plc

 

discoverIE Group plc is an international group of businesses that designs and
manufactures innovative electronic components for industrial applications.

 

The Group provides application-specific components to original equipment
manufacturers ("OEMs") internationally through its two divisions, Magnetics
& Controls, and Sensing & Connectivity. By designing components that
meet customers' unique requirements, which are then manufactured and supplied
throughout the life of their production, a high level of repeating revenue is
generated with long term customer relationships.

 

With a focus on sustainable key markets driven by structural growth and
increasing electronic content, namely renewable energy, medical,
electrification of transportation and industrial automation &
connectivity, the Group aims to achieve organic growth that is well ahead of
GDP and to supplement that with complementary acquisitions. The Group has an
ongoing commitment to reducing the impact of its operations on the environment
and with its key markets aligned with a sustainable future, MSCI has awarded
the Group an ESG "A" rating.

 

The Group employs c.5,000 people across 20 countries with its principal
operating units located in Continental Europe, the UK, China, Sri Lanka, India
and North America.

 

discoverIE is listed on the Main Market of the London Stock Exchange and is a
member of the FTSE250, classified within the Electrical Components and
Equipment subsector.

 

 

 

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