REG - Essentra plc - Acquisition of BMP TAPPI

EssentraAnnouncement

21/09/2023 07:00

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RNS Number : 1383N  Essentra plc  21 September 2023

Essentra PLC

("Essentra" the "Company" or the "Group")

 

Acquisition of BMP TAPPI

 

Essentra plc, a leading global provider of essential components and solutions,
is pleased to announce the acquisition of BMP s.r.l ("BMP TAPPI"), a
family-owned, leading Italian manufacturer and distributor of protective caps
and plugs for an initial cash consideration of EUR33.5m, in line with its
inorganic growth strategy previously communicated at the Capital Markets event
in November 2022.

 

Based in Milan, Italy, BMP TAPPI has over 60 years of history and a
track-record of consistent growth. BMP TAPPI manufactures and distributes an
extensive range of protective caps and plugs from their Italian based
facilities, serving thousands of customers predominantly across Europe, in
multiple end-markets, including mechanical, automotive and pharmaceutical
sectors, and has been a trading partner to Essentra for over 20 years, with a
well-established relationship. With over 100 injection moulding machines and
located in a modern facility, BMP TAPPI's strong market position is
well-invested, and further enhanced by its R&D capabilities focusing on
developing more sustainable products, and a number of sustainably sourced
products are already included within its current range.

 

BMP TAPPI is a complementary and strategically aligned bolt-on acquisition,
demonstrating the continued momentum of Essentra's disciplined inorganic
strategy, following the successful acquisition and integration of the Wixroyd
Group in December 2022. In line with the Group's acquisition criteria, BMP
TAPPI will strengthen and enhance the Group's existing core, profitable
product range, further expand the Group's manufacturing footprint in Europe,
and deliver attractive cost and revenue synergies through cross-selling
opportunities into both the Essentra and BMP TAPPI customer base. BMP TAPPI
will be led by Essentra's established Italian management team, who have
successfully led the Group's existing business in Bologna since the
acquisition of the Richco business in 2011, providing a strong base from which
Essentra has been able to grow.

 

The consideration payable comprises an initial cash consideration of EUR33.5m,
and deferred contingent consideration(1) of up to EUR3.5m on a cash-free,
debt-free basis. For the year ended 31 December 2023, BMP TAPPI is forecast to
generate revenues of EUR13.4m and the initial consideration is forecast to
represent an acquisition multiple of c.8.0x EBITDA on a full year 2023 basis.
Essentra anticipates a post-synergy multiple approaching 5.3x EBITDA(2).

 

The initial acquisition consideration, and any subsequent contingent
consideration will be financed from Essentra's existing debt facilities, the
majority of which is funded by low interest, fixed long term debt, and from
free cash flow. Essentra's ongoing share buyback programme, announced on 29
March 2023 remains in place. The Company's balance sheet remains strong, with
the pro-forma net debt position of the Group remaining comfortably within the
mid-term leverage guidance of <1.5x, providing the Group with sufficient
headroom to continue to support further organic and inorganic growth
opportunities. Essentra continues to maintain a strong and active bolt-on
acquisition pipeline.

 

The acquisition of BMP TAPPI is expected to be accretive to Group margins and
adjusted EPS(3) in the first full year post-completion, with a ROIC(4) of
c.15% expected to be delivered within three years.

 

The acquisition is expected to complete before the end of 2023, subject to
local government approvals and competition clearances.

 

Essentra's leadership team look forward to working with BMP TAPPI's existing
management and former owner during the transition period.

 

Scott Fawcett, CEO of Essentra plc, commented:

 

"I am delighted to announce the acquisition of BMP TAPPI, a business we have
known for 20 years, which strengthens Essentra's market leading product
portfolio and expands our offering, while unlocking further cross-selling
opportunities and growing our presence in Europe. This transaction continues
to demonstrate our successful inorganic growth strategy in action, as we
leverage our strong balance sheet to capitalise on the significant
opportunities we see for product expansion and market share gains, and brings
another high quality business into Essentra, which will be accretive to both
underlying earnings and margins."

 

 

(Notes)

(1.     Deferred contingent consideration of up to EUR3.5m is subject to
certain performance conditions over a two-year period)

(2.     Post-synergy multiple is based on a three-year projection and
includes deferred contingent consideration of EUR3.5m)

(3.     The term adjusted excludes the impact of amortisation of acquired
intangible assets and adjusting items)

(4.     ROIC is calculated as adjusted operating profit expressed as a
percentage of invested capital. Invested capital is defined as initial
consideration and deferred contingent consideration, plus capex investment,
and associated acquisition transaction fees)

 

MAR Statement

 

Certain information contained in this announcement would have constituted
inside information (as defined by Article 7 of Regulation (EU) No 596/2014),
as it forms part of domestic law by virtue of the European Union (Withdrawal)
Act 2018 ("MAR") prior to its release as part of this announcement, and is
disclosed in accordance with the Company's obligations under Article 17 of
those Regulations.

 

 

Enquiries

 Essentra plc                                Teneo
 Jack Clarke, Chief Financial Officer        Olivia Peters
 Claire Goodman, Investor Relations Manager  essentra@teneo.com

 Emma Reid, Company Secretary
 Tel: +44 (0)1908 359100                     Tel: +44 (0)20 7353 4200

 

 

Additional information

The acquisition constitutes a Class 2 transaction for the purposes of the UK
Financial Conduct Authority's Listing Rules. For the year ended 31 December
2022, BMP TAPPI had a pre-tax profit of EUR1.3m and held total gross assets of
EUR7.3m excluding cash and goodwill.

 

More information on BMP TAPPI can be found on its website at www.bmp-tappi.com
(http://www.bmp-tappi.com)

 

Cautionary forward-looking statement

These results contain forward-looking statements based on current expectations
and assumptions. Various known and unknown risks, uncertainties and other
factors may cause actual results to differ from future results or developments
expressed or implied from the forward-looking statements. Each forward-looking
statement speaks only as of the date of this document. The Company accepts no
obligation to revise or update these forward-looking statements publicly or
adjust them to future events or developments, whether as a result of new
information, future events or otherwise, except to the extent legally
required.

The release, publication or distribution of this announcement in jurisdictions
other than the United Kingdom may be restricted by law and, therefore, any
persons who are subject to the laws of any jurisdiction other than the United
Kingdom should inform themselves about, and observe, any applicable
requirements. Any failure to comply with these requirements or restrictions
may constitute a violation of the securities laws or regulations of any such
jurisdiction.  This announcement has been prepared for the purposes of
complying with English law and the UK Listing Rules and the information
disclosed may not be the same as that which would have been disclosed if this
announcement had been prepared in accordance with the laws and regulations of
any jurisdiction outside of England. No statement in this announcement is
intended as a profit forecast or estimate for any periods.

 

Notes to Editors

About Essentra plc

Essentra plc is a FTSE 250 company and a leading global provider of essential
components and solutions, focusing on the manufacture and distribution of
plastic injection moulded, vinyl dip moulded and metal items.

Headquartered in the United Kingdom, Essentra's global network extends to 28
countries worldwide and includes over 3,000 employees, 13 manufacturing
facilities, 24 distribution centres and 33 sales & service centres serving
c.74,000 customers with a rapid supply of low cost but essential products for
a variety of applications in industries such as equipment manufacturing,
automotive, fabrication, electronics, medical and renewable energy.

For further information, please visit www.essentraplc.com
(http://www.essentraplc.com)

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