REG - Strix Group PLC - Conditional acquisition of Billi

StrixAnnouncement

05/10/2022 09:33

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20221005:nRSE7981Ba&default-theme=true

RNS Number : 7981B  Strix Group PLC  05 October 2022

The information contained within this announcement is deemed to constitute
inside information for the purposes of article 7 of the Market Abuse
Regulation (EU) no. 596/2014. Upon the publication of this announcement, this
inside information is now considered to be in the public domain.

 

5 October 2022

 

Strix Group plc

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

 

Conditional acquisition of Billi for c.£38 million

 

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 conditional agreements to acquire the entire issued share capitals of
each of (i) Billi Australia Pty Ltd ("Billi Australia") and Billi New Zealand
Ltd ("Billi NZ") and (ii) Billi UK Ltd ("Billi UK", together with Billi
Australia and Billi NZ, "Billi") (the "Acquisition"), for an aggregate cash
consideration of approximately £38m, payable on completion, on a debt and
cash free basis, subject to customary closing adjustments.

 

The consideration for the Acquisition will be funded through a new term loan
and Strix is undertaking an equity placing to maintain an appropriate level of
leverage post the Acquisition. The placing is being conducted through an
accelerated bookbuilding process which will be launched immediately following
release of this announcement.

 

Highlights

 

·    c.£38 million acquisition of Billi, a leading Australian brand
supplying premium filtered and non-filtered instant boiling, chilled and
sparkling water systems

 

·     Expecting net debt as at 31 December 2022 to be approximately 1.9x
Strix's 2022 pro forma adjusted EBITDA, with strong deleveraging thereafter to
c.1.4x by end of 2023

 

·     In the 12 months ending 31 December 2022, Billi is expected to
generate revenue of c.£43.7m and adjusted EBITDA of c.£10.2m

 

·    Billi has a successful history of growth, with double digit revenue
CAGR over the past 5 years and is highly cash generative, delivering cash
conversion of c.88%

 

·    The Acquisition materially accelerates the trajectory of and is
accretive to Strix's medium term targets with these targets now expected to be
reached ahead of the initial 2025 timeframe

 

Strategic rationale

 

·    Materially changes the earnings profile of the Group, accelerating
growth plans for the Water & Appliance categories and supporting the
Group's medium term ambition

 

·    The Board expects the Acquisition to be mid single digit earnings
accretive in the first full year of ownership and c.10% accretive in the
second, in advance of any synergies(1)

 

·     Billi is benefitting from structural market and ESG tailwinds
including increasing focus on water filtration, a reduction in single use
plastics and a focus on energy consumption from heating water which is aligned
with Strix's sustainability goals

 

·    Adds well developed and premium products in the high growth and
strategically important hot tap market and increases Strix's position and
portfolio of water dispenser systems

 

·      The Board expects Strix's existing technology and expertise can
be used to enhance Billi's NPD roadmap

 

·      Opportunity for further organic growth driven by increased
residential sales, new product development particularly in sparkling,
internationalising Billi's revenue stream through Strix's global footprint,
cross selling Strix products into commercial applications and growing
aftermarket sales

 

·  Identified efficiencies across Billi's product lifecycle through
utilising Strix's Chinese operation to improve procurement, using Strix
filters in Billi products, consolidating the marketing group and rationalising
the store estate

 

Details of the Acquisition and Financial Information on Billi

 

·    Conditional acquisition of Billi Australia by Strix Australia Pty Ltd
("Strix Australia") and Billi NZ  by Strix (U.K.) Limited ("Strix UK") on a
debt free, cash free basis, subject to customary closing adjustments. Strix
Australia and Strix UK are entities ultimately owned by Strix

 

·      Conditional acquisition of Billi UK by Strix UK for a fixed cash
consideration

 

·      The aggregate consideration for Billi Austrialia, Billi NZ and
Billi UK is approximately £38m (AUD $65m) and is due in full in cash on
completion

 

·    The Acquisition is conditional upon: (a) completion of the
Waterlogic / Culligan merger; and (b) approvals of the Australian Competition
and Consumer Commission, the UK Competition and Markets Authority and the New
Zealand Commerce Commission

 

·     The agreements entered into in respect of the Acquisition contain
certain warranties and indemnities given by each of the parties, which are
customary for a transaction of this nature

 

·     The parties intend to put in place certain transitional services
provisions for an agreed period post completion of the Acquisition

 

·      Key management of Billi will remain in place and participate in
the Strix Group Long Term Incentive Plan

 

·     In the 12 months ended 31 December 2021, on a consolidated basis,
Billi Australia and Billi NZ generated adjusted revenue of c.£33.1m and
adjusted EBITDA of c.£6.9m. During this period Billi UK was part of
Waterlogic Group ("Waterlogic") and did not report its financials separately

 

·     In the 12 months ending 31 December 2022, Billi, including Billi
UK, is expected to generate revenue of c.£43.7m and EBITDA of c.£10.2m

 

·     Acquiring Billi from Culligan International after the completion
of its combination with Waterlogic; the divestment of Billi is a condition to
completion of the Waterlogic / Culligan merger announced in December 2021,
with timetable dictated by that process

 

·     Completion of the Acquisition is expected before year end, subject
to regulatory approvals

 

Debt Refinance

 

In conjunction with the Acquisition, the Group announces a debt refinancing
with new facilities consisting of:

 

·      A refinance of the current £80 million revolving credit facility
with a new tenor of 3 years plus two 1 year extension options; and

 

·      A new £49 million amortising term loan with a tenor of 3 years.

 

The interest rate on both facilities is calculated as the sum of the margin
(made by reference to a sliding scale dependent on net leverage) and SONIA.
The margin rates that Strix will be paying will not be materially different to
those on its existing revolving credit facility.

 

Mark Bartlett, Chief Executive of Strix Group plc, said:

 

"We are delighted to enter this agreement to acquire Billi, a leading
multifunctional taps manufacturer and distributor. Billi accelerates our
strategy within our Water and Appliances categories which is core to Strix's
five year plan. We look forward to welcoming the Billi team to the Strix Group
and working together to grow our combined businesses."

 

(1)Accretion figures are calculated based on market consensus as at 4(th)
October 2022, based on analyst notes released after the publication of the
interim results on 21(st) September 2022

 

Note: all figures are calculated using an AUD:GBP exchange rate of 0.58

 

 For further enquiries, please contact:

 Strix Group Plc                                                                             Tel: +44 (0) 1624 829829
 Mark Bartlett, CEO
 Raudres Wong, CFO

 Zeus (Joint financial adviser and nominated adviser)                                        +44 (0) 20 3829 5000
 Nick Cowles / Jamie Peel / Jordan Warburton / Matt Hogg (Investment Banking)

 Dominic King (Corporate Broking)

 Stifel Nicolaus Europe Limited (Joint financial adviser and debt adviser)                   +44 (0) 20 7710 7600
 Matthew Blawat / Francis North

 IFC Advisory Limited (Financial PR and IR)                                                  +44 (0) 20 3934 6630
 Graham Herring / Tim Metcalfe / Florence Chandler

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.

Information on Strix

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).

Information on Billi

 

Established in 1989 and headquartered in Melbourne, with distribution channels
located across Australia, and internationally in New Zealand, UK, Hong Kong,
Singapore and China, Billi is renowned for its premium filtered and
temperature-controlled water systems and manufacturing innovation. Billi is
led by a highly experienced management team with over 50 years of expertise in
leadership positions.

Products are marketed under two distinct ranges - 'Billi for Work'
(commercial) and 'Billi for Home' (residential), both sets of products are
fitted with industry leading features such as water-cooled technology and
space saving features. The core product range is supported by consumable
offerings (filters, CO2 cannisters, spare parts) and service (plans and
reactive). The Billi products are first choice for architects and designers
for specifications of products with an ESG focus, due to Billi's strong ESG
credentials. Billi was certified by Global Greentag, the WELL building
institute and Green Gas and has positioned itself at the forefront of ESG in
the premium filtered water systems category.

Billi operates in the high growth and strategically important hot tap and
water filtration markets. Businesses and consumers are increasingly becoming
health and environmentally conscious and so Billi has benefitted from the
shift away from bottled beverage consumption and the perception of filtered
water systems being seen as a must-have product in the home and office. As a
result, Billi has seen a c.6% CAGR growth in its commercial channel and c.30%
CAGR growth in its residential channel.

Billi has a total of 216 employees.

Cautionary statements

Certain statements in this Announcement are forward-looking statements, which
include all statements other than statements of historical fact and which are
based on the Company's expectations, intentions and projections regarding the
Company's future financial condition, performance, anticipated events,
strategic initiatives, or trends, the future performance of the Company
resulting from the Acquisition and other matters that are not historical
facts. These forward-looking statements, which may use words such as "aim",
"anticipate", "believe", "could", "intend", "estimate", "expect" (or the
negatives thereof) and words of similar meaning. These forward-looking
statements are not guarantees of future performance and involve known and
unknown risks, assumptions, uncertainties and other factors that could cause
the actual results of operations, financial condition, performance, liquidity
and dividend policy and the development of the industries in which the
Company's and Billi's businesses operate to differ materially from those
expressed or implied by the forward-looking statements. Undue reliance should
not be placed on such forward-looking statements. In particular, but without
prejudice to the generality of the above, no representation or warranty is
given, and no responsibility or liability is accepted, either as to the
achievement or reasonableness of any future projections, forecasts, estimates
or statements as to any prospects or future returns contained or referred to
in this Announcement or in relation to the basis or assumptions underlying
such projections or forecasts. Forward-looking statements speak only as of the
date of such statements. Except as required by applicable law, the Company,
Stifel, Zeus and their respective affiliates undertake no obligation to update
or revise publicly any forward-looking statements, whether as a result of new
information, future events or otherwise. Results can be positively or
negatively affected by market conditions beyond the control of the Company or
any other person. No statement in this announcement is intended to be a profit
forecast.

Stifel Nicolaus Europe Limited ("Stifel") and Zeus Capital Limited ("Zeus"),
each of which is authorised and regulated in the United Kingdom by the
Financial Conduct Authority, are acting exclusively for the Company and for no
one else in connection with the Acquisition and will not regard any other
person (whether or not a recipient of this announcement) as a client in
relation to the Acquisition or any other matter referred to in this
announcement, and will not be responsible to anyone other than the Company for
providing the protections afforded to their respective clients nor for
providing advice in relation to the Acquisition, or any other matter referred
to in this announcement. The responsibilities of Zeus as the Company's
nominated adviser under the AIM Rules for Companies and the AIM Rules for
Nominated Advisers are owed solely to the London Stock Exchange and are not
owed to the Company or any director, shareholder or any other person.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  ACQKZMGGFDVGZZZ