Door and window components supplier Tyman has entered into a conditional agreement to acquire Ashland Hardware, a North American manufacturer of hardware for residential windows and doors, for an enterprise value of $101m (£72.7m), it announced on Wednesday.
The London-listed firm said the acquisition was in line with its strategy to develop and extend the product portfolio of AmesburyTruth, through a combination of new product development and targeted acquisitions.
It said the acquisition and associated expenses would be funded through a drawdown of the group's existing committed banking facilities, together with the net proceeds from a proposed placing also announced on Wednesday of up to 10% of Tyman's issued share capital with institutional shareholders.
The enterprise valuation represented an acquisition multiple of 9x Ashland's adjusted EBITDA for the year ended 31 December 2017.
Tyman's board said it believed that the acquisition would provide operational and financial benefits which were expected to create value for shareholders.
For the year ended 31 December, Ashland recorded unaudited revenue of approximately $67.2m, up from $63.6m in 2016, with adjusted EBITDA of $11.2m, flat year-on-year.
Assuming successful completion of the fundraising, the acquisition was expected to be accretive to the group's underlying earnings per share in the 2019 financial year - the first full financial year following completion
Additionally, assuming delivery of the synergy plan and no material deterioration in Ashland's end markets, the acquisition was expected to exceed the group's 15% run rate ROAI target by March 2020.
Estimated annual pre-tax cost synergies and revenue benefits of at least $4m were expected to be delivered from 2020.
The expected one-off cash costs to implement the integration and deliver synergies were estimated at approximately $3m.
Leverage at year-end was 1.83x, and was projected to increase to the half year before reducing to within the group's year-end target range of 1.50x to 2.00x by the end of 2018.
On a 2017 proforma basis, the enlarged group's 2017 revenue would have been approximately £572.5m, with underlying operating profit of approximately £83.2m.
"The acquisition of Ashland represents a strategic opportunity to expand our residential hardware offering in North America," said Tyman chief executive Louis Eperjesi.
"Ashland offers an excellent fit with our AmesburyTruth business with its established customer relationships and strong product offering.
"The acquisition gives the enlarged division a viable 'good better best' product offering across multiple categories."
Eperjesi said the acquisition would be accretive to the group's underlying earnings per share from 2019, would strengthen AmesburyTruth's business model, and would help deliver the board's growth objectives.
"On behalf of the board I am pleased to welcome Ashland's management and employees to the group."