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NZX listed fittings and tap manufacturer Methven is making a bold bid for a chunk of the British market with the acquisition of UK company Deva for $59 million.
Methven itself has a market cap of just $117 million and the deal is expected to lift its annual revenue by 75 per cent - to $124 million.
"It is a significant strategic move for the company," chairman Richard Cutfield said yesterday.
"Having said that, Deva a good solid company which we understand and relative to the scale of the UK market it's not a large company."
The Auckland-based company already has a 30 per cent share of the Australian market and a 40 per cent share of the New Zealand market.
The company had successfully built its market share in Australia through the acquisition of Flexispray in 2003 and 2004.
The aim was to replicate that model in the UK, Cutfield said.
Flexispray was in similar position to the Deva business, "although Deva has more scale and more highly developed sales infrastructure".
Deva has a 6 per cent share of the UK market.
One of the strengths of the acquisition was the UK management team who would be retained and would bring value to the group, Cutfield said.
The acquisition will be funded through a $15 million institutional placement, a 12.8 million rights issue, the issue of $2.4 million worth of shares to Deva management and about $30 million of long-term debt - including existing Deva debt.
Methven was undergeared so it was prudent to be taking on some more debt to improve the efficiency of the balance sheet, Cutfield said.
Trading of Methven shares was suspended yesterday while the placement was undertaken by ABN Amro Craigs. It was due to resume on Monday.
The acquisition is conditional on shareholder approval with a vote to be held at the annual meeting on July 26. the deal is expected to be completed by August 31.
Methven shares last traded at $2.30.
