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Bathroom products maker Methven is to buy British tap and showerware supplier Deva Tap Company Ltd for $59 million.
Methven today said that the deal would see it more then triple its direct distribution reach.
The acquisition would be funded through a combination of a $15 million institutional placement, $12.8 million rights issue, $2.4 million in shares to key senior management of Deva and up to $30 million of long term debt, including existing Deva borrowings.
Trading of Methven shares on the New Zealand stock exchange was suspended today at Methven's request while the placement was undertaken by ABN AMRO Craigs.
Methven expected the share placement to be completed by 5pm tomorrow, with normal sharemarket trading in the shares to start again on Monday, but reserved the right to close the placement and restart trading earlier.
The acquisition and associated financing was conditional on shareholder approval which was scheduled to be voted on at Methven's annual meeting on July 26, with the transaction expected to be completed by August 31.
Methven, whose products include the water saving Satinjet shower range, said the purchase of independent and privately-owned Deva was highly complementary to its existing business.
Manchester-based Deva had 6 per cent of the British brassware market, including taps and showerware, with established trading relationships with most of Britain's major plumbing and building merchants, and DIY groups.
Methven Group's post-acquisition revenue was expected to increase by an estimated 75 per cent to almost $124 million, Methven chairman Richard Cutfield said.
Earnings before interest, tax, depreciation and amortisation (ebitda) were expected to increase by an estimated 65 per cent to more than $22 million, with earnings per share expected to rise by around 19 per cent on Methven's March 31 level.
Deva had a sound track record of profitability and was achieving good growth in the competitive British brassware market, based on a quality, cost competitive offering and responsive customer service, Mr Cutfield said.
The acquisition would see Methven Group's direct distribution increase from a total Australasian population of about 25 million to a combined Australasian and British population of around 85 million, excluding Methven's start-up operations in the USA.
It offered the future potential to widen Methven's existing access to markets in continental Europe.
Methven managing director Rick Fala said it was expected that over time the acquisition would enable the company to realise cost savings in aggregating procurement, engineering, quality assurance and product sourcing.
Methven shares closed yesterday at $2.30, having ranged between $1.50 and $2.50 in the past year.
- NZPA
