discoverIE, a leading international designer, manufacturer and supplier of customised electronics to industry, today announces the acquisitions of Logic PD Inc (also known as Beacon EmbeddedWorks) (or “Beacon”) and Antenova Limited (“Antenova”) (collectively the “Acquisitions”) together with a proposed placing to raise gross proceeds of approximately £45m (the “Placing”).
Acquisition Highlights and Rationale
- Beacon is a US-based designer, manufacturer and supplier of custom System on Module (SOM) embedded computing boards and related software, supplying the medical, industrial and aerospace & defence markets in the US.
- Beacon delivered revenue of $28.1m (£20.5m) for its most recent financial year ended 31 December 2020, generating an underlying EBITDA1 of $6.8m (£5.0m) and an underlying EBIT of $5.9m (£4.3m).
- Beacon has been acquired for a cash consideration of $80.5m (£58.8m) on a debt free, cash free basis, before expenses, funded from the Group's existing debt facilities. With a record order book, management incentives have been agreed based on profit growth targets over the next four years.
- The Group has separately acquired Antenova, a UK-based designer and manufacturer of antennas and radio frequency (RF) modules for industrial connectivity applications, for a cash consideration of £18.2m on a debt free, cash free basis, before expenses, funded from the Group's existing debt facilities.
- Antenova is experiencing strong growth in the current year with sales expected to be c.£8.0m. Underlying EBITDA is expected to be in the region of £2.3m, with underlying EBIT of £2.2m. Management incentives have been agreed based on the achievement of future profit growth targets.
- The Acquisitions represent further progress with the Group's stated growth strategy. In particular, they:
- Create further organic growth opportunities in the Group’s target markets, particularly medical, and industrial & connectivity, with high proportions of customised products for long life cycle applications;
- Expand the Group’s international footprint significantly in North America, increasing revenues from outside Europe for the Design & Manufacturing (“D&M”) division by 4ppts to 40% on a proforma basis for the last financial year and for the Group by 3ppts to 31%; and
- With both businesses generating operating margins in excess of 20%, the Acquisitions enhance underlying operating margins for both the D&M division and the Group as a whole by approximately 0.8ppts on a proforma basis for last financial year.
- The Acquisitions and the Placing (as described below), taken together, are expected to be immediately enhancing to underlying EPS.
Placing Highlights
- Proposed placing of new ordinary shares of 5 pence each in the Company (the “Placing Shares”), to raise gross proceeds of approximately £45m. The total number of Placing Shares is expected to represent approximately 5 per cent. of the Company’s existing issued share capital as at the date of this Announcement.
- The Placing is being conducted through an accelerated book building process (the “Bookbuild”) which will commence immediately following this Announcement in accordance with the terms and conditions set out in the Appendix. The Placing Price will be determined at the close of the Bookbuild.
- The consideration for the Acquisitions has been satisfied from discoverIE’s existing debt facilities, with the net proceeds of the Placing, which are expected to be approximately £43.6m, used to reduce the Group’s net debt, to fund working capital and for general corporate purposes.
- Following the Acquisitions and the Placing, proforma gearing, calculated as net debt to adjusted EBITDA (annualised for acquisitions), at 31 March 2021 would have increased from 1.25x2 to 1.8x on a pro forma basis, remaining within the Company’s target range of 1.5x to 2.0x.
- The Group retains a healthy pipeline of further acquisition opportunities and the Placing, together with continued strong cash generation and a disciplined approach to portfolio management, will enable further investment allowing the Group to remain within its target leverage ratio.
- The Placing is being conducted and underwritten by Peel Hunt LLP (“Peel Hunt”) as to an amount of £45m, subject to certain conditions.
Nick Jefferies, Group Chief Executive of discoverIE, said:
"The earnings accretive acquisitions of Beacon EmbeddedWorks and Antenova continue our strategy of building a high quality, high margin international group that designs and manufactures differentiated and customised electronics. Both Beacon and Antenova have long-established track records of supplying high quality products, mostly into our core target markets, and are therefore well-positioned to exploit a range of growth opportunities. We are delighted to welcome the businesses and all their employees into the Group.
“With a clear strategy focused on long-term, high quality growth markets, a diversified customer base, and a strong pipeline of acquisition opportunities, the Group is well positioned to make further progress on its key priorities.”
Market Abuse Regulation
The information contained within this Announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (“MAR”). Upon the publication of this Announcement via a regulatory information service, this inside information is now considered to be in the public domain.
The person responsible for arranging release of this Announcement on behalf of the Company is Greg Davidson, Group General Counsel and Company Secretary of the Company.
In addition, market soundings (as defined in MAR) were taken in respect of the Placing and the Acquisition with the result that certain persons became aware of inside information (as defined in MAR), as permitted by MAR. This inside information is set out in this Announcement being made by the Company today. Therefore, those persons that received inside information in a market sounding are no longer in possession of such inside information relating to the Company and its securities.
Terms used but not defined elsewhere in this Announcement shall have the meanings given to such terms in the Definitions section of the Appendix to this Announcement.
Enquiries:
discoverIE
Nick Jefferies - Group Chief Executive
Simon Gibbins - Group Finance Director
01483 544 500
Peel Hunt (Broker and bookrunner)
Mike Bell
Ed Allsopp
Jock Maxwell Macdonald
Sohail Akbar
Max Irwin
020 7418 8900
Buchanan (Financial PR)
Chris Lane
Toto Berger
Jack Devoy
020 7466 5000
About discoverIE
discoverIE Group plc is an international group of businesses that designs, manufactures and supplies innovative components for electronic applications.
The Group provides application-specific components to original equipment manufacturers (“OEMs”) internationally. By designing components that meet customers’ unique requirements, which are then manufactured and supplied throughout the life of their production, a high level of repeating revenue is generated with long term customer relationships.
With a focus on key markets driven by structural growth and increasing electronic content, namely renewable energy, medical, transportation and industrial & connectivity, the Group aims to achieve organic growth that is well ahead of GDP and to supplement that with targeted complementary acquisitions. The Group has an ongoing commitment to reducing the impact of its operations on the environment, while its key markets are aligned with a sustainable future.
The Group employs c.4,600 people and its principal operating units are located in Continental Europe, the UK, China, Sri Lanka, India and North America.
The Group is listed on the Main Market of the London Stock Exchange and is a member of the FTSE250, classified within the Electrical Components and Equipment subsector, with revenues of around £500m.