Insulation specialist Kingspan is poised to buy a Canadian rival in a €109 million deal.
The Irish group said yesterday it has agreed to buy the building products division of Toronto-listed Vicwest for $154.5 million Canadian dollars (€109 million).
The deal requires the backing of two-thirds of Vicwest’s shareholders and approval of the Canadian courts. It will be completed next year if these and other conditions are met.
Its terms require Kingspan to buy all of Vicwest for $376 million and to simultaneously sell on the Canadian group's steel business to another company, Ag Growth International (AGI), while keeping the building products division.
The Irish company will pay $154.5 million for the building products division while AGI will pay $221.5 million for Westeel, the business it is acquiring.
Vicwest shareholders will meet in January to vote on the two transactions, both of which need their approval for the deal to go through.
Vicwest's building products division consists chiefly of three insulated panel manufacturing plants in Hamilton in Canada and Arkansas and California in the US. Kingspan has aCanadian business with manufacturing facilities in Ontario and British Caledonia in Canada.
Earnings ratio
The business it is buying had sales last year of $253.7 million and earnings before interest, tax, depreciation and amortisation – a measure of the cash a company generates – of $13.2 million. That figure is expected to increase to $15 million this year, indicating the Irish company is paying roughly 10 times earnings for the business.
Kingspan said it plans to implement further changes expected to increase earnings to about $18 million a year. Vicwest Building Products had gross assets of $127 million at the end of June.
News of the Vicwest deal follows last week's announcement that Kingspan has completed the purchase of US insulation products manufacturer Pactiv for €61 million. Earlier this year, the group's chief executive, Gene Murtagh, had the scope to raise up to €350 million to fund acquisitions and hoped to execute at least one this year. Mr Murtagh said the acquisition would boost the Irish group's ability to drive the North American construction market to energy-efficient insulated panels.
Vicwest president and chief executive Colin Osborne said yesterday the agreement with Kingspan and AGI delivers the highest value for shareholders.
Kingspan confirmed it is on target to deliver a trading profit of €144 million for the full year a 17 per cent increase on 2013.
