This morning, Renold, a long-established industrial chain manufacturer, announced the acquisition of two North American chain makers for a total of US$31.4 million.
The acquisitions of MAC Chain Company Ltd (U.S.) and MAC Chain Company Limited (Canada) will provide Renold greater access to the lucrative forestry markets in the Western United States and Canada. The management teams of MAC Chain will join Renold’s existing North American team, ensuring a smooth transition and continuity in operations.
A trading update for the five months ended 31 August 2024 reported revenue of £102.3m, a 0.9% reduction at constant exchange rates and a year-on-year decrease of 2.3% at reported rates due to adverse foreign exchange movements. However, Renold’s order book as of 31 August 2024 stood at £85.5m, remaining close to a record high level.
The acquisition of MAC Chain is structured on a cash-free, debt-free basis, consisting of an initial cash payment of US$28.26 million, followed by two subsequent payments of US$1.57 million each payable 12 months and 24 months post-completion. This total consideration represents an acquisition multiple of approximately 7.5x EBITDA for the twelve months to June 2024. Realising the initially identified synergies is expected to reduce this multiple to 6.9x in the initial year of ownership and well below 6.0x in subsequent years.
The deal has been funded by Renold’s existing borrowing facilities, with the Group’s net debt to EBITDA multiple anticipated to be below 1.2x post-acquisition, down from 0.6x as of 31 March 2024. With continued strong cash generation, Renold retains sufficient facility headroom to pursue further bolt-on opportunities.
MAC Chain reported revenue of US$25.8m for the twelve months ended June 2024, generating an EBITDA of US$4.2 million and a pre-tax profit of US$3.5m. The tangible net assets acquired are estimated at US$11.5m.
Renold’s Group Chief Executive, Robert Purcell, noted, “Not only are we buying an excellent business, but also retaining the services of a very talented group of managers and employees. The acquisition of MAC Chain considerably expands and strengthens our North American Conveyor chain offering. This acquisition builds our momentum as we execute our deal pipeline. Reduced leverage has been driven by strong operational performance, resulting in a strong balance sheet and conservative debt levels, allowing accelerated growth through complementary bolt-on deals.”
The strategic acquisition of MAC Chain underscores Renold’s commitment to expanding its presence in North America, particularly in the forestry sector, while maintaining strong financial health and operational performance.
