9th Sep 2020 11:05
(Alliance News) - Avon Rubber PLC on Wednesday said it has agreed to acquire Cleveland, Ohio-based helmets supplier Team Wendy LLC for USD130 million.
Shares in the Wiltshire-based protection equipment manufacturer were up 5.9% at 3,936.67 pence each in London.
Team Wendy supplies helmets and helmet liner retention systems for military and first responder markets, including the US Department of Defense. Avon Rubber expects it to "be an important step in the strategic development of Avon Rubber as a leading provider of life critical personal protection systems" to these markets.
Once acquired, Team Wendy will be combined with Avon Protection's Helmets & Armor business, giving the enlarged group "better scale and an enhanced route to market". In 2019, Team Wendy posted revenue of USD44.2 million.
The acquisition price of USD130 million is subject to a normalised level of working capital and amounts to 9.7 times Team Wendy's 2019 earnings before interest, tax, depreciation, and amortisation of USD13.4 million. It will be earnings accretive within the first full financial year following completion, with the acquisition expected to close in the first quarter of Avon Rubber's financial year ending September 2021.
Avon Rubber also provided a trading update, stating that its Avon Protection and milkrite InterPuls units are still operating and trading as predicted, with the firm still confident of meeting its current year expectations.
The company's businesses have experienced "only minor disruption" resulting from the Covid-19 pandemic and demand has stayed strong. Avon Rubber's operational efficiency has been improved by the short-term cost savings in place in response to lockdown conditions.
Avon Rubber is expecting full year cash conversion to return to normalised levels after it receives delayed payment relating to its Rest of World mask contract.
Once Team Wendy is acquired and milkrite InterPuls is divested, most of Avon Rubber's activities will be conducted in US dollars, with the company then planning to change its reporting currency for its 2021 financial year to US dollars. Its dividend in financial 2021 will also be set in US dollars.
Avon Rubber Chief Executive Paul McDonald said: "We are delighted to have identified an opportunity that fits our clear commercial and financial criteria and enables us to immediately reinvest the milkrite InterPuls proceeds to drive additional shareholder value.
"Team Wendy is a high-quality business with complementary liner and retention system technologies and established positions in Rest of World military and first responder helmet markets. Bringing Team Wendy into the same family with our existing Helmets & Armor business establishes Avon Protection as a global leader in military and first responder helmets, with an enhanced and broader product portfolio with stronger capabilities and routes to market."
By Anna Farley; [email protected]
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