With the acquisition of Encore Wire for USD 290 per share in cash, Prysmian aims to enhance its presence in North America and broaden its product offering.
Apr 18, 2024
Leading global solution provider for cables, energy, telecom cables and systems industry, Prysmian has announced acquisition of Encore Wire, leading manufacturer of copper and aluminum electrical wire and cables, for USD 290 per share in cash.
As per a release issued by the Milan-based company, the transaction represented a premium of approximately 20 percent to the 30-day volume weighted average share price (VWAP) as of April 12, 2024 and approximately 29 percent to the 90-day VWAP as of the same date.
At the terms of the transaction, Encore Wire’s implied enterprise value was approximately USD 4.16 billion representing a multiple of 8.2x EV/2023A EBITDA and 6.3x EV/2023A EBITDA including run rate synergies.
The statement further said that Encore Wire was highly complementary to Prysmian’s strategy.
The transaction will allow Prysmian, in particular, to increase its exposure to secular growth drivers; enhance its exposure to North America; leverage Encore Wire’s operational efficiency and best in class service across Prysmian’s portfolio; broaden Prysmian’s product offering enabling the combined company to better address customers’ needs in North America; and
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generate USD 14.95 million in run-rate EBITDA synergies expected within four years from closing.
“The acquisition of Encore Wire represents a landmark moment for Prysmian and a strategic and unique opportunity to create value for our shareholders and customers,” said Massimo Battaini, Prysmian designated Group CEO.
“Through this acquisition, Prysmian will grow its North American presence, enhancing its portfolio and geographic mix, while significantly increasing the exposure to secular growth drivers. We look forward to welcoming the Encore Wire team to Prysmian and benefitting from the combined company’s enhanced product offerings and customer relationships,” he added.
“We are pleased to have reached an agreement that reflects the remarkable value Encore Wire has created with our expansive single-campus model, low-cost production, centralized distribution and product innovation,” said Daniel L. Jones, Encore Wire’s Chairman, President and Chief Executive Officer.
“This transaction maximizes value for Encore Wire shareholders and provides an attractive premium for their shares. Encore Wire and Prysmian are two highly complementary organizations, and we anticipate a bright future for Encore Wire as part of Prysmian.
“Furthermore, as part of a larger, global operation, we expect this transaction will bring additional future opportunities for our employees, whose dedication and hard work made this transaction possible. We look forward to working with Prysmian to complete this value-enhancing combination and realize the significant benefits that we expect it will bring to all of our stakeholders,” he added.
Following closing of the transaction, Prysmian expects to maintain a significant presence at Encore Wire’s vertically-integrated, single-site campus, spread over 3 million square feet in McKinney, Texas.
Based on pro forma aggregated results for 12 months ended December, 2023, the combined group would have posted net sales of over USD 18.9 billion and adjusted EBITDA of approximately USD 2.24 billion.
Prysmian expects to generate run-rate pre-tax synergies of approximately USD 14.95 million within four years from closing. One-off capex / costs to achieve the above-mentioned synergies are estimated at approximately 1.2-1.3x run-rate pre-tax synergies.
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The transaction is expected to generate an EPS accretion of 30 percent, including run-rate synergies, an EPS accretion of 20 percent pre-synergies for Prysmian shareholders.
The transaction will be financed through a mix of cash on Prysmian’s Balance Sheet (USD 1.18 billion) and newly committed debt facilities (USD 3.63 billion). Pro-forma net debt for the combined group of approximately USD 5.45 billion, representing a 2.4x 2023 ND/Adj. EBITDA ratio.
Given the strong cash flow generation of the combined business, further enhanced by the synergies, Prysmian will enjoy an accelerated deleverage, which is expected to bring leverage ratio (ND/Adj. EBITDA) close to Prysmian standalone 2023 leverage ratio by 2027.
The transaction, which has been unanimously approved by each company’s Board of Directors and recommended to its shareholders by Encore Wire’s Board of Directors, is expected to close in the second half of 2024, subject to approval from Encore Wire’s shareholders representing at least a majority of the outstanding shares, regulatory approvals, and other customary closing conditions.
Prysmian is a global cabling solutions provider leading the energy transition and digital transformation. Encore Wire is a leading manufacturer of a broad range of copper and aluminum electrical wire and cables, supplying power generation and distribution solutions.
