- Combination with Texon will provide $6mn of synergies
- Purchase price equates to 9-times trailing 12-month earnings
Thread maker Coats (COA) has completed a £92mn capital raise, which it will use to fund the €115mn (£97mn) acquisition of Rhenoflex, a German manufacturer of shoe parts.
Coats placed almost 145mn new shares at 63.5p a share with retail and institutional customers at a discount of about 4.5 per cent to the previous day's closing price of 66.5p. The placing shares equate to about 10 per cent of the company’s capital.
The acquisition of Rhenoflex is “highly complementary” to Coats' $237mn (£194mn) purchase of Texon International announced last month. It expects to deliver synergies of about $6mn from their combination, which it argues presents an opportunity to build a leader in a fragmented market.
Both firms serve athleisure and sports footwear markets and Coats expects their combined operations to deliver compounded growth of 8 per cent a year.
The €115mn purchase price equates to 9.2-times Rhenoflex’s trailing 12-month earnings, Coats said.
Analysts at RBC Capital Markets expect the deal to be “slightly dilutive”, given the increase in Coats’ share base but argued that it should facilitate growth, with operating margins of 15 per cent or more “in sight”.
Coats’ shares currently trade at just over 8-times broker Peel Hunt’s forecast earnings of 8p per share, below both their peers and their own historic valuation. Buy.
