RWC to Acquire Holman Industries
Reliance Worldwide Corporation Limited (ASX: RWC) (“RWC” or “the Company”) has entered into an agreement to acquire the Holman Industries business (“Holman”) for A$160 million(1) (US$105 million). The price reflects a 7.0 times multiple of Holman’s LTM EBITDA(2) before synergies. The business is being acquired from interests associated with Holman’s founder Walter (Wally) Edwards.
RWC expects the acquisition of Holman will be EPS accretive from the first full year of ownership, and the return on capital employed (ROCE) to exceed RWC’s current level.
Holman is a leading independent manufacturer and distributor of branded plumbing and watering products sold through retail and wholesale channels in Australia. Approximately half of Holman’s revenues are generated from sales of “water-out” plumbing products focused on drain, waste and vent (DWV) solutions, stormwater fittings, and PVC pressure fittings. The remaining revenues are generated by sales of watering products including a range of hose systems, fittings, timers, and garden products in retail and hardware. Holman is a long-term supplier to this segment with strong retail fulfilment execution expertise.
Holman’s PVC plumbing products for DWV solutions are manufactured at its plants in Western Australia and Queensland. Other products are sourced from trusted international suppliers. Holman has a network of seven distribution centres across Australia to service its channel partners.
Holman recorded net sales of A$192 million and Adjusted EBITDA of A$22.9 million(2) in the 12 months ended 31 December 2023. The acquisition of Holman is expected to double RWC’s annual net external sales in its Asia Pacific (“APAC”) region to approximately A$360 million(3).
RWC estimates that APAC segment net sales for the current financial year ending 30 June 2024 will increase by approximately A$50 million reflecting a part period contribution from Holman(4). Holman’s trading pattern has a higher seasonality than RWC’s existing APAC business, with around 75% of operating earnings occurring in the period from 1 July to 31 December.
The acquisition will be debt funded utilising RWC’s existing committed borrowing facilities. RWC’s pro-forma leverage (Net Debt to Pro Forma EBITDA) will increase to 1.90 times post completion, compared with 1.69 times at 30 June 2023.
Holman’s founder Wally Edwards has agreed to remain with the business for two years following completion of the acquisition.
RWC believes the acquisition of Holman will provide additional sales growth opportunities from an expanded product portfolio coupled with a much broader retail channel partner distribution footprint in Australia. In addition to revenue synergies, RWC also expects to achieve cost savings of approximately A$5 million p.a. on a run rate basis by the end of Year 3 through distribution footprint rationalisation and optimisation.
RWC Chief Executive Officer, Heath Sharp said the acquisition of Holman aligns with RWC’s growth strategy and will enhance its market position in Australia.
Footnotes
1 Subject to conditions precedent and customary closing adjustments and conditions. All figures are in Australian dollars unless otherwise specified.
2 Pro forma adjusted earnings before interest, tax, depreciation, and amortisation (“EBITDA”) for the 12 months ended 31 December 2023. Source: Holman management accounts for the period, which have not been subject to audit review.
3 Based on RWC net external sales for the year ended 30 June 2023 and Holman’s net sales for the same period.
4 Assumes completion by early March 2024 as currently expected.