Avon Rubber p.l.c. (“Avon Rubber” or the “Company”) is pleased to announce the signing of an agreement to acquire Team Wendy, LLC (“Team Wendy” or the “Business”), a leading supplier of helmets and helmet liner and retention systems for military and first responder markets, for US$130 million (approximately £100 million ) on a cash-free and debt-free basis, subject to a normalised level of working capital (the “Acquisition”).
- The Board believes that the Acquisition will be an important step in the strategic development of Avon Rubber as a leading provider of life critical personal protection systems to military and first responder markets.
- Combining Team Wendy with Avon Protection’s existing Helmets & Armor business will create a global leader in Military and First Responder helmets with a broader product portfolio and stronger capabilities and routes to market.
- Team Wendy adds leading helmet liner and retention systems used by the U.S. Department of Defense (the “DoD”) and established positions in Rest of World Military and First Responder helmet markets to Helmets & Armor which is focussed on next generation ballistic helmets and body armor for the DoD.
- The enlarged helmet business will be better positioned for investment in next generation products.
- Establishes a broader platform into which other technologies can be incorporated.
- The Enlarged Group will have better scale and an enhanced route to market, with Team Wendy’s complementary customer base and well-established global footprint expected to provide significant business development opportunities over the medium-term.
- The Directors believe that the Acquisition will enhance shareholder value, meeting all of the Group’s strategic and financial criteria, and represents an immediate and compelling use of proceeds from the sale of milkrite | InterPuls (the “Dairy Disposal”) through the redeployment of capital into a highly complementary business with higher growth and margins and at a lower EBITDA multiple than obtained for milkrite | InterPuls.
- The acquisition price represents a multiple of 9.7x Team Wendy’s 2019 EBITDA. The Directors believe that the Acquisition is financially attractive and is in line with Avon Rubber’s stated financial performance criteria for value-enhancing acquisitions, as set out below.
- The Acquisition will be earnings accretive in the first full financial year after Completion, both on a standalone basis and after completion of the Dairy Disposal, before the delivery of revenue or cost synergies.
- Team Wendy has a track record of strong organic revenue and profit growth, high-recurring EBITDA margins and strong cash conversion.
- Avon Rubber will retain a strong balance sheet, with an anticipated net cash position following completion of the Acquisition and the Dairy Disposal.
- Team Wendy’s key strengths are closely aligned to those of Avon Protection – the Directors believe that Team Wendy is well positioned in its core markets; it has a track record of profitable revenue growth and an attractive product portfolio supported by proprietary technology.
- Diversified customer base of Military and First Responder users, both in the U.S. and internationally, with customers in over 50 countries ensuring it is not reliant on any single customer or contract.
- Strong R&D capabilities with leading helmet liner and retention system technologies and a focus on impact protection capabilities. Team Wendy has developed advanced proprietary technology relating to helmet liner and retention systems.
- The Team Wendy brand name is well respected and widely recognised internationally for its high-quality products, commitment to safety and advanced technological capabilities.
- Revenue in the year ended 31 December 2019 of US$44.2 million and EBITDA of US$13.4 million resulting in an EBITDA margin of 30.3%.
Strong and longstanding management team who will transfer with Team Wendy following completion.
The Business currently operates from a single facility in Cleveland, Ohio, employing approximately 130 people. Team Wendy will continue to operate from its Cleveland base, benefiting from the wider Avon Rubber infrastructure and management support.
- The cash consideration of US$130 million on a cash-free and debt-free basis, which is subject to closing and customary adjustments, is payable on Completion.
- The Acquisition constitutes a Class 1 transaction under the FCA Listing Rules and accordingly is conditional upon, inter alia, the approval of Shareholders at a General Meeting.
- The Acquisition is expected to close in the first quarter of the Group’s 2021 financial year, subject to U.S. regulatory approvals and customary closing conditions.
- Financing and Structure
- The consideration will be fully satisfied in cash. In the event that Completion occurs prior to completion of the Dairy Disposal, the consideration will be financed by drawing on a new US$200 million RCF facility with an initial term of three years, with two options to extend by an additional 365 days (“New RCF”), which will be repaid following completion of the Dairy Disposal. Following completion of the Acquisition and the Dairy Disposal it is intended that the New RCF will be used to support Avon Rubber’s medium-term growth objectives, including financing potential future acquisitions in line with Avon Rubber’s growth strategy.
- The facility made available under the New RCF is a US$200 million multicurrency revolving credit facility, subject to the satisfaction of certain conditions precedent. The New RCF is available for drawing in U.S. dollars, sterling, euro and other currencies (subject to certain conditions).
- The milkrite | InterPuls divestment, as announced on 2 July 2020, is subject to customary closing conditions and regulatory approvals, with completion expected to take place in the first quarter of the Group’s financial year. Avon Rubber expects to receive net proceeds before customary adjustments of circa £160 million post the completion of the Dairy Disposal. Avon Rubber has agreed with the trustees of its U.K. pension scheme to make a one-time contribution of £20 million to strengthen the scheme's funding position following completion of the divestment. In the event that completion of the divestment occurs prior to the completion of the Acquisition, Avon Rubber will use the net remaining proceeds to finance the Acquisition.
Paul McDonald, Avon Rubber, Chief Executive Officer, commented:
“The acquisition of Team Wendy is another important strategic step in the transformation of Avon Rubber into a leading provider of life critical personal protection systems.
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.
We look forward to welcoming Team Wendy into the Avon Rubber family and working together to further develop head protection systems that prevent traumatic brain injury and to improve the performance and capability of our customers.”
Jose Rizo-Patron, Team Wendy, LLC, Chief Executive Officer, added:
“Today’s announcement marks an exciting new chapter for Team Wendy that will usher in new opportunities for our employees, our customers and our business partners.
It was important for us to find the right owner for Team Wendy with a shared vision to save lives by providing the best for anyone wearing a helmet and who would continue to build on Team Wendy’s legacy.
Avon Rubber shares our vision for the growth and expansion of Team Wendy and, as such, we believe they are the right long-term partner for our customers, employees and other stakeholders.”
For the announcement, please visit the acquisition page on our website.