Renatus’ Weekly M&A Newsletter – 16/08/2020
August 16, 2020Renatus’ Weekly M&A Newsletter – 23/08/2020
August 23, 2020
Renatus Weekly M&A & Company Performance Newsletter 02/08/2020
Dear Reader,
You are receiving this mail every week as we see you as a key partner and we look forward to continuing to enjoy our journey with you over the decades ahead.
Please find below this week’s newsletter covering the latest M&A, company performance, fundraisings and executive moves.
M&A ACTIVITY
Kingspan agrees to acquire TeraPlast’s insulated panels division
Deal Details: Kingspan has agreed to acquire Romanian construction material supplier TeraPlast’s insulated panels division. The €85m cash deal is subject to approval by the competition authority and TeraPlast’s shareholder vote.
Bucharest stock exchange-listed TeraPlast makes and sells insulated sandwich panels, metallic roof tiles and other accessories.
Cavan-based global insulation and building materials provider Kingspan employs more than 15,000 people at 159 locations globally and has built a reputation as being the global leader in this space. In its financial year to December 2019, Kingspan PLC reported revenue of c. €4.7bn and EBITDA of c. €579m.
Advisers: None mentioned
Renatus Comment: Kingspan’s share price was trading at an all-time high pre-covid at €64 and closed Friday at €60.75. It is yet another example, along with many of its ISEQ neighbours of a great Irish company that raised capital to expand internationally, both organically but also massively through acquisition. We in Renatus have already partnered with three SME Irish market-leaders and we are partnering with them to find and fund international bolt-on acquisitions. If you are a market leader in Ireland and have not expanded international yet please give us a call. This is a good article on same:
https://go.renatus.ie/e/
Source: Irish Independent
Draper Esprit sells remaining TransferWise stake
Deal Details: Dublin and London-listed venture capital firm Draper Esprit has sold its remaining stake in portfolio company TransferWise for £18m (€19.8m).
Having initially invested in the fintech company in 2017, Draper Esprit’s cash returns stand at £33m (€36.4m) following this week’s transaction and another share sale in May 2019.
Headquartered in London, TransferWise is an online money transfer company founded in 2011.
This week’s share sale values the company at $5bn (€4.2bn), a 43% increase in valuation since May 2019. Other backers in the fundraise include D1 Capital Partners, Lone Pine Capital, Vulcan Capital, Baillie Glifford and Fidelity Investments.
Advisors: None Mentioned.
Renatus Comment: This is Draper Esprit’s second exit in as many months having sold portfolio company Peak Games to Zynga Inc in July for £88 million (€97 million). Returns such as this will surely be welcome given the broader macroeconomic environment.
Source: Irish Times
United Molasses Marketing has acquired Greencore’s molasses business
Deal Details: Dublin-headquartered Greencore Group has sold its molasses business to United Molasses Marketing for £15.6m (€17m). The division is responsible for importing and distributing animal feed in Ireland.
United Molasses Marketing is focussed on the global trading and marketing of molasses, vegetable oils and related products, and the storage of bulk liquids.
Convenience foods company Greencore has outlined that the funds from the transaction will be used to strengthen its balance sheet. In the Group’s half year financial results to March 2020, they recorded revenue of £712m and EBITDA of £63m.
Advisors: None Mentioned.
Renatus Comment: Greencore Group, which is one of the biggest pre-packed sandwich makers in the UK, has been particularly hit by drastic changes to peoples’ eating habits since the onset of Covid-19. In its report at the end of March, the Group outlined that sales of “to-go” meals had fallen by 70% in the 6 weeks to the end of March versus the same period last year.
Greencore is trading at less than half the price it traded at in January suggesting the market thinks there is at least another 12/18 months of disrupted buying patterns for quick lunches ahead.
Source: Irish Independent
Stanley Capital acquires Noden Pharma
Deal Details: UK-based Stanley Capital has acquired Irish-based Noden Pharma for consideration reportedly worth up to €40m.
Noden Pharma is a specialty pharmaceutical player that is focused on acquiring medicines across a broad range of therapeutic areas. Noden was owned by US-based PDL BioPharma until this transaction. In its financial year to December 2018, the company had revenue of c. €53.8m and EBITDA of c. €18.9m.
Advisers: None mentioned
Renatus Comment: Stanley Capital reportedly consider Noden Pharma as a platform company with which they plan to acquire a number of other specialty pharmaceutical companies in a buy-and-build play. Mature medicines with a proven market need can be a highly cash generative asset with high barriers to entry due to patents.
Source: Sunday Independent
Mr. Price acquires Star Buys
Deal Details: Irish discount retailer Mr. Price has acquired Star Buys, a similar business based in Dublin. The financial consideration was not disclosed.
With a combined c. 50 stores, Mr. Price is one of Ireland’s largest discount retailer chains. It sells a wide range of products across household, stationary, food appliances and other. The business is Irish-owned and employs over 1,000 people.
In its press release, the company stated that it intends to keep expanding its retail footprint with a number of new store openings planned.
Advisers: None mentioned
Renatus Comment: Discount retailers such as Mr. Price have shown themselves to be resilient in economic downturns and almost recession proof. In the US between 2008 and 2012, the three major discount retailers, Dollar General, Family Dollar and Dollar Tree, added thousands of stores to their estate. Such characteristics mean Mr. Price can be ambitious in uncertain economic times.
Source: Mr. Price Press Release
DEALS IN THE MAKING
Canadian bakery giant pursues a deal with Aryzta
George Weston Ltd is rumoured to be working with an advisor to potentially acquire Irish-Swiss bakery group Aryzta.
George Weston Ltd is a Canadian-listed holding company with interests in real estate, food and pharmacies. The business is majority owned by Galen Weston, who also has interests in Associated British Foods (owner of Pennys) and Brown Thomas.
Aryzta has recently been heavily tipped as a takeover target. The company reportedly hired Rothschild & Co in April for a strategic review that effectively put the business on the market.
Source: Irish Independent
Kerry Group considers sale of dairy division
It has been reported that Kerry Group is considering a sale of a 60% share in its dairy business. While the company has not made a formal comment on the potential deal, it is reported that a sale to members of the Kerry Co-op is on the cards.
The Kerry Co-op is reportedly the largest shareholder in Kerry Group with a 12.7% stake. Under this deal, “dry” shareholders, those who no longer supply dairy, will be paid in Kerry Group shares while milk suppliers will be asked to reinvest in a new company that will acquire a 60% in the dairy business while retaining a stake in the public company.
Source: The Sunday Times
DEAL UPDATES
Madison Dearbon makes an offer to acquire IPL
Madison Dearbon, a Chicago-based investor, has made an offer to buy Irish-backed IPL for $555 million Canadian dollars (€353m) or $10 a share.
This is a 69% premium on the average at which they traded on the Toronto stock exchange for 20 days up to July 28th.
The success of the deal depends on approval from at least two thirds of the shareholders and IPL not securing a better offer in 30-40 days in a ‘go-shop’ provision in the terms, allowing IPL to seek a better offer from interested parties.
Source: Irish Times
Blackrock Hospital and Hermitage Clinic share sale cleared by CCPC
Larry Goodman’s vehicle Parma Investments has completed the acquisition of additional shares in Blackrock Hospital and Hermitage Clinic. Mr. Goodman is now the largest shareholder in the hospitals having previously held a significant stake.
Source: CCPC
Dawn Meats takes full control of Dunbia
Irish-based Dawn Meats will take full control of the Dunbia business that was jointly established in 2017.
Founded by Jim Dobson OBE and his brother Jack, Dunbia has grown to be one of the largest food companies in Ulster.
It processes beef and lamb from 12 facilities across Scotland, England, Wales and Northern Ireland and exports its produce to 36 countries.
Dunbia employs c. 1,000 people in Northern Ireland, an increase of 25% since the joint venture was formed.
Dawn Meats’ consolidated businesses in the UK and Ireland process around one million cattle and three million sheep annually; employs over 7,000 staff; and works with over 30,000 farmers.
Source: Belfast Telegraph
COMPANY PERFORMANCE
EBITDA is an accounting term and is often the best indicator of profitability in non-capital-intensive businesses before financing and tax are considered. In capital-intensive businesses EBIT or EBITDA less average Capital Expenditure are often better measures. YoY is an acronym for the year-on-year movement in turnover, EBITDA, etc.
Established in 1961 by the late Archie O’Leary, O’Leary Insurances now has 8 locations nationwide including Cork, Dublin, Galway and Waterford. The company provides a comprehensive insurance broking service to clients both in Ireland and abroad.
In FY19, O’Leary Insurances saw revenue increase by 6.1% to c. €11.6m while EBITDA decreased by 16.1% to c. €1.8m. This reduction was mainly due to pressure on operating profit driven by the c.10% increase in administrative costs in FY19. Net cash Increased by c. €488k to leave an ending balance of c. €10.5m. The most significant cash flow movement were the repayment of loans amounting to c. €887k.
The company had 94 employees in FY19 at a total cost of c.€8.27m. Anthony O’Leary owns 100% of the business.
Founded in the 1970s and Headquartered in Northern Ireland, Henry Brothers Limited is now recognised as a leading construction company. The Henry Group comprises a number of manufacturing & construction sector companies ranging from external construction through to interiors fit-out.
In its latest fiscal year, Henry Brothers saw revenue decrease by 18.2% to c. £69.8m while EBITDA also dropped by 11.2% to c. £2.8m. Management attributed this drop to the subduing of the construction sector due to the onset of Covid-19. Net cash increased by c. £508k to leave an ending balance of c. £30.3m. The most significant cash movements were the c. £1.2m working capital movement and the c. £1.5m in dividends paid out.
The company employed 177 people in FY19 at a total cost of c. £7.4m. The company is owned by David Henry (54.43%), Julie McKeown (22.78%) and Ian Henry (22.78%).
Based in Northern Ireland, Cooneen By Design Limited is a market-leading designer, manufacturer and supplier of garments as well as the provision of a complete uniform managed services to a diverse range of customers, both private and public sector.
In FY19, Cooneen By Design saw revenue increase 9.5% to c. £70.2m while EBITDA also increased by an impressive 44.6% to c. £5.5m. Gross margins were up c.2%. Net cash increased by c. £2.2m to leave a negative ending balance of c. £2.5m. The most significant drain on cash was the c. £1.4m working capital movement.
The company hired an additional 20 people in FY19, bringing the total headcount to 191 employed at a total cost of c. £7.4m. Cooneen is owned by McGuckian family members Bernard, Brigid, John and Pauline as well as Eugene Greene.
RECENT FUNDRAISINGS
Who: BHSL is an Irish owned Waste to Energy business . It operates through trading subsidiaries in Waste Water treatment (Hydro International Co Meath), household Waste processing (Glanway Waterford) and BHSL which combusts waste to generate heat and energy (Limerick).
What: The business has reportedly raised €8.5m which brings it total fundraising to-date to c. €40m. BHSL was advised on this fundraise by Focus Capital Partners.
Why: The funds will reportedly be used for the expansion of the Waterford Waste processing facility and the balance for working capital for expansion of the group.
Source: The Irish Times
Who: Irish molecular diagnostics company GlowDX, founded by Blaine Doyle and Rodrigo Cervantes, raises funds.
What: A €1.1m funding round was led by SOSV venture capital and a number of angel investors such as former Nightline Logistic CEO John Tuohy; JingaLife CEO Dr Johnny Walker; Aalto Bio Reagents MD Philip Noone and Dr. Donal O’Shea, Founder and CEO of Deciphex. This funding comes after it received a PandemicTech fellowship grant of $100k to improve Covid-testing diagnostics.
Why: The main focus of this funding will be directed at facilitating further expansion in Latin America and to initiate expansion in Europe, with a number of R&D projects already underway. The company has a second lab opening soon in Mexico and is considering a move into the Colombia market.
Source: Irish Times
Who: Trinity College spin-out Volograms, founded in 2018 by post-doctoral researchers Rafael Pagés, Konstantinos Amplianitis and Jan Ondrej, raises funding.
What: The €1.5m funding round has been led by Sure Valley Ventures with the Atlantic Bridge University Fund. While Enterprise Ireland also participated. An LK Shields team of Emmet Scully and Lester Sosa-Villatoro advised Sure Valley on the transaction.
Why: The company’s ambition is to bring its technology to everyone by enabling mobile phone users to insert their own volograms into video and share these with others across social media and in content for use in apps and VR headsets.
Source: Irish Times
Who: Atxa Therapeutics is seeking to raise funds.
What: The UCD spinout plans on raising $30m (€25.7m) in a funding round.
Why: The money will be used to complete clinical trials and to secure marketing authorisation for a drug (NTP42) developed for treating pulmonary arterial hypertension (PAH), a deadly heart condition.
Source: Irish Times
Who: Digital media venture Kinzen has raised funding. Kinzen is a news app which helps connect readers with publishers.
What: Kinzen has reportedly raised between €725,000 and €750,000 from backers including Norway’s FST Growth Ray Nolan, and US-based DK Investments.
Why: The use of funds was not disclosed.
Source: The Sunday Times, Business Post
EXECUTIVE AND BOARD APPOINTMENTS
We in Renatus believe that more important than the deals are the people and we have teamed up with leaders in this field Korn Ferry to provide you with details of key recent executive and board level appointments.
THOUGHT FOR THE WEEK
It was fascinating to see Kodak come out as a potential player producing ingredients for drugs to fight Covid during the week. It had been getting more coverage in business history books than anything else and it is fascinating pivot.
In Renatus, we were exchanging stories of companies who once ruled supreme in their markets but are now barely even a shadow of what they were like Kodak up until last week. They include but are not limited to Nokia, Blackberry(RIM), Blockbuster, Commodore, Atari, Polaroid, Palm, Sony Walkman. The lesson for us all in business is when a strategic shift is suggested around the board table and ruled out based on threat of cannibalisation, be careful. There are stories of many of the aforementioned being aware of trend and in a position to pivot but never did out of protectionism for a cash-cow that ultimately died.
@RenatusCapital Tweets
6.8%
The year-on-year increase in the NI grocery sales for a 12 week period to July 12th 2020, according to Kantar survey. @BelTel
55.5
The Bank of Ireland’s consumer sentiment index for July 2020, a 26 point drop from July 2019, according to BoI. @IrishTimes
29.2%
The reduction in the Irish retail sales for Q2 2020, according to Retail Excellence Ireland (REI), based on data from 4,500 stores across the State. @IrishTimes
97.1% & 96.4%
The year-on-year decrease in the overseas arrivals and departures, respectively, for June 2020 amounting to 57,100 arrivals and 73,900 departures vs c. 2m people travelling in each direction in June 2019, according to @CSOIreland
3.5% & 0.0%
The year-on-year increase in the Irish retail sales volume, while the value index remains the same for June 2020, with the most notable changes in the Hardware, Paint & Glass (+30.1%) and Bars (-81.1%), according to @CSOIreland
34.8% & 35.11%
The year-on-year decrease in the volume and value of mortgage drawdowns, respectively, for Q2 2020 amounting to 6,622 mortgages to the value of €1.46bn, according to BPFI. @IrishTimes
165%
The year-on-year increase in the Irish household savings for Q2 2020 amounting to approx €5.3bn vs c. €2bn deposited in the same period last year, according to the Central Bank. @RTEbusiness
3.8%
The year-on-year increase in the Irish agricultural operating surplus for 2019 amounting to €3,055,2m, according to @CSOIreland
ABOUT RENATUS
Renatus was established in 2014 by Mark Flood and Brendan Traynor to provide growth funding to growing Irish SMEs and to partner with ambitious management teams to help companies reach their full potential.
Renatus targets companies with sustainable earnings of €1m+ and valuations of €5m and above. Our typical solutions include:
- Succession Planning
- Management Buyouts / Buy-Ins
- Funding for organic growth
- Acquisition Funding; and
- Share Sales
OUR INVESTMENTS
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