Source: Sharecast
Under the terms of the deal, Rosebank will acquire ECI – an electrical components specialist founded in 1953 – for an enterprise value of around $1.9bn on a debt and cash free basis, nine times expected 2025 adjusted EBITDA.
It will fund the acquisition through debt facilities and a fully underwritten institutional capital raise priced at 300p per share, which is expected to raise £1.14bn.
The deal is Rosebank’s first since it floated on Aim last year. The business was founded by veteran dealmaker Simon Peckham with a specific ‘buy, improve and sell’ focus.
Rosebank said “numerous” other acquisition targets had also been identified, adding: “M&A opportunities general, and for ECI, are enhanced by the turbulence of recent months.”
Peckham said: “This is the first step on the journey and we are very confident we can help ECI to fully realise its potential, for the benefit of its employees, customers and our shareholders.”
Russ Mould, investment director at AJ Bell, said: “Share in the cash shell rocketed on the stock market debut last summer, as investors speculated about what Rosebank might achieve.
“Reality now hits hard that it will need to raise a significant amount of money to make acquisitions, and then I could year to do each one up.
“Rosebank is certainly not buying ECI on the cheap. It is paying nine times adjusted earnings, which is fine for a company that is running smoothly but twice as much as you might find with acquisitions of a broken business.
“Rosebank hopes to improve ECI’s margins, improve working capital and reduce leverage, so servicing debt doesn’t consumer so much of its cashflow. This sounds like fine tuning the engine rather than chucking in a new one.”