Michelmersh Brick Holdings Plc - Acquisition of Floren & Cie & Proposed Placing of new Ordinary Shares to raise £5.0 million

Michelmersh, the specialist brick manufacturer, is pleased to announce that it has acquired the entire issued share capital of Floren & Cie ("Floren"), an established, profitable clay brick manufacturing business, for a maximum consideration of EUR 9.9 million (the "Acquisition"). The Acquisition is expected to be immediately earnings enhancing for the Group.

 

Floren has been operating out of Sint Lenaarts (Brecht) nr. Antwerp, Belgium, since 1896. In 2018, Floren manufactured 19.5 million premium wirecut bricks, which were predominantly sold within the Belgian and UK markets, generating unaudited revenues of EUR 5.7 million and EBITDA of EUR 1.75 million. The strategic acquisition will enhance Michelmersh's product portfolio, significantly increase the Group's overall output and provide a foothold in new European markets.

 

The Company also today announces that it is seeking to raise up to £5.0 million through a placing (the "Placing") of new ordinary shares in the capital of the Company (the "Placing Shares"), pursuant to the terms and conditions set out in the Appendix below. Completion of the Acquisition is not conditional on the Placing.

 

Acquisition Highlights:

 

·      Floren is being acquired for a maximum total consideration of EUR 9.9 million (£8.7 million), with EUR 9.4 million paid on completion and a deferred consideration of 400,000 Michelmersh ordinary shares (with a value no greater than EUR 500,000) in 24 months if certain EBITDA targets are met.

·      The Acquisition price is sub 6 times EBITDA.

·      The Acquisition is to be funded from the existing debt facilities available to the Group and the Placing.

·      Floren generated unaudited revenues of EUR 5.7 million and EBITDA of EUR 1.75 million for the financial year ended 31 December 2018. Floren had unaudited net assets as at 31 December 2018 of EUR 4.17 million.

·      Michelmersh believes there is potential to increase the current Floren output of 19.5 million bricks per annum with future capital investment.

·      As part of the Acquisition, Michelmersh is acquiring 120 acres of land, of which 60 acres is utilised by plant operations.

·     Michelmersh has undertaken a valuation exercise on the land owned by Floren, which indicated a potential value of up to EUR 9 million. The Directors believe Floren has clay reserves that will support production on site for up to 25 years. 

·      The Acquisition will enhance Michelmersh's UK product portfolio and increase the Group's scale while also providing access to new European markets.

·      The vendors of Floren will remain within the business for 24 months to oversee operations and support the integration into the Group.

 

The Board considers Floren to be an excellent strategic asset which gives Michelmersh access to the wider Benelux and German markets and adds significant value to the Group. The Acquisition is also in line with the Company's premium centric market strategy, given Floren's high quality product range and desirable aesthetics it is able to help building designers and architects create.

 

The Group welcomes the Floren team to the business and looks forward to building on the significant success already achieved by its dedicated team in Antwerp.

 

The Placing

 

Michelmersh is proposing to raise £5.0 million (before expenses) through a placing of 5,555,556 Placing Shares to institutional investors at a price of 90 pence per Ordinary Share (the "Placing Price"). The Directors believe it is appropriate to part fund the Acquisition via the Placing in order to maintain a sensible leverage level for the enlarged Group. The Placing also enables the Group to expand its shareholder base, helping to increase liquidity and meet investor demand. The Placing has been undertaken within the Company's existing share authorities granted at the 2018 Annual General Meeting.

 

The Placing will be conducted by way of an accelerated bookbuilding process (the "Bookbuild") which will be launched immediately following this Announcement in accordance with the terms and conditions set out in the Appendix. The Placing Shares are not being made available to the public.

 

The Placing Shares will represent approximately 6.4 per cent. of the existing issued share capital of the Company and the Placing Price represents a discount of approximately 0.6 per cent. to the closing mid-market price of 90.5 pence per Ordinary Share on 15 February 2019, being the latest practicable date prior to the publication of this Announcement.

 

It is envisaged that the Bookbuild will be closed no later than 4.30 p.m. GMT, 18 February 2019. The Placing is not being underwritten.

 

The Placing Shares will, when issued, rank pari passu in all respects with the existing ordinary shares. Application will be made for the Placing Shares to be admitted to trading on AIM on 18 February 2019 and admission is expected to take place on or around 22 February 2019. Completion of the Placing is conditional on, inter alia, admission of the Placing Shares.

 

Total Voting Rights

 

Following the issue of the Placing Shares, the Company's issued share capital consists of 92,041,669 Ordinary Shares, with voting rights. This figure may be used by shareholders of the Company as the denominator for the calculation by which they will determine if they are required to notify their interest in, or a change to their interest in, the share capital of the Company under the Financial Conduct Authority's Disclosure Guidance and Transparency Rules.