Building materials specialist Tyman (TYMN:AIM) has made a large acquisition as it could soon become one of the rare Aim stocks to successfully elevate to the main market. Although the shares are held back today by a large fund raising, the £265 million cap could be an interesting stock to watch over the coming months.
Tyman was flat at 204p after announcing the $200 million (£129 million) acquisition of American window and door hardware manufacturer Truth Hardware from Melrose (MRO). A fully-underwritten placing and open offer at 185p per share will raise £73 million.
The deal coincides with the £264.7 million cap's confirmation that it will move from Aim to London's main market. 'Given the strategic nature of the acquisition and the increased scale of the enlarged group, the board considers it is appropriate to proceed with this move alongside the acquisition,' says Tyman.
The Truth Hardware acquisition is expected to complete in mid-late June. By our calculation, Tyman will become the first stock to leave AIM for the main market since Playtech (PTEC) in July 2012.
Formerely known as Lupus Capital, Tyman says the acquisition should be accretive to earnings in the first full financial year following completion of the deal. 'We believe that the deal should prove around 10% enhancing,' says analyst Charlie Campbell at Liberum Capital. 'After the deal, investors will find a main listed company with £300m market cap and 65% sales into the US, with leading market shares, on a price-to-earnings ratio of around 12 times 2014 forecast earnings, which should be of significant appeal.'
Truth Hardware recorded sales of $126.0 million and earnings before interest, depreciation and amortisation (EBITDA) of $22.5 million for the year ended 31 December 2012.
'The acquisition adds a complementary product portfolio to Tyman’s existing offering in North America, a well-invested manufacturing base, a trusted brand and a meaningful presence in the Canadian market,' says Louis Eperjesi, Chief Executive of Tyman.
Canaccord Genuity analyst Michael O'Brien says Truth’s strong position in casement hardware and the Canadian market (30% of historic sales) alongside Tyman’s stronger exposure to international sales appears to offer meaningful medium term revenue synergy opportunities. He has a 235p price target for the shares, concluding: 'With 65% of post acquisition sales to North America, we believe Tyman offers UK investors almost unique exposure to US housing market recovery.'