# Renold strengthens North American conveyor chain offering with MAC Chain acquisition

- Link: https://www.directorstalkinterviews.com/renold-strengthens-north-american-conveyor-chain-offering-with-mac-chain-acquisition/4121171187
- Published: 2024-09-10T07:32:03+01:00
- Author: Amilia Stone

**Renold plc** (LON:RNO), a leading international supplier of industrial chains 
and related power transmission products, has announced that it has acquired the 
trade and net assets of MAC Chain Company Ltd (U.S.) and the entire issued share
capital of MAC Chain Company Limited (Canada), for a total cash consideration of
US$31.4 million.

**Highlights**

·      With operations in the Pacific Northwest of the USA, British Columbia, and
Quebec, MAC Chain is a manufacturer and distributor of high quality conveyor chain(
CVC) and ancillary products, with a significant presence in the forestry and broader
industrial markets.

·      The Acquisition substantially increases the Group’s access to the Western
US and Canadian CVC markets, particularly forestry, which we have identified as 
a significant opportunity for the Group to expand into.

·      When combined with Renold’s existing US and Canadian operational footprint,
the Acquisition presents opportunities for significant manufacturing synergies on
integration into the enlarged Group.

·      The MAC Chain management team, which brings many years of industry and market
knowledge, will transfer to the Group following completion of the Acquisition, and
continue to lead the MAC Chain business, joining Renold’s North American management
team.

·      Following completion, the Acquisition is expected to immediately enhance 
Group adjusted earnings per share, as well as be accretive to the Group’s operating
margin.

·      ROIC is expected to be above Renold’s WACC in the first year of ownership.

**The Acquisition and Financial Considerations**

MAC Chain is being acquired on a cash free debt free basis, and will consist of 
an initial cash consideration of US$28.26 million, followed by two further cash 
payments of US$1.57 million, payable 12 months and 24 months from the anniversary
of completion of the Acquisition. The total consideration for the Acquisition of
US$31.4 million represents an acquisition multiple of c.7.5x twelve months to June
2024 EBITDA. Realising the initially identified hard synergies will result in the
multiple reducing to 6.9x, in the initial year of ownership, reducing to well below
6.0x in subsequent years.

The Acquisition was funded utilising the Group’s existing borrowing facilities. 
As at 31 March 2024, the Group’s net debt to EBITDA multiple was 0.6x and following
completion of the Acquisition, it is expected to be below 1.2x. With continuing 
expected strong cash generation, and following completion of the Acquisition, there
remains sufficient facility headroom to execute the identified pipeline of further
bolt-on opportunities.

MAC Chain reported revenue of US$ 25.8m for the twelve months ended June 2024, generating
an EBITDA of US$4.2 million, and a PBT of US$3.5m. Tangible net assets acquired,
are anticipated to be US$11.5m.

> **Commenting on the Acquisition, Robert Purcell, Group Chief Executive of Renold,
> said:**
> “We are delighted that MAC Chain is to join the Renold Group and that not only
> are we buying an excellent business, but also retaining the services of a very
> talented group of managers and employees. The acquisition of MAC Chain considerably
> expands and strengthens our North American Conveyor chain offering.
> “MAC Chain is our third CVC acquisition in a little over 2 years and builds our
> momentum as we execute our deal pipeline. Reduced leverage has been driven by 
> strong operational performance over recent periods, leading to a strong balance
> sheet and a conservative level of debt, allowing us to accelerate the growth of
> the business through complementary bolt-on deals.”

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