# RS Group acquiring industrial and automation product distributor, Risoul

- Link: https://www.directorstalkinterviews.com/rs-group-acquiring-industrial-and-automation-product-distributor-risoul/4121076877
- Published: 2022-08-10T07:30:16+01:00
- Author: Amilia Stone

**[RS Group plc](https://www.directorstalkinterviews.com/ftse-company/rs-group/rs1.l)**(
LON:RS1) has announced an agreement to acquire Risoul y Cia, S.A. de C.V., a family-
owned distributor of industrial and automation product and service solutions in 
Mexico, for a cash consideration of US$275 million (c. £228 million) on a cash-free
and debt-free basis. The consideration represents an acquisition multiple of c. 
12x adjusted EBIT on a 12-month basis to 30 June 2022.

·      Acquisition of leading distributor of industrial and automation product and
service solutions in Mexico

·      Largest authorised distributor of Rockwell products in Mexico and also Latin
America

·      Delivering on all our acquisition priorities: geographic expansion, product
adjacencies and service solutions

·      Significantly strengthening the RS Group offer in Mexico

·      Opportunity to leverage our digital expertise, complementary products including
our main own-brand RS PRO, and a broad range of product and service solutions to
accelerate growth

·      Accretive to adjusted^(1) earnings per share (EPS) in the first full year
and expected to exceed Group cost of capital within three years

**Strong strategic alignment**

The acquisition of Risoul delivers on the Group’s strategy to accelerate organic
growth through high-quality inorganic opportunities that expand our geographic reach,
extend targeted product adjacencies, and develop our product and service solutions
offer. We are excited about deepening our presence in Mexico and having a strong
platform to expand into Latin America, a region we can see benefiting from nearshoring
owing to de-globalisation and a greater focus on improving [sustainability](https://www.directorstalkinterviews.com/sustainability-green-stocks-news)
through reducing distances products travel.

Risoul is a leading distributor of industrial and automation product and service
solutions in Mexico, a highly fragmented market, with almost 50 years of operational
knowledge and automation expertise. Risoul sells a range of branded products and
is the largest authorised Rockwell Automation distributor in Latin America, the 
tenth globally, with rights to distribute Rockwell’s products in the main industrial
areas of Mexico and has recently launched into Spain. Risoul also provides several
service solutions including onsite product training, control board and panel assembly,
air conditioning maintenance, specialist tool repair and a smart network infrastructure
service.

There is a strong cultural overlap between Risoul and RS Group. Risoul is led by
Chief Executive Officer (CEO), Gerardo Ayala Guarneri, who has been with the company
for 18 years, the last five as CEO. Risoul, like RS Group, believes that having 
an engaged and motivated team is critical to delivering success. There is a strong
emphasis on training and ensuring the health and wellbeing of its people, with a
high employee engagement score demonstrating this. We are looking forward to working
together with Gerardo and his team.

**Compelling financial rationale**

The acquisition of Risoul by RS Group is expected to deliver significant revenue
synergies. Combining Risoul’s established presence in Mexico with RS Group’s range
of complementary and ancillary products, including our main own-brand RS PRO, will
support increased average order value for existing customers. We will develop Risoul’s
digital presence to increase customer reach and offer a broader product range while
improving execution capabilities and driving efficiencies. We expect the combination
to greatly enhance prospects for employees, customers and suppliers of both organisations.

For the year ended 30 September 2021, Risoul generated revenue of US$166 million
and EBIT of US$19 million. Over recent months, revenue growth has been held back
due to interruptions in supply which has led to an increased order book which should
unwind over the next twelve months. The acquisition, which will be financed from
RS Group’s existing debt facilities, is due to be completed by November 2022, subject
to customary closing conditions including Mexican anti-trust. It is expected to 
be accretive to adjusted^(1) EPS in the first full year of ownership and exceed 
Group cost of capital within three years. Following the acquisition, RS Group’s 
balance sheet will remain strong, with pro forma net debt to adjusted EBITDA (for
the year ended 31 March 2022) of <0.8x, which provides the capacity to continue 
driving our growth ambitions.

> **LINDSLEY RUTH, CEO RS GROUP PLC, COMMENTED:** “We are accelerating our organic
> growth with bolt-on acquisitions that meet our key strategic, financial and cultural
> criteria. Risoul enables RS to expand our position and execution expertise in 
> the Americas, specifically in Mexico and the rest of Latin America, and drive 
> cross-selling synergies across our product and service solutions offer. As part
> of RS Group, Risoul will benefit from our digital capabilities and international
> scale, providing an opportunity to expand beyond its existing strengths, while
> creating new capabilities. We are excited about the growth opportunities we see
> as part of our Journey to Greatness and welcome the Risoul team to the RS Group.”

> **GERARDO AYALA GUARNERI, CEO RISOUL, COMMENTED:** “The Rockwell model has helped
> build our business and reputation in our market. It is not just about selling 
> products; we are also providing value-added product and service solutions that
> help customers run their businesses. Our product specialists and sales engineers,
> who have a great deal of commercial and technical knowledge and experience, can
> recommend and install efficient and productive processes and technology. RS Group
> brings extensive digital expertise, strong execution knowledge and global support,
> allowing us to extend our customer reach and accelerate the growth ambitions of
> our winning Risoul model.”

**Rockwell Automation welcomes RS Group to the partner network**

> **ARIEL BURSZTEIN, MARKET ACCESS DIRECTOR LATIN AMERICA, ROCKWELL AUTOMATION, 
> COMMENTED:** “Rockwell is delighted to expand its partnership with RS Group into
> Mexico. We are confident that the pairing of RS Group’s omni-channel capabilities
> with Risoul’s established strengths with Rockwell Automation solutions will represent
> a winning formula.”

**Notes:**

1.         Adjusted excludes amortisation of intangible assets arising on acquisition
of businesses, acquisition-related items, substantial reorganisation costs, substantial
asset write-downs, one-off pension credits or costs, significant tax rate changes
and associated income tax.

**Conference call details**

There will be a presentation for analysts and investors today at 2.00 pm UK time
via an audio conference call. A copy of the presentation will be available on the
investor relations page of the RS Group website shortly before the call (www.rsgroup.
com/investors). A replay of the conference call will be provided after the call.

**Pre-registration link**

If possible, please pre-register for this call to join digitally (without an operator),
via the following link: https://webcast.openbriefing.com/rsgroup-aug22/

**Participant dial in number:**

United Kingdom:                  020 3936 2999

All other locations:              +44 20 3936 2999

Or dial-in online:                 www.incommuk.com/customers/online

Access code:**                        750098** – Participants will be greeted by
an operator who will register their details.  

**Conference call timing**

Date: 10 August 2022

Time: 2.00pm UK time

**Additional information on Risoul**

Risoul has more than 580 employees across 16 locations in Mexico, providing product
and services solutions to key industrial markets in the country. It has two distribution
centres (Mexico City and Monterrey), eight local warehouses and its own delivery
fleet, enabling it to offer 18,000 stocked products and a further 42,000 unstocked.
As per the distribution agreement with Rockwell Automation, Risoul will continue
to operate as an independent business within the broader Americas region, with Gerardo
Ayala Guarneri, the Risoul CEO, reporting into Ken Bradley, President RS Americas.

**Acquisition details and financing**

RS Group has entered into an agreement to acquire Risoul, a family-founded and managed
business, for US$275 million (c. £228 million) on a cash-free and debt-free basis
from the Risoul family who privately hold the entire shareholding of the company.
This is subject to customary closing conditions, including Mexican anti-trust, and
is expected to be completed by November 2022 and be financed by existing debt facilities.

The acquisition constitutes a class 2 transaction for the purposes of the UK Financial
Authority’s Listing Rules. Total gross assets as of 30 June 2022 were c. US$80 million.

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