LONDON (ShareCast) - (ShareCast News) - Flooring designer, manufacturer and distributor Victoria announced on Tuesday it has agreed to acquire Italian ceramic flooring manufacturer, Ceramiche Serra, for cash consideration of up to €56.5m (£50.4m) - net of cash acquired as part of the acquisition - to be funded from the company's cash reserves and existing debt facilities.
The AIM-traded firm said €36.5m of the total consideration would be paid on completion, with the balance of €20.0m to be paid over the next four years, subject to the business meeting annual targets in earnings before interest, tax, depreciation and amortisation.

It said the acquisition would be "immediately and significantly" earnings accretive on completion.

Victoria said Serra, operating from sites in Serramazzoni, Sassuolo, which it described as "the heart" of the Italian ceramics industry, manufactures ceramic flooring, which is sold domestically and exported internationally.

It sells to a combination of wholesalers, retail groups, and independent stores throughout continental Europe, North America, and the Far East.

The acquisition marked Victoria's first move into the ceramic flooring market, which is reportedly the largest flooring sector in the world, representing over 60% of flooring sold globally and 30% of flooring sold in Europe.

"Acquiring Serra therefore opens a large new market to Victoria," the company's statement read.

"The board believes that there is significant opportunity for further acquisitions in the sector, which should result in a number of commercial, operational and financial synergies - creating additional value for Victoria's shareholders in the medium term."

In line with Victoria's acquisition criteria, the management team at Serra had committed to running the business as part of Victoria for a minimum period of four years and continuing to develop its growth.

For the year to 31 December 2016, Serra generated audited revenues of €28.2m, EBITDA of €10.5m, and EBIT of €10.0m.

Assuming the contingent consideration was paid in full, the acquisition would represent a multiple of 5.4x 2016 EBITDA.

Completion of the acquisition remained subject to customary conditions, and was expected to take place in December.

On completion, Victoria's net debt to EBITDA ratio would remain less than 2.0x, which the board said it believed to be a !very comfortable! level given the group's high level of cash generation, and well within its stated acceptable level of debt.

"Serra is a very important acquisition for us and one which reinforces our strategy of targeting earnings enhancing acquisitions to expand our business, in addition to our focus on organic growth," said Victoria chairman Geoff Wilding.

"It will make an immediate positive contribution to Victoria's performance whilst diversifying our market exposure.

"Post-completion, nearly 40% of Victoria's earnings will come from outside the UK - continuing our transformation into a genuinely international flooring business."

Wilding said shareholders would recall that the company signalled its intention to expand into hard flooring around 12 months ago, and subsequently acquired its first hard-flooring business, Australian manufacturer and distributor Dunlop Flooring, in January.

"Since then we have conducted extensive due diligence on the sector in Europe and explored a multitude of potential opportunities, as well as recruiting a senior, director-level hard flooring expert in May of this year.

"Given this planning and preparatory work, Serra is the first of a number of acquisitions we expect to make in the ceramic flooring sector."

Wilding also noted that it had been eight months since the company's last acquisition, Avalon/Grass in the Netherlands, which was now "fully integrated" within Victoria and contributing to its performance.

"Our strategy of achieving scale through acquisitions and using that scale to extract operational synergies continues to deliver value for the group and we look forward to developing the Serra business as part of Victoria."

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