LONDON (ShareCast) - (Sharecast News) - Flooring company Victoria has agreed to acquire the "highly profitable and growing" rugs division of the Belgium-based Balta Group, it announced on Monday, along with its profitable UK polypropylene carpet and non-woven carpet businesses.
The AIM-traded firm said the €138m acquisition could be funded entirely from its existing financial resources, but the board had taken the opportunity to conclude a firm commitment for a further preferred equity investment with KED Victoria Investments on improved terms, to support further growth in due course.

It said that, for the 12 months to March, the divisions being acquired generated unaudited total revenues of €307m, and normalised EBITDA of €35.5m.

Total consideration to be paid in cash on completion would be €138m, depending on the working capital movements and cash generation of the divisions up to completion.

In addition, the divisions had around €57m of debt, excluding IFRS 16 leases, which was expected to remain in place following completion.

As at Balta Group's most recent year-end on 31 December, the divisions had net assets excluding that debt of around €213m.

Completion of the acquisition remained subject to the conclusion of the carve-out of the divisions from the rest of the Balta Group, which was expected in April 2022.

Victoria said the purchase price would be funded entirely from its cash balances, along with additional preferred equity to be provided by its substantial shareholder KED.

Following recent negotiations, the amount of that follow-on preferred equity was increased since the original commitment in November 2020, and the pricing was reduced.

The company said its leverage would remain in line with its stated financial policy following completion, with a current ratio of net debt to pro-forma EBITDA2, considering the full effect of the acquisition and the newly-committed KED funding, of about 3.2x.

It said the acquisition would be "immediately" earnings-accretive, describing it as a "continued step" in its strategy of growing the business with earnings-enhancing acquisitions, and then using available synergies to drive further increases in margin and revenue.

The board said it believed that the acquisition presented an "excellent" strategic fit with Victoria's existing business, and would be "additive" to the group's "strong" organic growth prospects.

"This selective acquisition of two highly complementary businesses will be significantly value creating for Victoria's shareholders," said group chief executive officer Philippe Hamers.

"The rugs division has been hugely successful over many years and there are very material operating synergies between the carpet division and Victoria's existing business.

"These are both businesses that Victoria already knows extremely well."

At 1023 GMT, shares in Victoria were up 0.58% at 1,091.33p.

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