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(Alliance News) - Midwich Group PLC on Wednesday announced the CAD44.3 million, around GBP26.7 million, acquisition of SF Marketing Inc, a specialist value-add audio video distributor in Canada.
The cash deal, on a debt free basis, will comprise an initial payment of CAD39.3 million, a CAD2.0 million fixed deferred consideration paid on the first twelve month anniversary, and up to CAD3.0 million also payable on the first twelve month anniversary, subject to growth in operating profit.
Midwich is a specialist audio visual distributor to the trade market with operations across the UK and Ireland, Continental Europe, Asia-Pacific and North America.
The deal is the group's second investment in the North American region and gives Midwich its first physical presence in Canada.
The company said it would finance the purchase from existing bank facilities.
Further, Midwich announced plans to raise GBP50 million via a placing.
Proceeds will be used to pay down the debt which will fund the initial acquisition consideration of SFM, in addition to securing funding which will enable the execution of further acquisitions.
This includes six opportunities which are currently in due diligence, the firm said.
Midwich also announced a GBP2.0 million retail offer. The issue price of the placing and retail offer will be determined at the close of the bookbuild process.
The acquisition and M&A pipeline combined is expected to be materially earnings accretive in the first full year of ownership, including the impact of the fundraise and before synergies, the firm stated.
For the year ended May 31 2022, SFM delivered revenue of CAD94.7 million, a gross margin in excess of 23% and adjusted earnings before interest and tax of CAD6.1 million. The acquisition represents a multiple of approximately 7x financial year 2022 adjusted Ebit.
Shares in Midwich rose 1.1% to 454 pence each in London on Wednesday.
By Jeremy Cutler, Alliance News reporter
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