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(Alliance News) - RHI Magnesita NV on Tuesday announced the acquisition of Resco Group, a US based producer of alumina monolithics and basic and non-basic refractories, from Balmoral Funds.
RHI, the Vienna-headquartered manufacturer of refractory products for the processing of steel, glass, and non-ferrous metals, said the deal had an enterprise value of up to USD430 million.
The cash part of the deal, expected to be around USD324 million, and up to USD342 million, will be funded by RHI's existing liquidity, together with a new committed facility of EUR200 million, the company said.
RHI said gearing measured as a ratio of net debt to earnings before interest, tax, depreciation and amortisation is expected to increase by around 0.3x to 2.6x on a pro forma 2024 Ebitda basis, rising from 2.3x in 2023.
RHI said unspecified synergies will be created in the mid-term following the restructuring of the combined supply chain. These will create one time costs of EUR60 million, including restructuring of non-US plants.
The company explained the deal would increase its local production in the US and Canada by transferring significant volumes of production from non-US plants to the Resco production facilities in the US.
RHI Chief Executive Stefan Borgas said: "The acquisition advances our 'local for local' production strategy and will shorten supply chains, improve our speed of reaction and increase the security of supply of refractories for our customers."
The deal is expected to be completed in the second half of 2024.
Resco operates seven plants and two raw material sites in the US and two plants in the UK and Canada.
In 2023, Resco recorded unaudited revenues of USD252 million, pretax profit of USD20 million and had gross assets of USD191 million at December 31.
Balmoral Funds is a California-based private equity firm with around USD1.5 billion assets under management.
Shares in RHI Magnesita fell 1.1% to 3,495.00 pence in London on Tuesday.
By Jeremy Cutler, Alliance News reporter
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