Michelmersh has announced its acquisition of the entire issued share capital of Carlton Main Brickworks Limited for a net consideration of £31.2 million.
Carlton is a regional brick manufacturer operating from a 93-acre site brickwork based in Barnsley, Yorkshire. The factory, first established in the 1880s, currently manufactures up to 37 million wirecut bricks per annum, with a strong product offering that complements the geography and market segment of Michelmersh.
Carlton is being acquired for a gross consideration of up to £38.4 million, which includes Carlton's cash balances at completion of £7.2 million.
The acquisition is expected to increase Michelmersh's output to over 100 million bricks per annum, an expected increase of over 40% on Michelmersh's current output.
Michelmersh is funding the acquisition through the issue of ordinary shares in the Company, its own cash resources and new debt facilities provided by HSBC, including a £20.0 million term loan, a £6.0 million RCF and a £1.0 million overdraft facility.
According to the company, the Acquisition will give Michelmersh access to new regional markets, provide opportunities for cross selling and product synergies and increase output efficiency. Other operational synergies are expected to benefit the enlarged Group over time. • The Acquisition is expected to be significantly earnings enhancing in the current financial year and increase the overall operational cash flow of the Company going forward, assisting in, post debt servicing and repayment, further investment within the Group and future shareholder distributions.
In the 12 months ended 31 March, 2016, Carlton made an audited profit before taxation of £2.62 million on turnover of £13.1 million, which represents an unaudited adjusted EBITDA of £5.56 million after adding nonrecurring expenses (directors' emoluments). The audited net assets of Carlton at 31 March 2016 amounted to £9.3 million, including land and buildings at book value of £0.6 million, but which have been independently valued for the Group at £6.3 million.
The acquisition was welcomed by the Brick Development Association. Chief Executive Officer Keith Aldis said: "This is an excellent time for a business with the experience and resources of Michelmersh to be investing in a strong regional brand such as Carlton. As a member of the Association, Carlton is an example of exceptional quality and service. Their portfolio of products and, more importantly, their customers will be well-served by Michelmersh's established supply chain and market strength.
"As the UK undertakes initial exit negotiations with the EU, the stability and certainty of our sector is crucial to the sustained health of our construction industry. The opportunity for further investment and solidarity this acquisition represents is positive news for investors, developers and home-owners alike."