Audio visual products distributor Midwich Group (LON: MIDW) is acquiring SF Marketing Inc, which has a similar business in Canada for £26.7m. Midwich is also raising £50m via a placing at price to be set when the bookbuilding is finalised. A Primary Bid offer could raise up to £2m more at the same price.
The retail offer will not go ahead if the placing is unsuccessful. Existing and new shareholders can subscribe for shares. The minimum subscription is £250. The offer closes at 9pm today.
The acquisition and fundraising were announced just after 4.30pm and the share price closed at 450p.
The cash raised will help to reduce debt, which had risen to £119.4m by the end of 2022, although that includes £23.4m of lease liabilities. That is before the acquisition of SF Marketing. Further earnings enhancing acquisitions are likely.
Midwich already has a north American operation called Starin. Last year, revenues increased by 78% to £123.1m, but gross margin declined to 14%. Adjusted operating profit rose 41% to £6.4m. That is around 12% of group operating profit. The majority of profit is currently generated by European activities with the UK and Ireland the biggest contributor.
In the year to May 2022, SF Marketing generated revenues of C$94.7m and adjusted operating profit of C$6.1m, so it will be a significant boost to the North American operations. There is £1 to C$1.66. The deal should be earnings enhancing in the first full year.
