Victoria piles up cash for acquisitions


Floorcoverings and tiles manufacturer Victoria (LON: VCP) is getting rid of a share overhang and bringing in a new investor that is injecting cash into the company so it can make more acquisitions in the European floorcoverings sector.

Invesco owns nearly 20% of Victoria, but this stake has been an overhang for more than one year. New investor Koch Equity Development will buy just below 10% of Victoria from Invesco at 350p a share – the level at which the shares were trading when the deal was agreed. Spruce House Partnership will buy a 2.87% stake from Invesco and the rest of the stake will be bought back by Victoria at a cost of £29.9m.

Preferred stake

On top of the Invesco stake purchase, US-based Koch is investing up to £175m in convertible preference shares. There will be an initial investment of £75m with the potential for a further £100m over an 18-month period. From the sixth anniversary of the investment, the preferred shares can be converted into ordinary shares at the market price.

Victoria does not pay dividends on ordinary shares, but the preferred shares will generate an annual income of 9.35% – if paid in cash. After five years, this dividend will be escalated.

The investment comes with up to 12.4 million warrants exercisable at 350p each. That equates to around 8% of the enlarged share capital, assuming the preference shares have not been converted. The number of warrants will depend on the timing of drawdowns and whether the preference shares have been redeemed.

Koch is a diversified industrial company, and it does have floorcoverings businesses in North America. They are Invista and Stainmaster. Koch tends to do one or two major investments each year. It does not have any floorcoverings businesses in Europe.


Executive chairman Geoff Wilding is confident that the cash can be invested in acquisitions that will generate enough profit to more than offset the additional cost of the preferred shares. It is estimated that the share buy back will enhance earnings per share by 7%.

Victoria know the businesses it wants to assess as potential targets. Valuations may even be more attractive following the problems with Covid-19.

The share buyback and new investment by Koch is dependent on shareholder approval. A circular will be sent to shareholders and the approval should be gained during November.


Current trading is going well for Victoria. Consumers are diverting money that would have been spent on holidays and leisure into investment in their homes. In recent months, sales are running at higher levels than last year and also higher than pre-Covid budgets.

It should be remembered that there was a poor start to the year so the interim figures to September 2020 will be held back by trading in the first few weeks of the financial year. The interim figures will be published in a few weeks.

The share price has already recovered to 530p, up 102p on Friday. Future acquisition could help to push the share price higher.