November 12, 2024

Mattr Corp. announced recently that it has agreed to acquire AmerCable Incorporated, a globally recognized U.S. manufacturer of highly engineered wire and cable solutions used in mission critical applications.

Mattr, through its subsidiary, has entered into a definitive agreement to acquire all of the outstanding shares of AmerCable from Nexans USA Inc. for a purchase price of US$280M, or approximately C$390M (the “Transaction”). This purchase price represents a multiple of approximately 5.0 times Adjusted EBITDA¹ of the AmerCable business for the trailing twelve-month (“TTM”) period ended June 30, 2024.

The Transaction is subject to customary closing conditions including U.S. anti-trust review and approval. Upon closing of the Transaction, which the Company anticipates will occur around year end, AmerCable will be incorporated into Mattr’s Connection Technologies reporting segment and will position the Company as one of the premier, custom engineered cable manufacturers in North America.

“The pending acquisition of AmerCable will be a significant step forward in Mattr’s strategy to enhance our wire and cable business exposure within the large and growing U.S. market,” said Mike Reeves, Mattr’s President and CEO. “This transaction will broaden our existing portfolio of highly engineered low voltage electrical power, control and instrumentation cable solutions, while also adding medium voltage electrical power, control and instrumentation cable solutions and enhancing our North American manufacturing capacity, allowing Mattr to better serve customers in both Canada and the U.S.”

Mr. Reeves continued, “Specialized wire and cable products are essential to the continued expansion and modernization of North American critical infrastructure, and this combination will position Mattr as a premier provider in this important sector.”

Mr. Reeves concluded, “Working in partnership with our existing wire and cable business conducted through our Shawflex brand, the pending addition of AmerCable’s talented workforce, differentiated product portfolio, globally recognized brand presence and substantial U.S. manufacturing platform bolsters our mid and long-term wire and cable growth and margin profile outlook.”

“We believe this transaction will create substantial long-term value for shareholders and expect it to be immediately accretive to Mattr’s earnings per share (“EPS”), excluding expected synergies,” said Tom Holloway, Mattr’s CFO. “This is a unique opportunity to acquire a business that is closely aligned with our strategic growth objectives for a compelling valuation, while maintaining Mattr’s attractive balance sheet, transforming the existing breadth and geographic reach of our wire and cable business and adding a successful platform to drive incremental growth of the Connection Technologies segment over time.”

EBITDA, Adjusted EBITDA and Total Net Debt to Adjusted EBITDA, are non-GAAP measures. Non-GAAP measures do not have standardized meanings under GAAP and are not necessarily comparable to similar measures provided by other companies. See “ Reconciliation of Non-GAAP Measures” for further details and a reconciliation of these non-GAAP measures.

Strategic Rationale

Complementary core competencies. The AmerCable business is closely aligned with the innovative and advanced technical capabilities of Mattr’s existing Shawflex wire and cable business. Like Shawflex, AmerCable focuses on bespoke, lower volume, higher margin solutions to address complex challenges for which “off-the-shelf” solutions may not be appropriate. Both Shawflex and AmerCable take a collaborative approach with end-users to design and manufacture highly engineered wire and cable solutions in extreme operating conditions across a variety of critical end-markets where customer cost of failure is highest.
Enhanced geographic presence. Through this acquisition, Mattr will expand its existing Canada-oriented wire and cable capabilities to include meaningful production capabilities and commercial networks in the U.S., providing the product portfolios of Shawflex and AmerCable with broad access to both Canadian and U.S. electrification markets with significant untapped sales opportunities globally.
Broadened product offering. While both Shawflex and AmerCable offer highly engineered low voltage electrical power, control and instrumentation cable solutions, AmerCable also brings unique medium voltage wire and cable capabilities to Mattr, allowing the Company to offer this critical electrification solution across North America alongside its existing, predominantly Canadian, low voltage portfolio.
Expanded end-market access and supply chain efficiency. AmerCable will diversify Mattr’s end market exposure with additional material technologies and certifications while enhancing the Company’s raw material procurement scope and efficiency.
Cross-selling opportunities. Sharing of best practices and technical expertise across both businesses is expected to drive innovative product development and strengthen Mattr’s access to new and existing markets with attractive long-term tailwinds. The combined product portfolios of Shawflex and AmerCable will be unique in the North American market, enabling each organization to offer more comprehensive solutions to their respective customer bases and geographies.
Platform for future growth. In addition to Shawflex’s newly modernized production site in Vaughan, Ontario, AmerCable’s wire and cable production site in El Dorado, Arkansas and cable assembly site in Katy, Texas will create a highly strategic network of wire and cable manufacturing facilities across North America, providing a platform for future organic and acquisition driven growth opportunities.

Financial Highlights

Compelling valuation. The purchase price represents a multiple of approximately 5.0 times TTM Adjusted EBITDA for the period ended June 30, 2024, representing a compelling shareholder value creation opportunity relative to other capital allocation options currently available to Mattr.
Enhanced financial performance with lower volatility. The combination of AmerCable and Shawflex is expected to enhance the Company’s full-cycle margin profile and accelerate Mattr’s achievement of its previously communicated longer-term financial performance aspirations. Giving pro forma effect to the Transaction, the Connection Technologies segment will represent 54% of consolidated revenue on a TTM basis as of June 30, 2024 (an increase from 37% of consolidated revenue previously reported by Mattr for the same time period).
Adds meaningful relative scale. Giving pro forma effect, the contemplated Transaction is expected to add >C$75 million of TTM Adjusted EBITDA for the period ended June 30, 2024 and will position Connection Technologies as the largest segment within Mattr’s portfolio.
Strengthens financial profile. AmerCable’s global brand presence, mission critical product offering, and in-house custom design and engineering capabilities have enabled the establishment of long-term relationships with leading blue-chip customers, resulting in strong backlog visibility and a highly recurring revenue profile. In conjunction with the material increase in the relative scale of the Connection Technologies segment, the Transaction is expected to improve Mattr’s overall earnings cyclicality and revenue predictability.
Margin enhancing. AmerCable has a track record of generating Adjusted EBITDA margins at or above Mattr’s long-term target of 20%, enhancing margin resiliency within the Connection Technologies segment.
Highly accretive before synergies. On a TTM basis through June 30, 2024 and giving pro forma effect to the Transaction, this acquisition would be more than 40% accretive to EPS, with accretion in the coming twelve months expected to be similar in magnitude, before synergies.

Mattr intends to finance the Transaction through a mix of cash on its balance sheet and its existing credit facility. The Transaction will increase the Company’s total net debt to Adjusted EBITDA¹ ratio modestly above its normal course target of 2.0 times in the near term. The Company will retain ample financial flexibility and access to capital to pursue its near-term capital allocation priorities, including organic growth initiatives and ongoing share repurchases under the existing normal course issuer bid (“NCIB”).

Based on the Company’s continued confidence in its cash flow generation and growth outlook, the Company repurchased 1.4 million shares during the third quarter of 2024 for a repurchase price of approximately C$22.2 million and remains active under the NCIB.

Transaction Approvals, Timing and Fees

The Transaction, which has received unanimous approval from both Mattr’s and Nexans’ Board of Directors, is subject to regulatory approvals and customary closing conditions. The Company currently anticipates closing will occur around the end of 2024. Transaction fees are anticipated to be in the range of C$8-9 million with most to be recorded in the fourth quarter of 2024.

Advisors

TD Securities Inc. and Dentons LLP are serving as the exclusive financial and legal advisors respectively to Mattr for the Transaction.

Conference call and webcast

Mattr will be hosting a Shareholder and Analyst Conference Call and Webcast on Friday November 8^th, 2024 at 9:00 AM ET, which will discuss the Transaction. To participate via telephone, you can register at this link here and a telephone number and pin will be provided.

Alternatively, you can go to the following website address to participate via webcast: https://edge.media-server.com/mmc/p/28zy9jb5. The webcast recording will be available within 24 hours of the live presentation and will be accessible for 90 days.

Source