Alcadon: Putting the strong balance sheet to good use - ABG

Acquires Networks Centre Holding Company in the UK

Pays 8.8-11.5x EV/EBITDA

An attractive market within Data centers and FTTH

Enters the UK market and strengthens its presence in Benelux
Alcadon has entered into a binding agreement to acquire 100% of the UK company Networks Centre Holding Company (NWC), a professional distributor of premium products and complete systems for network infrastructure solutions in the UK and the Netherlands. ~40% of NWC’s sales comes from the Commercial Property segment, 30% from the Data Centre segment and 30% from Fiber Networks (FTTX). The largest customer categories are installers, integrators, data centres and broadband operators, with no customer making up more than 10% of sales, according to management. NWC will remain an independent company within the group, in line with Alcadon’s decentralized strategy. NWC will be consolidated into Alcadon as of the acquisition date, which is scheduled for 17 August 2022.

The acquisition adds ~15% to our ‘23e EPS
Alcadon is paying an EV of ~SEK 390m, of which ~SEK 70m will be paid in newly issued shares. The remainder will be financed through existing cash in Alcadon and refinancing of existing loans of SEK 130m together with a new bank loan of SEK 250m. An additional maximum of ~SEK 123m in cash will be paid depending on NWC’s EBITDA over the next 36 months. The purchase price corresponds to an R12m EV/EBITDA of 8.8-11.5x, depending on earn-out payments. Alcadon’s net debt will increase by ~SEK 380m after the acquisition, corresponding to a ‘22e pf ND/EBITDA of 2.8x. As of the end of June, NWC reported R12m sales of SEK 524m and an EBITDA of 44m (8.5% margin vs. Alcadon at ~10%). The acquisition will add ~50%, ~40% and ~15% to our ‘23e sales, EBITDA and EPS, respectively. The effect on EPS is more uncertain, as we do not know the interest rate for the new loan or the share dilution.

High growth expected in UK data centers and FTTH In terms of investments in data centers, management expects the UK ...
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