Ferronordic: Transformative US acquisition announced at an attractive multiple - Nordea

Ferronordic has entered into an agreement to purchase Rudd Equipment Company, Inc. (“Rudd”), one of the largest dealers of Volvo CE (~70% of Rudd’s sales) in the United States with operations in nine states. The purchase price amounts to USD 105m (SEK 1.1bn) including two properties that are currently rented (worth USD 10m), corresponding to 6.4x EV/EBIT 2023E pro-forma (5.8x excluding the properties), based on Rudd’s 2022 sales and earnings (5.4% EBIT margin). Note that this is pre any potential synergies or further expansion. In 2022, Rudd had sales of USD 308m with an EBIT of USD 16.5m and EBT of USD 16.4m (per IFRS). The acquisition adds 123% to Ferronordic’s 2023E sales and 144% to EBT. It also lowers Ferronordic’s P/E from 18x to 7x. We present more details and assumptions for our pro-forma analysis in the table below. Conclusion: at a first glance we are positive to the acquisition which is carried out at a multiple below Ferronordic’s own and more than doubles its proforma earnings, while diversifying its sales base and also helps cover the previously too high central costs.

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