Embellence Group acquires US company Artscape, Inc.
Embellence Group, a leading European player in the premium interior design market, has acquired the US company, Artscape Inc. Through this acquisition, Embellence Group is expanding its operations to include exclusive pattern-based window film (“artwork for windows”).
The purchase consideration on a cash-free and debt-free basis amounts to MUSD 20, corresponding to an EV/EBITA multiple of approximately 5.5x. The parties have jointly decided on a transaction structure that enables the share acquisition to be handled for tax purposes as an asset acquisition (”Joint election under Section 338 (h) (10) of the Internal Revenue Code”). After taking this tax relief into account, the effective EBITA valuation multiple amounts to approximately 5.1x. In addition, a potential earnout may be paid, corresponding to an EV/EBITA multiple of approximately 6, based on the increase in earnings for 2022 compared with 2021.
Through the addition of the Artscape premium brand, Embellence Group is strengthening its robust market position and brand portfolio, taking another step towards its goal of becoming a leading international player in premium interior design. Window film is a large and growing market segment with an underlying growth of approximately 5% globally. The largest product categories consist of the segment privacy protection, decoration and heat control for commercial properties and homes.
“I am very pleased that Artscape has become part of Embellence Group. Artscape is a brand-driven company with all the ingredients we seek: a premium position in its category, an international profile with 100% of sales outside the Nordics, excellent quality, patent-protected technology and fantastic employees. We foresee many synergies, in both the income and expense columns, and good profitability, which even before synergies, clearly contributes to further strengthening Embellence Group's operating margin. We are now looking forward to taking the brand to the next level together with Artscape’s founder and CEO, Thomas Hicks and his talented team,” says Embellence Group President and CEO Olle Svensk.
Artscape has around 40 employees and annual sales of approximately MUSD 14. Production is outsourced to external manufacturers in the US. To date, sales is mainly focused on North America, where the company has a strong position in its niche. The company has displayed profitable growth since it was formed in 1999.
The acquisition will immediately increase the earnings per share in Embellence Group and enhance attractive opportunities for Embellence Group through:
- Continued growth potential for Artscape in the US
- Major potential for the pattern-based window film category in Europe, where Artscape currently has a more limited business.
- Design synergies with Boråstapeter
- Strong cash flow
- Diversification of Embellence Group’s product offering
- Cost synergies with Embellence Group’s European warehouse and distribution centre in Borås
- Large potential for DTC (Direct to Consumer) through dedicated e-commerce channel
“I have always had big dreams for Artscape. This was an opportunity that couldn’t be turned down – the possibility of continued development and expansion. Artscape’s vision has always been clear, to be a pioneer in the sector. In the US market, Artscape currently holds a strong position in its category, and I also see major potential for expansion and growth in Europe,” says Thomas Hicks, founder and CEO of Artscape.
The acquisition is being financed through cash payment corresponding to 70% of the purchase consideration, 20% through offset against newly issued shares in Embellence Group, and the remaining 10% through a promissory note loan. The acquisition is expected to result in an increase in Embellence Group’s interest-bearing net debt in relation to the adjusted EBITDA result (pro forma for the 12-month period) from 1.2 as of December 31, 2021 to a multiple of approximately 1.8, which is within the target level of below a multiple of 2.5.
The subscription price per share will correspond to the volume-weighted average price for the Embellence Group’s share over the most recent ten trading days on Nasdaq First North Premier Growth Market immediately prior to publication of this press release, corresponding to SEK 34.54 per share, which entitles the sellers the right to 1,105,619 shares in Embellence Group, corresponding to an ownership share of 4.9%. The newly issued shares are subject to lock-up, which is gradually wound up over a two-year period.
The issue is being conducted in accordance with the authorisation from Embellence Group’s General Meeting on February 25, 2021 and is scheduled to take place in March 2022, after the transaction is completed.
Following the acquisition, Embellence Group, with its House of Brands strategy, comprises six strong brands in pattern-based interior decoration products: Boråstapeter, Cole & Son, Wall&decò, Perswall, Pappelina and Artscape. In addition to wallpaper, in which the Group has its roots, Embellence Group also offers interior decoration textiles, cushions, rugs and, through the acquisition of Artscape, also pattern-based window decorations.
“Our growth target is to achieve net sales of SEK 1.2 billion for the 2025 financial year. This corresponds to more than double 2020 net sales and will be achieved through both organic growth and acquisitions. Embellence Group’s long-term goal is also to achieve an EBITA margin of at least 15% over a business cycle. The acquisition of Artscape is an important building block in realizing these financial goals both in terms of sales and EBITA margin,” adds Olle Svensk.
Access date is March 1, 2022. The acquisition of Artscape Inc. will be presented in more detail in connection with the presentation of the financial statements for 2021 which will be held on Tuesday 22 February at 10:00 CET. For a link to the presentation, see embellencegroup.com.
This information is information that Embellence Group AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. This information was submitted for publication through the agency of the contact persons below at 08:00 a.m. CET on 21 February 2022.
