Beijer Ref AB (publ) (“Beijer Ref”) has signed a binding agreement to acquire Heritage Distribution Holdings (“Heritage Distribution”) for a purchase price of USD 1,275 million1 (USD 1,175 million excluding net present value of tax benefits) on a cash and debt free basis (approximately SEK 13,000 million).
- Beijer Ref and Gryphon Investors have signed a binding agreement whereby Beijer Ref will acquire Heritage Distribution for a purchase price in cash of USD 1,275 million1 (USD 1,175 million excluding net present value of tax benefits) on a cash and debt free basis (SEK 13,0002 million). The purchase price excluding net present value of tax benefits represents a multiple of 12x Heritage Distribution’s adjusted EBITDA3 for the twelve months ended September 30, 2022, and on a pro forma basis including acquisitions made by Heritage Distribution during 2022
- The acquisition of Heritage Distribution represents Beijer Ref’s entry into the strategically important and attractive North American market
- Heritage Distribution is a leading distribution company for Heating Ventilation Air Conditioning and Refrigeration (“HVACR”) equipment, parts and supplies in North America with a strong track-record of high and consistent organic growth and a high share of recurring revenues derived from repair and replacement
- For the twelve months ended September 30, 2022, and on a pro forma basis including acquisitions made by Heritage Distribution during 2022, Heritage Distribution had a turnover of USD 636 million (SEK 6,492 million) and an adjusted EBITDA of USD 95 million (SEK 970 million)
- The acquisition of Heritage Distribution provides an ideal platform for Beijer Ref, which includes businesses with longstanding track-records and an experienced management team that will continue to drive consolidation in the highly fragmented North American market
- The acquisition is financially compelling and Beijer Ref expects it to be EPS accretive in 2023 and accretive to Beijer Ref’s organic sales growth and EBITDA margin4
- The acquisition is fully financed through a bridge facility provided by Handelsbanken and Nordea. Beijer Ref intends to repay the bridge facility with proceeds from a fully underwritten rights issue of class B shares amounting to approximately SEK 14 billion with preferential rights for existing shareholders in Beijer Ref, intended to be launched during the first half of 2023. EQT has undertaken to subscribe for its pro rata share of the rights issue, corresponding to 29.8% of the shares5. Citi, Handelsbanken and Nordea have committed to underwrite the remaining 70.2% of the rights issue by entering into a so‑called standby underwriting agreement, subject to customary terms and conditions
- The acquisition is conditional upon regulatory approvals and customary closing conditions and is expected to close early in Q1 2023
Beijer Ref has signed a binding agreement with Gryphon Investors to acquire Heritage Distribution, a leading North American distribution company for HVACR equipment, parts and supplies. The acquisition includes approximately 98% of the shares in Heritage Distribution and the remaining shareholding will continue to be held by current management. The acquisition will be Beijer Ref’s entry into the North American market and will establish the company as a leading HVACR distributor in the U.S. South/South East region, one of the most attractive regions for HVACR in North America.
Heritage Distribution originated from mergers of three regional leaders, each with longstanding track-records and strong brands – Wittichen Supply (founded in 1914), Benoist Brother Supply (founded in 1928) and Ed’s Supply (founded in 1957). Heritage Distribution is headquartered in Atlanta, Georgia, with 64 branches in ten states and approximately 800 employees.
Heritage Distribution6 has a strong track-record of high and consistent organic growth, and a high share of recurring revenues, with repair and replacement representing approximately 95% of sales. In terms of end markets, the residential segment represents approximately 90% of sales. Heritage Distribution has experienced a long-term compound annual organic growth of approximately 9% over the period 2012-20217 and an adjusted EBITDA margin of 15% for the twelve months ended September 30, 2022, and on a pro forma basis including acquisitions made by Heritage Distribution during 2022.
Heritage Distribution provides an ideal platform from which Beijer Ref is well placed to drive consolidation of the North American market. Beijer Ref will add strategic synergies to Heritage Distribution’s operations in new technologies such as CO2-based systems, global supplier agreements, private label products (both in HVAC and refrigeration) and strong capabilities in M&A. In addition, Heritage Distribution has a broad and diverse product portfolio with comprehensive brands that will complement Beijer Ref’s current product offering.
For the twelve months ended September 30, 2022, and on a pro forma basis including acquisitions made by Heritage Distribution during 2022, Heritage Distribution had a turnover of USD 636 million (SEK 6,492 million) with an adjusted EBITDA margin of 15%.
Christopher Norbye, CEO Beijer Ref, comments:
“The acquisition of Heritage Distribution constitutes an important strategic step for Beijer Ref. The North American market is currently undergoing a shift towards electrification and energy efficiency, accelerated by regulatory changes. Also, the growing recognition of indoor air quality and climate change impacts has increased the demand for environmentally friendly and innovative HVAC technologies, which creates a great opportunity for our combined product offering. Furthermore, the North American market is highly fragmented and Heritage Distribution offers an excellent platform from which we can continue to drive consolidation. With our collective industry awareness and proficiency, there are many significant and valuable synergies to be unlocked. We are pleased to welcome Heritage Distribution to the Beijer Ref group and look forward to continuing their successful journey.”
Alex Averitt, CEO Heritage Distribution, comments:
“We are really excited to be joining the Beijer Ref family, a world-leading distributor and wholesaler of cooling technology and HVAC. Personally, I am looking forward to working with Christopher and the whole Beijer Ref team to unlock the many growth opportunities that we will have. Beijer Ref has an impressive history of successful acquisitions and strong organic growth. This agreement enhances our current position in the U.S. and is expected to generate many positive outcomes for our customers and employees, who will benefit from our expanded product portfolio and value-creating synergies. Heritage Distribution Holdings and Beijer Ref share the same decentralized business model where entrepreneurial thinking and freedom with responsibility permeating the organization. Joining forces will enable us to accelerate growth and explore new development opportunities.”
Rationale for the acquisition
The acquisition of Heritage Distribution marks Beijer Ref’s entry into the strategically important and attractive North American market. North America represents a significant growth opportunity for Beijer Ref as it is the world’s largest HVACR market. It is a highly fragmented market underpinned by strong secular trends and a regulatory shift towards more energy efficient and sustainable products. In addition, the ongoing market shift towards higher electrification and energy efficiency drives increased underlying demand.
Heritage Distribution is a leading HVACR distributor in the South/South East region of the U.S. which is one of the most attractive regions for HVACR in North America. The region experiences a warm climate entailing high frequency replacement cycles that are expected to accelerate due to climate change and higher energy efficiency demands.
Heritage Distribution is an ideal platform with an experienced management team that will continue to drive consolidation in the highly fragmented North American market. The acquisition also enables a significant opportunity to cross-sell Beijer Ref’s green refrigeration OEM product offering. Moreover, Beijer Ref’s strong relationships with global OEM suppliers is expected to lead to scale benefits and a broader product offering.
In addition, the acquisition is expected to enhance Beijer Ref’s organic growth profile. Heritage Distribution had a compound annual organic sales growth rate of approximately 9% over the period 2012-2021. Beijer Ref expects the acquisition of Heritage Distribution to be accretive to Beijer Ref’s EBITDA margin and organic sales growth. For the twelve months ended September 30, 2022, and on a pro forma basis including acquisitions made by Heritage Distribution during 2022, Heritage Distribution had an adjusted EBITDA margin of 15%, compared to Beijer Ref’s EBITDA margin of 12% over the same period.
Financing of the acquisition
The acquisition will be financed through a bridge facility provided by Handelsbanken and Nordea.
To repay the bridge facility, Beijer Ref intends to carry out a rights issue of class B shares amounting to approximately SEK 14 billion with preferential rights for existing shareholders in Beijer Ref during the first half of 2023, after closing of the acquisition.
The shareholders EQT, Joen Magnusson and Per Bertland, together controlling 53.2% of the votes outstanding8, have undertaken to vote in favor of the implementation of the rights issue at an extraordinary general meeting. EQT has also undertaken to subscribe for its pro rata share of the rights issue, corresponding to 29.8% of the shares in the rights issue9. Citi, Handelsbanken and Nordea have committed to underwrite the remaining 70.2% of the rights issue by entering into a so called standby underwriting agreement, subject to customary terms and conditions.
A detailed time plan and the forms for the implementation of the rights issue will be announced at a later stage.
Financial terms and effects for Beijer Ref
The consideration for the acquisition of Heritage Distribution amounts to USD 1,275 million10 (USD 1,175 million excluding net present value of tax benefits) on a cash and debt free basis (approximately SEK 13,000 million). The purchase price excluding net present value of tax benefits represents a multiple of 12x Heritage Distribution’s adjusted EBITDA for the twelve months ended September 30, 2022, and on a pro forma basis including acquisitions made by Heritage Distribution during 2022.
For the twelve months ended September 30, 2022, and on a pro forma basis including acquisitions made by Heritage Distribution during 2022, Heritage Distribution had a turnover of USD 636 million (SEK 6,492 million) with an adjusted EBITDA of USD 95 million (SEK 970 million) and an adjusted EBITDA margin of 15%. Heritage Distribution’s turnover and adjusted EBITDA consequently corresponds to 31% and 39% of Beijer Ref’s sales and EBITDA, respectively, during that period. The acquisition is expected to have a positive effect on Beijer Ref’s EPS pre synergies immediately after closing.
Transaction-related costs, a combination of acquisition costs of approximately SEK 250 million, bridge financing (incl. interest) of approximately SEK 210 million, underwriting and issue costs of approximately SEK 240 million, a total of approximately SEK 700 million whereof approximately SEK 250 million will be recognized in Q4 2022 and the remaining in the first half of 2023.
Conditions for the acquisition
The transaction is conditional upon regulatory approvals and customary closing conditions and is expected to close early in Q1 2023.
Advisors
Beijer Ref has engaged Seale & Associates as financial advisor and Hogan Lovells as legal advisor in relation to the acquisition. Citi, Handelsbanken and Nordea act as financial advisors and underwriters of the rights issue. Mannheimer Swartling acts as legal advisor to Beijer Ref in relation to the debt financing and rights issue, Davis Polk & Wardwell acts as U.S. legal advisor to Beijer Ref in relation to the rights issue and White & Case acts as legal advisor to Citi, Handelsbanken and Nordea in relation to the rights issue. Gryphon Investors has engaged Baird as financial advisor and Kirkland & Ellis as legal advisor.
Telephone conference
Beijer Ref invites investors, analysts and the media to attend a telephone conference 15 December, 2022, at 10.00 a.m. (CET) where CEO Christopher Norbye and CFO Ulf Berghult will describe the acquisition and answer questions related to this press release.
Webcast: https://ir.financialhearings.com/pressconference-december-2022
Dial-in number:
SE: +46 856642651
Pin: 28642350#
Malmö, 15 December 2022
Beijer Ref AB (publ)
For more information, please contact:
Christopher Norbye
CEO
Telephone +46 40-35 89 00
Email cne@beijerref.com
Ulf Berghult
CFO
Telephone +46 40-35 89 00
Email ubt@beijerref.com
Niklas Willstrand
Global Corporate Communications Manager
Telephone +46 40-35 89 00
Email nwd@beijerref.com
BEIJER REF AB is a technology-oriented trading Group which, through added-value products, offers its customers competitive solutions within refrigeration and climate control. Beijer Ref is one of the largest refrigeration wholesalers in the world, and is represented in 42 countries in Europe, Africa, Asia and Oceania.
IMPORTANT INFORMATION
None of the securities referred to herein have been or will be registered under the United States Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any state or other jurisdiction in the United States, and may not be offered, pledged, sold, delivered or otherwise transferred, directly or indirectly, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with applicable other securities laws. There will not be any public offering of any of the securities in the United States.
In the United Kingdom, this press release is directed only at, and communicated only to, persons who are qualified investors within the meaning of article 2(e) of the Prospectus Regulation (2017/1129) of the European Parliament and of the Council of 14 June 2017 as it forms part of domestic law in the United Kingdom by virtue of the European Union (Withdrawal) Act 2018 who are (i) persons who fall within the definition of "investment professional" in article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “Order”), or (ii) persons who fall within article 49(2)(a) to (d) of the Order, or (iii) persons to whom it may otherwise be lawfully communicated (all such persons referred to in (i), (ii) and (iii) above together being referred to as “Relevant Persons”). This press release must not be acted on or relied on by persons in the UK who are not Relevant Persons.
Citi, Handelsbanken and Nordea are acting for Beijer Ref in connection with the transaction and no one else and will not be responsible to anyone other than Beijer Ref for providing the protections afforded to its clients nor for giving advice in relation to the transaction or any other matter referred to herein.
This press release and the information herein is not for publication, release or distribution, in whole or in part, directly or indirectly, in or into the United States, Australia, Hong Kong, Japan, Canada, New Zealand, South Africa, Switzerland, Singapore or any other state or jurisdiction in which publication, release or distribution would be unlawful or where such action would require additional prospectuses, filings or other measures in addition to those required under Swedish law.
The press release is for informational purposes only and does not constitute an offer to sell or issue, or the solicitation of an offer to buy or acquire, or subscribe for, any of the securities mentioned herein (collectively, the “Securities”) or any other financial instruments in Beijer Ref AB (publ). Any offer in respect of any of the Securities will only be made through the prospectus that Beijer Ref AB (publ) expects to publish in due course. Offers will not be made to, and application forms will not be approved from, subscribers (including shareholders), or persons acting on behalf of subscribers, in any jurisdiction where applications for such subscription would contravene applicable laws or regulations, or would require additional prospectuses, filings, or other measures in addition to those required under Swedish law. Measures in violation of the restrictions may constitute a breach of relevant securities laws.
This press release contains forward-looking statements that reflect Beijer Ref AB (publ)’s current view of future events as well as financial and operational development. Words such as “intend”, “assess”, “expect”, “may”, “plan”, “estimate” and other expressions involving indications or predictions regarding future development or trends, not based on historical facts, identify forward-looking statements and reflect Beijer Ref AB (publ)’s beliefs and expectations and involve a number of risks, uncertainties and assumptions which could cause actual events and performance to differ materially from any expected future events or performance expressed or implied by the forward-looking statement. The information contained in this press release is subject to change without notice and, except as required by applicable law, Beijer Ref AB (publ) does not assume any responsibility or obligation to update publicly or review any of the forward-looking statements contained in it and nor does it intend to. You should not place undue reliance on forward-looking statements, which speak only as of the date of this press release. As a result of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements as a prediction of actual future events or otherwise.
This announcement does not constitute an investment recommendation. The price and value of securities and any income from them can go down as well as up and you could lose your entire investment. Past performance is not a guide to future performance. Information in this announcement cannot be relied upon as a guide to future performance.
The securities mentioned in this press release have not been registered and will not be registered under any applicable securities law in Australia, Hong Kong, Japan, Canada, New Zealand, South Africa, Switzerland or Singapore and may, with certain exceptions, not be offered or sold within, or on behalf of a person or for the benefit of a person who is registered in, these countries. The Company has not made an offer to the public in to subscribe for or acquire the securities mentioned in this press release other than in Sweden.
In the EEA Member States, with the exception of Sweden, (each such EEA Member State, a “Relevant State“), this press release and the information contained herein are intended only for and directed to qualified investors as defined in Article 2 (e) of Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 (the “Prospectus Regulation”). The securities mentioned in this press release are not intended to be offered to the public in any Relevant State and are only available to qualified investors except in accordance with exceptions in the Prospectus Regulation. Persons in any Relevant State who are not qualified investors should not take any actions based on this press release, nor rely on it.
1 Represents purchase price for 100% of the shares. Beijer Ref will acquire approximately 98% and management will continue to own the remaining approximately 2%.
2 USD/SEK FX rate of 10.2074 as of 14 December 2022.
3 Earnings before interest, taxes, depreciation and amortisation of tangible and intangible fixed assets adjusted for items affecting comparability.
4 See https://www.beijerref.com/alternative-performance-measures/ for definitions and other information on Beijer Ref's alternative performance measures.
5 Excluding treasury shares. As of 14 December 2022, Beijer Ref held 1,958,500 treasury shares of class B, which do not entitle to participation in the rights issue.
6 Heritage Distribution applies U.S. GAAP.
7 Calculated as the compound annual organic growth rate of the combined turnover for Wittichen Supply, Benoist Brothers and Ed’s Supply.
8 Excluding treasury shares. As of 14 December 2022, Beijer Ref held 1,958,500 treasury shares of class B, which do not entitle to participation in the extraordinary general meeting.
9 Excluding treasury shares. As of 14 December 2022, Beijer Ref held 1,958,500 treasury shares of class B, which do not entitle to participation in the extraordinary general meeting.
10 Represents purchase price for 100% of the shares. Beijer Ref will acquire approximately 98% and management will continue to own the remaining approximately 2%.
This disclosure contains information that Beijer Ref AB is obliged to make public pursuant to the EU Market Abuse Regulation (EU nr 596/2014). The information was submitted for publication, through the agency of the contact person, on 15-12-2022 08:45 CET.