Deal Overview
Quanex Building Products has acquired Tyman plc for $1.1 billion in a cash and stock deal. The move is expected to significantly increase the size of Quanex’s business and result in meaningful synergies.
Strategic Rationale
The acquisition will diversify Quanex’s revenue stream, reduce its reliance on the US market, and expand its product line. Tyman generates a significant portion of its revenue from window and door hardware, which complements Quanex’s existing portfolio.
Financial Impact
Quanex expects to achieve approximately $30 million in annual cost savings from the transaction. The combined entity will have an annual revenue of approximately $1.95 billion and an EBITDA of approximately $310 million. Quanex’s EV to EBITDA multiple is expected to improve to 7.3 with synergies.
Operational Challenges
Quanex is facing some weakness in its operations, with revenue and net profits declining in 2023. However, management expects revenue to recover in 2024 and is bullish on the homebuilding market.
Valuation and Outlook
Despite the challenges, Quanex’s shares look attractive on a forward basis. The combined entity is expected to have a reasonable valuation and growth prospects. However, analyst Daniel believes that much of the easy money has already been made and assigns a soft ‘buy’ rating to the stock.
