Reece Ltd (ASX: REH) has announced it is going to expand into the US market by acquiring MORSCO Inc, a leading US distributor of plumbing, waterworks and heating & cooling equipment (HAV) products.
Reece is a well-known bathroom and plumbing supplier, it also has other products like civil engineering and irrigation.
It is going to acquire MORSCO Inc for US$1.44 billion, which is $1.91 billion in Australian dollars.
MORSCO operates in the “Sun Belt” region of the USA, which includes Alabama, Arizona, Florida, Georgia, Louisiana, Mississippi, New Mexico, South Carolina and Texas, as well as parts of other states nearby.
According to Reece, MORSCO had ‘adjusted’ sales of US$1.72 billion in the 2017 calendar year. Reece has calculated that MORSCO is likely to return high single-digit profit per share growth in the first year of ownership.
“We’re excited to be entering a long-term partnership with MORSCO to invest in the growth of their business in the US market,” Reece’s CEO, Peter Wilson, said.
“It’s a market that’s forecast to grow at twice the rate of the Australian market and it is currently about eight times the size.”
Most of the purchase will be funded by debt, but Reece will raise around $560 million from investors to help pay for the acquisition. Around $300 million of the new shares will be acquired by the Wilson family.
Reece shares are currently in a trading halt, it should come out of the trading halt on 9 May 2018.
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