Cable maker Volex PLC (LON:VLX) is to continue its recent spending spree after it confirmed plans to buy cable harness supplier Silcotec for up to £15.9mln (€18.1mln).
To fund the acquisition, Volex is raising £36mln from investors by selling 48mln new shares at 75p each – a slight premium to Tuesday’s closing price of 74.5p.
The AIM-listed group said in a statement that the placing will de-lever the company and provide the financial muscle needed to continue to grow the company.
Silcotec will be the latest acquisition made by Volex, which has long signalled its intent to consolidate the highly fragmented cable assembly industry.
Only a few weeks ago it announced the purchase of US peer MC Electronics in an all-share deal worth up to £2.6mln.
As for Silcotec, the Ireland-based business generated sales of €17.8mln and underlying earnings (EBIT) of €3.1mln in the year ended December 31 – the latest available set of results.
‘An important step’
“This acquisition is an important step in expanding our Cable Assembly activities in Europe,” said chairman Nat Rothschild.
“Silcotec is a well-run business, providing high quality cables, assemblies and box-builds for the medical industry.
Rothschild added: “Following the fund raising, Volex will have a well-capitalised balance sheet to allow for further investment in our business.”
Liberum analyst Rory Smith put his rating and price target under review following the news but said in a note to clients that “whilst risks remain, Volex has been on an improving trajectory” since the broker initiated its coverage back in June 2016.
Volex shares climbed 3.1% to 76.8p on Wednesday morning.