Franchise Brands PLC (AIM:FRAN) has taken a major step into Europe with the acquisition of Hydraulic Authority I Limited, the owner of Pirtek Europe, an established provider of B2B on-site hydraulic hose replacement.
The consideration is £200mln and a further £12.2mln for working capital adjustments to be met through a combination of a placing, debt and shares.
Pirtek, which promises a replacement hose in an hour in emergencies, has 70 franchisees across eight countries in Europe, operating from 213 service centres and 838 vans.
Underlying profits at Pirtek have grown at a compound rate of almost 19% over the past five years, Franchise Brands said.
Sales last year were £164mln with underlying profits of £14.7mln and (on a pro forma basis) revenues for the enlarged group are forecast at £168mln this year (2023) and £182mln in 2024, with underlying profits at £33.5mln and £36.9mln respectively.
In a statement, Stephen Hemsley, Franchise Brands’ executive chairman, said: “The acquisition brings an established business of scale with an attractive financial profile and growth prospects and significantly expands the group's range of B2B services, customer base and end markets.
“By expanding the group's operations to ten countries, the acquisition will significantly advance the board's aim to create a market-leading international B2B multi-brand franchisor that generates its income equally from the UK, North America and continental Europe.”
Pirtek Europe's established base will also provide a low-cost platform from which to launch its current brands into Europe, he added.
Part of the consideration will be met through a placing to raise at least £90mln, with shares to be issued at 180p, a 27% discount to yesterday’s close, while AIM-listed Franchise Brands borrowing facilities now comprise a £55mln term loan and a £55mln revolving facility.
All members of Pirtek's senior management team are expected to remain with the enlarged group, with Alex McNutt, its chief executive to be appointed to the group board following completion.