Diploma PLC's (LSE:DPLM) £236 million acquisition of a US maker of nuts and bolts for the aerospace industry looks "appealing" and could be "significant", say analysts.
The addition of Peerless Fasteners to the FTSE 100-listed group is "consistent with management’s strategy" and expands its presence in an existing market, said Kean Marden at Jefferies.
Analyst Sam Dindol at Stifel called the acquisition "significant", noting that Peerless management is remaining with the business, with the acquisition being funded by existing facilities.
Peerless generated $107.7 million of revenue and EBIT of $33.5 million in the year to 30 September 2023, with "a long track" record of organic growth of around 9% and roughly 30% operating margins.
Both analysts were impressed by the financial metrics of the UK company paying a multiple of seven times 2024 forecast earnings versus a "typical 6-8x range" and 8% accretive to earnings per share in the first full year of ownership.
Said Dindol: "We view this as an attractive deal financially and strategically, with the acquisition significantly extending the group's US capabilities in aerospace fasteners, and adding scale in Europe. We [...] see upside from further compound growth and strong delivery against financial targets."
Both brokerages reiterated their 'buy' rating.
Shares in Diploma climbed over 10% to 3,800p on Wednesday, hitting an all-time intraday high of 3,870p in morning trading. They are up roughly 40% over the past year and almost 90% since the start of 2020.