Reliance Worldwide Corporation (ASX:RWC) shares surged 22% to $4.42 after the plumbing products group confirmed it had signed a process deed with Brookfield Capital over an unsolicited takeover proposal worth $4.75 per share.
The latest non-binding, indicative cash offer values Reliance Worldwide at an enterprise value of more than $4 billion, although the proposed price remains above the company’s current share price and has been described by some analysts as appearing low.
Brookfield has progressively increased its interest in the company during 2026, making offers of $4.15, $4.25 and $4.50 per Reliance Worldwide share in April and May.
Those approaches prompted Reliance Worldwide to provide Brookfield with non-public information as part of an 8-week due diligence process, which the company said resulted in a “meaningfully improved proposal”.
Following further negotiations, Brookfield submitted its revised $4.75-per-share cash offer in early August.
Reliance Worldwide’s board has now determined that Brookfield should be allowed to progress the proposal and has entered into a process deed covering the next stage of discussions.
Under the deed, Reliance Worldwide has agreed to exclusivity provisions, including non-solicitation, no-talk provisions without a fiduciary exception and restrictions on providing due diligence to competing parties.
The arrangements will remain in place for four weeks until September 15.
However, the company cautioned there was no certainty the proposal would result in a definitive transaction or binding takeover offer.
Citi questions valuation
Citi equity analyst Samuel Seow said the offer valued Reliance Worldwide at about 12.1 times EBITDA, broadly in line with the company’s long-term average despite earnings currently being depressed.
He said the valuation was effectively around where the stock had been trading last year and questioned whether the roughly 32% premium to Reliance Worldwide’s previous closing price adequately reflected the company’s earnings potential.
“Given EBITDA is down ~13% year on year, includes tariff impact and [is] materially below normalised earnings, it appears low despite the ~32% premium,” Seow said.
He also pointed to Brookfield’s repeated approaches and elements of the process deed as indications that the Reliance Worldwide board may consider the proposal insufficient.
“Given it appears this is the 4th bid, the process deed includes a ‘go-shop’ provision and what appears a lack of recommendation from the board. We estimate the RWC internal signals are the bid is also too low,” Seow said.
Earnings hit by tariffs and weaker demand
Reliance Worldwide recently reported that its financial performance had been affected by US tariffs, higher input costs and weaker demand in the US and UK.
FY26 net sales were US$1.31 billion, down 0.7% from the previous corresponding period. On a constant-currency basis, adjusted net sales increased 1.5%.
Statutory profit was US$6.3 million after the company recognised US$103.3 million in post-tax one-off costs associated with rationalising its Australian manufacturing footprint.
Adjusted net profit fell 15% to US$125.1 million.
Reliance Worldwide did not declare a dividend because of the Brookfield proposal, but said it would consider making a payment in FY27 if a transaction did not proceed.