Michelmersh Brick Holdings Plc (LON:MBH) has acquired regional brick manufacturer Carlton Main Brickworks for a net consideration of £31.2mln.
The company said it expects the acquisition to enhance earnings from the get-go. In the year to 31 March 2016 Carlton produced unaudited adjusted underlying earnings (EBITDA) of £5.6mln after adding back one-off expenses.
Carlton operates from a 93-acre site in Barnsley, Yorkshire that has been churning out bricks since the 1880s.
It manufactures up to 37mln wire-cut bricks a year and has a strong product offering that complements the geography and market segment of Michelmersh.
The acquisition is expected to increase Michelmersh’s annual production by more than 40% to more than 100mln bricks a year.
Carlton will sit alongside Michelmersh's other brickworks and will continue to manufacture its range of products. The current managing director, Pat Furr, is retiring from the business at the end of 2017 but will help with the business transfer.
The sales staff at Carlton will continue to serve the existing customer base but over time will be integrated into the Michelmersh national sale structure to encourage cross selling of products and widening of the geographical presence of the enlarged group.
The net consideration for Carlton is being financed through a mixture of new facilities provided by HSBC and Michelmersh’s own cash balances; the board is also anticipating proceeds from the completion of the sale of the Dunton landfill site shortly.
The new facilities being provided by HSBC comprise a £20mln term loan, a £6mln revolving credit facility and a £1mln overdraft facility.
As part of the consideration, Michelmersh will issue 4.7mln ordinary shares to the sellers at an assumed price of 72p a share.