Diploma PLC (LON:DPLM) shares blew higher on Wednesday after the company confirmed it had raised £194mln to complete a proposed £357mln acquisition of a US distributor of premium quality, low voltage wire and cable.
Windy City Wire Cable & Technology Products (WCW) is a “highly attractive business” in a core market, the FTSE 250 company said, and from the first year of ownership is expected to be both significantly earnings enhancing and cover Diploma's cost of capital.
WCW is expecting to maintain revenues in its current financial year of US$192mln in line with the prior year, and grow underlying profit (EBITDA) around 18% to circa US$44.5mln.
The proposed deal was announced after hours on Tuesday and on Wednesday Diploma said it had raised gross proceeds of £190mln from an institutional placing, plus a subscription by directors of roughly £265,000 and with retail investors subscribing for another £4mln via the PrimaryBid platform.
The placing price was 1,711p per share.
WCW, whose management team will stay with the business, enhances Diploma existing position in the controls market, “with a core product we understand”, and offers “exciting organic growth potential taking market share in structurally attractive end segments”.
Diploma shares jumped 22% to 2,098p on Wednesday morning, taking them into positive territory for 2020.