Building materials group Marshalls (MSLH) has stolen a march on its rivals with the acquisition of roofing solutions firm Marley in a cash and shares offering.
The deal is highly complementary in terms of products and is expected to be ‘double-digit earnings per share accretive’ in the first full year after completion.
UP ON THE ROOF
Marley, which is owned by private equity and its management team, is a leading supplier of roofing products including concrete and clay roof tiles, fittings, timber battens, solar panels and roofing accessories.
Marshalls is paying £535 million for the business through a combination of £371 million in cash and the issue of 24 million new shares to the sellers, who will be subject to a minimum six-month lock-up period.
The price represents a multiple of 10.7 times underlying EBITDA (earnings before interest, taxes, depreciation and amortization) for the year to last December.
That isn’t expensive for a firm which generated an EBITDA margin of over 20% throughout the pandemic compared with Marshalls’ average mid-teens margin over the last three years.
Investors marked Marshalls shares down 7% to 645 to adjust for the increased number of shares in issue.
‘TRANSFORMATIONAL’ DEAL
Marshalls’ chief executive Martyn Coffey described the purchase as ‘a significant step towards achieving our strategic goal to become the UK's leading manufacturer of products for the built environment.
‘Marley is a highly profitable business with established market positions across UK RMI (repair, maintenance and improvement) and new build housing. Much like Marshalls, its position is underpinned by a track record of product quality and customer service, and we believe Marley will represent a strong cultural fit with our own business.’
Analysts at research firm Davy called the deal ‘transformational both strategically and financially’ and see it boosting pro-forma earnings by more than 20% within the first year after completion.
Marley’s current chief executive David Speakman and chief operating officer Paul Reed have been with the firm since 2004 and 1989 respectively and will continue to lead the business along with chief financial officer Dominic Heaton.
BUOYANT MARKET
The UK housing market continues to defy expectations, meanwhile, with the latest Halifax survey showing prices accelerating to a record high last month.
The average UK property now costs £282,753 according to the society, a full £28,000 more than a year ago and a whopping £43,000 more than two years ago as the country went into lockdown for the first time.
The annual rate of price increase accelerated to 11% from 10.8% in February and 9.7% in January, with the South West seeing the biggest annual increase at 14.6%, the highest level in almost two decades.
‘The story behind such strong house price inflation remains unchanged: limited supply and strong demand, despite the prospect of increasing pressure on households’ finances’, said Halifax managing director Russell Galley.
‘Although there is some recent evidence of more homes coming onto the market, the fundamental issue remains that too many buyers are chasing too few properties’, added Galley.
