Essentra acquires Italian manufacturer, BMP TAPPI

Essentra plc (LON:ESNT), a leading global provider of essential components and solutions, has announced the acquisition of BMP s.r.l, a family-owned, leading Italian manufacturer and distributor of protective caps and plugs for an initial cash consideration of EUR33.5m, in line with its inorganic growth strategy previously communicated at the Capital Markets event in November 2022.

Based in Milan, Italy, BMP TAPPI has over 60 years of history and a track-record of consistent growth. BMP TAPPI manufactures and distributes an extensive range of protective caps and plugs from their Italian based facilities, serving thousands of customers predominantly across Europe, in multiple end-markets, including mechanical, automotive and pharmaceutical sectors, and has been a trading partner to Essentra for over 20 years, with a well-established relationship. With over 100 injection moulding machines and located in a modern facility, BMP TAPPI’s strong market position is well-invested, and further enhanced by its R&D capabilities focusing on developing more sustainable products, and a number of sustainably sourced products are already included within its current range.

BMP TAPPI is a complementary and strategically aligned bolt-on acquisition, demonstrating the continued momentum of Essentra’s disciplined inorganic strategy, following the successful acquisition and integration of the Wixroyd Group in December 2022. In line with the Group’s acquisition criteria, BMP TAPPI will strengthen and enhance the Group’s existing core, profitable product range, further expand the Group’s manufacturing footprint in Europe, and deliver attractive cost and revenue synergies through cross-selling opportunities into both the Essentra and BMP TAPPI customer base. BMP TAPPI will be led by Essentra’s established Italian management team, who have successfully led the Group’s existing business in Bologna since the acquisition of the Richco business in 2011, providing a strong base from which Essentra has been able to grow.

The consideration payable comprises an initial cash consideration of EUR33.5m, and deferred contingent consideration¹ of up to EUR3.5m on a cash-free, debt-free basis. For the year ended 31 December 2023, BMP TAPPI is forecast to generate revenues of EUR13.4m and the initial consideration is forecast to represent an acquisition multiple of c.8.0x EBITDA on a full year 2023 basis. Essentra anticipates a post-synergy multiple approaching 5.3x EBITDA².

The initial acquisition consideration, and any subsequent contingent consideration will be financed from Essentra’s existing debt facilities, the majority of which is funded by low interest, fixed long term debt, and from free cash flow. Essentra’s ongoing share buyback programme, announced on 29 March 2023 remains in place. The Company’s balance sheet remains strong, with the pro-forma net debt position of the Group remaining comfortably within the mid-term leverage guidance of <1.5x, providing the Group with sufficient headroom to continue to support further organic and inorganic growth opportunities. Essentra continues to maintain a strong and active bolt-on acquisition pipeline.

The acquisition of BMP TAPPI is expected to be accretive to Group margins and adjusted EPS³ in the first full year post-completion, with a ROIC⁴ of c.15% expected to be delivered within three years.

The acquisition is expected to complete before the end of 2023, subject to local government approvals and competition clearances.

Essentra’s leadership team look forward to working with BMP TAPPI’s existing management and former owner during the transition period.

Scott Fawcett, CEO of Essentra plc, commented:

“I am delighted to announce the acquisition of BMP TAPPI, a business we have known for 20 years, which strengthens Essentra’s market leading product portfolio and expands our offering, while unlocking further cross-selling opportunities and growing our presence in Europe. This transaction continues to demonstrate our successful inorganic growth strategy in action, as we leverage our strong balance sheet to capitalise on the significant opportunities we see for product expansion and market share gains, and brings another high quality business into Essentra, which will be accretive to both underlying earnings and margins.”

^Notes

^{1.     Deferred contingent consideration of up to EUR3.5m is subject to certain performance conditions over a two-year period}

^{2.     Post-synergy multiple is based on a three-year projection and includes deferred contingent consideration of EUR3.5m}

^{3.     The term adjusted excludes the impact of amortisation of acquired intangible assets and adjusting items}

^{4.     ROIC is calculated as adjusted operating profit expressed as a percentage of invested capital. Invested capital is defined as initial consideration and deferred contingent consideration, plus capex investment, and associated acquisition transaction fees}