Prysmian will finance the transaction through a mix of 1.1 billion euros in cash and new debt lines of 3.4 billion euros. The transaction has been approved by the boards of directors of each company and is expected to close in the second half of 2024, subject to regulatory and shareholder approvals.
The synergies
Prysmian estimates that, post integration, the group will be able to generate approximately 140 million euros of synergies when fully operational and before tax effects, within four years of the completion of the operation. Extraordinary integration costs are estimated at approximately 1.2-1.3x the fully operational synergies and gross of tax effects. For Prysmian shareholders, the acquisition is expected to lead to growth of 30% from the point of view of earnings per share including the impact of fully operational synergies, and 20% without considering the impact of synergies. The pro-forma net financial position post acquisition will be approximately 5.1 billion. Thanks to the strong cash generation of the combined group, further accelerated by the synergies generated, Prysmian will benefit from a rapid reduction in financial leverage and expects to return, by 2027, to a leverage ratio similar to the level of December 2023. The completion of the transaction is scheduled for the second half of 2024.
Battaini: «Strategic acquisition»
“The acquisition of Encore Wire represents a milestone for Prysmian and a unique strategic opportunity to create value for our shareholders and customers,” commented Massimo Battaini, CEO designate of Prysmian, in a statement. «Thanks to this acquisition, Prysmian will increase its position in North America, further improving the geographical and business mix and strengthening the company’s exposure to long-term trends».
Encore Wire is a leading manufacturer of a wide range of copper and aluminum electrical wires and cables. The diversified product portfolio and low production costs – we read in a note from Prysmian – position it exceptionally well to play a key role in the transition towards a more sustainable and reliable energy infrastructure. In 2023, the company reported revenues of approximately $2.6 billion and EBITDA of $517 million. Strategically, Encore Wire the transaction will allow Prysmian to increase its presence in secular growth trends and increase its exposure in North America by broadening Prysmian’s product offering. Approximately 140 million EBITDA synergies are expected when fully operational within four years of closing.
“This transaction maximizes value for Encore Wire shareholders and provides them with a substantial share premium over stock prices,” said Daniel L. Jones, president and chief executive officer of Encore Wire. “Encore Wire and Prysmian are two complementary organizations and we are confident that Encore Wire will have a bright future as part of the Prysmian group,” he said. Following the closing of the transaction, Prysmian expects to maintain a significant presence at Encore Wire’s single-model, integrated site in McKinney, Texas.
