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Symphony Ltd signs agreement to acquire Australian Firm Climate Technologies

Posted On: 2018-06-22 16:42:16

Symphony Limited ("symphony", or the "company") (NSE: symphony; BSE: 517385), the world's largest air cooler manufacturer, today announced that it has signed an agreement to effectively purchase 95% equity stake in Climate Technologies pty Limited ("Climate Technologies", or "CT"), Australia's leading manufacturer of cooling and heating appliances. The acquisition will be executed at a valuation range of AS 40-44 million (INR 201 crs - INR 221 crs) depending on the achievement of FY18F EBITDA (June ended). Further, the valuation is subject to change based on customary closing conditions. The Company plans to finance the acquisition through a judicious mix of debt and internal cash accruals.

Headquartered in Adelaide, South Australia, Climate Technologies manufactures and sells evaporative air coolers, ducted gas heaters, and other cooling products in Australia and USA. CT was established by Ted Celi in December, 1976 and he & his family effectively own 90% equity stake while 10% stake is owned by Tim O' Leary, current CEO of the Company. With iconic brands such as 'Bonaire' (a history of 64 years) and 'Celair' (46 years), Climate Technologies is one of Australia's most recognized manufacturers and suppliers of cooling and heating appliances. CT commands 30% and 25% market share of the domestic Australian evaporative air coolers and ducted gas heaters market, respectively. CT forayed into the US markets through a relationship with Home Depot, who now considers CT as an innovator in its class.

CT's manufacturing facility is located in Salisbury, South Australia with an assembly operation in Las Vegas, Nevada.

For the financial year ending 30 June 2018, it is estimated to report net sales of AS 55 million (INR 274 crs) with an EBITDA of AS 5.45-6.0 million (INR 27.4 crs - INR 30.1 crs), respectively. CT's revenues, presented in the table below, have consistently grown at a CAGR of -9% over the last 3 years.

Acquisition will substantially add to Symphony's international footprint and provides an excellent opportunity of de-risking business its business as a result of exactly opposite winter and summer seasons in India and Australia and through complementarity between Symphony's cooling and CT's heating products.

Mr Achal Bakeri, Symphony Limited's CMD and major shareholder said, "This is an exciting opportunity for Symphony as Climate Technologies is a very strong strategic fit. This acquisition will provide Symphony access to new geographies such as Australia and a strong position in the US which is the largest air cooler market in the world. We are uniquely placed to assist Climate Technologies in its next phase of growth, by providing immediate access to an international distribution network across 60 countries to offer its complimentary suite of products. The opportunity exists for Symphony to provide supply chain expertise and infrastructure to grow the business and realize significant synergies".

Mr. Bakeri also said, "Cls senior management team, led by Tim O' Leary, is committed to driving the next phase of growth and will continue to own effectively 5% stake in CT. We have been impressed by his and the broader CT team's energy during this transaction. Tim has a comprehensive understanding of the Australian and US markets and was responsible for driving the business turnaround, post rejoining as cT,s cEo in 2015 (Tim was earlier employed by cr between 1999 - 2008)."

Upon closing, the acquisition is expected to be immediately accretive to Symphony's earnings and return on capital, with potential for significant synergies.

Acquisition is expected to be completed within a period of 30 business days, subject to fulfillment of customary closing conditions by relevant parties. No government or regulatory approvals are required for the acquisition. The acquisition does not fall within related party transaction and none of Symphony's promoter, promoter group, group companies have any interest in Climate Technologies pty Limited.

Shares of Symphony Limited was last trading in BSE at Rs.1438.45 as compared to the previous close of Rs. 1411.45. The total number of shares traded during the day was 1925 in over 323 trades.

The stock hit an intraday high of Rs. 1474 and intraday low of 1401.5. The net turnover during the day was Rs. 2754169.

Source: Equity Bulls

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