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Thermax (THMX.BO)
Alert: Acquires European Boiler-Maker Danstoker
The acquisition – Thermax has acquired 100% equity stake in Danstoker A/S,
Denmark and its German subsidiary Omnical Kessel for €29.5m. Danstoker is a
manufacturer of industrial boilers and waste heat recovery systems in Europe. The
acquisition will be funded by €10m debt and €19.5m equity.
Healthy financials; reasonable valuations – Danstoker had revenue, EBITDA and
PAT of €40m, €3.7m and €3.2m in the financial year ending September 2010.
Company has debt of €3.7m and does not have any major unfunded pension
liabilities. The acquisition values the company on 9x EV/EBITDA, reasonable in our
view.
Strategic rationale – 1) Market access: The acquisition would give Thermax market
access to Europe which has a target of sourcing 20% of energy requirements from
renewable sources. The market size for industrial boilers in Europe is ~€370m.
Danstoker has 50% market share in Denmark, 20% in Germany and 20-25% in
Sweden in industrial boilers. Germany, Denmark and Sweden contribute 34%,
24% and 14% to Danstoker’s revenues. Thermax will also use Danstoker to target
Russian, Middle East and Eastern European market as well 2) Access to
technology and skilled man-power: Thermax would also get access to European
technology for industrial boilers, especially in renewable space. Danstoker has
237 employees of which 77 are engineers with 10+ years of experience.
Earlier investors wanted exit – Danstoker had undergone a management buyout in
2000. Current CEO has been running the company since then. Acquisition by
Thermax would give CEO and current investors an exit. All of the current
management team would remain in place except the CEO, who would continue as
a member on the board of the company.
Our view: A small, reasonably priced acquisition that will be an addition to
Thermax’ green products portfolio.
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