GCIMpac Group acquires CSi Palletising in €56m deal to boost automation and global reach
The maths behind successful acquisitions is simple: 1+1=3. However, for transformational deals such as 's purchases of CSi Palletising (€56m, £46.6m) today and BCA ($17m) a fortnight ago, the arithmetic could be much higher.
You see, at its core the strategic logic of buying both businesses is to provide a simple, cheap and higher-quality solution for customers - who in this instance might be global FMCG brands (Unilever, Nestle) and/or healthcare firms (Haleon).
Here their manufacturing teams want best-of-breed, high-speed packaging and automation systems, ideally from a sole supplier who can offer all the equipment and expertise under one roof - thus not only reducing complexity, friction costs, capex and downtime, but also improving machine performance/efficiency and product quality, right from the production line to final palletising.
The good news is that now possesses this seamless, end-to-end capability, with CSi providing greater downstream expertise in palletising/casing and BCA bringing first-class upstream and food handling skills - which once fully integrated, should ultimately generate significant sales and cost synergies in terms of cross/upselling, procurement, robotics, aftermarket services and scale.
Better still, the acquisitions propel the group to the next level, accelerating the Board's goal of doubling turnover (£114m 2023) by 2 years to 2026 (vs 2028 before), alongside delivering 10% top line growth and 10% EBIT margins.
But that's not all. CSi also has a large European footprint, as well as owning two low-cost production facilities in Romania, which will be leveraged globally within the Board's thorough integration plans.
With regards to price, CSi (2023 sales €71.5m) and BCA ($14m) were acquired on modest trailing EBITDA multiples of 7.7x and 6.1x respectively - funded via a combination of debt (re HSBC) and a £29m placing at 400p/share. At completion, proforma net debt to EBITDA should be around 1.9x, and fall rapidly towards 1x EBITDA by Dec'25.
Ok, how much could hypothetically be worth in 2.5 years time? Well, assuming things go to plan, then by 2026 the enlarged group could be delivering 10% EBIT margins on revenues of £228m - which based on a 12x EV/EBIT multiple, would theoretically deliver £11+/share, or 830p in today's money discounting back at 12%.
Similarly, Panmure Liberum has a 765p-980p valuation range, supported by FY25 turnover, EBITDA, EBIT and EPS forecasts of £209m, £25.0m, £20.1 and 46.8p respectively - hence putting the stock at 415p on a modest FY25 PER of 8.9x, declining to 7.5x in 2026 - implying a PEG ratio of only 0.5x. Elsewhere, Shore Capital values the shares at >900p.
CEO Adam Holland commenting: "I'm delighted to announce the transformational acquisition of CSi palletising, which will significantly transform our customer offering & core capabilities. We have substantially expanded the breadth of our technology & extended our customer reach globally."
Exciting times ahead.
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