Perth distribution group Stealth Global Holdings (ASX: SGI) has announced it will spend $3.83 million on the synergistic acquisition of Brisbane-based construction consumables supplier C&L Tool Centre.
The purchase will be primarily debt funded through Stealth’s existing cash and debt facilities and will comprise $2.45m to be settled in cash on 1 December; $0.48m in Stealth Global shares issued at $0.10 each and escrowed for 12 months; and $0.90m deferred payment consideration to be paid over a one-year period subject to achieving required profit and tenure thresholds.
C&L will also receive a 25% share of Stealth’s net pre-tax profit earned above $0.9 million in the 12-month period following completion of the transaction, expected next month.
The directors and management of C&L will continue working with the business under the change of ownership.
The proposed acquisition is believed to be complementary to Stealth’s existing business, with the companies sharing a similar customer and supplier base and offering similar services.
Identified annual cost synergies will be approximately $0.5m for the combined business.
Stealth managing director Mike Arnold said the synergies would deliver on the company’s aim of providing long-term value to shareholders and customers.
“[We believe] the depth of C&L’s products and tailored services will give [our] merged businesses greater scale as we continue to build a national distribution network to deliver more value, better experiences, more stores in our network, a deeper assortment of merchandise and brand range, and a more complementary team of experienced [personnel],” he said.
“[We] will continue to maintain Stealth’s capital discipline to capitalise on investment and growth opportunities over coming years, underpinned by a customer base [which demands] wide-ranging everyday workplace items and results in a steady flow of recurring sales activity.”
Established in 1969, C&L distributes industrial and tooling supplies; safety and personal protective equipment; and hardware, building, construction and workplace consumables to business (accounting for 80% of sales) and retail customers (20%).
These include large multinational corporations and domestic companies, small-to-medium enterprises, schools and universities, and government agencies.
C&L operates three divisions and houses big-name brands within a “mega-store” setup comprising a showroom and distribution centre across 2700 square metres.
Almost 25% of the company’s sales orders are received and processed online through various digital channels and its systems include retail point of sale technology, providing new capability to the wider Stealth group which is focused predominantly on business customers.
For the 2020 financial year, C&L delivered revenue of $14.3m and earnings before interest taxation depreciation and amortisation of $1.26m.
Sales for the first four months of the 2021 year are believed to be tracking 25% higher than the previous corresponding period.