Very Nice First Growing Cash Flowing Business
Aimia to acquire Tufropes for $249.6-million
2023-01-31 08:51 ET - News Release
Mr. Phil Mittleman reports
AIMIA TO ACQUIRE TUFROPES FOR $249.6 MILLION
Aimia Inc. has signed definitive agreements to acquire all of the issued and outstanding shares of Tufropes Pvt. Ltd. as well as certain business undertakings of India Nets. Aimia will pay a purchase price of $249.6-million on a cash-free and debt-free basis, subject to customary adjustments related to net debt and working capital at closing. The closing of the transaction, which is subject to regulatory approval and other customary closing conditions, is expected to occur before the end of the first quarter of 2023. Paladin Private Equity LLC will act as Aimia's partner on the transaction.
Tufropes is leading global manufacturer of high-performance synthetic fibre ropes and netting solutions for the aquaculture and maritime sectors, as well as diversified industrial end markets. Aquaculture is among the fastest growing sectors within the food industry, and now supplies more than half the world's fish for human consumption. Through its global sales network and its cost-efficient manufacturing facilities across India, Tufropes is capable of producing ~70,000 metric tons of rope and netting solutions per year. It boasts a product portfolio of over 35,000 individual SKUs and is uniquely positioned to capture an increasing share of these attractive end markets. Its revenue is geographically diverse, with its products sold in over 70 countries, with 34% of revenues generated in Europe, 34% in Asia, 20% in the Americas and 12% in Australasia.
A family-owned business founded in 1992, Tufropes is expected to achieve annual revenue of approximately $130 million (1) for the fiscal year ending March 31, 2023, and industry-leading EBITDA margins of 18%. Based on reasonable assumptions such as operational improvement initiatives, as well as the optimization of product mix, EBITDA margins are expected to grow above 20% within the next two years. Since 2001, the company has grown revenue at a compounded annual growth rate of approximately 20%, with limited capital investment requirements and high free cash flow conversion. Upon closing, Aimia intends to add key senior management and sales & marketing positions in Canada and Europe, strategically located near key customers and allowing Aimia to use its tax attributes.
Paladin will act as Aimia's partner on the transaction. In connection thereto, upon closing of the transaction, Aimia and Paladin will enter into certain agreements on customary terms and conditions and providing for, among other things, governance rights, preferred return for Aimia, certain carry related rights to the benefit of Paladin, and an option for Paladin to acquire up to 19.9% minority equity position of Tufropes from Aimia within one year of closing. Tariq Osman and Eric Hauser of the Paladin team will join the Board of Directors of Tufropes and support its strategic growth initiatives.
It is anticipated that the acquisition will be initially financed with Aimia's cash on hand. Aimia is currently evaluating financing options with an expectation to raise a modest level of debt at Tufropes within one year of closing.
Phil Mittleman, CEO of Aimia, said: "Tufropes represents an outstanding opportunity for Aimia and Paladin to invest in a global market leader, with a long track record of organic growth and strong free cash flow generation, while utilizing Aimia's sizeable tax attributes to further enhance returns for its stakeholders. The new executive leadership and expanded global sales team will support and grow Tufropes' long-standing relationships globally. We are excited to be partnering with Paladin Private Equity, whose experience and investment acumen will help Tufropes grow both organically and through potential acquisitions. We also wish to thank the Goel family for over 31 years of stewarding this company through an incredible period of growth and for their help in transitioning the ownership of this company to Aimia."
Arun Goel, Founder of Tufropes, said: "Over the past 31 years, Tufropes has grown to be a global leader in the manufacturing of synthetic fibre rope and netting solutions. Our dedicated team and valued business partners have built a robust global platform and the time is right for the business to scale to new heights. We believe that Aimia and Paladin are the right partners to captain the next phase of this journey. In changing hands, we have faith that the company will be able to deepen its relationships with all of our customers and develop new markets. We expect Tufropes' strong work ethic and culture of teamwork to continue while our company is introduced to new opportunities and diverse experiences and that this new chapter will catalyse our employees' individual and personal growth. We keenly anticipate the future of this growth story, as we pass the baton to our new partners."
Paladin's founder and Managing Partner, Tariq Osman, added: "Tufropes' manufacturing excellence and its modern and cost-efficient operating capabilities have already made the business a top global producer in each of its ~US$500 million end markets. Aimia and Paladin believe these to be a core tenant of future growth as customers continue to focus on mission-critical materials and ever-increasing safety and regulatory standards. We look forward to partnering with Aimia on this transaction to realize the full growth potential of the business." Eric Hauser, a Principal at Paladin mentioned: "We've seen an underlying and secular industry shift away from legacy steel wire ropes to high-performance synthetic fibres, and from commoditized netting solutions to high modulus polyethylene (HMPE) netting solutions. Tufropes is well-positioned to take advantage of these trends, and new management will seek to commercially advance the company's existing manufacturing and newly developed products on a global level."
Mr. Mittleman further added: "We continue to actively pursue other investment opportunities with similar growth, EBITDA and free cash flow profiles, and look forward to sharing further information when appropriate."
Kotak Investment Banking acted as sole Financial Advisor to Tufropes and India Nets, and Anagram Partners acted as Legal Advisor for Tufropes and India Nets. JSA Law acted as Legal Advisor to Aimia and Paladin.
Conference Call Information
Aimia will host a conference call and live webcast to discuss the acquisition on January 31, 2023, at 8:30 a.m. Eastern Standard Time. The webcast will be accompanied by presentation slides which are now available at Aimia's website and whi