Exchange Income Corp T.EIF.DB.L

RBC

[retiredcf]

June 24, 2024

Exchange Income Corporation
Tuck-in deal increases Northerns Mat's reach into Eastern Canadian market

TSX: EIF | CAD 43.46 | Outperform | Price Target CAD 65.00

Sentiment: Positive

Our view: EIF today announced the acquisition of Duhamel, a company that owns and operates a sawmill operation which manufactures products for customers in Quebec, Ontario, and Atlantic Canada. We are taking a positive view on the tuck-in deal ($19MM purchase price) as we believe it positions Northern Mat to capitalize on what we see as significant upcoming demand on the back of electrical grid investment in Ontario and Quebec over the coming decade. Management noted the deal will be immediately accretive to EPS; however, most important in our view is that the deal increases exposure to the Eastern Canadian market and what we see as a meaningful upcoming investment cycle in grid hardening throughout the region.

What happened? Exchange Income announced today it has acquired Armand Duhamel & Fils, a privately owned Quebec-based company, for $19 million, which can increase up to $22 million if certain post-closing targets are achieved. The purchase price was funded by the issuance of $3 million of EIC common shares to the vendors and cash in the amount of $16 million from the Corporation’s credit facility. Duhamel, founded in 1965 in St-Ignace-de-Stanbridge, Quebec, owns and operates a sawmill operation which manufactures products for customers in Quebec, Ontario, and Atlantic Canada. Duhamel primarily focuses on the manufacturing and sale of eastern hemlock products, for which they are a leader in the Quebec market.