Reece bursts into US market with $1.9 billion acquisition

Reece bursts into US market with $1.9 billion acquisition

Melbourne-based plumbing giant Reece Group (ASX: REH) has acquired US-based distributor MORSCO Inc. for AUD$1.9 billion in a deal partially funded by the company's latest round of capital raising.

Reece announced today that it raised approximately $248 million through an institutional placement and institutional entitlement offer to partially fund the acquisition, as well as pay associated transaction costs.

The entitlement offer raised approximately $69 million while the size of the placement was increased from $139 million to $179 million, reflecting strong support from institutional investors both new and existing.

MORSCO operates across 16 states and in FY17 the company recorded AUD$2.2 billion in sales as well as a pro forma adjusted EBITDA result of AUD$133 million.

Reece's buyout of MORSCO represents a significant foray into the US 'Sun Belt' region which is expected to generate higher rates of GDP and population growth compared to national averages.

The acquisition also creates access to the USD$32 billion plumbing market in the US which, according to Reece, is highly fragmented and ripe with opportunity.

Reece CEO Peter Wilson says his company is looking forward to entering the rapidly growing market.

"We're excited to be entering a long-term partnership with MORSCO to invest in the growth of their business in the US market," says Wilson.

"It's a market that's forecast to grow at twice the rate of the Australian market and it is currently about eight times the size."

Reece intends to operate MORSCO separately to its existing businesses in Australia and New Zealand.

The existing MORSCO management team will remain in place under the leadership of its CEO Chip Hornsby and Reece soon intends to deploy its CFO Sasha Nikolic as the company's senior operational representative in the US.

In a trading update which was released together with the MORSCO announcement, Reece expects to deliver record results at FY18.

The company expects sales to be in the range of AUD$2.65-2.7 billion and net profit to hit between AUD$223-230 million.

REH shares have jumped by more than 14.4 per cent today to trade at a 52-week high of $12.30 at the time of writing (11:41am AEST).

Never miss a news update, subscribe here. Follow us on Facebook, LinkedIn, Instagram and Twitter.

Help us deliver quality journalism to you.
As a free and independent news site providing daily updates
during a period of unprecedented challenges for businesses everywhere
we call on your support

From pandemic side hustle to multi-million dollar business: Meet Ling Fung
Partner Content
Ask any parent, and they’ll tell you: preparing for a new baby is no easy task.&n...
Metro Baby
Advertisement

Related Stories

ACCC gives Compare the Market operator green light for iSelect takeover

ACCC gives Compare the Market operator green light for iSelect takeover

The Australian Competition & Consumer Commission (ACCC) has ann...

Sales software group Bigtincan receives $442m takeover offer from SQN

Sales software group Bigtincan receives $442m takeover offer from SQN

Sales performance software company Bigtincan (ASX: BTH) has been on...

How Sourci made it: Meet the founders behind Australia’s new e-commerce wave

How Sourci made it: Meet the founders behind Australia’s new e-commerce wave

In just four short years the co-founders of product development con...

Competition watchdog sniffs at Cochlear-Oticon acquisition

Competition watchdog sniffs at Cochlear-Oticon acquisition

The management at Cochlear (ASX: COH) are hoping to add an extra 75...