Having recently announced a deal to sell its milking equipment division and focus on its highly successful Avon Protection respiratory and ballistic protection business, Avon Rubber p.l.c is wasting no time in targeting a strategically advantageous acquisition: the British company says it has signed an agreement to acquire Team Wendy, LLC, a leading supplier of helmets and helmet liner and retention systems for military and first responder markets, for $130 million on a cash-free and debt-free basis, subject to a normalised level of working capital.
The board of Avon Rubber, which specialises in respiratory protection equipment for military, law enforcement and fire personnel as well as dairy milking equipment, believes that the acquisition of Team Wendy will be an important step in the strategic development of Avon Rubber as a leading provider of life-critical personal protection systems to military and first responder markets.
Combining Team Wendy with Avon Protection’s existing Helmets & Armor business will create a global leader in Military and First Responder helmets with a broader product portfolio and stronger capabilities and routes to market, Avon says.
Team Wendy produces leading helmet liner and retention systems used by the U.S. Department of Defense (DoD) and enjoys established positions in Rest of World Military and First Responder helmet markets, while Avon Protection’s existing Helmets & Armor business is focused on next generation ballistic helmets and body armor for the DoD.
The enlarged helmet business will be better positioned for investment in next generation products and establishes a broader platform into which other technologies can be incorporated.
The Enlarged Group will have better scale and an enhanced route to market, with Team Wendy’s complementary customer base and well-established global footprint expected to provide significant business development opportunities over the medium-term, Avon Rubber explained
The directors of the company believe that the acquisition of Team Wendy will enhance shareholder value, meeting all of Avon Rubber’s strategic and financial criteria, and represents an immediate and compelling use of proceeds from the sale of milkrite | InterPuls, through the redeployment of capital into a highly complementary business with higher growth and margins and at a lower EBITDA multiple than obtained for milkrite | InterPuls.
The acquisition price represents a multiple of 9.7x Team Wendy’s 2019 EBITDA. This makes the purchase financially attractive, the directors say, and it is in line with Avon Rubber’s stated financial performance criteria for value-enhancing acquisitions, as set out below:
The acquisition will be earnings accretive in the first full financial year after completion, both on a standalone basis and after completion of divestment of milkrite | InterPuls, before the delivery of revenue or cost synergies.
Cleveland, Ohio-headquartered Team Wendy has a track record of strong organic revenue and profit growth, high-recurring EBITDA margins and strong cash conversion and its key strengths are closely aligned to those of Avon Protection. Avon Rubber’s directors believe that Team Wendy is well positioned in its core markets; it has a track record of profitable revenue growth and an attractive product portfolio supported by proprietary technology and a diversified customer base of Military and First Responder users, both in the U.S. and internationally, with customers in over 50 countries, ensuring it is not reliant on any single customer or contract. The American company has strong R&D capabilities with leading helmet liner and retention system technologies and a focus on impact protection capabilities, having developed advanced proprietary technology relating to helmet liner and retention systems.
Team Wendy was founded in Cleveland in 1997 by Dan Moore after his daughter Wendy died from traumatic brain injury (TBI) after a skiing accident. For the year ended December 31, 2019, the company posted revenue of $44.2 million and EBITDA of $13.4 million, resulting in an EBITDA margin of 30.3%. The company has a “strong and longstanding management team” who will transfer with Team Wendy following completion. The business currently operates from a single facility in Cleveland, Ohio, with approximately 130 employees. Team Wendy will continue to operate from this base, benefiting from the wider Avon Rubber infrastructure and management support.
Avon Rubber says it will retain a strong balance sheet, with an anticipated net cash position following completion of the acquisition of Team Wendy and the divestment of milkrite | InterPuls. The acquisition is expected to close in the first quarter of the group’s 2021 financial year, subject to U.S. regulatory approvals and customary closing conditions.
Commenting on the purchase deal, Mr. Paul McDonald, CEO of Avon Rubber, said “We are delighted to have identified an opportunity that fits our clear commercial and financial criteria and enables us to immediately reinvest the milkrite | InterPuls proceeds to drive additional shareholder value.”
Mr. Jose Rizo-Patron, Team Wendy, LLC, CEO, remarked, “Avon Rubber shares our vision for the growth and expansion of Team Wendy and, as such, we believe they are the right long-term partner for our customers, employees and other stakeholders.”