Expected to be 15% accretive to earnings per share on a pro forma basis
Acquisition further enhances HDI's presence in the home builder distribution customer channel
Founded in 1967, Mid-Am is a leading wholesale distributor of building products to customers in the
"We are very pleased to welcome Mid-Am's capabilities to HDI, which we believe are complementary to our current operations," commented
The Acquisition is an important strategic addition to HDI's capabilities in the Pro Dealer and home center customer channel. The Pro Dealer / home center customer channel represents a substantial addressable market opportunity for HDI to capitalize on its deep expertise in architectural building products. The Acquisition of Mid-Am, combined with the HDI's purchase of
"With today's announced addition of Mid-Am, plus the previous acquisition of Novo, we have achieved additional diversification for our business," commented
HDI believes that the Novo and Mid-Am acquisitions are well timed with respect to the Company's outlook for end markets. HDI expects favorable multi-year demand for its products from the new residential and repair and remodel markets, supported by low existing home inventories, favorable demographics, historically low interest rates, rising home equity levels and an aging US housing stock.
The building products distribution market is large in size and scope, but remains fragmented. The Company maintains a pipeline of M&A targets and intends to remain active with respect to additional acquisition opportunities. Mid-Am represents HDI's eleventh acquisition in the last five years, on a pro forma basis adding over US$1.4 billion in annual revenues during this time period.
Mid-Am Acquisition Highlights
- Accretive acquisition terms, and further synergies expected. The Acquisition is expected to be 15% accretive to earnings per share before accounting for any synergies. Management has identified potential synergies in the areas of supply chain, tax and logistics that are anticipated as sources for further upside.
- Strategic growth in the scale and breadth of HDI's operations. Mid-Am brings new local presence in the Midwest to HDI's existing network of 83 distribution centers. It serves over 800 customers from six sales and distribution facilities located in four
U.S. states includingMissouri (two),Kansas (two),Illinois , andIowa . Mid-Am generated annual revenues of overUS$270 million in 2021. - Leadership team with proven track record in operations, fabrication, and sales. Mid-Am has a team of over 350 employees, with tenure in its customer-facing roles averaging 15 years. Mid-Am's leadership has significant industry experience and will continue to lead the Mid-Am business as part of HDI, ensuring business continuity while further adding to the Company's skillset.
Completion of the Acquisition is subject to a number of conditions customary for a transaction of this nature. The Acquisition is expected to close in
Credit Facility
HDI has received a commitment from its existing lender
The Expanded Credit Facility is expected to bear interest at a rate equal to (a) Term SOFR plus (i) the applicable spread adjustment for the relevant tenor and (ii) up to 2.25% or (b) the base rate of interest charged by the Lender under the Expanded Credit Facility from time to time ("Base Rate"). The Term SOFR and Base Rate margins for the Expanded Credit Facility are expected to be subject to performance pricing adjustments, from time to time, based on the Company's then applicable leverage ratio.
The financial covenants under the Expanded Credit Facility are expected to include, among others: (i) a consolidated interest coverage ratio (a ratio of adjusted EBITDA to total interest expense, determined on a consolidated basis of the Company, with the specific definitions to be agreed upon) and (ii) a consolidated leverage ratio (a ratio of total funded debt to adjusted EBITDA, determined on a consolidated basis of the Company, with the specific definitions to be agreed upon).
The commitment and advance of the loan facilities are subject to usual conditions including, among others, execution of documents satisfactory to the Lender, completion of the related transactions on terms satisfactory to the Lender, no material adverse change in the business of the Company and its subsidiaries or the sellers of Mid-Am having occurred, delivery of certain interim financial statements, pro forma financial statements and a pro forma compliance certificate confirming compliance with financial covenants and borrowing base on a pro forma basis, receipt of all necessary consents for the Acquisition and completion of the Lender's due diligence.
Conference Call Details
HDI will hold an investor call on Tuesday, February 1, 2022 at 8:00 am Eastern time to discuss the Acquisition. Participants should dial 1-888-204-4368 or (647)-794-4605 (GTA) at least five minutes before the call begins. A replay will be available through February 15, 2022 by calling toll free 1-888-203-1112 or (647)-436-0148 (GTA), followed by passcode 2525443.
About HDI
HDI is one of
Forward-Looking Statements
Certain statements in this news release may constitute "forward-looking information" or "financial outlook" within the meaning of applicable securities laws that involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements or industry results to be materially different from any future results, performance or achievements or industry results expressed or implied by such forward-looking information and financial outlook. Forward-looking information and financial outlook are identified by the use of terms and phrases such as "anticipate", "believe", "could", "estimate", "expect", "intend", "may", "plan", "predict", "project", "will", "would", and similar terms and phrases, including references to assumptions. Such information may involve, but is not limited to, comments with respect to strategies, expectations, planned operations or future actions. Forward-looking information in this news release includes, without limitation, statements with respect to: the anticipated closing of the Acquisition, the terms thereof and the timing therefor; the Acquisition of Mid-Am, combined with HDI's purchase of Novo, is expected to reposition HDI to meaningfully participate in the Pro Dealer / home center customer channel. ; approximately 55% of our sales mix will be now focused on industrial customers, and 45% on Pro Dealer / home center; HDI believes the Novo and Mid-Am acquisitions are well timed with respect to the Company's outlook for end markets; HDI expects favorable multi-year demand for its products from new residential and repair and remodel markets, supported by low existing home inventories, demographics, historically low interest rates, and an aging US housing stock; the Company intends to remain active with respect to additional acquisition opportunities; .; Mid-Am's expected annual revenues; Mid-Am's leadership will continue to lead the Mid-Am business as part of HDI, ensuring business continuity while further adding to the Company's skillset; the expected accretion to cash flows and earnings resulting from the Acquisition; management has identified potential synergies that are expected to provide further upside to the accretion; ; and, the anticipated entering into of the Expanded Credit Facility and the terms thereof and timing therefor. Actual events or results may differ materially.
The forecasts and projections that make up the forward-looking information and financial outlook in this news release are based on assumptions which include, but are not limited to: the completion of the Acquisition; no undisclosed liabilities associated with the Acquisition; no material adverse changes occur in respect of the acquired assets before the completion of the Acquisition; the Company completes the Expanded Credit Facility in accordance with the terms currently contemplated; the financial impact of the Acquisition is as currently expected by management; the Company and Mid-Am do not lose any key personnel; there are no decreases in the supply of, demand for, or market values of products that harm the Company or Mid-Am's business; the Company does not incur material losses related to credit provided to its customers; the Company is able to sustain its level of sales and earnings margins; the Company is able to grow its business long term and to manage its growth; the Company is able to integrate acquired businesses, including Mid-Am; there is no new competition in the markets in which the Company operates that lead to reduced sales and profitability; the Company can comply with existing regulations and will not become subject to more stringent regulations; no material product liability claims; importation of products manufactured with hardwood lumber or sheet goods does not increase and replace products manufactured in
The forward-looking information and financial outlook in this news release is subject to risks, uncertainties and other factors that could cause actual results to differ materially from historical results or results anticipated by the forward-looking information. The factors which could cause results to differ from current expectations include, but are not limited to: failure to close the Acquisition; the actual impacts of the Acquisition on the Company's earnings per share may not be in line with management's expectations; the Acquisition may not be immediately accretive to earnings per share; potential undisclosed liabilities associated with the Acquisition; no control by the Company over Mid-Am until completion of the Acquisition; the Company may not be able to obtain the Expanded Credit Facility on the terms currently expected, or at all; the Expanded Credit Facility will be subject to certain restrictive conditions that limit the discretion of management; exchange rate fluctuations between the Canadian and US dollar could affect the Company's performance; the Company's results are dependent upon the general state of the economy; the Company depends on key personnel, the loss of which could harm its business; decreases in the supply of, demand for, or market values of hardwood lumber or sheet goods could harm the Company's business; the Company may incur losses related to credit provided to the Company's customers; the Company's products may be subject to negative trade outcomes; the Company may not be able to sustain its current level of sales or earnings margins; the Company may be unable to grow its business long term or to manage any growth; the Company may be unable to integrate acquired businesses; competition in the Company's markets may lead to reduced sales and profitability; the Company may fail to comply with existing regulations or become subject to more stringent regulations; product liability claims could affect the Company's sales, profitability and reputation; importation of products manufactured with hardwood lumber or sheet goods may increase, and replace products manufactured in
To the extent any forward-looking information or statements in this news release constitute a "financial outlook" within the meaning of securities laws, such information is being provided to demonstrate the potential benefits of the Acquisition and management's estimate of the future financial performance of Mid-Am, and readers are cautioned that this information may not be appropriate for any other purpose and that they should not place undue reliance on such information.
Although HDI has attempted to identify factors that would cause actual actions, events or results to differ materially from those disclosed in the forward-looking statements or information or financial outlook in this news release, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. Also, many of the factors are beyond the control of HDI. Accordingly, readers should not place undue reliance on forward-looking statements or information in this news release. The forward- looking information is made as of the date of this news release, and HDI assumes no obligation to publicly update or revise such forward-looking information to reflect new information, subsequent or otherwise, except as may be required by applicable securities law. The forward-looking information contained herein is expressly qualified in its entirety by this cautionary statement.
Non-IFRS and Non-
This news release makes reference to certain non-IFRS financial measures, in the case of the Company, or non-U.S. GAAP financial measures, in the case of Mid-Am. These non-IFRS and non-
The definitions of the non-IFRS and non-
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