Kingspan is to take a majority holding in German building envelope firm Steico, in a deal worth an initial €251.4 million.
The Cavan-based firm is buying 51 per cent of the company from its chief executive Udo Schramek for €35 per share, Kingspan said in an emailed statement. That is an 8 per cent premium to the German firm’s closing share price on Monday. As much as a quarter of the sale price could be covered by new Kingspan shares.
Kingspan could ultimately pay as much as twice the initial fee if Steico hits “specified thresholds with a material uplift in profitability”, it added. Kingspan will also hold an option to buy the remaining 10 per cent of Steico shares owned by Mr Schramek, potentially takings its stake to 61 per cent.
“The acquisition of a majority stake in Steico represents an exciting next step in our strategy to provide the full spectrum of insulation products,” Kingspan chief executive Gene Murtagh said. “Its suite of wood-based building envelope solutions broadens our ability to enable our customers to meet their sustainability and energy performance needs,” he added.
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“Kingspan’s global routes to market, paired with our drive to innovate and widen the applications of Steico’s current technologies, are key to our plans to bring Steico bio-based solutions to the next level,” Mr Murtagh said.
Steico makes natural insulation and wood-based building envelope products. It has four large production sites accounting for 27 product lines in Poland and France, including additional capacity nearing completion with up to €200 million revenue headroom, according to Kingspan.
It is “the world market leader for ecological wood fibre insulation materials, uniquely complemented by its integrated timber construction system,” Steico said on its website. The company employs about 1,900 people.
The German firm reported operating revenue of €445 million in 2022 and earnings before interest, tax, depreciation and amortisation (EBITDA) of €90 million. As of June 2023, Steico guided 2023 revenue of €378 million at an EBIT margin of 8 per cent to 10 per cent. That compared with more than 14 per cent for all of 2022. It had gross assets of €509 million at the end of last year.
Kingspan said the deal is likely to be earnings neutral “initially”.
The current Steico executive management team will be retained and will continue to manage the business while Kingspan “will seek fair representation on Steico’s administrative board”, it said.
The deal is expected to complete in early 2024 assuming it is cleared by regulators.
“We are now entering the next phase of growth and are very enthusiastic about the collaboration opportunities Kingspan brings, in both the existing Steico range and across the Kingspan portfolio and geographies,” Mr Schramek said. “I am excited about the future for Steico and about being invested in the future growth of both companies.”
Mr Schramek, who founded the company that became Steico in the 1980s, was preparing to sell his holding earlier this year, Bloomberg News reported in May. Bloomberg first reported the two companies were in talks on Monday.
