RPM Automotive Group (ASX:RPM) to acquire DWT

Highlights

  • RPM Automotive Group Limited (ASX:RPM) announced its decision to acquire another FNQ based business, Direct Wholesale Tyres (DWT).
  • The purchase of DWT is in line with RPM’s focused growth strategy, which includes expanding the business through accretive acquisitions.
  • Post this announcement, the Company’s shares fell by over 6% on ASX.

Today, ASX-listed Australian automotive Company RPM Automotive Group Limited (ASX:RPM) announced it will be taking over FNQ based business, Direct Wholesale Tyres (DWT).

The Company stated that the acquisition will add scale to RPM’s existing FNQ footprint and ensure that the new RPM Distribution Centre in Townsville not only services the Group’s existing business, but also supports DWT and its associated customers.

The purchase of DWT is in line with RPM’s focused growth strategy, which includes expanding the business through accretive acquisitions.

The Group will pay AU$1.7 million for DWT, featuring 60% in cash and 40% in RPM ordinary shares (escrowed for 12 months from the issue date) at an issue price similar to the weighted average share price over the previous 60 days. Consideration will be paid 60% on completion and the balance on 1 October 2022. The Company has said that the acquisition has been funded from its recent strategic investment.

The announcement stated that the sale and purchase agreement has standard conditions precedent for completion, and RPM anticipates completing the acquisition of DWT on or around 1 October 2021.

Noticeably, DWT generated AU$6.5 million in revenue for FY21 and is forecast initially to offer an annual contribution of AU$450k to RPM’s new FNQ operation.

Post this announcement, shares of RPM Automotive Group Limited dropped 6.6% to trade at AU$0.350 per share at 11.40 AM AEST.

Bottomline

RPM Automotive Group Limited has currently a market capitalisation of AU$49.98 million. It has a resilient and growing business model and this acquisition is a strategically aligned one which will provide a greater vertical integration capacity and cost savings.

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