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Volution Group plc (LSE:FAN), a prominent designer and manufacturer of energy-efficient indoor air quality solutions, has signed a significant agreement to acquire the Fantech Group from the owners of Elta Group Ltd, based in the UK.
Details of the Acquisition
Volution will acquire 100% of the holding company of Fantech Australasia for an initial consideration of AUD$220 million (£112.9 million) on a debt/cash-free basis. Additionally, there will be non-contingent consideration of AUD$60 million (£30.8 million) payable twelve months after the deal's completion. For the financial year ending 31 March 2024, Fantech reported audited revenues of AUD$177 million (£90.8 million) and EBITDA of AUD$33.3 million (£17.1 million).
This acquisition aligns with Volution’s long-term strategy to strengthen its portfolio by acquiring leading ventilation brands, further extending its market reach. Since its initial acquisition of Simx in March 2018, the Group has successfully expanded in the Australasian region.
Fantech’s Market Presence
Fantech encompasses several well-known brands, including Ideal Air, NCS Acoustics, Air Design, Major Air, Systemaire, and Burra Steel. The company has established itself as a leading provider of commercial and residential ventilation solutions in Australia and commercial solutions in New Zealand. With a history dating back to 1973 and a move to a new 20,000m² headquarters in Melbourne in 2021, Fantech boasts substantial operational capacity to support its growth trajectory. The company operates 13 manufacturing, warehouse, and sales locations across Australia and New Zealand, employing over 350 staff.
Strategic Benefits of the Acquisition
- Enhanced Market Position: The acquisition will strengthen Volution’s position in the Australasian market through Fantech’s well-recognized brands, allowing the Group to penetrate new applications, especially in the commercial sector.
- Revenue Growth: Post-transaction, Australasia is expected to account for over 30% of Volution's total revenue.
- Product Synergy: The acquisition allows Volution to integrate its existing range of low-energy ceiling fans, marketed as Ventair, with Fantech's commercial and residential ventilation solutions.
- Diversified Customer Base: Fantech’s presence in the commercial market in New Zealand complements Volution’s existing residential focus, creating a broader customer base that includes both distribution and trade contractors.
- Immediate Earnings Accretion: The acquisition is anticipated to be earnings accretive from day one, with Volution maintaining an adjusted operating margin above its long-term target of 20%.
Transaction Completion Conditions
Completion of the transaction is subject to anti-trust approvals, which Volution is optimistic will be secured within approximately two to three months.
Refinancing and Financial Strategy
To finance this acquisition, Volution has successfully refinanced its previous revolving credit facility, securing a new £230 million multi-currency Sustainability Linked Revolving Credit facility, along with a £70 million uncommitted accordion facility. The new facility has an initial term of three years, expiring in September 2027, with options for extension up to two additional years.
Following the acquisition, leverage is expected to increase from approximately 0.4x at 31 July 2024 to between 1.5x and 1.7x on a pro forma basis. Volution’s robust de-leveraging profile is expected to take effect following the deferred consideration payment twelve months post-completion.
