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RPC Group expanding in U.S. with acquisition of Letica Group

Staff Writer |
RPC Group is to buy U.S. plastics manufacturer Letica Group for up to £511 million ($640 million), the latest acquisition for the plastics engineering firm as it bids to expand in its reach outside Europe.

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The acquisition, subject to approval from the U.S. Federal Trade Commission and the Depart of Justice, is expected to complete by the end of March, which it intends to fund by raising £552m through a fully underwritten rights issue.

RPC Group will pay £391m ($490m) up-front on a cash- and debt-free basis, with an additional £120m ($150m) paid subject to Letica achieving earnings before interest, tax, depreciation and amortisation (EBITDA) greater than $140m and up to $201m over the two-year period starting on 1 July.

The £391m amount represents a multiple of 8.5 times Letica's adjusted EBITDA for the year ended 30 June 2016 and if the full additional earn-out payment is made, the amount will represent 6.4 times Letica's average adjusted EBITDA over the same period.

The company believes that the acquisition would help it "create a meaningful presence outside of Europe", which is one of the key pillars to RPC's 'Vision 2020' strategy, and provide it with a complementary platform from which to make future growth investments in North America.

Letica, which reported profit before tax of $27m in the year to last June, is expected to deliver pre-tax cost synergies of at least $5m per year, before integration costs, to be met within the second full financial year of ownership.