The acquisition has been done at an Enterprise Value of Rs 200-220cr.The acquisition will be funded through a 60:40 mix of debt-internal accruals. Since the debt will be denominated in Australian dollars, it has a fixed interest rate less than 5.5%.
CT manufactures and sells evaporative air coolers, ducted gas heaters, and other cooling products in Australia and USA. CT has iconic brands such as 'Bonaire' and 'Celair'. It commands 30% and 25% market share of the domestic Australian evaporative air coolers and ducted gas heaters market. CT's manufacturing facility is located in Salisbury, South Australia with an assembly operation in Las Vegas, Nevada respectively. It also follows asset light model on the lines of Symphony, as it has 85 permanent employees (2 in the US), and employs contract labourers (~90 nos) during the season.
After 9% CAGR in sales over FY15-18E, CT expects 14% CAGR over FY18-21E led by increasing penetration in the US (air coolers). US is the largest air cooler market in the world, with an estimated size of US$250-300mn, 6x the size of Australian market. CT is estimated to report net sales of Rs274cr for FY18 (June end) with an EBITDA of Rs27-30cr. Based on this, the acquisition will be done at an EV/EBITDA of 7.5x, which is very attractive. Moreover, EV/Sales is also less than 1x.
This acquisition will help Symphony expand its international footprint and provides an opportunity of de-risking business as a result of exactly opposite winter and summer seasons in India and Australia. It provides Symphony entry into Australia and US markets (88%/12% of mix). CT has a complimentary product mix with Symphony with 54%/40%/6% mix between air coolers/ heating products/ air conditioners. Hence, we see the acquisition in a good light.