Benzinga | Nov 5, 2020 07:23AM EST

CSW Industrials Announces Definitive Agreement To Acquire TRUaire For $360M

TRUaire Acquisition Highlights



* Expands existing product portfolio in the rapidly growing heating, ventilation, air conditioning, and refrigeration (HVAC/R) accessory end market

* Aligns with previously established acquisition criteria of leveraging existing distribution channels, increasing market share in HVAC/R end market, expanding product offerings, and growing share of wallet with current customers

* Expected to be accretive to earnings per share in the first full year of ownership, excluding purchase price accounting effects

* Sales into the profitable HVAC/R end market would represent approximately 49% of CSWI's expected annual revenue, including the acquisition

* Transaction economics enable maintaining strong, resilient balance sheet and ample liquidity, with anticipated leverage of approximately 2.1x at closing

DALLAS, Nov. 05, 2020 (GLOBE NEWSWIRE) -- CSW Industrials, Inc. (NASDAQ:CSWI) and TRUaire announced today the execution of a definitive stock purchase agreement under which CSWI will acquire TRUaire for approximately $360 million, subject to standard regulatory approvals and other customary conditions. The proposed purchase price is approximately 10x TRUaire's expected 2020 adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). CSWI anticipates funding the transaction with a combination of cash on hand, debt under its existing $300 million credit facility, and approximately 850,000 shares of common stock issued to the sellers, with closing expected to occur by calendar year-end.

TRUaire, based in Santa Fe Springs, California, is a leading supplier of passive air handling solutions for residential and commercial applications, offering a broad suite of high-quality products including grilles, registers and diffusers (GRD). TRUaire sells through wholesale distribution and retail channels, with HVAC/R technicians and homeowners as primary end users. During calendar year 2019, approximately 86% of TRUaire's business served residential customers in the HVAC/R end market, while the remainder served commercial customers.

TRUaire has five U.S. distribution centers and one state-of-the-art manufacturing facility located in Vietnam, where TRUaire's products are manufactured. TRUaire expects calendar year 2020 revenue of approximately $108 million and a margin profile accretive to CSWI's.

Joseph B. Armes, CSW Industrials' Chairman, President, and Chief Executive Officer, commented, "We are pleased to have entered into a definitive agreement to acquire TRUaire. This acquisition will allow us to expand our existing HVAC/R platform with a compelling portfolio of best-in-class products, while leveraging our existing distribution channels, and serving the same customers that we serve today. TRUaire has a demonstrated track-record of profitable growth, product innovation, and resiliency through economic cycles, while maintaining an exceptional reputation for customer service and product quality. This acquisition will enable us to continue driving sustainable, profitable growth, while delivering value to all of CSWI's shareholders."

Armes continued, "I look forward to welcoming the TRUaire team to CSW Industrials. This is a unique opportunity to augment an experienced management team and own a large-scale, high-quality manufacturing operation, while diversifying and strengthening our supply chain."

This strategic acquisition is expected to result in a combined entity with a compelling HVAC/R product offering that will incorporate TRUaire's leading GRD product offerings and CSWI's existing robust HVAC/R solutions portfolio, including a condensate management platform, ductless accessories, and chemical offerings. CSWI's go-to-market strategy, strong distribution channels, and deep experience in the HVAC/R market is expected to increase customer share of wallet, while providing an enhanced service offering. CSWI's existing investments in technology and e-commerce are expected to benefit TRUaire's operations and drive increased efficiency across the combined operations.