Benzinga | Sep 8, 2021 08:14AM EDT

Vertiv Acquires E&I Engineering Group For $1.8B; Cuts Q3, FY21 Outlook

* Vertiv Holdings Co (NYSE:VRT) has agreed to acquire E&I Engineering Ireland Limited and its affiliate, Powerbar Gulf LLC, for ~$1.8 billion, plus the potential for up to $200 million in cash. The upfront consideration consists of $1.17 billion in cash and ~$630 million of Vertiv common stock.

* E&I is an independent provider of electrical switchgear and power distribution systems, with annual sales of ~$460 million (2021E) and 2,100 employees. The deal provides the opportunity to leverage Vertiv's footprint outside of the U.S., particularly in Europe and Asia.

* The transaction is expected to be accretive to Vertiv's organic growth, adjusted operating margins, cash flow, and EPS in 2022, and is expected to close in 4Q21.

* Vertiv plans to finance the deal with cash and new debt financing, supported by committed funding. It held cash and cash equivalents of $716.8 million as of June 30, 2021.

* Vertiv orders in July and August were up ~12% year-over-year. Order growth drives a backlog of about $2.4 billion at the end of August, a 30% increase from year-end 2020.

* Q3 Outlook: Vertiv lowered its outlook citing supply chain challenges. It sees net sales of $1.21 billion - $1.25 billion (prior $1.26 billion - $1.3 billion), and an adjusted operating margin of 10.3% - 10.8% (prior 12.3% - 12.8%). Adjusted EPS outlook of $0.17 - $0.20 (prior $0.26 - $0.30).

* FY21 Outlook: The company expects net sales of $4.88 billion - $4.94 billion (prior $4.97 billion -$5.03 billion), an adjusted operating margin of 10.9% - 11.1% (prior 11.8% - 12.2%), and sees an adjusted EPS of $0.96 - $1.01 (prior $1.12 - $1.18).

* Price Action: VRT shares are trading lower by 3.71% at $27.00 during the premarket session on Wednesday.