Benzinga | Dec 17, 2021 08:11AM EST

DMC Global To Buy 60% Controlling Interest In Arcadia For $282.5M In Cash, Stock

Addition of Leading Architectural Building Products Manufacturer to Significantly Expand DMC's Addressable Market

Acquisition Expected to be Accretive to Earnings in 2022;

Will Double DMC's Consolidated Annual Sales to Nearly $500 Million, Enhance Gross Margin

BROOMFIELD, Colo., Dec. 17, 2021 (GLOBE NEWSWIRE) -- DMC Global Inc. (NASDAQ:BOOM), a diversified holding company, has signed a definitive agreement to acquire a 60% controlling interest in privately held Arcadia Inc. for $282.5 million in cash and DMC stock. Arcadia is a leading U.S. supplier of architectural building products, which include exterior and interior framing systems for low and mid-rise commercial buildings, windows, curtain walls, interior partitions, and highly engineered windows and doors for the high-end residential real estate market.

Transaction details

* DMC will purchase a 60% interest in Arcadia for $282.5 million, subject to final purchase price adjustments and closing conditions $262.0 million of the purchase price to be paid in cash and $20.5 million will be paid in DMC stock Cash portion to be financed with cash and marketable securities on DMC's balance sheet and funds from a $150.0 million senior credit facility

* DMC's total debt-to-adjusted EBITDA leverage ratio after closing will be 2.79 based on total borrowings of $150.0 million and pro forma adjusted EBITDA of $53.7 million; total net debt-to-adjusted EBITDA leverage ratio will be 2.25 based on net debt of $120.8 million and pro forma adjusted EBITDA of $53.7 million

* Closing is expected to occur prior to December 31, 2021

* DMC to acquire the remaining 40% interest in Arcadia through a three-year put and call option with a floor valuation of $187.1 million

* Total implied transaction value is $469.6 million

* Transaction value is 8.6x Arcadia's trailing 12-month adjusted EBITDA of $54.6 million as of September 30, 2021

Kevin Longe, DMC's president and CEO, said, "This is a milestone transaction for DMC and aligns with our strategy of building a diversified portfolio of industry-leading businesses with differentiated products and services. The acquisition of Arcadia will double DMC's consolidated sales, strengthen our gross margins and provide diversification outside our more cyclical energy and industrial infrastructure markets.

"Arcadia's strong position in a $4.5 billion segment of the architectural products industry will also significantly expand DMC's addressable market. We look forward to supporting Arcadia's growth plans, and I am delighted to welcome CEO Jim Schladen and the company's 850 employees to the DMC family."

Schladen added, "This is an exciting transaction for Arcadia, its employees and our customers. We look forward to DMC's support as we expand Arcadia's capacity and increase its position in the commercial and high-end residential architectural products markets. I am confident this will be an outstanding partnership that will provide long-term benefits to Arcadia, DMC, and our stakeholders."

Inclusive of Arcadia, DMC's consolidated pro forma sales for the trailing 12 months ended September 30, 2021, would be $491 million, while consolidated adjusted EBITDA would be $53.7 million. Arcadia recorded unaudited sales of $245.7 million and adjusted EBITDA of $54.6 million for the trailing 12-month period. Under the structure of the agreement, 60% of Arcadia's adjusted EBITDA will be reported by DMC.

From 2010 through 2020, Arcadia increased its sales at a 13% compound annual growth rate (CAGR) and increased adjusted EBITDA at a 23% CAGR.

DMC expects the acquisition will be accretive to earnings within the first year. Arcadia will operate as a standalone business of DMC and will be led by Jim Schladen and his management team.

Based in Vernon, California, Arcadia operates three divisions. Its commercial architectural products business, Arcadia Inc., primarily serves the low and mid-rise commercial buildings market. Its differentiated business model is focused on providing a broad selection of architectural framing solutions, short lead times, reliable product availability, and exceptional service. Its customer base includes more than 2,000 glass and glazing contractors, building owners, and commercial architects. Arcadia Inc. has established a leading position in the western and southwestern United States, and it serves a diverse range of end markets that include commercial offices, healthcare, higher education, retail, civic and public facilities, and religious buildings.

Arcadia's commercial interiors business, Wilson Partitions, provides a national customer base with custom interior architectural framing systems. Its products are used in new construction and repair and remodel projects, and address noise control, fire rating, functionality, and aesthetics.

Arcadia's residential business, Arcadia Custom, provides premium, energy-efficient steel, aluminum, and wood windows and doors to the America's fast-growing, high-end home market. The division works closely with architects, contractors, and installers. It sells through a national network of sales agents, and approximately 140 high-end window and door dealers.

New Senior Secured Credit Facilities

To fund a portion of the purchase price for the acquisition, DMC expects to enter into a new five-year syndicated credit facility, which includes a $150 million term loan and a $50 million revolving line of credit. The term loan will be fully funded and will be used to complete the acquisition, while the revolving line of credit will be fully undrawn and available. The term loan and revolving credit facility will bear interest at the Secured Overnight Financing Rate (SOFR) plus 2.5% at inception.

Presentation

A presentation on the transaction, Arcadia's business and pertinent financial data is available here:

https://dmc.mobi/arcadia