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Prysmian Pays Premium on General Cable to Buy American Market Share

MILAN, ITALY (Cable-X) – Italian wire & cable manufacturer Prysmian Group (PRY.MI) has agreed to pay a nice bonus to buy U.S. rival General Cable (BGC.N) in a $3 billion deal struck despite competing bids from all over the world including China and Europe.

This merger provides a gaping hole in the American Wire & Cable market for competitors to spring up. For companies like Belden Inc., Dekoron Wire & Cable, Okonite, 1X Technologies Wire & Cable, and R-SCC this will be an opportunity to gain market share.

Whenever there is a merger or acquisition there is always going to be opportunity to pick up market share from multiple angles and opportunities including just the simple consolidation of products from both companies.

General Cable should turn out stronger from the merge, but there will most definitely be areas where other companies can swoop in and offer better service during the transition to win over customers.

We saw this when Southwire purchased Coleman Cable in a nearly 1 Billion dollar deal a few years back with competitors gaining big pieces of market share due to unhappy customers during the transition and after. It will be interesting to see how it plays out to say the least.

Reuters on the deal

From Reuters:  Prysmian, which makes cables for the energy and telecoms sectors, said the acquisition of the Kentucky-based group would strengthen its industry-leading position and increase its exposure to North America.

“Four groups were vying for the acquisition including the Chinese … it was not an easy weekend, but successful one,” Prysmian CEO Valerio Battista told analysts on a conference call.

He and Chief Financial Officer Pier Francesco Facchini were speaking from New York in the early hours of Monday after having negotiated over the weekend to trump bids coming from France’s Nexans (NEXS.PA), Denmark NKT (NKT.CO) and China’s Hengtong Optic-Electric, sources said.

Letting others grab General Cable could have put Prysmian under pressure in some markets, especially North America, where it generates 15 percent of its sales. Prysmian has been looking for months for possibilities to grow in the U.S. market.

The Italian company is paying $30 for each General Cable share in an all-cash deal that values the group at about $3 billion, once debt and other liabilities are included.

The price is a premium of more than 80 percent to General Cable’s price last July, when it started a strategic review to identify a possible merger partner to boost growth and maximize shareholder value.

 

GENERAL Cable & Prysmian on the merger

From General Cable & Prysmian:

The transaction, which has been unanimously approved by each company’s Board of Directors and recommended to its shareholders by General Cable’s Board of Directors, is expected to close by the third quarter of 2018, subject to the approval of General Cable’s shareholders representing at least a majority of the outstanding shares, regulatory approvals, and other customary conditions.

From their mouths

“The acquisition of General Cable represents a landmark moment for Prysmian Group and a strategic and unique opportunity to create value for our shareholders and customers,” said Valerio Battista, Prysmian Group CEO. “Through the combination of two of the premier companies in the cable industry we will be enhancing our position in the sector, by increasing our presence in North America and expanding our footprint in Europe and South America.”

John E. Welsh, III, Non-Executive Chairman of the Board of General Cable, said, “Today’s announcement is the culmination of a thorough and robust review of strategic alternatives undertaken by the General CableBoard of Directors. We are confident that this transaction maximizes value for our shareholders.”

Michael T. McDonnell, General Cable President and Chief Executive Officer, said, “This combination is an ideal strategic fit and ensures we are well-positioned to meet the future opportunities and challenges in the dynamic and evolving wire and cable industry. Together, we will be able to deliver a robust portfolio of products and services and new product innovation across the full breadth of the wire and cable industry globally. Importantly, Prysmian and General Cable have a shared vision and highly compatible cultures founded on similar values.”

Mr. McDonnell continued, “I am extremely proud of our people’s efforts to transform our business over the past several years, including rationalizing the asset base and refocusing on core businesses, streamlining our supply chain, and accelerating profitable growth and innovation in key segments. Today’s announcement is a testament to the team’s hard work and tireless dedication.”

 

Marketwatch on the Wire & Cable acquisition:

 

Based on aggregated results in the 12 months ended Sept. 30, the combined group would have sales of more than 11 billion euros ($13 billion) and adjusted earnings before interest, tax, depreciation and amortization, or Ebitda, of around EUR930 million, the companies said in a joint statement.

“Through the combination of two of the premier companies in the cable industry we will be enhancing our position in the sector, by increasing our presence in North America and expanding our footprint in Europe and South America,” said Prysmian Chief Executive Valerio Battista.

Prysmian expects run-rate, pre-tax cost synergies of approximately 150 million euros within five years, mainly from procurement, overhead costs savings and manufacturing. It estimates one-off integration costs of approximately EUR220 million.

The deal will be financed through a mix of new debt, cash-on-hand and existing credit lines, Prysmian said. The company also asked its chief financial officer to analyze a rights issue and other equity financing options for a maximum amount of EUR500 million.

The merger is expected to close by the third quarter of 2018, the companies said.