Encore Wire, a McKinney, Texas-based manufacturer of copper and aluminum electrical wires and cables, announced April 15 it agreed to be acquired by Italian cable maker Prysmian SpA for $4.1 billion, including debt.
The deal, for $290 per share in cash, represents a premium of about 20 percent over the 30-day volume weighted average share price as of Friday, 29 percent over 90 days.
The price represents a multiple of 8.2 times last year’s EBITDA, 6.3 times including synergies. The transaction is expected to generate about $148.5 million in run-rate EBITDA synergies within four years from closing.
The purchase is expected to close in the second half of 2024 if it clears regulators and a majority of Encore Wire’s shareholders.
Under the agreement’s terms, Encore Wire may solicit alternative acquisition proposals from third parties during a 35-day “go-shop” period following the date of execution of the merger agreement.
The transaction will be financed through a mix of cash on Prysmian’s balance sheet ($1.2 billion) and newly committed debt facilities ($3.6 billion).
J.P. Morgan Securities is financial advisor to Encore Wire and O’Melveny & Myers is legal advisor. The O’Melveny team was led by partner Andor Terner in Newport Beach, Calif., but included tax partner Will Becker and associates Eleanor Gilbert and Sean Horan in Dallas.
Goldman Sachs Bank Europe SE, Succursale Italia is financial advisor to Prysmian and Wachtell, Lipton, Rosen & Katz is legal advisor with a group led by partner Adam Emmerich in New York. (Emmerich also counseled Prysmian on its $3 billion acquisition of Kentucky-based General Cable in 2017.)
Daniel Jones, Encore Wire’s chairman, president and CEO, said in the announcement that the agreement reflects the value Encore Wire has created with its single-campus model, low-cost production, centralized distribution and product innovation.
“This transaction maximizes value for Encore Wire shareholders and provides an attractive premium for their shares,” he said. “Encore Wire and Prysmian are two highly complementary organizations and … as part of a larger, global operation, we expect this transaction will bring additional future opportunities for our employees.“
Massimo Battaini, Prysmian designated Group CEO, said the deal represents a landmark moment for the company and an opportunity to create value for its shareholders and customers.
“Through this acquisition, Prysmian will grow its North American presence, enhancing its portfolio and geographic mix, while significantly increasing the exposure to secular growth drivers,” he said.
Based on year-end 2023, the combined group would have posted net sales of more than $18.8 billion and adjusted EBITDA of about $2.2 billion.
After closing, Prysmian expects to maintain a significant presence at Encore Wire’s vertically-integrated McKinney campus.