- Strategically expands Helios’s electronic control technology
with complementary AC (alternating current) capabilities, enabling
further diversification of end markets
- Proprietary electronic controls technology will be leveraged
to increase penetration of existing Helios end markets and to
expand to new industrial end markets
- Expected to be accretive to Adjusted EPS day one onward;
first year cash return on invested capital (ROIC) expected to
exceed Helios’s weighted average cost of capital (WACC)
- Management to host teleconference on Monday, October 12 at
9:00 a.m. ET
Helios Technologies (Nasdaq: HLIO) (“Helios” or the “Company”),
a global industrial technology leader that develops and
manufactures solutions for both the hydraulics and electronics
markets, has entered into a definitive agreement to acquire BWG
Holdings I Corp. (operating as Balboa Water Group, hereinafter
“Balboa”) for $218.5 million from investment funds affiliated with
AEA Investors LP (the “Acquisition”). Helios plans to fund the
Acquisition through a combination of cash and existing and new
credit facilities. Helios expects to close the transaction in the
fourth quarter of 2020, subject to customary closing conditions and
regulatory approvals.
Balboa is an innovative market leader of electronic controls for
the health and wellness industry with proprietary and patented
technology that enables end-to-end electronic control systems for
therapy bath and spas. Headquartered in Costa Mesa, CA, Balboa is a
global operation selling into 47 different countries and utilizing
a new state-of-the-art manufacturing facility in Baja, Mexico.
“With this acquisition, we are further advancing our Vision 2025
strategy by executing on the value streams focused on product and
technology expansion and market diversification,” commented Josef
Matosevic, the Company’s President and Chief Executive Officer.
“The addition of Balboa’s complementary technology to our portfolio
enhances our scale and leadership position in digital control
systems and allows us to strategically expand our product
portfolio. We believe the strategic and financial benefits
resulting from this acquisition are compelling for both our company
and our stakeholders. We look forward to welcoming the Balboa team
to the Helios family and are excited about the opportunities
ahead.”
Complementary Electronic Controls Technology Increases
Addressable Market
Balboa has differentiated, proprietary controls technology
expected to enhance and accelerate the Electronics segment’s
ability to innovate and propel into new end markets. Balboa is the
leader in the markets it serves with proprietary and patented
technology. Balboa’s AC controls technology is a great addition to
the capabilities of Enovation Controls, a wholly owned subsidiary
of Helios, which has a long history of deep application knowledge
in control of DC (direct current) and battery powered technologies.
This combination is intended to enable Helios to enter new and
adjacent, high growth markets with a robust complementary product
portfolio. This Acquisition diversifies Helios’s end markets,
customers and product offerings while enhancing scale, addressable
market and innovation in electronic control systems.
Solid Financial Contributions
Balboa has delivered compounded annual growth in the mid-single
digits for nearly 10 years and is expected to achieve Adjusted
EBITDA margins of approximately 20 percent by year-end 2021. The
Acquisition is expected to be accretive to Adjusted EPS day one
onward, and the first year ROIC is expected to exceed Helios’s
WACC. The purchase price of $218.5 million represents a 2020E
Adjusted EBITDA transaction multiple of 9.3x on a pro forma
basis.
Adds Low Cost Manufacturing Operations
Balboa utilizes a new, state-of-the-art production facility in
Baja, Mexico with the potential to increase capacity and optimize
costs. This facility can be leveraged to further optimize the
manufacturing and supply chain process across other areas of the
Electronics segment.
Financing and Closing
Total consideration for the transaction is $218.5 million.
Helios intends to use a combination of cash on hand and existing
and new credit facilities. On a pro forma basis following the close
of the transaction, Helios expects its 2020E year-end net
debt-to-Adjusted EBITDA leverage ratio to be approximately 3.4x.
Helios is committed to a long-term net debt leverage target of less
than 2.0x and expects to continue to benefit from strong cash flows
to support debt reduction and organic growth initiatives.
The Acquisition is expected to close in the fourth quarter of
2020, subject to customary closing conditions and regulatory
approvals.
Advisors
Morgan Stanley & Co. LLC served as financial advisor and
Jones Day as legal counsel to Helios on this transaction. Houlihan
Lokey served as financial advisors and Fried, Frank, Harris,
Shriver & Jacobson LLP served as legal counsel to Balboa.
Conference Call and Webcast
Helios will host a conference call and webcast today, October
12, 2020 at 9:00 a.m. ET to discuss the transaction. The live
conference call is available by dialing (201) 689-8573. The
Internet webcast and accompanying slide presentation will be
available here: www.heliostechnologies.com.
A telephonic replay will be available from 12:00 p.m. ET on the
day of the call through October 19, 2020. To listen to the archived
call, dial (412) 317-6671 and enter conference ID number 13711834.
The webcast replay will be available in the investor relations
section of the Company’s website at www.heliostechnologies.com.
About Helios Technologies
Helios Technologies is a global industrial technology leader
that develops and manufactures hydraulic and electronic control
solutions for diverse markets. The Company operates in two business
segments, Hydraulics and Electronics. The Hydraulics segment
markets and sells products globally under the brands of Sun
Hydraulics for its cartridge valve technology, Custom Fluid Power
for its hydraulic system design and Faster which provides quick
release coupling solutions. Global Electronics brands include
Enovation Controls and Murphy for fully-tailored solutions with a
broad range of rugged and reliable instruments such as displays,
controls and instrumentation products. Helios Technologies and
information about its associated companies is available online at
www.heliostechnologies.com.
About AEA Investors LP
AEA Investors LP was founded in 1968 by the Rockefeller, Mellon
and Harriman family interests and S.G. Warburg & Co. as a
private investment vehicle for a select group of industrial family
offices with substantial assets. AEA has an extraordinary global
network built over many years which includes leading industrial
families, business executives and leaders; many of whom invest with
AEA as active individual investors (“Participants”) and/or join its
portfolio company boards or act in other advisory roles. Today,
AEA’s approximately 90 investment professionals operate globally
with offices in New York, Connecticut, London, Munich and Shanghai.
The firm manages funds that have over $15 billion of invested and
committed capital including the leveraged buyouts of middle market
companies and small business companies and mezzanine and senior
debt investments. AEA Private Equity invests across three sectors:
value added industrials, consumer, and services. The AEA Small
Business Funds is a strategy within AEA that currently manages $1.8
billion of invested and committed capital. The team seeks to help
grow and transform companies at the lower end of the middle market
by sponsoring growing companies with proven management teams and
superior business models.
Forward Looking Information
This news release contains “forward-looking statements” within
the meaning of Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements involve risks and uncertainties, and
actual results may differ materially from those expressed or
implied by such statements. They include statements regarding
current expectations, estimates, forecasts, projections, our
beliefs, management’s plans, projections and objectives for future
operations, scale and performance, integration plans and expected
synergies therefrom, the timing of completion of the proposed
transaction, and assumptions made by Helios Technologies, Inc.
(“Helios” or the “Company”), its directors or its officers about
the Company and the industry in which it operates, and assumptions
made by management, and include among other items, (i) the
Company’s strategies regarding growth, including the expected
benefits of the Acquisition; (ii) the timing of completion of the
Acquisition; (iii) Company’s financing plans with respective to the
funding of the Acquisition; and; (iv) objectives for future
operations, integration plans and expected synergies. Words such as
“may,” “expects,” “projects,” “anticipates,” “intends,” “plans,”
“believes,” “seeks,” “estimates,” variations of such words, and
similar expressions are intended to identify such forward-looking
statements. Similarly, statements that describe our future plans,
objectives or goals also are forward-looking statements. These
statements are not guaranteeing future performance and are subject
to a number of risks and uncertainties. Our actual results may
differ materially from what is expressed or forecasted in such
forward-looking statements, and undue reliance should not be placed
on such statements. All forward-looking statements are made as of
the date hereof, and we undertake no obligation to update any
forward-looking statements, whether as a result of new information,
future events or otherwise.
Factors that could cause the actual results to differ materially
from what is expressed or forecasted in such forward-looking
statements include, but are not limited to, the occurrence of any
event, change or other circumstances that could give rise to the
termination of the Acquisition; the risk that the Acquisition will
not be consummated in a timely manner or at all; our ability to
obtain the financing necessary to consummate the Acquisition; risk
that any of the closing conditions to the Acquisition may not be
satisfied or may not be satisfied in a timely manner; risks related
to disruption of management time from ongoing business operations
due to the Acquisition; failure to realize the benefits expected
from the Acquisition; failure to promptly and effectively integrate
the Acquisition; and the ability of Helios to retain and hire key
personnel, and maintain relationships with suppliers. Further
information relating to factors that could cause actual results to
differ from those anticipated is included but not limited to
information under the heading Item 1. “Business” and Item 1A. “Risk
Factors” in the Company’s Form 10-K for the year ended December 28,
2019 and Part II, Item IA, “Risk Factors” in the Company’s Form
10-Q for the quarter ended March 28, 2020 and other filings with
the Securities and Exchange Commission.
Non-GAAP Financial Measures
This news release presents forward-looking statements regarding
non-GAAP Adjusted EPS, net debt-to-Adjusted EBITDA leverage ratio,
Adjusted EBITDA transaction multiple, and Adjusted EBITDA margin.
These non-GAAP financial measures are derived by excluding certain
amounts, expenses or income from the corresponding financial
measures determined in accordance with GAAP. The determination of
the amounts that are excluded from these non-GAAP measures is a
matter of management judgment and depends upon, among other
factors, the nature of the underlying expense or income recognized
in a given period. Helios is unable to present a quantitative
reconciliation of these forward-looking non-GAAP financial measures
to their most directly comparable forward-looking GAAP financial
measures because such information is not available, and management
cannot reliably predict all the necessary components of such GAAP
measures without unreasonable effort or expense. In addition, the
Company believes that such reconciliations would imply a degree of
precision that would be confusing or misleading to investors. The
unavailable information could have a significant impact on Helios’s
full year 2020 financial results. These non-GAAP financial measures
are preliminary estimates and are subject to risks and
uncertainties, including, among others, changes in connection with
quarter-end and year-end adjustments. Any variation between
Helios’s actual results and preliminary financial data set forth
above may be material.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201012005164/en/
Tania Almond VP, Investor Relations & Corporate
Communications (941) 362-1333 tania.almond@HLIO.com
Deborah Pawlowski Kei Advisors LLC (716) 843-3908
dpawlowski@keiadvisors.com
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