Coats Group, the industrial thread manufacturer, has signed a definitive agreement to acquire 100 percent of Rhenoflex GmbH, the maker of sustainable structural materials for the footwear industry, for an enterprise value of €115 million ($117 million).

Following the recent acquisition of Texon, this represents a synergistic bolt-on acquisition and an opportunity to strengthen Coats’ position in footwear components.

The consideration will be funded via the proceeds of an equity placing of up to 10 percent of the company’s issued share capital. The placing is conducted through an underwritten accelerated book-building process.

Transaction Highlights

  • Acquisition of Rhenoflex GmbH consolidates Coats’ presence in the athleisure and sports footwear market and strengthens its position with key global footwear brands;
  • It is complementary to Texon and Coats with product offerings across footwear components and fashion accessories;
  • Combines two makers of structural footwear components with enhanced scale, reach and capability, with commercial opportunities to accelerate growth;
  • Strengthens the platform with combined sales from Rhenoflex, Texon and Coats’ footwear and accessories business at c.$425m on a last twelve-month basis to June 2022;
  • Increases credentials in sustainability and expands sustainable product innovations with an in-house R&D team;
  • Value creation potential through the realization of cost synergies through efficiencies in purchasing and back-office of $6 million, incremental to $5 million synergies from Texon, with combined synergies of $11m resulting from the two transactions;
  • The purchase price represents 9.3x last twelve months to June 2022 EBITDA and 6.2x on a post-synergy basis; and
  • Consideration to be funded via ten percent equity placing, with leverage to remain within 1-to-2x target range, maintaining strategic balance sheet flexibility

Coats Group said, “Rhenoflex is a highly complementary addition to Texon, supplying high-quality structural components to the premium global footwear market, including heel counters, toe puffs, interlinings and eyelets, alongside sustainable material solutions for the luxury industry.

“Rhenoflex’s strategic focus on sustainability together with its reputation as a technology leader further enhances our portfolio of innovative offerings and strengthens our customer proposition to leading footwear brands.

“The acquisition is highly synergistic and expected to generate annual cost synergies of $6m through efficiencies in procurement and headcount. These are expected to be delivered by the end of the first full year of ownership with a one-off cash cost of $5m.

“Cost synergies from both Texon and Rhenoflex acquisitions are expected to total $11m. Integration of the business with Coats will be overseen by a dedicated team.”

Rajiv Sharma, Coats Group chief executive, said: “We are delighted to announce the acquisition of Rhenoflex, which presents an exciting and synergistic opportunity for Coats to establish a leading global platform in footwear components, expanding our presence in the fast-growing athleisure footwear market. Rhenoflex is a high-quality business that is complementary to both Texon and Coats, and its strategic focus on sustainability and innovation will significantly enhance our proposition to customers.”