LONDON: Volex plc, the global supplier of integrated manufacturing services and power products, has signed a share purchase agreement for the proposed acquisition of the entire issued share capital of De-Ka Elektroteknik Sanayi ve Ticaret Anonim Şirketi (DEKA), for a total consideration of up to €61.8 million, on a debt-free basis.

The Acquisition is expected to close in January 2021, subject to approval by the Turkish Competition Authority and admission of the Consideration Shares (as defined below) to trading on AIM.

DEKA is a leading power cord manufacturer for the European white goods market. Headquartered in Kocaeli, Turkey, with three production facilities and approximately 450 employees, it is strategically located in a low-cost region close to Europe.

Like Volex, DEKA has shown a resilient performance through the period of the Covid-19 pandemic and reported unaudited sales of €33 million for the nine months ended 30 September 2020. DEKA has best-in-class automation, full vertical integration and a strong management team who are expected to remain with the business.

DEKA offers exciting organic growth potential, providing Volex with increased market share in attractive end market segments; expands Volex’s presence in Europe, a key market for Volex’s capabilities; provides additional diversity to Volex’s business in terms of customers and end-markets, and increased scale should allow the enlarged Volex group to continue to improve our cost structure and realise procurement savings and reductions in engineering and safety approval costs.

For the year ended 31 December 2019, DEKA generated audited sales of €44.3 million and operating profit of €6.5 million. Following the Acquisition, Volex’s ROCE is expected to exceed 25%.

Acquisition of DEKA for initial cash consideration of €37million and €9.8 million to be satisfied by the issue of 3.32 million ordinary shares in Volex to the sellers on Completion. Deferred cash consideration of €2.0 million is payable in January 2022.

Deferred contingent cash consideration of up to €13.0 million in cash, which may be payable within two years of Completion based on certain profit targets of DEKA being met. The Consideration Shares are subject to a six-month lock-up, and an application will be made to the London Stock Exchange for the admission of the Consideration Shares to trading on AIM.

The initial and deferred cash consideration will be funded through new debt facilities. Completion of the Acquisition is expected to occur in January 2021, subject to approval by the Turkish Competition Authority.

Commenting on the acquisition, Nat Rothschild Executive Chairman of Volex said: “The acquisition of DEKA is an exceptional opportunity for Volex and is expected to be significantly earnings enhancing in the first full year of ownership. As one of the two leading power cord producers in Europe, with a strong management team and an impressive customer list, DEKA is a perfect fit with our business model. Furthermore, it accelerates our strategy of creating the most efficient and lowest-cost producer in the industry, providing an immediate and scalable European platform. The business has an excellent track record and is positioned well in high structural growth end-segments such as White Goods to deliver exciting growth in the future.”

Volex plc (AIM:VLX) is a leading integrated manufacturing specialist. The Group designs and manufactures products that ensure a critical connection never fails and are used in everything from defibrillators and ventilators through to data networking equipment and vehicle telematics.

Headquartered in the United Kingdom, Volex serves the needs of its blue-chip customer base from its manufacturing sites located across nine countries and three continents, employing over 6,000 people. Volex’s products are sold through its own global sales force and through distributors to Original Equipment Manufacturers (‘OEMs’) and Electronic Manufacturing Services companies. www.volex.com