Victoria Group is to buy Balta Group’s rug division, its UK carpet business and its non-woven operations for £117m in cash and take on £48m of debt.
It has also raised a further £150m from investment group Koch.
Balta will now focus on its ITC residential band and the contract sector.
The three divisions had EBITDA of £30.1m in the year to 31 March, a 18.7% rise, from sales of £260.2m, up 1.1%.
The rug division had sales of £155m in 2020 and is the second largest rug producer behind Oriental Weavers. The UK carpet division had sales of £87.5m in 2020 and the non-wovens division £14.7m.
Victoria says it expects synergies of at least £12.7m in the next two to three years.
It will retain the Balta brand. The deal is expected to be completed in April.
Balta says the deal will allow it to focus on ITC, its residential polyamide business, and its Modulyss and Bentley Mills contract operations. ‘The remaining group has a stronger cash flow and balance sheet, as well as a reduced risk profile. A higher average EBITDA margin and better cash conversion will enable more investment in sustainability and growth through innovation, manufacturing optimisation and more agile digital solutions. Being more focused and less complex is also expected to improve overall efficiency. Furthermore, the impact of currency fluctuations and international transport costs will be significantly reduced in the remaining group,’ it says.
ITC had adjusted EBITDA of £7m from sales of £49m in the first three quarters of 2021, while the contract operations had earnings of £19.5m from sales of £120.2m.
‘I am pleased that we have achieved this mutually beneficial agreement with Victoria. While our rugs, residential PP and non-woven businesses have found a new owner with a great operational fit, the transaction will allow the remaining group to focus on its commercial businesses in Europe and the US and their expected recovery after the lifting of pandemic restrictions, and on its premium European residential PA business. The remaining group has a stronger cash flow and balance sheet, as well as a reduced risk profile, allowing us to invest in growth and strengthen our position across markets. Until the transaction closes, we will continue to run our businesses “as usual” and our employees and customers remain a top priority,’ says Cyrille Ragoucy, Balta Group ceo and chairman.
‘This selective acquisition of two highly complementary businesses will be significantly value creating for Victoria’s shareholders. The rugs division has been hugely successful over many years and there are very material operating synergies between the carpet division and Victoria’s existing business. These are both businesses that Victoria already knows extremely well,’ says Philippe Hamers, Victoria Group chief executive.
‘Victoria has spent time building a high-quality operational management team with depth and commitment. They have been successful at increasing the operating margin of the group’s UK carpet division from 5% to 18% through steady productivity gains and improved customer service. Consequently, Victoria’s management team are now laser-focussed on execution of our detailed plans for each of the recently announced acquisitions, and I am certain they will achieve similar gains as the businesses are integrated,’ says Geoff Wilding, Victoria Group executive chairman.
Once the deal is completed Victoria says it have ‘a little under 5%’ of the UK flooring market and 16% of UK broadloom carpet sales.
