The Reece Ltd (ASX: REH) share price is edging lower this afternoon after the company announced to the ASX that it has made an acquisition. REH shares opened at $10.03 this morning and dipped down towards the $9.80 mark before slightly recovering to the current level.
What has Reece acquired?
Reece has announced that it has acquired Todd Pipe & Supply, LLC – a plumbing supply wholesaler based in Southern California, United States (US).
Todd Pipe & Supply has six branches in 'attractive growth areas' which will join the US-based Reece subsidiary MORSCO, which Reece acquired in May 2018. The addition of Todd Pipe & Supply will take MORSCO's Southern California locations to 23 and total US locations to 181.
This was a privately negotiated deal and will cost Reece/MORSCO US$122 million, with "a further US $38 million deferred until December 2021 and subject to achieving certain milestones." This will be funded from cash and debt and is expected to be completed by 1 October 2019. Todd Pipe delivered adjusted earnings of US$16.4 million in the twelve months to March 2019.
Here's some of what Reece CEO Peter Wilson had to say:
Todd Pipe is an example of us acting on opportunities to consolidate the fragmented plumbing market in the US Sun-Belt region. We acquired MORSCO last year to create a growth platform for the Group, and we will do this through organic, and considered in-organic opportunities as they arise.
Reece shares have had a relatively steady 2019 so far, starting the year at $9.45 which is 5% below the current price (at the time of writing). This is still a ways off the 52-week (and all-time) high of $12.95 that Reece shares hit in August last year.
