Encore Wire (WIRE, Financial), a leading US manufacturer of electrical wire and cables, has seen a significant uptick, surging 12% today. This comes after the announcement of its acquisition by Italy's Prysmian, a major cable supplier, for $290 per share, valuing the enterprise at €3.9 billion. This acquisition price reflects an 11% premium over Encore's last closing price of $260.98 and a 20% premium against the 30-day volume-weighted average price (VWAP).
Key highlights of the acquisition include:
- The deal marks a significant expansion of Prysmian's footprint in the North American market.
- Encore Wire's operational model and product offerings are expected to complement Prysmian's strategy, aiming to tap into secular growth drivers with anticipated EBITDA synergies of approximately €140m within four years.
- The merger will create a global powerhouse in the wire and cable industry, with combined annual sales exceeding €17.7 billion and adjusted EBITDA around €2.1 billion. The transaction is slated for completion in the second half of 2024 and has received unanimous approval from both companies' Boards of Directors.
- A unique aspect of the deal is a 35-day go-shop period for WIRE, allowing it to entertain higher offers.
The all-cash offer of $290 per share is deemed attractive for WIRE shareholders, considering the company's historical financial volatility largely tied to fluctuating copper prices. With copper constituting nearly 80% of its raw material costs, the current favorable market conditions have propelled WIRE's share price from $165 last September to $261 on Friday. The go-shop provision further benefits shareholders by potentially attracting higher bids, ensuring they receive maximum market value.
This acquisition not only benefits WIRE shareholders by leveraging a strong market position but also allows Prysmian to enhance its North American operations and integrate WIRE's efficient production model into its broader strategy.
