Exel acquires Chinese composites business, downsizes Australian operations

Image credit: Exel Composites Facebook page

Exel Composites has announced the acquisition of a Chinese composites production business in an effort to strengthen its position in the Asia Pacific (APAC) market.

Image credit: Exel Composites Facebook page
Image credit: Exel Composites Facebook page

The business in question, which employs about 90 workers, uses mainly pultrusion technology to produce composites products that are mostly complementary to Exel Composites’ existing product offering.

Riku Kytömäki, President and CEO of Exel Composites, said the acquisition will result in an increased production capacity in China and allow for a significant downsize of the underperforming Australian manufacturing unit in Melbourne.

According to him, the transaction will also result in the cancellation of the project to expand the company’s Nanjing site in China, which was initiated in December 2014.

“This acquisition is an important step in the implementation of Exel Composites’ growth strategy in China. Here megatrends such as urbanisation, demographic change, as well as sustainability and total life cycle cost management are driving increased demand and business opportunities,” Mr Kytömäki stated.

“In addition to expanding manufacturing capacity, we also are expanding our local sales and product development network and the range of applications we offer to the local market. The acquisition is also a good opportunity for the Group to improve operational efficiency and optimise capacity utilisation in the APAC region.”

According to the press release by Exel, the total estimated net debt free purchase price for 100% of the Business is EUR 8.8 million with the current exchange rate.

“70% of the purchase price, EUR 6.2 million, will be paid after closing of the transaction. The current main owner of the Business will retain a 30% minority ownership in a company, through which a part of the Business will be conducted,” reads the press release.

“The parties have agreed on a call and put option structure, under which Exel Composites is expected to acquire the remaining 30% stake earliest three years after the closing. The remaining purchase price includes a variable component depending, among other things, on the profit development of the Business.”

The transaction is expected to close during the first quarter of 2017.