The aluminum company agreed to buy the Polish supplier and processor in hopes to expand its reach into Europe.
Gränges (SWX:GRNG), a global aluminum supplier, announced its agreement to purchase Aluminium Konin for US$239 million, valuing the company at 6.9 times its annual earnings before interest, tax, depreciation and amortization.
The Swedish company agreed to purchase the small Polish producer due to its consistent track-record, with an annual capacity of 100,000 metric tons. The company believes that purchasing Aluminium Konin will put Gränges in a strong position in key niche markets in Europe.
“Aluminium Konin contributes with technically advanced operations, strategically located in Central Europe. The acquisition is a good strategic fit and complements our business and geographic presence,” said Gränges CEO Johan Menckel in a statement.
“Aluminium Konin strengthens Gränges’ product offering for new niche markets and enables a broader offering of solutions for future vehicles,” he added. “The acquisition will sharpen our competitive strength and create a stronger position in growing markets to further drive the development of sustainable customer offerings.”
Gränges is a leading global supplier of rolled aluminum products for heat exchanger applications and similar niche markets. The company boasts that every second car in the world produced today contains material manufactured by Gränges.
This acquisition follows a challenging Q3 2019 for Gränges, with sales volume decreasing by 8.1 percent to 85,800 metric tons. The company also increased its net debt to 4.3 billion Swedish crowns.
Gränges’ share price has made gains this year, posting a gain of 17.9 percent since January. The company did particularly well during the month of April, when it posted its high for the year to date of 108.10 Swedish crowns. In April, Gränges refinanced the credit agreement that originally financed the acquisition of its US business, allowing for more financial flexibility.
“Since the listing of the share in 2014, Gränges has more than doubled its sales volume and profit and generated growth above industry average, driven by technically advanced products, innovation, successful acquisitions and a strong sustainability commitment,” said Jannis Kitsakis in a statement. He is the senior portfolio manager at the Fourth Swedish National Pension Fund, representing the largest shareholder in Gränges.
At market close on November 28, Gränges’ share closed the market trading for 94.70 crowns. Meanwhile in London, aluminum traded for US$1,770 per metric ton on November 27.
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Securities Disclosure: I, Sasha Dhesi, hold no direct investment interest in any company mentioned in this article.