Relais expands to the workshop equipment business through an acquisition

Translation: Original comment published in Finnish on 8/1/2023 at 10:15 pm EEST.

In the acquisition carried out on Tuesday, Relais acquires the Norwegian NDS Group AS’ workshop equipment business unit. We find the valuation of the acquisition moderate. We also believe that the acquisition target is well suited as part of Relais that operates in the vehicle aftermarket, as it opens opportunities for capital reallocation to complementing acquisitions in the same sector.

AutoMateriell ja Nordic Lift offer workshop equipment to vehicle import and dealer chains

Relais announced an acquisition on Tuesday where it acquires NDS Group's workshop equipment business unit. The acquisition comprises the AutoMateriell business and personnel, as well as the shares of Nordic Lift AS. The acquisition took place on Tuesday and the acquired business will be merged into Relais Group from the beginning of August.

AutoMateriell is a premium supplier of workshop equipment solutions for vehicle import and dealer chains with a long history in the Norwegian workshop equipment sector. Its customers operate, e.g., in the defense and marine sectors. Nordic Lift also provides workshop equipment for a wide range of customers in Norway. In 2022, the total revenue of the business unit was approximately EUR 17.7 million (198 MNOK) and the EBIT approximately EUR 1.2 million (13 MNOK) corresponding to an EBIT margin of 6.6%. These represent about 6% of our 2023 revenue estimate for Relais and 4% of our corresponding EBIT estimate.

The valuation of the acquisition is moderate and seems quite reasonable with capital allocation

The debt-free value of the acquired business unit is approximately EUR 6.3 million (70 MNOK) and the preliminary purchase price is around EUR 5.2 million (58 MNOK). Based on the 2023 full year result an additional purchase price of at most some EUR 2.6 million (29 NOK) may also be paid. No interest-bearing debt is transferred in the transaction and the net assets to be transferred are provisionally some EUR 4.7 million (53 MNOK). Relais finances the acquisition with existing cash assets.

The valuation of the acquisition with 2022 figures corresponds to a 0.4x EV/S ratio and a 5.4x EV/EBIT ratio. Thus, with 2022 figures, the valuation of the transaction is moderate and according to our estimate corresponds to a ROIC that is clearly double-digit and exceeds the cost of capital in a static examination. This provides relatively good preconditions for successful capital allocation and value creation.

Relais also pointed out in the release that the acquired business unit provides a new growth platform for the company. We assess that the company sees preconditions for complementing acquisitions in similar operations in its other operating countries. Thus, we would not be surprised if the company consolidated the workshop equipment business at a Nordic level in the future. We will include the acquisition in our estimates in connection with Relais’ Q2 report to be published on Thursday next week (August 10).