Hexatronic Group AB has entered into a definitive agreement to acquire KNET CO., LTD (“KNET”) – one of the global leaders within microduct solutions for the telecommunication industry – for an expected enterprise value of USD 63 million.
KNET is a global leader and pioneer in the development and manufacturing of microduct solutions for the telecommunication industry. Since 2002 the company has delivered to more than 70 countries on 5 continents. Today the main markets are North America followed by Europe and Asia.
KNET is headquartered in Seoul and has a manufacturing plant in Jeongeup-si in the Southern part of South Korea. The company also has offices in the US and Indonesia. The acquisition also includes the land and buildings of the production plant.
KNET will post-closing operate as an independent company with the existing management team and will continue to serve all existing customers under the KNET brand. The seller who also is the founder will continue in his current position as the chairman for KNET.
Overview of the transaction
The purchase price for KNET is a fixed enterprise value of USD 48 million plus a potential earn-out based on the accumulated EBITDA for the 36-month period post-closing. The potential earn-out is estimated to USD 15 million.
For the current year, ending December 31st, KNET is expected to generate an EBITDA of more than USD 10 million. This represents a fixed transaction multiple of approximately 4.6x and an expected transaction multiple, including earn-out, of approximately 6.1x.
The maximum earn-out amounts to USD 36 million and is achieved if KNET performs an accumulated EBITDA for the 36-month period of more than USD 63 million. If the accumulated EBITDA for the same period is less than USD 27 million no earn-out will be paid out.
The fixed purchase price of USD 48 million is to be paid in cash at closing, fully financed with senior debt. The third quarter pro forma Net Debt-to-EBITDA ratio for the Hexatronic Group, following the transaction, including previously announced transactions, is expected to be about 1,8. The acquisition is immediately accretive to earnings and is expected to add 0.28 SEK per Hexatronic share on an annual basis.
The acquisition is expected to close December 1, 2022.