RPM Automotive Group has added East Coast Tyre Wholesalers (ECTW) to its wheels and tyres division. ECTW is an Australian-owned tyre and wheel importer based in western Sydney, with a distribution network country-wide. It has traded for more than 13 years. The company is the exclusive distributor of several tyre brands, including Pace, Compasal, and Zeta Truck Tyres. ECTW supplies passenger tyres from 12 inch to 22 inch in size, with a full range of PCR, UHP, 4WD, TBR and run-flat tyres.
In FY20, ECTW generated revenue of $6 million and EBITDA of over $500k. Revenue and EBITDA in FY21 are forecast to be more than $6 million and $550,000 respectively.
RPM CEO, Clive Finkelstein, said the acquisition will provide the group with many benefits. “Our businesses are operationally aligned, often in parallel markets and tyre segments. We see attractive potential to add value and revenue to both businesses through cross-selling of products and tyre brands to different customer bases, as well as cost synergies as a result of the scale achieved.”
Around $200k of efficiency synergies are expected from integrating ECTW with RPM’s existing wheel and tyre wholesale businesses. In addition, potential revenue synergies from cross-pollinating customer-bases and cross-selling RPM’s current, and ECTW’s product range are expected.
The group said it is well positioned to provide ECTW and its customers with benefits derived from a larger infrastructure and greater coverage. RPM wheels and tyres division now has operations effectively covering the East Coast of Australia.
The total purchase price for ECTW is $2.6 million, with consideration comprising 67.5 per cent cash and 32.5 per cent shares (valued at RPM’s 60-day volume weighted average price from signing of the sale and purchase agreement).
Fifty per cent of the consideration will be paid on 1 September 2021, following a due diligence. The remaining 50 per cent will be paid in two annual instalments of 25 per cent each, within 60 days of the end of FY22 and FY23. RPM anticipates completing the acquisition on or by 1 September 2021.
Finkelstein said the acquisition is funded from the group’s recent capital raise and will be immediately earnings accretive. “It is another example of our sustainable growth strategy designed to grow RPM into Australia’s leading business operating a diversity of brands across the transport and automotive aftermarket sectors,” he said.
According to RPM, its growth strategy remains on course, with organic business growth exceeding budget and further potential acquisitions in the pipeline. The group said it remains on track to generate record results in FY21, with FY22 group revenue forecast to exceed $75 million.