Italian cabling solutions provider Prysmian (IT:PRY) is acquiring electrical building wires and cables maker Encore Wire Corp. (NASDAQ:WIRE) in a $4.2 billion deal. The $290 per share acquisition price tag has sent WIRE shares nearly 8% higher in the early trading session today.
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A Bumper Deal
The deal pegs Encore’s enterprise value at 8.2 times its EBITDA for 2023. Moreover, the $290 per share price tag points to a nearly 20% premium over Encore’s 30-day VWAP (Volume Weighted Average Share Price).
The strategic M&A move expands Prysmian’s presence in North America, while enhancing the company’s portfolio and geographic mix. Encore is known for its low-cost production, centralized distribution, and a single-campus model. Prysmian plans to maintain a substantial presence at Encore’s vertically integrated, single-site, Texas campus following the closing of the deal.
Notably, the combined pro forma sales for the two companies are estimated to exceed €17.7 billion for 2023. Prysmian expects run-rate EBITDA synergies of nearly €140 million from the acquisition within four years of closing.
The acquisition has been approved by the boards of both companies and is anticipated to close in H2 2024. Simultaneously, Encore has a 35-day “go-shop” period, during which the wire maker can entertain alternative acquisition proposals from third parties.
Is Encore Wire a Buy, Sell, or a Hold?
Today’s bumper price gains in Encore come on top of a nearly 56% rally in the company’s share price over the past year. Overall, the Street has a Moderate Buy consensus rating on the stock, alongside an average WIRE price target of $295. However, analysts’ views on Encore could see a revision following today’s acquisition announcement.
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