Nexans Pauses for Integration After $275 Million AmerCable Deal
Nexans SA (NEX), the cable and wire maker that agreed today to buy AmerCable Holdings Inc., will probably take a breather to integrate acquisitions rather than make more purchases this year, the French company’s chief executive said.
Nexans plans to complete the $275 million acquisition of AmerCable this month to become the leader in cables used by the oil and gas industry. It aims to finish acquiring 75 percent of China’s Shandong Yanggu Cables Group’s power-cable business in the third quarter, CEO Frederic Vincent said in an interview today. And it’s building an extra-high voltage plant in the U.S. and an assembly line for rail-car harnesses in Morocco, he said.
“We have to consolidate and integrate all that,” said Vincent, who became CEO of the Paris-based company in 2009. “Management can’t multiply itself indefinitely.”
Nexans, which was leapfrogged as the world’s largest cable maker by Italy’s Prysmian SpA (PRY) last year, has said it wants to expand in energy infrastructure in emerging markets, and specialty cables for rolling stock, automation and oil and gas in mature economies as well as in China. The market for cables used by the oil and gas industry may grow by 5 percent to 10 percent a year, Vincent said.
“The growing shift in North America towards unconventional oil and gas development is set to increase demand for AmerCable’s products and services,” Vincent said in a statement. “AmerCable’s presence in mining and oil and gas will double the size of Nexans’ activities in those segments.”
AmerCable, based in El Dorado, Arkansas, had earnings before interest, taxes, depreciation and amortization representing 13.3 percent of revenue at constant copper prices last year, and that margin “will evolve” between 12 percent and 15 percent, Vincent said. Nexans said it’s paying about 9.5 times adjusted Ebitda for AmerCable, which is owned by Houston-based Quintana Energy Partners.
AmerCable had revenue of about $270 million in 2011, up more than 30 percent from a year earlier, Nexans said. The cash purchase will boost Nexans’ Ebitda margin and earnings per share from the first year, the French company said.
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