HMS Networks AB (publ) (OM:HMS) has entered into a binding agreement to acquire Red Lion Controls, Inc. from Spectris plc (LSE:SXS) for approximately $350 million on December 11, 2023. The acquisition will be financed through a combination of new debt and equity. HMS has obtained debt financing in an amount of $225 million provided by Skandinaviska Enskilda Banken AB and the Swedish Export Credit Corporation, consisting of a term loan and a revolving credit facility.

In addition, Skandinaviska Enskilda Banken AB has provided a bridge loan facility in an amount of $120 million, which is expected to be repaid with the proceeds from a share issue that is planned to be carried out after the closing of the acquisition. In the twelve-month period ending on September 30, 2023, Red Lion reported sales of about $128.211 million and an adjusted EBIT of about $26.4315 million , corresponding to an adjusted EBIT margin of about 20.6 percent. Further, Red Lion reported in the corresponding period, a gross margin of about 55 percent.

After allowing for tax, the net proceeds from the sale are expected to be approximately $275 million. After completion of the acquisition and the share issue, net debt/adjusted EBITDA on pre-IFRS 16 basis, excluding transaction and integration costs, is expected to be approximately 2.0x. The acquisition is subject subject to customary closing conditions including regulatory approvals, filing with and approval by the appropriate authorities under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 and filing with and approval by the Committee on Foreign Investment in the United States.

The transaction is expected to close during the first half of 2024. The acquisition is expected to be accretive to HMS' earnings per share from completion of the acquisition (excluding any non-cash amortization impacts from the transaction). Skandinaviska Enskilda Banken AB provides the debt financing facility (together with SEK) and acts as exclusive financial advisor to HMS on the contemplated share issue.

Mannheimer Swartling Advokatbyrå acts as lead counsel to HMS on the acquisition of Red Lion, the debt financing facility and the contemplated share issue, with Cravath, Swaine & Moore as special US counsel. Alvarez & Marsal acts as Accountant and financial advisor to HMS in the transaction. Evan Yellin, Malte Richter and Han Wool Park of EC M&A - London acted as financial advisor to Spectris plc (LSE:SXS).

Wilmer Cutler Pickering Hale and Dorr LLP acted as a legal counsel to Spectris plc (LSE:SXS). For HMS and Red Lion customers, there will be no initial changes. The HMS and Red Lion company names remain unchanged and product brands will be marketed and sold as before through the same channels.

Production and shipping are handled from the HMS and Red Lion entities respectively. Contact details and email addresses remain, with the exception of India where Red Lion staff will get an hms-networks.com address.