Prysmian secures $4.2bn Encore Wire deal

July 2024 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

July 2024 Issue

In a transaction that expands its exposure in North America, Italian cablemaker Prysmian is to acquire US wire and cable manufacturer Encore Wire in a deal valued at approximately €3.9bn.

Under the terms of the definitive merger agreement, Prysmian will pay Encore Wire $290 per share in cash each, an 11 percent premium to the stock’s closing price on Friday 12 April 2024. The transaction will be financed through a mix of cash on Prysmian’s balance sheet and newly committed debt facilities.

A leading manufacturer of a broad range of copper and aluminium electrical wire and cables, supplying power generation and distribution solutions, Encore Wire’s diversified product portfolio and low-cost of production position it to play a key role in the transition to a more sustainable and reliable energy infrastructure.

The acquisition of Encore Wire is highly complementary to Prysmian’s strategy and will allow the Italian company to increase its exposure to secular growth drivers, leverage Encore Wire’s operational efficiency and best in class service across Prysmian’s portfolio, and broaden Prysmian’s product offering, enabling the combined company to better address customers’ needs in North America.

The transaction is also expected to generate €140m in run-rate earnings before interest, taxes, depreciation and amortisation (EBITDA) synergies within four years from closing.

“The acquisition of Encore Wire represents a landmark moment for Prysmian and a strategic and unique opportunity to create value for our shareholders and customers,” said Massimo Battaini, chief executive-designate of Prysmian. “Through this acquisition, Prysmian will grow its North American presence, enhancing its portfolio and geographic mix, while significantly increasing the exposure to secular growth drivers.”

Prysmian is a public company listed on the Italian Stock Exchange with 150 years of experience, 30,000 employees, 108 plants and 26 research and development centres in over 50 countries. Following the close of the transaction, Prysmian expects to maintain a significant presence at Encore Wire’s vertically-integrated, single-site campus located in McKinney, Texas.

“We are pleased to have reached an agreement that reflects the remarkable value Encore Wire has created with our expansive single-campus model, low-cost production, centralised distribution and product innovation,” said Daniel L. Jones, chairman, president and chief executive of Encore Wire. “This transaction maximises value for Encore Wire shareholders and provides an attractive premium for their shares.”

The transaction has been unanimously approved by each company’s board of directors and recommended to its shareholders by Encore Wire’s board of directors. It is subject to approval from Encore Wire’s shareholders (representing at least a majority of the outstanding shares), as well as regulatory approvals and other customary closing conditions.

Acting as sole financial adviser to Prysmian is Goldman Sachs Bank Europe SE, Succursale Italia, with Wachtell, Lipton, Rosen & Katz acting as legal adviser. JP Morgan Securities LLC is acting as sole financial adviser to Encore Wire and O’Melveny & Myers LLP is acting as legal adviser.

The transaction is expected to close in the second half of 2024.

“We expect this transaction will bring additional future opportunities for our employees, whose dedication and hard work made this transaction possible,” concluded Mr Jones. “We look forward to working with Prysmian to complete this value-enhancing combination and realise the significant benefits that we expect it will bring to all of our stakeholders.”

Fraser Tennant