BHG Group - Another target was hiding in the Nest
Acquires Home Furnishing company Nordic Nest Adds 13% to sales and 15% to EBITDA (‘21e) Target multiples of 1. 6x and 17x EV/EBIT adj. (’21e) The deal in brief After close to five months without any announced deals, BHG launched its largest acquisition by far on 13 December. At an enterprise value of SEK 1.
8bn, the group acquired 97. 6% of Nordic Nest Group AB, the fast-growing home furnishing site. BHG expects Nordic Nest to reach sales of SEK 1bn and EBITDA of SEK 120m in fiscal ’20/’21e (ending March).
Hence, the implied multiple is 15x EBITDA, or around 16. 5x EBITA according to our estimates. The valuation is roughly in line with some of BHG’s most recent deals but higher than its targeted 6-8x EBITDA.
The consideration of SEK 1. 6bn is financed through a SEK 1bn new term loan facility, with the reminder in cash, implying that net debt/EBITDA (pre IFRS 16) could reach just below 2x by year-end 2020e. The deal is expected to close before the end of 2020.
Strategic and financial rationale We believe that Nordic Nest complements BHG’s product portfolio well with a strong position within the tablewear category, in contrast to BHG’s generally bulkier products. The private label share for the group is set to drop by around 5pp to 45%, as Nordic Nest’s product portfolio primarily consists of external brands. It has grown at a swift pace of around 40% while fiscal ‘20/’21e is expected to grow by around 100% (fueled by the stay-at-home trend).
Assuming 10% sales growth in 2021e, we pencil in Nordic Nest to add 12% to sales, 15% to EBITDA and 15% to EPS. Our rough calculations suggest that the deal is made on 1. 6x sales and 17x adj.
EBIT (2021e) versus BHG’s current valuation of 1. 7x EV/Sales and 25x EBIT adj. All else equal, BHG’s EV/EBIT multiple decreases to 24x if adding the aforementioned financials.
Continuing the home improvement consolidation By acquiring Nordic Nest, BHG continues to show the power of its M&A strategy, which further strengthens.
