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DMC Global's (BOOM) 60% Stake Buyout in Arcadia to Aid Earnings

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DMC Global Inc. (BOOM - Free Report) yesterday announced that it acquired a 60% stake in Vernon, CA-based Arcadia Inc. in a cash and stock transaction valued at $282.5 million. The deal for the stake acquisition was declared by DMC Global on Dec 17.

Shares of DMC Global gained 3.66% yesterday, ending the trading session at $40.82.

Privately held, Arcadia is a supplier of architectural building products in the United States. It operates the commercial architectural products business through Arcadia Inc., the commercial interiors business through Wilson Partitions, and the residential business through Arcadia Custom. Products offered include windows, interior and exterior framing systems, interior partitions, and curtain walls.

In the trailing 12 months ended Sep 30, 2021, Arcadia's revenues totaled $245.7 million and its adjusted earnings before interest, tax, depreciation and amortization were $54.6 million.

Inside the Headlines

Of the total $282.5 million acquisition price, DMC Global paid $262 million in cash and the rest $20.5 million were settled through its stock. The cash portion of the buyout was funded through the company's cash and marketable securities, and $150 million raised through the senior credit facility. Its total debt-to-adjusted EBITDA is now 2.79.

Notably, DMC Global intends to buy the rest 40% stake in Arcadia in a three-year period (put and call option). The floor valuation for the 40% stake acquisition is set at $187.1 million. The total value for the acquisition of 100% stake in Arcadia is $469.6 million for DMC Global.

The addition of Arcadia to the portfolio will boost DMC Global's product and service offerings, the size of the addressable market, and team strength by 850 skilled employees. Expansion in the architecture products markets will help DMC Global double sales and boost margins. Arcadia will operate as a standalone business under DMC Global.

DMC Global anticipates earnings accretion in the first year of the Arcadia buyout.

Zacks Rank, Price Performance and Earnings Estimates

With a market capitalization of $764 million, DMC Global currently carries a Zacks Rank #5 (Strong Sell). Supply-chain-related woes and travel restrictions are worrisome for the company.

In the past three months, DMC Global's shares have gained 9.2% against the industry's decline of 15.9%.

 

Zacks Investment ResearchImage Source: Zacks Investment Research

 

The Zacks Consensus Estimate for DMC Global's earnings per share is pegged at 16 cents for 2021 and 74 cents for 2022, reflecting declines of 27.3% and 12.9% from the respective 60-day-ago figures. The consensus estimate for the fourth quarter of 2021 of 2 cents has declined 33.3% over the past 60 days.

DMC Global Price and Consensus

 

DMC Global Price and Consensus

DMC Global price-consensus-chart | DMC Global Quote

Stocks to Consider

Three better-ranked stocks in the industry are discussed below.

SiteOne Landscape Supply, Inc. ((SITE - Free Report) ) presently sports a Zacks Rank #1 (Strong Buy). SITE's shares have gained14.8% in the past three months.

You can see the complete list of today's Zacks #1 Rank stocks here.

In the past 60 days, the Zacks Consensus Estimate for SiteOne's earnings has been raised by 13.8% for 2021 and 13.4% for 2022. The last reported quarter's earnings surprise for SITE was 41.46%.

ScanSource, Inc. (SCSC - Free Report) presently carries a Zacks Rank #2 (Buy). Shares of SCSC have declined 2.8% in the past three months.

The Zacks Consensus Estimate for ScanSource's earnings has increased 0.9% for fiscal 2022 (ending June 2022) and 2.2% for fiscal 2023 (ending June 2023) in the past 60 days. SCSC's earnings surprise in the last reported quarter was 32.00%.

Global Industrial Company (GIC - Free Report) presently carries a Zacks Rank #2. GIC's share price has increased 8.4% in the past three months.

In the past 60 days, the Zacks Consensus Estimate for GIC's earnings has been raised by 1.2% for 2021 and 10.1% for 2022. The last reported quarter's earnings surprise for GIC was 1.67%.