Incap Corporation: Incap acquires AWS Electronics Group

Incap Corporation       Inside information      January 23 2020 at 8.00 a.m (EET)

Stock exchange release

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Incap acquires AWS Electronics Group

Incap Corporation has signed an agreement to acquire 100% ownership of AWS Electronics Group. AWS Electronics Group is an electronic manufacturing services (EMS) provider specialized in high complexity services with production facilities in the U.K. and Slovakia. Through this acquisition, Incap will widen its portfolio into U.K and Central Europe and strengthen its position in geographical areas such as USA and South-East Asia.

The enterprise value of the transaction is GBP 13.5 million (EUR 15.9 million) and an additional earn-out of a maximum of GBP 1.3 million (EUR 1.5 million). The transaction will be paid in cash except for the amount of GBP 0.6 million (EUR 0.7 million), which will be paid in Incap shares.

The signing and closing of the agreement were completed simultaneously.

Overview of AWS Electronics Group

In the financial year ended on June 30, 2019, AWS Electronics Group had a revenue of GBP 35 million (EUR 41 million*), EBITDA of GBP 2.1 million (EUR 2.5 million) and operating profit (EBIT) of GBP 1.5 million (EUR 1.8 million) **. The number of personnel was 436. The AWS Electronics Group has its own production facilities in Newcastle-under-Lyme, U.K. and in Namestovo, Slovakia. The headquarters is based in the U.K. and the company has been privately owned.

AWS Electronics focuses on high complexity EMS services for industrial controls, medical, automotive, aerospace, scientific instrumentation and controls among others.

After the acquisition, the AWS Electronics business units will continue to run their operations as highly independent units within Incap Corporation as per Incap`s current business model. The former owners of the company, Paul Deehan and Adrian Keane, are committed to support Incap over the transition period.

Strategic rationale

Through the acquisition, Incap will be able to improve service and product offering to its existing customers, widen its customer base, enter into new market segments and increase its geographic presence.

New strategic foothold is gained especially in the U.K. markets and Central Europe and position strengthened further in the USA and South-East Asia. The production facilities in the U.K. and Slovakia complement Incap’s current production facilities located in Estonia and India. In particular, this will open the opportunity to widen the commercial prospects between the U.K. and India.

The acquisition also balances Incap’s customer portfolio both in numbers and industrial segments.

In the long-term, the acquisition is expected to bring synergy benefits in e.g. material purchasing and cross-selling opportunities.

Key terms of transaction and financial impacts

The enterprise value of the transaction is GBP 13.5 million (EUR 15.9 million) and an additional earn-out of a maximum of GBP 1.3 million (EUR 1.5 million) based on the business performance over 2020.

The transaction is initially financed by a loan of EUR 13 million. Incap may at a later stage, subject to market conditions, explore the option of equity financing to optimize its capital structure. In addition to this, approximately GBP 0.6 million (EUR 0.7 million) will be paid by Incap shares to the owners of the acquired company. The transaction agreement includes an additional payment in the form of an earn-out and its maximum amount is GBP 1.3 million (EUR 1.5 million) based on 2020 EBITDA of AWS.

The transaction is estimated to have a significant impact on revenue and a slightly positive impact on operating profit (EBIT) of Incap group in 2020 as there will be one-time integration and transaction costs (for example purchase price allocation amortization). The amount of integration costs incurring will be specified in more detail during the financial year.

Otto Pukk, President & CEO of Incap Corporation:

"This acquisition will enable us to serve our customers even better. I am happy to welcome AWS Electronics team onboard to take the next steps on our growth path. AWS has been growing for many years and we see a strong fit with Incap. With this long-term, strategic acquisition we will strengthen our market position and balance our customer base. We are excited to widen our geographic presence and gain foothold in the U.K. and Central European markets.”

Paul Deehan, former CEO of AWS Electronics Group:

"I am pleased to see AWS Group step onboard with Incap Group. The combined companies create a very strong player in the electronics manufacturing services market that will allow us to serve our customers in the best possible way. There are also a number of key synergy benefits that mean we will be able to offer our customers a broader and more complete service portfolio.”

The acquisition will be reported as part of Incap Corporation from the first quarter of 2020 financial report onwards.

* All figures in EUR have been converted from GBP by using January 17, 2020 currency rate 1 EUR=0,848 GBP 
** AWS Electronics Group applies Financial Reporting Standard 102 ‘The Financial Reporting standard applicable in the UK and Republic of Ireland’ (FRS 102) in their group reporting.

INCAP CORPORATION

For additional information, please contact:
Otto Pukk, President and CEO, tel. +372 508 0798

Distribution:
Nasdaq Helsinki Ltd.
Principal media
The company’s home page www.incapcorp.com

INCAP IN BRIEF
Incap Corporation is an international contract manufacturer. Incap's customers are leading suppliers of high-technology equipment in their own business segments, and Incap increases their competitiveness as a strategic partner. At the beginning of 2020 Incap has operations in Finland, Estonia, India and Hong Kong and the company employs approximately 830 people. Incap's share is listed on the Nasdaq Helsinki Ltd. as from 1997. Additional information: www.incapcorp.com.

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