Purmo's peer sold at a good price

Translation: Original comment published in Finnish on 4/18/2024 at 8:53 am EEST.

Purmo's peer company, the Swiss-based Arbonia, announced this morning that it has sold its Climate division, a competitor of Purmo. According to the company, the price corresponds to an EV/EBITDA multiple of 12x this year's expected result, which is roughly double Purmo's current valuation in our forecasts. Arbonia said it had several bidders. We see the interest in the industry and the high valuation as a positive indicator for Purmo shares.

Arbonia sells its second division

Arbonia consists of two divisions, one of which is the Climate division, whose products include radiators and other indoor climate products, corresponding to Purmo's largest division, Climate Products & Systems. The other division is the doors business, on which Arbonia will focus on in the future, and will therefore no longer be a relevant competitor/peer company to Purmo after the divestment. The acquisition is expected to be completed in the second half of the year.

In the transaction announced today, China-based Midea will acquire Arbonia's Climate division for 760 MEUR, which the company says corresponds to an EV/EBITDA multiple of 12x. Last year, Arbonia's Climate division generated revenue of approximately 575 MEUR and EBITDA-% of 7.4%. This can be compared to Purmo's revenue of around 740 MEUR and EBITDA of more than 12%. Purmo's EV is currently around 520 MEUR including the hybrid loan and 2024e EV/adj. EBITDA is around 5.5x. The valuation of the Arbonia transaction therefore clearly supports a higher valuation. Arbonia also notes that the valuation is in line with precedent transactions in the industry.

Purmo could also attract interest

We think it is also positive for Purmo that there is a buying appetite in the sector. Purmo's low share price/valuation and the large stake held by Rettig (and likely willingness to divest Purmo at some point in the future) also make Purmo a potential acquisition target in our view, if the sector is attractive to the market.