CSW Industrials Deploys Over $30 Million, Executing on Acquisition Strategy in HVAC/R and Plumbing End Markets, With Focus on Indoor Air Quality
CSW Industrials, Inc. (Nasdaq: CSWI) announced the strategic deployment of $30.3 million for acquiring Dust Free®, Guardian Drain Lock, and Sure Grade Drain. The acquisitions are expected to enhance the Company’s product offerings for residential and commercial customers in HVAC/R and plumbing end markets, positively impacting the health of customers and driving impressive growth.
Positive
Acquisition of Dust Free, LP, Guardian Drain Lock, and Sure Grade Drain for $30.3 million will add innovative product offerings for existing residential and commercial customers
Valuation represents 7.5x Dust Free’s trailing twelve-months’ EBITDA, excluding future earn-outs
Expected to be accretive to earnings per share in the first full year of ownership
Cumulative acquisition capital investment in the high-margin, high-growth Contractor Solutions segment since December 2020 amounts to $521 million
The acquisition of Dust Free by CSW Industrials, valued at 7.5 times Dust Free's trailing twelve-month EBITDA, is a significant financial move. This multiple is within a reasonable range for acquisitions in the industrial sector, suggesting a balanced investment strategy by CSWI. The expected accretion to earnings per share in the first full year post-acquisition indicates a positive outlook on the financial synergy of the merger. Additionally, the funding method, utilizing cash and credit facilities, reflects a strategic use of capital structure without diluting existing shareholders' equity.
With $521 million invested in high-margin, high-growth segments since December 2020, CSWI is demonstrating a clear focus on expanding its market share and product offerings in the Contractor Solutions space. This aggressive investment strategy could lead to significant revenue growth and margin expansion, assuming successful integration and market penetration of the acquired entities.
The strategic acquisition of Dust Free, along with the smaller acquisitions of Guardian Drain Lock and Sure Grade Drain, positions CSW Industrials favorably within the HVAC and plumbing markets. By leveraging existing distribution channels and integrating these new products, CSWI aims to capitalize on the growing demand for indoor air quality solutions. The focus on IAQ products, which include filtration, purification and UV inactivation, taps into a rising consumer and regulatory trend prioritizing health and safety in living and working environments.
The added plumbing offerings from Guardian Drain Lock and Sure Grade Drain broaden CSWI's portfolio, potentially opening up new sales channels and customer segments. These moves could enhance the company's competitive edge by offering a more comprehensive product suite to its customers.
The integration of Dust Free's patented IAQ products into CSWI's HVAC/R offerings could provide a distinct competitive advantage. IAQ is increasingly important for residential and commercial clients and the acquisition allows CSWI to address this need with advanced technology. The mention of three levels of IAQ products—Filtration, Purification and UV Inactivation—highlights a comprehensive approach to air quality, which is critical given the heightened awareness of health issues related to poor indoor air quality.
The mention of Dust Free being a Master Distributor since 2021 suggests a prior relationship that could facilitate smoother integration into CSWI's operations, potentially reducing the risk typically associated with acquisitions. This prior relationship may also mean that CSWI has a deep understanding of the product line, market fit and potential for growth within their existing sales infrastructure.
02/06/2024 - 04:15 PM
Investment Highlights
Capital investment of $27.4 million for acquisition of Dust Free® , which offers an extensive line of patented products for residential and commercial indoor air quality and HVAC applications Valuation represents 7.5x Dust Free’s trailing twelve-months’ EBITDA, excluding future earn-outs, which if achieved would be incrementally accretive to CSWI Closed on two smaller acquisitions, totaling $2.9 million , in plumbing end market Expected to be accretive to earnings per share in the first full year of ownership $521M M of cumulative acquisition capital investment in the high-margin, high-growth Contractor Solutions segment since December 2020DALLAS, Feb. 06, 2024 (GLOBE NEWSWIRE) -- CSW Industrials, Inc. (Nasdaq: CSWI) today announced the strategic deployment of $30.3 million , excluding future earn-outs, upon completing the acquisitions of Dust Free, LP, Guardian Drain Lock, and Sure Grade Drain. These acquisitions are evidence of the Company’s continued commitment to add innovative product offerings for existing residential and commercial customers by maximizing its extensive experience in the HVAC/R and plumbing end markets and leveraging its robust distribution channels and go-to-market strategy. CSWI funded the transactions with cash on hand and borrowings under its existing $500 million revolving credit facility.
Joseph B. Armes, Chairman, President, and Chief Executive Officer of CSW Industrials, said, “These acquisitions are completely consistent with our record of enhancing long-term shareholder value as we continue to drive impressive inorganic and organic above-market growth in our current end markets.”
Mr. Armes continued, “Having served as a Master Distributor of Dust Free indoor air quality (IAQ) products since 2021, we know how well these newly acquired products complement CSWI’s existing HVAC/R offerings and integrate directly into Contractor Solutions’ sales channel, warehouses, distribution networks, and supply chain. The addition of Dust Free’s high value-added products further solidifies our leadership position in the HVAC/R marketplace.”
Jeff Underwood, Senior Vice President of Sales and Marketing for Contractor Solutions commented, “We are excited to continue investing in our breadth and depth of products within Contractor Solutions. Adding Dust Free to our portfolio allows us to offer industry leading technology to address indoor air quality. I could not be more excited to work with the Dust Free team to increase the distribution and evolution of these products. The addition of Guardian Drain Lock and Sure Grade Drain extend our innovative plumbing offerings to our distribution channels.”
The $27.4 million of capital for the acquisition of Dust Free, excluding future earn-outs, represents a valuation of approximately 7.5x Dust Free’s trailing twelve-month adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).
The acquisition of Dust Free brings a family of IAQ products to CSWI that are designed to improve the quality of the air we breathe. Dust Free’s IAQ strategy integrates three levels of products to increase the overall air quality of a space: Filtration, Purification, and UV Inactivation. Through these differentiated products, Contractor Solutions expects to achieve incremental market penetration and positively impact the health of our customers.
In addition to Dust Free, CSWI also closed two small product line acquisitions, totaling $2.9 million , in the second fiscal quarter of 2024 for Guardian Drain Lock and Sure Grade Drain. These two acquisitions further expand the Company’s position in the plumbing end market. The Guardian Drain Lock portfolio offers tamper-proof locking floor sinks and floor drains designed for commercial use to protect unwanted debris from clogging and backing up plumbing lines and help to maintain a safe and hygienic environment. Sure Grade Drain was an IP acquisition for an innovative on-grade adjustable drain primarily used in commercial settings.
Safe Harbor Statement
The forward-looking statements included in this press release are based on our current expectations, projections, estimates, and assumptions. These statements are only predictions, not guarantees. Such forward-looking statements are subject to numerous risks and uncertainties that are difficult to predict. These risks and uncertainties may cause actual results to differ materially from what is forecast in such forward-looking statements, and include, without limitation, the risk factors described from time to time in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K.
All forward-looking statements included in this press release are based on information currently available to us, and we assume no obligation to update any forward-looking statement except as may be required by law.
About CSW Industrials www.cswindustrials.com .
Investor Relations
Alexa Huertaalexa.huerta@cswindustrials.com
What is the ticker symbol of CSW Industrials, Inc.?
The ticker symbol of CSW Industrials, Inc. is CSWI.
What is the total capital investment for the acquisition of Dust Free?
The capital investment for the acquisition of Dust Free, excluding future earn-outs, is $27.4 million.
How many acquisitions did CSWI close on?
CSWI closed on two smaller acquisitions, totaling $2.9 million, in the plumbing end market.
What does the acquisition of Dust Free bring to CSWI?
The acquisition of Dust Free brings a family of IAQ products to CSWI, designed to improve indoor air quality through Filtration, Purification, and UV Inactivation.
How were the acquisitions funded by CSWI?
CSWI funded the acquisitions of Dust Free, Guardian Drain Lock, and Sure Grade Drain with cash on hand and borrowings under its existing $500 million revolving credit facility.
