Kingspan Group - Nothing to be Board about; Recticel deal rationale looks compelling

Davy Research
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Kingspan’s proposal to acquire Recticel’s Insulation division looks like another astute move. There clearly is considerable uncertainty given the nature of the offer, but we believe that the fundamental rationale is sound. Recticel’s insulation operations would unquestionably enhance Kingspan’s Insulation Boards division and would likely add at least 4% to the current 2019 forecast earnings base. Not only would it increase the division’s scale, but it would also bring it more directly into France and thus open a new frontier for insulation boards. In addition, the likely proposed net acquisition cost would not place Kingspan’s financial position under any stress as we estimate initial pro-forma net debt/EBITDA would be around 1.6x. Further developments are awaited.