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Solid State PLC said on Tuesday it entered a conditional agreement to acquire Los Angeles-based battery systems manufacturer Custom Power LLC for a maximum of $45.0 million.
The Worcestershire, England-based computing products manufacturer said an initial cash consideration of $30.0 million will be paid on completion and a deferred consideration of $10.0 million will be payable in two equal tranches at six and 12 months post-completion.
A further earn-out consideration of up to $5 million is payable, subject to a revenue performance target of $37.5 million on a 12-month basis, the company added.
In 2021, Custom Power generated revenue of $29.8 million and underlying earnings before interest, tax, depreciation and amortisation of $3.5million.
Solid State said it believes the acquisition will be earnings enhancing in its first full year, the company's financial year ending March 31, 2024.
The company has conditionally entered into new term loan facilities with Lloyds Bank, totalling £13 million, to part finance the initial consideration.
This comprises of £6.5 million repayable over five years and a £6.5 million of interest only loan committed for three years.
In addition, Lloyds Bank has also committed to provide two $5.0 million standby letters of credit providing security over the deferred consideration.
These new facilities will sit alongside the company's existing bank facilities, including a £7.5 million revolving credit facility and a £3.0 million multi-currency overdraft.
Solid State also proposed an equity fundraise of £27.2 million, comprising a £25 million placing, a £2 million open offer, and a £150,000 directors' subscription.
The placing price is 1,025 pence per share, representing a 11% discount to the company's closing mid-market price of 1,145p per share on Monday.
Shares in Solid State closed up 4.9% at 1,201.00p on Tuesday in London.
The company said it expects to release is full-year results on July 26. Solid State said it expects revenue of £85 million and adjusted pretax profit of no less than £7.2 million for the year, unchanged from the guidance given in its trading update on April 21.
In the first quarter of its new financial year, Solid State reports a ‘strong start’ with revenue and margins ahead of the equivalent period last year. Its order book at the end of May was £89.7 million.
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