Ad hoc announcement pursuant to Art. 53 LR

R&S Group agrees to acquire Kyte Powertech, a leading manufacturer of distribution transformer solutions, to broaden geographic footprint in Ireland, the UK and Western Europe

• R&S Group agrees to acquire Kyte Powertech for an enterprise value of EUR 250 million
• Combined pro forma net sales of CHF 384 million, EBITDA of CHF 81 million and EBIT of CHF 78 million¹⁾
• Complementary acquisition that will enhance product portfolio and give access to new markets and customers, with synergies from cross-selling opportunities and operating efficiencies
• The acquisition of Kyte Powertech will expand R&S Group’s management capacities and capabilities, supporting the strong growth momentum
• Kyte Powertech management shareholding in R&S Group proves strong commitment

20 August 2024 – R&S Group Holding AG (SIX: RSGN), a leading provider of electrical infrastructure components in focus markets in Europe and the Middle East, has entered into an agreement to acquire 100% of Kyte Powertech Limited, an Ireland-based leading manufacturer of distribution transformers. R&S Group agreed to acquire Kyte Powertech from MML Growth Capital Partners Ireland and existing management for an enterprise value of EUR 250 million on 20 August 2024. The majority of the consideration will be paid in cash secured by a bridge facility and a participation roll-over by management, a sign of strong commitment to future performance.

“M&A is a strategic pillar of the R&S Group roadmap,” says Markus Laesser, CEO of R&S Group. “Combining with a leader in additional markets which R&S Group is currently not serving, will strengthen the combined group and management capabilities. We are gaining in our product offering and technical expertise.”

Kyte Powertech, founded in 1977 and headquartered in Cavan, Ireland, is a manufacturer of distribution transformer solutions, with main markets being Ireland, the United Kingdom, the Netherlands, Belgium and France. Kyte Powertech’s competitive edge is built on the ability to provide designs and solutions in-house, and its engineering capabilities. These factors have resulted in strong, long-lasting relationships with leading utilities. These aspects translate into a strong increase in financial performance of 52% against prior year to EUR 165 million of net sales and EUR 33 million of EBIT in FY2024 (as of 31 March 2024)²⁾. Kyte Powertech’s competitive advantage as a well-positioned player means it can count on a significant amount of repeat and recurring business.

Kyte Powertech has about 490 employees. R&S Group stays fully committed to the production facility in Cavan and its workforce, and intends to significantly invest in capacities and its technology center. Kyte Powertech’s management team has committed to stay on board and invested with a participation of around 6% in R&S Group shares to ensure continuity within the business.

Stephanie Leonard, CEO Kyte Powertech adds: “Over the past years we have achieved the evolution of Kyte Powertech into a European champion in the transformer industry. We are excited to join forces with R&S Group, continue our growth trajectory together and further strengthen the deep customer relationships and recognition of our brand”.

Strong strategic and financial rationale

R&S Group’s strategy is to focus on its existing capabilities when entering new markets and adding complementary applications. In addition to organic growth, acquisitions are a key pillar of value creation.

The acquisition of Kyte Powertech will be complementary on several levels and represent a unique fit to R&S Group’s strategy. Both companies have a long history of engineering excellence, high-quality products, close customer and supplier relationships, strong brand equity and high market shares.

Kyte Powertech will give R&S Group access to an attractive product portfolio in distribution transformers, with synergies from cross-selling opportunities, procurement and R&D. It will add production capacity through a central manufacturing site in Cavan, Ireland, to capture strong demand potential. The transaction will also expand the sales network into Ireland, the UK, the Netherlands, Belgium and France and improve the joint service expertise. The combination will also strengthen R&S Group’s management capabilities and benefit from a shared culture focusing on product quality and sustainability.

Guidance

R&S Group is confirming its guidance on net sales growth and EBIT margins as published on 17 May 2024. The free cash flow guidance for 2024 is currently under review due to transaction costs related to this acquisition and subsequent tax payments in Italy as well as for the mid-term due to new capital expenditure plans for the combined group. The Board of Directors of R&S Group changes the dividend policy towards a stable dividend of CHF 0.50 per share for 2024 and for the financial years 2025 and 2026 (each paid out in the following years once approved by the shareholders).

Financing and expected timetable

The completion of the transaction is expected to occur in the course of today and the funding for the acquisition has been secured by a bridge facility amounting to CHF 233 million as well as a rollover of a significant portion of shares held by existing Kyte Powertech management into RSGN shares. The bridge facility is expected to be refinanced by a combination of a new bank debt facility, excess cash and an equity issuance of CHF 23 million for which R&S has secured commitments and is planned to be executed in a timely manner. R&S Group is expected to receive equity proceeds from the committed execution of R&S Group warrants, among others, by Artemis Beteiligungen in the amount of CHF 9.6 million and from the partial sale of treasury shares held by the company of approximately CHF 10 million secured by a commitment of Zürcher Kantonalbank. Upon completion of the takeout of the bridge facility and the equity issuance, R&S Group’s immediate net leverage is around 2.25x LTM EBITDA (as of June 2024), ensuring a prudent capital structure and balance sheet strength. The aim is to reduce this to 2x LTM EBITDA by year-end 2024.

UBS acts as Exclusive Financial Advisor to R&S Group on the transaction.

¹⁾ based on June 2024 LTM (last 12 months)
²⁾ Kyte Powertech financials reported under UK GAAP

Conference for analysts, investors and media

The company will host a physical conference for analysts, investors and the media in Zurich covering the envisaged acquisition of Kyte Powertech on 20 August 2024, at 11.00 CEST, at UBS,
St. Peterstrasse 19, 8001 Zürich, Switzerland. A pre-registration by e-mail is appreciated.

Alternatively, the conference can be joined online via Teams Call (LINK).

A presentation covering the key aspects of the transaction is available for download in the IR section of R&S Group’s website https://ir.the-rsgroup.com/presentations/

Calendar 2024

Contact Investor and Media Relations R&S Group

Doris Rudischhauser
Phone: +41 79 410 81 88
Email: investors@the-rsgroup.com

 
About R&S Group

R&S Group Holding AG’s (“R&S Group”, the “company”) operating headquarters are located in Sissach/BL, Switzerland. With six manufacturing facilities in Switzerland, Italy, Poland and the Middle East, R&S Group serves its domestic and various European export markets with small and medium power and distribution transformers and other components in the utility, infrastructure and industrial sectors. The company has been successfully positioned to benefit from the accelerating demand for energy production and distribution, driven by the global trend towards decarbonization. R&S Group has been listed on SIX Swiss Exchange since 13 December 2023 under the ticker symbol RSGN following its successful business combination with VT5 Acquisition AG, a previously Swiss-listed Special Purpose Acquisition Company (SPAC).

Further information about the R&S Group can be found at www.ir.the-rsgroup.com.

About Kyte Powertech

Kyte Powertech Limited (“Kyte Powertech“) is headquartered in Cavan, Ireland. With a central manufacturing facility in Cavan and further sales and service representations in Belgium, France, the Netherlands and the United Kingdom, Kyte Powertech serves its domestic and various European export markets with utility distribution transformers across the entire mega volt ampere (MVA) spectrum. The company is well positioned to capture market growth, benefitting from long-standing customer relationships, high-quality reputation and a track record of consistent delivery for customers.

Further information about Kyte Powertech can be found at www.kytepowertech.com.

Disclaimer

This communication expressly or implicitly contains certain forward-looking statements concerning R&S Group Holding AG and its business, including the business of Kyte Powertech Limited. Such statements involve certain known and unknown risks, uncertainties and other factors, which could cause the actual results, financial condition, performance or achievements of R&S Group Holding AG to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. R&S Group Holding AG is providing this communication as of this date and does not undertake to update any forward-looking statements contained herein as a result of new information, future events or otherwise.