What happened?
RHM has announced to acquire U.S. based Loc Performance Products, a full-service provider of driveline, suspension, track systems, rubber products, armor products and fabricated structures for vehicle platforms for an EV of c. EUR 860m, which might imply c. 2x EV/sales based on our estimates. Based on expected NDT/EBITDA of 0.4x at YE24, RHM should be able to fund the deal via debt.
BNPP Exane View:
Through the deal, RHM aims at not only expanding its U.S. capacity, technological portfolio and workforce, but also to further improve its chances to tap into the XM30 (IFVs) and CTT (trucks) programs with a respective revenue potential of USD 45bn and USD 16bn. Note that a conference call with mgmt. is due at 14.30 CET today (register here)
1) What does Loc Performance Products, LLC do?
Loc profile: Loc -founded in 1971 in Taylor, Michigan - is a full-service provider of driveline, suspension, track systems, rubber products, armor products and fabricated structures for vehicle platforms. It serves 250+ customers and sells direct to the Government, its major prime contractors, as well as vehicle manufacturers in agriculture, construction, mining, locomotive, mass transportation, and oil and gas industries. Loc employs around 1k staff and has 4 production facilities, all of which are in the U.S. (Plymouth HQ, Lansing, Lapeer, St. Marys).
Product offering: Loc makes military track systems and is ''the only qualified supplier for every major Ground Combat Vehicle platform in the U.S. Army fleet'', including the M1 Abrams Main Battle Tank and M2 Bradley Fighting Vehicle. Besides, Loc offers fabricated structures (armored cab, hull structures, turret structures), mechanical systems (driveline and suspension systems), armor products (armor doors, turret hatches and underbelly armor) as well as rubber tracks (Trackman) and other rubber products (Wheels and Mounts, Hay Conditioner Mower Rolls, Bladder Bags).
2) What is the deal rationale for RHM?
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