Business fit between Expal and RHM looks compelling given its complementary nature RHM has announced it will acquire Spanish ammunition maker Expal Systems for an EV of EUR 1.2bn from Maxam, owned by US investor Rhone Capital, which appears to want to focus on the energy materials business for civil applications instead. Expal''s product offering is complementary: besides medium calibres, this especially applies to the strongly growing artillery and mortar markets, with combined capacity set to grow by 3.5x and 3x respectively thanks to Expal (based on the provided information on the call and slide deck). We understand that the deal should help to reduce dependence on external suppliers, and that Expal''s products have been deployed in platforms that have not been penetrated by RHM, thus limiting the risk of potential antitrust remedies, in our view. Terms look equally attractive given 12x EV/EBIT 22/23e might slide to 6x in the mid-term Expal is expected to generate sales of EUR 400m in FY 2022/23e (ends: 31/8) backed by an order book of EUR 520m and which should rise to EUR 600m by year-end. In 22/23e, EBIT margin should reach ~25% and EBITDA ~30% with EPS accretion to the tune of 10-15% expected as of year 1. Margins are said to have been at similarly high levels in prior years, not least due to a high degree of automation, which looks supported by sales/FTE of EUR 500k at Expal vs. EUR 250k for RHM''s WA segment. The agreed EV thus puts the asset at 3x EV/sales, 10x EV/EBITDA, and 12x EV/EBIT 2022/23e dropping to 1.5x / 5.0x / 6.0x based on potential sales of EUR 800m in the mid-term, even without assuming any further margin improvement that should come along with a doubling in sales. No equity planned for now, political support and upside risk at WA the icing on the cake While financing conditions are still subject to negotiation, the CFO hinted at new debt of EUR 1.1bn to finance the deal with NDT/EBITDA seen at 1x post the deal,...