Acquiring Danish Cassøe for SEK 97m

Adding 13% to sales and 24% to EBITA ’21e (ABGSCe)

Proving value in M&A strategy

Cassøe in brief
Svedbergs today announced a signed agreement to acquire all shares of Cassøe, a Danish bathroom and kitchen furniture trader. Founded in 1997 by Peter Cassøe Dalsgaard, the company has been run by son-in-law Michael Cassøe as CEO since 2008, who will continue to do so. Production is outsourced, and products are sold under both its own brand as well as external brands. Cassøe has an impressive history regarding financial performance, having grown sales by a CAGR of c. 17% during the last three years. With its opex-light business model, it has an EBITA margin of c. 23% (ABGSCe), much higher than Svedbergs at c. 12% and the group’s target of 15%.

Acquisition details
We estimate the EBITA margin at 23% given that there are essentially no costs between earnings and EBITA except tax expenses. Hence, the estimated addition to our 2021e sales and EBITA (assuming no Cassøe growth during next year) for Svedbergs is 13% and 24%, respectively. The acquisition payment can become a maximum of SEK 97m (DKK 70m), depending on the continued performance. This implies an acquisition multiple of 5x EV/EBITA. Looking at Svedberg’s 21e EV/EBITA multiple as of the 30 November close (SEK 29.4 per share), the stock was trading at 9.4x. Currently, at SEK 31 per share, our pro forma calculation implies a 21e EV/EBITA of 8.7x.

Acquisition strategy going forward
The Cassøe acquisition was a solid addition to the group. Low multiples for high margins, growth and a well-run family business in general. Looking forward, we have a hard time seeing that the list of targets with similar margins and multiples is especially long. However, after a time without M&A activity, we argue the company has proven the worth in putting resources towards M&A with this addition to the group.

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