Reliance Joins Reece In Big Plumbing Expansion

By Glenn Dyer | More Articles by Glenn Dyer

Brisbane-based Reliance Worldwide Corp (RWC), best known for its Sharkbite plumbing fittings, is looking to increase its size by around half via the $1.2 billion acquisition of UK group John Guest Holdings, which is a rival maker of push to connect fittings for plumbing and other uses.

Reliance said in a statement to the ASX yesterday that the purchase price would be supported by raising equity of up to $A1.10 billion.

A corporate vehicle related to RWC chairman, Jonathan Munz, would use its full entitlement of $A110 million of the $1.1 billion entitlement issue.

An institutional component will account for $945 million of the raising with the remainder to be raised from existing shareholders. Eligible shareholders can subscribe for 1 new share for every 1.98 shares they hold, at an offer price of $4.15 (a 9% discount to yesterday’s closing price of $4.56).

Reliance has also established a new $750 million syndicated debt facility which increases its available facility limits by $400 million.

Trading in RWC shares were halted on the ASX until Monday to allow the issue to be made to institutional holders. The last price was $4.56 on Wednesday.

At that price, RWC had a market value of $A2.4 billion, so the Guest purchase will change the shape of the company (which has grown rapidly in the US) with a new and larger area of interest in the UK.

The deal is expected to be completed in June and Reliance has maintained its full-year earnings guidance range of between $150 million and $155 million, excluding the John Guest transaction costs.

RWC’s move is the second by a big Australian plumbing supplies group to move offshore in a major way in the past month.

Melbourne-based Reece said in April it will pay $1.9 billion for the US plumbing supplies group, Morsco which has operations across America’s so-called Sunbelt states from the Carolinas to New Mexico and Texas.

John Guest also has operations in the United States and Asia Pacific.

Reliance, which described itself as the world’s leading manufacturer of brass PTC fittings, said the purchase would provide total synergies of more than $A20 million in core earnings per year.

RWC CEO, Heath Sharp said yesterday the company was excited by the opportunity to expand its manufacturing and distribution capabilities in the UK.

“The people of John Guest are executing at a very high level, underpinned by a great culture and values closely aligned with our own,” he said.

The Financial Times pointed out that “the deal represents a big pay day for John Guest’s owners, Robert, Barry and Tim Guest, who helped build the UK company into one of Europe’s biggest suppliers of plastic fittings for the engineering and plumbing sector. The company was founded by their father John Guest, a self-taught engineer, who died in 2010 at the age of 83.”

The family nature of guest echoes the family nature of RWC which is dominated by the Munz family of Melbourne. They bought RWC (which had been started in 1949) in 1986 and floated part of their shareholding in 2016, and then cut their stake from 30% to 10% in 2017.

The two sales made Mr Munz and his family over $1.2 billion. The remaining shares are worth $240 million, plus the $110 million the family company, GSA will contribute to maintain its stake at 10%.

Reece is also family controlled – the Wilson family of Melbourne have around 70% after the US deal completes.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

View more articles by Glenn Dyer →