ATS To Acquire Packaging Machine Provider Paxiom
ATS (TSX: ATS, NYSE: ATS) has announced a definitive agreement to acquire Paxiom Group, a provider of packaging machines for the food and beverage, cannabis, and pharmaceutical industries. Paxiom, headquartered in Montreal, Quebec, includes companies like WeighPack Systems, EndFlex, Valtara, and Kang-Di, with operations in Canada, the US, Italy, and China. The acquisition will enhance ATS' product offerings and expand its footprint in regulated markets. For the year ending December 31, 2023, Paxiom generated $67 million in revenue with an adjusted EBITDA margin above 19%. The transaction, whose financial terms were not disclosed, is expected to close in Q3 2024 and will be funded through cash and ATS' revolving credit facility.
- ATS' acquisition of Paxiom will enhance its product offerings in regulated markets, including food, beverage, and life sciences.
- Paxiom generated $67 million in revenue and had an adjusted EBITDA margin above 19% in 2023.
- The acquisition will be funded through cash and ATS' revolving credit facility, indicating solid financial planning.
- Paxiom's existing product line complements ATS' businesses like CFT, Raytec, Marco, IWK, and NCC.
- Paxiom employs approximately 200 people and has a strong customer portfolio in multiple sectors, which could contribute to ATS' customer base.
- No specific financial terms of the transaction were disclosed, which may cause uncertainty among investors.
- The transaction is subject to customary closing conditions, introducing a potential risk of delays or non-completion.
- Funding the acquisition by drawing on a revolving credit facility could increase ATS' debt levels.
- The acquisition's impact on ATS' financials will depend on the successful integration of Paxiom, which carries inherent risks.
Insights
ATS Corporation's acquisition of Paxiom is a strategic move that has significant potential to enhance both revenue streams and profit margins. Paxiom's annual revenue of
Short-term, the costs associated with the acquisition such as the use of the cash and revolving credit facility may stress liquidity, but the long-term benefits in terms of expanded market reach and product offerings appear promising. The integration of Paxiom's solutions with ATS’s existing portfolio could result in operational synergies and cost savings, enhancing profitability.
Rating: 1
From a market research perspective, this acquisition is a smart move for ATS Corporation. Paxiom's established presence in North America, along with its reputation in the food and beverage, cannabis and pharmaceutical industries, provides ATS with valuable market entry points. The acquisition aligns with industry trends towards automation and efficiency in packaging solutions. Paxiom’s sophisticated offerings and established customer portfolio position ATS well to capitalize on these trends, potentially gaining market share quickly.
Paxiom’s manufacturing facilities in strategic locations like Montreal, Miami, Schio and Shanghai, coupled with an integration center in Las Vegas, enhance ATS’s global footprint. This acquisition could also position ATS to meet increasing demand in the packaging market, driven by regulatory requirements and shifts towards sustainability in packaging solutions. The synergy between existing and new product lines can drive innovation and offer more comprehensive solutions, further attracting a broad customer base.
Rating: 1
“With a dynamic product mix and a growing global footprint, Paxiom will be a great addition to ATS,” said Andrew Hider, Chief Executive Officer of ATS Corporation. “As we seek to expand our presence in regulated markets, such as food and beverage and life sciences, the strong reputation and sophisticated offerings that Paxiom brings to market will provide both organic and synergistic opportunities for growth with an accretive margin profile.”
With headquarters in
“Paxiom’s differentiated solutions in filling, wrapping, sealing, labelling and palletizing across a range of industries will be a strong complement to our existing ATS portfolio,” added Jeremy Patten, President of ATS Products & Food Technology. “As we continue to expand our value proposition to customers across the markets we serve, the addition of Paxiom to ATS is highly complementary and will bring meaningful expansion to how we can support our customers.”
The purchase price represented an EV/EBITDA1 multiple accretive to ATS’ current trading multiple, however, specific financial terms of the transaction were not disclosed. The transaction is expected to close in the third calendar quarter of 2024, subject to customary closing conditions. ATS plans to fund the acquisition with cash and by drawing on its revolving credit facility.
1. Adjusted EBITDA is a non-IFRS measure; adjusted EBITDA margin is a non-IFRS ratio. |
About ATS Corporation
ATS Corporation is an industry-leading automation solutions provider to many of the world's most successful companies. ATS uses its extensive knowledge base and global capabilities in custom automation, repeat automation, automation products and value-added solutions including pre-automation and after-sales services, to address the sophisticated manufacturing automation systems and service needs of multinational customers in markets such as life sciences, transportation, food & beverage, consumer products, and energy. Founded in 1978, ATS employs over 7,000 people at more than 65 manufacturing facilities and over 85 offices in
Forward-Looking Statements
This press release contains certain statements that may constitute forward-looking information and forward-looking statements within the meaning of applicable Canadian and
Forward-looking statements are inherently subject to significant known and unknown risks, uncertainties, and other factors that may cause the actual results, performance, or achievements of ATS, or developments in ATS’ business or in its industry, to differ materially from the anticipated results, performance, achievements, or developments expressed or implied by such forward-looking statements. Important risks, uncertainties, and factors that could cause actual results to differ materially from expectations expressed in the forward-looking statements include, but are not limited to, the impact of regional or global conflicts; general market performance including capital market conditions and availability and cost of credit; performance of the markets that ATS serves; industry challenges in securing the supply of labour, materials, and, in certain jurisdictions, energy sources such as natural gas; impact of inflation; interest rate changes; foreign currency and exchange risk; the relative strength of the Canadian dollar; risks related to customer concentration; risks related to a recession, slowdown, and/or sustained downturn in the economy; impact of factors such as increased pricing pressure, increased cost of energy and supplies, and delays in relation thereto, and possible margin compression; the regulatory and tax environment; the emergence of new infectious diseases or any epidemic or pandemic outbreak or resurgence, and collateral consequences thereof, including the disruption of economic activity, volatility in capital and credit markets, and legislative and regulatory responses; the effect of events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transaction counterparties, or other companies in the financial services industry generally, or concerns or rumours about any events of these kinds or other similar risks, that have in the past and may in the future lead to market-wide liquidity problems; energy shortages and global prices increases; the consequences of activist initiatives on business performance, results, or share price; the impact of analyst reports on price and trading volume of ATS’ shares; that closing is delayed or prohibited as a result of the inability to complete closing conditions; that the expected synergies are not realized; that the acquisition does not complement or expand ATS’ offering, or benefit customers, as expected; that the transaction is not funded as expected; and other risks and uncertainties detailed from time to time in ATS' filings with securities regulators, including, without limitation, the risk factors described in ATS’ annual information form for the fiscal year ended March 31, 2024, which are available on the System for Electronic Data Analysis and Retrieval+ ("SEDAR+") at www.sedarplus.com and on the
Forward-looking statements are necessarily based on a number of estimates, factors, and assumptions regarding, among others, management's current plans, estimates, projections, beliefs and opinions, the future performance and results of the Company’s business and operations; the ability of ATS to execute on its business objectives; and general economic and political conditions, and global events, including any epidemic or pandemic outbreak or resurgence.
Forward-looking statements included in this press release are only provided to understand management’s current expectations relating to future periods and, as such, are not appropriate for any other purpose. Although ATS believes that the expectations reflected in such forward-looking statements are reasonable, such statements involve risks and uncertainties, and ATS cautions you not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. ATS does not undertake any obligation to update forward-looking statements contained herein other than as required by law.
Non-IFRS and Other Financial Measures
Throughout this press release management refers to certain non-IFRS measures, and non-IFRS ratios. The term "adjusted EBITDA" is a non-IFRS measure, and "adjusted EBITDA margin" is a non-IFRS ratio, both of which do not have any standardized meaning prescribed within International Financial Reporting Standards ("IFRS") and therefore may not be comparable to similar measures presented by other companies. Such measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Adjusted EBITDA is defined as net income excluding income tax expense, net finance costs, depreciation and amortization before items excluded from management's internal analysis of operating results, such as amortization expense of acquisition-related intangible assets, acquisition-related transaction and integration costs, restructuring charges, the mark-to-market adjustment on stock-based compensation and certain other adjustments which would be non-recurring in nature ("adjustment items"). Adjusted EBITDA margin is an expression of the Company's adjusted EBITDA as a percentage of revenues. Adjusted EBITDA and adjusted EBITDA margin are used by the Company to evaluate the performance of its operations. Management believes that adjusted EBITDA is an important indicator of the Company's ability to generate operating cash flows to fund continued investment in its operations. The adjustment items used by management to arrive at these metrics are not considered to be indicative of the business' ongoing operating performance. Management believes that ATS shareholders and potential investors in ATS use these additional IFRS measures and non-IFRS financial measures in making investment decisions and measuring operational results.
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For more information:
David Galison
Head of Investor Relations
ATS Corporation
730 Fountain Street North
(519) 653-6500
dgalison@atsautomation.com
For general media inquiries:
Matthew Robinson
Director, Corporate Communications
ATS Corporation
730 Fountain Street North
(519) 653-6500
mrobinson@atsautomation.com
Source: ATS Corporation
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