CSW Industrials Deploys $40 Million of Acquisition Capital in Profitable Plumbing End Market

Rhea-AI Summary

CSW Industrials (CSWI) has announced the $40 million acquisition of PF Waterworks, LP, a company specializing in innovative, eco-friendly drain management solutions. The acquisition, funded with cash on hand, represents approximately 9.5x PF Waterworks' trailing twelve-months' EBITDA. This strategic move within CSWI's Contractor Solutions Segment expands their plumbing product portfolio and is expected to be accretive to earnings per share in the first full year of ownership. PF Waterworks develops and manufactures 'Clean and Green' plumbing products for residential and commercial applications, with certified technology for public health and safety.

Positive

• Acquisition expected to be accretive to earnings per share in first year
• $40M acquisition funded with cash on hand, showing strong liquidity
• Strategic expansion in existing plumbing market with synergistic potential
• Addition of innovative, certified 'Clean and Green' product portfolio
• Shared customer base indicates immediate market integration potential

Negative

• Significant capital outlay at 9.5x EBITDA multiple
• Future earn-out payments may increase total acquisition cost

Insights

Financial Analyst

The $40 million acquisition of PF Waterworks represents a strategic expansion in CSWI's plumbing segment at a reasonable valuation of 9.5x EBITDA. The deal metrics are attractive given the current market conditions and industry standards. This acquisition is particularly noteworthy as it's expected to be earnings accretive in the first year, indicating strong potential for immediate value creation.

The transaction, funded with cash on hand, demonstrates CSWI's robust financial position and disciplined capital allocation strategy. Since going public in 2015, CSWI has deployed $695 million in acquisitions, showing a consistent track record of inorganic growth. The focus on eco-friendly, innovative products in the plumbing sector positions CSWI well for future growth, particularly given increasing environmental regulations and consumer preferences for sustainable solutions.

Market Research Analyst

The strategic fit of PF Waterworks within CSWI's portfolio is compelling, with significant cross-selling opportunities through shared customers. The 'Clean and Green' focus aligns with growing market demand for environmentally conscious plumbing solutions. The residential and commercial applications provide diversified revenue streams and market exposure.

The existing relationship between CSWI management and PF Waterworks suggests smooth integration potential and reduced execution risk. The certification for public health and safety adds credibility and market access advantages. This acquisition strengthens CSWI's competitive position in the plumbing end market, which has proven resilient through economic cycles.

Investment Highlights

• Capital investment of $40 million for acquisition of PF Waterworks, LP, which offers innovative, eco-friendly drain management solutions
• Valuation represents approximately 9.5x PF Waterworks’ trailing twelve-months’ EBITDA
• Expected to be accretive to earnings per share in the first full year of ownership
• $695 million of cumulative acquisition capital investment since going public in October 2015

DALLAS, Nov. 07, 2024 (GLOBE NEWSWIRE) -- CSW Industrials, Inc. (Nasdaq: CSWI) today announced the strategic acquisition of PF Waterworks, LP, deploying $40 million. This additional acquisition in our Contractor Solutions Segment represents the Company’s commitment to allocate capital on a risk adjusted returns basis for innovative products which add vitality to our portfolio of products. CSWI funded the transaction with cash on hand.

Joseph B. Armes, Chairman, President, and Chief Executive Officer of CSW Industrials, said, “I am pleased to announce the acquisition of PF Waterworks, which is a synergistic acquisition within our existing plumbing end market, where we have opportunity for expansion. The addition of these new products to our portfolio expands our offering of innovative plumbing products and further fuels the opportunity for additional inorganic growth and market share gains.”

Jeff Underwood, Senior Vice President of CSWI and General Manager, Contractor Solutions, commented, “We are thrilled to bring the PF Waterworks team to the CSWI family. I have known the company and owner for a number of years and watched PF Waterworks grow into a sizeable supplier to a number of shared customers based on product innovation and service, which are core values at CSWI.”

PF Waterworks develops and manufactures revolutionary, problem-solving plumbing products targeting ‘Clean and Green’ for both residential and commercial applications. The advanced, proven technology used in these products is certified for public health and safety and provides dependable performance that promotes self-sufficiency and makes life easier for homeowners, contractors, property managers, and builders. PF Waterworks sets a new industry standard in drain management products while providing excellent value for partners and customers.

The $40 million of capital for the acquisition of PF Waterworks, including estimated working capital adjustments but excluding future earn-outs, represents a valuation of approximately 9.5x PF Waterworks’ trailing twelve-month adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).

Safe Harbor Statement
This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. Words or phrases such as "may," "should," "expects," "could," "intends," "plans," "anticipates," "estimates," "believes," "forecasts," "predicts" or other similar expressions are intended to identify forward-looking statements, which include, without limitation, earnings forecasts, effective tax rate, statements relating to our business strategy and statements of expectations, beliefs, future plans and strategies and anticipated developments concerning our industry, business, operations, and financial performance and condition.

The forward-looking statements included in this press release are based on our current expectations, projections, estimates, and assumptions. These statements are only predictions, not guarantees. Such forward-looking statements are subject to numerous risks and uncertainties that are difficult to predict. These risks and uncertainties may cause actual results to differ materially from what is forecast in such forward-looking statements, and include, without limitation, the risk factors described from time to time in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K.

All forward-looking statements included in this press release are based on information currently available to us, and we assume no obligation to update any forward-looking statement except as may be required by law.

About CSW Industrials
CSW Industrials is a diversified industrial growth company with industry-leading operations in three segments: Contractor Solutions, Specialized Reliability Solutions, and Engineered Building Solutions. CSWI provides niche, value-added products with two essential commonalities: performance and reliability. The primary end markets we serve with our well-known brands include: HVAC/R, plumbing, electrical, general industrial, architecturally-specified building products, energy, mining, and rail transportation. For more information, please visit www.cswindustrials.com.

Investor Relations

Alexa Huerta
Vice President, Investor Relations, & Treasurer
214-489-7113
alexa.huerta@cswindustrials.com

FAQ

How much did CSWI pay for PF Waterworks acquisition?

CSWI paid $40 million for the acquisition of PF Waterworks, LP, representing approximately 9.5x PF Waterworks' trailing twelve-month EBITDA.

When will the PF Waterworks acquisition be accretive to CSWI's earnings?

The acquisition is expected to be accretive to CSWI's earnings per share in the first full year of ownership.

What type of products does PF Waterworks manufacture?

PF Waterworks develops and manufactures revolutionary 'Clean and Green' drain management solutions for both residential and commercial applications, with technology certified for public health and safety.

How did CSWI finance the PF Waterworks acquisition?

CSWI funded the PF Waterworks acquisition with cash on hand.