Marshalls (MSLH) 665p

Gain to date: 4.1%

Original entry point: Buy at 638.5p, 25 February 2021

Building products group Marshalls (MSLH) has taken a big step towards its strategic goal of becoming the UK’s leading maker of building products with the £535 million acquisition of Marley.

Marley, a leading supplier of roofing products, is highly profitable, generating an EBITDA (earnings before interest, tax, depreciation and amortisation) margin of over 20% throughout the pandemic, above Marshalls’ own margin.

The purchase price, which represents a multiple of 10.7 times EBITDA, isn’t expensive for a business which will boost Marshalls’ earnings growth by double digits in the first full year after completion.

The deal looks well-timed too, given the continued strength of the repair, maintenance and improvement market and the boom in demand for new housing.

Marshalls is financing the purchase through a mixture of cash and new equity which means an increase in the number of shares in circulation.

Crucially, Marley’s long-standing management team will remain with the business and they are not allowed to sell their new shares in Marshalls for six months.

SHARES SAYS: The acquisition makes strategic and financial sense. Keep buying the shares. 

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