Madison Air Solutions (MAIR -6.45%), a recent arrival to the stock exchange, wasn't having one of the best weeks in its existence as a publicly traded company.
After the cooling solutions specialist announced a splashy acquisition, investors actively and eagerly traded out of its equity. As of Friday morning before market open, Madison's shares were down by 16% week to date, according to data compiled by S&P Global Market Intelligence.
A major buy
That slide started early on Monday, when Madison Air announced it had signed a definitive agreement to become the new owner of a Germany-based peer, ebm-papst. The enterprise value of the deal is $5.4 billion, Madison said, or $5 billion when accounting for anticipated future tax savings.
Image source: Getty Images.
ebm-papst is a company over 60 years old that has grown into an international supplier of airflow solutions. According to its owner-to-be, more than 250 million of its fans are installed worldwide.
The American company quoted CEO Jill Wyatt as saying that "By combining ebm-papst's differentiated technology with Madison Air's application expertise, trusted customer relationships and proven operating model, we will help more customers improve uptime, efficiency, compliance and productivity in mission-critical environments."
Madison Air expects the acquisition to close by the end of this year.
NYSE: MAIR
Key Data Points
Flush with funds
Madison Air added that it would fund the acquisition with a mix of cash on hand and debt/equity financing. It did not get more specific. It did write that it was provided a debt commitment letter from several lenders, notably the large American bank Wells Fargo.
The company raised over $2.2 billion in its April IPO. Regardless, its admission that the deal would dramatically increase its leverage -- plus create potential dilution from a secondary stock issue -- sent investors heading for the exits. I'd say that's understandable, as those concerns are warranted. I'd be careful with this stock.
