EnerSys announces agreement to acquire NorthStar Battery Company

Posted on Sep 24, 2019 in Nuts & Bolts

• With $78 million cash consideration and the assumption of $104.5 million in debt this acquisition combines world-class complementary products and expedites $500 million of Thin Plate Pure Lead (TPPL) production capacity when combined with the new high-speed TPPL production line and supporting equipment
• Synergy savings greater than $40 million per annum achieved primarily by minimizing transoceanic freight by manufacturing locally and longer, more efficient, production runs
• Increases our manufacturing capacity for the world class NexSys® motive power batteries and SBS® battery products for the Telecom and Uninterruptible Power Supply industry
• Facilitates the growth of our ODYSSEY® battery brand into the high performance sectors of transportation markets, including Class 8 over the road trucking
• Available floor space at existing NorthStar facility will accommodate our new high-speed TPPL production line, preserving over $100 million of existing TPPL production capacity
• Upon closing, adds over $150 million in annualized revenue

EnerSys, the global provider in stored energy solutions for industrial applications, today announced that it has entered into an agreement to acquire all issued and outstanding shares of N Holding AB, the parent company of NorthStar, from Altor Fund II.

With two production facilities in Springfield, Missouri, NorthStar manufactures and distributes batteries nearest in design and performance to EnerSys TPPL products. The acquired companies generated $157 million in revenue for the twelve months ending August 31, 2019 and adjusted EBITDA of $14 million, or 9% adjusted EBITDA margin. The transaction enterprise value is 13x of the LTM adjusted EBITDA (pre-synergies) and only 3x adjusted EBITDA, including run-rate synergies.

“In line with our previously disclosed strategy to increase sales of premium products we are excited to announce the acquisition of NorthStar, which will enable EnerSys to dramatically accelerate our sales for TPPL batteries,” said David M. Shaffer, President and Chief Executive Officer of EnerSys.

“The manufacturing processes and quality standards of NorthStar are very similar to EnerSys® TPPL production. It will require a modest capital investment to convert the NorthStar factories to build our ODYSSEY®, NexSys®, and SBS® battery products over a six month period. The proven expertise and training of the NorthStar production teams will dramatically accelerate our growth versus building Greenfield sites and training new teams. We are very impressed with the NorthStar team and we look forward to welcoming the organization to the EnerSys® family.

“In addition, the newer of the two NorthStar factories was not fully built out and has floor space immediately available for our new TPPL high-speed production line. The highly automated and digitized line has passed manufacturer acceptance tests and was already on route to Missouri. The line adds $175 million of production capacity, produces batteries three times faster than our existing production lines and requires significantly less operators and is well aligned with our operational excellence goals. It also eliminates the need to remove two existing production lines from our Warrensburg, Missouri facility to accommodate this line.

“Finally, NorthStar has blue chip customers in Europe and EnerSys currently imports significant amounts of batteries from Europe into the US market. This transaction will allow a rebalancing of factory loading and a dramatic reduction in inventory, freight, duty and currency risks. It will also allow us to better match the rate and amount of future capital expenditure to specific market requirements.”

Shaffer continued, “Our premium TPPL core technology distinguishes EnerSys in various vertical markets and we look forward to combining the strengths of these two businesses to deliver enhanced value to our customers and shareholders.”

The transaction is predicted to generate annual run-rate synergies in excess of $40 million to EnerSys and to be accretive to EnerSys’ earnings, excluding any one-time or acquisition related costs. The transaction is expected to close in the next fifteen (15) days, subject to the satisfaction of customary closing conditions.

The transaction will also be covered during our Investor Day presentation at The New York Stock Exchange on October 2, 2019.