LSI Industries Inc. (NASDAQ: LYTS) has just announced the acquisition of EMI Industries for a total of $50 million in an all-cash transaction. The acquisition expands LSI's display solutions capabilities within the grocery, convenience store, and restaurant markets.
In the full year calendar 2023, EMI reported total revenue of approximately $87.0 million and adjusted EBITDA of $5.5 million. Upon closing, the transaction will immediately be accretive to LSI on an adjusted earnings per share basis.
LSI funded the acquisition utilizing cash and availability under its existing credit facility. At closing, LSI anticipates that its pro-forma ratio of net debt outstanding to trailing twelve-month adjusted EBITDA will be approximately 1.3x. LSI intends to significantly reduce net leverage within the business during the next 24 months, supported by anticipated growth in pro-forma free cash flow from the combined entities.
As part of the transaction, LSI will welcome EMI’s more than 300 employees to LSI, while retaining EMI’s experienced leadership team, including President and CEO Alan Harvill, together with each of its five facilities. Following the closing of the transaction, EMI will remain an independent brand, given its established commercial presence in the market. LSI anticipates EMI will become part of LSI’s display solutions segment on a reporting basis moving forward.
The acquisition of EMI further establishes LSI as a market-leading business of scale within the retail display solutions market. Following the successful acquisition of JSI Store Fixtures in 2021, EMI significantly expands LSI’s presence in the grocery, convenience store, and QSR/restaurant verticals. The combined business provides considerable commercial and operational synergies to be realized over the next several years.
The business combination also provides a one-stop, end-to-end integrated solution to LSI customers. The addition of EMI positions LSI to further enhance its unique value proposition with customers across the full continuum of product design, manufacture, installation, and post-sale support. LSI believes its integrated approach will further entrench its value as a trusted partner equipped to support the full project management lifecycle.
LSI’s "Fast Forward" strategy seeks to deliver sustained commercial expansion, operational excellence, and disciplined capital allocation, consistent with the company’s focus on long-term value creation. As outlined within the strategy, LSI remains focused on adding scale and competencies within both new and existing vertical markets. By fiscal year 2028, LSI projects net sales growth of more than 60%, adjusted EBITDA growth of more than 100%, and adjusted EBITDA margin expansion of approximately 250+ basis points, or 12.5% of net sales, as supported through a balance of organic and inorganic investments.
LSI will host the EMI Industries acquisition conference call at 11 a.m. ET on April 19, 2024, to review the acquisition and conduct a question-and-answer session.
Following these announcements, the company's shares moved 4.0%, and are now trading at a price of $14.55. Check out the company's full 8-K submission here.
