Adrian J Cotterill, Editor-in-Chief
Midwich has entered into a binding agreement to acquire a controlling stake in Nicolas M. Kyvernitis Electronics Ent., NMK Middle East FZE and Edge Electronics Trading LLC.
Based in the UAE and Qatar, the NMK Group is a value-added distributor of AV products and represents Midwich’s entry into the Middle Eastern market.
As part of the agreement, Midwich will acquire 80% of the voting rights of each of the NMK Group companies. The purchase price comprises an initial cash consideration of AED 49.8 million (approximately £10.0 million) followed by an additional AED 21.0 million in cash (approximately £4.2 million) six months later. Completion, which is subject to local regulatory approval(s) as required by foreign investment laws in the region, is expected in early 2021.
NMK was founded in 1989 by Nicolaos Kyvernitis. Through its operations in Sharjah and Dubai, the business supplies specialist AV products to customers in the UAE and wider Gulf region, with Edge, based in Doha, supporting customers in Qatar. The NMK Group will continue to be led by the existing management team of Alex Kemanes (Managing Director) and Constantinos “Dino” Drimakis (Director – Business Development), who will retain their aggregate 20% shareholding in the NMK Group. Nicolaos Kyvernitis will retire from the business following a period of transition post completion.
NMK is a specialist audio and visual distributor with a strong heritage in the professional audio market where the business operates with high-end specialist brands, such as Shure and Bose. More recently, NMK has expanded its technology offering, including the addition of key video brand Epson to its portfolio.
The Middle Eastern market is one of the fastest growing AV markets in the world according to trade body AVIXA. The deal further expands Midwich’s geographical footprint, enabling the Group to extend the support it can provide to customers and vendors internationally. The acquisition further delivers on the Group’s strategy to grow earnings both organically and through the selective acquisition of strong, complementary businesses. The deal follows the acquisition of US distributor Starin Marketing Inc. in February 2020.
In the pre Covid year ended 31 December 2019, the NMK Group generated revenues of approximately AED104 million (£21.6 million) and net profit of AED17.9 million (£3.7 million). Net assets as at 31 December 2019 were AED73.5 million (£14.8 million), including net cash of around AED 38 million (£7.6 million). Although the Covid crisis has had some impact on the NMK Group, trading performance has recovered well and long-term prospects appear unaffected.
Stephen Fenby, the Midwich Group Managing Director told us “This is an exciting day for the Midwich Group as it not only marks the Group’s entry into one of the fastest growing AV markets in the world, but also means we now have a presence in all major global territories. This gives us a truly global footprint, and ensures we are able to support our customers across all key geographies. NMK has built a strong reputation for service and its value-add model is an excellent fit with Midwich’s global offering. We are looking forward to working with Alex, Dino and the rest of the NMK Group team to support their growth ambitions and to further enhance our Group proposition. I would also like to take this opportunity to thank Nicolaos Kyvernitis for his support through the transaction, and to wish him well in the future.”
The acquisition is expected to be earnings enhancing in the first full year following completion.
The transaction will be undertaken on a cash free/ debt free basis.
The consideration for the acquisition will come from the remaining proceeds of the Group’s fundraise undertaken in February 2020, having funded the acquisition of Starin Marketing, Inc.
Options are in place whereby Midwich can purchase (or management can sell) the remaining 20% of the NMK Group in three years’ time or later, with the capped consideration payable based on pre-agreed formula linked to the financial performance of the NMK Group, up to a maximum of AED 46 million (£9.3 million). The maximum aggregate consideration for the purchase of 100% of the NMK Group is AED 116.8 million (£23.5 million).
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