A US multinational corporation has committed to invest £218m in Worcestershire-based royal carpet maker Victoria to support its acquisition drive. The listed business will also have an option to secure a further £100m.
Victoria has signed a commitment letter with KED Victoria Investments, an affiliate of Koch Equity Development (KED), a wholly owned subsidiary of Koch Industries.
KED, based in Wichita, will invest an initial £175m by way of convertible preferred shares to be issued by Victoria, subject to definitive agreements being entered into and conditional upon the approval of Victoria’s shareholders, to support the company’s continued growth.
Victoria said the Covid-19 pandemic revealed “some potentially exceptional acquisition possibilities” in Europe and the UK and the £175m investment would enable it “to move quickly and decisively to capitalise on these potential opportunities”.
As part of the deal, Victoria will have an option for a period of up to 18 months following the close of the initial investment to secure a further £100m from KED. KED will also have the right, but not the obligation, to appoint one director to Victoria’s board.
At completion of the initial investment, KED will be granted warrants to subscribe for a maximum of 12,402,000 ordinary shares in the ordinary share capital of the company, representing 9 per cent of the current share capital.
A Victoria statement to the London Stock Exchange said: “The board believes that the investment from KED will have significant positive attributes for shareholders and lenders.
“In particular, the future M&A transactions that the proposed investment will finance, and the consequent anticipated growth in EBITDA, are expected to reduce the company’s senior leverage ratio and improve the company’s credit rating over time.”
KED has also entered into discussions with Invesco Asset Management Limited to purchase off-market 12,500,000 ordinary shares, 9.97 per cent of the issued share capital of the company, £3.50 per share. The deal would be worth £43.7m.
Victoria’s board has also entered into discussions with Invesco to conditionally purchase off-market 8,546,095 of its ordinary shares, 6.82 per cent of the issued share capital of the company, at the same price per share. The deal would be worth £29.91m.
Spruce House Partnership LLC, a 14.8 per cent shareholder of Victoria, has started talks with Invesco to purchase off-market 3,600,000 ordinary shares, 2.87 per cent of the issued share capital of Victoria, at the same price.
Victoria, which is headquartered in Kidderminster, was established in 1895 and was first listed in 1963.
It has operations in the UK, Spain, Belgium, the Netherlands and Australia, employing about 3,400 people across more than 20 sites.
Victoria executive chairman Geoff Wilding said: “Victoria’s business model has proven resilient this year during the most difficult trading conditions in living memory.
“So, the time has now come to again focus on growth and the capital provided by Koch will enable us to deliver significant value creation while maintaining stable and secure debt leverage ratios.
“I am delighted to bring the capital, resources, and deep industrial expertise of the largest privately held company in the United States to Victoria’s next phase of growth as we execute on the exceptional organic growth and acquisition opportunity ahead.“
Koch Equity Development managing director Blake Ressel added: “We are delighted to be partnering with Victoria. We have conducted due diligence over the last few months, and we are confident in Victoria’s strategy, its management team, and the size of the market opportunity.
“We expect our investment to help Victoria accelerate execution of its growth plans.”