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RHI Magnesita announces intention to acquire Resco Group

2024-03-30

Mar. 30, 2024 - RHI Magnesita announces its intention to acquire Resco Group, a US based producer of alumina monolithics and wide range of basic and non-basic refractories, for an enterprise value of up to $430 million.



About Resco                                                                
Resco is a producer of shaped and unshaped refractories, including products for use in the petrochemical, cement, aluminium, and steel making industries. Resco operates seven plants and two raw material sites in the US and two plants in the UK and Canada. Resco’s Rescobond and Rescocast brands are widely used in refining and petrochemical applications by global customers.

Resco is currently owned by Balmoral Funds, a $1.5 billion assets under management California-based private equity RIA focusing on investments in industrials, business services, aerospace and logistics businesses with complex operations and/or ownership dynamics, such as corporate divestitures.

Resco recorded unaudited revenues of $252 million in the year to 31 December 2023, with Profit before Tax of $20 million and had Gross Assets of $191 million at 31 December 2023.


Logic of the Acquisition


Currently, approximately 50% of RHI Magnesita’s US sales are not produced in the country. The Acquisition will increase RHI Magnesita’s local production in the US and Canada by transferring significant volumes of production from non-US plants to the Resco production facilities in the US. Based on customer feedback, they are taking steps to improve supply chain security, reduce production lead times and stabilise working capital. This acquisition continues the Group’s strategic growth trajectory in alumina-based refractories by providing US customers with an improved product offering.

Synergies will be created in the mid-term following the restructuring of the combined supply chain, which is expected to last approximately two years and will create one-time costs of €60 million, including restructuring efforts in non-US plants. Synergies are expected to be generated through supply chain improvements, production network optimisation, working capital reduction, logistics efficiencies, supply integration, technology transfer, increased recycling opportunities and procurement savings.

Commenting on the Acquisition, Stefan Borgas, Chief Executive Officer of RHI Magnesita, said:

“I am pleased to report that the acquisition of Resco represents a step-change for our US business and our North American production footprint. The acquisition advances our ‘local for local’ production strategy and will shorten supply chains, improve our speed of reaction, and increase the security of supply of refractories for our customers. We are listening to our customers and responding to their desires. Resco’s main strengths are in the petrochemical, cement and aluminium industries, where RHI Magnesita has had very little business thus far, and its activities in steel making are complementary to those of RHI Magnesita. Resco operates seven refractory plants and two raw material sites, with two plants also located in the UK and Canada.

Resco has an excellent reputation with its customers and is a profitable and cash flow generative business which will make an important financial contribution to our Group. We have been nothing but impressed with the professional people that we have met throughout the entire Resco and Balmoral organizations, especially in operations and we are keen to welcome Resco into the RHI Magnesita Group and provide global career opportunities. I am confident that the combined team will set new industry standards.”

The acquisition is subject to customary closing conditions including merger control authority approval and is expected to be completed in H2 2024.

A&O served as RHI Magnesita’s legal advisor.

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