AAON, Inc. (NASDAQ: AAON) (“AAON” or the “Company”), a leader in
innovation and production of premium quality, highly energy
efficient HVAC products for nonresidential buildings, today
announced it has entered into a membership interest purchase
agreement to acquire 100% of the equity interests of BasX, LLC, dba
BasX Solutions (“BasX”), a leader in the manufacturing of high
efficiency data center cooling solutions, cleanroom systems, custom
HVAC systems and modular solutions. The transaction terms require
an upfront payment of $100 million, subject to customary
adjustments. Additional payments valued at up to $80 million are
subject to earn-out milestones that extend through 2023. As a
condition to closing, AAON will also sign a real estate purchase
agreement with BasX Properties, LLC, an affiliate of BasX, to
acquire the real property and improvements utilized by BasX for an
additional $22 million, subject to customary closing conditions and
adjustments. AAON plans to fund the transactions through a
combination of cash, borrowings under its revolving credit facility
and equity.
BasX specializes in the design, engineering and
manufacturing of custom, energy efficient cooling solutions for the
rapidly growing hyperscale data center market. BasX also designs
and manufactures custom solutions for cleanroom environments for
the bio-pharmaceutical, semiconductor, medical and agriculture
markets, as well as custom, energy efficient air handlers and
modular solutions for a vast array of markets. Headquartered in
Redmond, Oregon, BasX operates a manufacturing footprint of 200,000
square feet. In 2021, BasX is expected to realize revenue of
approximately $70 million.
Strategic Rationale
There are several factors that led AAON to
believing this was a compelling acquisition:
- BasX brings the Company exposure to
attractive end-markets into which AAON had minimal exposure.
- The products that BasX manufactures
are highly engineered, customized products, fully complimenting
AAON’s existing business model.
- There are high barriers to entry.
The sophistication of the equipment, the high cost of failure if
the equipment fails and the strong customer relationships with a
concentrated group of blue chip companies all act as a moat to this
business.
- The acquisition is accretive to
organic growth. BasX has experienced a five-year sales CAGR of 45%
and has a robust backlog that supports future growth.
- AAON anticipates revenue and cost
synergies to result from the acquisition. The AAON brand and the
financial support will help BasX penetrate their markets at an
accelerated rate. AAON also foresees cross selling opportunities
related to having manufacturing locations in different geographies
of the U.S. and R&D related synergies. Cost synergies are
related to procurement of materials and components, productivity
improvements associated with the sharing of best practices and
vertical integration opportunities.
- AAON anticipates the acquisition
will be accretive to earnings immediately, excluding upfront
acquisition-related costs and ongoing purchase accounting
amortization expenses.
- Lastly, AAON gains a premier
leadership team that has a multi-decade track record of success in
the industry. Conditional to the deal, BasX’s management team will
remain intact for at least three years following the close of the
acquisition.
“Upon closing this acquisition, we will continue
to advance our long-term strategy of focusing on innovative,
semi-custom and custom, energy efficient HVAC solutions for
nonresidential applications,” commented Gary Fields, AAON’s
President and Chief Executive Officer. “BasX will provide AAON with
an immediate presence in the high-growth data center and cleanroom
markets, both of which the Company has historically had minimal
exposure. The growth and profitability fundamentals of these new
markets are very compelling for AAON. We also believe there are
material revenue and cost synergies that will result from the
combined entity. Moreover, BasX is led by a management team that
has decades of experience in developing products that have shaped
today’s industry, an attribute that is fully complementary to
AAON’s strategy. Overall, we believe the strategic and financial
benefits resulting from this acquisition are compelling for our
Company and all of our stakeholders. We look forward to welcoming
the BasX team to the AAON family and are excited about the
opportunities ahead.”
Matt Tobolski, PhD, President and Co-Founder of
BasX stated, “Since our inception, the BasX team has focused on
delivering value added solutions by engineering and building
industry leading custom products that meet the most stringent
demands in the data center, cleanroom and commercial markets. The
creativity, collaboration, and execution of projects by our team
will be strengthened as we enter this new chapter with AAON. BasX
and AAON are extremely well aligned from company cultures,
engineering expertise, manufacturing efficiency and the steadfast
commitment to delivering on promises to our customers.” Dave
Benson, BasX CEO and Co-Founder added, “As BasX joins the AAON
family, we are confident that the incremental add in product
offerings and market segments will result in fantastic value to our
collective customers and shareholders.”
Solid Financial
Contributions
BasX has delivered compounded annual revenue
growth of 45% over the past five years and is expected to achieve
adjusted EBITDA margins in the mid-to-high-teens in 2021. Cost and
revenue synergies expected over the next several years will help
further expand margins. The full amount of the additional
transactional payments that are subject to several earn-out
milestones are based on EBITDA more than doubling from 2021 to
2023. Excluding upfront acquisition-related expenses and non-cash
purchase accounting amortization costs, the Company anticipates the
acquisition will be accretive to earnings.
Financing and Closing
The upfront payment of $100 million will be
funded mostly with cash on hand, with the rest from borrowings
under the Company’s revolving credit facility. Earn-out payments
based on certain milestones will be paid in equity. The acquisition
is expected to close by year-end, subject to customary closing
conditions and approvals, and the real estate acquisition is
expected to close by the end of the first quarter of 2022.
Financial Advisors
J.P. Morgan Securities, LLC acted as exclusive
advisor to AAON.Wells Fargo Securities, LLC acted as exclusive
advisor to BasX.
Conference Call and Webcast
AAON will host a conference call and webcast tomorrow, November
19, 2021 at 9:00 a.m. ET to discuss the transaction. The live
conference call is available by dialing (646) 402-9168 (code:
1302435). The webcast and accompanying slide presentation will be
available at
https://onecast.thinkpragmatic.com/ses/JFkp0YIojLjb6xj2VV0tCg~~.
The slide presentation is also accessible at
https://www.aaon.com/Investors.
A link to the recording of the webcast will be available at
https://onecast.thinkpragmatic.com/ses/JFkp0YIojLjb6xj2VV0tCg~~ or
https://www.aaon.com/Investors.
About AAON
AAON, Inc. is engaged in the engineering,
manufacturing, marketing and sale of air conditioning and heating
equipment consisting of standard, semi-custom and custom rooftop
units, chillers, packaged outdoor mechanical rooms, air handling
units, makeup air units, energy recovery units, condensing units,
geothermal/water-source heat pumps, coils and controls. Since the
founding of AAON in 1988, AAON has maintained a commitment to
design, develop, manufacture and deliver heating and cooling
products to perform beyond all expectations and demonstrate the
value of AAON to our customers. For more information, please visit
www.AAON.com.
Forward-Looking Statements
This press release includes “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. Words such as “expects”, “anticipates”,
“intends”, “plans”, “believes”, “seeks”, “estimates”, “should”,
“will”, and variations of such words and similar expressions are
intended to identify such forward-looking statements. These
statements are not guarantees of future performance and involve
certain risks, uncertainties and assumptions, which are difficult
to predict. Therefore, actual outcomes and results may differ
materially from what is expressed or forecasted in such
forward-looking statements. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak
only as of the date on which they are made. We undertake no
obligations to update publicly any forward-looking statements,
whether as a result of new information, future events or otherwise.
Important factors that could cause results to differ materially
from those in the forward-looking statements include (1) the timing
and extent of changes in raw material and component prices, (2) the
effects of fluctuations in the commercial/industrial new
construction market, (3) the timing and extent of changes in
interest rates, as well as other competitive factors during the
year, and (4) general economic, market or business conditions.
Contact InformationJoseph
MondilloDirector of Investor RelationsPhone: (617) 877-6346Email:
joseph.mondillo@aaon.com
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