CUI Global Inc (NASDAQ:CUI) has closed its acquisition of Reach Construction Group, a privately-held engineering, procurement and construction (EPC) company focused on solar construction in North America.
Headquartered in Apex, North Carolina, Reach has executed more than 40 renewable energy projects in excess of 450 megawatts. The company possesses deep expertise in utility-scale renewable energy project delivery, particularly solar farms, site preparation and public utility construction.
Reach immediately becomes a wholly owned subsidiary of CUI Global. CEO Brandon Martin will continue in his current role, and he will report to CUI CEO Jim O’Neil.
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The deal includes the issuance of 2 million 12-month restricted shares of CUI’s common stock and $35 million in seller’s debt. The debt comes in the form of two promissory notes due between 18 and 36 months from the effective merger date, April 1.
The acquisition provides synergies for revenue growth, and Reach’s in-house engineering capabilities, supply chain relationships and industry expertise will complement and drive the growth of CUI’s other divisions, the company said.
"This transaction effectively positions CUI Global for even more accelerated growth," O'Neil said in a statement. "Reach's talent base of technical employees and their world-class management and support team, as well as their sterling reputation within the renewable energy industry, will help drive increased growth across our company portfolio. We believe both Reach and CUI Global will see tremendous benefits, using our joint network of iconic customers to market our combined portfolio of energy capabilities and products to a much larger audience."
CUI anticipates cost synergies coming from leveraging existing sales, integration and distribution infrastructure for cross-selling opportunities.
"This is a significant company milestone for Reach," Martin said. "With the combination of these two companies, we will now be able to expand our programs and services for our existing customer base, while at the same time pursue growth opportunities across a much broader market. As part of a global entity, we expect enhanced visibility in the market and heightened awareness for our company offerings."
Reach also has a contractual backlog of $100 million North America for fiscal 2020, which will immediately add revenue and positive net earnings to CUI.
"The acquisition of Reach will be immediately accretive, providing increased revenues, operating margins, net earnings and significantly enhancing our ability to penetrate the renewable (solar) energy market," O'Neil added. "This acquisition demonstrates our commitment to further our strategy of making opportunistic, synergistic acquisitions that will increase our growth and, thereby, enhance our shareholder value."
CUI Global, based in Houston, owns another energy company, Orbital Gas Systems, and a digital platform provider for the networking and telecom sectors, CUI Inc.
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