Mohawk Industries, Inc. (NYSE: MHK) today announced that the company has entered into a definitive agreement to acquire the Marazzi Group, which will make Mohawk — the parent of Dal-Tile Corporation — the worldwide leader in ceramic tile.
The Marazzi Group is a leading manufacturer and marketer of ceramic tile in all its major geographies, including Russia, the United States, Italy, France and Spain. Marazzi’s 2011 revenues were about €833 million, or $1.16 billion, with EBITDA of approximately 15.5% under historical IFRS accounting. Marazzi is held by the Marazzi family and two private equity funds—Permira and Private Equity Partners.
Mohawk is acquiring Marazzi for €1.17 billion, or approximately $1.5 billion, with a combination of cash and equity. Marazzi’s estimated 2012 EBITDA of €145 million represents a purchase multiple of about eight times. The transaction is expected to be completed during the first quarter of 2013 pending customary closing conditions and regulatory approvals. Mohawk anticipates that the transaction will be accretive in 2013.
Ceramic tile remains the world’s most widely utilized flooring product with an estimated worldwide consumption of more than 110 billion square feet and annual growth of 5 to 6%. Marazzi distributes ceramic tile in more than 100 countries through a strong international sales force, which will increase Mohawk’s worldwide growth.
Founded and managed by Filippo Marazzi, Sr. and his family, the Marazzi Group has become a global leader in ceramic tile with worldwide brand recognition. Marazzi’s product line features glazed ceramic, glazed porcelain, technical tile and color body porcelain. Marazzi introduced the single fire process that revolutionized the industry, making ceramic more accessible to a wider market. Technological innovations continue today with new introductions such as crystalized porcelain and single-fired thin tiles. Marazzi operates manufacturing facilities in Russia, the United States and Western Europe and employs around 6,300 people.
Jeff Lorberbaum, Mohawk’s chairman and chief executive officer, stated, “This acquisition represents the next step in the expansion of Mohawk’s global business and will make Mohawk a stronger company. We found Marazzi attractive because of its solid management team and leadership positions in the U.S., Russia and Europe. Marazzi’s differentiated products, leading-edge design, efficient manufacturing and exemplary service have created one of the most valued brands in the industry. We have many opportunities to improve results by leveraging best practices, operational expertise, product innovation and manufacturing assets.”
In the U.S., Marazzi’s products are sold through independent distributors, home centers and a few company service centers. Mohawk expected to leverage the combined manufacturing expertise, design capabilities and distribution systems to enhance its ceramic business. Marazzi and the Daltile brand will maintain separate identities in the market, with the expectation that streamlining manufacturing, technical and marketing capabilities will strengthen both brands. The total residential and commercial offerings complement each other and can satisfy every requirement in the market. Additional products from facilities in Mexico, China and Europe will help the company compete directly with the large quantity of imported ceramic tile.
In a letter to its customers, Daltile vice president John Cousins said, “While we are still in the process of closing the transaction, which is expected to occur in the first quarter of 2013, we want to share with you some key points as we move forward:
- We are committed to preserving the unique strengths that made Dal-Tile’s and Marazzi’s businesses successful over the years. The brands will maintain separate identities in the market and they will continue to serve each channel as they do today. To a large extent, you will continue to do business with us in the same way that you have done in the past.
- The combination of these two companies will leverage complimentary product, manufacturing, technical and marketing capabilities that will be focused on helping you profitably grow your business.
- Through access to the global capabilities of each organization, we will be able to bring new, innovative products and services to market more quickly.
- We are also committed to maintaining the high level of sales and customer service support that you have come to expect from our organizations.
I hope you share in our excitement as Marazzi joins with us, and together, we become North America’s premier manufacturer and marketer of tile and stone products.”
Lorberbaum added, “The combination of Mohawk and Marazzi creates opportunities to expand U.S. distribution through service centers and other channels, source ceramic from our worldwide assets, utilize our relationships to expand all product categories and deploy leading innovation and design trends to all of our ceramic businesses around the globe. Mohawk and Marazzi’s strong management and solid financial position combined with process and material knowledge, distribution expertise, and synergies with other products will deliver additional value to our shareholders.”
Marazzi has the number one position in the Russian ceramic market (similar in size to the United States), where it operates two manufacturing sites and 21 regional distribution centers as well as owning and franchising more than 300 retail stores that carry only Marazzi products. About 50% of the Marazzi Russian business is sold directly to end users. Retail advertising done by the stores has created a strong consumer brand. The company expects increase its geographic reach by expanding company owned and franchised stores, other distribution channels.
Presently European flooring is at a low point where Marazzi has leading positions in Italy, France and Spain. Marazzi has rationalized its capacity to align with the market and is implementing new strategies to enhance its sales in the region and adjacent countries. Improvements have been made that enhanced the manufacturing efficiency, quality and sales effectiveness. Additional investments are planned to further reduce manufacturing cost, increase sales and expand the company’s design capabilities.