Last close As at 05/08/2026
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GBP105m
Research: Industrials
Solid State is acquiring Custom Power, a California-based battery systems manufacturer and energy solutions provider, for up to $45.0m (c £36.0m) in cash. It is raising up to £27.2m (gross) through a placing and open offer at 1,025p/share to partly finance the acquisition. Management believes that the acquisition will be earnings enhancing in its first full year (FY24).
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Step change in Power capabilities
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14 July 2022 |
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Solid State is a research client of Edison Investment Research Limited |
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Solid State is acquiring Custom Power, a California-based battery systems manufacturer and energy solutions provider, for up to $45.0m (c £36.0m) in cash. It is raising up to £27.2m (gross) through a placing and open offer at 1,025p/share to partly finance the acquisition. Management believes that the acquisition will be earnings enhancing in its first full year (FY24).
Internationalising existing Power business unit
In common with the group’s existing Power business unit, Custom Power is involved at the pack manufacture stage of the supply chain and focuses on medium volume, complex custom assemblies with long-term, multi-year production runs. Similarly, it is not involved in consumer electronics or electric vehicles other than highly specialised applications such as cherry pickers, unmanned aerial vehicles and unmanned military vehicles. The acquisition provides the group with additional US manufacturing capacity, contract manufacturing relationships in Mexico and sales links with new multinational customers including Honeywell, Lockheed Martin and Philips Medical. It adds a portfolio of semi-standard battery products used in the security and defence, medical and industrial markets, significantly expanding the group’s revenues in the first of these sectors where it currently has relatively little exposure. The acquisition provides opportunities for cross-selling. It also strengthens the group’s engineering team with electronic engineering circuit design and battery management system software design expertise and adds complementary technology, including pack heating and fuel gauge algorithms.
Acquisition of growing, profitable business
The initial consideration payable is $30.0m (c £24.0m), followed by two equal tranches of deferred consideration totalling $10.0m (c £8.0m) and up to $5m (c £4m) consideration contingent on achieving $37.5m (£30.0m) or more revenues over a 12-month period within 18 months of completion. Custom Power generated revenues of c US$ 29.8m (c.£23.8m) and underlying profit after tax of $2.5m (c £2.0m) for the year ended December 2021. Management believes that the revenue target is ambitious but nevertheless likely to be achieved.
Valuation: Modest prospective multiples paid
Management calculates that if Custom Power reaches the target while maintaining margins at FY21 levels it will generate $3.2m profit after tax. The maximum consideration payable therefore represents 1.2x prospective revenues and 14.2x prospective profit after tax.
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Consensus estimates
Source: company data, broker consensus |
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