Vertiv Acquires E&I Engineering Group For $1.8B; Cuts Q3, FY21 Outlook

Vertiv Holdings Co VRT has agreed to acquire E&I Engineering Ireland Limited and its affiliate, Powerbar Gulf LLC, for ~$1.8 billion, plus the potential for up to $200 million in cash. The upfront consideration consists of $1.17 billion in cash and ~$630 million of Vertiv common stock.
E&I is an independent provider of electrical switchgear and power distribution systems, with annual sales of ~$460 million (2021E) and 2,100 employees. The deal provides the opportunity to leverage Vertiv's footprint outside of the U.S., particularly in Europe and Asia.
The transaction is expected to be accretive to Vertiv's organic growth, adjusted operating margins, cash flow, and EPS in 2022, and is expected to close in 4Q21.
Vertiv plans to finance the deal with cash and new debt financing, supported by committed funding. It held cash and cash equivalents of $716.8 million as of June 30, 2021.
Vertiv orders in July and August were up ~12% year-over-year. Order growth drives a backlog of about $2.4 billion at the end of August, a 30% increase from year-end 2020.
Q3 Outlook: Vertiv lowered its outlook citing supply chain challenges. It sees net sales of $1.21 billion - $1.25 billion (prior $1.26 billion - $1.3 billion), and an adjusted operating margin of 10.3% - 10.8% (prior 12.3% - 12.8%). Adjusted EPS outlook of $0.17 - $0.20 (prior $0.26 - $0.30).
FY21 Outlook: The company expects net sales of $4.88 billion - $4.94 billion (prior $4.97 billion -$5.03 billion), an adjusted operating margin of 10.9% - 11.1% (prior 11.8% - 12.2%), and sees an adjusted EPS of $0.96 - $1.01 (prior $1.12 - $1.18).
Price Action: VRT shares are trading lower by 3.71% at $27.00 during the premarket session on Wednesday.

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