Shares of carpet and flooring manufacturer, Mohawk Industries Inc. (MHK) reached a new 52-week high of $167.64 on Jan 14, a day after it announced a definitive agreement to acquire IVC Group – a leading manufacturer of sheet vinyl, luxury vinyl tile (LVT) and laminate – for $1.2 billion.
Mohawk’s share price increased almost 6% after announcement of the IVC deal which is expected to strengthen its position in the global floor manufacturing market.
Founded in Belgium, the IVC Group is a major sheet vinyl provider in Europe and the U.S. It is also a leading company in the fast growing LVT sector which has witnessed nearly 18% rise in demand over the past year. IVC's sheet vinyl is made with a fiberglass core that results in a cushioned product that is durable and easy to install.
The cash and stock deal, worth $1.2 billion, is expected to be completed by the end of March, this year, subject to certain regulatory terms and conditions. Mohawk anticipates that the deal will be accretive to earnings per share in the first 12 months.
For Mohawk, the deal will be a strategic fit and boost its existing sheet vinyl and LVT products portfolio, which boasts years of expertise. Further, the company will collaborate with IVC to begin operations at its new Belgian LVT factory faster.
In the U.S., LVT currently represents around 5% of the total flooring market, and sales are estimated to rise more than 15% annually by the end of this decade. Post the deal closure, IVC Group’s LVT plant in Dalton, GA will position Mohawk to meet the accelerating demand for LVT in the U.S. market.
The deal will help Mohawk expand its range of flooring products, further strengthening its market share in the flooring industry.
Stocks to Consider
Mohawk Industries carries a Zacks Rank #3 (Hold). Better-ranked stocks in the home furnishing/textile industry include Restoration Hardware Holdings, Inc. (RH), Pier 1 Imports, Inc. (PIR) and Williams-Sonoma Inc. (WSM). All these stocks have a Zacks Rank #2 (Buy).
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