Good morning, ladies and gentlemen, welcome to Aimia Announces the Tufropes Acquisition Conference Call. At this time, all lines are in a listen-only mode. If at any time during this call you require immediate assistance, please press star zero for the operator. I would now like to turn the conference over to Mr. Albert Matousek. Please go ahead, sir.
Thank you, Lara, and welcome everyone to this morning's call. Today's presentation is available on SEDAR and on our website. Before we get underway, I would like to remind everyone to review our forward-looking statements and the cautions and risk factors pertaining to the statements, as well as the non-IFRS measures and presentation of financial information disclaimer, all of which can be found in the presentation in the investor relations section of our website. My name is Albert Matousek, Head of IR and Communications. With me on the call today are speakers Phil Mittleman, Aimia's CEO, Michael Lehmann, our President, and Steven Leonard, our CFO. Phil will cover the strategic highlights of our announced Tufropes transaction, followed by Michael, who will review the investment rationale for the acquisition, and Steve will speak to some of the financials. With that, let me hand it over to Phil.
Good morning, everyone, thank you for listening in today. We've been hard at work pursuing an exciting pipeline of investment opportunities with long-term track records of free cash flow generation and strong growth prospects. Today marks an important milestone for Aimia as we have announced the signing of definitive agreements to acquire Tufropes, which will be our first acquisition since the sale of our PLM stake in the second half of last year. We are very excited about this acquisition. A family-owned business founded in 1992, Tufropes is a global leader in the manufacture of high-performance synthetic ropes and netting solutions for the aquaculture and maritime sectors, as well as numerous industrial end markets, including manufacturing, construction, safety, agriculture and horticulture, sports and recreation, and transportation.
Aquaculture is among the fastest-growing sectors within the food industry and now supplies more than half the world's fish for human consumption. Tufropes produces high-performance synthetic ropes and netting products that provide compelling lower cost solutions for the aquaculture industry with higher reliability. Tufropes revenue is geographically diverse, with its products sold in over 70 countries, with 34% of revenues generated in Europe, 34% in Asia, 20% in the Americas, and 12% in Australasia. Tufropes reaches these markets through a strong global sales and distribution network. Supported by over 2,700 employees operating within five manufacturing plants based in India, it produces high quality advanced products on a cost-efficient basis with the manufacturing capacity to produce up to 70,000 metric tons of rope and netting solutions per year.
Tufropes is expected to achieve annual revenue of approximately CAD 130 million for the fiscal year ending March 31, 2023, and industry-leading EBITDA margins of 18%. Based on reasonable assumptions such as operational improvement initiatives as well as the optimization of product mix, EBITDA margins are expected to grow above 20% within the next two years. Since 2001, the company has grown revenue at a compounded annual growth rate of approximately 20%, with limited capital investment requirements and high free cash flow conversion. Aimia will add key senior management and sales marketing positions in Canada and Europe, strategically located near key customers and allowing Aimia to use its tax attributes.
Tufropes represents an outstanding opportunity for Aimia to acquire a global market leader with a long track record of organic revenue growth, leading EBITDA margins, and strong free cash flow generation. With that, let me turn the floor over to Mike to provide some further detail. Mike?
Thanks, Phil, and good morning to everyone. As Phil noted, we're really pleased to have found such an attractive business to acquire. Of the two business lines within Tufropes, Ropes represents 76% of overall sales, and the higher margin netting segment represents 24%. One of the primary initiatives is to increase our penetration of the netting market. Tufropes is a top three global manufacturer of high-performance synthetic fiber ropes with a 12% market share. We see the high-performance synthetic rope market currently at a half a billion U.S. dollars, taking a greater share of the $12 billion global rope market as industries look to move away from steel ropes and cables to lighter weight and durable high-performance synthetic rope products.
Businesses are looking to manage their total cost of ownership, and high-performance synthetic ropes offer lighter weight solutions to save on energy costs and provide for safer and more productive solutions for personal handling of these products. Tufropes is the second largest global player in the aquaculture net solutions industry, currently holding a 5% share in the highly fragmented market of over $450 million. We expect the market will continue to grow at a high rate as the world continues to source more fish protein. Tufropes uses the same high-performance synthetic fiber to produce nets for the aquaculture market. Aside from being a lighter product, the netting solution offers customers higher reliability in terms of ensuring the cages are durable and mitigates the risk of losing fish due to netting failures.
This is a significant advantage over the cheaper synthetic and nylon nets used within the industry. The netting market remains highly fragmented, and we believe there are significant opportunities to grow the segment both organically as well as through strategic acquisitions. Finally, let me highlight our strategic rationale for the acquisition. First, we'll be acquiring a global market leader with a number of sustainable competitive advantages, including technologically advanced products driven by an in-house R&D team, as well as advanced manufacturing expertise and scale across its five manufacturing facilities. Second, the company is selling into a highly attractive large and growing end market, bolstered by the secular trend of fiber ropes replacing steel wire, as well as the growth in aquaculture. Third, the company boosts an attractive financial profile and cash flow dynamics.
They have a 20-year track record of 20% compounded annual growth in revenue and industry-leading EBITDA margins and strong free cash flow conversion. Fourth, we see opportunities to grow and improve margins by building on the company's existing strengths through operating initiatives, investment in leadership, sales and marketing, and pursuing strategic acquisitions. With that, let me turn the floor over to Steve to provide you with some details on the transaction. Steve?
Thanks, Mike, and good morning to everyone. With our announcement today, subject to some regulatory approvals and customary closing conditions, we expect to close the transaction before the end of March. In terms of the purchase consideration, we are acquiring 100% of Tufropes for approximately CAD 249.6 million, which may change slightly upon closing based on the exchange rates at that time. The purchase price will also be subject to customary closing net debt and working capital adjustments. It is anticipated that the acquisition will be initially financed with Aimia's cash on hand. Aimia is currently evaluating financing options with an expectation to raise a modest level of debt at Tufropes within one year of closing.
Separately, Paladin Private Equity, our partner on this transaction, has an option to acquire up to 19.9% of equity within 12 months of the transaction close. Paladin will also be entitled to certain minority governance rights and a carried interest should the value of the business over a multi-year term achieve a threshold target, which is customary with this type of arrangement. With that, let me turn it back over to Phil to wrap up with a few concluding remarks. Phil?
Thanks, Steve.
Since the recent close of the PLM transaction, which provided over CAD 541 million in net cash proceeds, we have been hard at work pursuing an exciting pipeline of acquisition targets. The acquisition of Tufropes is a great example of the type of company that we will be acquiring. It has an enviable position as a global leader. It sells into consistently growing and diverse business segments, and it provides technological advantages that enable it to produce high returns on invested capital. All of these qualities are further enhanced by our ability to utilize our significant tax attributes. This is the type of company that we have been pursuing and are continuing to pursue, and we would like to thank our shareholders for their continued support.
We also wish to thank the Goel family for 31 years of stewarding this company through an incredible period of growth and for their help in transitioning the ownership of this company to Aimia. Last, but by no means least, we continue to actively pursue other acquisition targets with similar economic and growth profiles, and we look forward to updating you when appropriate. We look forward to providing more color on the details of the transaction and answer any questions you may have after closing the transaction.
Thank you very much for joining us on this call. We look forward to speaking to you again after we report our year-end results. Thank you very much.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a lovely day.