Good day and welcome to the Mattr conference call. At this time all participants are in listen-only mode. After the speaker's presentation there will be a question and answer session. Instructions will be given at that time. As a reminder, this call may be recorded. I would like to turn the call over to Meghan MacEachern, Vice President of External Communications and ESG. Please go ahead.
Good morning. Before we begin this morning's conference call, I would like to take a moment to remind all listeners that today's call includes forward-looking statements that involve estimates, judgments, risks and uncertainties that may cause actual results to differ materially from those projected.
The complete text of Mattr's statement on forward looking information is included in the Company's press release that preceded this call and is in its second quarter 2024 MD&A that is available on SEDAR+ and on the company's website at mattr.com. For those joining via webcast, you may follow the visual presentation that accompanies this call. Given the timing of this call and that the Company expects to release its third quarter 2024 results next week, today's discussion will be limited to the details of the transaction. The Company will not be in a position to comment on financials. I'll now turn it over to Mattr's President and CEO Mike Reeves.
Good morning, and thank you for attending today's call, during which myself, Meghan, and our CFO Tom Holloway will provide additional details of the Company's pending acquisition of AmerCable Incorporated, which was announced earlier today. The acquisition of AmerCable aligns well with our previously disclosed M&A criteria and offers us a platform to grow our U.S. wire and cable footprint, particularly in the medium voltage space, which is benefiting from a number of electrification tailwinds and longer-term macro trends. The core competencies lie in our mostly Canadian-focused Shawflex wire and cable business. Both organizations work closely with customers to design and manufacture highly engineered wire and cable solutions for the most challenging operating environments where the cost of failure is elevated and the value of performance is at its highest.
The combination of these two entities will create one of the premier custom engineered cable manufacturers in North America, and I look forward to welcoming the AmerCable family to Mattr. There are several reasons why we think this acquisition is highly attractive to Mattr. Not only does this transaction offer a host of strategic benefits through our enhanced geographic and end market presence, there are several key financial benefits that Tom will address later on in the presentation. The purchase price of $280 million reflects approximately five times the business's trailing twelve-month Adjusted EBITDA and the transaction is expected to be immediately and meaningfully accretive to Mattr's earnings per share while allowing us to maintain a balance sheet with significant financial flexibility. In addition, AmerCable is expected to strengthen Mattr's consolidated financial performance by reducing earnings cyclicality and increasing revenue predictability.
AmerCable is a U.S.-based producer of highly engineered low- and medium-voltage wire and cable solutions. Providing a full suite of products and services including in-house design and engineering capabilities. AmerCable's product portfolio consists of multiple globally recognized brands that are regarded as market leaders in their respective end markets and like Shawflex, focuses on bespoke high-margin solutions to address complex challenges. Upon closing this transaction, our Connection Technologies segment will have the ability to provide highly engineered wire and cable solutions in both low- and medium-voltage configurations to customers in Canada, across the U.S. and in key international markets v ia the collaborative combination of Shawflex and AmerCable. Between its 600,000 sq ft manufacturing facility in El Dorado, Arkansas and its 57,000 sq ft assembly facility in Katy, Texas, Mattr will gain a highly skilled, well trained and experienced workforce of around 300 AmerCable employees, an important factor in a generally talent constrained U.S. employment market. We look forward to combining our technical expertise to further our technology roadmap in combination with our new modernized low voltage facility in Vaughan, Ontario. This acquisition will allow us to offer a unique combination of solutions in response to rising customer demand while operating from an efficient yet strategically distributed manufacturing footprint located in close proximity to key activity centers. It's important to note that each of these production sites have the ability to enable gradually increasing output by a relatively modest staged future capital investment.
Looking into the future, the scaled U.S. footprint that Mattr will secure as a result of this acquisition will serve as a platform to accelerate future growth both organically and through additional potential acquisitions. We believe incremental growth opportunities will exist for Shawflex branded products manufactured within the U.S. AmerCable footprint and marketed into a broad spectrum of industrial and infrastructure applications which are subject to the provisions of the Buy American Act and other similar U.S. federal regulations. We anticipate the shared technical capabilities of Shawflex and AmerCable will allow meaningful cross-selling opportunities to their respective customer bases in the years to come, with AmerCable's proven strengths in medium voltage and low smoke zero halogen solutions likely to be particularly valuable to Shawflex's Canadian customers. Where while Shawflex's wide array of premium low voltage instrumentation and control cable solutions are likely to be particularly valuable to U.S.
customers within AmerCable's network. Mattr does not currently serve the medium voltage market today and we estimate a build strategy to enter this market would take more than three years to execute on a pro forma basis. We believe both AmerCable and Shawflex are positioned well for success. The combination of both businesses leading products and technical capabilities, a scaled and highly strategic footprint in North America and the significantly expanded addressable market as a result of both low and medium voltage capabilities represents a significant step forward in our wire and cable growth strategy and provides multiple levers to drive growth over the long- term, particularly in the industrial and infrastructure sectors. Tom will now walk through the financial and accounting impacts of the. Transaction.
Thanks Mike. As Mike noted earlier, Mattr will be acquiring the AmerCable Incorporated entity from Nexans for a purchase price of $280 million, which is approximately CAD 390 million at current exchange rates. This represents approximately five times AmerCable's trailing twelve-month adjusted EBITDA. The transaction is subject to customary closing conditions including U.S. antitrust review and approval, and we currently anticipate the transaction will close around year-end. There are a number of very attractive financial benefits that this business will bring to Mattr, including a track record of delivering adjusted EBITDA margins in excess of 20%. This is expected to immediately enhance the margin profile of our Connection Technologies segment and Mattr overall, while also meaningfully expanding the financial scale of our organization via the addition of over CAD 75 million of trailing twelve-month adjusted EBITDA.
On a trailing twelve month basis, this transaction will be more than 40% accretive to Mattr's earnings per share and we expect a similar magnitude of accretion for the next 12 months. Before accounting for synergies. AmerCable's mission critical products are tied to OPEX spending and projects with long lifespans. Coupled with a sticky blue chip customer base and a robust, highly visible ordering cycle, this acquisition is expected to reduce Mattr's overall earnings volatility and improve revenue predictability. AmerCable has also had historically low CAPEX intensity which has driven strong free cash flow conversion and is expected to continue going forward, adding incremental strength to the balance sheet. Pro forma for the acquisition, our Connection Technologies segment will represent more than 50% of trailing 12 month revenue.
This incremental financial scale in Connection Technologies will help to mitigate the impact of the recent volatility in our Composite Technologies segment. While enhancing our exposure to the large and growing electrification trends in the U.S. and across North America. Connection Technologies' pro forma revenue generation capabilities in the U.S. reach approximately 50% of segment revenues which further geographically balances the portfolio. We will be funding this transaction through a mix of balance sheet cash and our existing credit facility. In pro forma for this transaction, our trailing twelve month net debt to Adjusted EBITDA ratio at June 30, 2024 would have been approximately 2.2 times or 1.4 times if lease liabilities were excluded, just marginally above our normal course target of two times.
By maintaining a strong financial profile with significant cash generation capabilities, Mattr will maintain balance sheet capacity and access to capital to pursue its capital allocation priorities. We encourage investors to note that since the beginning of 2021 to the middle of 2024, and including the expected capital outflow to acquire AmerCable, Mattr is deploying nearly $1 billion of capital under our all of the above strategy while maintaining strict balance sheet discipline. In that period, we have paid down over $260 million on our credit facility, deployed over $200 million into high return organic growth initiatives and repurchased over $100 million or nearly 10% of our shares post transaction. Mattr will retain financial flexibility and expects to adjust capital allocation priorities to emphasize debt repayment, complete existing growth investments and continue share repurchases under our NCIB.
In 2021, Mattr committed itself to a fundamental transformation designed to elevate margins, lower volatility, and focus our resources on high-growth, high-value businesses which enable the expansion and renewal of critical infrastructure. We have moved with pace to meet these commitments, completing the divestiture of multiple non-core business lines and excess assets and utilizing the proceeds to strengthen our balance sheet. In parallel, we have grown Adjusted EBITDA by 77% from our remaining business lines from the full year 2021 to the trailing 12-month period to mid-2024. Since the start of 2021, we have lowered the outstanding balance on our credit facility to zero and made significant organic investments intended to enable high-margin, mid- and long-term growth across our Composite and Connection Technologies segments while also returning capital to shareholders through our Normal Course Issuer Bid.
Throughout this process, we have consistently shared our desire to enhance our existing wire and cable business via acquisition. Specifically, we have spoken regularly about our work to identify and acquire a U.S.-based specialty wire cable manufacturer with the technical capabilities and U.S. commercial networks necessary to complement our existing Shawflex business and allow Mattr to become a more meaningful participant in the large and growing U.S. critical infrastructure wire and cable market. We believe that AmerCable is an excellent fit to this strategic vision and through this acquisition we are well positioned to accelerate and enhance the financial ambitions that we set out in 2023 to drive strong consistent revenue growth supported by high margins and strong free cash flow conversion. I'll now turn it over to Mike for some final re marks.
Thank you, Tom. While our Connection Technologies team have efficiently grown our existing Shawflex wire cable business over the last three years, Mattr's corporate development team has been working hard to identify and secure a strategically aligned complementary addition to our wire and cable offering. They have remained disciplined and today's announcement is a reflection of their hard work. We're excited to work with Nexans to complete this transaction and ultimately to welcome the talented and committed AmerCable team into Mattr. I have full confidence that working together AmerCable and Shawflex unlock substantial growth opportunities and serve their collective customers even more effectively as evidenced by the expected immediate accretion to earnings per share.
I firmly believe this acquisition represents compelling value for our shareholders, positioning Mattr as a premier provider in the North American custom engineered wire and cable space and enabling accelerated achievement of our mid and long- term growth, profitability and cash flow targets while preserving our balance sheet strength. I'll now turn the call over to the operator and open it up for any questions you may have for myself, Tom or Meghan.
Thank you. If you'd like to ask a question, please press star 11. If your question has been answered and you'd like to remove yourself from the queue, please press star 11. Again, our first question comes from Yuri Lynk with Canaccord Genuity. Your line is o pen.
Hey, good morning e veryone.
Morning.
Morning,
Mike, can you comment at a ll on how this business has grown over the last few y ears?
So obviously this was a business that was acquired by Nexans a little over a decade ago, and during that period they delivered a consistent, I'd say mid single digit type of CAGR on EBITDA. As we look at this business in terms of our pathway forward, I think what's key to us is the recognition that while it's a very well run business, very efficient, and we're very, very excited by the financial performance that it will bring to us on day one. It has been categorized as non-core by Nexans for a number of years and has, as a result, not been in a position to compete for capital. So some of the things that perhaps the AmerCable team may have been capable of achieving over the last several years they haven't been able to.
But I believe under our ownership and in partnership with Shawflex they will be able to going forward. So we believe that the growth profile for this business over the midterm under our ownership is likely considerably better than it's had over the last decade.
Okay, that's h elpful. And can you comment on the end market e xposure? I mean the press release by t he seller flagged oil and gas and mining. Just any color on that and maybe where you plan on taking that exposure over t ime?
Absolutely. So AmerCable serves. I generally categorize it as four end markets. Industrial mining, oil and gas, and then other energy. And their revenue is relatively evenly spread between those four categories. If I speak specifically to oil and gas, because I realize that's an area where people may have some questions. AmerCable's oil and gas exposure is largely concentrated in the offshore and international oil and gas drilling completion and production space. They sell relatively small percentages of overall product consumed to drilling contractors and production floating offshore production vessels, support vessels, things of that nature. They are supporting very long- term projects in environments where the volatility associated with day to day commodity price movement are really very subdued. Nothing like the North American land market.
So we view their oil and gas exposure as being something that A is a very good business, they are a market leader in what they do, B is exposed to generally favorable trends. We see offshore and international oil and gas activity levels likely to rise modestly over the course of the next decade and probably beyond, and relatively low volatility because they are not dependent on very large projects coming and going. They serve as an operational expense to their customers. And I think if you were to look at some of their biggest customers' public statements about their backlog of activity. I'll use Transocean as an example. It is robust and growing. So we feel very good about that oil and gas business.
It is not the majority of their operation and over time, strategically, our intent here is to leverage their footprint, their capabilities with the existing capabilities of Shawflex and particularly enhance the combined industrial and infrastructure exposure of the two businesses. So oil and gas, while we are certainly going to support it and are excited by the returns on it, will likely become a smaller percentage of their revenue as time goes by. On the mining side, we view mining very much through the lens of an enabler of global electrification. So that the kind of activity that AmerCable supports here is generally North American and is across the spectrum from precious metals mining to iron ore, copper, metallurgical coal that's used in the production of steel.
Things that have high demand today, where that demand is likely to continue to rise through population growth and electrification and a market where again they are not dependent on new mine openings. They are part of the day to day operating spend of those mining customers which happens day in and day out with very limited volatility. We do see an opportunity to help them expand their mining exposure outside North America. A decade or so ago they did have a fairly robust international mining business and we think that's there for them to grow into over time and firmly believe that this combination of end markets that they serve really plays to the strengths of our organization. It's all about infrastructure expansion and renewal and the opportunities to grow are there across all of those end m arkets.
Thank you for the color. I'll turn it o ver.
Thank you. Our next question comes from Ian Gillies with Stifel. Your line is o pen.
Morning e veryone.
Good M orning.
Maybe if we think about the h istorical results, you know, when you look a t disclosures, it looks like EBITDA for the business has grown at, call it 5.5% a year over the last 12 years. Are you able to talk at all about the volatility between the peaks and troughs in the business? Or maybe framed differently you've alluded to it. Do you primarily view this as a maintenance capital spending business, thus it should be reasonably stable moving f orward?
Yes. I think your second point is really the point I'd make. We do view it as a maintenance capital driven business and therefore one that ought to be and historically has been fairly low volatility. The ultimate bottom line performance under its previous owner is really not something that I should be talking about. I think that's a Nexans's conversation, but I would say I think Nexans did a very, very good job of working with the AmerCable team and helping them drive further efficiency in their commercial and operating execution, which has been a part of the growth that they've delivered over the course of their Nexans's ownership period.
I think at the end of the day, what we believe we have acquired or will acquire here is a business that has relatively low volatility, high margins, high free cash flow conversion, starts with substantial scale, but really does open the door for the combination of Shawflex and AmerCable to work collaboratively and bring low voltage and medium voltage product, which we've never had access to, to a much broader spectrum of customers in North America and beyond. So really it plays to the heart of our fundamental belief, which is that we are a corporation whose success is built on the expansion and renewal of critical infrastructure, primarily in North America. And that's exactly what AmerCable will help us a ccelerate.
Understood. As it pertains to the margins, the commentary I thought was quite constructive about being north of 20%. But can you Just? Is that where the business is today or is there anything you need to do immediately upon close to kind of fix and get them t here?
Yeah. Hey, Ian. I mean, I think they have been historically above that level and we don't see any reason why that would change. I think what's nice about this business is the market positioning of their business is that they do have some pricing power, their brands are well recognized and that helps them maintain that margin profile. So I don't think there's really anything we think we need to do in the short term, although I would say there's obviously the expenses as you bring a business in that may be incurred in the coming months, year or two. But on the broad scope, I think their margin profile is quite strong and will be that way going f orward.
Got. Maybe as it pertains to the actual operating facility, there's obviously some photos of it online. It looks quite large. Can you maybe talk a little bit about how much you think you could potentially upsize it and is there any way at this time to quantify what you believe the capital costs might be moving forward to get that facility l arger?
Yeah. So as noted in the materials and you'll see it in the on the slides that we posted on the website, we are in the process within our existing Shawflex business of moving to a new production site for our low voltage wire and cable. And that new site will be approximately 230,000 sq ft, which is a fairly meaningful growth from where we have been in recent history. Contrast that with AmerCable site in El Dorado, Arkansas, which is 600,000 sq ft. So nearly three times the size of our new site and well more than three times the size of our existing site. I'd say that the site itself is operating very efficiently.
There have been moments where I think the team have wrestled with some bottlenecks with production, various pieces of equipment, and those are opportunities for us to step in fairly quickly and help open up some incremental production. But generally what I tell you is that we see within the existing square footage and in the land that surrounds it, the ability to deploy relatively modest amounts of capital over a period of multiple years to enable this business to grow really quite substantially. I think there is order of magnitude at least a 50% growth opportunity out there spread over the course of multiple years. Of course. And in terms of capital, we've already established that we would consider our typical baseline capital spend on an annual basis for the corporation to be CAD 30 million-CAD 50 million.
I think you're unlikely to see us deviate materially from that even while we are helping AmerCable expand their capacity.
Understood. That's very h elpful. Thanks very much. I'll turn the call back o ver.
Thank you. Our next question comes from Tim Monachello with ATB Capital Markets. Your line is open.
Hey, good morning. So you know, when you guys were out in the market talking about the acquisitions that you were going to go after, you talked about, you know you're going to have to buy some businesses that weren't perfect. It sounds like this one's actually working pretty well from an operating standpoint. Why do you think the multiple is so cheap? Do you think it's just the end market e xposure?
So you're right. We have said that in order to acquire things that are in this space at this kind of multiple, we may have to work with things that have a little hair on them. As we said, I think in this particular case the business is extremely well run. The leadership team and the entire organization committed, very professional. There is nothing broken in this business. The challenge I think here has been that it is non-core to its current owner. It's been defined that way for multiple years and as a consequence, current owner has quite rightly allocated capital elsewhere. So when you look at a business that's not necessarily had the investment necessary to position it for 10%+ revenue growth on a regular basis, clearly there's a multiple impact.
The hurdle on this one is more about just carving a business out of a corporate parent. These are things that there's some work to do, but nothing that we haven't done before as a team. So we have no concerns about our ability to execute that relatively near term piece of this process. Really the most critical piece is that we are able to make the modest capital investments necessary to allow this organization to grow at a higher pace than it has in recent years. And I think it's really been the growth rate that led to the multiple. And quite frankly, we feel very, very good about this transaction. I think this demonstrates that if you know what you intend to own and are willing to be patient and disciplined, opportunities ultimately are there.
This is one where I think we have secured great value for our shareholders and we can create great value for our shareholders going forward.
Okay. Does the business come with working capital? You're going to have to fund the working capital once you have i t?
Yeah, no, it comes with a customary working capital as usual. We would inherit whatever's on their balance sheet at close and have negotiated that appropriately. So we expect no issues with funding working c apital.
Okay. It occurs to me that you don't have a lot of overlap with their existing business right now. So can you talk about if there are any synergies that you see in the business and also your expectation for any, you know, restructuring charges or you know, one-time items throughout the integration process that you foresee at this p oint?
I'll offer a partial response and then pass to Tom. So as I said earlier, we through the last several months getting to know this business and really understanding its financial performance, I would describe it as being very well run. So this is not a scenario where we are anticipating material cost synergies. I think as time goes by, there will be some cost synergies available through consolidated supply chain and perhaps some software license purchasing that's consolidated, things of that nature. But you should not expect to see us extract substantial cost synergies here. The real opportunity here is commercial synergy and accelerated growth at accelerated margins. Giving ourselves access to medium voltage product, which we've never had access to before, and giving ourselves access to the full North American market, roughly multiplies our addressable market by about eight times from where it is today.
So that's really where the value will come. Tom, do you want to comment about any c harges?
Yeah, I would say I do not anticipate any restructuring charges with the exception of transaction fees which we called out. And just to give you visibility, those likely get added back to EBITDA going forward. So no restructuring charges. The other thing I would just point to here is it gives us an opportunity to leverage our corporate structure which we've spent time and effort bringing down the cost. Not hugely materially, but we've worked hard on that. And I think this gives us an opportunity to leverage that structure without having to add incremental cost there. So no real restructuring expected here. As Mike said, there'll be some normal integration of or extraction of a business from a larger parent when you have this sort of transaction. But we will just have those in our normal recurring costs going f orward.
Like, I guess the one that comes to mind is like ERP integration. That can be a significant e xpense?
Yeah, I would just say to you, I mean, other than the, you know, pulling it out of their current IT structure. We don't anticipate needing to make any sort of changes in the near term. So no, I wouldn't even anticipate that o ne.
Okay. And then I guess when you think about the cross selling opportunities, can you I guess just talk a little bit about what those look like, the biggest opportunities within those portfolios to cross sell into both m arkets?
Yeah, obviously we can talk some more in detail about this once we're actually owners of AmerCable. But to offer an example, Shawflex. The majority of Shawflex's revenue today is in Canada to customers who purchase premium low voltage wire and cable from us and premium medium voltage wire and cable from somebody else. Those customers have consistently asked us to make available medium voltage product because they would choose to work with us across the voltage spectrum and we've never been in a position to do it. On day one post transaction we'll be in a position to walk into those customers' offices and share with them a much broader portfolio of offerings. It'll take a little while to secure those first orders, but we see that kind of opportunity across North America between the two b usinesses.
So when you think about that medium voltage opportunity in Canada, I guess a couple questions. One, what does that, you know, that opportunity look like on a size basis? And two, do you have to manufacture everything in the U.S. and then bring it into Canada or is it just a matter of bringing those, I guess the process into your Vaughan facility? And do you envision any issues with I guess cross border tariffs if you're going to have to ship product back and forth out of Canada in the. U.S.,
So the production process and the physical equipment required for medium voltage is very, very different than low voltage. So at least in the foreseeable future, my expectation is that the AmerCable production facility in Arkansas would be our center of excellence for medium voltage product and yes, we would ship it around North America from that location. Canada doesn't have the equivalent of the Buy American Act. So generally speaking U.S. made product is entirely acceptable for Canadian applications. And yes, there's some transportation cost and there may even ultimately be some taxes or duties that are in effect cross border. But we've certainly incorporated those potentials into our modeling of this opportunity and feel that the returns on Canadian sale of medium voltage product will still be very, very attractive.
In terms of scale, the medium voltage market in Canada is a little smaller than the low voltage market in Canada. So we think the Canadian low voltage total addressable market in Canada is somewhere between CAD 2.5 billion and CAD 3 billion. Medium voltage is smaller than that, but it's not an order of magnitude smaller than that. So meaningful market size and opportunity, and as we've noted in the materials, the U.S. market across low and medium voltage is about eight times bigger than the Canadian market. So the scale of the opportunities here are really quite substantial. I do not believe that the growth of this business over the next three, four, five years will be constrained by market opportunity.
This will be entirely about our ability to move through the process of effectively cross selling to customers who are buying these kinds of products on a daily basis from somebody else.
Okay, got it. And then, promise. Last one for me, just to put a point on it, is the $75-$80 million of EBITDA on a trailing 12-month basis. Your expectation for the forward 12-month basis as well, or how should we think about t hat?
Yeah, I think we'll give better visibility to this in all of our businesses as we go into our year- end reporting cycle. So a little difficult to comment at this point in time, but what I would just point you to is as I alluded to before, there's some cost that we'll have to incur in order to separate the business from its current owner to stand up certain things inside the business. So I would say it will be in the range of that, but without giving you exact guidance at this point, is probably the right way to think about it.
The only thing I'd say, Tim, is we look at the end market served by AmerCable and I'd say across almost all of them we believe 2025 is likely to be a year where they have favorable trends. So on the top line I think we've got opportunities to expand the business year- over- year and as Tom said, we'll have a little bit of kind of trailing cost that we'll need to work our way through as we extract the business and stand it up within our own organization. Not massive, but we'll have to see whether that gets us to a number north of 75 million in 2025 or maybe modestly lower. But in that range we'll have to see. But we'll be able to share more as we report year-e nd.
Thank you very. Much.
Thanks.
Thank you. Our next question comes from Arthur Nagorny with RBC. Your line is o pen.
Hey, good m orning.
Good Morning.
Just on the Buy America benefit from acquiring AmerCable, will that just be on the AmerCable side or are there any opportunities for Shawflex as w ell?
Yes. So the primary benefit there is really for Shawflex. AmerCable already meets the requirements of Buy American Act, so they have the opportunity to compete for some federally funded or partially federally funded projects. In fairness, I think we can provide them with some incremental assistance to be even more successful in competing for those projects. So I do think that together we enhance their ability to win in the U.S., but for Shawflex, we've never been able to meet Buy American requirements because we just don't make our product in the U.S. and over time the opportunity will present itself for us to make some of the Shawflex products within the AmerCable footprint in Arkansas and therefore have them viable under Buy American Act. So I think both businesses will benefit. Shawflex likely benefits m ore.
Got it. And then on the distributor restocking that you're seeing in Shawflex, is that a near-term consideration for AmerCable as w ell?
So I think obviously we're close to Q3 earnings release, so I need to be very careful about talking, you know, what exactly is happening today in the market. But I would tell you that Shawflex and AmerCable both work through distributors for a portion of their revenue stream, in some cases the same distributors. So it's not unreasonable to expect that in certain product categories you would see similar behavior. What I would just point out is that the majority of the distributor stocking and destocking impact to Shawflex is in the lower margin stock industrial products that we make. AmerCable doesn't make products in that category. So their exposure to that element of volatility that historically Shawflex has experienced is really approaching z ero.
That's helpful. That's a lot for me. Thank. You.
Thank you. Our next question comes from Zachary Evershed with National Bank Financial. Your line is Open.
Good morning, everyone. Congrats on the t ransaction.
Morning.
Thank you. [Cross talk]
So most of my questions have already been answered, so I guess I'll ask the same question again from a slightly different direction just to make sure. Are there orders in AmerCable's LTM EBITDA that lifted margins above what they would normally be or is it still consistent with the overall product portfolio on a go f orward?
There's nothing in the LTM period that is u nusual.
Perfectly clear. And then maybe to wrap up, can you talk about the competitive landscape in the U.S. given the regulatory approvals r equired?
Yes.
So I think the competitive environment for premium wire and cable highly engineered products that are designed to work in extremely harsh environments is similar in the U.S. to Canada. It tends to be the domain of small to midsize private businesses. There are very, very few large public wire and cable companies that choose to participate in that space. So I think we see the same dynamics in the U.S. that we see in Canada. Organizations that have carved out a niche or multiple niches for themselves and defend them aggressively. AmerCable has done that very, very well.
What we're finding, though, and through our diligence have confirmed, is that many of the certifications and qualifications they already hold for their products to meet specific needs within their existing end markets are identical to the qualifications and certifications required by a broader array of industrial and infrastructure end consumers in the U.S. Just haven't necessarily been a full point of focus for AmerCable, whereas they have been for Shawflex. So I think we see the certification and qualification portfolio that we would be inheriting here as a commercial advantage, I think an opportunity to defend against new entrants into existing markets, but also something that will propel us into expanded presence in some of the markets that have just had a little less f ocus.
Great color. Thanks. And last one from me on the international opportunity you mentioned briefly before. Why did that end up dwindling under Nexans'?
Well, I think every corporate owner has certain priorities for pieces of their business, and Nexans has worked with the AmerCable team to prioritize some North American opportunities that were in a few different end markets. Nexans itself has a footprint that serves the international markets. So I think it was just a gradual migration of activity from AmerCable to other parts of Nexans. On the international mining side of the business, obviously, you know, we're respectful of the fact that that's how Nexans has chosen to run the business. But when, when and assuming we have control of the organization, we view that international mining opportunity as one that's exciting. And the team at AmerCable are all very tenured and have all of the experience from capturing that market when they were, you know, 10 years ago, 15 years ago. So we believe that they can do it.
Again. Thank you very much. I'll turn it o ver.
Thank you. Our next question comes from David Ocampo with Cormark. Your line is o pen.
Thanks. Good morning, everyone.
Morning,
Mike and Tom. I really appreciate the color around the synergy opportunities, but maybe you can walk us through the steps it takes to qualify your Shawflex products to your U.S. customer base or your new U.S. customer b ase?
Yeah, so obviously it depends on the customer, but generally there are Canadian certifications and then there are U.S. certifications. They may be worded identically, they may be subtly different, but if you can meet a Canadian certification, then I think you can with confidence know that you will meet a U.S. certification and vice versa. It's simply the administrative process of going through the various testing and certification protocols. So we would generally be talking about a time frame that maybe is multiple quarters to multiple years. It depends which end market you're talking about. So it will take multiple years to certify Canadian products to U.S. standards. In the nuclear space, it will take a lot less time than that in most other industries.
So I think the way we view this is over the course of a three-to-five-year period, the opportunity is really quite substantial and some things will come earlier than others, but it won't be a day one event. But certainly within the first year we expect to make some p rogress.
Yes, that makes sense. And then, Tom, you guys didn't really touch on the total synergy opportunities. It does sound like a lot of it's going to come on the revenue side. But just using some back of the envelope math, and my math may be wrong here, but it does seem like in order to hit your 20% after tax IRR target, it does imply that EBITDA could go up, call it 25-30 million. Is that a fair statement? And what is your expectation on timeline of hitting that 20% t arget?
Yeah, so what I would say is that at conservative levels, this reaches close to our 20% target. So, you know, obviously we can't talk about exact numbers and as I said, we'll give better visibility as we get into the end of the year reporting. So I would just encourage you to maybe modify or be a little modest with some of those expectations in the near term. There are significant opportunities here, but we are being conservative with our m odeling.
Okay, that's it. I'll stop there with my line of questions and hop back in the r oom.
Thank you. Our next question comes from John Gibson with BMO Capital Markets. Your line is open.
Good morning all, and congrats on the acquisition here. My only question is, on the balance sheet, as we sort of think longer term, what are your sort of leverage targets? Obviously, the business has changed significantly over the past few years. I guess what I'm trying to ask is, are you done with M& A for the short term or could we see you move leverage a little higher in the case of some good d eals?
Yeah, I think there was some commentary in our script about reprioritizing or moving back to debt repayment as a high priority, which is consistent with the way we've managed our balance sheet very conservatively. I would never say we wouldn't look at good opportunities, but I would tell you that our leverage targets have not changed. So the two times normal course is still our target. We still intend to get back there within the timeframes we've talked about publicly. You know, 12-18 months most likely. So I would point you to John, really no change to the way we manage that balance sheet. We will be opportunistic.
But I will also just say it's a good opportunity for me to highlight, and we said it in the commentary, with our ability to finish the organic investments and continue the NCIB, we still can get to those modest and conservative targets in a very reasonable time. So that's a long way of saying nothing has really changed. Of course, with a big deal like this, we want to focus our attention on getting the debt paid down a bit, but our overall targets are not m oving.
I'd maybe add, John, strategically, I'd much rather do one deal well than multiple deals badly. So it's going to be very, very important that we onboard the AmerCable team with as little disruption to their business as we possibly can and then work through that initial introductory phase and make sure that they've got momentum, that Shawflex has momentum. I'd say, well, you never say never. It's unlikely that you would see us do meaningful M& A over the course of the first 12 months of ownership of AmerCable. I think we want to make sure that our debt's in the right place. We want to make sure that we are doing the right things with our organic growth initiatives and our share repurchases. Quite frankly, we will be disciplined.
Even if a great deal shows up, if it pushes us beyond our comfort level when it comes to debt multiples, we're going to p ause.
Got it. I really appreciate the response and congrats again. I'll turn it b ack.
Thank y ou.
Thank you.
Thank you. That concludes our question and answer session. I'd like to turn the call back over to Michael Reeves for closing r emarks.
Thank you for joining us this morning and for your interest in Mattr. We look forward to talking with you again when we report third quarter results in a few days. Until then, have a great weekend e verybody.
Thank you for your participation. This does conclude the program and you may now disconnect, everyone. Have a great day.