One of the things discussed in the GN Store Nord post was the debt-financed acquisition of SteelSeries:
To further expand its product offering, earlier this year GN closed the acquisition of SteelSeries for an enterprise value of around $1.1 bn (SteelSeries was owned by the private equity firm Axcel).
SteelSeries is particularly known for its premium gaming headsets, keyboards and mice that are software-enabled and system-integrated, which significantly enhance the user experience and reinforce customer loyalty. The gaming gear market has experienced significant growth over the past few years and is expected to continue to grow in the mid-term at around 7-8% per year.
While that made sense in the company’s strategy, it also stretched the balanced sheet at a time of peak euphoria for gaming and working-from-home:
However, the share buyback plan has been put on hold following the acquisition of SteelSeries, which was consumed entirely in cash and financed with a bridge loan and a new €600 million bond maturing in 2024 (still with a very cheap 0.875% coupon). Leverage, which was typically held below 2x net debt/EBITDA, shot up to 6x following the acquisition: the company expects to focus on deleveraging in order to be within its capital structure policy again within a couple of years (so do not expect buybacks in either 2023 or 2024: dividends should still be paid unless the situation deteriorates dramatically).
That is more or less what happened, and yesterday GN was “forced” to announce a new plan for the repayment of the debt that matures next year:
The package includes disposing of some assets and issuing a mix of new and existing treasury shares (totalling around 13% of pre-existing shares and 11% post-transaction) worth DKK 2.75bn (€370 million).
Might be painful short-term but it was probably the right thing to do.