Shares of Norma Group SE (ETR:NOEJ) rose more than 5% on Friday after reports that U.S.-based Advanced Drainage Systems Inc. is in advanced talks to acquire its water management business for about €850 million.
Bloomberg reported that ADS submitted a binding offer by last week’s deadline, with a possible agreement expected in the coming days, according to people familiar with the matter.
No final decision has been made, and additional bidders could still join the process. Both companies declined to comment on the negotiations, the report said.
Norma announced on Nov. 28, 2024, that it would sell the water unit as part of a broader transformation plan. The division generated about €300 million in sales with an EBIT margin of 15% to 20%.
Analysts described the business as the strongest part of the company’s portfolio. The rumored price sits at the lower end of market estimates, which ranged between €800 million and €1.2 billion.
Not all proceeds from the sale will remain with Norma. The company will need to pay taxes on the book value gain, reduce debt, and could face pressure to distribute a special dividend. Norma acquired NDS, which forms part of the water unit, in 2015 at a multiple of around 12 times EV/EBIT.
The current offer would value the business closer to 17 times EV/EBIT. The company has said the divestment will allow it to concentrate on industrial applications and mobility and energy solutions.
That strategy would leave Norma with lower-margin operations after the disposal. As of Sept. 17, Norma had a market capitalization of €542.9 million.
Its shares have gained 14.1% since the beginning of the year and traded between €9.20 and €18.28 over the past 12 months.
Kepler Cheuvreux kept a “hold” rating on the stock with a target price of €11, citing the challenges of the transformation process and ongoing pressure on margins.
