Highlights

• Reliance Worldwide Corporation Limited entered a Process Deed with Brookfield Capital Partners following an unsolicited AU$4.75-per-share cash proposal, implying an enterprise value of approximately AU$4.1 billion.
• RWC reported FY26 net sales of US$1,305.6 million, Adjusted EBITDA of US$242.1 million and Adjusted NPAT of US$125.1 million, although earnings were pressured by tariffs, elevated copper costs and softer demand.
• RWC reduced net debt to US$243.4 million at 30 June 2026 from US$331.6 million a year earlier, while net debt to EBITDA improved to 1.11x from 1.30x, supported by strong operating cash generation.

Brookfield Proposal Sends RWC Shares Sharply HigherReliance Worldwide Corporation Limited (ASX: RWC) attracted significant market attention after announcing that it had entered into a Process Deed with Brookfield Capital Partners LLC and its affiliates following a takeover approach. At the time of writing, RWC shares were trading at AU$4.460, up 23.55%, reflecting a strong market response to Brookfield’s takeover proposal.

Brookfield has proposed acquiring 100% of RWC's ordinary shares through a scheme of arrangement for AU$4.75 per share in cash. The offer represents a 31.6% premium to RWC's AU$3.61 closing price on 17 August 2026, a 32.8% premium to its three-month VWAP of AU$3.58 and a 43.2% premium to its six-month VWAP of AU$3.32.

At a CMP of AU$4.460, the shares remain approximately 6.5% below Brookfield's proposed AU$4.75 consideration. This discount indicates that the market continues to price in execution and completion risk, as the proposal remains non-binding and subject to several conditions.Proposal Values RWC at Approximately AU$4.1 BillionBrookfield's proposal implies an enterprise value of approximately AU$4.1 billion. Based on RWC's FY26 financial metrics, the proposal represents a transaction multiple of approximately 12.1x FY26 Adjusted EBITDA on a post-AASB 16 basis, or 12.9x on a pre-AASB 16 basis.

Notably, Brookfield had previously submitted proposals of AU$4.15, AU$4.25 and AU$4.50 per share during April and May 2026. Following around eight weeks of due diligence and subsequent negotiations, the offer was increased to AU$4.75 per share in early August.

The progression in offer prices indicates that access to additional company information and subsequent negotiations resulted in Brookfield assigning a higher valuation to RWC.FY26 Earnings Reflect a Challenging Operating EnvironmentThe potential transaction arrives after a difficult FY26 operating year for RWC.

Group net sales declined 0.7% to US$1,305.6 million, although adjusted net sales increased 1.5% in constant currency. Adjusted EBITDA fell 12.8% to US$242.1 million, while the Adjusted EBITDA margin contracted to 18.5% from 21.1% in FY25.

Adjusted NPAT decreased 15.3% to US$125.1 million, while reported NPAT fell sharply to US$6.3 million after the company recognised US$103.3 million of post-tax one-off charges, primarily related to restructuring its Asia-Pacific manufacturing footprint.

The earnings decline reflected a combination of US tariffs, elevated copper prices, weaker volumes across the Americas and EMEA, and broader cost inflation. RWC partly offset these pressures through price increases and approximately US$10.0 million of cost savings during FY26.Strong Cash Generation Provides Balance-Sheet SupportDespite weaker earnings, RWC's cash conversion remained a notable positive.

Cash generated from operations reached US$263.4 million, while operating cash flow conversion improved to 108.8% of Adjusted EBITDA, compared with 97.6% in the prior corresponding period.

Strong cash generation helped reduce net debt by US$88.2 million, from US$331.6 million at 30 June 2025 to US$243.4 million at 30 June 2026. Net debt to EBITDA, adjusted for lease payments, consequently improved to 1.1x from 1.3x.

RWC also reported a weighted average debt maturity of 6.7 years, while approximately 92% of drawn debt was fixed-rate at year-end. Its weighted average funding cost declined to 4.22% from 4.67% in FY25.Regional Performance Remains MixedThe Americas remained RWC's largest business, generating FY26 sales of US$824.8 million, down 4.0%. On an adjusted basis, however, Americas sales increased 1.4%. Adjusted EBITDA declined 11.5% to US$161.4 million, with the margin falling to 19.6%.

Asia Pacific delivered stronger top-line growth, with sales rising 9.5% to US$298.3 million. However, Adjusted EBITDA declined 22.4% to US$20.2 million, reflecting higher raw-material and freight costs alongside lower manufactured volumes.

EMEA sales reached US$260.0 million, broadly stable year on year, while Adjusted EBITDA fell 8.0% to US$68.7 million. The region continued to face subdued UK demand, although Continental Europe benefited from growth in Germany, France and Italy.Mexico and Poland Facilities Could Support Future MarginsOperational restructuring remains important to RWC's medium-term earnings outlook.

RWC expects its New Mexico manufacturing facility to begin operations before the close of calendar 2026. Management expects the facility to improve manufacturing flexibility, provide a competitive cost base and help reduce exposure to tariff-related pressures.

Meanwhile, RWC commenced operations at its new assembly facility in Poland during November 2025. While ramp-up costs weighed on FY26 margins, management expects the facility's lower cost structure to support earnings growth during FY27.

The APAC manufacturing restructuring is also expected to generate approximately US$9 million of annual net Group cost savings from FY28.Dividend and Share Buy-Back Put on HoldThe Brookfield proposal has also affected RWC's capital-management plans.

The Board withheld the FY26 final dividend after receiving Brookfield’s takeover proposal, as any distribution made after the proposal date would reduce the AU$4.75-per-share offer price by an equivalent amount. RWC also paused its on-market share buy-back program.

FY27 Sales Growth Expected Despite Weak Macro ConditionsRWC does not anticipate a material improvement in economic conditions across its major end markets in FY27. Management expects geopolitical uncertainty and US trade policy to continue affecting inflation, interest rates and consumer demand.

Nevertheless, the company expects Group sales to increase by mid- to high-single-digit percentage points in FY27, supported by price increases and new products. Management anticipates FY27 Adjusted EBITDA margins to remain around FY26 levels.

RWC is also targeting FY27 operating cash flow conversion above 90%, capital expenditure of US$25 million-US$30 million, and approximately US$10 million-US$12 million of cost savings. The anticipated FY27 impact from US tariffs remains around US$5 million-US$7 million.What Happens Next in the Brookfield Process?RWC and Brookfield have agreed to work toward entering a Scheme Implementation Deed during the exclusivity period running through 15 September 2026. The proposal remains subject to confirmatory due diligence, Brookfield investment committee approval, agreement on definitive documentation and unanimous support from RWC's directors.

Importantly, any Scheme Implementation Deed is expected to include a 30-day "go-shop" period, allowing RWC to actively seek competing proposals. Brookfield would then have a five-business-day matching right in relation to a qualifying superior proposal.

This feature creates the possibility, although not the certainty, that another interested party could emerge with a superior offer.OutlookThe 23.55% surge in RWC shares to AU$4.460 reflects the substantial valuation uplift created by Brookfield's AU$4.75-per-share proposal. With the offer representing a 31.6% premium to RWC's previous close and valuing the company at approximately AU$4.1 billion, takeover developments are likely to remain the dominant near-term share-price catalyst.

Fundamentally, FY26 demonstrated pressure on earnings from tariffs, copper prices and softer demand, with Adjusted EBITDA and Adjusted NPAT declining by 12.8% and 15.3%, respectively. However, cash conversion remained strong, net debt was materially reduced, and management expects renewed sales growth alongside further cost efficiencies in FY27.

For investors, the key variables are now Brookfield's completion of due diligence, execution of a binding Scheme Implementation Deed, potential competing interest during the go-shop period and the remaining spread between the market price and the AU$4.75 proposed consideration. Until those conditions are resolved, transaction risk remains, and RWC has stated that there is no certainty the proposal will result in a definitive transaction.Note- All data presented is based on information available at the time of writing.Disclaimer for Kapitales ResearchThe materials provided by Kapitales Research, including articles, news, data, reports, opinions, images, charts, and videos ("Content"), are intended for personal, non-commercial use only. The primary goal of this Content is to educate and inform readers. This Content is not meant to offer financial advice, nor does it include any recommendation or opinion that should be relied upon for making financial decisions. Certain Content on this platform may be sponsored or unsponsored, but it does not serve as a solicitation or endorsement to buy, sell, or hold any securities, nor does it encourage any specific investment activities. Kapitales Research is not authorized to provide investment advice, and we strongly advise users to seek guidance from a qualified financial professional, such as a financial advisor or stockbroker, before making any investment choices. Kapitales Research disclaims all liability for any direct, indirect, incidental, or consequential damages arising from the use of the Content, which is provided without any warranties. The opinions expressed by contributors or guests are their own and do not necessarily reflect the views of Kapitales Research. Media such as images or music used on this platform are either owned by Kapitales Research, sourced through paid subscriptions, or believed to be in the public domain. We have made reasonable efforts to credit sources where appropriate. Kapitales Research does not claim ownership of any third-party media unless explicitly stated otherwise. 

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