In the News – Mohawk’s Marazzi Tile Unit Eyes Italian Acquisition

In the News – Mohawk’s Marazzi Tile Unit Eyes Italian Acquisition

Summary: After announcing a second key investment in its existing Italian production plans, Mohawk’s Marazzi tile unit is now targeting inorganic growth. According to several sources, Marazzi is finalizing the acquisition of EmilGroup, the 8th largest ceramic tile group in Italy. The acquisition would give Marazzi the opportunity to add to its offering a few high-end, very export oriented brands, and would boost the company’s total production share in Italy.

Back in 2012, Seeking Alpha broke the news of Mohawk’s (NYSE:MHK) $1.5 billion acquisition of Italy-based Marazzi Group, which was the fifth largest tile producer in the ceramic tile industry, with operating units spread throughout Italy, Spain, USA and Russia.

At that time, we indicated that Marazzi’s US and Russian operations represented the acquired company’s jewels, while Mohawk’s management expected a decline in revenue, over the short term, related to Marazzi’s European assets.

However, we saw Mohawk’s move to own production plants in Italy as strategic for many reasons, including the fact that the Sassuolo district is a key hub for most European markets and the place where innovative technologies, high-end products and design trends originate.

After restructuring its Italian operations, rumors from several sources indicate that Marazzi is now ready to close on a key acquisition, that would be on top of two large production increases made/announced in its Fiorano and Sassuolo production plans.

Over the long term, we believe that Marazzi will target representing a significant share of the Italian ceramic tile production, which now ranges in the 400 million square meters (4,300 million sqft.).

European Marazzi assets: From “performing horribly” to targeting market leadership

As we discussed earlier, at the time of Mohawk’s €1.17 billion, or approximately $1.5 billion, Marazzi acquisition, the purchased Spanish and Italian units represented more a source of headaches for the company rather than a real asset.

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