Reliance Worldwide shares (ASX: RWC) were the clear leader on the ASX 200 today, adding almost 25% on the day. The move came after the company announced that it had received a takeover proposal from Brookfield Capital, eclipsing an otherwise disappointing set of full-year results that showed earnings under pressure from tariffs and weaker construction markets.
The RWC share price closed out the day up 24.65% at A$4.50, after the company disclosed it had entered into a process deed with Brookfield Capital Partners LLC following an unsolicited, non-binding, indicative proposal to acquire 100% of RWC via a scheme of arrangement for A$4.75 per share in cash. The proposed price represents a premium of around 5.6% to Tuesday’s close and sits well above the levels where the stock traded for much of the past eight months, during which it fell as much as 36% before recovering 55% from April lows.
Financials A Footnote, As Share Price Takes Cue From Bid Price
The takeover interest comes as RWC reported a challenging financial year ended 30 June 2026, with reported net profit after tax collapsing to just US$6.3 million from US$147.7 million a year earlier, weighed down by US$103.3 million in one-off post-tax restructuring charges related to the rationalisation of Australian metals manufacturing operations. On an adjusted basis, stripping out those one-time items, net profit still fell 15.3% to US$125.1 million, while adjusted EBITDA declined 12.8% to US$242.1 million.
Net sales of US$1,305.6 million were down 0.7% on a reported basis, though up 1.5% on a constant currency, adjusted basis. The earnings decline was driven by a confluence of headwinds: US tariffs that management estimated cost the business between US$25 million and US$30 million in FY26 EBITDA, elevated copper prices squeezing margins on brass products, and softer demand in key US and UK residential construction and renovation markets.
Despite the profit pressures, RWC demonstrated continued financial discipline, reducing net debt by US$88.2 million during the year thanks to strong operating cash flow and ongoing deleveraging efforts. The company’s balance sheet strength has been a multi-year focus, positioning it well to weather cyclical downturns and, evidently, attract private equity interest.
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The board elected not to declare a final dividend for FY26 and suspended the on-market share buyback programme in light of the Brookfield proposal. Management indicated that if the takeover does not proceed, the board may consider resuming dividend payments or restarting the buyback in 2027, subject to balance sheet conditions and trading outlook.
For markets, the takeover interest has effectively transformed RWC from a cyclical industrial play into an event-driven arbitrage situation. At A$4.50, the share price now trades at a modest discount to the A$4.75 offer price, suggesting that the street see’s a high chance of the transaction proceeding.
Bull Case:
- Brookfield’s A$4.75 offer provides near-term value floor and crystallises upside
- Tariff drag expected to fall sharply in FY27 to US$5-7 million
- Strong cash generation and deleveraging reduce balance sheet risk materially
- Restructuring of Australian operations should improve long-term cost base and margins
- Private equity validation suggests earnings power materially higher than current depressed levels
Bear Case:
- Takeover proposal remains non-binding with significant execution and financing risk ahead
- Adjusted NPAT down 15.3% and EBITDA down 12.8% show weak momentum
- No final dividend or buyback until at least 2027 removes income
- US and UK housing markets remain weak with elevated interest rates
- Policy uncertainty and copper price volatility could re-escalate cost pressures
