TIDMBOY
RNS Number : 0512P
Bodycote PLC
09 October 2023
www.bodycote.com
9 October 2023
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
Bodycote plc
Acquisition of two specialist technology focussed businesses for
$145m and plans for the opening of a new HIP facility in Southern
California
Bodycote, the world's leading provider of heat treatment and
specialist thermal processing services, announces a number of
strategic steps to enhance and drive further growth in its
Specialist Technologies business, through the expansion of the
Group's Hot Isostatic Pressing (HIP) footprint and scale in the
US.
Acquisition of Lake City HT and Stack Metallurgical Group
On 6 October 2023, Bodycote agreed to acquire two specialist
technology focussed businesses:
- Lake City HT based in Warsaw, Indiana, a leading Medical
market HIP and vacuum heat treatment business primarily supplying
the orthopaedic implant market as well as Civil Aerospace
customers.
- Stack Metallurgical Group based in the Pacific Northwest of
the US, a key provider of HIP, heat treatment and metal finishing
services primarily for the Civil Aerospace, Defence and Energy
markets.
The businesses are highly complementary to Bodycote's existing
operations and will both expand our geographic footprint in North
America and provide additional customer reach. The businesses
comprise two HIP and three heat treatment sites, which will be
integrated into Bodycote's existing Specialist Technologies
business and Aerospace, Defence and Energy classical heat treatment
business respectively.
The combined gross consideration for the acquisitions is $145m
(GBP119m) on a cash and debt free basis and will be subject to
customary closing adjustments. After expected tax benefits worth at
least $15m, the net economic consideration is approximately $130m
(GBP106m). The combined acquisition multiple is less than 9x
expected 2024 EBITDA, taking into account tax benefits and
synergies.
The businesses delivered strong growth in H1 2023, with revenues
rising by 29%. A broadly similar rate of growth is expected for H2
2023, with FY 2023 forecast revenues expected to be around $45m
(GBP36m). This growth reflects the ongoing recovery in the Civil
Aerospace market, strong growth in the Medical market and new
customer wins, which provide a solid foundation for the future.
Completion of the acquisitions is subject to regulatory
clearance and will be funded out of existing Group credit
facilities. They will be accretive to Group margins and earnings
per share from the first year post completion and are expected to
exceed Bodycote's cost of capital in 2025. Post acquisition, the
Group's leverage will be comfortably within our target range,
providing continued balance sheet strength to support the execution
of the Group's strategy.
Plans to open a new HIP facility in greater Los Angeles
In addition, Bodycote today announces plans to open a new HIP
plant utilising one of the Group's existing sites in greater Los
Angeles. This capacity will become operational during 2024 and will
support the rapid growth in Space and Civil Aviation markets in the
Los Angeles area.
Stephen Harris, Group Chief Executive of Bodycote plc,
commented:
"These investments are an important and exciting enabler of our
strategy to further enhance and grow our Specialist Technologies
businesses. In addition, they will also expand our footprint in
Aerospace and Medical heat treatment on the West Coast and in
Indiana in the US. The acquisitions will enhance group margins, are
accretive to earnings per share and allow us to further capitalise
on the structural growth opportunities in the Space, Civil
Aerospace and Medical markets.
The proposed new HIP plant in greater Los Angeles will allow
Bodycote to take advantage of the burgeoning HIP market in Space
and Civil Aerospace in the region. It will require only modest
investment as it utilises an existing Bodycote site and existing
HIP vessels that are immediately available for installation.
Optimal allocation of capital to drive shareholder value remains
a top priority for the Group and these investments reflect
this."
Lazard acted as exclusive financial advisor to Bodycote on the
acquisition of Lake City HT and Stack Metallurgical Group.
About Lake City Heat Treating (Lake City HT)
Lake City HT, currently owned by the Davis family, operates out
of a single site in Warsaw, Indiana. The site provides HIP and
associated heat treatment services. The business predominantly
serves the medical orthopaedic implant market but also encompasses
aerospace related business.
About Stack Metallurgical Group (SMG)
SMG, currently owned by a group of private investors, operates a
HIP plant in Albany, Oregon and heat treatment plants in each of
Portland, Oregon, Spokane, Washington and Salt Lake City, Utah, in
the US. The business focusses on the aerospace market and has
additional sales in the energy and general industrial markets.
About Bodycote
With more than 165 accredited facilities in 22 countries,
Bodycote is the world's largest provider of thermal processing
services. Through Specialist Technologies and classical heat
treatment, Bodycote improves the properties of metals and alloys,
extending the life of vital components for a wide range of
industries, including aerospace, defence, automotive, power
generation, medical, oil & gas, construction, and
transportation. Customers in all of these industries have entrusted
their products to Bodycote's care for more than 50 years. For more
information, visit www.bodycote.com .
Disclosures
The acquisition constitutes a Class 2 transaction for the
purposes of the UK Financial Conduct Authority's Listing Rules.
During the full year ended 31 December 2022, the businesses
generated combined revenues of $35m and combined EBIT of $6m, and
the business had combined gross assets of $46m.
This announcement contains inside information for the purposes
of Article 7 of Regulation 2014/596/EU which is part of domestic UK
law pursuant to the Market Abuse (Amendment) (EU Exit) Regulations
(SI 2019/310) ("UK MAR"). Upon the publication of this
announcement, this inside information (as defined in UK MAR) is now
considered to be in the public domain. The General Counsel of
Bodycote is the person responsible for making this disclosure.
This announcement contains forward-looking statements based on
current expectations and assumptions. Various known and unknown
risks, uncertainties and other factors may cause actual results to
differ from future results or developments expressed or implied
from the forward-looking statements. Each forward-looking statement
speaks only as of the date of this document. Bodycote plc accepts
no obligation to revise or update these forward-looking statements
publicly or adjust them to future events or developments, whether
as a result of new information, future events or otherwise, except
to the extent legally required.
For further information, please contact:
Bodycote plc
Stephen Harris, Group Chief Executive
Ben Fidler, Chief Financial Officer
Tel: +44 1625 505 300
FTI Consulting
Richard Mountain
Susanne Yule
Tel: +44 203 727 1340
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