Acquisition & Placing

RNS Number : 5308B

Pressure Technologies PLC

05 March 2014

 

5 March 2014

Pressure Technologies plc

("Pressure Technologies", the "Company" or the "Group")

Acquisition of Roota Engineering Ltd

Oversubscribed Vendor Placing and Placing to raise £16.7 million

The Board of Pressure Technologies, is delighted to announce that it has agreed to acquire the entire issued share capital of Roota Engineering Limited ("Roota"), a long established, privately owned business, specialising in the manufacture of bespoke engineered products for the oil and gas industry.  Pressure Technologies is acquiring Roota for a maximum consideration of £13.5 million (plus cash balances) comprised of an initial net cash consideration of £9.0 million (plus cash balances) with additional deferred payments of up to £4.5 million, based on the future financial performance of Roota (the "Acquisition").

As part of this transaction, Pressure Technologies is also delighted to announce that Charles Stanley Securities has placed 1,856,174 New Ordinary Shares of 5 pence each in the capital of the Company (the "Vendor Placing Shares") at a price of 575 pence per New Ordinary Share (the "Placing Price"). £10.7 million has been raised by the sale of the Vendor Placing Shares (the "Vendor Placing") to fund the initial cash consideration due under the Acquisition, adjusted for the surplus cash balances of Roota of approximately £1.7 million.

The Board believes that the Acquisition will:

·     be earnings enhancing in Roota's first full financial year as part of the enlarged Group;

·     be complementary to the Group's other subsidiary  businesses and  provides cross selling opportunities between the respective customer bases;

·     continue the Group's stated strategy of expanding both organically and by acquisition; and

·     deliver exceptional, longer term growth by being part of the enlarged Group.

In addition, the Company announces that Charles Stanley Securities has placed a further 1,048,174 New Ordinary Shares (the "Placing Shares"), at the Placing Price, to raise a further £6.0 million (the "Placing"). The net proceeds of the Placing will be used by the Group to augment its working capital facilities and fund certain capital expenditure requirements.

The 2,904,348 New Ordinary Shares, representing the Vendor Placing Shares and the Placing Shares, are being placed with certain existing and new institutional investors.

Information on Roota Engineering Limited

Founded in 1973, Roota is a long established, privately owned business, based in Rotherham,  specialising in the manufacture of bespoke engineered products for the oil and gas industry, such as components for high added value ball valves, mandrels, connectors and well-head cleaning tools. Roota's niche lies in the production of highly complex products, with a specialism in machining exotic alloys to exacting tolerances. It has modern manufacturing facilities, located close to Pressure Technologies' existing cylinder business and an impressive "blue chip" customer base. Roota has 35 employees and upon completion of the Acquisition the key members of Roota's management, Matthew Crampin and Nicholas Crampin, will remain with the enlarged business, retaining their long standing roles as Managing Director and Production Manager, respectively, of Roota.

For the year ended 30 November 2013, Roota reported revenues of £8.0 million and profit before tax of £2.6million. As at 30 November 2013, Roota had Net Assets of £4.4 million.

Background to and Reasons for the Acquisition

Pressure Technologies is a well-balanced profitable group, occupying a high growth niche market in the oil and gas industry. It is enjoying strong demand for its core products and has an advanced development programme of next generation products. The management has a proven capability to acquire and integrate businesses into the wider Group and the acquisition of Roota fits well with the Company's clearly defined acquisition criteria. Pressure Technologies is acquiring a highly complementary business, selling into markets of which the Group has a detailed understanding. 

Strategic rationale for the Acquisition

The Acquisition will dovetail with Pressure Technologies' subsidiary Al-Met Limited, as the business serves the same oil and gas market and produces similar, albeit larger and more complex products. Leveraging Roota's established reputation, modern manufacturing facility and technical expertise through its highly skilled and experienced workforce, will present cross selling opportunities across the two customer bases.

Pressure Technologies' established reputation and networks within the industry will help to win new customers and develop export markets for Roota.

The Acquisition is an obvious strong strategic fit with Pressure Technologies' growth strategy and the Directors believe that Roota will have exceptional long term growth prospects as part of Pressure Technologies.

Terms of the Acquisition

The initial consideration payable is £10.7 million (adjusted for the surplus cash balances of Roota of £1.7 million), to be satisfied in cash from the proceeds of the Vendor Placing. Further consideration of up to £4.5 million is payable in two separate periods over the 24 months post completion dependent on the future performance of Roota for the 12 month period to 28 February 2015 and the 12 month period to 28 February 2016. These potential payments will be up to £2.0 million and £2.5 million for 2015 and 2016 respectively.

Details of the Placing and the Vendor Placing

The Placing and the Vendor Placing will raise gross proceeds of approximately £16.7 million through the issue by the Company of 2,904,348 New Ordinary Shares at a price of 575 per share.

Application has been made for the 1,048,174 Placing Shares and 1,856,174 Vendor Placing Shares to be admitted to trading on AIM and it is expected that Admission will take place on 6 March 2014. The New Ordinary Shares will rank pari passu with the Existing Ordinary Shares of the Company. Following Admission, the total issued share capital of the Company will be 14,266,597 Ordinary Shares.

The Placing Price of 575 pence per share represents a discount of 2.54 per cent. to the closing mid-market price on 4 March 2014, being the last practicable date prior to the announcement of the Placing, being 590 pence per share.

The Placing and Vendor Placing are conditional, inter alia, upon:

·     the Placing Agreement becoming unconditional in all respects and not having been terminated in accordance with its terms; and

·     Admission.

The Placing Shares and the Vendor Placing Shares represent, in aggregate, approximately 25.6 per cent. of the Company's existing issued share capital and approximately 20.4 per cent. of the issued share capital of the Company immediately following Admission of the Placing Shares and the Vendor Placing Shares.

Following the recent round of investor presentations by the Company, Charles Stanley Securities has identified significant investor demand for the Company's shares. In order to satisfy part of this excess demand, Charles Stanley Securities has, in addition to the Vendor Placing and the Placing outlined above, placed an additional 925,000 Ordinary Shares, for a value of approximately £5.3 million, held by three of the Company's founding Shareholders with certain existing and new institutional investors at the Placing Price. None of the aforementioned individuals hold a position on the Board of Pressure Technologies and no Director of the Company has sold any Ordinary Shares in the Company.  

Philip Cammerman, Non-Executive Director, and Neil MacDonald, Non-Executive Director, have each subscribed for, respectively, 1,605 and 5,200 Ordinary Shares in the Placing.

Following the participation in the Placing by certain of the Directors and subject to Admission, the Directors' respective beneficial holdings in the Company will be as follows:

Director	Number of Ordinary Shares following Admission	% holding following Admission
John Hayward	1,002,221	7.0
James Lister	30,000	0.2
Philip Cammerman	35,000	0.2
Neil MacDonald	5,200	0.04
Nigel Luckett	70,000	0.5

In addition, Matthew Crampin, Managing Director of Roota, has subscribed for 25,000 Ordinary Shares in the Placing and will, subject to Admission, have a beneficial holding of 25,000 Ordinary Shares representing 0.2 per cent. of the enlarged issued share capital of the Company. 

John Hayward, Chief Executive of Pressure Technologies, said: "Roota is an ideal acquisition for Pressure Technologies and the support and enthusiasm of both existing and new investors for the deal are testament to this. Roota is profitable, operates in markets we know well and we believe the acquisition will be earnings enhancing. In addition, the business is located just 2 miles from the Group's head office, making it ideally located for a seamless integration with the enlarged Group."  

"It has been our long-stated strategy to grow the Group both organically and through acquisition. Roota gives us the opportunity to enhance our position in the specialist engineering supply chain to the oil and gas industry. Together with Al-Met, we will have two of the UK's premier, niche component manufacturers respected for both their highly skilled workforce and customer service."

 "On behalf of the Board, I welcome Matt and Nick Crampin and all the staff at Roota to Pressure Technologies.  We look forward to working with them and taking Roota to the next stage of its development."

ENDS

For further information, please contact:

Pressure Technologies plc John Hayward, Chief Executive James Lister, Group Finance Director	Tel: [phone] www.pressuretechnologies.com
Tavistock Communications Catriona Valentine / Keeley Clarke	Tel: [phone]
Charles Stanley Securities (Nomad and broker) Philip Davies / Carl Holmes	Tel: [phone]

Company description

Pressure Technologies is an AIM listed, leading designer and manufacturer of speciality engineering solutions for high pressure systems serving large global markets. The Group is organised into three divisions: Cylinders, Engineered Products and Alternative Energy.

Cylinders

Chesterfield Special Cylinders is a global market leader in the design and manufacture of speciality high pressure, seamless steel gas cylinders for the offshore oil and gas, defence, industrial gases and alternative energy markets and retesting and refurbishment services.

The company has unparalleled industry knowledge, gathered over the last 100 years' trading. As a trusted supplier with unrivalled expertise, Chesterfield Special Cylinders plays an integral role in the project design and engineering process, working closely with its customers on design solutions for high pressure systems.

The core activity of Chesterfield Special Cylinders is the design and manufacture of Air Pressure Vessel systems for oil rig motion compensation systems and deepwater offshore platforms. This is closely followed in importance by activity in the naval market. Chesterfield Special Cylinders provides cylinders for a wide range of applications in submarines and surface ships to a significant proportion of the world's navies.

The company's product and process knowledge has led, in recent years, to an expansion from manufacturing into value added services, making full use of expertise in the business. Chesterfield Special Cylinders has developed a number of service offerings for the inspection and revalidation of cylinders including a novel "in-situ" testing service, which is driven by a new BSI standard for the inspection of hard to reach/impossible to move gas tubes.  Chesterfield Special Cylinders is the only company capable of delivering this strict new testing regime worldwide.

More information is available on the company's website www.chesterfieldcylinders.co.uk.

Kelley GTM is a leading manufacturer of high pressure vessels for high pressure gas transport solutions based in Amarillo, Texas. Founded in 2008, Kelley GTM is part of the Kelley Family of Companies in Texas, a group that has led the speciality gas transportation industry in the United States and globally for over 60 years.  The company's expertise lies in the production of light-weight composite cylinders and the strategy is to develop and expand Kelley GTM's product range for use in the United States and subsequently further afield.

Pressure Technologies has an option to acquire a further 40 per cent. stake in Kelley GTM in 2015.

More information is available on the company's website www.gogtm.com.

Engineered Products

This division comprises Al-Met Limited ("Al-Met") and the Hydratron group of companies ("Hydratron").

Al-Met is a niche manufacturer of specialised, precision engineered valve wear parts used in the oil and gas industries, acquired by Pressure Technologies plc in 2010. Its products are used in high-pressure choke and flow control valves, designed to regulate flow volumes in extremely demanding applications in the subsea and surface oil and gas industries. The business, established in 1985, has developed a market leading capability in precision machining carbides, high grade stainless steels and super alloys. More information is available on the company's website www.almet.co.uk.

Hydratron designs, manufactures and sells a range of air operated high pressure hydraulic pumps, gas boosters, power packs, hydraulic control panels and test rigs. The business, which was also acquired in 2010, operates out of two locations situated in the UK and USA. Hydratron also has an extensive network of distributors in key locations around the world. Formed in 1981, Hydratron has established itself as a leading supplier of quality high pressure equipment to the oil and gas industries. The full range of Hydratron products may be viewed at www.hydratron.co.uk.

Alternative Energy:

Chesterfield BioGas Limited was founded in November 2008, following the signing of a co-operation agreement with Greenlane® Biogas Limited, the world leader in biogas upgrading, which gives Pressure Technologies exclusive rights to market and manufacture Greenlane® equipment in the UK and Eire.

Chesterfield BioGas provides turnkey solutions for the cleaning, storage and dispensing of biomethane for injection into the gas grid or use as a vehicle fuel. In 2010, Chesterfield BioGas installed the UK's first biogas upgrader supplying biomethane to the national grid at a Thames Water site in Didcot.  A second upgrader was delivered in October 2012.

For more information visit the company's website www.chesterfieldbiogas.co.uk.

 

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