Bodycote PLC (LON:BOY) shares rose on Christmas Eve as it revealed the US$200mln (£154mln) acquisition of Ellison Surface Technologies, creating one of the world’s largest providers of thermal spray and engineered coating surface technology services to the aerospace industry.
In early trading, Bodycote shares were up 1.5% at 962p.
The FTSE 250-listed engineer pointed out that Ellison’s business, based in North America, is highly complementary to Bodycote’s existing Surface Technology business.
The group said Ellison will be integrated into Bodycote’s surface technology and aerospace business, which itself has seen strong structural growth in recent years. Ellison employs almost 400 people across six sites located across the United States, Canada and Mexico.
It noted that Ellison’s business generated revenues of US$50m (£38mln) in 2018, with associated pro-forma underlying earnings (EBITDA) of US$8mln (£6mln), and based on results in the year to date, it is anticipated that Ellison’s revenue for 2019 will be US$58mln (£44mln) with pro-forma EBITDA of US$12mln (£9mln).
Bodycote said: “This expected revenue growth of 16%, and its associated 50% increase in pro-forma EBITDA, reflects the fact that Ellison has been successfully gaining share in the civil aviation business, which will also provide a solid foundation for further revenue and profit growth in future years.”
The company anticipates that the Ellison business will be immediately earnings enhancing to the enlarged Bodycote business.
It added that, when adjusted for tax benefits worth at least US$30mln, the net consideration for the transaction is approximately US$170mln which will be settled using Bodycote’s existing committed credit facilities.
Commenting on the transaction, Stephen Harris, Bodycote’s group chief executive said: “Ellison’s business is one that we have long respected and is a perfect strategic fit for Bodycote’s aerospace and Specialist Technologies’ businesses. Ellison has been successful in winning new business in recent years and it will be very complementary to Bodycote’s existing Surface Technology business.”
The group said that it is anticipated the transaction will complete during the first quarter of 2020.
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