Spirax-Sarco Engineering PLC Acquisition of Chromalox for US$415 million (2974G)
May 26 2017 - 2:01AM
UK Regulatory
TIDMSPX
RNS Number : 2974G
Spirax-Sarco Engineering PLC
26 May 2017
Spirax-Sarco Engineering plc
26(th) May 2017
Acquisition of Chromalox for US$415 million (GBP319 million)
Spirax-Sarco Engineering plc (Spirax Sarco), which specialises
in the control and efficient use of steam, and in peristaltic
pumping and associated fluid path technologies, announces that it
has signed an agreement to acquire Chromalox, Inc. (Chromalox) from
Irving Place Capital for a cash-free, debt-free consideration of
US$415 million (GBP319 million).
Chromalox is a well-established USA based provider of electrical
products, systems and solutions for industrial process heating and
temperature management that we have been following since 2008. It
serves a broad range of end markets with approximately 70% of sales
being addressed via its direct salesforce, with the remainder going
through distributors. Around two thirds of its sales are recurring
revenue. It has five manufacturing facilities; three in North
America, one in France and one in China. Chromalox is led by a
strong, long-serving executive team who will remain with the
business post acquisition.
Chromalox is closely related to the Spirax Sarco Steam
Specialties business in delivering thermal energy management
solutions to its customers through a primarily direct sales
channel. Chromalox is also highly complementary to the Steam
Specialties business, with the decision between using steam or
electricity as a heating medium being driven by differing needs of
the application or customer circumstances. As a result, Chromalox
will expand our total addressable market by GBP2.1 billion to
GBP7.9 billion. It will form part of the Spirax Sarco business
group and be reported as a separate segment within that
business.
In the year ended 30(th) September 2016, Chromalox recorded
revenues of US$201 million (GBP155 million), EBITDA of US$43
million (GBP33 million) and EBIT of US$37 million (GBP28 million).
In 2016, 78% of the company's revenues were in North America with
11% in Europe and 11% in Asia Pacific. At 30(th) September 2016,
Chromalox's gross assets were US$185 million (GBP142 million).
We will invest in Chromalox to strengthen its direct sales
channels globally; leverage our worldwide footprint to grow
Chromalox's presence outside of its core markets in the USA; and
support the company's research and development programme to ensure
that it continues to deliver innovative new products to
customers.
Chromalox derives c.18% of sales from Oil & Gas end markets
and has in recent years experienced headwinds similar to those seen
across the industry. Expectations and timing of the anticipated
recovery in growth have been analysed and considered carefully;
current order intake levels and market activity indicate improving
prospects. Our estimate for Chromalox's current year, ending 30(th)
September 2017, is for sales of US$190 million (GBP146 million),
EBITDA of US$38 million (GBP29 million) and EBIT of US$32 million
(GBP25 million). The acquisition will be accretive to Group
earnings in 2017.
The purchase consideration will be financed from new debt
facilities supplied by our existing banks. Following completion of
the Chromalox acquisition and the recent acquisition of Gestra,
Spirax Sarco will maintain a strong balance sheet and we expect the
ratio of net debt to EBITDA to be in the region of 1.5 by 31(st)
December 2017, falling to around 1.0 by the end of the following
year.
Completion is subject to regulatory approval of the transaction
by the merger control authority in the USA. These conditions are
expected to be satisfied during the current quarter.
Nicholas Anderson, Chief Executive of Spirax-Sarco Engineering
plc, said;
"We are delighted to bring Chromalox, its management and
employees into the Spirax Sarco family. We have been following
Chromalox for a number of years and believe that the acquisition
represents an excellent opportunity to expand our addressable
markets through the purchase of a clearly related business, which
solves customers' specialist heating requirements, and that shares
our strong direct sales business model. As we invest in
strengthening the company's direct sales and leverage Spirax
Sarco's global footprint and expertise, Chromalox will enhance our
growth and provide sustainable value creation for customers and
shareholders."
There will be a hosted conference call including Q&A, and a
listen only audio webcast, for investors and analysts at 9.00am UK
time on Friday 26th May. The listen only live audio feed and
simultaneous PowerPoint presentation will be accessible from
http://edge.media-server.com/m/p/2rs4mrmo. To have the facility to
ask questions participants will need to dial-in to the conference
call on these numbers: UK Toll Free 0808 109 0700 or for Standard
International Access +44 (0) 20 3003 2666, using the password
'Spirax-Sarco'. To view both the webcast presentation and have the
facility to ask questions, participants will need to both log on to
the webcast and dial into the conference call number.
Enquiries:
Nicholas Anderson, Chief Executive
Kevin Boyd, CFO
Tel: 01242 535234
Cautionary statement
This announcement contains certain forward-looking statements
with respect to the performance of Chromalox. By their nature,
these statements involve uncertainty since future events and
circumstances can cause results and developments to differ
materially from those anticipated. The forward-looking statements
reflect knowledge and information available at the date of
preparation of this announcement and subject to applicable law or
regulation we undertake no obligation to update these
forward-looking statements.
About Spirax Sarco
Spirax-Sarco Engineering plc is the world leader in each of its
two businesses, Spirax Sarco for steam specialties and
Watson-Marlow Fluid Technology Group for niche peristaltic pumps
and associated fluid path technologies. The Steam Specialties
business provides a broad range of fluid control products,
engineered packages, site services and systems expertise for a
diverse range of industrial and institutional customers. The
Company helps its end users to improve production efficiency,
reduce energy costs, water usage and emissions, improve product
quality and enhance the safety of their operations. Watson-Marlow
Fluid Technology Group offers the ideal solution for a wide variety
of demanding fluid path applications with highly accurate,
controllable and virtually maintenance free pumps and associated
technologies. The Group is headquartered in Cheltenham, England,
has strategically located manufacturing plants around the world and
employs over 5,900 people, of whom more than 1,400 are direct sales
and service engineers. Its shares have been listed on the London
Stock Exchange since 1959 (symbol: SPX).
Further information can be found at
www.spiraxsarcoengineering.com
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END
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