30/11/2007 - 11:52

Forge Group acquires Abesque for $26m

30/11/2007 - 11:52

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Como-based construction company Forge Group Ltd has acquired engineering, procurement, and construction company Abesque Engineering & Construction Ltd in a cash and scrip deal worth up to $26 million.

Como-based construction company Forge Group Ltd has acquired engineering, procurement, and construction company Abesque Engineering & Construction Ltd in a cash and scrip deal worth up to $26 million.

Abesque operates from leased offices on Stirling Highway, Nedlands and owns fabrication facilities in Welshpool.

Forge said Abesque as an immediate fit with the company's other wholly owned subsidiary Cimeco Pty Ltd and with the company's plans for expansion into Africa.

Abesque has extensive experience in all aspects of project development, from preliminary metallurgical testwork and conceptual studies to feasibility studies and through to detail design, total plant construction and commissioning.

With current capacity constraints in Western Australia, Abesque's additional management, crane fleet (and other items of construction plant) and workshop capacity will help deliver scale growth for the company.

Forge has based the purchase price on forecast calendar year 2008 revenue for Abesque of $100 million and forecast calendar year net profit before tax of $8 million.

Forge will pay $10 million cash at completion and issue 14 million Forge shares to the vendors as the base consideration.

The vendors are further entitled to be issued with an additional one million Forge shares if EBIT of Abesque is between $6 million and $7 million, a further one million Forge shares if EBIT is between $7 million and $8 million and a final one million Forge shares if EBIT exceeds $8 million for the financial year ended June 30, 2008.

Forge said it was confident that the net realisable assets of Abesque at the time of completion (expected to by late
January 2008) will equate to the cash consideration of $10 million and in any event, the book value of net assets must not be less than $7 million at completion.

Abesque managing director Greg McRostie has been invited to join the board of Forge Group Ltd.

The contract provides for economic ownership to commence with effect from 1st January 2008 and is conditional upon Forge shareholder approval, the consent of the National Australia Bank and the company's bankers, completion of due diligence and a capital raising of no less than $7million..

Forge has already forecast annual revenue of approximately $100 million this financial year, but based on the level of tenders and the current Abesque order book, the company is forecasting revenue exceeding $200 million for the 2008 calendar year.

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