13/01/2012 - 10:32

Forge to acquire CTEC for up to $38m

13/01/2012 - 10:32


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Forge Group's Peter Hutchinson

Engineering and construction firm Forge Group has diversified into the energy sector through the acquisition of Balcatta-based CTEC Pty Ltd for up to $38.6 million.

CTEC provides engineering, procurement, construction and maintenance services to the energy and utilities sectors.

The acquisition price of a maximum $38.6 million includes an upfront payment of $16 million and deferred payments dependent upon profits in the next two years, and the retention of key executives.

Forge says it expects CTEC to contribute annual revenue in the range of $200 million to $250 million, and earnings before interest, tax, depreciation and amortisation (EBITDA) of $15 million to $20 million, in the first full year of ownership.

"CTEC represents a good strategic fit to grow Forge Group as it opens up new markets both geographically and strategically," Forge executive chairman Peter Hutchinson said in a statement.

"The acquisition of CTEC brings with it a total uninvoiced order book of approximately $600 million to be billed over the next 30 months."

 Mr Hutchinson said there was also potential for Forge subsidiaries Abesque and Cimeco to undertake engineering and civil, mechanical and E&I services to CTEC "which on CTEC’s current contracts could amount to additional internally generated revenue of well over $100 million".

Founded in 2003, CTEC has more than 60 employees based in Balcatta and regional offices in Queensland.

The vendors are the four directors of CTEC, namely Neil Robinson, Kevin Robinson, Peter Hallam and Thierry Van Deen.

"We are enthusiastic about the transaction," Neil Robinson said.

"Forge brings financial strength and relationships to CTEC at a time when we are experiencing significant growth and scale in contract wins.”

CTEC currently has four major EPC contracts, including the Diamantina power station in Queensland, a Rio Tinto power station at the West Angelas iron ore mine, the Merredin power station in WA's wheatbelt, and the Bay of Plenty power station in New Zealand.

It also operates and maintains the Kwinana Swift power station.

The conditions of the sale include completion of due diligence by Forge on CTEC.

Shares in Forge were 34 cents, or 6.55 per cent, higher at $5.53 at 1309 AEDT on Friday.



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