Monadelphous in deal to buy KT

Engineering company Monadelphous has agreed to pay up to $30 million for Midvale-based pipeline constructor KT Pipeline Services.

Monadelphous and KT have entered in to a memorandum of understanding, with the deal set to be completed by the end of this financial year.

The finalisation of the acquisition is subject to the parties entering into a legally binding share sale and purchase agreement.

KT is involved in the oil and gas, minerals and water sectors constructing onshore pipelines.

Monadelphous has agreed with KT's shareholders to acquire 100 per cent of the shares in KT for a combination of cash and an issue of shares in Monadelphous.

The consideration will comprise an upfront component of $16.5 million and a deferred component payable subject to KT achieving certain financial targets.

The total consideration payable, which will not exceed $30 million, will be based on three times average annualised earnings before interest and tax.

Monadelphous managing director Rob Velletri said the planned acquisition was a further step in the company's strategy of diversification.

"This will support the expansion of our infrastructure business to continue to drive our successful record of long term growth," Mr Velletri said.

Full announcement below.

Leading Australian engineering company Monadelphous Group Limited (ASX: MND) ("Monadelphous" or "the company") today announced it had entered into a Memorandum of Understanding (MOU) to acquire onshore pipeline constructor KT Pty Ltd.

The finalisation of the acquisition is subject to the parties entering into a legally binding share sale and purchase agreement.

At this stage, it is considered likely the agreement will be concluded by the end of the 2009-10 financial year.

KT Pty Ltd, trading as KT Pipeline Services, is based at Midvale in Western Australia and has a track record in the oil and gas, minerals and water sectors constructing onshore pipelines.

Monadelphous has agreed with KT Pty Ltd's shareholders to acquire 100 per cent of the shares in KT Pty Ltd for a combination of cash and an issue of shares in Monadelphous.

The consideration will comprise an upfront component of $16.5 million and a deferred component payable subject to KT Pty Ltd achieving certain financial targets.

The total consideration payable, which will not exceed $30 million, will be based on three times average annualised earnings before interest and tax (EBIT).

There is unlikely to be any impact on 2009-10 earnings for Monadelphous.

The current KT management team will be retained.

Monadelphous Managing Director Rob Velletri said the planned acquisition was a further step in the company's strategy of diversification.

"This will support the expansion of our infrastructure business to continue to drive our successful record of long term growth," Mr Velletri said.