RCR to acquire Eagle Engineering for $21m

Welshpool-based engineering services firm RCR Tomlinson Ltd will acquire Queensland-based Eagle Engineering Pty Ltd for $21 million, the company announced today.

The full text of a company announcement is pasted below

RCR Tomlinson Ltd is pleased to advise that it has reached agreement to purchase Eagle Engineering Pty Ltd (Eagle Engineering) through the acquisition of all the issued shares of Eagle Engineering.

Highlights

• Established in 1989, in Gladstone, Queensland
• Eagle Engineering provides construction and maintenance repair services to the Queensland and New South Wales coal industry
• Provides RCR with the opportunity to significantly increase exposure to the coal industry sector for our Product range and increase the organic growth of our existing Wacol operations
• EBIT for FY2008 anticipated to be $4.25 million
• Provides RCR's Site Construction and Maintenance business unit with a new regional location that now enables RCR to tender on major projects in Queensland from a local base
• Purchase price of $21.m of which $6m is a two year earn out and includes $12 million of net tangible assets including land and buildings in Gladstone

Business Overview

Eagle Engineering is based in Gladstone, Queensland and was established 18 years ago by the current vendors. Eagle Engineering employs around 180 staff and services the coal mining industry by performing dragline and faceshovel shut-downs in the Bowen
Basin and Hunter Valley region. In the local Gladstone metropolitan area it provides structural steel and pipework fabrication, bucket repairs and construction and shutdown services to the local aluminium smelters, chemical plants, oil refineries and coal handling
facilities.

This acquisition significantly broadens the geographic and industry coverage of RCR's Site Construction and Maintenance business unit and establishes a strong foundation for RCR to grow its presence in the Queensland coal, alumina, chemical and refineryindustries.

The principals of the business will be employed by RCR to grow the Company's presence in Queensland and New South Wales. The three vendors along with key management personnel will enter into two year minimum employment contracts with RCR.

Eagle Engineering has previously been constrained not by available work, but by its own capacity and consequently RCR will grow the business significantly over the next 2 years.

The additional capabilities and capacity available through RCR's Site Construction and Maintenance business unit and the workshop facilities of the Wacol operation will strongly complement the Gladstone facility and existing business.

Consideration

The purchase consideration of $21.0 million will be satisfied by the payment of $15.0m cash on settlement with the balance to be paid over a two year earn out period by the way of two annual payments of $3 million, to be satisfied either by way of the issue of RCR shares or cash. The issue price of any shares will be based on the weighted average share price 5 days before execution of the sale and purchase agreement. The earn out payments are based on Eagle Engineering achieving an average EBIT of no less than $4.25m per annum over the two year earn out period.

Financial Effect of the Acquisition

The acquisition of Eagle Engineering will be funded utilising RCR's internal financial resources and through the issue of shares to the vendors over the earn out period.

The acquisition is expected to be strongly earnings per share positive for RCR, from the acquisition date.

Acquisition Conditional & Settlement

The acquisition is conditional on the execution of a sales and purchase agreement with settlement expected by the end of April 2007.

Update on the RCR Business

All of the Company's business units continue to run well, with RCR enjoying high levels of capacity utilisation, and with a long pipeline of tenders in the system.