UK-headquartered oil services company Cape plc has bought Kwinana-based mining and industrial processing services company TCC Group in a cash and scrip deal worth $85 million.
UK-headquartered oil services company Cape plc has bought Kwinana-based mining and industrial processing services company TCC Group in a cash and scrip deal worth at least $85 million.
The acquisition follows Cape's failure earlier this month to secure PCH Group Ltd for $1.30 per share(about $230 million) making the offer after conducting due diligence.
The TCC sale is one of a number of recent significant private sell-downs of services companies in Western Australia as founders and management seek to take advantage of the buoyant times.
Formerly Total Corrosion Control, TCC's sellers Terry and Tony Iannello and Sam Cinalli can boost the sale price by up to a further $12.5 million if the WA operation achieves its earnings target for the year ending June 2008.
In a statement released to the London Stock Exchange, Cape said it will pay an initial $65 million in cash and $20 million in new Cape shares, in what is its third acqusition for the year.
TCC, which operates mainly in Western Australia, had earnings before interest, depreciation, tax and amortisation of $14.9 million in the year to end-June on turnover of $113.6 million.
TCC has regional offices in Karratha, Port Hedland and Portland in Victoria.Its main customers are BHP Billiton, Alcoa, Rio Tinto, BP Refineries, the Murrin Murrin Nickel Mine and Woodside.
TCC managing director Terry Iannello, who was one of the group's founders 25 years ago, said Cape's international strengths would be well coupled with the TCC Group's long expertise in the Australian market.
Mr Iannello said the existing management planned to stay on and the group would eventually trade as Cape TCC.
He said Cape has a small office in Australia, having downsized its presence here since the two companies last worked alongside eachother on the North West Shelf's third train.
"We need to grow over east and get bigger and have the capacity to take on bigger projects," Mr Iannello said.
Cape has more than 8,000 staff operating in 26 countries, TCC has 700.
Also announced today, Perth's MacCormick family has agreed to sell its Maddington-based engineering and tunnelling business, DJ&MB MacCormick Civil Engineering, to ASX-listed contractor Walter Diversified Services Ltd for $35 million.
Other recent deals include:
Sydney-based Crane Group Ltd bought Welshpool's Kingston Bridge Engineering Pty Ltd for $100 million
English company Intertek Group plc paid $56 million for Maddington-based minerals testing business Genalysis Laboratory Services Pty Ltd.
Belmont-based Paladio Group Ltd paid $54 million for Pilbara construction firm Decmil Australia Pty Ltd.
Northbridge-headquartered VDM Group Ltd acquired Welshpool earthmoving contractor Malavoca for $45 million, the biggest of $98 million in purchases which also included Wylie & Skene, Como Engineers and Barlow Gregg.
ASX-listed Coote Industrial Ltd, another Maddington company, paid $25 million for Kewdale rail company South Spur Rail Services, before also buying North Fremantle-based FCD Container Logistics for $12.5 million. Coote aslo bought GEMCO Rail for $33.8 million.
West Perth-based engineering services company Neptune Marine Services Ltd bought Midland company Tri-Surv Pty Ltd, paying $16.4 million in cash and scrip for the specialist hydrographic surveyor. It also bought Subsea Developments Australia for at least $5.5 million, plus earn-out.
Late last year, NSW-based steel player Bradken acquired Wundowie Foundry Pty Ltd in Western Australia for $8 million.
Cape PLC (AIM:CIU), the international provider of essential support services to
the energy sector, announces that it has agreed to acquire the Australian based
Total Corrosion Control group of companies ("TCC Group").
These arrangements, which are due to complete on 31 August 2007, are between
Cape Australia Investments Pty Limited ("Cape Australia"), a wholly-owned
subsidiary of Cape PLC and the shareholders of TCC Holdings (2005) Pty Ltd ("TCC
Holdings"), the ultimate holding company of the TCC Group.
Cape Australia has agreed to acquire all of the issued share capital of TCC
Holdings for a consideration that reflects an enterprise value for the TCC Group
of A$85.0 million (£34.3 million)1.. Subject to the TCC Group achieving its
earnings target for the year ending 30 June 2008, up to a further A$12.5 million
(£5.1 million) will be payable.
The initial consideration payable at completion will comprise A$65.0 million
(£26.3 million) in cash and A$20.0 million (£8.1 million) in Cape new ordinary
shares ("Initial Consideration Shares") (at an issue price per share calculated
by reference to the volume weighted average price of Cape's ordinary shares over
the five business days immediately preceding 31 August 2007) which will be
subject to orderly market provisions concerning their disposal over the two
years following completion. The additional consideration will be payable in
cash.
At completion, application will be made for the Initial Consideration Shares to
be admitted to trading on AIM.
The TCC Group, which operates mainly in Western Australia, offers a wide range
of industrial services to blue chip clients in the mining, oil, gas and
construction industries. The TCC Group specializes in the provision of blasting,
industrial painting, protective coatings, thermal and acoustic insulation, sheet
metal fabrication, rubber lining and access scaffolding. The TCC Group is
headquartered in Kwinana where it operates one of the largest blasting and
painting workshops in the world. It also has regional offices at Karratha and
Port Hedland. Its principal customers are BHP Billiton, Alcoa, Rio Tinto, BP
Refineries, the Murrin Murrin Nickel Mine and Woodside.
In the year to 30 June 2007, the TCC Group's turnover was A$113.6 million (£45.9
million), its earnings before interest, depreciation, tax and amortization were
A$14.9 million (£6.0 million) and it generated earnings before interest and tax
of A$14.0 million (£5.6 million). The approximate value of the net assets being
acquired at completion is A$ 18.2 million (£7.4 million). Cape's Directors are
of the opinion that the acquisition will be earnings enhancing in the first
year. 2.
PricewaterhouseCoopers Corporate Finance and DLA Phillips Fox acted for Cape on
this transaction. Middletons acted for the TCC Group's current shareholders.
1. For the purposes of this announcement a conversion rate of A$1: £0.404 has
been used.
2. This statement should not be interpreted as a profit forecast and does not
necessarily mean that Cape's future earnings per share will match or exceed
Cape's reported historical earnings.
Cape's Chief Executive, Martin May, said:
"Cape's agreement to acquire the TCC Group is a major milestone in the
achievement of Cape's international strategic plan. I am pleased to say that our
dealings with the TCC Group, from initial discussions through exclusivity and
due diligence to completion, have been conducted in a timely and professional
manner which is much to the credit of the TCC Group's vendors, advisers and
senior management.
Cape's Directors believe that following completion of the acquisition
agreements, the TCC Group will bring immediate benefits to both businesses. The
TCC Group will provide a stable platform from which to develop Cape's existing
Far East/ Pacific Rim businesses while significantly extending Cape's footprint
in the region. The TCC Group's blasting, painting, insulation and access
services are all key components of Cape's core disciplines. The TCC Group's
established presence in Australia's booming resources sector offers Cape an
opening into a huge new market. With this platform in place, Cape will not
solely be reliant on making acquisitions in Australia but will also be able to
achieve organic growth by competing on both price and quality of service.
We are also delighted to have secured the continuing involvement of the TCC
Group's highly experienced senior management team and its skilled blue-collar
workforce. Moreover, as part of its commitment to the region, Cape plans over
the coming months to relocate its regional head office from Singapore to Perth,
Western Australia. In the meantime, Cape will shortly complete on a lease of
premises in the Darwin area from which to support offshore works on the North
West Shelf and will continue to pursue other complementary acquisition
opportunities and targets in Australia."
Terry Iannello, the TCC Group's Managing Director, said:
"The TCC Group is excited by the new phase of growth offered by our inclusion in
the Cape group of companies. Cape's international strengths, coupled with the
TCC Group's long expertise in the Australian market, will provide many
additional benefits and services to our clients, as well as additional
opportunities for our staff and management. We look forward to working together
to provide even more high quality services to the energy, mining, oil and gas
industries in Australia. We have also been impressed with the ease of the
process and the negotiations with Cape and look forward to working together as
Cape TCC."
Cape PLC is the parent company of a number of service providing organizations
operating primarily in the oil and gas, petrochemical and power generation
industries.
In the year to 31 December 2006, Cape reported turnover of £295.5 million.
Cape currently employs c. 8,200 people in 23 countries worldwide.
Cape specialises in the provision of scaffolding, insulation, fire protection,
specialist cleaning and other essential services to major industrial clients in
the energy sector.
Cape's ability to provide specialist cleaning services was enhanced by the
acquisition of DBI Group Limited in October 2006.
On 23 April 2007, Cape's shareholders approved the placing of 26,923,077
ordinary shares at £2.60 per share to raise £70 million (before expenses).
On 6 June 2007, Cape acquired Total Rope Access International Limited.
On 22 June 2007, Cape acquired Endecon Limited.
