Industrials sector comment – July 2012

Date

Clearwater’s Industrials Team has been at the 2012 Farnborough Air Show this week.

The usual aircraft and equipment orders at Farnborough have been supplemented with an announcement by the Government that it will provide £120m of new funding to enhance the UK’s aerospace manufacturing capabilities. At the same time, M&A activity has been widely discussed following GKN’s acquisition of Volvo Aero, rumours surrounding Chemring and the on-going hunt by many players for niche, strategic acquisition targets.

The volume of completed M&A deals in the first half of the year showed a jump in activity from this time last year. Significantly, the market continues to be an attractive market for private equity firms seeking to make new investments and also wanting to grow their existing platforms through bolt-on acquisitions. Gardner Aerospace is just one private equity-backed company to have followed this latter course with its recent acquisition of Airia SA, a French manufacturer of metallic and composite aerospace detail parts and complex sub-assemblies. As a result Gardner will enhance its presence in the French market and solidify its relationships with the likes of Airbus and Eurocopter. The group completed the acquisition with the support of its private equity-backer, Better Capital.

Deals

Premier Farnell Plc has acquired Shenzhen Embest Technology Co Ltd, a China based provider of embedded system development boards and tools and design engineering services. The acquisition will expand Premier’s footprint in the Asian market, broaden the customer base and provide access to new technologies and services thereby increasing product offerings.

Continental AG has acquired Omitec Group Ltd, a UK based designer, manufacturer, and distributor of diagnostic and test equipment for the automotive industry. The acquisition will enable Continental to further expand its offerings for maintenance and repair of cars and light commercial vehicles.

Verder Holding BV has acquired Carbolite Ltd, a UK manufacturer and supplier of electric furnaces, ovens, and incubators for the laboratory, pilot plant, industrial, and heat treatment applications. The acquisition provides an exit for Nova Capital and will add a new product group to Verder’s laboratory equipment division.

Davidson Holdings Ltd has acquired Talon Manufacturing Ltd, a UK manufacturer of pipe fixings, accessories and cover profiles. The acquisition adds complementary products to Davidson’s existing product range.

Amec Plc has acquired the Nuclear technical service (TS) business of Serco Group Plc, the listed UK provider of support and consulting services, for €172.8m The acquisition is part of AMEC’s 2012 strategy to expand its footprint and capabilities in the clean energy market, and will complement Amec’s existing expertise in nuclear.

Excelsior Technologies Ltd, a UK designer, developer and manufacturer of flexible packaging solutions, has been acquired in a management buyout transaction backed by UK private equity firm Growth Capital Partners LLP. The transaction is in line with Growth Capital Partners’ expansion strategy.

Rosti AS has acquired McKechnie Engineered Plastics Ltd, a UK plastic engineering company engaged in moulding and extruding plastics, from Melrose Plc for €38.8m. The McKechnie business is considered to be a strategic fit for Rosti and will be incorporated in to the company’s European division.

Godiva Bearings Group Ltd, a UK supplier of bearings and related products, has been acquired in a management buy-out transaction. The acquisition funded by Natwest will provide for further growth opportunities and expansion.

Valfidus Building Systems SA has acquired a 90% stake each in Blyweert Beaufort Aluminium Ltd, a UK based supplier of premium aluminium systems, and Blyweert Aluminium BV, a Belgium based manufacturer of aluminium products. The acquisition will expand the presence of Valfidus in Europe.

Elecnor SA has acquired a 55% stake in IQA operations Group Ltd, a UK developer of electrical infrastructures, for €7m. The acquisition is part of Elecnor’s strategy to expand its services in Europe and will increase their activities in the field of electrical infrastructures in Spain, Latin America and especially in Brazil.

Severn Glocon Group Plc has acquired a controlling stake in L.B. Bentley Ltd, a UK designer and manufacture of small bore subsea valves, high pressure filters, and desiccant dryers for the oil and gas industry. Severn has also bought Leeds Valves Ltd, a butterfly valve manufacturer. The transactions will enable Severn Glocon to make inroads into the subsea market and to extend its product portfolio.

Normet Oy has acquired the remaining 60% stake it did not own in TAM International Group Holdings Ltd, a specialist chemicals manufacturer for waterproofing, leak sealing, repair and protection for the construction & building industry. The acquisition will allow Normet to expand its underground equipment offering and product solutions.

ATR Holdings Ltd has acquired Underwater Engineering Services Ltd (UES), an Aberdeen-based supplier of support equipment for the offshore industry. This is the first acquisition for ATR since its management buyout in March this year. The acquisition will strengthen ATR’s existing subsea capabilities. ATR is backed by UK private equity firm NBGI Private Equity.

UK private equity firm Encore Capital has acquired Technical Software Consultants Ltd (TSC), a UK manufacturer of inspection systems for crack detection and stress measurement in a deal backed by a £3m financing facility from Octopus Investments. The transaction provides a partial exit for two of TSC’s owners.

ContiTech AG has acquired Specialised Belting Supplies Ltd, a manufacturer of steep-angle conveyor belts for the transport of bulk materials including ore, coal and gravel. The acquisition opens up additional opportunities for ContiTech in the growing worldwide market of steep inclined and vertical conveying.

Glacier Energy Services Holdings Ltd has acquired Site Machining Services Ltd, a UK provider of pipe cutting and preparation services for the oil and gas industry. The acquisition will extend Glacier’s offering to the oil and gas industry. Glacier Energy Services is backed by UK private equity firms Maven Capital Partners and Simmons Parallel Energy.

ThyssenKrupp AG has acquired Energy & Power Global Ltd, a UK engineering consultancy with clients worldwide in the oil, gas and energy industries. The acquisition further strengthens ThyssenKrupp’s chemical engineering capabilities in the global oil and gas business.

GKN Plc has agreed to buy Volvo Aero AB, a division of AB Volvo which designs, engineers and manufactures components and sub-assemblies for aircraft engine turbines for €800m. The acquisition will create a market leader in the aero engine components sector and enhance GKN Aerospace’s engine component business.

Mondi Plc has agreed to acquire 93.4% of the outstanding share capital of Nordenia International GmbH, an international supplier of innovative consumer packaging solutions and hygiene components. The transaction will establish a platform for Mondi to expand further in high-growth emerging markets.

Ultra Electronics Holdings Plc has agreed to acquire Barron McCann Technology Ltd and Barron McCann Payments Ltd (BeMac) for €15.2m. BeMac provides baseline grade crypto and key management services to the UK government, military, law enforcement agencies and the finance sector. BeMac will be absorbed into Ultra’s AEP Networks business and will broaden the company’s crypto portfolio and provide access to the lucrative financial services market.

DS Smith Plc has completed the acquisition of SCA Packaging Holding BV, a manufacturer of packaging for €1.6bn. The acquisition is part of DS Smith’s strategic plan to become the leading supplier of recycled packaging across Europe, will provide access to new markets and increase ability to develop new products.

Varomexx Beteiligungen GmbH has acquired Associated Perforators and Weavers Ltd, a perforated sheet, expanded metal and woven wire manufacturer. Together with new sister companies Mevaco and Solvaro, the acquisition of APW will enable Varomexx to offer a more comprehensive and diverse range of perforated products.

Megger Group Ltd has acquired SebaKMT Holding GmbH, a manufacturer of power cable fault location and testing and in pipe leakage detection. The acquisition will allow Megger to enhance its existing cable test product portfolio whilst giving SebaKMT access to the technical and financial resources of the Megger organisation.