Industrials sector comment – February 2010

Date

The last few weeks have proved a busier time for Clearwater’s Industrial Products and Services team, completing two deals.

We were delighted to source the buyer for specialist builders merchant UGS Ltd, and advise the family shareholders on its sale to quoted BSS Group Plc. The transaction highlights the fact that there are Plc buyers with the appetite for making strategic acquisitions during 2010.

Hard on the heels of that transaction was our role in advising entrepreneur Gary Dutton MBE on the sale of Synseal Extrusions Ltd, the UK’s leading supplier of PVC-U windows, doors and conservatories to private equity firm H.I.G Europe. H.I.G’s total funding into the deal was £30.5m.

The month also saw Maven Capital Partners providing development capital to Deritend Industries Ltd and turnaround specialists Endless who invested in engineering group Davy Markham in 2007, exit through sale to Indian giant HDO.

So the private equity market shows signs of beginning to stir and an increasing number of corporates are reporting to us a more proactive stance towards acquisitions.

We shall wait with baited breath to see whether this trend gathers momentum.

Deals

Airworks India Engineering Ltd has acquired an 85% stake in Air Livery Ltd, a provider of aircraft refinishing services, for £13m.The acquisition will add aircraft painting and refurbishment services to Airworks’ portfolio of services and positions the group as a complete solution provider of MRO services. Airworks is an Indian provider of aircraft maintenance services and a portfolio company of GTI Group, a US private equity firm.

Pressure Technologies plc has acquired Al-Met Ltd, a manufacturer of precision engineered valve wear parts for the oil and gas industry, for £2.25m. Al-Met’s products are used in high-pressure choke and flow control valves designed to regulate flow volumes in extremely demanding applications in the subsea and surface oil and gas markets.

Hindustan Dorr-Oliver Ltd (HDO) has acquired DavyMarkham Ltd, a provider of heavy engineering services for the mining, nuclear, oil and gas, power generation, quarrying and transportation industries. HDO is an Indian provider of construction and engineering services and a subsidiary of IVRCL Infrastructures and Projects Ltd. The acquisition will enhance HDO’s presence in the oil and gas and power generation industries and significantly enhance its technical capabilities in the production of heavy equipment for the nuclear power plant sector.

Maven Capital Partners has provided £2m of funding to Deritend Industries Ltd, a provider of engineering equipment repair and maintenance services. The deal will support Deritend’s strategy of expanding its energy efficiency consultancy services for industrial customers. The company is a provider of online maintenance information and outsourced whole-life asset management services including condition monitoring, energy efficiency improvements, thermal imaging and vibration analysis.

Michelmersh Brick Holdings plc has acquired Freshfield Lane Brickworks Ltd, a manufacturer of clamp-fired stock bricks, for £10m. Michelmersh is the UK’s fourth largest brick maker and is seeking to actively consolidate the UK brick industry whilst also developing its land reclamation and landfill operations.

Rolls-Royce plc has acquired the remaining 67% of Odim ASA for £154m. Odim is a Norwegian developer of automated handling systems for offshore and seismic survey vessels. The company complements Rolls-Royce’s existing capabilities in integrated ship systems for the offshore industry including ship design and the integration of power and propulsion systems. At the same time Rolls Royce has acquired the remaining 49% stake in Europea Microfusioni Aerospaziali Srl, an Italian manufacturer of aero engine micro-castings, from Finmeccanica SpA.

HIG Europe has backed the management buy-out of Synseal Extrusions Ltd, a manufacturer of PVC doors and windows. Synseal supplies over 700 independent window and door fabricators and installers across the UK and the company is well placed to drive consolidation in the market. HIG Europe is part of HIG Capital, a US private equity firm.

BSS Group plc has acquired UGS Ltd, a distributor of below-ground drainage and civils equipment. Operating from ten distribution branches nationwide, UGS will enhance BSS’s ability to serve the broader drainage market where the group sees significant growth potential as drainage and water infrastructure is upgraded over the coming years.