Engineering group swoops for rail contractor in £80m deal
Engineering group Renew Holdings has acquired QTS Group, a specialist independent rail contractor based in Scotland, for £80m.
The Leeds-based group also this morning announced a placing to raise £45m to part-fund the acquisition. QTS has a longstanding relationship with Network Rail, operating under long-term framework positions.
AIM-listed Renew said the acquisition would increase Renew’s market share, footprint and specialist positioning in the rail market, a market with high barriers to entry. The acquisition is expected to complete tomorrow, following completion of the Placing
Numis, on behalf of Renew, has placed 12.6m new ordinary shares of 10 pence each at a price of 355 pence per share with new and existing investors, raising £45m; which represents around 20% of the company’s existing issued share capital.
The proceeds of the placing will be used to fund part of the deal, with the balance to be funded from new debt facilities provided by Renew’s existing lending bank HSBC, comprising a £35m four year term loan, £20m revolving capital facility and £10m overdraft facility, which together replace all existing debt facilities.
Paul Scott
Paul Scott, CEO of Renew, said: “We are delighted to welcome the management and staff of QTS to the Renew group. This is a very complementary and earnings enhancing acquisition that aligns with our established and proven strategy, strengthening our position in the UK infrastructure market.
“QTS has grown to become a leading and well respected brand in the Rail sector and we very much look forward to supporting its ambition for continued growth including opportunities via collaboration across our expanded range of services in this sector.”
Renew said that the placing would allow the Group to maintain a strong balance sheet with a conservative gearing level, in line with its strategy. On a pro forma enlarged Group basis (aggregating Renew’s Sep-17 annual results and QTS’ Mar-18 annual results), Renew’s net debt will represent less than one times historic EBITDA.
Alan McLeish, managing director of QTS, added: “QTS is delighted to be joining the Renew Group and we very much look forward to the future as part of a larger group. The transaction will provide opportunities to expand our market share and benefit from the synergies with their existing successful brands working in highly regulated sectors.
“It was important to attract an owner with relevant expertise to support our growth ambitions without compromise to customer service or staff loyalty, the Renew business model fits perfectly with these aspirations.”
Renew last year posted strong results and earlier this year said trading in the first half of 2018 had been in line with expectations as the performance of the group remains strong.
Last year, it disposed of the loss-making division Forefront, an engineering services business focused in the gas infrastructure market, and also purchased of Giffen Holdings for £7.2m.
Walker Morris advised Renew Holdings on the acquisition and placing. Debbie Jackson from Walker Morris said: “Renew is a long-standing client of the firm and it is particularly satisfying to see them go from strength to strength We’ve advised them on a number of acquisitions in the past including Clarke Telecom Limited and Giffen Holdings Limited. This latest transaction will reinforce their proven strategy to achieve growth through selective acquisitions.”
Numis Securities acted as Nominated Adviser and Broker for Renew.
