Cheshire firm expands into US with £170m acquisition

Bodycote Vacuum Furnace

A firm which specialises in heat treatment and thermal processing is expanding into America with a £170m acquisition.

Macclesfield based Bodycote has entered into an agreement to acquire Ellison Surface Technologies, which will lead to the creation of one of the world’s largest providers of thermal spray and engineered coating surface technology services to the aerospace industry.

Ellison’s business, based in North America, is highly complementary to Bodycote’s existing Surface Technology business.

It is primarily focused on the aerospace market. It will be integrated into Bodycote’s surface technology and aerospace business, which itself has seen strong structural growth in recent years.

Gross consideration for the acquisition will be $200m (£154m). When adjusted for tax benefits worth at least £30m, net consideration for the transaction is approximately £170m.

The consideration will be settled using Bodycote’s existing committed credit facilities.

Ellison’s business generated revenues of $50m (£38m) in 2018, with associated pro-forma EBITDA of $8m (£6m).

Based on results year to date, it is anticipated that Ellison’s revenue for 2019 will be $58m (£44m) with pro-forma EBITDA of $12m (£9m).

This expected revenue growth of 16%, and its associated 50% increase in pro-forma EBITDA, reflects the fact that Ellison has been successfully gaining share in the civil aviation business, which will also provide a solid foundation for further revenue and profit growth in future years.

It is anticipated that the Ellison business will be immediately earnings enhancing to the enlarged Bodycote business.

Ellison employs almost 400 people across six sites located across the United States, Canada and Mexico.

Stephen Harris, group chief executive of Bodycote, said: “Ellison’s business is one that we have long respected and is a perfect strategic fit for Bodycote’s aerospace and Specialist Technologies’ businesses.

“Ellison has been successful in winning new business in recent years and it will be very complementary to Bodycote’s existing Surface Technology business.”

Completion of the transaction is contingent on various regulatory filings’ processes; it is anticipated that the transaction will complete during the first quarter of 2020.

Bodycote was advised by Credit Suisse on the transaction, while the sellers were advised by Lazard.

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