Bodycote expands its US operation, including £119m of acquisitions
Bodycote, the Macclesfield-based provider of heat treatment and specialist thermal processing services, announced the acquisition of two specialist technology-focused businesses for $145m and plans for the opening of a new HIP (Hot Isostatic Pressing) facility in Southern California
The group has acquired Lake City HT and Stack Metallurgical Group.
Lake City HT is based in Warsaw, Indiana, and is a leading Medical market HIP and vacuum heat treatment business primarily supplying the orthopaedic implant market as well as civil aerospace customers.
Stack Metallurgical Group is based in the Pacific Northwest of the US, a key provider of HIP, heat treatment and metal finishing services primarily for the civil aerospace, defence and energy markets.
Bodycote said the businesses are highly complementary to its existing operations and will both expand its geographic footprint in North America and provide additional customer reach. The businesses comprise two HIP and three heat treatment sites, which will be integrated into Bodycote’s existing Specialist Technologies business and Aerospace, Defence and Energy classical heat treatment business, respectively.
The combined gross consideration for the acquisitions is $145m (£119m) on a cash and debt free basis and will be subject to customary closing adjustments.
After expected tax benefits worth at least $15m, the net economic consideration is approximately $130m (£106m).
The businesses delivered strong growth in the first half of 2023, with revenues rising by 29%. A broadly similar rate of growth is expected for the second half of 2023, with financial year 2023 forecast revenues expected to be around $45m (£36m). This growth reflects the ongoing recovery in the civil aerospace market, strong growth in the medical market and new customer wins, which provide a solid foundation for the future.
Completion of the acquisitions is subject to regulatory clearance and will be funded out of existing group credit facilities. They will be accretive to group margins and earnings per share from the first year post-completion and are expected to exceed Bodycote’s cost of capital in 2025.
Post acquisition, the group’s leverage will be comfortably within its target range, providing continued balance sheet strength to support the execution of the group’s strategy.
Bodycote also unveiled plans to open a new HIP facility in greater Los Angeles, utilising one of the group’s existing sites. This capacity will become operational during 2024 and will support the rapid growth in space and civil aviation markets in the Los Angeles area.
Group chief excecutive, Stephen Harris, said: “These investments are an important and exciting enabler of our strategy to further enhance and grow our Specialist Technologies businesses. In addition, they will also expand our footprint in aerospace and medical heat treatment on the West Coast and in Indiana in the US.
“The acquisitions will enhance group margins, are accretive to earnings per share and allow us to further capitalise on the structural growth opportunities in the space, civil aerospace and medical markets.
The proposed new HIP plant in greater Los Angeles will allow Bodycote to take advantage of the burgeoning HIP market in space and civil aerospace in the region. It will require only modest investment as it utilises an existing Bodycote site and existing HIP vessels that are immediately available for installation.”
He added: “Optimal allocation of capital to drive shareholder value remains a top priority for the group and these investments reflect this.”
Lazard acted as exclusive financial advisor to Bodycote on the acquisition of Lake City HT and Stack Metallurgical Group.
