Bodycote expands in US with £42m deal
ENGINEERING group Bodycote hopes to tap into new aerospace and off-road vehicle markets after acquiring another US business in a £42m cash deal.
The Macclesfield-based firm, which specialises in heat treatment of metals for industrial use, has bought Carolina Commercial Heat Treating (CCHT) from Bluewater Thermal Solutions.
It is its second US acquisition in six months after buying the Curtiss-Wright Corporation’s heat treatment business in April. The latest deal will see it take control of six facilities but Bluewater will continue to run a further 10 in the Great Lakes region of the US.
CCHT had sales of £21.7m on earnings before interest, tax, depreciation and amortisation of £7.2m in the year to September. Bodycote said it had paid for the business with its own cash and a bank loan.
It serves industrial areas of Georgia, Alabama and Tennessee, including the off-road vehicle and heavy truck manufacturing sectors. It also has a growing presence in aerospace and energy markets.
Bodycote said the deal is expected to achieve a return on investment “well in excess” of its cost of capital.
Chief executive Stephen Harris said: “The business is of high quality and has few local competitors. This region of the USA continues to be amongst the highest recipients of inward investment in North America with many domestic and overseas corporations establishing facilities and supply chains in the area.
“The recent announcements from both Boeing and Airbus concerning their new manufacturing operations in the region underscore this trend. We expect the business to become more focused on aerospace and energy markets over time as the supply chains for these industries expand.”
Commenting on trading for Bodycote’s global operations, Mr Harris said: “Trading for the period July 1 to September 30 was volatile, but overall has been in line with expectations.”
Dave Gorman, a director at Manchester broker Milkstone, said: “This looks like a good acquisition for Bodycote and it marks the company’s first foray into off-road vehicles and heavy trucks in North America.
“The businesses they have bought generated an impressive EBIT margin of 24% last year. We think the shares are still attractive.”
