Hill & Smith expands US operation with £28m acquisition

CONSTRUCTION products supplier Hill & Smith has expanded its global operation with the £28m ($45m) acquisition of US-based pipe manufacturer The Paterson Group.

The Shirley-based group, which today announced a 4% decline in full year revenues, said the acquisition was in line with its strategy of creating one of the world’s leading pipe supports businesses.

The acquisition, to be financed from the group’s existing bank facilities, is on a debt free cash free basis and includes the Paterson Group’s (TPG) related companies.

Established in 1908, TPG is a family owned, leading manufacturer and distributor of pipe supports and hangers to the power generation, commercial and industrial markets in North America.

It is also one of only three full line pipe supports suppliers with certification for the US nuclear market and has supplied to almost half of all US nuclear power plants built to date.

Hill & Smith said the acquisition represented a significant increase in its presence in the US, where applications for the combined group’s pipe support business include the nuclear, gas and coal powered electricity generation industries, as well as water and waste treatment plants, oil refineries, pharmaceuticals and chemical plants.

The board said it expected the combined business to secure material cost synergies over time through the outsourcing of some of TPG’s commercial pipe supports production and through enhanced purchasing arrangements.

Derek Muir, chief executive of Hill & Smith, said: “By acquiring TPG, we are taking a significant strategic step forward in creating one of the world’s leading pipe supports businesses.  

“As well as making us a significant player in the North American market, TPG gives us an established presence in the highly regulated nuclear power industry both in the US and globally.”

The acquisition will be a boost to the group after it revealed revenue declined to £374.2m last year, down from £389.7m in 2009. Underlying pre-tax profits was flat at £42.2m, however, net debt was reduced from £87.6m to £70.6m. Dividends per share increased more than 10% to 12.7p.

The group said the results reflected its broader geographical footprint, which now saw 55% of underlying operating profit generated from outside the UK.

It said the tough trading conditions in 2010 had continued in the first two months of this year but on a more positive note, it had seen an uptake in its utilities business. Nevertheless, it said its outlook for this year had remained unchanged.

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