£38m acquisition for listed engineering business
Leeds-based engineering services group Renew Holdings is to acquire Staffordshire-headquartered Agger Limited.
Renew intends to acquire 100% of the issued share capital of Agger, the parent company of Carnell Support Services Limited and certain assets of Adger Limited, a provider of specialist engineering services to the highway network for a cash free/debt free consideration of £38m.
The Group has also announced a placing to raise gross proceeds of £15m to part-refinance the acquisition.
Explaining the reasons for the deal today, Renew states: “Carnell is an excellent fit with Renew’s established and proven acquisition strategy.
“It operates in the regulated highways sector, with long term framework contracts and high barriers to entry.
“The acquisition will expand Renew’s total addressable market into an attractive new growth sector. The acquisition and placing are expected to be immediately earnings enhancing; the return on investment is expected to comfortably exceed Renew’s cost of capital.”
Paul Scott, CEO of Renew, said: “At our capital markets day last year we highlighted our ambitions to establish a position in new markets including the strategic highways sector.
“This acquisition represents the realisation of this strategy and we are very pleased to welcome the management and staff of Carnell to the Renew group.
“This is a complementary and earnings enhancing acquisition that aligns with our established and proven strategy, strengthening our position in the UK infrastructure market.”
Aidan Clarke, managing director of Carnell, said: “Carnell is delighted to join Renew and we look forward to continued success as part of a larger group.
“The transaction will provide opportunities to leverage added value for clients and wider business benefits from synergies with the existing successful brands within the Group.
“It was important to attract an owner with relevant expertise to support our growth ambitions without compromise to service delivery or staff loyalty, and the Renew business model fits perfectly with these aspirations.”
Numis, on behalf of Renew, has conditionally agreed to place 3,157,894 new ordinary shares of 10 pence each at a price of 475 pence per share with new and existing investors, raising £15m.
The net proceeds of the placing will be used to refinance part of the consideration.
The consideration, plus associated transaction costs, has been funded from a new £15m two-year term loan with HSBC and an expanded revolving credit facility provided by HSBC & Natwest of £44.2m, expiring in January 2024.