IMI strengthens power arm with £120m German acquisition
BIRMINGHAM engineering group IMI has strengthened its power arm with the acquisition of a German firm in a deal worth £120m.
IMI said B&R Holding (Bopp & Reuther) was very closely aligned with its Critical Engineering’s existing large control valve business (CCI) and therefore it expected to deliver synergies of approximately £7m (€9m) from the combination of the companies by the end of 2017.
In the calendar year 2013, Bopp & Reuther’s revenues were £71.1m (€90m) and EBITDA was £8.85m (€11.2m) with an improved performance expected in 2014.
The deal will give the company a lift after a tough few months.
In a separate trading update, IMI revealed that on a reported basis, revenues were 6% down for the four months to the end of October and 5% down year to date. It has attributed the decline to the ongoing adverse impact of exchange rate movements.
In addition to the synergies, IMI said the transaction would significantly enhance its presence in the growing power sector and extend the Critical Engineering division’s existing product range to include complementary semi-severe valve products and technologies which will expand the division’s current market.
It is also forecast to increase exposure to the emerging markets in particular China and India where the power markets are forecast to grow 5% to 7% per annum over the next five years.
Also, it will give the group access to new higher margin aftermarket opportunities from Bopp & Reuther’s existing installed base.
The acquisition is expected to be earnings accretive in 2015 and return on invested capital is expected to exceed the group’s weighted average cost of capital by the end of 2017.
Commenting on the acquisition Mark Selway, chief executive of IMI said: “The strategy for our Critical Engineering division is all about focus and growth and this acquisition provides a meaningful addition to our capabilities. It gives us critical mass in the power sector particularly in the faster growing geographies of China and India. It also expands our product portfolio, enabling us to offer customers complete valve packages and Bopp & Reuther’s existing installed base gives us access to a bigger aftermarket opportunity.”
Bernard Engel, Chief Executive of Bopp & Reuther said the firm was delighted to be combining forces with IMI and saw tremendous scope to expand Bopp & Reuther’s business.
“IMI’s proven capabilities, including the application of lean and project management processes, will enhance our current offering and further strengthen Bopp & Reuther’s competitive market position,” he said.
Bopp & Reuther, which is recognised as a leading global control valve producer, is based in Germany. It specialises in the design and manufacture of control and safety valves for the power generation industry. Its product portfolio includes both configured and semi-severe valve technologies and in recent years it has extended its geographic reach and has a large customer base across China, India and Korea. The company is privately owned and, following the acquisition, Bernard Engel and the management team will remain with the business.
IMI is funding the deal in cash from its existing bank facilities. Completion is subject to merger clearance and is expected to occur around the end of the year.
In a separate trading statement covering the period from July 1 to October, IMI said that on an organic basis, after adjusting for acquisitions, disposals and exchange rate movements, revenues for the period were 1% ahead of last year and 2% higher year to date.
Overall results for the year are still expected to be broadly in line with market expectations, despite market conditions being more difficult than anticipated particularly in Germany.
