Information  X 
Enter a valid email address

Silverdell PLC (SID)

  Print          Annual reports

Wednesday 30 May, 2012

Silverdell PLC

Acquisition

RNS Number : 3869E
Silverdell PLC
30 May 2012
 



Silverdell PLC

("Silverdell", "the Company" or "the Group")

 

Acquisition of EDS

Placing of New Ordinary Shares

 

Transformational acquisition, expected to be immediately earnings enhancing

which will create an international Specialist Environmental Support Services Group with a blue-chip, multi-national client base.

 

Silverdell Plc (AIM: SID), the Specialist Environmental Support Services group, is delighted to announce that it has conditionally agreed to acquire the entire issued share capital of EDS Group Holdings Ltd ("EDS"), for an initial consideration of £15 million. EDS is specialist provider of decommissioning and dismantling services to the power generation, chemical, oil & gas, pharmaceutical, petrochemical and fuel industries with operations in the UK, Canada and Australia.

 

This is a transformational acquisition which is expected to be immediately earnings enhancing. It will create a Specialist Environmental Support Services group with scale and global reach and will accelerate the planned expansion into Canada and Australasia, providing an immediate scale and track record in those markets. Significant cross-selling opportunities are expected to exist and the enlarged group will be a more attractive partner to multi-national corporations.

 

Acquisition Highlights

 

·      EDS is a specialist provider of decommissioning and dismantling services.

 

·      Offers significant cross-selling opportunities to the enlarged Group's global, blue chip customer base.

 

·      Expected to be immediately earnings enhancing.

 

·      It will enable Silverdell to accelerate its planned expansion into Canada and Australasia, viewed as attractive overseas markets, providing immediate scale and track record.

 

·      Enlarged business will benefit from scale and will be well placed to win further large framework contracts with multi-national corporations.

 

·      EDS has an established working relationship with Silverdell, a complementary culture, and serves an attractive market niche to which Silverdell does not currently have significant exposure.

 

About EDS

 

·      EDS is a specialist provider of decommissioning and dismantling services to the power generation, chemical, oil & gas, pharmaceutical, petrochemical and fuel industries, and has previously won contracts in Argentina, the Philippines, Turkey, Portugal, Italy and Finland.

 

·      In 2011 EDS achieved revenue of approximately £46m which resulted in Adjusted EBITDA of approximately £2.8m and a reported profit before tax of £1.36m.  EDS has forecast Adjusted EBITDA of approximately £5.0 million for their year ending 30 June 2012.

 

·      EDS has successfully won contracts for several multi-national corporations including: Shell, RioTinto, GSK GlaxoSmithKline, ExxonMobil, Rolls Royce, Pfizer and Ineos. 

 

·      EDS has a good track record in completing large and complex projects with bespoke contracts, and has significant levels of repeat business coming from the existing client base.

 

·      EDS is an existing partner of Silverdell; the companies tendered successfully together for the Magnox Framework Contract.

 

·      Silverdell intend to retain EDS's key staff including Managing Director Darren Palin.

 

 

Placing

 

To fund the acquisition of EDS, Silverdell announces today a conditional placing of, in aggregate, 80,101,466  new Ordinary Shares at a price of 11 pence per share raising approximately £8.81 million (before expenses).

 

The total maximum consideration of £18.6 million comprises £15 million of initial consideration and a further £3.6 million of deferred consideration subject to the achievement of certain financial targets by EDS.

 

The placing and acquisition are subject to approval of shareholders at a General Meeting, which will be held at 11.00 a.m.on 15 June at the offices of finnCap, 60 New Broad Street, London, EC2M 1JJ. Subject to shareholder approval, admission of the placing shares is expected to occur at 8.00 a.m. on 18 June 2012.

 

Sean Nutley, CEO of Silverdell Plc, said:

 

"This acquisition will transform Silverdell into a global Specialist Environmental Support Services group. EDS is a highly specialised decommissioning and dismantling provider with genuine global reach and a blue chip customer list which provides repeat work. Having worked closely with them, we understand the business well and believe that it can be successfully integrated into the Group. It serves attractive market niches in geographies which are target territories for us. We believe that the enlarged business will be well placed to win further large framework contracts with multi-national corporations."

 

Stuart Doughty, Chairman, commented:

 

"This acquisition marks an entirely new stage in Silverdell's growth. In short, we now have the scale, capability and blue chip customer base to go from strength to strength. We look forward to the future with great confidence."

 

The circular to shareholders will be made available on Silverdell's website, http://www.silverdell.plc.uk/investor-relations. Defined terms used in this announcement are the same as those defined in the circular unless the context requires otherwise.

 

30 May 2012

 

ENQUIRIES:

 

Silverdell Plc

Tel: + 44 20 7389 6827

Sean Nutley, Group Chief Executive


Ian Johnson, Group Financial Director




finnCap

Tel: + 44 20 720 0500

Marc Young (Corporate Finance)

Ben Thompson (Corporate Finance)


Victoria Bates (Corporate Broking)




College Hill

Tel: + 44 20 7457 2020

Helen Tarbet


Mark Garraway

       



 

 



 

Disclaimer

 

finnCap Ltd, which is authorised and regulated by the Financial Services Authority, is acting as nominated and financial adviser to the Company in connection with the matters described in this announcement. finnCap Ltd will not be responsible to anyone other than the Company for providing the protections afforded to clients of finnCap Ltd or for advising any other person on the Acquisition and Placing or any other arrangements described in this announcement. finnCap Ltd has not authorised the contents of, or any part of, this announcement and no liability whatsoever is accepted by finnCap Ltd for the accuracy of any information or opinions contained in this announcement or for the omission of any information.

 

 

Silverdell PLC

 

Acquisition of EDS

Placing of New Ordinary Shares

 

 

Information on EDS

 

EDS is a multi national decommissioning and dismantling business with operations in the UK Canada and Australia. EDS is a UK registered company based in Sheffield, established in 1994, with approximately 200 employees. EDS is a specialist provider of decommissioning and dismantling services to the power generation, chemical, oil & gas, pharmaceutical, petrochemical and fuel industries. EDS has previously won contracts in Argentina, the Philippines, Turkey, Portugal, Italy and Finland.

 

In 2011 EDS achieved revenue of approximately £46 million which resulted in Adjusted EBITDA of approximately £2.8 million and a reported profit before tax of £1.36 million. EDS has forecast EBITDA of approximately £5.0 million for their year ending 30 June 2012.

 

EDS derives revenue from a broad spectrum of income streams including payments under contract with multi national corporations, asset recovery and sales of plant, equipment and metals. Therefore, as in the case of the Company, the Directors believe that estimation and tendering abilities are key in delivering a good margin. The Directors' current intention is to retain experienced estimation and tendering staff with the business post Acquisition. EDS has a good track record in completing large and complex projects with bespoke contracts. Significant levels of repeat business come from the existing client base.

 

EDS is an existing partner of the Company, the respective management teams have recently successfully tendered for the Magnox Contract. The Directors are familiar with the operations of EDS and the market it operates in. It is understood the Acquisition would be well received by clients of both businesses. The enlarged business will be well placed to win further large framework contracts with multi national corporations.

 

EDS has successfully won contracts for several multi national corporations including: Shell, RioTinto, GSK GlaxoSmithKline, ExxonMobil, Rolls Royce, Pfizer and Ineos. 

 

EDS was awarded the Queen's Award for International Trade in 2011 in recognition of their sustained and continued international growth.

 

Rationale for the Acquisition

 

EDS has an established working relationship with the Group and serves an attractive market niche to which the Company does not currently have significant exposure. The Directors believe that EDS's complementary culture means that it can be successfully integrated within the Group. The Directors believe the Acquisition offers them the opportunity to create an environmental services group with global reach and it will complement and augment the Group's existing capabilities, in particular, complementing the Company's core asbestos capabilities. Significant cross-selling opportunities are expected to exist and the enlarged group will be a more attractive partner to multi-national corporations.

 

Furthermore, EDS provides services to an extensive and "blue-chip" customer base which could potentially provide attractive cross selling opportunities to the Group. The Acquisition will expand the Group's global reach and accelerate the planned expansion into Canada and Australasia, providing immediate scale and track record in those markets. The Canadian operation offers significant cross-selling and synergistic benefits and according to management accounts this operation accounted for approximately 25% of EDS's revenue in 2011.

 

Following the Acquisition, the Directors intend to retain EDS's key staff, including the managing director, Darren James Palin, who will remain as Managing Director of EDS.

 

The Directors believe the Acquisition will be transformational in nature, expanding the reach, competencies and management expertise within the Group. It is expected that the Acquisition will be immediately earnings enhancing. The Directors estimate that the enlarged group will have a lower level of gearing and will be well positioned to re-bank on good commercial terms.

 

The Directors' strategy of securing high quality recurring revenues will be furthered by the Acquisition. The potential order book value of EDS is £13.8 million (for the period 1 July 2012 to 30 September 2012) and approximately £62 million for the Company's financial year 2013 (1 October 2012 to 30 September 2013). The order book value of EDS comprises the value of the contracted work EDS has actually been awarded.

 

 

Acquisition of EDS

 

Under the terms of the Acquisition Agreement, the Company has conditionally agreed to acquire EDS, for a maximum total consideration of up to £18.6 million. EDS provides decommissioning and remediation services within environmentally sensitive locations.

 

The Initial Consideration to be paid for EDS is £15 million to be satisfied as follows:

·      £5.75 million by the issue of Ordinary Shares (at a price equal to the Placing Price) (49, 545, 454 Ordinary Shares to Andrew Owen McGee* representing 15.82% of the Enlarged Issued Share Capital and 2,727,273 Ordinary Shares to Darren James Palin* representing 0.87% of the Enlarged Issued Share Capital);

·      £9.175 million in cash which will be payable following completion of the Acquisition.  Andrew Owen McGee will lend £675,000 back to the Company by subscribing for £675,000 in nominal value of loan notes designated as Series A Loan Notes.  The Series A Loan Notes are to be secured, repayable by a single payment on 31 March 2015 and carry interest at 8.5% per annum;

·      £75,000 by the issue of loan notes to Darren James Palin designated as Series B Loan Notes.  The Series B Loan Notes are to be secured, repayable by a single payment on 31 March 2015 and carry interest at 8.5% per annum.

 

In addition, deferred consideration of up to £3.6 million will be payable if certain future financial targets are achieved by EDS.  The deferred consideration will be payable in cash.

 

Andrew Owen McGee and Darren James Palin have undertaken to the Company that they will not sell or dispose of, except in certain limited circumstances (as detailed in the paragraph below), any of their respective interests in the Acquisition Shares at any time for a period of one year from the date of allotment.  Andrew Owen McGee and Darren James Palin will also be subject to orderly market arrangements during the following twelve months after the initial one-year lock-in period.

 

The above restrictions on Andrew Owen McGee and Darren James Palin regarding their respective interests in the Acquisition Shares will not apply in the following circumstances:

·      in the event of any offer being announced or by way of acceptance of an offer for any class of share in the capital of the Company;

·      in the event of any demerger, reconstruction, amalgamation being proposed in respect of the Company or any class of share capital of the Company;

·      pursuant to a compromise or arrangement under Part 26 of the Companies Act 2006 between the Company and its members or any class of them;

·      pursuant to an offer made by the Company to purchase its own shares (or any class of them);

·      to a disposal of the Acquisition Shares to an associate;

·      pursuant to a court order or judgment requiring the disposal of the Acquisition Shares; or

·      in the event of the death of a Seller during certain specified periods, to a disposal by the personal representatives of that Seller.

 

The Acquisition Agreement is conditional upon:

 

·      the passing of the Resolutions at the General Meeting;

·      Admission;

·      the parties to the Acquisition Agreement having agreed the terms of (i) a transitional services agreement, (ii) a consultancy agreement and (iii) service contracts relating to Darren James Palin and Sylvain Dupont;*

·      the terms of two lease surrenders and a new lease having been agreed in respect of the properties from which EDS currently operates;

·      the exercise of certain unapproved options by Darren James Palin and Sylvain Dupont who are senior executives of EDS and the subsequent allotment and issue of shares in EDS;

·      compromise agreements being agreed between each of Darren James Palin and Sylvain Dupont and EDS;

·      loan note instruments, loan notes, loan note security and intercreditor agreement in relation to the Series A Loan Notes to be issued to Andrew Owen McGee, and the Series B Loan Notes to be issued to Darren James Palin being agreed;

·      the Company agreeing and completing new facilities with its bankers in connection with the Acquisition;

·      the Company receiving written notice from FinnCap that all of the investors who have entered into placing letters in relation to Placing Shares have inputted all relevant entries into CREST to settle and pay for their subscription of Placing Shares upon Admission.

·      certain facts, matters or circumstances not having occurred prior to completion of the Acquisition Agreement.

 

*Seller

 

The Placing

 

The Company is proposing to issue 80,101,466 Placing Shares at the Placing Price to raise, in aggregate, approximately £8.81 million (before commissions and expenses) by means of the Placing. The Placing Price represents a premium of 0.875 pence (8.6 per cent.) to the closing middle market price of an Ordinary Share on 29 May 2012, the latest practicable date prior to the date of this document. The Placing Shares will rank in full for all dividends declared following Admission and pari passu with the existing Ordinary Shares from the date of Admission.

 

Certain Directors have agreed to subscribe for new Ordinary Shares under the Placing as follows:

 

Director

Number of existing Ordinary Shares currently held

Number of new Ordinary Shares conditionally subscribed for pursuant to the Placing

Percentage of Enlarged Issued Share Capital

 

Stuart Doughty

150,000

636,364

0.25

Sean Nutley

4,832,350

636,364

1.75

Ian Johnson

222,500

409,091

0.20

 

It is expected that the Placing Shares and the Acquisition Shares will be admitted to trading on AIM on 18 June 2012.  The Placing is conditional, inter alia, upon:

 

·      the passing of the Resolutions at the General Meeting;

 

·      the Placing Agreement becoming unconditional in all respects and not having been terminated in accordance with its terms;

 

·      the Acquisition Agreement not having been terminated in accordance with its terms; and

 

·      Admission,

 

in each case by no later than 8:00 a.m. on 18 June 2012 (or such later time and date as the Company and FinnCap may agree, being in any event not later than 22 June 2012).

 

Use of Proceeds of the Placing

 

The net proceeds of the Placing will be used to fund the Acquisition.

 

The Directors believe that the Company will, following the Placing and completion of the Acquisition, have sufficient working capital following the payment of the consideration for the Acquisition to fulfil the Company's current strategy, for the 12 month period following the Placing and completion of the Acquisition.

 

Further Terms of the Acquisition Agreement

 

Andrew Owen McGee is currently the sole shareholder of EDS.  It is expected that before completion, Darren James Palin and Sylvain Dupont will exercise certain unapproved options and will be allotted and issued shares inEDS. Each Seller will sign and be bound by the Acquisition Agreement.

 

The Acquisition Agreement states that provided net debt of EDS is not more than £2 million, EDS will declare a pre-completion dividend to Andrew Owen McGee which will either be in cash or a dividend in specie.

 

Under the terms of the Acquisition Agreement, the Company benefits from customary warranties suitable for a transaction such as the Acquisition given by the Sellers. Sellers' aggregate liability under the Acquisition Agreement (in respect of warranties or otherwise) is limited to the aggregate of: 50% of the initial cash consideration received by Andrew Owen McGee less £675,000; 50 per cent of the initial cash consideration received by Sylvain Dupont; and 50% of the initial cash consideration received by Darren James Palin after deduction of tax.

 

The Acquisition Agreement includes a number of specific indemnities from the Sellers of EDS in favour of the Company relating to, EDS's net debt being more than £2 million and, the Net Contract Working Capital being below £1.5 million at completion, any residual liability in relation to EDS's former remediation and regeneration businesses which it disposed of in February 2007, any asbestos claims against EDS, any contaminated land liability and ongoing investigations being carried out by the Health and Safety Executive and the CPS subject to certain limitations.

 

The Acquisition Agreement provides that to the extent that any indemnified liabilities arise under certain environmental health and safety indemnities and payment obligations, the Company will set off such liabilities or the relevant part against the value of any earn-out payable by the Company to the Sellers.

 

New Banking Facilities

 

The Company, subject to completion of the Acquisition, has an offer (credit approved but subject to documentation and conditions precedent) of bank facilities with HSBC Bank plc. The new facilities include a revolving credit facility of £5.45 million and a term loan of £3.0 million.  If the Company reaches formal agreement with HSBC Bank plc, the new facilities will replace the Company's current bank facilities with Barclays Bank plc and have a term of 36 months. EDS has an historic relationship with HSBC Bank plc.

 

 

The Placing Agreement

 

Pursuant to the terms of the Placing Agreement, FinnCap, as agent for the Company, has conditionally agreed to use its reasonable endeavours to place the Placing Shares on a non-underwritten basis at the Placing Price per Placing Share.

 

The Placing Agreement contains certain warranties from the Company in favour of FinnCap in relation to, inter alia, the accuracy of the information contained in this document and certain other matters relating to the Company and its business, subject to certain limitations.  In addition, the Company has agreed to indemnify FinnCap in relation to certain liabilities it may incur in respect of the Placing.  FinnCap has the right to terminate the Placing Agreement in certain circumstances prior to Admission, including without limitation for an event of force majeure or in the event of a material breach of the warranties set out in the Placing Agreement or if the Acquisition Agreement is terminated.  Under the terms of the Placing Agreement the Company has agreed to pay FinnCap a corporate finance fee and commission based on the number of Placing Shares which are the subject of the Placing. 

 

Related Party Transaction

The placing of 15,454,545 of the Placing Shares with Marwyn Investment Management LLP is classified as a related party transaction for the purposes of the AIM Rules by virtue of Marwyn Investment Management LLP being a substantial shareholder, as defined in the AIM Rules, in the Company. The Independent Directors, having consulted with FinnCap, as Nominated Adviser to the Company, consider the terms of the Placing to be fair and reasonable insofar as the Shareholders are concerned. In providing advice to the Independent Directors, FinnCap has taken into account the Independent Directors' commercial assessments of this related party transaction.

Admission and dealings

 

Application will be made to the London Stock Exchange for the Placing Shares and the Acquisition Shares to be admitted to trading on AIM. The Placing Shares and the Acquisition Shares will, when issued, rank pari passu in all respects with the existing Ordinary Shares, including the right to receive dividends and other distributions declared following their issue. Subject to, among other things, the Resolutions being duly passed by the requisite majority at the General Meeting, it is expected that Admission will become effective and that dealings in the Placing Shares and the Acquisition Shares will commence on 18 June 2012 and that Completion of the Acquisition will take place on or about 18 June 2012.

If Admission does not take place on or before 8.00 a.m. on 18 June 2012 (or such later time and date as the Company and FinnCap may agree, being in any event not later than 22 June 2012), the Placing will not proceed.

 

Issued Share Capital

 

If the Placing and the Acquisition are completed, the Company's issued share capital will be £3,132,139.10 divided into 313,213,910 Ordinary Shares.

 

 

Summary

The Directors of Silverdell believe that this acquisition will transform the Group into a global Specialist Environmental Services business. EDS is a specialised decommissioning and dismantling provider with blue chip customers. The Directors of Silverdell understand the business well and believe that it can be successful integrated into the Group. It serves attractive market niches in geographies which are target territories for the Group. The Directors believe that the enlarged business will be well placed to win further large framework contracts with multi-national corporations.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
ACQEBLBXLEFZBBL

a d v e r t i s e m e n t