TIDMSID
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 GBP15
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 GBP46m which
resulted in Adjusted EBITDA of approximately GBP2.8m and a reported
profit before tax of GBP1.36m. EDS has forecast Adjusted EBITDA of
approximately GBP5.0 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
GBP8.81 million (before expenses).
The total maximum consideration of GBP18.6 million comprises
GBP15 million of initial consideration and a further GBP3.6 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 GBP46 million
which resulted in Adjusted EBITDA of approximately GBP2.8 million
and a reported profit before tax of GBP1.36 million. EDS has
forecast EBITDA of approximately GBP5.0 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 GBP13.8 million (for the period 1 July 2012 to
30 September 2012) and approximately GBP62 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 GBP18.6 million. EDS provides
decommissioning and remediation services within environmentally
sensitive locations.
The Initial Consideration to be paid for EDS is GBP15 million to
be satisfied as follows:
-- GBP5.75 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);
-- GBP9.175 million in cash which will be payable following
completion of the Acquisition. Andrew Owen McGee will lend
GBP675,000 back to the Company by subscribing for GBP675,000 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;
-- GBP75,000 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 GBP3.6 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 GBP8.81
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 Number of new Ordinary Percentage of
Ordinary Shares Shares conditionally Enlarged Issued
currently held subscribed for Share Capital
pursuant to the
Placing
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 GBP2 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 GBP675,000;
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 GBP2 million and, the
Net Contract Working Capital being below GBP1.5 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 GBP5.45 million
and a term loan of GBP3.0 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 GBP3,132,139.10 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
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