THIS ANNOUNCEMENT, INCLUDING THE APPENDIX HERETO (TOGETHER, THE “ANNOUNCEMENT”) AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR PUBLICATION, DISTRIBUTION OR RELEASE, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES (INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATES OF THE UNITED STATES AND THE DISTRICT OF COLUMBIA), CANADA, AUSTRALIA, JAPAN OR THE REPUBLIC OF SOUTH AFRICA OR IN OR INTO ANY OTHER JURISDICTION IN WHICH SUCH PUBLICATION, DISTRIBUTION OR RELEASE WOULD BE PROHIBITED BY ANY APPLICABLE LAW ("RESTRICTED JURISDICTIONS").
THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE OR FORM PART OF AN OFFER TO SELL OR ISSUE OR A SOLICITATION TO BUY, SUBSCRIBE FOR OR OTHERWISE ACQUIRE, ANY SECURITIES IN ANY JURISDICTION IN WHICH ANY SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL, INCLUDING THE RESTRICTED JURISDICTIONS AND NEITHER THIS ANNOUNCEMENT NOR ANYTHING CONTAINED HEREIN SHALL FORM THE BASIS OF, OR BE RELIED UPON IN CONNECTION WITH, ANY SUCH OFFER OR SOLICITATION WHATSOEVER IN ANY OF THOSE JURISDICTIONS.
discoverIE, a leading international designer, manufacturer and supplier of customised electronics to industry, today announces the acquisition of Xi-Tech Limited and its wholly-owned subsidiary Sens-Tech Limited (collectively “Sens-Tech”) (the “Acquisition”) together with a proposed placing to raise gross proceeds of approximately £33m (the “Placing”).
Highlights of the Acquisition
- Sens-Tech is a UK-based designer, manufacturer and supplier of specialist sensing and data acquisition modules for x-ray and optical detection applications, supplying the transport security, medical, food processing and industrial markets.
- Sens-Tech has a global customer base and reported revenue of £15.0m for its year ended 31 March 2018, generating reported profit before tax of £4.4m, and an underlying EBIT of £5.3m.1
- The consideration for Sens-Tech comprises an initial cash consideration of £58.0m on a debt free, cash free basis (the "Initial Consideration") with further contingent cash consideration of up to £12.0m, payable subject to the achievement of certain profit growth targets over a three year period.
- Following on from the successful acquisitions of Hobart and Positek in April 2019, the Acquisition represents a further step in the Group's stated strategy. In particular, it:
- Creates further organic growth opportunities in our target markets, particularly medical, transportation and industrial & connectivity, with a high proportion of customised products for long life cycle applications;
- Expands the Group’s international footprint with approximately 70% of acquired revenues generated in North America and Asia, increasing overall Design & Manufacturing (“D&M”) divisional revenues from outside Europe by 2ppts, to 29%, on a pro forma basis for last year; and
- Enhances underlying operating margins for both the D&M division (by approximately 1.2ppts) and the Group as a whole (by approximately 0.8ppts) with Sens-Tech generating operating margins well ahead of those in both the D&M division and on a Group level.
- The Acquisition and the Placing (as described below), taken together, are expected to be immediately enhancing to underlying EPS.
Placing highlights
- Proposed placing of 8,034,840 new ordinary shares of 5 pence each in the Company (the “Placing Shares”), at a price of 415 pence per Placing Share, to raise gross proceeds of approximately £33m. The Placing Shares represent approximately 9.96 per cent. of the Company’s existing issued share capital as at the date of this announcement.
- The Placing Price represents a discount of 3.9 per cent. to the closing price of 432 pence per share on 16 October 2019.
- The Initial Consideration will be satisfied from discoverIE’s existing debt facilities.
- The net proceeds of the Placing, which are expected to be approximately £32m, will be used to reduce the Group’s net debt, to fund working capital and for general corporate purposes.
- Following the Acquisition and the Placing, gearing, calculated as net debt to adjusted EBITDA (annualised for acquisitions), at 30 September 2019 would have increased from 1.4x to 1.7x on a pro forma basis, remaining within the Company’s target range of 1.5x to 2.0x.
- The Placing is being conducted through an accelerated book building process (the “Bookbuild”) which will commence immediately following this Announcement in accordance with the terms and conditions set out in the Appendix.
- The Placing is being conducted and fully underwritten by Peel Hunt LLP (“Peel Hunt”), subject to certain conditions.
Nick Jefferies, Group Chief Executive of discoverIE, said:
"Sens-Tech continues our strategy of building a higher margin, international Group that designs and manufactures customised electronics and is one of our largest acquisitions to date. We are acquiring Sens-Tech, which has a long-established track record of supplying high quality products, at a time when it is well-positioned to exploit a range of growth opportunities. We are delighted to welcome the business and all their employees into the Group."
Market Abuse Regulation
The information contained within this Announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (“MAR”). Upon the publication of this Announcement via a regulatory information service, this inside information is now considered to be in the public domain.
In addition, market soundings (as defined in MAR) were taken in respect of the Placing and the Acquisition with the result that certain persons became aware of inside information (as defined in MAR), as permitted by MAR. This inside information is set out in this announcement being made by the Company today. Therefore, those persons that received inside information in a market sounding are no longer in possession of such inside information relating to the Company and its securities.
1 Underlying EBIT excludes shareholder and associated costs.
Enquiries:
discoverIE
Nick Jefferies, Group Chief Executive
Simon Gibbins, Group Finance Director
01483 544 500
Peel Hunt (Broker and bookrunner)
Jock Maxwell Macdonald
Mike Bell
Ed Allsopp
020 7418 8900
Instinctif (Financial PR)
Mark Garraway
James Gray
020 7457 2020
This Announcement should be read in its entirety. In particular, you should read and understand the information provided in the "Important Notices" section below.
The Appendix to this Announcement (which forms part of this Announcement) sets out the terms and conditions of the Placing. Persons who have chosen to participate in the Placing, by making an oral or written offer to acquire Placing Shares, will be deemed to have read and understood this Announcement in its entirety (including the Appendix) and to be making such offer on the terms and subject to the conditions herein, and to be providing the representations, warranties, agreements, acknowledgements and undertakings contained in the Appendix.
About discoverIE
discoverIE Group plc is an international group of businesses that designs, manufactures and supplies innovative components for electronic applications.
The Group provides application-specific components to original equipment manufacturers (“OEMs”) internationally. With in-house engineering capability, the Group is able to design components to meet customer requirements, which are then manufactured and supplied for their ongoing production needs. This generates a high level of repeating revenue and long term customer relationships.
By focusing on key markets driven by structural growth and increasing electronic content, namely renewable energy, transportation, medical and industrial connectivity, the Group aims to achieve organic growth that is well ahead of GDP and to supplement that with targeted complementary acquisitions.
The Group employs c.4,300 people and its principal operating units are located in Continental Europe, the UK, China, Sri Lanka, India and North America.
The Group is listed on the Main Market of the London Stock Exchange and is a member of the FTSE Small Cap Index, classified within the Electrical Components and Equipment subsector, and has revenues of over £400m. Over the last five years, revenue and underlying earnings per share has more than doubled.
17 Oct 2019 Acquisition of Sens-Tech Limited & Proposed Placing (305KB PDF)