NBI.L Share News (NBI)

whether to use the proceeds to finance other carefully selected acquisitions, which would be approved if necessary by Shareholders, and/or consider the possibility of returning cash to Shareholders. 2. Background to and reasons for the Acquisition and Placing Northbridge's strategy is to build a group of specialist industrial equipment businesses in niche sectors which are capable of further organic growth and which demonstrate some or all of the following criteria: · potential for expansion into complete outsourcing providers; · supplying, or capable of supplying, a non-cyclical customer base including utility companies, the public sector and the oil and gas sector; · incorporating a strong element of service work; and · annual turnover of between approximately GBP1 million and GBP10 million. Through the consolidation of a number of such companies, Northbridge intends to add value through organic expansion into new geographical or industry markets and increase the Company's product offering to its customer base. In delivering such a strategy, the Board believes that Northbridge will be able to capitalise on the opportunity to become a significant industrial services business serving an international market. Since the Ordinary Shares were admitted to trading on AIM in March 2006, Northbridge has made a number of acquisitions and incorporated a new subsidiary in the Jebel Ali Free Zone of Dubai. On its admission to AIM, Northbridge acquired Crestchic, which designs and manufactures load bank equipment, which it hires and sells to a diverse national and international customer base. Crestchic is one of the largest specialist load bank equipment manufacturers in the world. In March 2007, the Group acquired the trade and assets of Loadbank Hire Services, a competitor of Crestchic in the London area, for a total consideration of GBP909,000. The additional equipment, staff and premises provided additional scale to the business as well as affording better access to the Group's customers and markets in the south east of England. In September 2007, the Group acquired a 51 per cent. holding in RDS (Technical) Limited ("RDS") for GBP650,000. The principal business of RDS is to provide generators and associated equipment to the oil and gas industry in the Caspian Sea through a branch office in Azerbaijan. The remaining 49 per cent. of RDS was acquired by the Group for GBP1.1 million in June 2008. In April 2009, Northbridge acquired 67 per cent. of the share capital of Tyne Technical Equipment Rental Services LLC ("TTERS"), a company registered in Dubai whose principal business is the rental of generators and the sale of associated services to the infrastructure and the oil and gas industries in the United Arab Emirates. Northbridge has an option to acquire the remaining 33 per cent. of the share capital of TTERS on 13 April 2011 for a price based on a multiple of net profits in the preceding twelve months, subject to a maximum amount of GBP680,000. Additionally, in 2007, the Company incorporated a subsidiary, Northbridge (Middle East) FZE, in the Jebel Ali Free Zone of Dubai to focus on supplying equipment to the oil and gas industries in the Middle East and the Caspian Sea. The Directors of Northbridge believe that the proposed acquisition of Tasman, a business that specialises in the rental of drilling tools and equipment to the oil and gas industry and conducts servicing of some client-owned equipment, would be a positive next step in the development of the Company and is in line with its stated strategy. Tasman is a well established profitable business that has been trading for more than 25 years. In addition, Tasman is cash generative with a broad range of rental assets suitable for the oil & gas industry and the Board believes that it is also capable of organic growth. Further information on Tasman is set out below in paragraph 3. The Board believes that Tasman is an excellent strategic fit for the Group increasing the range of services that the Enlarged Group will be able to offer its oil and gas customers as well as increasing the geographical reach of the Enlarged Group. The net proceeds of the Placing will, in conjunction with the Bank Facility and the Group's cash resources, be used to finance the consideration and expenses payable in relation to the Acquisition. 3. Information on Tasman Tasman provides rental of tools and drilling equipment to the oil and gas industry and conducts servicing of some client-owned equipment. Tasman was founded in 1980 and its head office is in Perth, Western Australia. In addition, Tasman has operations in three further locations across Australia being Darwin (Northern Territories), Sale (Victoria) and Roma (Queensland) (via an agent). From these locations, Tasman services approximately 150 customers, assisting them with their onshore and offshore drilling activities. Tasman provides services to a number of large oil and gas exploration and drilling companies as well as large oilfield services companies such as Apache Energy Limited, Santos Limited, Weatherford Australia, Woodside Energy Limited, ConocoPhillips and Exxon Mobil (Esso Australia Pty Limited). Tasman's business operations are divided into the following key divisions: Equipment Rental Tasman has a broad range of tools and drilling equipment available for rental to customers in the oil and gas industry. Typically, Tasman enters into rental agreements for periods ranging from weeks to several months and has a high level of repeat business. Tasman has over 4,000 products available for rental including drill strings and collars, blow-out preventers, hole openers, stabilisers, mud pumps, power tongs, torque wrenches and power wash down units. Equipment rental is Tasman's main operational area and accounted for approximately 80 per cent. of total turnover for the year ended 30 June 2009. 2009 saw an increase in oil and gas activity as a result of high global oil prices which in turn translated into record equipment rental revenue for Tasman. Service Tasman's main workshop in Perth offers a servicing and repair facility to drilling and service companies for the maintenance of their own drilling equipment. This division is complementary to the Equipment Rental division as customers may hire equipment whilst their own are being serviced. Tasman's capability in servicing has recently been expanded with the completion of a pressure testing bay in March 2010. Revenue from the Service division represented approximately 13 per cent. of Tasman's turnover in the year ended 30 June 2009. Product Sales Tasman also sells consumables and spare parts to drilling companies such as corrosion inhibitors, industrial paints, mud spill kits, thread protectors and lubricants. Products are sourced from third party manufacturers/suppliers to be on-sold to customers. Revenue from this activity represented approximately 7 per cent. of Tasman's turnover in the year ended 30 June 2009. Financial information The trading record of Tasman for the three years ended 30 June 2009 as extracted from Tasman's financial statements is summarised below: +---------------------+------------+------------+------------+ | | Year ended | Year ended | Year ended | | | 30 June | 30 June | 30 June | | | 2009 | 2008 | 2007 | +---------------------+------------+------------+------------+ | | A$'000 | A$'000 | A$'000 | +---------------------+------------+------------+------------+ | | | | | +---------------------+------------+------------+------------+ | Turnover | 11,167 | 10,229 | 9,579 | +---------------------+------------+------------+------------+ | | | | | +---------------------+------------+------------+------------+ | Gross profit | 9,667 | 8,718 | 8,127 | +---------------------+------------+------------+------------+ | Gross margin (%) | 87% | 85% | 85% | +---------------------+------------+------------+------------+ | | | | | +---------------------+------------+------------+------------+ | Operating profit | 5,729 | 4,544 | 4,466 | | (EBIT) | | | | +---------------------+------------+------------+------------+ | | | | | +---------------------+------------+------------+------------+ | Profit before | 5,744 | 4,564 | 4,461 | | taxation | | | | +---------------------+------------+------------+------------+ | | | | | +---------------------+------------+------------+------------+ | Net assets | 21,175 | 15,383 | 8,001 | +---------------------+------------+------------+------------+ Tasman expects to produce another strong performance for the year ending 30 June 2010 with revenues comparable to 2009. Profits in 2010 are expected to be lower than 2009 as 2009 included exceptional profits from the sale of some surplus equipment during that year. 4. Proposed terms of the Acquisition The proposed aggregate consideration payable for the entire issued share capital of Tasman is A$16.9 million (GBP9.8 million), subject to certain adjustments, which is comprised of an initial consideration of A$13.9 million (GBP8.0 (MORE TO FOLLOW) Dow Jones Newswires June 30, 2010 02:00 ET (06:00 GMT)