Avingtrans offloads Peter Brotherhood for £35m

(Sharecast News) - Energy, medical and industrial components manufacturer Avingtrans has sold Peter Brotherhood to privately-held air and gas handling products company Howden Group, it announced on Friday, for a total consideration of £35m.
The AIM-traded firm said that after adjustments for debt and working capital, the sale would result in net proceeds of about £30.6m before transaction costs.

It said the disposal was in line with its long-term 'pinpoint-invest-exit' strategy, which aimed to realise value for shareholders.

Peter Brotherhood was in difficulty when it was acquired by Avingtrans, the board said, adding that a "rapid" restructuring programme was implemented, followed by a strategy reset.

That led to a project to recruit and train an improved sales force, multiple sales agents and a strengthening of the aftermarket team, which it said proved to be "key" to recovery and increased value.

Peter Brotherhood's revenues for the year ended 31 May totalled £25.7m, resulting in a contribution to the group operating profits of £3.3m.

At the date of sale, the unaudited pro-forma net assets being disposed of, after adjusting for intercompany funding, came in at about £5m.

The disposal was for an enterprise value of £35m, with no earn-out arrangements or deferred consideration.

Avingtrans said the sale and purchase agreement contained warranties and indemnities by the company, which it said were standard for such a transaction, as well as a covenant for the company not to compete in the steam turbine and associated market sectors for a limited period of time.

Following the disposal, the Avingtrans group would retain its three core divisions, being engineered pumps and motors, and process solutions and rotating equipment in the energy sector, as well as medical and industrial imaging.

The impact of the disposal would thus reduce the size of the process solutions and rotating equipment division, which generated segmental revenues and operating profits, including Peter Brotherhood, of £52.7m and £3.9m respectively in the 2020 financial year.

Avingtrans said it would consider the application of the proceeds from the disposal following completion, but said it expected to retain a portion of the proceeds to invest in the current divisions, including to fund the recently-announced £3.2m investment in Magnetica.

It would also partially repay its existing debt, while retaining appropriate banking facilities and relationships for the future effective operation of the group, and also continue to review potential opportunities, which would enhance its pinpoint-invest-exit strategy.

The process solutions and rotating equipment division would now concentrate on the recovery of Booth Industries, and on further business growth opportunities in the nuclear sector, the board said, especially at Metalcraft and at the fluid handling business in Scotland.

"This well executed exit of Peter Brotherhood once again demonstrates the success of the Avingtrans strategy," said chief executive officer Steve McQuillan.

"Peter Brotherhood was in poor shape when we acquired it in 2017, but it has been turned around to make it attractive to specialist groups in its sectors.

"The result is enhanced value for Avingtrans shareholders and the potential opportunity to repeat the pinpoint-invest-exit model elsewhere."

At 0914 GMT, shares in Avingtrans were up 12.79% at 339.5p.