Diploma Regulatory News (DPLM)

DIPLOMA ACQUIRES THE BUSINESS, ASSETS AND GOODWILL OF RT/DYGERT INTERNATIONAL INC FOR A MAXIMUM OF £13.2m (US$19.75m) CASH

Diploma PLC, the international group of businesses supplying specialised technical products and services, is pleased to announce the acquisition of the business, assets and goodwill of RT/ Dygert International Inc ("RTD"). 

RTD is a leading supplier of seals, o-rings and custom moulded and machined parts offered in a range of elastomeric and thermoplastic materials. RTD supplies customised products to a range of industrial OEM customers and cylinder manufacturers and also supplies standard seals and o-rings to industrial catalogue companies and other sub-distributors. RTD employs ca. 50 staff at its principal locations in Minneapolis, MN and Chicago, IL in the United States; RTD also has a majority share (51%) in a start-up operation in Seattle, WA ("HPS") and a small joint venture operation ("ASIA") in Shanghai, China.

The business will be acquired by a new corporate entity, RTD Seals Corp, which is a newly incorporated subsidiary within Diploma's North American Seals business ("HFPG"). The ownership, pre-emption rights and management control over HPS and ASIA will also pass to RTD Seals Corp. The transaction is expected to close in early January 2009 and completion will be conditional upon certain conditions precedent being satisfied. These conditions include approval by the RT/Dygert International, Inc Employee Stock Ownership Plan and Trust ("ESOPT"), agreement by the employees to be re-hired by RTD Seals Corp and confirmation that the representations and warranties remain true and correct at completion.

RTD is a good sized, long established supplier to industrial OEMs with a solid reputation and a strong established position in the Mid-Western US states. The core business is built on strong, long standing customer relationships and it will provide a platform for building HFPG's OEM business in North America. The newer o-ring and custom parts businesses within RTD are not restricted geographically and offer good opportunities for growth when supported by HFPG's broader sales and marketing resources. There should also be good opportunities for synergies in purchasing, after the initial transition period.

At the time of acquisition, RT/Dygert International Inc was owned by Mr and Mrs L Goode (President and his wife), Mr V Underwood (Sales Vice President), Mrs E Underwood (Operations Vice President) and the ESOPT. Following the acquisition, the President will remain in position for a twelve month period, after which he will continue to provide services on a consultancy basis. The Sales and Operations Vice Presidents will also remain in position on longer term contracts. 

RTD's revenues in the year ended 31 December 2007 were £13.9m (US$20.9m).   Net income before tax was £1.5m (US$2.3m), after payments to the ESOPT, excess owner compensation payments and certain other payments, none of which will apply after acquisition. Revenues in the year to 31 December 2008 are expected to close at a similar level to 2007, despite more challenging trading conditions in the last quarter.

Gross assets at 31 December 2007 were £5.1m (US$7.6m). The financial statements of RT/Dygert International Inc for the year ended 31 December 2007 were subject to audit in accordance with US generally accepted standards. At closing, net assets are expected to be approximately £3.3m (US$5.0m). 

The initial cash consideration for RTD will be £9.4m (US$14.0m), which will be met from the Group's existing cash resources, supplemented as appropriate from its existing committed bank facilities. This may be subject to minor adjustment based on the net assets at completion. 

Further deferred consideration up to an aggregate maximum of £3.8 m (US$5.75m), may be payable in the 2010 financial year, depending primarily on the operating profit of RTD in the 12 months following completion, but also on achievement of certain other criteria. The Board expects this acquisition to be immediately earnings enhancing for the Group.

Bruce Thompson, Chief Executive of Diploma PLC said:

"The acquisition of RTD fits with Diploma's strategy of building a more substantial, broader based Seals business. RTD will give a solid platform for building our OEM business in North America as well as offering good growth opportunities in O-rings and custom parts."

For further enquiries please contact:

Bruce Thompson, Chief Executive Officer 020 7549 5700

Nigel Lingwood, Group Finance Director 020 7549 5705

NOTE TO EDITORS:

Diploma PLC is an international group of businesses supplying specialised technical products and services to the Life Sciences, Seals and Controls industries.

Diploma achieves stable growth and attractive margins from its focus on supplying specialised technical products to markets which value high levels of customer service, technical support and value adding activities. A high proportion of revenues are generated from essential products and services funded by operating, rather than capital budgets.

The Group employs ca. 1,000 employees and its principal operating businesses are located in the UK, Germany, US and Canada.

Over the last five years, the Group has grown adjusted earnings per share at an average of ca. 21% p.a. through a combination of organic growth and acquisitions. The current market capitalisation is ca. £140m.