25 Jun 2008 07:02
Renold PLC
("Renold", the "Group" or the "Company")
Update on acquisition of industrial chain business of L.G. Balakrishnan & Bros. Ltd ("LGB")
Placing of seven million new ordinary shares underwritten by Kaupthing Singer and Friedlander Capital Markets Limited ("Kaupthing")
Renold is pleased to announce that, further to its announcement on 9 June 2008, the Company's subsidiary, Renold Chain India Private Limited ("Renold India") has entered into an agreement to acquire the industrial chain business of LGB (the "Business"), for an initial cash consideration of approximately £5.7 million (the "Acquisition"). LGB is listed on the Stock Exchange in India. Renold Group will have a 75 per cent interest in Renold India and LGB a 25 per cent interest.
In connection with the acquisition Renold has conditionally placed 7,000,000 New Ordinary Shares at 76p per share (the "Placing") with institutional investors. The Placing is conditional, inter alia, on the transfer of regulatory licences and LGB shareholder approvals. The placing was fully underwritten by Kaupthing.
Acquisition of the industrial chain business of LGB (the "Acquisition")
The initial consideration payable by Renold India (to be paid in Indian Rupees) is approximately £5.7 million, subject to adjustment through completion accounts. The actual consideration is to be calculated as a multiple of EBITDA for the two years ending 31 March 2009. The maximum consideration is approximately £8.5 million and the minimum consideration is approximately £6.5 million.
To fund the Acquisition, Renold Group and LGB have agreed to contribute to the equity share capital of Renold India in the proportions 75 per cent and 25 percent respectively.
Renold Group also has a call option that gives it the right (but not an obligation) to purchase after the second anniversary of completion, the remaining 25 per cent. of Renold India at a price based on an agreed formula.
The Acquisition will be classified as a Class 2 transaction under the Listing Rules and the associated disclosure in relation to the Acquisition is set out below:
Renold estimates, that on a stand alone basis for the year to 31 March 2008, the Business would have had a turnover in the region of £8 million, generating a pre tax profit of circa £800,000*
Renold Group is acquiring all manufacturing assets of the Business plus intellectual property, marketing and distribution in domestic and export markets and substantial engineering and development capabilities.
Renold estimates that the gross value of the assets to be acquired is £4.9 million.
\* The Business is not a stand alone division within LGB and does not have audited financial statements as a discrete operating unit. The figures represented above are Renold management estimates based on LGB management information and due diligence.
The entire management team and skilled employee base comprising more than 500 people are being transferred to Renold India, with extensive support commitments from LGB to aid the transition to new ownership and future development of the Business.
LGB is currently the market leader for the production and distribution of industrial chains in India as well as having established exports. The Acquisition will enable Renold to promote its existing product range into India's rapidly growing market place, take advantage of existing export markets, as well as exploit new product, market and export opportunities.
The Acquisition is in line with the Company's stated strategy and PACE (Profit and Cash Enhancement) objectives of increasing the proportion of the Company's workforce in low cost countries ("LCCs"). LGB has plants located throughout India and its products complement those of Renold, adding to the current competencies of the Group.
Benefits of the Acquisition:
Extensive domestic sales network and rapidly growing export business
Workforce in excess of 500 people which will increase the proportion of Renold employees in LCCs to over 60 per cent.
Highly competent engineering and development capability
Capacity to increase its production volumes
Sophisticated operating systems in finance, manufacturing and quality control
The Company expects that the Acquisition and the Placing will be completed before 31 July 2008. It is currently anticipated that the Placing shares will be admitted to trading on or around this date.
Settlement and Dealings
Application will be made to the UK Listing Authority for the new Ordinary Shares to be admitted to the Official List and to the London Stock Exchange for the new Ordinary Shares to be admitted to trading on its Main Market. The Placing shares will rank Pari Passu with the existing Ordinary Shares following Admission.
Kaupthing Singer & Friedlander Capital Markets Limited ("Kaupthing") is acting as placing agent to the Company in relation the Placing and will not be responsible to any other person, in that capacity, for providing protections afforded to customers of Kaupthing, or for advising any other person on the transactions and arrangements proposed in relation to the Placing and the Acquisition.
25 June 2008
| Enquiries: | |
| Renold plc | 0161 498 4517 |
| Bob Davies, Chief Executive | |
| Peter Bream, Finance Director | |
| Kaupthing Singer & Friedlander | 020 3205 7500 |
| Graham Swindells | |
| Marc Young | |
| College Hill | 020 7457 2020 |
| Nicholas Potter | |
| Adam Aljewicz |
NOTES FOR EDITORS:
Renold plc is a global leader in the manufacture of industrial chains and a wide range of precision engineering products which are sold throughout the world to a broad range of original equipment manufacturers and distributors. Its products are used in a wide variety of industries including transportation, energy, steel, manufacturing and mining.
The company has a well deserved reputation for quality that is recognized worldwide.
The group has 13 manufacturing plants throughout the world and employs 2,500 staff. It is currently expanding its geographical footprint by increasing its manufacturing presence in "low cost countries".
In June 2007 the company completed the acquisition of a 90% interest in Hangzhou Shanshui, a chain manufacturer based in Hangzhou, China, 200 kilometres west of Shanghai.
For more information on Renold, visit www.renold.com
Renold (RNO)