TIDMTGP
RNS Number : 3618Y
Tekmar Group PLC
21 August 2018
For release 07:00am on 21 August 2018
The information communicated within this announcement is deemed
to constitute inside information as stipulated under the Market
Abuse Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain
Tekmar Group plc
("Tekmar", the "Group" or the "Company")
Proposed Acquisition of Subsea Innovation Ltd
Tekmar Group plc, a market-leading technology provider of
protection systems for subsea cable, umbilical and flexible pipes
and offshore engineering services, is pleased to announce that it
has today signed a sale and purchase agreement for the acquisition
of Subsea Innovation Ltd ("Subsea Innovation") for a maximum
consideration of approximately GBP4 million (the "Proposed
Acquisition") from its founder Gary Ritchie-Bland (the "Seller").
The Proposed Acquisition is subject to shareholder approval.
The Proposed Acquisition represents the Group's first
transaction since its successful AIM admission in June 2018,
launching the Group's strategy to acquire offshore energy
businesses which have a clear technology focus, have complementary
customer bases and can leverage Group support. Subsea Innovation,
which currently operates in the global oil and gas market, will
bring world-class engineering in the design, development and
manufacture of back deck equipment and subsea pipeline repair
clamps ("EPRC") to Tekmar's portfolio, along with a blue chip
client list and a skilled engineering team.
The Proposed Acquisition includes the purchase of a high
specification 40,000 sq ft manufacturing and office facility and
its fixtures and fittings, which, combined, amount to approximately
GBP3 million in fixed assets. This property will become Tekmar
Group plc's headquarters and provide additional land for future
expansion. Subject to grant and local planning approval, this site
would provide the opportunity to reduce overheads across the Group
and improve working practices by consolidating multiple
manufacturing sites and offices into one location.
Background
Subsea Innovation is an innovation leader in the design,
manufacture and supply of complex engineered equipment and
technology used in the installation of subsea equipment for the
offshore oil and gas market. Its products include large equipment
handling systems, which operate on the back of installation
vessels; including cable, pipeline and SURF (subsea umbilical riser
and flowline); pipeline repair clamps, which protect major oil and
gas pipelines, and equipment for the construction of offshore oil
and gas projects.
The business is headquartered in Darlington in a facility which
includes a manufacturing centre accredited to ISO 9001, ISO 14001,
OHSAS 18001 and ISO/TS 29001; HSQE centre, business administration
and product testing. The site also includes land for development
and expansion.
Subsea Innovation employs 27 skilled staff, including a highly
experienced management team, all of whom will remain with the
business post acquisition.
The addition of Subsea Innovation's engineering team will add 16
specialist engineers to aid the development of new products for
Group companies; in addition to adding long standing relationships
with key EPC clients such as Technip FMC, Saipem and Subsea7 and
oil and gas operators including the likes of BP, Shell and
Total.
Subsea Innovation and Tekmar have shared heritage. In 2011,
Tekmar Subsea Limited, originally founded by two commercial divers
in 1985, divided to form two new entities Tekmar Energy Limited and
Subsea Innovation Ltd.
Given the heritage, focus on engineering excellence,
complementary products and shared markets and Subsea Innovation's
track record in the delivery of back deck deployment equipment, the
Board of Tekmar believes the Proposed Acquisition is an excellent
commercial, cultural and technical fit.
Subsea Innovation's last three years of trading are recorded as
GBP11.3 million turnover and GBP0.4 million profit in 2015, GBP5.9
million turnover and (GBP0.8 million) profit in 2016 and GBP2.0
million turnover and (GBP1.3 million) profit in 2017. Current year
management accounts for 2018 show turnover at GBP4 million and
GBP0.3 million profit with strong projections for 2019.
Although all management are remaining, none of the directors of
Subsea Innovation will be joining the board of Tekmar.
Consideration and issue of equity
The total consideration of up to GBP4 million will be satisfied
through approximately GBP2 million in cash and GBP1 million through
the issue of 645,161 new ordinary shares in Tekmar (the
"Consideration Shares") to the Seller on completion.
The initial cash consideration of GBP2million will be subject to
an adjustment in that it will be:
(a) increased by certain cash items in Subsea Innovation;
(b) reduced by certain indebtedness of Subsea Innovation;
and
(c) increased by the amount the working capital exceeds a target
figure agreed by the parties or reduced by an amount of any
shortfall in working capital below the target figure.
An earn-out consideration of GBP1 million in cash will be
payable based on the profits before tax of Subsea Innovation being
not less than GBP500,000 prior to 31 March 2020. The profits before
tax shall be tested over each 12 month period ending on 31 August
2019, 30 September 2019, 31 October 2019, 30 November 2019, 31
December 2019, 31 January 2020, 28 February 2020 and 31 March 2020
(each a "Relevant Period"). The earn-out consideration shall become
payable following expiry of the first Relevant Period in which the
profits before tax of Subsea Innovation are at least GBP500,000. No
earn-out consideration is payable if the profits before tax of
Subsea Innovation are not GBP500,000 in any of the Relevant
Periods.
The issue price of the Consideration Shares is GBP1.55 per
share, which is calculated by reference to the closing mid-market
price at which an ordinary share in the capital of Tekmar has
traded on AIM, as derived from the AIM Appendix of the Daily
Official List, on the Business Day immediately prior to the date of
the agreement, being 20 August 2018.
The Consideration Shares will rank pari passu with existing
ordinary shares and will be subject to a lock-in period of 24
months followed by orderly market provisions for 12 months.
Application will be made for the Consideration Shares to be
admitted to trading on AIM at 8.00 a.m. on or around 18th September
2018.
Under the terms of the Share Purchase Agreement, the Company is
obliged to procure the satisfaction of certain indebtedness of
Subsea Innovation, including a mortgage owed to HSBC Bank plc and
repayment to Gary Richie-Bland of sums owed to him by Subsea
Innovation. It is envisaged that on completion of the acquisition
of Subsea Innovation, the Company will put in place a loan to
Subsea Innovation to allow it to do so. The loan will be at a
commercial rate of interest and repayable on demand by the
Company.
In addition, it was a requirement of HSBC Bank plc (the current
bankers of Subsea Innovation), that on completion the Company
enters into a guarantee to cover liabilities owed by Subsea
Innovation to HSBC Bank plc pursuant to its overdraft facility
(which is up to a maximum amount of GBP500,000), any business card
facilities (up to a maximum of GBP80,000) and any liabilities owed
pursuant to an Omnibus Counter-Indemnity (up to a maximum amount of
GBP360,000).
Alasdair MacDonald, Non-executive Chairman of Tekmar, said:
"Our vision is to continue building on Tekmar's position as the
global leader in subsea cable protection systems in the offshore
wind market and to become the partner of choice for the supply of
subsea protection equipment to the global energy markets. The
proposed acquisition of Subsea Innovation will bring new
capabilities, new markets and strong cross-selling opportunities to
the Group. The Independent Directors are confident that Subsea
Innovation's blue chip global client base will open up new sales
opportunities for our offshore wind business. Equally, we expect
Subsea Innovation to benefit from Tekmar's trusted name in offshore
wind, opening up sales and supply chain opportunities for the
previously wholly oil and gas focused business."
Dave Thompson, Managing Director of Subsea Innovation,
added:
"The team at Subsea Innovation is hugely excited by this move
and view it as the start of the next phase in the development of
our business. The oil and gas market is already showing clear signs
of recovery; Tekmar's backing and its global offices and support
functions would enable us to capitalise on this upturn and make
strides towards our goal to become a global leader in both oil and
gas and offshore wind."
Subsea Innovation will continue to trade under its own name and
remain as a separate legal entity. There will be no disruption or
change for its customers and all current employees intend to remain
with the business.
General Meeting
Subsea Innovation is wholly owned by its founder Gary
Ritchie-Bland, the father of James Ritchie-Bland, CEO of Tekmar
Group. Whilst the Proposed Acquisition is not a related party
transaction under the AIM Rules, it constitutes a substantial
property transaction for the purposes of section 190 of the
Companies Act 2006. In addition, any loan from the Company to
Subsea Innovation would constitute a loan to a person connected to
a director of the Company for the purposes of section 200 of the
Companies Act 2006 and any guarantee to be given by the Company in
relation to the liabilities of Subsea Innovation would constitute a
guarantee in connection with a loan or quasi-loan to a person
connected to a director of the Company for the purposes of section
200 of the Companies Act 2006. Accordingly the Proposed Acquisition
needs to be approved by shareholders at a General Meeting of the
Company.
Although supportive, and after tabling the acquisition for
consideration, having declared his connection in this matter, James
Ritchie-Bland has not taken part in the Board's recommendation to
vote in favour of the Proposed Acquisition. Other than James
Ritchie-Bland, the directors of Tekmar believe that the Proposed
Acquisition is in the best interests of the Company and
shareholders as a whole and are unanimously recommending that the
Company's shareholders vote in favour of the resolution to be
proposed at the General Meeting. The directors of Tekmar intend to
vote in favour of the resolution in respect of their own beneficial
holdings of Ordinary Shares, representing 1,762,930 Ordinary
Shares, being 3.5 per cent of the Group's total voting rights.
Following completion of the transaction, Gary Ritchie-Bland will
hold 694,899 Ordinary Shares, representing 1.4 per cent. of the
Group's total voting rights.
The General Meeting will be held at 09:30 am on Wednesday 12
September 2018.
A circular will be published today and will be made available on
the Company's website: https://investors.tekmar.co.uk.
Enquiries:
Tekmar Group plc
James Ritchie-Bland, Chief Executive Officer
Sue Hurst, Chief Financial Officer +44 (0)1325 379 520
Grant Thornton UK LLP (Nominated Adviser)
Philip Secrett / Jen Clarke +44 (0)20 7383 5100
Berenberg (Broker)
Chris Bowman / Ben Wright / Laure Fine +44 (0)20 3207 7800
Belvedere Communications (Financial PR)
John West / Llew Angus +44 (0) 74 070 23147
About Tekmar Group plc - www.tekmar.co.uk
Tekmar Group plc is a market-leading technology provider of
protection systems for subsea cable, umbilical and flexible pipes
and offshore engineering services.
It operates two primary divisions: the Offshore Wind Farm
division, which focuses on the provision of subsea protection for
power transmission cables from and between offshore wind turbines,
and the Subsea division which focuses primarily on the provision of
subsea protection for umbilicals and flexible pipes to the oil and
gas market. Both divisions are supported by AgileTek which provides
subsea analysis, simulation and engineering consultancy
services.
The Group is headquartered in Newton Aycliffe in the United
Kingdom in a 70,000 sq ft facility that includes the manufacturing
centre, HSQE centre and business administration, and a 30,000 sq ft
facility that includes product testing, client-training centre and
the sales, project and engineering offices. AgileTek operates from
an office in London and has offices supporting its Offshore Wind
Farm division in Hamburg (Germany) and Shanghai (China). Tekmar has
appointed sales agents in Busan (South Korea) and Boston (United
States) for the Offshore Wind Farm division and in Singapore and
Abu Dhabi (United Arab Emirates) for the Subsea division.
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END
ACQUARRRWWAWURR
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