Hayward Tyler Group plc has acquired Dresser-Rand Company Ltd

The directors of Hayward Tyler Group plc, the specialist engineering group, are delighted to announce the conditional acquisition of the trade and assets of the Peter Brotherhood business from Dresser-Rand Company Ltd, a Siemens-owned business, for a total consideration of US$15 million, subject to an adjustment for a working capital benchmark. The consideration will be paid in cash and will be wholly funded through new facilities from Royal Bank of Scotland.

Highlights

• Peter Brotherhood is a UK engineering business specialising in steam turbines, reciprocating gas compressors and combined heat and power units for the power generation, oil and gas and marine markets;
• The acquisition is expected to be immediately earnings enhancing in Hayward Tyler's current financial year and significantly earnings enhancing in the first full financial period following completion of the Acquisition;
• The transaction is to be funded through £14 million of new facilities from RBS;
• Peter Brotherhood recorded normalised operating profit1 of US$3.2 million in 2014;
• The deal increases Hayward Tyler's scale, number of customers and orders, thus diversifying the Group's operations;
• The acquisition gives the Group access to a range of new customers including Keppel Shipyard and deepens relationships with existing customers including Rolls Royce;
• This new client base offers Hayward Tyler the opportunity to cross-sell products across both customer bases;
• and The Group intends to explore the potential for a sale & leaseback of the 11.5 acre Peterborough
• property in the near term.

 Normalised profit is calculated by carving out the Peter Brotherhood division from Dresser-Rand Company Ltd

Details of the Acquisition

Peter Brotherhood is a UK engineering business based in Peterborough that can trace its history back to 1867. More recently it has focused on energy efficient solutions for land and marine based applications including steam turbines, reciprocating gas compressors and combined heat and power units for the power generation, oil and gas and marine markets.  It was acquired by Dresser-Rand Inc in 2008 (a company that was subsequently acquired by Siemens) and is now a non-core disposal.

Peter Brotherhood is the UK's only producer of steam turbines with an output up to 40MW which has applications in waste heat recovery, the FPSO and FLNG markets and the British Navy Astute class submarine new build program. Steam turbines tend to have higher operational availability and lower operating costs, when compared to gas turbines.

Peter Brotherhood has nearly 1,500 units that continue to operate across 100 countries globally, having supplied steam turbines to many of the world's leading operators including Woodside, SBM, Saipem, Aker, Fred Olsen, Samsung and Maersk.

In the year to 31 December 2014, the Peter Brotherhood business (on a stand-alone basis) generated revenues of US$46.7 million and normalised operating profit of US$3.2 million. The net assets being acquired had an adjusted unaudited value of US$16.0 million as at 30 June 2015.

Under the terms of the Acquisition, Hayward Tyler will be acquiring the Peter Brotherhood trade and assets for the total cash consideration of US$15 million, subject to an adjustment for a working capital benchmark, payable on completion. The assets include an 11.5 acre freehold property in Peterborough, all of the plant and machinery, transferring book debts and stock.

The Acquisition is scheduled to complete on 30 October 2015 and is conditional only on the completion of the TUPE process relating to the 146 employees based at the Peterborough facility who will join the newly formed Peter Brotherhood Ltd, a wholly-owned subsidiary of Hayward Tyler Group.

Reasons for the Acquisition

Over the past near 150 years Peter Brotherhood has built up a leading reputation in its end markets for reliability and on-time delivery at a competitive price. The Board believes there is a significant opportunity to re-invigorate the Peter Brotherhood brand to increase revenue from existing customers and its existing installed base of nearly 1,500 units globally. The Board is also confident that, operating within the Hayward Tyler Group, Peter Brotherhood will benefit from improved manufacturing processes, broader geographical coverage, access to overseas service facilities and accelerated investment in new product development and design. 

New Banking Facilities

The acquisition will be funded through a package provided by the Group's existing bankers, Royal Bank of Scotland. This package provides additional facilities, an attractive cost of borrowing, extended term and further covenant headroom whilst Hayward Tyler develops, invests and grows the Peter Brotherhood business.

The financial covenants have been amended to reflect the new extended facilities and are as follows:

•  Interest cover >4.5x;
•  Leverage <3.0x reducing to <2.0x over the term;
•  Cash flow cover >1.0x rising to 1.1x over the term;
• Monitoring formula <1.0x.

The Group also intends to explore the potential for a sale & leaseback of the Peterborough property in the near term, in order to repay the bridging finance facility detailed above.

Ewan Lloyd-Baker, CEO of Hayward Tyler, added:
"Over the last four years we have transformed Hayward Tyler into a forward-thinking, profitable market-leader in its specific niche markets. We believe the same philosophy will allow us to drive significant growth from Peter Brotherhood's strong installed base and into new market areas and technologies. This acquisition, which the Directors expect will be significantly earnings enhancing during the first full financial period following completion of the Acquisition, will also underpin the strength and depth of the wider Hayward Tyler group and set the stage for our next level of growth across the global energy sector whilst further cementing our position in the oil & gas and specialty chemical markets. The Board likewise remains fully committed to delivering on its progressive dividend policy in the current financial year.

Hayward Tyler Group plc is a market leader in the design, manufacture and servicing of performance-critical motors and pumps for the harshest of environments. Core markets for the group include: oil & gas exploration - both topside and subsea; power generation - both conventional and nuclear; and the chemical/industrials sector. With facilities in the UK, US, China and India, the Group has a proven reputation for providing innovative, reliable technological solutions built on a proud heritage stretching back over 200 years. www.haywardtyler.com