Deals

Kentz Corporation Limited Acquires Valerus Field Solutions

Posted: 9th December 2013 08:50
Kentz Corporation Limited (LSE: KENZ), the holding company of the Kentz engineering and construction group, announces the proposed acquisition of the Valerus field solutions business ("Valerus FS") for US$435 million in cash, subject to a working capital adjustment, payable in cash at Completion (the "Acquisition").
 
Key Highlights

  • Valerus FS is a US-based integrated oil and gas surface facility solutions provider which provides a full suite of products and services from the well head to the pipeline as well as an integrated services capability
  • The Acquisition is consistent with Kentz's strategy of establishing itself as a recognised market leader in providing highly skilled process engineering, EPCM and EPC services for small and medium sized oil and gas processing facilities worldwide. In particular, the Acquisition is expected to deliver the following principal benefits:
- increased exposure to high value, high margin contracts further up the value chain;
- expanded offering through the addition of 665 employees including 198 personnel with demonstrable experience in gas handling and processing;
- diversified and expanded operational footprint with Valerus FS strongly positioned in the US onshore oil and gas market, including shale gas, a new market for Kentz;
- increased exposure to Latin American markets with Valerus FS' established presence in Brazil, Mexico, Colombia and Venezuela;
- an increased ability to leverage and enhance existing EPC capabilities and differentiators in onshore oil and gas processing facilities;
- the potential to offer integrated solutions for clients and bid on contracts, where previously the Group would not have been able to due to the specific range of capabilities required;
- an increased focus on mid-sized modular projects expected in gas plants and EPF;
- a strong, diversified client base with over 60 per cent. of Valerus FS' work being from repeat clients, only a few of which are current Kentz customers; and
- increased opportunities for Kentz by providing services to the outsourced portion of Valerus FS' projects.
 
Financial Highlights

  • In the year ended 31 December 2012, Valerus FS reported EBITDA of US$51.5 million on revenue of US$492.9 million. Valerus FS has experienced strong year-on-year revenue growth historically and this trend is expected to continue in 2014.  Outlook for 2014 is positive with 60 per cent. of projected 2014 revenues under contract
  • The Acquisition is expected to be earnings enhancing for Kentz in the first full financial year of ownership and is expected to generate a return on investment exceeding the Group's pre-tax cost of capital[1]
  • The Acquisition will be satisfied by full draw down on a new US$400 million term loan with the balance satisfied from either Kentz's existing cash resources or a new multi-currency US$160 million revolving loan facility
  • The Acquisition is conditional on the approval of Kentz's shareholders. It is expected that the Company will post a circular to shareholders today with details of the Acquisition and giving notice of the Extraordinary General Meeting expected to be held at The Great Room, Central Court, 25 Southampton Buildings, London WC2A 1AL at 10.00 a.m. on 2 January 2014 (the "Circular"). The Circular will be made available at www.Kentz.com 
  • Kentz has received an irrevocable undertaking from Kerbet Limited, its largest shareholder, to vote in favour of the Resolution to be proposed at the Extraordinary General Meeting
Christian Brown, Chief Executive Officer of Kentz commented: "We have achieved exceptional organic growth since listing in 2008. We have also highlighted our desire to expand our offering through selective acquisition that creates shareholder value. The Board of Kentz believes that, consistent with our strategy, the acquisition of Valerus Field Solutions will help to establish Kentz as a recognised market leader in providing highly skilled process engineering, EPCM and EPC services for small and medium sized oil and gas processing facilities worldwide. It also provides us with a significant presence in the growing US market."

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