Manroy Plc Acquires of trade and assets of Base Enamellers Ltd and purchase of assets of RJL Engineering
Manroy Plc ("Manroy" or the "Group"), the AIM quoted UK defence contractor, today announces the acquisition of the trade and certain of the assets of Base and certain of the assets of RJL for a total aggregate cash consideration of £0.8m.
- Acquisition of a strategic GPMG supplier
- Addition of new high end manufacturing capabilities to the Group
- Possibility of synergistic costs savings to the Group through the internal manufacture of the Group's mounts, tow-bars, tripods and a majority of key GPMG components
- Financed through increase of bank facilities which have been restructured to give the Group more working capital post-acquisition
Glyn Bottomley, Chief Executive of Manroy, commented: "The acquisition of Base and RJL will bring many tangible benefits to the Group in both the short and long term. This is an excellent strategic and cost effective acquisition for the Group which we anticipate will immediately enhance our capabilities and result in cost savings."
Following Manroy's successful expansion of its product range into the General Purpose Machine Gun ("GPMG") market, the Directors have concluded that it is beneficial for the Group to extend its operational and manufacturing capability. The Directors believe that this acquisition will result in synergistic savings as a result of a lower cost of manufacture.
Base was formed in 1972 and has grown into an established high precision engineering company located in Erith, Kent, where it will continue to operate after the acquisition. Base currently employs 19 people and is currently owned by Roger Topliffe (founder) and Damon Batstone. Roger will retire following the acquisition and Damon will continue to manage the new subsidiary Base (Manroy) Limited's operation within the Group.
Base offers a one stop manufacturing solution and has a complete CNC milling and turning facility which is complemented by highly capable and sophisticated paint spraying centres. The extended capabilities that will be brought within the Manroy Group as a result of the acquisition include: Surface Grinding; Spray Painting; Alocrom; Anodising; Chroming and pre-treatments; as well as engraving and silk screening. For the year ended 30 September 2012, revenue for Base was £2.0m of which approximately 50% related to sales made to Manroy.
For the past two years Base has been working with Manroy as a strategic supplier on significant manufacturing elements of the GPMG production programme. This partnership followed good manufacturing sub-contract support provided by Base on other smaller production requirements, such as lightweight tow bars, lightweight tripods for the MoD, and other weapon mounting solution products sold by the Group. Base's contribution to the GPMG development programme has proved to be invaluable to the Group's delivery performance to its customer base.
When Manroy commenced acquisition negotiations with Base, Base had already begun the process of acquiring the assets of RJL. RJL is located next to Base and provides a high proportion of sub-contract supply directly to Base. Having reviewed this proposal, the Directors considered that the acquisition of RJL would be beneficial to Base and, in turn, the enlarged Group.
Both Base and RJL bring with them key employees who possess expertise in both large scale production engineering and experience to complement GPMG production.
These two acquisitions will result in all manufacturing for the Group's mounts, tow-bars, tripods and a majority of key GPMG components, being manufactured within the Group. As a result this will improve manufacturing controls and efficiencies which is expected by the Board lead to result in cost savings for the Group. In addition, Base and RJL bring additional revenue and customers from their own customers as original equipment manufacturers ("OEM") as well as other UK based customers within the defence sector.
The acquisition of Base has been financed through restructured bank facilities that have also increased the Group's available working capital. The restructured facilities provide the Group with a £2.1m loan repayable over three years and an increase in the Group's overdraft facility to £1.0m. These new facilities are secured by standard bank debentures and securities given by the Company and its subsidiaries.