Renew Holdings Group Ltd to purchase specialist engineering firm Amco

Renew Holdings Group is to purchase the entire issued share capital of Amco for a cash consideration of £19.8 million. However, the investment remains subject to shareholder approval. The Acquisition will be funded with a new £15 million term loan provided by HSBC Bank plc and out of existing cash resources.

In addition to this amount, Renew will pay the Vendors compensation for lock-box profits of £0.9 million and deferred consideration of £6.2 million. Both the lock-box profits compensation and the deferred consideration are entirely self-funding and do not represent a further cash funding requirement for Renew.

The move is in line with Renew Group’s strategy of growing its Specialist Engineering business. Renew expects to derive in excess of 50 per cent of revenue of the enlarged group from Specialist Engineering. Amco is a specialist engineering company operating in the rail, energy, and engineering markets.

The company provides an integrated service from feasibility, budget and design through to installation, commissioning and maintenance. The business delivers through dedicated, service-focused business units retaining the specialist skills required for the particular needs of the sectors in which it operates.

Amco's revenue and operating profit for the 9 month period ended 30 September 2010 was £59.8m and £4.2m respectively. The Acquisition is being funded entirely out of existing cash resources and a new debt facility provided by HSBC Bank plc.

Brian May, Renew Chief Executive said the acquisition of Amco allows Renew to increase and broaden the scale of its specialist engineering operations, as well as adding to the range of services it can provide to its customers.

Under the terms of the acquisition, Renew will acquire the entire issued ordinary share capital of Amco for £26.9 million comprising of an initial consideration of £19.8 million plus compensation for locked box profits of £0.9 million and deferred consideration of £6.2 million.

The initial consideration and compensation for locked box profits will be funded by £15 million of new bank debt and £5.7 million of existing Renew cash reserves. The deferred consideration will be funded by the payment to the Amco shareholders upon receipt by Amco of £4.6 million owed to Amco by other companies owned by the Vendors and the transfer of an Amco Group property valued at £1.6 million to another company owned by the Vendors.

In Specialist Engineering, the Group seeks to exploit its specialist skills in a range of industries which offer sustainable earnings opportunities and have high barriers to entry.

3 Feb 2011.