TIDMBRAM TIDMTPK
RNS Number : 5603N
Brammer PLC
02 September 2011
THIS ANNOUNCEMENT (AND THE INFORMATION CONTAINED HEREIN) IS NOT
FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY,
IN OR INTO THE UNITED STATES, CANADA OR AUSTRALIA, JAPAN OR SOUTH
AFRICA OR ANY JURISDICTION IN WHICH SUCH PUBLICATION OR
DISTRIBUTION IS UNLAWFUL.
2 September 2011
Brammer plc ("Brammer", the "Company" or the "Group")
Acquisition of the business and assets of Buck & Hickman for
GBP27.6 million
Introduction
Brammer, the pan-European added value technical distributor, is
pleased to announce that it has conditionally agreed to acquire the
business and assets of Buck & Hickman for a total cash
consideration of GBP27.6 million on a debt-free, cash-free basis
from Travis Perkins PLC (the "Acquisition"). In addition, Brammer
has separately announced today a placing of 10.535 million new
ordinary shares, representing 9.9 per cent. of the Company's total
issued share capital, to raise GBP25.3 million (GBP23.9 million net
of expenses relating to the Placing and the Acquisition) (the
"Placing"), the proceeds of which will be used to partially fund
the cash consideration for the Acquisition, with the balance being
satisfied through borrowings from existing facilities.
Overview of the Acquisition
Buck & Hickman is a UK distributor of industrial products,
operating predominantly in the Tools and General Maintenance MRO
market. Founded in the 1830s, the business was acquired by BSS
Group plc in April 2007 before becoming part of Travis Perkins PLC,
following the latter's acquisition of BSS in December 2010.
Buck & Hickman offers a range of over 60,000 branded and
own-brand industrial and maintenance products, with just under
14,000 of those products bearing its proprietary industrial brand,
'Roebuck'. The key focus of the product range is hand and power
tools, janitorial, health & safety and personal protective
equipment ("PPE") items. Buck & Hickman has over 18,000
customers, of which approximately 9,000 have made purchases within
the last 12 months, ranging from multinationals to small and medium
sized enterprises. Customers are serviced through a nationwide
network of 28 branches and a 90,000 square foot national
distribution centre in Coventry, together with its own fleet of
approximately 90 commercial vehicles.
Sales channels include national accounts (of which Buck &
Hickman has approximately 70), local accounts, trade counters,
online and catalogue. In addition, Buck & Hickman also provides
a range of value added services, such as inventory management,
expenditure control, and on-site store management.
In the year ended 31 March 2011, Buck & Hickman generated
revenues (including intercompany sales) of GBP94.8 million (2010:
GBP80.7 million), adjusted EBTIDA of GBP1.9 million (2010: GBP0.17
million) and adjusted operating profit of GBP1.0 million (2010:
loss of GBP0.6 million). Revenue and adjusted EBITDA for the 12
months ending 31 December 2011 are forecast by Buck & Hickman's
management team to be approximately GBP105.0 million and GBP3.2
million respectively. As at 31 March 2011, Buck & Hickman had
net assets of GBP32.8 million and gross assets of GBP50.3
million.(2)
Background to and reasons for the Acquisition
Brammer's strategy is to focus on the continuing development and
growth of the Group's core distribution business as a pan-European
market leader. The proposed acquisition of Buck & Hickman
supports this strategy and provides the Group with:
-- a top five presence in a fragmented UK Tools and General
Maintenance market that the Directors estimate to be worth
approximately GBP2.2 billion per annum;
-- increased critical mass in the European market, within which
the Continental European market is thought by the Directors to be
worth at least EUR10.0 billion, enabling cross-selling
opportunities from within the Group's existing customer base;
-- a number of cross-selling initiatives from:
- an extended product range, including the well-regarded,
own-brand "Roebuck" products;
- leveraging sales of the extended product range through the
Group's existing pan-European distribution channels;
- access to a large number of new Buck & Hickman customers,
including those in key markets sectors such as aerospace,
construction and rail where Brammer is currently
under-represented;
-- enhanced geographic coverage in the UK and critical mass from
the integration of two branch networks; and
-- expertise and depth of experience from people with strong
product knowledge.
The Board has put together a detailed integration plan, through
which it has identified annualised synergies of GBP7.5 million to
be realised by the end of 2013. Following the Acquisition, the
Board's stated medium term return on sales target of 8 per cent.
remains unchanged.
Synergies identified include:
-- economies of scale and supplier relationship management,
which are likely to increase purchasing scale and enhance Brammer's
buying power, are expected to improve supplier terms;
-- margin improvement through purchasing leverage and Roebuck
brand substitution, which the Directors expect to contribute to an
improvement in gross margin;
-- similarities in business processes and operations between the
two organisations, with a strong fit in all areas, especially
supply chain;
-- brand development, through the leveraging of Roebuck's strong
reputation amongst industrial customers; and,
-- cost savings arising from the integration of branch networks,
supply chain, inventory management and catalogue production.
The Directors believe the Acquisition will give Brammer a
critical mass of suppliers and technically experienced staff, which
it will use to improve significantly the growth rate of the nascent
Tools and General Maintenance business, across Continental
Europe.
Taking into account the effect of the Placing, the Directors
expect the Acquisition to be earnings neutral in the current
financial year and earnings enhancing in 2012 and thereafter
(before amortisation and exceptional costs and on a weighted
average basis).
Principal terms of the Acquisition
The total consideration payable for the Acquisition is GBP27.6
million, which will be satisfied in full and in cash on completion.
The consideration is being partially funded by the proceeds of the
Placing, which is expected to raise GBP25.3 million (GBP24.9
million net of expenses), with the balance being satisfied through
borrowings from existing facilities. The completion of the
Acquisition is expected to take place by the end of September
2011.
Commenting on the Acquisition, Ian Fraser, Chief Executive
Officer of Brammer, said:
"Buck & Hickman is an excellent strategic acquisition for
the Group, providing us with the opportunity to enhance our
position significantly in the approximate GBP2.2 billion UK Tools
and General Maintenance MRO market. It will also increase our
critical mass and generate additional value from cross-selling
initiatives in the larger European market place, which is hugely
fragmented, and which we estimate to be worth at least EUR10.0
billion per annum. We look forward to working alongside Buck &
Hickman's highly experienced and knowledgeable team. I am confident
that together we can drive the business forward and that Brammer
will be a stronger group as a result."
Enquiries:
Brammer plc +44 (0) 161 902 5572
David Dunn, Chairman
Ian Fraser, Chief Executive Officer
Paul Thwaite, Group Finance Director
Investec Bank plc +44 (0) 20 7597 5970
Chris Treneman
James Rudd
Peel Hunt LLP +44 (0) 20 7418 8900
Julian Blunt
Andy Crossley
Hudson Sandler +44 (0) 20 7796 4133
Andrew Hayes
Andrew Leach
Notes
1. The statements in this announcement regarding the enhancement
of earnings per share do not constitute profit forecasts nor should
they be interpreted as meaning that the earnings per share of the
Company for the current or future years will necessarily match or
exceed the historical published earnings of the Company
2. Financial figures for Buck & Hickman are extracted from
unaudited management accounts and other financial sources provided
by Buck & Hickman
This information is provided by RNS
The company news service from the London Stock Exchange
END
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