Sean Fennon, CEO, Flowtech Fluidpower plc commented on the acquisition of balu: “We are delighted to announce the acquisition of Balu which brings together three major catalogue brands in the UK market place and again widens the customer base we serve. It also gives us the opportunity to add a second logistics centre in Leicester which should deliver stock optimisation and supply chain improvements across the Group and operationally de-risk the main Skelmersdale site.
We are also pleased to announce the successful placing to raise GBP11 million which demonstrates clear support from both new and existing shareholders for our ongoing strategy to develop a focused fluid power group that serves a wide number of industry sectors.”
Flowtech (LON:FLO), the specialist technical fluid power products supplier, this morning announced that on 13 March 2018 it entered into an agreement to acquire the entire issued share capital of Balu and its trading subsidiaries, Beaumanor and Derek Lane, for a total consideration of approximately GBP10.2 million.
Beaumanor was founded in 1974 and is an importer and distributor of fluid power equipment in the UK. The Beaumanor business is based in Leicester and employs 44 staff. Derek Lane was founded in 1979 and is a supplier of fluid power products and engineered solutions. The Derek Lane business is based in Newton Abbot, Devon, and employs 28 staff. The unaudited financial statements of Balu for the year to 31 January 2018 showed revenue of GBP11.4 million and proforma EBIT of GBP1.4 million. Unaudited net assets excluding net debt at the same date were GBP5.9 million.
The Acquisition provides a further complementary business to the Group, creating a co-ordinated approach to three major catalogue brands in the UK market place. The Acquisition widens the target customer base using separate trading “styles” from the same platform and will replicate the Flowtechnology model to deliver cost and service synergies. It also creates a second logistics centre in Leicester to deliver stock optimisation and supply chain improvements across the Group, as well as establishing a substantial operational site in the important Midlands region of the UK and operationally de-risks the main Skelmersdale site.
As part of the transaction, Flowtech is also pleased to announce that Zeus Capital and finnCap have co-ordinated a Firm Placing and Conditional Placing to raise up to GBP11.0 million by way of the issue of an aggregate 6,470,589 new Ordinary Shares at the Placing Price of 170 pence per Ordinary Share with certain existing and new institutional and other professional investors. Those net funds raised in addition to the cash consideration for the Acquisition will be used to strengthen the balance sheet.
The Placing Price represents a discount of approximately 3.8 per cent. to the closing mid-market price of the Ordinary Shares on 13 March 2018 (being the last practicable dealing day prior to the date of this announcement). The Placing Shares will represent approximately 10.9 per cent. of the ordinary share capital as enlarged by the Acquisition and Placing and will, when issued, rank pari passu in all other respects with the Company’s Existing Ordinary Shares. Following the Firm Placing, the Conditional Placing and the allotment of the Acquisition Shares, the total number of ordinary shares and voting rights in the Company will be 59,582,531. The Company does not hold any shares in treasury.
Application has been made for the Firm Placing Shares to be admitted to AIM and it is expected that Admission will become effective and trading will commence at 8:00 a.m. on 15 March 2018.
Additional information on the Acquisition and the Placing is included below.