Vulcan Industries (AQSE: VULC ) announced that it will acquire Romar Process Engineering Ltd ("Romar"), a specialist metal fabrication business based in Essex, UK, for £0.55m to be satisfied using internal financial resources and the issue of 2.5m Ordinary shares in VULC.
For the nine-month period to 20 July 2020, Romar reported unaudited revenue and profit before tax of £0.73m and £0.2m respectively. The Company’s book value of tangible assets, inventories and cash being acquired is around £65,000, Vulcan highlighted to investors.
The acquisition of Romar marks the first acquisition for Vulcan since its admission to AQSE in June and is in line with its wider growth strategy.
Vulcan said Romar is ‘closely aligned’ to businesses within the group and will enable the sharing and transfer of skills between in-house fabrication and fitting on client sites, allowing it to take larger contracts and distribute workload to optimise resource capacity.
Vulcan believes the acquisition of Romar will also provide a clear contribution to the Company’s EBITDA as a result of ‘new long-term clients, extended workforce skill sets, saving for existing businesses and improvements in supplier negotiations.’ The engineering group therefore said it expects the acquisition to be ‘immediately earnings enhancing’.
Vulcan said the Romar site also offers another business within the Group and the opportunity to shed its discrete overhead and move production into the Romar facility. As a result, the Company said it intends to merge these two operations in 2021.
The total consideration for the purchase of Romar is £0.55m with £0.350m payable in cash on completion of the acquisition, a deferred consideration of £0.05m payable in ten equal instalments per month following the completion date and £0.15m to be satisfied by the issue of 2.5m ordinary shares in Vulcan at an issue price of 6p, the Company noted.
IVI Metallics, a subsidiary of Vulcan, is making an interest free loan to RPE of £0.35m to fund the acquisition with the deferred £0.05m to be satisfied through ten monthly instalments.
Shares in Vulcan Industries have traded within a range of 5p and 8p in the past three months to open at 6p in early morning trading.
Meanwhile, Vulcan has also announced that the exclusivity period in respect of its proposed acquisition of E Lowe Holdings Ltd has been further extended until 15 January 2021.
The group said it is conducting due diligence and that the disruptions caused by the Covid-19 pandemic have impaired the ability of the parties' advisers to complete that process.
Follow News & Updates from Vulcan Industries here: