LONDON: Spectris plc announced the divestment of its Brüel & Kjær Vibro (‘B&K Vibro’) and Millbrook businesses.
Subject to the completion of these disposals, the proceeds will be used to further strengthen Spectris’ balance sheet and then be deployed in accordance with its capital allocation policy.
Brüel & Kjær Vibro:
Spectris has agreed with NSK Ltd. (‘NSK’), for NSK to acquire B&K Vibro from Spectris for a headline value of €180 million (£163 million).
B&K Vibro, part of Spectris’ Industrial Solutions segment, is an independent supplier of machinery protection and condition monitoring systems for rotating and reciprocating industrial machinery, such as pumps, turbines, compressors, motors, generators and gearboxes.
As at 30 June 2020, the book value of B&K Vibro’s gross assets amounted to £34.4 million. For the 12-month period ended 30 June 2020, the adjusted operating profit generated by B&K Vibro was £7.0 million and EBITDA was £8.3 million.
For the full-year 2020, it is expected to deliver an adjusted operating profit of £4.9 million and EBITDA of £6.1 million.
Headquartered in Tokyo, Japan, NSK is a global manufacturer of bearings and precision machinery. It is one of the world’s largest bearing suppliers and has also expanded its product offering into automotive products, precision machinery and parts, and mechatronic products. One of NSK’s strategic initiatives has been to establish new business utilising condition monitoring technology and the B&K Vibro suite of products, which customers use to help optimise machine availability and efficiency, aligns with this aim.
The net consideration, to be settled in cash, is €168.6 million, subject to locked box adjustments. The transaction is subject to customary completion conditions and regulatory approvals, with completion expected to take place in the first quarter of 2021.
Spectris has agreed with UTAC CERAM, the French automotive testing and homologation specialist, for UTAC CERAM to acquire certain subsidiaries constituting the Millbrook business from Spectris for a headline value of £133 million.
Millbrook, also part of Spectris’ Industrial Solutions segment, provides vehicle test, validation and engineering services to customers in the automotive, transport, tyre and petrochemical industries. It has a range of test facilities for full vehicles, tyres and components located in the UK, the USA and northern Finland.
As at 30 June 2020, the book value of Millbrook’s gross assets amounted to £189.4 million. For the 12 months ended 30 June 2020, Millbrook generated adjusted EBITDA of £11.1 million and an adjusted operating loss of £0.2 million. For the full-year 2020, it is expected to deliver EBITDA of £5.5 million and make an adjusted operating loss of £7.0 million.
In September 2020, Eurazeo became a majority shareholder in UTAC CERAM, the French automotive testing and homologation specialist with a diversified portfolio of activities such as development testing, homologation, technical inspection and EuroNCAP testing. It has two proving grounds in France and is opening one in Morocco in 2021.
Given the highly complementary portfolio with Millbrook, Eurazeo’s strategic plan is to combine the two businesses. In this context, Spectris believes Millbrook’s next stage of development can be better fulfilled in combination with UTAC CERAM, given the complementary assets, increased scale and geographic reach and broader customer offering.
The combination will enable the group to strengthen its market position and enhance its customer offering given the expanded technological resources, technical expertise and geographical coverage.
After accounting for £15 million of adjustments, including committed capex, the net consideration for the transaction is expected to be £118 million (subject to a locked box arrangement and certain other adjustments), which will be settled by:
• £70 million cash proceeds (subject to adjustments relating to, and including amounts used to settle, certain inter-company balances);
• A £23 million interest-bearing vendor loan note issued by the UTAC Group, with a maximum term of seven years (repayable early upon the occurrence of certain events, including a change of control of the combined Millbrook/UTAC CERAM entity); and
• A £25 million reinvestment into an indirect c.13.5%1 retained equity stake in the combined Millbrook/UTAC CERAM group.
The transaction structure provides Spectris with an immediate cash inflow and allows it to benefit from the future performance of the combined group. The transaction is subject to customary completion conditions and regulatory approvals, with completion expected to take place in the first quarter of 2021.
Commenting on the transactions, Andrew Heath, Chief Executive, said: “I am pleased that we continue to execute our portfolio optimisation strategy to become a more focused and profitable business and have found highly-complementary businesses to become the new owners of our companies.
“The sale of B&K Vibro delivers compelling value for our shareholders and will be an important addition to the NSK product portfolio. Being part of a global organisation with complementary products and greater commercial alignment will be a positive move for the B&K Vibro business.
“For Millbrook, the structure of the transaction provides us an immediate cash inflow plus the chance to participate in the future performance of the combined group, which will now be able to provide a more extensive and comprehensive range of services to its clients. I would like to thank all of our B&K Vibro and Millbrook employees for their contribution to Spectris over the years and wish them well in the next stage of their journey.”