LONDON, UK: Spectris plc (SXS: LSE), the expert in providing insight through precision measurement, announced the sale of Omega Engineering to Arcline Investment Management for $525 million (£403 million), at a valuation of approximately 20.4x Omega’s 2021 adjusted EBITDA. 

Omega will be joining the Dwyer Group of companies (‘Dwyer’), an Arcline portfolio company. Alongside this, Spectris also announces a £300 million share buyback programme.

Omega is a provider of specialist sensors that help customers improve processes, delivered by a high service omni-channel distribution platform. Dwyer is a global leader in the design and manufacture of innovative sensors and instrumentation solutions for the indoor environmental quality, building automation, process and environmental markets. Dwyer views Omega’s high-quality measurement, monitoring and control solutions as a highly complementary product offering and sees benefits of a scaled platform within their shared markets.

For the 2021 financial year, Omega generated sales of £129.0 million, adjusted EBITDA of £19.7 million, and as at 31 December 2021, the book value of Omega’s gross assets was £197.7 million. The consideration for the disposal will be settled in cash subject to customary adjustments for working capital, cash and debt and is subject to customary completion conditions and regulatory approvals, with completion expected to take place early in the third quarter of 2022.

Supporting Omega’s development and delivering value for Spectris

With new management and a revised strategy launched in 2020, Omega ended 2021 with a strong order book and well positioned for future growth; expecting to return to pre-COVID levels of revenue this year. We have been clear that scale is essential to deliver acceptable levels of profitability at Omega. As such, we believe that Omega’s next stage of development can be better fulfilled with the scale provided as part of a larger group.

At a valuation of 20.4x Omega’s 2021 adjusted EBITDA, significantly above the Group’s current trading multiple, this divestment offers a better opportunity to generate returns for shareholders and further enhance Group margins.

Since 2019, we have been working to transform Spectris into a higher-quality business, focusing on attractive growth markets. This sale increases the gross divestment proceeds over the past three years to over £1 billion, at attractive valuations, above the Group’s trading multiple. Following completion of the sale of Omega, Spectris will be made up of three core businesses: Malvern Panalytical; HBK; and Industrial Solutions, with a much-improved financial profile, focused on high precision measurement solutions.

Balance sheet strength provides opportunities to accelerate growth 

The Group’s enhanced balance sheet strength leaves us well positioned to participate in further investment activity. The Group remains committed to driving sustainable organic growth, with significant investment in R&D, whilst continuing to evaluate value-enhancing M&A opportunities, from early-life technologies, through bolt-ons, to larger scale acquisitions, as well as collaborations with third parties. M&A remains a key strategic component and provides opportunities to compound growth and returns. We will remain disciplined in accordance with our stated capital allocation framework and financial criteria for acquisitions.

Share buyback programme

Based on our enhanced balance sheet, projections for the year ahead and the pipeline of acquisition opportunities, we are today announcing a share buyback programme of up to £300 million. This will constitute an initial tranche of £150 million to be launched shortly, and undertaken pursuant to the authority granted by the Company’s shareholders at the 2021 AGM, as well as a further tranche of £150 million to be launched, subject to approval of the Company’s shareholders at the 2022 AGM, held on 27 May 2022.

Andrew Heath, Chief Executive, said: “In 2018, we set out to improve the quality of Spectris and simplify our business around a clear purpose of delivering value beyond measure to all our stakeholders. Spectris today is a more focused, more profitable, and more resilient business, underpinned by a very strong balance sheet. We are more aligned than ever to end markets with attractive growth trajectories, supported by key sustainability themes. The divestment of Omega will further improve our financial profile.

Today’s announcement is yet a further example of our approach to optimising our assets and successfully divesting businesses at multiples higher than the Group as a whole. This disposal, in conjunction with the share buyback programme, delivers clear value for shareholders, whilst also allowing us to take advantage of new growth opportunities for our core businesses, in line with our purpose. 

I would like to thank all of our Omega employees for their contribution to Spectris over the years and wish them well in the next stage of their journey.”

Arcline Investment Management is a growth-oriented private equity firm with $4.4 billion in cumulative capital commitments. Arcline seeks to invest in technology-driven, meaningful to the world industrial businesses that enable a better future. www.arcline.com