LONDON, UK: Judges Scientific Plc, the group focused on acquiring and developing companies in the scientific instrument sector, announces that it has today acquired the entire issued share capital of Geotek Holding Limited and Geotek Coring Limited (together Geotek), a world leading developer and manufacturer of instruments used to measure and log various characteristics of geological cores and a supplier of related services.
The Board expects the Acquisition to be materially earnings enhancing in the current financial year.
The total consideration for Geotek is up to a maximum of £80 million plus excess cash, consisting of an initial cash consideration of £45 million, paid on completion and further contingent consideration of up to £35 million to be satisfied through a mixture of cash and new ordinary shares in the Company. The cash consideration for the Acquisition is being financed from a new £100 million club facility led by Lloyds Banking Group plc alongside Santander UK plc and Bank of Ireland.
Geotek specialises in high resolution, non-destructive analysis of geological cores to enable university researchers, mining companies and oil and gas operators to analyse, record and digitise information about cores they have extracted, through its proprietary range of Multi Sensor Core Logger (“MSCL“) instruments. Geotek comprises three divisions of broadly similar sizes consisting of:
· an instrument development and manufacturing business (“Instruments“);
· a core logging service business (“MSCL services“); and
· a gas hydrate business (“Coring“).
Geotek’s scientific environment is contiguous to GDS Instruments, another Judges subsidiary, and it is hoped that this will lead to positive interactions between the two companies.
Historical Financial Performance
Geotek’s average annual operating profit for the 3-year period ended 30 April 2020, adjusted to eliminate non-recurring items and to reflect Geotek’s ongoing cost base within Judges, amounted to £6.3 million.
Geotek’s combined accounts for the financial year to 30 April 2021 show revenue of £7.3 million and profit before interest and taxation of £1.5 million. Net assets amounted to £19.5 million, including cash of £11.6 million. Trading during the period was severely affected by the Covid-19 pandemic and management consider the 3-year average to be more representative of Geotek’s historic profitability.
This is the first acquisition by the Group that derives a substantial proportion of revenues from services. It will provide the Group with greater medium-term visibility but also reliance on a small number of large contracts.
Principal Terms of the Acquisition
The purchase price of Geotek consists of the following:
· The initial price, paid in cash at completion, amounts to £45 million (“Initial Consideration“);
· Potential further contingent consideration of up to a maximum £35 million (“Earn-out“) to be satisfied half in cash and half in new ordinary shares in Judges to be issued at a price of £76.80 per new ordinary share, Judges’ prevailing share price at the time of signing heads of terms with Geotek’s vendors.
· The Earn-out starts to become payable on achievement of a minimum adjusted EBIT of £6.4 million for the calendar year 2022 increasing pro rata on a 7:1 ratio until it reaches a cap when an adjusted EBIT of £11.4 million is achieved.
· An additional payment will also be due if there is an excess cash balance at the completion date over and above the ongoing requirements of the business. The Board expects any such payment to be covered by the cash inherited at the completion date.
Alex Hambro, Chairman of Judges, said: “This is the Group’s twentieth, and largest, acquisition. Geotek is a world leading business in a focused global niche, providing top-quality products and services which are essential for the improvement of geophysical knowledge. This cash generative and earnings enhancing acquisition fits within Judges’ disciplined acquisition strategy and we are delighted to welcome Peter, Quentin and Tony and all their colleagues to the Judges family.”
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