LONDON, UK: Light Science Technologies (AIM: LST) has entered into an asset purchase agreement with Fire Barrier International Ltd (FBIL), to acquire its Injecta Fire Barrier trade and assets (IFB).
The agreement is structured with the consideration being a deferred profit share agreement, with no initial or fixed outlays and the acquisition is expected to be near term cash generative for the Group.
Injecta Fire Barrier trade and assets (IFB), which has a proven track record in the passive fire protection market and a strong sales pipeline in place, has an agreement with Injectaclad Ltd to retrofit its industry disrupting fire resistant graphite barrier system, targeting a UK market that is potentially worth up to £50 billion.
As a high-margin, cash-generative trade, it is expected to strengthen the wider Group’s balance sheet and investment opportunities.
There are a number of synergies with the Group’s existing operations – especially within the CEM division, which has long standing relationships within the fire protection market, providing technology and equipment for the fire safety sector for over 10 years.
IFB will also advantage from the additional governance required under the Group’s plc umbrella, which is expected to be a strong selling point for potential clients. It will further benefit from the Group’s knowledge and knowhow within maintenance and installation operations.
The acquisition is part of the Group’s managed expansion to create a self-funded cash-backed group that is positioned to take advantage of the clear opportunities across all of its target sectors as and when the time is right.
IFB, which will be integrated into the Company’s newly incorporated subsidiary LSTH IFB Limited, has signed a new contract with Injectaclad Ltd to install Injectaclad, which expands when heated and is used to contain the spread of fire and smoke within building compartments, in accordance with UK fire regulations.
FBIL is currently wholly owned by LSTH’s CEO, Simon Deacon. LSTH will acquire IFB from FBIL on a contingent deferred consideration basis as described below, with no initial or guaranteed deferred consideration payments. Total maximum consideration payable is £1.75 million over a five year payout time limit (subject to suspension in the event of certain force majeure events).
Contingent consideration is calculated monthly as 50% of net profit after tax, excluding intra-group charges and non-cash acquisition accounting adjustments. Consideration is payable 30 days after the end of the month to which it relates, subject to a retention for a proportion of unpaid trade debtor amounts.
The acquisition constitutes a related party transaction for the purposes of the AIM Rules for Companies, as Simon Deacon is a Director and Substantial Shareholder of the Company and is the sole owner of FBIL.
Simon Deacon, Chief Executive Officer of LSTH, commented: “The Government has called for urgent action to make buildings safe across the UK, and there are over 40,000 buildings in UK which need urgent attention.
These include hotels, students’ accommodation, apartments, hospitals, government buildings. Fire safety is paramount – the Government has already allocated over £5 billion to replace dangerous cladding – a figure that is expected to increase significantly, with some contractors suggesting that a figure closer to £50 billion would be appropriate.
“We believe that with our knowledge in the industry and our installation teams across the Group, this new division, in a growing market with high demand, resolves a significant problem quickly and cost effectively – and more importantly keeps people safe.
“The cash-generative nature of the business will be valuable as we grow, and the synergies with existing operations make it a strong fit as part of our managed expansion. We are excited by the continued opportunities across the CEM and CEA divisions and, given wider government legislation and need for protective solutions, believe that IFB will be a strong addition that will be self-funding from day one.”