LONDON, UK: Senior plc has signed a definitive agreement to acquire substantially all of the assets of Spencer Aerospace Manufacturing, LLC, a leading manufacturer of highly engineered, high-pressure hydraulic fluid fittings for use in commercial and military aerospace applications.

Senior has agreed to pay £48m ($60m) for Spencer Aerospace, comprising an initial consideration of £24m ($30m) in cash at completion and a further £24m ($30m) 12 months after completion. An additional £32m ($40m) is potentially payable in milestone amounts, dependent on the financial performance of Spencer Aerospace, during the period between completion of the acquisition and 31 December 2026.

Assuming the full consideration is payable, the Group expects to benefit from future tax relief valued at approximately £10m ($13m). The acquisition is expected to generate a return on invested capital in excess of Senior’s cost of capital in the third full year following acquisition.

Spencer Aerospace is based in Valencia, California and specialises in source-controlled, standard, and proprietary fluid fittings, helping customers to find solutions for their fluid conveyance challenges. Established customers include major North American OEMs and Tier 1 suppliers, supplying key single aisle and wide body platforms.

Based on the product approvals already undertaken and in progress, we expect the Company will be a strong platform for growth. Spencer Aerospace was founded in 2013 by its President Steven Spencer who has assembled an expert team with 300+ aggregate years of engineering and manufacturing experience. The current management team will remain with the Company following acquisition.

The fluid fittings products engineered and manufactured by Spencer Aerospace are in high demand from aerospace and defence customers around the world and are complementary to Senior’s existing advanced fluid conveyance product and system capabilities. The strong customer relationships that Senior has with OEMs, Tier 1 integrators, and aftermarket customers around the world, will open new opportunities for Spencer Aerospace.

The combined capabilities will provide greater access to developing market opportunities such as hydrogen infrastructure and fluid handling. There are strong synergies with Senior’s existing fluid conveyance businesses, and the combination of expertise will accelerate growth in aerospace and adjacent markets.

Commenting on the acquisition, David Squires, Senior’s Chief Executive Officer, said: “We are delighted to announce this acquisition and look forward to welcoming Steven and his team to Senior. Under his leadership, Spencer Aerospace has built impressive capabilities and an expanding product portfolio that addresses growth opportunities in our core markets.

While we already have some fluid fitting expertise within Senior, our customers have been strongly encouraging us to increase our presence in this area and our combined expertise and market reach will allow us to respond decisively and rapidly grow associated revenues.

This acquisition further enhances Senior’s industry-leading fluid conveyance capabilities and is an important step in our strategy to optimise our portfolio and maximise value for shareholders.

Beyond the immediate synergistic growth opportunities in our aerospace markets, I am excited by the potential of opening up further medium-term opportunities in adjacent markets served by our Aerospace and Flexonics Divisions.”

Steven Spencer, President of Spencer Aerospace, said: “We are very pleased to be joining forces with Senior plc. We have a shared vision about the critical role of fluid conveyance and are sure there will be a strong cultural fit with the Senior Plc team. Our combined resources will enable us to accelerate our product qualification activities and increase our speed to market with source-controlled fittings. I feel certain that our existing and new customers will benefit from this exciting collaboration.”

For the year ending 31 December 2022, the Company is expected to generate revenue of at least $12m and earnings before interest, tax, depreciation and amortisation of at least $1m. Given Spencer Aerospace’s healthy order pipeline and expected revenue acceleration, the Company is expected to deliver strong profitable growth over the coming years. The final earnout milestone would become payable upon Spencer Aerospace’s annual revenue reaching $40m, representing revenue growth to more than 300% of expected 2022 revenue.

The transaction will be funded using the Group’s existing borrowing facilities and is expected to be accretive to adjusted earnings per share in the first full year of ownership. The acquisition is expected to complete in Q3 2022, subject to customary closing conditions.