28 July 2017
Forterra plc
Acquisition of the trade and assets of Bison Manufacturing Ltd
Forterra plc ("Forterra"), a leading UK producer of manufactured masonry products, announces that it has entered into an agreement to acquire the trade and assets of Bison Manufacturing Ltd ("Bison") from Laing O'Rourke plc ("Laing O'Rourke") for £20m. The acquisition will be funded from the Group's existing cash balances and is expected to complete in Q3 2017. Bison is the UK market leading manufacturer of hollowcore precast concrete flooring with a highly automated manufacturing facility located at Swadlincote, Derbyshire, which was opened in 2006.
This acquisition provides a unique and immediate opportunity for Forterra to take a leadership position in the UK precast concrete market whilst also expanding its currently capacity-constrained business. It also enables the Group to take advantage of the growing demand for these products in the residential, commercial and infrastructure markets, which are underpinned by Government initiatives to tackle the country's housing deficit and improve infrastructure. The Swadlincote plant is the largest and most technically advanced hollowcore manufacturing facility in the UK. In addition, the site includes a specialist precast facility capable of producing a wide range of bespoke precast concrete products. Forterra management estimate that it would cost in excess of £35m to replicate these assets on a greenfield site. Furthermore, the Bison brand is highly respected and valued in the precast market.
The Swadlincote plant has been operating at little more than 50% capacity utilisation. The acquisition will allow Forterra to expand its own precast concrete business to enable increased sales across our range of concrete product whilst benefiting from production efficiencies and economies of scale as the utilisation of the Swadlincote facility is substantially increased.
The acquisition also provides an opportunity to partner with Laing O'Rourke, a leading innovator and pioneer in off-site construction methods, and includes a five year commercial agreement for Forterra to supply hollowcore and other precast products to Laing O'Rourke.
The acquisition constitutes a Class 2 transaction for the purposes of the UK Financial Conduct Authority's Listing Rules. The gross assets that are subject to the transaction relate purely to tangible fixed assets and inventory at the Swadlincote site and had a net book value in the financial statements of the seller of £10.0 million at 31 March 2017. Revenue attributable to those assets was £22.8 million for the year to 31 March 2017, and the loss (at EBITDA level) attributable to those assets was £1.1 million.
Following completion, Forterra expects to generate a return on its investment in excess of its cost of capital by 2019 through efficiency improvements, proposed consolidation of production between sites and leveraging procurement synergies.
Stephen Harrison, Chief Executive, commented:
"The acquisition is a unique opportunity to transform Forterra's precast business in terms of scale and capability. We are acquiring well invested assets whilst at the same time solving the capacity constraints on growth within our own business. We gain a well-respected brand and will attain a market leading position as we look to grow the combined business.
"We are confident that the acquisition will create value for our shareholders".
Forterra will announce half year results for the six months ended 30 June 2017 on 1 August 2017.
Enquiries
Forterra plc: |
+44 (0) 1604 707 600 |
Stephen Harrison (CEO) |
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Shatish Dasani (CFO) |
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FTI Consulting: |
+44 (0) 20 3727 1340 |
Richard Mountain |
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Nick Hasell |
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Further information relating to the Company and its group can be found at www.forterraplc.co.uk
