Acquisition of Spencer Aerospace
Updated : 07:00
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS DEFINED FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014 WHICH FORMS PART OF DOMESTIC LAW IN THE UNITED KINGDOM PURSUANT TO THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 ("UK MAR"). UPON PUBLICATION OF THIS ANNOUNCEMENT THIS INFORMATION IS NOW CONSIDERED IN THE PUBLIC DOMAIN.
9 June 2022
Acquisition of Spencer Aerospace
Significant advancement in Senior's strategic focus on fluid conveyance technology
Senior plc ("Senior" or "the Group") has signed a definitive agreement to acquire substantially all of the assets of Spencer Aerospace Manufacturing, LLC(1) ("Spencer Aerospace" or "the Company"), a leading manufacturer of highly engineered, high-pressure hydraulic fluid fittings for use in commercial and military aerospace applications.
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 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."
Senior has agreed to pay £48m(2) ($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.
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(3) in the first full year of ownership.
The acquisition is expected to complete in Q3 2022, subject to customary closing conditions.
A presentation for analysts and investors will be made available on Senior's website at: https://www.seniorplc.com/investors/presentations.aspx
Notes
For the year ended 31 December 2021, the Company generated revenue of $5.9m and a trading loss before tax of $2.6m. This reflected the impact of the pandemic where civil aircraft production rates were reduced. Gross assets of the business at 31 December 2021 were $12m.
(1) | Senior is buying substantially all of the assets of Spencer Aerospace Manufacturing, LLC from Spencer Aerospace Manufacturing, LLC, a subsidiary of Pivotal Manufacturing Group, LLC. |
(2) | All Pound Sterling equivalent amounts are calculated assuming US Dollar to Pound Sterling exchange rate of $1.25:£1. |
(3) | Adjusted earnings per share, as defined in Senior's Annual Report and Accounts 2021, is stated before amortisation of intangible assets from acquisitions, restructuring income/costs, corporate undertakings costs, net of associated tax and before exceptional non-cash tax. |
The person responsible for arranging the release of this announcement on behalf of Senior is Andrew Bodenham, Group Company Secretary.
Further information
David Squires | Group Chief Executive, Senior plc | +44 (0) 1923 714 738 |
Bindi Foyle | Group Finance Director, Senior plc | +44 (0) 1923 714 725 |
Gulshen Patel | Director of Investor Relations, Senior plc | +44 (0) 1923 714 722 |
Alex Lusty | Finsbury Glover Hering | +44 (0) 7795 950 497 |
About Senior
Senior is an international manufacturing group with operations in 12 countries. It is listed on the main market of the London Stock Exchange (symbol SNR). Senior designs and manufactures high technology components and systems for the principal original equipment producers in the worldwide aerospace & defence, land vehicle and power & energy markets. Further information on Senior plc may be found at: www.seniorplc.com
About Senior Aerospace
Senior Aerospace provides high technology products and systems for demanding applications in aerospace & defence and adjacent markets. Our product portfolio spans a wide range of fluid conveyance and thermal management components and sub-systems, as well as complex structural parts and assemblies, for fixed-wing and rotary aircraft, aero-engines, spacecraft and a variety of other industrial applications. With a global footprint, Senior Aerospace manufactures proprietary designed and build-to-print products for customers around the world that meet today's challenges and is actively engaged in developing products and capabilities for a low carbon sustainable future.
About Spencer Aerospace
Spencer Aerospace is an industry leader in high-precision hydraulic fluid fittings for use in commercial and military aerospace applications. The company specializes in source controlled, standard and proprietary fittings and offers a range of engineering, manufacturing, design and testing capabilities.
Cautionary Statement
This announcement contains certain forward-looking statements. Such statements are made by the Directors in good faith, based on the information available to them at the time of the announcement, and they should be treated with caution due to the inherent uncertainties underlying any such forward-looking information.
Purpose of this announcement
This announcement is made in accordance with the Group's disclosure obligations pursuant to Chapter 10 of the UK Financial Conduct Authority's Listing Rules. The acquisition constitutes a class 2 transaction for the purposes of the Listing Rules and, as such, does not require shareholder approval.
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