Plexus coughs up £0.74m for minority share in KMS

Oil and gas engineering services business Plexus Holdings has made an investment of £0.74m to acquire a 49% interest in independent precision engineering business KMS, it announced on Monday.

The AIM-traded firm said the transaction was in line with its strategy to position Plexus as an intellectual property-led company, based around its ‘POS-GRIP’ friction grip method of engineering with a design, development and now a machining capability.

KMS was founded in 2001, and had grown to become a specialist subcontracting manufacturer in precision engineering for the oil and gas industry, which Plexus said provided “world-class” engineering solutions and manufacturing services for complex components and assemblies.

It supplied a range of blue-chip international clients, including Schlumberger, Halliburton, GE Oil & Gas, NOV and Weatherford.

Following the sale of its niche wellhead exploration equipment services business for jack-up applications to TechnipFMC in February, Plexus said it was now focused on commercialising and exploiting its existing intellectual property, as well as developing new POS-GRIP-enabled products either organically or with partners such as TechnipFMC, with whom the firm had entered into a collaboration agreement.

It said that, as well as a “best in class” jack-up exploration wellhead that had been successfully used on more than 350 wells worldwide, Plexus had developed a suite of POS-GRIP-enabled products for larger markets such as surface production, subsea production and exploration and well abandonment and decommissioning.

It was anticipated that KMS would provide Plexus with additional means by which to machine bespoke equipment for new applications and technologies as well as for research and development testing, and would potentially enable Plexus to more effectively supply specific markets.

Plexus said it was acquiring its 49% interest in KMS by means of a subscription for new shares in KMS.

KMS intended to use the proceeds from the transaction to expand existing capacity, and fund other growth initiatives.

For example, KMS recently acquired a new large bore machine which had already resulted in a “significant” expansion in capacity.

The company reportedly intended to use around £0.31m of the proceeds arising from Plexus' investment in settlement for that piece of machinery.

Under the terms of the transaction, Plexus would be entitled to future distributions and dividend payments, which would provide an annual return on the investment, subject to KMS' profitability, in addition to any capital appreciation in the value of Plexus' 49% shareholding.

An additional cash payment of up to £0.15m could be payable by Plexus to the current owners of KMS, subject to the future performance of KMS in the year ending 31 December.

“As a highly experienced engineering company based in Aberdeenshire with a blue-chip customer base, KMS shares many similarities with Plexus,” said Plexus chief executive officer Ben Van Bilderbeek.

“We already have first rate intellectual property in the form of our POS-GRIP technology, and now thanks to today's transaction, we are further able to support our programme to expand the application of our proprietary technology throughout the oil and gas supply chain and beyond into areas such as geothermal and decommissioning.”

Van Bilderbeek said that, having established its jack-up exploration wellhead business as the “dominant supplier” to the North Sea high pressure/high temperature (HP/HT) market, Plexus was familiar with challenges the sector was facing.

“Therefore, we look forward to working with and supporting the KMS team going forward, as we look to grow our business substantially over the coming years.”