Acquisition of business & assets of Buck & Hickman (5603N)

TIDMBRAM TIDMTPK

RNS Number : 5603N

Brammer PLC

02 September 2011

THIS ANNOUNCEMENT (AND THE INFORMATION CONTAINED HEREIN) IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA OR AUSTRALIA, JAPAN OR SOUTH AFRICA OR ANY JURISDICTION IN WHICH SUCH PUBLICATION OR DISTRIBUTION IS UNLAWFUL.

2 September 2011

Brammer plc ("Brammer", the "Company" or the "Group")

Acquisition of the business and assets of Buck & Hickman for GBP27.6 million

Introduction

Brammer, the pan-European added value technical distributor, is pleased to announce that it has conditionally agreed to acquire the business and assets of Buck & Hickman for a total cash consideration of GBP27.6 million on a debt-free, cash-free basis from Travis Perkins PLC (the "Acquisition"). In addition, Brammer has separately announced today a placing of 10.535 million new ordinary shares, representing 9.9 per cent. of the Company's total issued share capital, to raise GBP25.3 million (GBP23.9 million net of expenses relating to the Placing and the Acquisition) (the "Placing"), the proceeds of which will be used to partially fund the cash consideration for the Acquisition, with the balance being satisfied through borrowings from existing facilities.

Overview of the Acquisition

Buck & Hickman is a UK distributor of industrial products, operating predominantly in the Tools and General Maintenance MRO market. Founded in the 1830s, the business was acquired by BSS Group plc in April 2007 before becoming part of Travis Perkins PLC, following the latter's acquisition of BSS in December 2010.

Buck & Hickman offers a range of over 60,000 branded and own-brand industrial and maintenance products, with just under 14,000 of those products bearing its proprietary industrial brand, 'Roebuck'. The key focus of the product range is hand and power tools, janitorial, health & safety and personal protective equipment ("PPE") items. Buck & Hickman has over 18,000 customers, of which approximately 9,000 have made purchases within the last 12 months, ranging from multinationals to small and medium sized enterprises. Customers are serviced through a nationwide network of 28 branches and a 90,000 square foot national distribution centre in Coventry, together with its own fleet of approximately 90 commercial vehicles.

Sales channels include national accounts (of which Buck & Hickman has approximately 70), local accounts, trade counters, online and catalogue. In addition, Buck & Hickman also provides a range of value added services, such as inventory management, expenditure control, and on-site store management.

In the year ended 31 March 2011, Buck & Hickman generated revenues (including intercompany sales) of GBP94.8 million (2010: GBP80.7 million), adjusted EBTIDA of GBP1.9 million (2010: GBP0.17 million) and adjusted operating profit of GBP1.0 million (2010: loss of GBP0.6 million). Revenue and adjusted EBITDA for the 12 months ending 31 December 2011 are forecast by Buck & Hickman's management team to be approximately GBP105.0 million and GBP3.2 million respectively. As at 31 March 2011, Buck & Hickman had net assets of GBP32.8 million and gross assets of GBP50.3 million.(2)

Background to and reasons for the Acquisition

Brammer's strategy is to focus on the continuing development and growth of the Group's core distribution business as a pan-European market leader. The proposed acquisition of Buck & Hickman supports this strategy and provides the Group with:

-- a top five presence in a fragmented UK Tools and General Maintenance market that the Directors estimate to be worth approximately GBP2.2 billion per annum;

-- increased critical mass in the European market, within which the Continental European market is thought by the Directors to be worth at least EUR10.0 billion, enabling cross-selling opportunities from within the Group's existing customer base;

-- a number of cross-selling initiatives from:

- an extended product range, including the well-regarded, own-brand "Roebuck" products;

- leveraging sales of the extended product range through the Group's existing pan-European distribution channels;

- access to a large number of new Buck & Hickman customers, including those in key markets sectors such as aerospace, construction and rail where Brammer is currently under-represented;

-- enhanced geographic coverage in the UK and critical mass from the integration of two branch networks; and

-- expertise and depth of experience from people with strong product knowledge.

The Board has put together a detailed integration plan, through which it has identified annualised synergies of GBP7.5 million to be realised by the end of 2013. Following the Acquisition, the Board's stated medium term return on sales target of 8 per cent. remains unchanged.

Synergies identified include:

-- economies of scale and supplier relationship management, which are likely to increase purchasing scale and enhance Brammer's buying power, are expected to improve supplier terms;

-- margin improvement through purchasing leverage and Roebuck brand substitution, which the Directors expect to contribute to an improvement in gross margin;

-- similarities in business processes and operations between the two organisations, with a strong fit in all areas, especially supply chain;

-- brand development, through the leveraging of Roebuck's strong reputation amongst industrial customers; and,

-- cost savings arising from the integration of branch networks, supply chain, inventory management and catalogue production.

The Directors believe the Acquisition will give Brammer a critical mass of suppliers and technically experienced staff, which it will use to improve significantly the growth rate of the nascent Tools and General Maintenance business, across Continental Europe.

Taking into account the effect of the Placing, the Directors expect the Acquisition to be earnings neutral in the current financial year and earnings enhancing in 2012 and thereafter (before amortisation and exceptional costs and on a weighted average basis).

Principal terms of the Acquisition

The total consideration payable for the Acquisition is GBP27.6 million, which will be satisfied in full and in cash on completion. The consideration is being partially funded by the proceeds of the Placing, which is expected to raise GBP25.3 million (GBP24.9 million net of expenses), with the balance being satisfied through borrowings from existing facilities. The completion of the Acquisition is expected to take place by the end of September 2011.

Commenting on the Acquisition, Ian Fraser, Chief Executive Officer of Brammer, said:

"Buck & Hickman is an excellent strategic acquisition for the Group, providing us with the opportunity to enhance our position significantly in the approximate GBP2.2 billion UK Tools and General Maintenance MRO market. It will also increase our critical mass and generate additional value from cross-selling initiatives in the larger European market place, which is hugely fragmented, and which we estimate to be worth at least EUR10.0 billion per annum. We look forward to working alongside Buck & Hickman's highly experienced and knowledgeable team. I am confident that together we can drive the business forward and that Brammer will be a stronger group as a result."

Enquiries:

Brammer plc [phone]

David Dunn, Chairman

Ian Fraser, Chief Executive Officer

Paul Thwaite, Group Finance Director

Investec Bank plc [phone]

Chris Treneman

James Rudd

Peel Hunt LLP [phone]

Julian Blunt

Andy Crossley

Hudson Sandler [phone]

Andrew Hayes

Andrew Leach

Notes

1. The statements in this announcement regarding the enhancement of earnings per share do not constitute profit forecasts nor should they be interpreted as meaning that the earnings per share of the Company for the current or future years will necessarily match or exceed the historical published earnings of the Company

2. Financial figures for Buck & Hickman are extracted from unaudited management accounts and other financial sources provided by Buck & Hickman

This information is provided by RNS

The company news service from the London Stock Exchange

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