16
JULY 2024
SPECTRIS GROUP
PLC
ACQUISITION OF MICROMERITICS
INSTRUMENT CORPORATION (MICROMERITICS)
Spectris plc (SXS: LSE), the expert
in providing insight through precision measurement, today announces
that it has agreed to acquire Micromeritics Instrument Corporation
(Micromeritics) for an upfront consideration of $630 million (£485
million) plus a deferred element up to $53 million (£41 million)
based on agreed financial performance metrics in 2024 and 2025.
This consideration equates to a multiple of under 14x based on
expected 2024 EBITDA of $35 million (£26.9 million) and run rate
cost synergies of $12 million (£9.2 million).
·
Consistent with our Strategy for Sustainable
Growth, the combination of Micrometrics and Malvern Panalytical
will create a global market leader in particle characterisation for
advanced materials analysis with a comprehensive, fully integrated
and differentiated offering with strong competitive
positioning
·
Micromeritics is a proven, high-growth,
high-margin business with forecasted mid-teens revenue CAGR over
the medium-term and will be immediately accretive to Group growth
rates and margins
·
Strong value creation opportunity:
o Highly synergistic with run-rate cost synergies of $12 million
(£9.2 million) with significant revenue synergy upside
o Accretive to earnings per share in the first year, post
completion
o ROIC
is expected to exceed our cost of capital in the third full year
post completion, with strong double-digit returns
thereafter
·
The acquisition is to be funded by a combination
of existing cash resources and new external debt, utilising
Spectris' strong balance sheet. We would expect leverage for
the Spectris Group to be c.1x by the end of 2025 including the
completion of the remainder of our £150 million buyback programme
and acquisition of SciAps
·
The transaction is expected to complete in the
third quarter
MICROMERITICS IS A HIGH-QUALITY, HIGH-GROWTH
BUSINESS
Headquartered in Norcross, Georgia,
with 470 employees, Micromeritics is the world leader in analytical
instrumentation for the physical characterisation of particles,
powders, and porous materials across research, product development,
and quality control. Micromeritics has a strong portfolio of
industry-leading, gold-standard technologies, covering a wide range
of fundamental particle measurements including: surface area;
particle activity; porosity; powder flow; and density.
Micromeritics also has a strong track record of innovation and
pipeline of new products.
Micromeritics serves a diverse
customer base in a range of end markets, with over 80% of sales
sold directly to customers, with c.40% of sales in clean-tech which
is growing at a rapid pace including batteries, hydrogen/fuel
cells, carbon capture/storage; and c.60% of sales in
industrial-tech covering the material science of chemicals,
pharmaceuticals and semiconductor, plus a diverse set of other
high-growth industrial technology end markets.
Micromeritics has a proven track
record and is growing rapidly, delivering a sales CAGR of 17% for
the period 2021-2024E and is expected to grow double-digit, on a
standalone basis over the medium-term. Micromeritics'
exposure to structural growth markets of industrial-tech and
clean-tech is expected to provide further strong growth
opportunities.
Operating at the premium end of its
markets, Micromeritics is a high-margin business expecting to
generate an EBIT margin of 25% in 2024 which is expected to
increase over the medium-term as the company grows.
Micromeritics is expected to deliver EBIT of $33.4 million (£25.7
million) in 2024.
COMPELLING STATEGIC RATIONALE
This acquisition is strongly aligned
with Spectris' Strategy for Sustainable Growth. Together with
Malvern Panalytical, the combination will create the leading
particle characterisation business for advanced materials analysis,
with a highly differentiated and fully integrated offering.
The addition of Micromeritics'
technologies alongside Malvern Panalytical's capabilities -
encompassing particle distribution, particle count and zeta
potential - will enable the comprehensive characterisation of
particles by detailing their size, count, surface properties and
behaviour, thus supporting the entire customer workflow from
R&D to QC/QA applications.
With highly complementary product
portfolios, the combination will also strengthen Spectris' offering
in the rapidly growing, clean tech markets and will deliver
significant synergies.
In addition to the recently
announced acquisition of SciAps, the acquisition of Micromeritics
further broadens Malvern Panalytical's customer offering and
strengthens Spectris Scientific's product portfolio. In the
Scientific division, where Malvern Panalytical sits alongside
Particle Measuring Systems and Servomex, we are bringing together a
number of complementary precision instruments businesses.
Each business has leading positions at the premium end of common
markets, where their deep domain knowledge and capability along
with high levels of customer centricity play a vital role in
solving some of our customers' toughest challenges.
Furthermore, as one division, this
provides real opportunities to collaborate by sharing best practice
in areas like operational effectiveness, including common IT
systems and the Spectris Business System as well as Research &
Development.
STRONG SYNERGY POTENTIAL
The alignment of the two businesses
is expected to drive substantial cost synergies and economies of
scale across a number of areas including sourcing, go-to-market,
and back-office functions. We estimate the annual uplift in
EBITDA associated with the cost synergies on a run rate basis to be
in the region of $12 million (£9.2 million).
We also anticipate the amount of
additional EBITDA generated from revenue synergies to be broadly
equivalent to that derived from cost synergies.
Malvern Panalytical and
Micromeritics are natural partners, frequently referenced together
in academic research, and with their instruments sitting
side-by-side in the same customer facilities. The combination
will provide the broadest particle characterisation offering in the
market, with a single suite of integrated instruments, from a
single manufacturer, improving workflow efficiency and enabling
deeper analytical insights, helping to win totally new
customers.
There are also significant
opportunities to sell new instruments to existing customers that
only buy from Micromeritics or Malvern Panalytical today and from a
geographic and go-to-market standpoint. We expect to realise
synergies by leveraging the respective strengths of both companies
in key territories; Europe and Asia (where both have a strong
presence), Japan (which has a strong Malvern Panalytical presence)
and North America (where Micromeritics has a strong
presence). Additionally, we see an opportunity for
Micromeritics to benefit from Malvern Panalytical's position in
research and academia.
In terms of services and aftermarket
revenue, we anticipate increasing the level of coverage for
Micromeritics towards that of Malvern Panalytical (~30%), whose
complementary products have comparable levels of
complexity.
VALUE ENHANCING FINANCIAL PROFILE
The transaction is expected to
deliver strong financial returns:
·
Micomeritics revenue CAGR over the medium-term of
mid-teens is well ahead of our medium-term financial framework with
margins expected to be in excess of Spectris' medium-term target of
at least 20%
·
Accretive to earnings per share in the first year,
post completion
·
ROIC is expected to exceed our cost of capital in
the third full year post completion, with strong double-digit
returns thereafter
·
Transaction multiple of under 14x 2024E EBITDA
including run-rate cost synergies of $12 million (£9.2
million)
The acquisition will be funded by a
combination of new external debt and existing cash resources,
utilising Spectris' strong balance sheet. We would expect
leverage for the Spectris Group to be c.1x by the end of 2025
including the completion of the remainder of our £150 million
buyback programme and acquisition of SciAps.
PRESIDENT MALVERN PANALYTICAL
Upon completion of the transaction,
Terry Kelly, CEO and President of Micromeritics, will be appointed
President of Malvern Panalytical. In his role, Terry will
lead Malvern Panalytical and oversee the integration of both
Micromeritics and SciAps. He will be a member of the Spectris
Scientific leadership team, reporting to Derek Harding.
TIMETABLE AND REGULATORY
Completion is subject to customary
regulatory approvals and conditions with a targeted completion date
in the third quarter.
Commenting on today's announcement,
Andrew Heath, CEO of Spectris said:
"The acquisition of Micromeritics fits perfectly with our
strategy to build world-class businesses compounding growth and
generating strong value creation for our customers and
shareholders. Micromeritics is a
high-quality business with a strong track record of growth and
innovation with excellent growth prospects.
The combination of Micromeritics with Malvern Panalytical is
highly synergistic. It will create the global market leader
in particle characterisation for advanced materials analysis with a
differentiated offering and strong competitive positioning
in end markets benefiting from long-term, secular and
sustainability growth trends. Together with SciAps, this adds
to our confidence in being able to deliver against our medium-term
financial objectives of 6-7% growth and margins in excess of
20%."
Commenting on today's announcement,
Terry Kelly, President and CEO of Micromeritics, said:
"Our market-leading technologies are used daily in the labs of
the world's most innovative companies and institutions. Our
end markets are strong and growing, and we have a robust new
product pipeline.
The combination with Malvern Panalytical is very powerful. I
am really looking forward to working together to unlock more
answers for customers and provide expert applications and technical
support that cannot be matched by any other company or combination
of companies. Becoming part of the Spectris Group is a
perfect fit for our technologies, our customers, and most
importantly our people."
LISTING RULES DISCLOSURES
The proposed acquisition constitutes
a Class 2 transaction for the purposes of the UK Financial Conduct
Authority's Listing Rules
During the full year ended 31
December 2023, Micromeritics generated sales of $117 million (£90
million) and EBIT of $30.5
million (£23.5 million), and the business had gross assets
of $173 million (£133 million).
Analyst presentation
A conference call for analysts and
investors will be hosted by Andrew Heath, Chief Executive, and
Derek Harding, Chief Financial Officer, at 08.00 BST today to
discuss this statement.
To view the webcast please use the
following link:
https://www.investis-live.com/spectris/668fea313b800c54001c644e/gaeet
To participate in the Q&A,
please dial +44 20 3936 2999 - Participant code: 342740.
For and on behalf of Spectris
plc.
LEI number:
213800Z4CO2CZO3M3T10
END
Contacts:
Spectris plc
Mathew Wootton
Investor Relations
Director
+44 7500 078 880
Teneo
Martin Robinson/Giles
Kernick
+44 20 7353 4200
THIS ANNOUNCEMENT CONTAINS INSIDE
INFORMATION
This Announcement contains inside
information for the purposes of article 7 of the Market Abuse
Regulation (EU) 596/2014 which is part of UK law by
virtue of the European Union (withdrawal) Act 2018. The person
responsible for arranging for the release of this Announcement on
behalf of the Company is Rebecca Dunn, Company
Secretary.
About Spectris
Spectris combines precision with
purpose, delivering progress for a more sustainable world. We
provide critical insights to our customers through premium
precision measurement solutions combined with technical expertise
and deep domain knowledge. Precision is at the heart of what
we do - our leading, high-tech instruments and software equip our
customers to solve some of their greatest challenges to make the
world cleaner, healthier and more productive.
We are focused on two key divisions
- Spectris Scientific and Spectris Dynamics, which are placed
in technology-driven end markets, with strong fundamentals
and attractive growth trajectories. We have leading market
positions in premium segments and employ 7,000 people located in
more than 30 countries, all united behind our purpose to deliver
value beyond measure for all our stakeholders. For more
information, visit www.spectris.com.
About Micromeritics
Micromeritics Instrument Corporation
is the world's leading manufacturer of high-performance systems to
measure density, surface area and porosity, powder rheology and
catalyst activity. The company is headquartered in Norcross,
Georgia, USA with manufacturing sites in the U.S. and Europe, and
direct sales operations throughout North America, Europe, and
Asia.