ATS to buy MW Process Automation- another new 52 week high.
ATS Automation to buy M+W Process Automation
2014-07-08 06:23 ET - News Release
Mr. Anthony Caputo reports
ATS TO ACQUIRE LEADING GLOBAL AUTOMATION SERVICES AND SOLUTIONS PROVIDER M+W PROCESS AUTOMATION
ATS Automation Tooling Systems Inc. has entered into a definitive agreement to acquire all shares of M+W Process Automation GmbH and ProFocus LLC, collectively M+W PA, a leading global provider of engineering-based automation services and solutions focused on the control, performance monitoring and measurement of critical production processes.
Headquartered in Germany and established 28 years ago, M+W PA addresses the needs of a wide spectrum of manufacturing and process-based industries, including automotive, pharmaceutical, biotechnology, chemicals, oil and gas, and food, with services that include consulting, system engineering, integration, life cycle management, process control and manufacturing execution systems, as well as enterprise programs, where M+W PA acts as the main automation contractor.
The acquisition is aligned with ATS's stated strategy of scaling its position in the global automation market by adding to its services and life cycle management capabilities across several core elements of the customer value chain. The addition of M+W PA is expected to enhance growth opportunities in both new markets and with existing customers.
"M+W PA's capabilities complement ATS's solutions in strategic customer markets and open new opportunities in several attractive industries," said Anthony Caputo, ATS chief executive officer. "We welcome M+W PA's highly skilled people, global and local customers, high-value service offerings, scale, and worldwide presence to our automation business, and look forward to continued successful collaboration with M+W Group."
M+W PA's work force of 1,000, including approximately 750 engineers, serves customers from 51 locations in 16 countries around the world, and is led by a highly experienced management team based in Europe and the United States. As part of ATS, M+W PA is expected to continue to enhance its portfolio, serve existing M+W PA and ATS customers, and build new customer relationships together with ATS.
"We are pleased that our automation business is becoming part of ATS," said Dr. Olaf Berlien, chief executive officer of M+W Group. "ATS is ideally suited to maximize the business area's potential for further worldwide growth. As we will be focusing more on our core business the change of ownership will be very beneficial both for M+W and all employees of the automation business."
In calendar 2013, M+W PA had revenues of approximately 166 million euros and earnings before interest, taxes, depreciation and amortization of approximately 20 million euros. Over the past three years, M+W PA's revenues have grown organically at an average annual rate of approximately 19 per cent. Sales by industry segment in 2013 were 41 per cent automotive, 26 per cent chemicals, 13 per cent pharmaceuticals and biotechnology, 3 per cent oil and gas, and 17 per cent other industries, including food and beverage, water, waste water, consumer care, paper, metal, and semiconductor. Europe accounted for approximately 70 per cent of global sales, North America 27 per cent and Asia 3 per cent. In calendar 2013, M+W PA's order bookings were 188 million euros, and at the end of May, 2014, it had approximately 120 million euros of backlog.
Subsequent to the completion of the transaction, the company expects M+W PA to benefit from the adoption of ATS best practices in approach to market, key account management, front-end-of-the-business processes, performance management and corporate strategy. M+W PA's significant capability and market position are expected to benefit ATS and its strategy to grow its business. The company expects meaningful revenue synergies through an expanded ATS offering, which will now include M+W PA's process controls, software integration, MES, remote monitoring, life cycle management, modelling and simulation capabilities. M+W PA provides an imbedded engineering, service and sales force, with early insight into customer preferences, developments, problems and programs, allowing M+W PA to act as first responders for postautomation services and equipment maintenance. M+W PA is expected to have increased opportunity to expand its MAC offering by utilizing ATS on a subcontractor basis to address capability gaps across a number of industries. Further, both ATS and M+W PA are expected to have opportunities to engage customers on a more comprehensive basis. Cost synergies are expected to be nominal.
The purchase price based on enterprise value of approximately 248 million euros ($362-million at current exchange rates) is subject to net debt and working capital adjustments and will be financed from a new fully committed $600-million credit facility underwritten by Bank of Nova Scotia and Toronto-Dominion Bank to be available at closing. With net assets of approximately $20-million, management expects that $342-million of the purchase price will be allocated to goodwill (approximately 60 per cent to 65 per cent) and intangibles (approximately 35 per cent to 40 per cent), subject to completion of the purchase price allocation, which may take up to one year to complete subsequent to transaction closing. Amortization of intangibles is expected to be $10-million to $14-million per year. In addition, the first six months after acquisition will include substantially all of the amortization of acquired backlog which is expected to be in the $7-million-to-$10-million range.
On a presynergy basis, the company expects the following:
- Dilution at the earnings per share level in the high single digits assuming two quarters of inclusion of M+W PA's results in fiscal 2015, due to the incremental amortization of backlog, which is not expected to continue beyond fiscal 2015;
- In fiscal 2016, EPS accretion in the high single digits;
- On a cash flow per share basis, in fiscal 2015 the company expects immediate accretion, in the high single digits;
- Cash flow per share accretion in fiscal 2016 is expected to be in the mid-teens.