RNS Number : 4298Q
26 February 2021
26 February 2021
('Severfield' or the 'Group')
Acquisition of DAM Structures Limited, an innovative steel
fabrication company offering a comprehensive design, manufacturing
and construction service
Severfield plc, the market leading structural steel group,
announces that it has entered into an agreement to acquire 100% of
the share capital of DAM Structures Limited ('DAM Structures'), an
innovative steel fabrication company for a net initial
consideration of GBP12.0m payable in cash on completion (the
'Acquisition'). A further maximum deferred consideration of GBP7.0m
is payable in 2022, together with a performance-based contingent
consideration of up to GBP8.0m, which would be payable over a
-- The Acquisition will give Severfield immediate access to attractive, complementary market sectors with strong
growth potential including the propping, railway and steel piling markets. Combining the businesses will enhance
Severfield's position as the UK's broadest structural steel services group.
-- The Acquisition will provide the Group with new clients from which to grow its existing services and gives
Severfield a platform to widen its supply chain into its existing client base.
-- For the twelve months to 31 October 2019, DAM Structures recorded audited revenues of GBP22.3m and a profit
before tax of GBP1.9m. The value of the gross assets as at 31 October 2019 was GBP14.2m.
-- The Acquisition consideration will be funded by a combination of cash reserves and a term loan.
-- The Acquisition is anticipated to be earnings enhancing in its first full year of operation.
Strategic rationale for the Acquisition
The Board of Severfield believes that DAM Structures is an
attractive acquisition opportunity. It is profitable, cash
generative, operates in complementary market sectors with strong
growth potential (including propping, railway and steel piling) and
offers the opportunity to broaden and deepen existing and new
customer relationships in the construction and railway sectors. DAM
Structures is highly regarded by its clients and presents a number
of opportunities for further profitable growth.
The core business of DAM Structures involves on-site work with
main contractors and ground and demolition contractors, often prior
to the stage of project construction at which Severfield would
typically become involved. The Acquisition will allow Severfield to
establish relationships and contracts at an earlier stage in site
development with both existing and new customers.
Prior to the Acquisition, DAM Structures was approaching its
maximum production capacity, which had the potential to constrain
its future growth. With the scale and capabilities of the Group,
the Acquisition will facilitate an immediate increase in the
production capacity of DAM Structures, enabling the company to
realise the growth opportunities which have been identified.
Entrance into high growth markets
In addition to its core steel fabrication markets, DAM
Structures operates in the propping, railway and steel piling
markets. Within the railway sector, there are significant
opportunities for growth in the UK from Network Rail
electrification programmes and elements of the HS2 project that are
not currently addressed by Severfield, such as temporary and
permanent tunnel work. All these opportunities will complement the
Group's existing expertise in bridges and stations.
The Network Rail electrification programmes also offer
opportunities in the steel piling market for immediate and
significant growth over the next ten years in England, Scotland and
The propping business of DAM Structures provides bespoke
fabricated propping systems to demolition and groundwork
contractors, an area of the business which also represents a growth
opportunity for Severfield.
DAM Structures is being acquired for an initial net cash
consideration of GBP12.0m on a cash free, debt free basis assuming
a normalised level of working capital on completion. The total
initial consideration will be GBP17.0m, including cash and cash
equivalents of GBP5.0m, which is being funded by a combination of
Group cash reserves and a new term loan.
In addition, a maximum deferred consideration is payable in cash
in April 2022. This deferred consideration payment will amount to
GBP7.0m unless certain performance criteria have not been achieved,
in which case the deferred consideration payment shall be reduced
to GBP5.0m. An additional performance-based contingent
consideration is also in place which could further increase the
purchase price by up to GBP8.0m, if certain work-winning targets in
the railway and steel piling sectors are achieved over a five-year
period, ending in April 2026.
Alan Dunsmore, Chief Executive Officer, Severfield
'This is a very exciting, highly complementary acquisition which
will help the Group continue to deliver on its strategic growth
objectives. DAM Structures will provide us with access to existing
and new customers earlier in the construction process as well as
access to new market sectors with strong growth potential including
the growing rail electrification sector. DAM Structures has an
established client base and proven track record of delivering
quality services and will fit in well with the Severfield culture
We look forward to working with the DAM Structures management
team on building new business opportunities together and driving
future growth from within the combined Group.'
Severfield Chief Executive Officer 01845 577 896
Group Finance Director 01845 577 896
Jefferies International Simon Hardy 020 7029 8000
Will Soutar 020 7029 8000
Camarco Ginny Pulbrook 020 3757 4992
Tom Huddart 020 3757 4991
Notes to editors on Severfield:
Severfield is the UK's market leader in the design, fabrication
and construction of structural steel, with a total capacity of
c.150,000 tonnes of steel per annum. The Group has five sites,
c.1,400 employees and expertise in large, complex projects across a
broad range of sectors. The Group also has an established presence
in the expanding Indian market through its joint venture
partnership with JSW Steel (India's largest steel producer).
Notes to editors on DAM Structures:
DAM Structures is a Yorkshire-based innovative steel fabrication
company. The company's manufacturing capabilities as specialist
steel fabricators of both temporary and permanent works range from
plunge columns, plated beams, box sections, tower crane grillages,
small and large diameter propping works, façade retention towers,
portal framed structures, mezzanine floors, heavy duty stairs and
minor bridges. The company operates from its bespoke premises in
Carnaby and can currently process up to 300 tonnes of structural
steelwork per week for distribution across the UK. DAM Structures
currently has 76 employees.
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(END) Dow Jones Newswires
February 26, 2021 02:00 ET (07:00 GMT)