Kentz To Buy US-based Valerus Field Solutions Business For $435 Mln

(RTTNews) - Kentz Corp. Ltd. (KENZ.L), the holding company of the Kentz engineering and construction group, Monday announced that it has entered into an agreement to acquire the US-based Valerus field solutions business for $435 million in cash, or 266.5 million pounds, subject to a working capital adjustment.

Kentz shares are up about 9 percent in the morning trade on the London Stock Exchange.

Kentz sees the acquisition to be earnings enhancing in the first full financial year of ownership and expects it to generate a return on investment exceeding the Group's pre-tax cost of capital.

Valerus field solutions business, or Valerus FS, is a US-based integrated oil and gas surface facility solutions provider. Valerus FS is currently part of the Valerus Group, which is controlled and majority owned by TPG.

Kentz noted that the acquisition is consistent with its strategy to become a recognised market leader in providing highly skilled process engineering, EPCM and EPC services for small and medium sized oil and gas processing facilities.

The acquisition is expected to deliver increase in high value, as well as high margin contracts. According to Kentz, the deal will also result in gaining experienced people in gas handling and processing; with the the addition of 665 employees, including 198 personnel.

Christian Brown, chief executive officer of Kentz stated, "The Board of Kentz believes that, consistent with our strategy, the acquisition of Valerus Field Solutions will help to establish Kentz as a recognised market leader in providing highly skilled process engineering, EPCM and EPC services for small and medium sized oil and gas processing facilities worldwide. It also provides us with a significant presence in the growing US market."

Also, Valerus FS has increased exposure to Latin American markets, with established presence in Brazil, Mexico, Colombia and Venezuela.

For the full year ended December 31, 2012, Valerus FS reported EBITDA of $51.5 million, on revenue of $492.9 million. Outlook for 2014 is positive with 60 percent of projected 2014 revenues under contract.

The deal is expected to be funded though a new $400 million term loan, with the balance satisfied from either Kentz's existing cash resources or a new multi-currency $160 million revolving loan facility.

The acquisition is conditional on approval of Kentz's shareholders. Kentz said it has received an irrevocable undertaking from Kerbet Ltd., its largest shareholder, to vote in favour of the Resolution to be proposed at the Extraordinary General Meeting, which is expected to be held on January 2, 2014.

In London, Kentz shares are currently trading at 631.5 pence, up 49.5 pence or 8.51 percent, on a volume of 480,930 shares.