Another payment, capped at £2.55M, could become due during the five years following the acquisition said Carr’s. Any additional payment will be linked to the growth in earnings before interest, tax, depreciation and amortisation.
The North Shields-based engineering business, which employs 52 people, will join Carr’s engineering division. It’s management team, led by md Paul Stewart, will remain with the business.
‘Innovation to its customers’
Carr’s Milling ceo Tim Davies said the acquisition will help drive the firm’s innovation programme. “We are thrilled to acquire Chirton Engineering,” said Davies. “The business and its management team are recognised in their industry and Chirton is renowned for delivering quality product innovation to its customers.
“The business will contribute to the ongoing development of our innovation programme within our engineering division and we look forward to welcoming the new team into the group.”
Chirton provides value-added manufacturing and services to businesses operating in offshore oil and gas manufacturing. It recently expanded into component manufacturing for high-end motor manufacturers, such as McLaren, as part of a strategy of collaborative innovation with its core customer base.
Carr’s has an existing business operating in this sector, Clive Walton, which was acquired in 2012 and sits within the firm’s larger Bendalls engineering business, which also serves the oil and petrochemical sectors.
Investec analyst Nicola Mallard said the acquisition will boost Carr’s profit potential. “The deal will be earnings enhancing, even prior to any revenue synergies the group hopes to deliver in time,” said Mallard.
The revenue of the acquired business was about £4M and, like the group’s existing engineering business, it generates an earnings before interest and tax of more than 10%, noted Mallard. “We therefore expect the acquisition to be accretive in its first full year and will build this into any estimate revisions we may undertake next week when the group releases its interim figures,” she said.
Investec offered a ‘buy’ rating on Carr’s stock.
The business is due to report its interim results on Monday April 14.