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Renew Holdings to buy Scottish rail contractor QTS, placing announced
Engineering services group Renew Holdings has announced plans to buy Scottish rail contractor QTS for £80m in cash, a deal it will part-fund through a placing.
Renew said QTS is an "excellent fit" with its acquisition strategy, noting that it has a longstanding relationship with Network Rail.
The AIM-listed company expects the acquisition to increase its market share, footprint and specialist positioning in the rail market, which has high barriers to entry.
Renew plans to part-fund the deal by placing just under 12.7m new ordinary shares at 355p each with new and existing investors to raise £45m. The balance of the consideration will be funded from new debt facilities provided by its existing bank HSBC, comprising a £35m four-year term loan, a £20m revolving capital facility and a £10m overdraft facility.
Chief executive officer Paul Scott said: "We are delighted to welcome the management and staff of QTS to the Renew group. This is a very complementary and earnings enhancing acquisition that aligns with our established and proven strategy, strengthening our position in the UK infrastructure market.
"QTS has grown to become a leading and well respected brand in the rail sector and we very much look forward to supporting its ambition for continued growth including opportunities via collaboration across our expanded range of services in this sector."
Renew said the placing will allow it to maintain a strong balance sheet with a conservative gearing level. On a pro forma enlarged group basis, its net debt will represent less than one time historic EBITDA.
The deal is expected to complete on Thursday, following completion of the placing.
At 1030 BST, the shares were down 4.4% to 395p.