Acquisition of Norfolk company opens up fresh markets for SDI
Leading analyst finnCap has raised its target price for Cambridge-based SDI Group by 25 per cent from 60p to 75p after another shrewd acquisition by the AIM-quoted business.
SDI has agreed to buy Norfolk company Chell Instruments which specialises in the design, manufacture and calibration of pressure, vacuum and gas flow measurement instruments for sectors such as aerospace, vehicle aerodynamics, gas and steam turbine testing and power generation.
SDI is paying £4.3 million plus an additional cash payment for net assets at completion.
SDI Group designs and manufactures scientific and technology products for use in digital imaging and sensing and control application.
For the year ended December 31, Chell achieved revenue of £4.7m, gross profit of £2.5m and profit before tax of £0.78m.
The SDI board says it has identified areas within Chell that have the potential for growth using the strong management team the company has recruited over the years. The deal is expected to be earnings enhancing in its first full year of ownership.
SDI chairman Ken Ford said: “Acquiring Chell Instruments is another step in our group growth strategy. It is a complementary fit providing potential areas for growth. The acquisition is in line with our previously announced strategy of organic and acquisitive growth.”
Anchored in North Walsham, Chell was founded in 1976 and employs 34 staff. Of those, 30 are either fully qualified engineers or in training to achieve that status.
Around 76 per cent of Chell’s sales are to the UK with the balance exported. It will be part of SDI Group’s Sensors and Control reporting segment.
SDI has funded the deal from existing cash resources and bank debt. In agreement with HSBC Bank plc, SDI has also taken a three-year amortising term loan of £4.8m to add to a senior facility of £5m which is not fully drawn.
The company expects to report its results for the six months to the end of October on December 17.
PEM Corporate Finance in Cambridge acted as lead adviser to Chell on the sale of the business.
Philip Olagunju, director at PEM Corporate Finance said: “PEMCF carried out an extensive marketing exercise on this deal, speaking to financial and trade buyers from around the world.
“From the very start we found SDI to be efficient, transparent, realistic and pragmatic, and I’m confident that Chell will go from strength to strength as part of the SDI family.”
Legal advice to the vendors was provided by Paul Warman at Leathes Prior Solicitors.