Hunting - thoughts on the first significant acquisition
Hunting has announced the acquisition of National Coupling Company Inc. ("NCC"), a leading developer and manufacturer of subsea hydraulic equipment, for an initial cash consideration of US$55m on completion and an additional US$5m to be paid after one year provided that certain financial performance targets are achieved.
NCC’s 2008 normalised profits before tax were US$4.6m with an EBITDA of US$6.5m. These are after adjusting for non-recurring items of US$3.1m. The net assets and gross assets of NCC at 31 December 2008 were US$15.6m and US$20.8m respectively. So seemingly not that cheap on a PER basis (just under 16x historic post tax earnings!) relative to current quoted valuations – cash rich, high margin Rotork trades at just under 14x 2008 numbers. NCC must have some good technology! It is expected the acquisition will be earnings enhancing in 2009 – we estimate approx 1.6p of additional earnings per share…