By Hugh Sharpe
Siebe’s plans to take over specialist controls and instruments maker Whessoe for £46m – a 72% premium over market value – could be the bargain of the year.
Sector watcher Stephen Williams, of stockbroker Williams de Broe, said: `Siebe has targeted a company where virtually all the spade-work for product change and recovery has been done. Now it has only to capitalise on that, and has the muscle to do so very effectively.
`Whessoe is a perfect fit, and it is impeccable logic on Siebe’s part to buy it,’ he said.
Whessoe has transformed from a heavy engineer making basic products such as pipes into a high-tech instruments business complementing Siebe’s £1bn-a-year sales control systems arm.
But changing product mix has taken a heavy toll of Whessoe’s resources including £10m spent on R&D for new lines and upgrades. These products will come to market in time for the new parent.
Siebe adds to its controls division Whessoe’s sophisticated fire detection, marine instrumentation, and tank gauging systems – the latter a world leader with more than 300,000 installations.
A gem in the portfolio is Coggins, the fuels manager software system subject to US defence contracts that will add $10m to group profits over two years.
In the City, Allen Yurko, Siebe’s chief executive is seen to be right in arguing that the £46m deal is excellent value.
He looks at more than 100 potential acquisitions every year, but few meet his exacting criteria. Whessoe is however the third UK business bought since last May, following Unitech and Satchwell Controls.
His aides say that while Whessoe’s margins may lag the 15% plus achieved by Siebe’s controls for a long time, they can be swiftly lifted above 10%.
Siebe’s spokesman denied savings will be made via hefty job cuts. `We aim to grow the company; we are not in the business of tearing it to pieces.’
Siebe sees huge expansion potential for Whessoe products in marketing through Siebe’s global network. And the parent’s purchasing muscle will slash costs of raw materials.
A bonus for Siebe is the greater Continental exposure the deal brings. Whessoe has plants in Norway and Italy as well as the UK. Sixty per cent of its sales are in mainland Europe.