23rd May 2019 08:33
LONDON (Alliance News) - Shares in support services firm Serco Group PLC jumped Thursday after it announced it has acquired a "leading" US defence business for USD225 million from Alion Science & Technology Corp.
Serco was 8.4% higher at 131.30 pence in early trade.
Serco will buy the Naval Systems Business unit from Alion on a cash and debt-free basis for USD225 million, or GBP173 million.
The deal, expected to close in the second half of 2019, will be funded through a new debt facility up to GBP75 million and a share placing to raise up to a further GBP130 million.
Serco will place up to 111.2 million shares in order to raise the targeted GBP130 million to fund the acquisition through an accelerated bookbuild. Details of the pricing of the placing shares will be announced once the process closes.
For the year ended September, the unit generated USD336 million in revenue. It also held an order book of around USD600 million and a new business pipeline of over USD2 billion. In contrast, Serco explained its North American defence revenue in 2018 stood at USD453 million.
In 2018, Serco generated a pretax profit of GBP74.1 million on revenue of GBP2.84 billion.
The acquisition is expected to contribute "materially" to earnings in the first full year of ownership in 2020.
"This is an important step for Serco which materially adds to the scale and capability of our US defence business, and in particular to the maritime support segment," Serco Chief Executive Rupert Soames said.
"Serco employs some 6,000 people in North America, of whom 2,300 work in defence, and has been providing services to the US Navy for nearly 30 years, so we know this market well."
"NSBU, which employs around 1,000 people, brings world-class ship and submarine design, systems, and engineering services, production support and in-service sustainment capabilities, which are highly complementary to Serco's existing skills in ship modernisation, hardware integration and naval logistics," Soames added.
Soames continued: "The combined business will be a top tier supplier of services to the US Navy, which has recently announced plans to increase the fleet from 280 to 355 ships by 2034, and we see a long-term and growing demand for the capabilities that the combination of Serco and NSBU will be able to provide."
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