REG - Fisher (James) - Proposed disposal of RMSpumptools business

James Fisher And SonsAnnouncement

22/03/2024 07:00

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RNS Number : 9367H  Fisher (James) & Sons plc  22 March 2024

James Fisher and Sons plc
 

22 March 2024

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR
INDIRECTLY, IN OR INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD
CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH
JURISDICTION

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

For immediate release

 

22 March 2024

 

James Fisher and Sons plc

Proposed disposal of RMSpumptools business

James Fisher and Sons plc (FSJ.L) ("James Fisher" or the "Company" and,
together with its subsidiaries, the "Group"), today announces that it has
entered into an agreement for the sale of the entire issued share capital of
RMSpumptools Limited ("RMS") to ChampionX UK Limited, a wholly-owned
subsidiary of ChampionX Corporation ("ChampionX" or the "Purchaser") for a
total enterprise value of £90 million (the "Disposal").

Transaction highlights

·      Agreement to sell RMS to the Purchaser for a total enterprise
value of £90 million;

·      The Disposal value implies a multiple of approximately 7.4 times
RMS's estimated EBITDA for the 12-month period ended 31 December 2023;

·      After taking into account cash-like and debt-like items and
estimated transaction costs, the net proceeds are expected to be approximately
£83 million in cash, subject to certain customary closing adjustments (the
"Net Proceeds");

·      The Net Proceeds will be used to reduce leverage and strengthen
the Group's balance sheet. The Disposal is expected to support a reduction in
leverage towards a target range of 1.0 to 1.5 times Net Debt to EBITDA;

·      The Disposal is in line with James Fisher's strategy to simplify
and focus its portfolio through the sale of non-core assets;

·      While RMS is a leader in its markets, it is a product business
operating in the oil and gas industry that has minimal synergies with the rest
of the Group and does not strongly align with James Fisher's strategy of
focusing on maritime services to its core Energy, Defence and Marine Transport
markets;

·      The Disposal has been unanimously agreed by the board of
directors of James Fisher (the "Board") to be in the best interests of James
Fisher's shareholders;

·      The Disposal constitutes a Class 1 transaction for the purposes
of the Listing Rules and therefore requires the approval of James Fisher's
shareholders. A circular containing further details and timetable of the
Disposal will be sent to James Fisher's shareholders in due course; and

·      The Disposal is expected to complete early in H2 2024, subject to
approval by James Fisher's shareholders, merger control clearance from the
Saudi Arabian General Authority for Competition and certain other conditions.

 

Jean Vernet, Chief Executive Officer of James Fisher, said:

"The sale of RMS marks a significant step in simplifying our portfolio to
further strengthen our financial position and create a platform for sustained
recovery. We believe the transaction represents good value for our
shareholders, reflecting RMS's strong performance in recent years. The
disposal allows James Fisher to continue its strategy of focusing and
simplifying the Group, investing in the core portfolio and innovative new
technologies that will deliver future growth.

"We would like to thank the whole RMS team for their hard work and dedication
to James Fisher over so many years. With its business portfolio, this is a
great opportunity for ChampionX to build on RMS's success and for our
colleagues at RMS to benefit from the focus that this change of ownership will
bring."

 

Enquiries

 James Fisher and Sons plc
 Jean Vernet, Karen Hayzen-Smith  +44 20 7614 9503

 FTI Consulting                   (PR Adviser)
 Richard Mountain, Susanne Yule   +44 20 7727 1340

 

This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) No. 596/2014, as it forms part of UK domestic
law by virtue of the European Union (Withdrawal) Act 2018 (as amended).

The person responsible for making this announcement on behalf of the Company
is Jean-François Bauer, Group General Counsel.

 

 

James Fisher and Sons plc

Proposed disposal of RMSpumptools business

1.       Introduction

The Company today announces it has agreed to sell RMS to ChampionX for a total
enterprise value of £90 million, representing a multiple of approximately 7.4
times RMS's estimated EBITDA for the 12-month period ended 31 December 2023.
After taking into account cash-like and debt-like items and estimated
transaction costs, the net proceeds are expected to be approximately £83
million in cash, subject to certain customary closing adjustments.

On 28 April 2023, James Fisher announced an updated strategy aimed at
improving the Group's operational performance and driving sustainable and
profitable growth through the provision of innovative marine service solutions
to the market verticals of Energy, Defence and Maritime Transport. Delivering
this strategy would, in turn, require a reshaping of the Group to simplify and
streamline its portfolio of businesses, alongside the implementation of new
operating and reporting structures under the 'One James Fisher' model, to
realise synergies and operational efficiencies.

In reviewing the portfolio, James Fisher identified a number of non-core
businesses which it considered did not align with its strategic objectives,
either as a consequence of their specific activities, or where their financial
profile was inconsistent with the Group's long-term targets. Whilst RMS is a
leader in its markets and is expected to have delivered a robust financial
performance in FY 2023, the Board considers it to be non-core from a strategic
perspective and with minimal synergies with the rest of the Group.

The Board believes the value to be achieved by the Disposal represents an
attractive outcome for James Fisher's shareholders (the "Shareholders"). The
Net Proceeds will be used to reduce leverage and strengthen the Group's
balance sheet. As such, the Disposal has been unanimously agreed by the Board
to be in the best interests of James Fisher's shareholders.

Owing to its size, the Disposal constitutes a Class 1 transaction for the
purposes of the Listing Rules, and therefore requires the approval of
Shareholders. A circular containing further details of the Disposal and a
notice convening a general meeting of the Company (the "General Meeting") for
the purpose of seeking Shareholder approval for the Disposal (the "Disposal
Resolution") will be sent to Shareholders in due course.

The Directors of the Company intend to recommend that Shareholders vote in
favour of the Disposal Resolution at the General Meeting as they intend to in
respect of their holdings.

2.       Background to and Reasons for the Disposal

In 2023, James Fisher set out an updated strategy aimed at driving
sustainable and profitable growth through the provision of innovative marine
service solutions to the market verticals of Energy, Defence and Maritime
Transport. Alongside this, the Board identified a clear requirement to reduce
the Group's net financial indebtedness to improve James Fisher's financial
resilience, reduce its borrowing costs and provide funding capacity for future
growth investment.

In order to achieve these strategic objectives, the Board initiated a review
of James Fisher's business and asset portfolio, with the objective of
achieving a number of specified goals:

·      simplifying the Group's operational, commercial and financial
structure, by reducing the number of operating entities;

·      transitioning James Fisher from being a collection of disparate
businesses into a group with more coherent activities, that is better able to
realise synergies between its businesses;

·      focusing the Group on businesses with attractive end markets
where James Fisher has a clear competitive advantage;

·      enhancing overall Group financial performance, by improving
individual business performance and exiting activities not capable of
achieving specific returns targets or where markets are subject to excessive
volatility; and

·      reducing financial net indebtedness to strengthen the Group's
financial position and provide funding capacity for growth investment
opportunities.

To date, the Company has made good progress in simplifying the Group, exiting
several business areas including Subtech Europe and James Fisher Nuclear, as
well as divesting non-core assets including Prolec, Mimic, Strainstall and two
dive support vessels. In total, this programme has generated gross proceeds in
excess of £60 million in the past three years.

The Group's Energy division comprises a number of specialist businesses
providing critical products and services to international customers operating
throughout the value chains of the oil & gas and renewable energy
industries. The Board believes that the structural drivers across these
sectors provide the Energy division with a highly attractive long term growth
opportunity through the provision of specialist and high value-added services
to these markets.

To allow for the Group to capitalise on this opportunity, the Board is seeking
to establish, within the Energy division, a synergistic portfolio of
specialist businesses which have a higher weighting to service delivery over
product manufacture and sale.

RMS provides products and components to the international oil and gas
industry, with a leading position in certain geographic markets. Whilst RMS is
a leader in its markets and is able to command attractive margins through its
differentiation and operational efficiency, its product-led offering means
that it is less well aligned with the Company's forward-looking services
focused strategy. Furthermore, RMS is a standalone business and has minimal
synergies with the rest of the Group.

In conjunction with the review of the Group's portfolio, the Board has been
seeking actively to reduce the Company's net indebtedness and strengthen its
financial position. On 6 June 2023, the Company entered into a new £210
million revolving credit facility (the "Revolving Credit Facility"), which has
a maturity date of March 2025. The Revolving Credit Facility capacity as of 31
December 2023 was £193 million following a stepdown and amortisation of the
facility. The Revolving Credit Facility is subject to certain leverage and
interest cover covenants, as well as a number of undertakings in respect of
the conduct of the Group's business.

As of 31 December 2023, approximately £168 million of the Revolving Credit
Facility was drawn and the Group had net debt for covenant purposes of
approximately £150 million, with leverage (net debt / EBITDA) of 2.8 times
and interest cover of 2.2 times. Whilst the Board expects the Group to
continue to retain sufficient liquidity and operate within its covenants, as
the benefits of the business improvement actions being taken translate into
improved and more consistent financial performance, it remains mindful that
demand and operating conditions in a number of its markets remain volatile. In
addition, the Board believes that reducing the Company's current level of
leverage and net indebtedness will enhance its ability to refinance the
Revolving Credit Facility ahead of its maturity and to do so on more
attractive terms.

Against this background, the Board believes that the Disposal is in the best
interests of the Company, its Shareholders and its other stakeholders, for the
following reasons:

(A)    the Net Proceeds will be used to reduce leverage, strengthen the
Group's balance sheet and increase headroom to the facility covenants thereby
providing a stronger position from which to refinance the Revolving Credit
Facility ahead of its maturity;

(B)    the Disposal value implies an EV/EBITDA multiple of approximately
7.4 times based on the estimated EBITDA for the 12-month period ended 31
December 2023 for RMS; and

(C)    the Disposal is in line with the Company's strategy to focus its
portfolio through the sale of non-core assets.

3.       Information on RMS

RMS designs and manufactures completion systems and components for Electrical
Submersible Pump (ESP) applications in the artificial lift segment of the oil
and gas industry. Products include ESP dual systems, downhole sensors,
mechanical, electrical and subsea electrical products. The business operates
from four locations in the UK, Saudi Arabia and the United Arab Emirates.

RMS serves international customers in the oil and gas industry and often works
directly with operators, usually in partnership with ESP providers, to design
bespoke products and solutions for customer requirements.

In total, the business employs around 130 people. RMS's management team
includes Doug Harwell (Managing Director), Martin Marsh (Finance Director) and
Ted Boueri (Sales Director), who plan to remain with the RMS business after
completion of the Disposal ("Completion"). In the year ended 31 December 2023,
RMS is estimated to have generated revenues of £43 million, EBITDA of £12
million and operating profit of £11 million. As of 31 December 2023, RMS had
total assets of approximately £26 million.

4.       Use of Proceeds and Financial Effects of the Disposal

Use of proceeds

The Net Proceeds arising from the Disposal are expected to be approximately
£83 million, subject to certain customary adjustments. The Net Proceeds will
be used to strengthen the Group's balance sheet and support a reduction in
leverage towards a target range of 1.0 to 1.5 times Net Debt to EBITDA.

Financial effects of the Disposal

In FY23, RMS is estimated to have contributed sales of £43 million and
operating profit of £11 million to James Fisher. Following Completion, the
Group will no longer receive the contribution that RMS makes to the
consolidated results of the Group. As a result of the anticipated reduction in
indebtedness, following Completion, the Group's interest costs are expected to
reduce which will, in part, offset the loss of the contribution that RMS would
have made to the future consolidated results of the Group.

5.       Information on Future Strategy of the Group

Following Completion, James Fisher will continue to pursue its strategy of
focusing on the market verticals of Energy, Defence and Maritime Transport
where it has a sustainable competitive advantage. James Fisher will continue
to implement its internal change agenda, including a focus on improvement and
simplification, aimed at creating a more focused, sustainable business and
targeting a value enhancing return on capital employed.

The Group will continue to operate across three business units, aligned with
the attractive market verticals identified:

·    Energy - supporting the energy transition through the provision of
responsible services and innovative renewable energy solutions, including; oil
and gas well testing and intervention, IRM, decommissioning and digital
solutions; and renewable offshore wind services across the construction,
installation, operations and maintenance lifecycle;

·    Defence - providing life support services and equipment to subsea
defence markets, such as submarine rescue, special operations vehicles, diving
equipment and mobility solutions; and

·    Maritime Transport - providing maritime coastal shipping and
ship-to-ship transfer services, alongside a range of marine products and
services to the broader industry.

Going forward, James Fisher will have a strong platform to deliver on its
strategy to support its customers in unlocking sustainability and benefit from
significant growth opportunities in its market verticals.

6.       Information on the Purchaser

ChampionX is a global leader in chemistry solutions and highly engineered
equipment and technologies that help companies drill for and produce oil and
gas safely and efficiently around the world. ChampionX's products provide
efficient functioning throughout the lifecycle of a well with a focus on the
production phase of wells. ChampionX has a presence in over 60 countries
around the world and has approximately 7,100 employees, with revenues of
approximately $3.8 billion for the year ended 31 December 2023.

RMS will be integrated into ChampionX's Production & Automation
Technologies (PAT) division, which offers technology and services that
facilitate the safe, efficient, and cost-effective extraction of oil and gas
through artificial lift and digital automation applications. ChampionX PAT
designs, manufactures, markets, and services a full range of artificial lift
equipment, end-to-end automation and digital solutions as well as other
production equipment and emissions monitoring solutions.

7.       Principal Terms of the Disposal

On 21 March 2024, the Company and its wholly-owned subsidiary James Fisher
Holdings UK Limited ("RMS Holdco") entered into a sale and purchase agreement
with the Purchaser (the "Sale and Purchase Agreement"), pursuant to which the
Company and RMS Holdco has agreed, on the terms and subject to the conditions
of the Sale and Purchase Agreement, to sell RMS to the Purchaser. The total
enterprise value for the Disposal is £90 million, subject to certain
customary adjustments.

The Sale and Purchase Agreement contains certain warranties and indemnities
given by James Fisher, RMS Holdco and the Purchaser which are customary for a
transaction of this nature.

Completion of the Disposal is conditional upon the satisfaction (or waiver,
where applicable) of the following conditions:

(i)  the passing of the Disposal Resolution by Shareholders at the General
Meeting;

(ii) the release of all security and guarantees granted pursuant to the
Revolving Credit Facility by or in respect of RMS by the relevant security
agent (requiring consent of the lenders under the Revolving Credit Facility);

(iii) no Material Adverse Change (being any event, circumstance, occurrence or
fact between the date of the Sale and Purchase Agreement and the Completion
Date resulting in: (i) a reduction in the value of the RMS shares by 20% or
more, other than certain customary global and market conditions; or (ii) the
Group or RMS becoming subject to sanctions), having occurred between signing
and the fulfilment of all other conditions; and

(iv) obtaining merger control clearance, approval and/or non-objection from
the Saudi Arabian General Authority for Competition regarding the Disposal.

The Board expects that, subject to the satisfaction and/or waiver (where
applicable) of the conditions, Completion is expected to occur early in H2
2024.

8.       Financial advice

The Board has received financial advice from Gleacher Shacklock in respect of
the Disposal. In providing its financial advice to the Board, Gleacher
Shacklock has relied upon the Board's commercial assessment of the Disposal.

 

 Enquiries
 James Fisher and Sons plc
 Jean Vernet, Karen Hayzen-Smith           +44 20 7614 9503

 FTI Consulting                            (PR Adviser)
 Richard Mountain, Susanne Yule            +44 20 7727 1340

 Gleacher Shacklock (Financial Adviser)
 James Dawson, Philippe Bégin

 Peel Hunt (Sponsor and Corporate Broker)
 Mike Bell, Tom Graham

 Investec (Corporate Broker)
 Chris Sim, Nick Prowting

 

Appendix

Bases and Sources

1.       Enterprise value: Throughout the announcement, the enterprise
value of RMS is stated on a debt free, cash free basis and before taking into
account any adjustments required under the terms of the Disposal and
associated transaction costs.

2.       2023 financial information relating to RMS: Unless otherwise
indicated, the historical financial information relating to RMS for the year
ended 31 December 2023 included in this document is unaudited and has been
extracted without material adjustment from the underlying consolidation
schedules and accounting records that underlie James Fisher's consolidated
financial statements.

3.       The Disposal value implies a multiple of approximately 7.4
times RMS's estimated EBITDA for the 12-month period ended 31 December 2023:
Calculation is based on £90 million enterprise value and the estimated EBITDA
of approximately £12 million for the 12-month period ended 31 December 2023.
EBITDA is defined as operating profit before depreciation and amortisation
expenses.

4.       Rounding: Certain figures in this announcement have been
subject to rounding adjustments.

 

IMPORTANT NOTICE

This announcement contains inside information and is issued on behalf of the
Company by Jean-François Bauer, Group General Counsel.

This announcement is not intended to, and does not constitute, or form part
of, any offer to sell or issue or any solicitation of an offer to purchase,
subscribe for, or otherwise acquire, any securities or a solicitation of any
vote or approval in any jurisdiction. James Fisher's shareholders are advised
to read carefully the Circular once it has been published. Any response to the
Disposal should be made only on the basis of the information in the Circular
to follow.

Gleacher Shacklock LLP ("Gleacher Shacklock") is authorised and regulated by
the Financial Conduct Authority (the "FCA") in the United Kingdom, is acting
as financial adviser exclusively for the Company and no one else in connection
with the Disposal and the matters set out in this announcement and will not
regard any other person (whether or not a recipient of this announcement) as
its client in relation to the Disposal and will not be responsible to anyone
other than the Company for providing the protections afforded to clients of
Gleacher Shacklock or its affiliates, or for providing advice in relation to
the Disposal or any other matters referred to in this announcement or any
other matter referred to herein.

Peel Hunt LLP ("Peel Hunt"), which is authorised and regulated in the United
Kingdom by the FCA, is acting as sponsor exclusively for the Company and for
no-one else in connection with the Disposal and the matters set out in this
announcement and will not regard any other person (whether or not a recipient
of this announcement) as its client in relation to the Disposal and the other
matters set out in this document and will not be responsible to anyone other
than the Company for providing the protections afforded to clients of Peel
Hunt, nor for providing advice in relation to the proposed Disposal or any
other matter set out in this announcement.

Apart from the responsibilities and liabilities, if any, which may be imposed
on Gleacher Shacklock and Peel Hunt by the Financial Services and Markets Act
2000 (as amended) or the regulatory regime established thereunder or under the
regulatory regime of any jurisdiction where the exclusion of liability under
the relevant regulatory regime would be illegal, void or unenforceable, each
of Peel Hunt and Gleacher Shacklock (and their respective subsidiaries,
holding companies, branches or affiliates and any of its and their respective
directors, officers, employees, agents or advisers), accepts no duty,
liability or responsibility whatsoever (whether direct or indirect, and
whether arising in contract, in tort, under statute or otherwise) to any
person in relation to this announcement or for any acts or omissions of James
Fisher and no representation or warranty, express or implied, is made by any
of them as to the contents of this announcement, including its accuracy,
completeness, verification or sufficiency, or for any other statement made or
purported to be made by James Fisher, or on its behalf, or by Peel Hunt or
Gleacher Shacklock, or on their behalf, in connection with James Fisher, the
Group, RMS or the Disposal, and nothing in this announcement should be relied
upon as a promise or representation in this respect, whether or not to the
past or future, in connection with James Fisher, the Group, RMS or the
Disposal. To the fullest extent permitted by law, each of Peel Hunt and
Gleacher Shacklock (and their respective subsidiaries, holding companies,
branches and affiliates and its and their respective directors, officers,
employees, agents and advisers) accordingly disclaim all and any
responsibility or liability whatsoever (whether direct or indirect and whether
arising in contract, in tort, under statute or otherwise (save as referred to
above)), which they might otherwise have in connection with this announcement,
any statement contained herein, the Disposal or otherwise.

Neither the contents of the Company's website nor any website accessible by
hyperlinks on the Company's website is incorporated in, or forms part of, this
announcement.

This announcement includes statements that are, or may be deemed to be,
"forward-looking statements" which includes all statements other than
statements of historical fact, including, without limitation, those regarding
the Company's financial position, business strategy, plans and objectives of
management for future operations, or any they might statements preceded by,
followed by or that include the words "targets", "believes", "expects",
"aims", "intends", "will", "may", "anticipates", "would, "could" or similar
expressions or negatives thereof. Such forward-looking statements involve
known and unknown risks, uncertainties and other important factors beyond the
Company's control that could cause the actual results, performance or
achievements of the Company to be materially different from future results,
performance or achievements expressed or implied by such forward-looking
statements. Such forward-looking statements are based on numerous assumptions
regarding the Company's present and future business strategies and the
environment in which the Company will operate in the future. These
forward-looking statements speak only as at the date of this announcement.
None of the Company, Peel Hunt, Gleacher Shacklock or their respective
affiliates undertakes or is under any duty to update this announcement or to
correct any inaccuracies in any such information which may become apparent or
to provide you with any additional information, other than any requirements
that the Company may have under applicable law or the Listing Rules, the
Prospectus Rules, the Disclosure Guidance and Transparency Rules or the UK
Market Abuse Regulation. To the fullest extent permissible by law, such
persons disclaim all and any responsibility or liability, whether arising in
tort, contract or otherwise, which otherwise have in respect of this
announcement. The information in this announcement is subject to change
without notice.

 

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