Renew Holdings plc (LSE:RNWH) has agreed to acquire Porter Brothers Holdings Limited, the parent company of PBU (UK) Ltd, for total consideration of up to £50 million, expanding its engineering capabilities in the UK’s electricity transmission and distribution market.
The infrastructure engineering group said the acquisition is being undertaken through its wholly owned subsidiary, Excalon Holdings Limited, and will add specialist extra high voltage cabling and directional drilling services to its existing operations.
Renew will pay initial cash consideration of £31.1 million, funded through its existing banking facilities, with a further £18.9 million potentially payable depending on the achievement of specified profit targets over three years.
The company expects the transaction to be immediately earnings enhancing and said it will continue to evaluate further acquisition opportunities.
Initial Acquisition Consideration Set at £31.1 Million
Renew has structured the acquisition with an initial cash payment of £31.1 million and additional contingent consideration of up to £18.9 million.
The transaction has been agreed on a cash-free, debt-free basis.
The initial consideration is based on PBU’s sustainable earnings before interest and tax (EBIT) of £3.9 million and earnings before interest, tax, depreciation and amortisation (EBITDA) of £5.5 million.
Based on these figures, the initial purchase price represents approximately 8.0 times sustainable EBIT and 5.7 times sustainable EBITDA.
If the full £50 million consideration becomes payable, the equivalent multiples would be approximately 12.8 times EBIT and 9.1 times EBITDA, using the disclosed sustainable earnings figures.
The additional consideration is conditional on the vendors meeting specified profit targets during the three-year period following the acquisition.
Renew did not disclose the individual performance thresholds or the expected timing of contingent payments.
The initial purchase price will be financed using the group’s existing banking facilities.
PBU Adds Extra High Voltage Cabling Expertise
PBU provides specialist engineering services to the electricity distribution sector, with particular expertise in extra high voltage cabling and directional drilling.
These services support the installation and development of electricity network infrastructure.
Extra high voltage cabling is used in electricity networks requiring the transmission or distribution of power at higher voltage levels.
Directional drilling enables underground infrastructure to be installed along planned routes, including where conventional excavation methods may be less suitable.
The acquisition expands the technical services available through Renew’s Excalon Holdings subsidiary.
Renew said the additional capabilities will allow the group to undertake a broader range of electricity transmission and distribution projects.
The company did not disclose PBU’s annual revenue, workforce size or current order book in the announcement.
Excalon Expands Turnkey Electricity Network Services
The acquisition forms part of Renew’s strategy to develop a wider range of engineering services within Excalon Holdings.
The group has previously acquired Emerald Power, Electricity Distribution Engineering Services and PWR-X.
Together with PBU, these businesses provide capabilities covering different stages of electricity network projects.
Renew said Excalon can now offer a turnkey service extending from initial design through to engineering delivery.
The expanded operating structure is intended to allow the group to undertake projects requiring several specialist disciplines under a single delivery arrangement.
The company expects the additional services to increase the range of contracts for which Excalon can compete.
The announcement did not specify any new contracts awarded as a direct result of the acquisition.
Acquisition Targets UK Electricity Transmission and Distribution Investment
Renew identified planned investment in the UK’s electricity networks as a principal reason for expanding its specialist engineering capabilities.
The company referred to approximately £50 billion to £60 billion of committed investment across the RIIO-ED2 and ET3 regulatory control periods and beyond.
These investment programmes relate to the development, maintenance and upgrading of electricity distribution and transmission infrastructure.
Renew said the acquisition will increase its ability to participate in projects associated with this expenditure.
The company’s engineering services support infrastructure maintenance, renewal and development across regulated markets.
By adding PBU’s cabling and drilling capabilities, Renew intends to address a wider range of project requirements within the electricity network sector.
The £50 billion to £60 billion figure represents broader industry investment rather than revenue contracted to Renew.
Transaction Expected to Be Immediately Earnings Enhancing
Renew stated that the PBU acquisition is expected to be immediately earnings enhancing.
The company based the initial purchase consideration on sustainable EBIT of £3.9 million and EBITDA of £5.5 million.
These earnings measures provide an indication of PBU’s existing operating profitability.
Renew did not quantify the anticipated contribution to group earnings per share or provide revised full-year financial guidance following the transaction.
The acquisition is expected to contribute to the group’s Engineering Services operations.
The financial impact will depend on PBU’s performance following integration, the cost of acquisition financing and the achievement of any contingent consideration targets.
Existing Banking Facilities Fund Initial Payment
Renew confirmed that the £31.1 million initial cash consideration has been funded through its existing banking facilities.
The company said it retains the financial capacity to continue pursuing its acquisition strategy following the transaction.
However, Renew did not provide an updated net debt figure, borrowing balance or liquidity position in the announcement.
The potential additional payment of £18.9 million will depend on PBU meeting agreed profit targets over the next three years.
The deferred structure links part of the acquisition cost to the financial performance of the acquired business.
Renew has not disclosed whether the contingent payments will be made annually or at the end of the performance period.
Renew Continues Acquisition-Led Expansion
Renew said it remains engaged in evaluating additional acquisition opportunities within its specialist engineering markets.
The group has expanded its electricity transmission and distribution activities through a series of transactions involving businesses with complementary technical capabilities.
The PBU acquisition follows the additions of Emerald Power, Electricity Distribution Engineering Services and PWR-X.
Renew’s strategy involves combining specialist engineering businesses to broaden its service offering and increase its participation in infrastructure investment programmes.
The company described its acquisition approach as focused on businesses capable of contributing to earnings.
No further acquisition targets, transaction values or completion timetables were announced.
CEO Paul Scott Comments on Acquisition
Paul Scott, Chief Executive Officer of Renew, commented on the acquisition and its role in the group’s electricity network operations.
“This acquisition represents an excellent strategic fit for the Group, adding complementary specialist capabilities to our already well-established position in the regulated energy market. Our enhanced capabilities leave us strongly positioned to capitalise on the significant growth opportunities presented by the unprecedented levels of investment in the UK’s electricity transmission and distribution networks.
“PBU is a company we already know very well, I am delighted to welcome their highly regarded teams into the Renew family and I look forward to updating the market on their integration into the Group in due course.”
Integration of PBU Into Excalon Holdings
PBU will become part of Renew’s Excalon Holdings operations, bringing additional engineering expertise to the group’s electricity network activities.
The acquisition is intended to complement the services provided by Excalon’s existing businesses.
Renew expects the combined operations to provide clients with a broader range of engineering services, including project design, extra high voltage cabling, directional drilling and associated infrastructure delivery.
Management said further information about PBU’s integration will be provided in due course.
The company has not disclosed specific integration costs, restructuring plans or expected operational savings.
Outlook for Renew’s Electricity Network Operations
Renew expects the acquisition to increase its ability to participate in UK electricity transmission and distribution investment programmes.
The addition of PBU expands the range of specialist services available through Excalon Holdings and supports the group’s objective of delivering projects from design through to completion.
The transaction is expected to contribute immediately to earnings, with further consideration dependent on PBU’s financial performance over three years.
Renew also intends to continue reviewing potential acquisitions that complement its existing engineering activities.
The company has not announced changes to its financial guidance or provided a revised earnings forecast following the acquisition.
More About Renew Holdings
Renew Holdings plc is a London-listed engineering services group focused on the maintenance and renewal of critical infrastructure in the United Kingdom.
The company provides specialist engineering services across infrastructure markets, including electricity transmission and distribution.
Its wholly owned subsidiary Excalon Holdings operates in the electricity network sector and has expanded through acquisitions of complementary engineering businesses.
The acquisition of PBU adds extra high voltage cabling and directional drilling capabilities to the group’s existing operations.
Renew continues to pursue organic development and acquisitions within its specialist engineering markets.
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