Kentz to seek shareholder backing for €316m purchase of US rival Valerus FS

CIARA O’BRIEN

Irish-based engineering group

Kentz will seek shareholder backing early in the new year for its proposed €316 million takeover of US operator Valerus Field Solutions (FS).

Kentz Corporation announced yesterday it proposed to buy Valerus FS business for $435 million (€316.5 million).

Its biggest shareholder, Malaysian-based Kerbet, controlled by chairman Tan Sri Mohd Razali Abdul, which has a 13.6 per cent stake, has already given an irrevocable undertaking to support the deal.

The company intends seeking the approval of the rest of its shareholders for the purchase at an extraordinary general meeting in London on January 2nd next.

To finance the deal, Kentz intends to draw down a new $400 million loan, with the balance coming from the company’s existing cash resources or a $160 million revolving loan facility.

Boost earnings
Kentz said it expected the deal to boost earnings of ownership and generate a return on investment exceeding its pre-tax cost of capital.

Kentz has been signalling its intention to make an acquisition given the right opportunity and on the basis it would add to shareholder value.

Chief executive Christian Brown said the Valerus deal would help establish the company as a leader in the process engineering and engineering procurement and construction markets. "It also provides us with a significant presence in the growing US market," he added.

Valerus FS provides engineering and construction services to the oil and gas exploration and production industries. It has operations in the US and Central and South America, including Brazil, Colombia, Mexico and Venezuela.

Last year, it reported earnings before interest, tax and write-offs of $51.5 million on revenue of $492.9 million.

The outlook for Valerus FS remains positive, according to Kentz, which said it had experienced strong growth in 2013.

The London-listed engineering group said it expected Valerus to give it a strong position the onshore and offshore oil and gas industries in the US, including in shale gas.