Spirax Group Plc. · LSE:SPX
Spirax — Spirax-Sarco Engineering — Merger or Acquisition (May 2017)
19 slides from Spirax's merger presentation, May 26, 2017
Slide 1: Acquisition announcement
> ENGINEERING SUSTAINABLE VALUE > Acquisition announcement Spirax-Sarco Engineering plc to acquire Chromalox, Inc. 26th May 2017 0
Slide 2: Strategic rationale
Strategic rationale “Chromalox represents an excellent opportunity to expand our addressable markets through the acquisition of a clearly related business that shares our strong direct sales business model. Chromalox will enhance our growth and sustainable value creation for customers and shareholde
Slide 3: Strong strategic fit with long-term potential
Strong strategic fit with long-term potential Group acquisition strategy: Related acquisition: expands addressable market and 1. Create significant accelerates opportunities for growth shareholder value Direct sales business model 2. Increase our addressable Provide products or services where ther
Slide 4: Chromalox, Inc., USA
Chromalox, Inc., USA Background and timings • Market leading provider of electrical solutions for industrial process heating and temperature management • Delivers Thermal Energy Management solutions through direct sales model • Expands Spirax-Sarco’s addressable market • Reinforces the Group’s long-
Slide 5: Acquisition details
Acquisition details Financial information • Transaction Enterprise Value US$415 million (£319 million) • 2016 performance: revenue US$201 million; EBITDA US$43 million; EBIT US$37 million • Multiple of 9.7x EBITDA 2016 • Funded in cash with facilities from Barclays and HSBC • Expected net debt to EB
Slide 6: Established market leader in the USA
Established market leader in the USA 100 years of innovative solutions • Three core technologies: • Industrial Heaters and Systems: engineered industrial heating solutions • Heat Tracing: flexible cables and controls to heat or maintain temperature in pipes, valves and tanks • Component Technologies
Slide 7: Chromalox products and services
Chromalox products and services Deep knowledge of material science, thermal engineering and fluid dynamics Industrial Heaters and Heat Trace Component Technologies Systems (IH&S) (HT) (CT) % of sales 54% 23% 23% Description • Process heating solutions for • Temperature management solutions • Compone
Slide 8: Expands addressable market
Expands addressable market Thermal Energy Management – electricity and steam have complementary uses Choice between heating mediums driven by application needs or customer circumstances > ENGINEERING 7 > SUSTAINABLE VALUE
Slide 9: Market size and share
Market size and share Expands addressable market by £2.1 billion Spirax Sarco Market share 18% Market share Spirax Sarco Watson-Marlow 18% Watson-Marlow Market £1.3bn £4.5bn share £1.3bn £4.5bn 7% New 2016 total market size Total market size £5.8 billion Acquisition £2.1bn £7.9bn Chromalox Market sh
Slide 10: Chromalox market size and share, 2016
Chromalox market size and share, 2016 US$2.9bn (£2.1bn) addressable market: headroom for growth Chromalox Americas EMEA Asia Pacific Revenue Revenue USA: 72% Revenue Revenue Worldwide: US$201m Region as a whole: 78% Region as a whole: 11% Region as a whole: 11% Market size & share Market size & shar
Slide 11: Direct sales business model
Direct sales business model Chromalox’s routes to market, 2016 Direct sales business model: • Chromalox: 68% direct, 32% distributor • Group post-acq’n: 73% direct, 27% distributor 32% 34% • Over 20,000 customers Primarily driven by customers’ Opex budgets: • Chromalox: 67% Opex, 33% Capex • Group p
Slide 12: Chromalox's global operations
Chromalox’s global operations Growth opportunities from leveraging Spirax Sarco’s global footprint Pittsburgh, Pennsylvania Ogden, Utah Soissons, France Nuevo Laredo, Wujiang, China Mexico La Vergne, Tennessee Global headquarters Manufacturing facilities Sales offices > ENGINEERING 11 > SUSTAINABLE
Slide 13: Operating in our core markets
Operating in our core markets Chromalox revenue by industry, 2016 Food 2% Pharmaceuticals & Biotechnology • Broad market diversity 5% OEM Machinery • Similar industries and 19% Oil & Gas customer needs 1% Chemical • Low technology overlap 21% Buildings (HVAC) • Heating medium driven Mining & Preciou
Slide 14: Financial performance
Financial performance Medium to long-term growth prospects US$ millions 2016 2017 Outlook (est.) • Recent order intake and market Revenue 201 190 activity levels indicate Operating profit 37 32 improving growth prospects (EBIT) • Growth opportunities by Profit (EBIT) margin 18.4% 17.1% leveraging Sp
Slide 15: Corporate structure and reporting
Corporate structure and reporting Spirax Sarco Watson-Marlow EMEA AsiaPac Americas • Closely related to Steam Specialties business • Strong management team continues post acquisition • Stand-alone business unit; minimal integration required > ENGINEERING 14 > SUSTAINABLE VALUE
Slide 16: Case study – industrial heaters & systems
Case study – industrial heaters & systems Electrically heated oil in moulds produces uniform imitation stone The challenge: • Uniform heating of moulds for consistent production of imitation landscaping stones The solution: • Hot oil circulation (375°F) determined the best method for heating moulds
Slide 17: Case study – heat tracing
Case study – heat tracing Heat trace cable keeps oil flowing in Indonesia The challenge: • Crude oil with waxy consistency solidifies and blocks pipeline when temperatures drop at oil production facility in Indonesia The solution: • Chromalox SRM/E self-regulating heat trace cable; 2,400m installed
Slide 18: Summary
Summary • Leading provider of electrical solutions for industrial process heating and temperature management; operates through a direct sales business model • Highly complementary to Spirax Sarco Steam Specialties business • Expands addressable market by £2.1 billion; broadens technology offering •
Slide 19: Cautionary statement
Cautionary statement This presentation may contain certain forward-looking statements, beliefs or opinions with respect of the financial condition and business operations of the Company or Chromalox, as well as certain plans and objectives of the Company. By their nature, forward-looking statements
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