LONDON The boards of Abacus and Deltron have reached agreement on the terms of a recommended all share offer for Deltron, a pan-European specialist distributor of electromechanical components and solutions and manufacturer of electromechanical components, sub-assemblies and related tools and production aids.
Deltron shareholders will receive 0.6432 new Abacus shares for each Deltron Share and, based on the Abacus closing price of 106.5 pence on October 25, values each Deltron share at 68.5 pence – a premium of 45.7per cent on its closing price on October 24 –which values the company at approximately £28.4million. Following completion of the acquisition, existing Deltron shareholders will hold around 38.5per cent. of the enlarged group.
The Abacus board sees the acquisition of Deltron as a route to providing a more comprehensive service to its customers and will facilitate growth of the business within Europe. The overlapping business activities in the UK, the Nordic Region and Italy will afford 'cost saving synergies'.
Annual operating costs of the enlarged group should be cut by around £3.5 million in the first full financial year following completion of the acquisition and at least £5.0 million in the following financial year. The cost of achieving these savings is not expected to exceed £6.0 million.
The acquisition is expected to be earnings enhancing in the first full financial year following completion of the deal.
After the purchase goes through Jerry Vaughan (left) will be appointed to the Abacus board as an executive director with the title Managing Director – Deltron, and David Weir is to be appointed to the Abacus board as a non-executive director.
Vaughan has over 27 years experience in the international electronics industry. Before joining Deltron as Executive Director in February 2004 he was Deputy Director of Development at Rexel Group in France, an electrical wholesale supplier with a turnover of Euro7.3billion. Prior to joining Rexel in 2002, he held the post of Group General Manager for 7 years at Electrocomponents plc (RS Components), having previously as Managing Director from start-up, built its French business over 10 years.
Christopher Sawyer, who led a management buy-in in 1991 and relocated Deltron from the South of England to Scunthorpe, will remain with the enlarged group until June 30 2006 to help with the integration and receive a compensation payment of £150,000. Derek O'Neill, Delton's Group Finance Director, is due to resign from the board on January 31 and will receive a compensation payment of £226,000 in settlement of his contractual entitlements.
Abacus Group’s profit before tax, exceptionals and goodwill is estimated by the directors to be not be less than £8.0 million for the year ended 30 September 2005 while the Deltron directors estimate that Deltron’s profit before tax, goodwill amortisation and exceptional items will not be less than £2.5 million for the financial year ended 30 September 2005.
Harry Westropp, Chairman of Abacus, said, “The acquisition is in line with our strategy of expanding into new regions within Europe and improving our market share in those regions in which we have existing businesses.”
David Potter, Chairman of Deltron, added, “The combination of Abacus and Deltron represents an exciting opportunity to capitalise on the strengths of both groups. It creates the opportunity for operating efficiencies, while reinforcing the position of the Enlarged Group in the markets in which it operates.”
The Abacus Group has nine principal trading businesses, operating in the UK, Ireland, Benelux, the Nordic Region and Italy. The majority of Deltron’s distribution businesses operate in the UK and mainland Europe, primarily distributing switches, connectors, audible alarms and magnetics. It has operations in the UK, Denmark, France, Ireland, Germany, Italy, Sweden, the Netherlands, Austria, Norway and China.
Deltron’s manufacturing operations, Deltron Emcon and Deltron EMC (based in the UK and France, respectively), principally make electromechanical products and sub-assemblies comprising electromagnetic compatibility filters, a variety of connectors and other interconnect devices.
In August Deltron acquired Deltrona Vertriebsgesellschaft für elektronische Bauelemente GmbH of Germany, a specialist distributor of electromechanical components to the manufacturing industry, for an aggregate consideration of £2.5 million in cash.
One interesting aspect of the deal is that is will bring a distribution operation in Germany to the Abacus Group, adding a geography that has long been talked of as a target for the group. Abacus formed an on-going commercial alliance with no equity participation with Rutronik, the German distribution group, in March 1998 to offer services across Europe to both customers and suppliers. However Rutronik has recently been expanding its operations in the UK and Nordic areas, the traditional stronghold of Abacus.