Bodycote extends American presence with two acquisitions

Bodycote extends American presence with two acquisitions

  • Bodycote has agreed to acquire Lake City HT and Stack Metallurgical Group
  • Both the companies its buying supply hot isostatic pressing (HIP) technology
  • The firm said the takeovers would help expand its specialist technologies arm

Bodycote is expanding its footprint in the US after agreeing to buy two companies for $145million (£119million).

The world’s largest thermal processing services provider, which celebrates its 100th anniversary this year, said the takeovers would help further expand its specialist technologies division.

It said deals were struck last Friday to buy Lake City HT, based in the small Indiana city of Warsaw, and Stack Metallurgical Group (SMG), which serves customers in the Pacific Northwest region.

Takeovers: Bodycote has agreed to buy Lake City HT and Stack Metallurgical Group (SMG)

Both firms supply hot isostatic pressing (HIP) technology, whereby high gas pressure levels and temperatures are combined to remove porousness in castings or enhance the density of materials.

Much of their business is with the civil aerospace sector, although Lake City primarily serves the orthopaedic implant market, and SMG also has close relationships with the defence and energy industries.

Bodycote is spending around £119million to acquire the two companies, although on a net basis, the amount falls to about £106million once forecast tax benefits are accounted for.

Upon completion of the transactions, which are being financed through current loan facilities, Bodycote will have an extra two HIP and three heat treatment sites.

Stephen Harris, the firm’s chief executive, claimed the deals were ‘an important and exciting enabler of our strategy to further enhance and grow our specialist technologies businesses’.

He added that they ‘will enhance group margins, are accretive to earnings per share and allow us to further capitalise on the structural growth opportunities in the space, civil aerospace and medical markets’.

Lake City and SMG achieved combined turnover growth of 29 per cent in the first half of 2023 and are expected to grow at a similar rate in the following six months.

For the full year, they expect to post around £36million in revenue, thanks to new customer contracts, the continued recovery of the civil aerospace market and solid demand from the medical sector.

Analysts at HSBC Global Research said: ‘In our view, the pending deals demonstrate smart capital allocation towards the key aspects of the group’s investment case in terms of technologies and end-market mix.’

Bodycote further announced that it planned to open a new HIP facility in the Greater Los Angeles area to take advantage of the region’s space and civil aviation market.

Harris noted that the location will need ‘only modest’ investment given it is a current Bodycote site and will contain existing HIP vessels ‘that are immediately available for installation.’

Bodycote shares were 0.25 per cent lower at 609p on early Monday afternoon but have still grown by approximately a quarter over the past 12 months.