£145m deal helps Polypipe to clear the air

From left, Paul Rice, Polypipe business development director, Peter Shepherd, chief financial officer, and David Hall, chief executive.
From left, Paul Rice, Polypipe business development director, Peter Shepherd, chief financial officer, and David Hall, chief executive.
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Polypipe, one of Europe’s biggest manufacturers of plastic pipe systems, is to buy a leading designer of ventilation systems for £145m in a deal that will tap into new legislation to reduce carbon emissions.

Analysts said the acquisition of Welsh firm Nuaire will be a good strategic fit for Doncaster-based Polypipe.

In a bid to reduce carbon emissions, the Government has introduced strict new rules on building regulations which are designed to reduce energy wastage.

Ventilation can play a large part as the energy from warm air needs to be harnessed rather than simply pumped back out into the atmosphere.

Polypipe said the acquisition will be financed with a combination of existing cash from the balance sheet and new debt and is expected to complete by the end of August.

It added that Nuaire has a solid track record of growth, profitability and successful cash flow generation. Polypipe’s chief executive David Hall ​said the market positions of Polypipe and Nuaire are highly complementary with little product overlap.

Nuaire will keep its name and be run as an independent part of Polypipe. All 450 Nuaire employees are also expected to remain with the business.

“Nuaire is a great fit with what we do,” said Mr Hall.

“Culturally the company is very similar to us. It has got a focused sales force that sells full solutions.

“We are very pleased to welcome the staff to Polypipe. All the senior management in Nuaire are staying with the business. They are enthusiastic to be part of a UK PLC.”

​Mr Hall said that ventilation systems need a lot of ducting (plastic piping that takes air in and out of a building) so Polypipe will be able to use its plastic pipes in future fit outs. The group specialises in low energy ducting by making low friction pipes that are more energy efficient.

Mark Huxtable, chief executive of Nuaire, said: “We are delighted to be joining Polypipe. The companies share many characteristics, including a similar culture and philosophy, and together we will be better placed to tap into the excellent prospects for the sector.”

Nuaire design​s, manufacture​s​ and distribut​es​ ventilation systems to the UK commercial, UK residential and international ventilation markets.

​​Nuaire​‘s commercial ​arm accounts for 56 per cent of the firm and has a market leading position, ​serving offices, schools, hospitals, hotels, ​shops, leisure outlets​​ and car parks.

​Its residential division makes up 28 per cent of revenues and customers include housing associations, local authorities, national, regional and local housebuilders as well as self-builders.

The international arm accounts for the remaining 16 per cent of revenue and products are sold to the Middle East and mainland Europe.

​In the year to June 30 Nuaire’s sales rose 19 per cent to £63.5m and earnings rose 30 per cent to £12.8m.

Analysts at Numis said in a note: “Nuaire represents a good strategic fit and is in line with management’s stated strategy of broadening its exposure to markets that benefit from energy legislation. Furthermore, we expect the acquisition to be substantially earnings-accretive.”

Analysts at Deutsche Bank added: “Polypipe states that it intends to maintain its existing dividend payout policy of 40 per cent post the acquisition. Despite the deal set to increase Polypipe’s leverage, we believe the rationale is robust – both businesses offer scope for growth from environmental legislation.”

Polypipe floated last year and has been one of Yorkshire’s most successful IPOs.

It is the largest manufacturer in the United Kingdom, and among the 10 largest manufacturers in Europe, of plastic pipe systems for the residential, commercial, civils and infrastructure sectors.

The group operates from 16 facilities, and with over 20,000 product lines, manufactures the UK’s widest range of plastic piping systems.

It primarily targets the UK, French and Irish building and construction markets, with a presence in Italy and the Middle East, plus sales to niche markets in the rest of the world.