Acquisitive Vp signs "significant" £69m deal

Tool Hire is the biggest contributor to Vp
Tool Hire is the biggest contributor to Vp
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Equipment hire firm Vp ​has ​bought Brandon Hire, one of the ​UK's ​largest​​ tool and equipment hire businesses​, in a £69m deal that will boost earnings in the first year of ownership.

Harrogate-based Vp said ​Brandon ​is ​a well established, profitable business​ that​ ​operates a full range of tool hire equipment with an operational model which is closely aligned to Vp’s own specialist tool hire business, Hire Station.

Analysts said the acquisition is a significant deal and a strong fit for Vp, which saw its shares rise 5 per cent on the news.

James Tetley at N+1 Singer said: "This is a significant deal at £69m enterprise value, representing a step change for Vp’s highly successful Hire Station business.

"Brandon is a long established, profitable business, which looks to be a strong cultural and geographic fit for Vp.

"We upgrade our 2019 pre-tax profit forecast by 14 per cent and expect further benefits to accrue over the medium term. We consider this deal a genuine one-off, which should be welcomed by the market, increasing our estimate of intrinsic value to 1050p."

Vp is buying Brandon for a cash consideration of £41.6m payable on completion and assumed net debt of approximately £27m. The acquisition has been funded from new banking facilities with the group’s lenders.

Established in 1971, Brandon Hire is a national tool and equipment hire business with over 900 employees, which operates from a network of 143 locations across the UK. ​It has an extensive customer base focused predominantly on small to medium sized enterprises (SMEs) operating in regional and local geographic markets.

​​Neil Stothard, ​c​hief ​e​xecutive of Vp, said:​ "Brandon is a very good business. It fits the target areas of growth that we've been looking for. They are very strong in the SME sector.

​"It's an area where we've had great success in recent years. We had an organic plan, but Brandon delivers these plans in one fell swoop.

"It's a business we like and an excellent addition to the group."

He described it as a good deal for both parties.

"We don't overpay. Tool Hire is the biggest contributor to Vp and this is a significant add on. It builds on our strength," he said.

Vp said Brandon is very strong in the South West, which complements Vp. While Vp has concentrated more on cities, Brandon is focused around towns and its branches are a lot smaller than Vp's Hire Station branches.

"There's very little overlap with out network and their's," said Mr Stothard.

​Vp is looking for cost savings in terms of procurement and infrastructure, but there are no plans for any job losses and ​Brandon will initially be run as a separate part of the business.

Vp said the combination of the two businesses will, over the medium term, deliver economies of scale in purchasing and operations and will create a leading specialist tool hire business within the UK division of Vp.

Brandon ​made a revenue of £79.8​m in 2016, generating profits before interest, tax, exceptionals and amortisation of £6​m from gross assets of £50.6​m.

Jeremy Pilkington, ​c​hairman of Vp said: “The acquisition of a well established business of the size and quality of Brandon Hire is a significant development for Vp.

​"​We have, over recent years, developed an industry leading specialist tool hire business in the UK. This transaction represents a major step change in the scale and scope of our specialist tool hire offering.

​"​The Vp and Brandon Hire business cultures are closely aligned and we look forward to working with all of the Brandon Hire employees in developing the business further over the coming years.”

Vp’s ​i​nterim ​results for the six months ​to​ ​September ​​30 will be announced on November 2​1.