Clyde Process agrees sale to private equity in £33.3m deal

The Doncaster-based engineer yesterday recommended an offer by Schenck Process, a German processing group owned by European buyout firm IK Investment Partners.

The takeover already has the backing of investors holding 54.1 per cent of CPS's shares.

Just days after publishing interm results which showed growing orders amid tough markets, the maker of pneumatic processing systems said it plans to sell the group for 82.5p per share.

That offers shareholders a 13.8 per cent premium to Tuesday's closing price, but is six per cent below the 88p level hit less than a month ago.

Chief executive Alex Stewart yesterday insisted the price is reasonable. "It's a fair premium," he said. "Lots of people have reviewed it to make sure it is."

The price is a 32.8 per cent premium to CPS's average price of 62.1p in the three months to the end of November. The sale will be via a scheme of arrangement, which will need the backing of at least 75 per cent of voting shareholders. Shares yesterday closed up 12.4 per cent at 81.5p.

CPS's chairman Jim McColl, the Scottish entrepreneur and multi-millionaire, has repeatedly railed against its stock market valuation. Part of his Clyde Blowers empire, it joined AIM in July 2006.

"We are frustrated with the share price if you value it on any logical basis," he said in May, upon reporting record annual operating profits. "We would, in a private equity type world, easily be looking at 85-90p a share."

CPS yesterday said its directors have been "disappointed at the continuing low valuation placed on the CPS Group despite the continuing strong performance of the business".

The group said its small market value and the stock overhang created by big shareholdings has kept it off the radar of UK fund managers.

Combined with its capital structure, investment needs and 12m pension scheme deficit, the buyout was "the most appropriate strategic way... to achieve its next phase of growth". In the summer it began seeking buyers for the group. Mr McColl, who owns 16 per cent of the stock, has pledged his stake in favour of the deal, as have other directors. Icelandic investor Atorka is also backing the buyout with its 24.2 per cent stake, as is Uberior Investments, the private equity arm of HBOS, with its seven per cent shareholding.

Mr McColl said in a statement: "Our board is unanimously recommending this acquisition by Schenck Process because of the clear benefits we see for the company's shareholders, customers and employees. We believe that the multiple of 9.7 times earnings before interest, tax, depreciation and amortisation represented by the enterprise value of the acquisition is an attractive valuation of CPS and that Schenck Process provides CPS, its management and employees with a strong platform from which to take the business forward."

Jochen Weyrauch, president and chief executive of Schenck, said: "We share similar visions and business philosophies and with their market leading MAC Equipment and Clyde Materials Handling brands, our combined product offering strengthens our position to deliver energy saving and environment solutions to target markets within the building materials, chemical, food, metals and mineral industries."

Schenck employs 2,100 staff in 27 countries and has revenues of 388m euros.

Mr Stewart, who has 6.4 per cent of Clyde's shares, said there was a "bit of sadness" at selling up.

"We wanted to be the acquirer and consolidator," said Mr Stewart, whose future role is unclear. "That's why we came onto the market. But times have changed."

He added the decision was made by the "whole board" and CPS will thrive within Schenck's bigger network.

A far-reaching portfolio

CLYDE Process Solutions is part of Scottish multi-millionaire Jim McColl's Clyde Blowers empire.

It has 83 operating companies in 27 countries and employs approximately 5,000 staff.

The Clyde Blowers portfolio invests and manages companies within power, materials handling, pump technologies and logistics.

Its other investments include Maag Pump Systems in Switzerland, David Brown Gear Systems in Huddersfield, Union Pumps in Michigan and Weir Pumps in Glasgow.

Mr McColl left school at the age of 16 to take up his first job as an apprentice in one of Glasgow's leading engineering companies, Weir Pumps.

After six years he attended university and then joined Coopers & Lybrand as a senior consultant.

He led several turnarounds before buying at 29.9 per cent stake in a small Scottish engineering company, Clyde Blowers, in 1992.

He strengthened the team with appointments including CPS's current chief executive Alex Stewart, and grew it via consolidation.

Two years later Clyde Blowers was acquired by Simon Macawber Ltd, a supplier of dense-phase pneumatic conveying equipment. It expanded in the power industry and was renamed Clyde Pneumatic Conveying, then Clyde Materials Handling.

In 2006 it reversed into an AIM shell company and was re-named Clyde Process Solutions.

At the time its stated strategy was to "identify, invest in, and integrate complementary technologies and solutions that can be used to improve the production processes of organisations that operate in metals and minerals markets."

CPS uses pneumatic conveying and air filtration to solve the problems posed by conveying dust and materials likely to cause contamination.