Redhall looks overseas with offer for rival

Wakefield-based Redhall said the purchase of York-based Mount would also boost its presence in international energy markets.

Redhall's executive chairman David Jackson said the group had looked at a number of possible acquisitions, but Mount stood out as the best.

"It's a very high quality business," he said. "We wanted a company with a strong international presence and 80 per cent of what Mount produces goes abroad."

The acquisition will strengthen Redhall's manufacturing capability for specialist equipment engineered for high hazard markets and will provide a number of cross-selling opportunities.

"We believe this acquisition will deliver significant improvement in operating margin," said Mr Jackson.

Alan McClue, executive chairman of Mount, said: "We believe that integrating Mount's brand- leading products into Redhall's specialist manufacturing business focusing on high hazard markets will assist Redhall in the development of those global markets."

He added that the offer represents a good opportunity for Mount shareholders who want to realise their investment.

The offer price of 70p a share represents a 26 per cent premium to Mount's closing share price on Tuesday.

The deal comes at a time of increasing consolidation in the UK engineering services sector, following Scott Wilson's takeover by US engineering firm URS Corp in July and the buyout of Delta by Valmont Industries in April.

Redhall, which caters to nuclear, oil and gas, food, defence, safety and security and transport infrastructure sectors, has irrevocable undertakings or letters of intent from 45 per cent of Mount shareholdings in favour of the deal.

There are no plans to make any material changes to Mount's staffing levels or conditions of employment.

The business has a nominal head office in York, but the majority of its 80 employees work in the Midlands and Suffolk.

"Jobs are safe," said Mr Jackson. "We bought this business to grow it."

Following completion of the deal, Mr Jackson said Redhall would continue to look at other bolt-on acquisitions.

Redhall, which had an order book of 130m at the end of June, said it would fund the acquisition with bank financing and existing cash.

Redhall's shares rose more than 8 per cent to close up 10.46p at 133.96p last night.

Analysts at Brewin Dolphin said Mount should have good synergies with Redhall's existing oil and gas activities.

In a note, they said: "Mount is a high margin business and the acquisition will have a positive impact on group margins. 80 per cent of Mount's sales are overseas, providing some international diversity.

"Increasing oil and gas exposure should help protect Redhall from the potential impact of UK public sector spending cuts."

Altium is acting as sole financial adviser and corporate broker to Redhall and Charles Stanley is acting as financial adviser to Mount. The Leeds office of Hammonds LLP is advising Redhall.

In June, Redhall said it had made good progress in what it described as testing markets and said it was looking forward to a surge in nuclear work.

The nuclear new-build programme is expected to create significant long-term opportunities for the group. "The nuclear new-build programme is beginning to take tangible shape," said Mr Jackson. "We are reaching the stage where we have identified preferred partners for manufacturing and contracting."

The coalition Government has committed itself to nuclear energy.

Redhall's work ranges from designing and building a new bioethanol plant at the BP Chemicals Saltend site, to outfitting contracts for nuclear submarines.

Firm plays safety role

Mount was incorporated in April 2007 and acquired the share capital of Mount (York) Limited in July 2007.

The group is involved in the manufacture and supply of threaded adaptors and reducers, which are safe to use in potentially explosive or hazardous areas.

Mount also stocks and provides industrial valves and actuators. Its main customers are in the oil and gas and petrochemical industries.

In addition it serves a range of other markets including mining, waste water, dust extr-action and pharmaceuticals.

For the year to the end of December 2009, it reported turnover of 9.3m and pre-tax profits of 2.7m. Revenues for the six-month period to the end of June 2010 fell by seven per cent to 4.6m.