Electronics firm Spectris (SXS) has agreed a deal to sell its Omega Engineering business to Arcline Investment Management for £403 million and announced plans to buy back £300 million worth of shares.
Investors have given the news a warm welcome as the shares are marked 5.5% higher to £26.53.
Omega is a specialist sensor business and while it is expected to return to pre-Covid levels of revenue this year, Spectris had made clear it needed greater scale to achieve acceptable levels of profitability. Arcline already owns the Dwyer Group which has a complementary product range.
Spectris noted the deal values Omega at 20.4 times adjusted EBITDA (earnings before interest, tax, depreciation and amortisation).
TRANSFORMATION CONTINUES
It commented: ‘Since 2019, we have been working to transform Spectris into a higher-quality business, focusing on attractive growth markets.
‘This sale increases the gross divestment proceeds over the past three years to over £1 billion, at attractive valuations, above the group’s trading multiple.
‘Following completion of the sale of Omega, Spectris will be made up of three core businesses: Malvern Panalytical; HBK; and Industrial Solutions, with a much-improved financial profile, focused on high precision measurement solutions.’
Shore Capital analyst Tom Fraine commented: ‘We believe Spectris shareholders will be encouraged that the group has been able to command a 20 times EBITDA multiple (3.1 times sales) for a business, which could be considered to be lower quality than the average across the Spectris portfolio.
‘Spectris currently trades at 10.9 times 2021 EBITDA. We believe, this transaction, along with previously announced disposals, highlights the undervaluation of the group.’
