Velosi has agreed to acquire a 60% stake in PSC Europe SRL ('PSC Italy') for an aggregate consideration of €1.8 million. The acquisition will give Velosi a strong platform with which to expand its presence in Italy's rapidly expanding natural gas market and the opportunity to offer the skills of PSC Italy's expert local team as part of the Group's broader service offering.
Established in February 2002, PSC Italy is a successful business with strong client relationships amongst the major oil and gas operators. Headquartered in Dalmine, Italy, its core business is in expediting and inspection as well as providing a range of other services including: consultation, supplier evaluation & ISO 9000 Audits, projects handling and follow-up. For the year ended 31st December 2007 PSC Italy generated audited revenues of €6.5 million and pre-tax profit of €0.7 million. As at 31st December 2007, Italy PSC had net assets of €0.4 million.
Natural gas is fast becoming the emerging fuel of Italy, with 70 billion cm of natural gas currently consumed per year. PSC Italy is well positioned within this market with a particular focus on the engineering and procurement phases. It is expected that PSC Italy's local market knowledge, combined with Velosi's existing presence in the natural gas market, and wider experience and expertise, will significantly enhance Velosi's ability to gain market share in this substantial marketplace.
The consideration is to be satisfied by an initial payment of €0.9 million in cash and a further deferred consideration of up to €0.9 million to be paid on the basis of the business performance in the period from 1st January 2008 to December 31, 2010, in either cash or shares.
In addition, there are two call and put options over the remaining 40% interest in PSC Italy. The first option is exercisable for six months post December 31, 2010 for up to 50% of the balance of the vendors' shares. The second option is exercisable for twelve months, commencing five years from the date of acquisition, for the remaining shares. The option price will be settled in cash and will be based on a pro-rata percentage of a multiple of six times the average audited profit after tax and minority interests of PSC Italy for the 3 years preceding the exercise of the respective call or put option.
Commenting on the acquisition Dr. Nabil Abdul Jalil, CEO of Velosi said, "Given the signifcant opportunities in the natural gas market, Italy has for some time been a market which Velosi has been looking to enter. We believe the local knowledge and market presence of PSC Italy combined with the Group's broader international expertise will create a strong platform from which to win new contracts.
"The acquisition is in line with our model of taking majority stakes in successful profitable business in markets where the Group does not currently have a physical presence. Importantly, the PSC Italy management team will retain a significant shareholding in the ongoing business and we look forward to working closely with them to develop the opportunity."
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