Sondex Acquires Bluestar Tools
Sondex plc, an international technology supplier to the oil and gas industry, said that it has acquired Bluestar Tools, a Canada-based business that designs, manufactures, and supplies instrumentation and tools for drilling operations in oil and gas wells. The maximum consideration, including sales related earn-out, is CDN$22.75 million (GBP11.0 million).
Sondex noted that the acquisition provides a complementary product range for its Drilling Division. In addition, it pointed out that Bluestar is growing, profitable, and cash-generative. Finally, the company said that Bluestar offers new technology with significant growth potential—both in North America and through the Sondex international sales network.
Bluestar’s financial highlights are as follows:
--Revenues in the 6 months ended June 30, 2006, were CDN$4.3 million. --The value of the gross assets acquired is CDN$1.95 million. --Pro-forma profits attributable to the acquired assets in the 6 months prior to acquisition were approximately CDN$2 million.
Calgary-based Bluestar is a fast-growing supplier of specialist technology and equipment used in drilling oil and gas wells. This equipment is used to reduce drilling time and improve productivity. Bluestar supplies a range of Measurement and Logging While Drilling tools that are complementary to Geolink, a company acquired by Sondex in June 2004. Together Geolink and Bluestar will form the expanded Sondex Drilling division. Bluestar’s instruments include tools to assist, when desired, in keeping wells vertical and straight during drilling. Additionally, Bluestar’s instruments include a replaceable measurement tool that reportedly can provide cost savings in the directional drilling process.
Bluestar has a significant presence in Canada, which accounts for 80 percent of its sales, and is also showing rapid growth in the U.S. Bluestar’s sales are expected to be increased globally with the help of the Sondex international distribution network. This acquisition will allow Sondex to combine Geolink and Bluestar’s products providing an enhanced well orientation solution enabling directional drilling contractors to offer a broader service. Prior to the acquisition by Sondex, Bluestar was owner-managed; the management team will remain with the business, and a program of integration with Sondex is planned.
The maximum consideration of CDN$22.75 million (GBP11 million) is settled as follows:
--At completion a payment in cash of CDN$5.5 million (GBP2.7 million) was made. --This will be followed by the issue of shares in Sondex plc to the value of CDN$7.4 million (GBP3.6 million) that will be issued to the vendors from 12 to 24 months after completion if certain technical and revenue milestones are reached (subject to a maximum number of 2.65 million shares); half are to be issued at the share price and exchange rate on completion and half at the prevailing market price and exchange rate at the date of vesting. --Earn-out payments up to a maximum of CDN$9.99 million (GBP4.8 million) paid 6 monthly in cash over a maximum of 3 years as a royalty from sales of specified products.
Funding for the maximum consideration and projected working capital requirements has been arranged through an extension to the existing bank facilities with the Bank of Scotland.
Martin Perry, Chief Executive of Sondex, said:
“This acquisition is an exciting opportunity for Sondex and is in line with our stated strategy of investing for growth both organically and through targeted acquisitions,” said Martin Perry, Sondex’s chief executive. “Bluestar offers our Drilling Division a complementary range of products which are, through their innovative nature and strong market demand, expected to build on the platform we have developed and deliver further growth for the company.”
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