Oil & gas industry communication services provider RigNet has acquired its Scottish peer Nessco Group Holdings for up to £31.1m (US$48.3m)
Under the terms of the transaction, RigNet will pay Nessco’s private equity owners an initial all-cash…
Oil & gas industry communication services provider RigNet has acquired its Scottish peer Nessco Group Holdings for up to £31.1m (US$48.3m)
Under the terms of the transaction, RigNet will pay Nessco’s private equity owners an initial all-cash consideration of £29.5m (US$46.4m) for the business, including the purchase of Nessco’s 30,000 sq. ft. headquarters facility in Aberdeen, as well its £4.2m (US$6.6m) of working capital. A further payment of up to £1.6m (US$2.5m) will be paid by November upon satisfaction of certain post-closing events.
Based on Nessco’s full year fiscal 2012 adjusted EBITDA of around £4m, the acquisition multiple, excluding working capital, is 6.7 times. RigNet’s CFO Marty Jimmerson said that this compared favourably to other acquisitions in the remote communications services market.
In order to fund the deal RigNet has entered into an amended and restated secured credit facility with Bank of America and BBVA Compass. The financing comprises a US$66.4m 5-year term loan and a US$10m revolving credit facility. Both loans carry an interest rate of Libor plus an applicable margin ranging from 2.25% to 3.50%, which varies as a function of RigNet’s leverage ratio.
The term loan, which replaces RigNet’s outstanding US$19.2m debt, requires quarterly scheduled principal amortization of US$2.4m commencing September 2012 through to March 2017, with the remainder due at maturity.
Speaking on an investor conference call, Jimmerson said that the primary driver of the acquisition was Nessco’s systems integration business which has grown rapidly in the past two years. Nessco has seen its revenues double from FY fiscal 2011 revenue of £16.1m, and a net loss of £500,000, to FY fiscal 2012 revenue of £33.2m, and a net profit of £500,000.
Mark Slaughter, RigNet’s chief executive and president, added: “Our customers will have immediate access to a broader range of integrated communications solutions as a result of this acquisition. Additionally, RigNet will now have the ability to support customers across the entire oil and gas value chain.
“I am also pleased that our debt refinancing for this transaction preserves our financial flexibility moving forward. This acquisition greatly expands the talent base of the RigNet family and underscores our commitment to investors and customers to grow and expand our business, both organically and through strategic acquisitions.”
Indeed, Slaughter said on the conference call that RigNet still had the ‘financial firepower’ for further acquisitions and was currently in the process of identifying them.
On completion of the acquisition, the merged business will operate under the RigNet brand, though the systems integration offerings will be co-branded with the Nessco brand for the time being. RigNet’s Aberdeen operations will be moved into Nessco’s facility, with the combined Aberdeen operation to be led by Ian McPherson, currently managing director of Nessco.
Established in 1979, Nessco designs, builds and installs telecommunications systems utilising technologies including satellite, fibre optic, digital radio and marine communications. The company has a small VSAT focussed business called Nesscoinvsat.
SatelliteFinance reported back in 2008 that Nessco’s private equity owners were understood to be considering a potential sale and had hired Johnston Carmichael Corporate Finance to look into strategic options. The process never came to anything though UK asset managers Aberdeen Asset Managers Growth Capital made a substantial investment in the company shortly afterwards.
Nessco was advised on the transaction by Simmons & Co, which also happened to be one of the underwriters on RigNet’s January 2011 US$69m Nasdaq IPO alongside Deutsche Bank, Jefferies and Oppenheimer & Co.
Paull & Williamsons provided legal advice to Nessco’s private equity owners, while Dundas & Wilson advised RigNet.
