Morgan Sindall has completed the acquisition of Pipeline Constructors Group, a provider of utilities services. The transaction is for a total of £16.45 million, satisfied by a mixture of £9.29 million of cash and £7.16 million loan notes. Pipeline Constructor’s acquired balance sheet includes some £0.75 million cash. The sale provides a realisation for private equity houses 3i and ISIS Capital, formerly Friends Ivory and SIME.
3i and Baronsmead VCT acquired a 44% stake in Pipeline Constructors following a management buyout of the business in September 1995. 3i invested around £2 million and Baronsmead committed approximately £1 million through its own trust and on behalf of pension funds it was managing at the time. In autumn 1997, 3i upped its holding in the business to around 42% when it inherited the Baronsmead investment portfolio. Baronsmead retained a 2% stake which the firm was managing for various pension funds and which Friends Ivory and SIME (now ISIS Capital) eventually acquired.
Based in Corby, Northants, Pipeline Constructors is an independent national utility services provider serving its clients from a number of business centres and depots throughout the UK.
John Dunlop, former chief executive of Pipeline Constructors and business development director of the new group, said: “This is extremely positive for us. We are now part of a much bigger group – our clients will get a more rounded service and the financial strength of the enlarged group will allow us to grow the business further.”
The deal, a strategic acquisition for Morgan Sindall, is earnings enhancing in the first financial year and will bring considerable scale to the group’s growing infrastructure services division, Morgan Est. The board believes that the combination of the two businesses will provide long term quality earnings flow and create one of the largest water contractors in the UK.
“This acquisition follows an extensive view of the utilities market,” said Graham Grundon, managing director of Morgan Est. “Pipeline Constructors is a leading brand with a strong presence in the water sector and considerable growth potential in its operating market currently worth an estimated £2 billion. It is the right fit for Morgan Est’s current infrastructure services businesses and will enable us to further penetrate the utilities market at a time when more utility companies are seeking improved and integrated outsourced services from their providers.”