News
Chamberlin & Hill expands foundry capabilities with acquisition of Russell Castings
7 April 2004Key Points:
Acquisition of Russell Castings, one of the principal UK iron foundries involved in the production of high integrity spheroidal graphite ductile iron, austempered ductile iron and grey iron castings
Extends the overall product range of the Company and provides the capability to produce castings of a size that complement those currently manufactured
Potential to access new markets as Russell Castings has a different customer base from Chamberlin & Hill
Strengthen the market position of the Company in the foundry sector where the Directors believe further consolidation will occur
Barrie Williams, Chief Executive of Chamberlin & Hill, commented:
''The acquisition of Russell Castings provides a real growth opportunity for the company expanding our range of castings and assuring continuity of supply for our customers. We will look forward to the future with a greater sense of optimism''
CHAMBERLIN & HILL PLC
Acquisition of the business, assets and liabilities of Russell Castings
Introduction
Chamberlin & Hill announces the proposed acquisition of the business, assets (excluding cash) and liabilities of Russell Castings, an iron foundry business based in Leicester. Russell Castings is a division of Elliott.
Background to and reasons for the Acquisition
The Directors believe that, with a strong balance sheet, Chamberlin & Hill is in a position to take advantage of any opportunities which emerge from the present market conditions in the foundry sector where the Directors believe further consolidation is likely. The Board has previously stated that its acquisition strategy remains one of pursuing appropriate opportunities and believes that the Acquisition of Russell Castings provides an excellent way of expanding Chamberlin & Hill's niche sector foundries and consolidating its market position as a leading manufacturer of iron castings in the UK.
The Directors believe that the product range of Russell Castings will extend the overall product range of the Group and provide the Group with the capability to produce castings of a size that complement those currently manufactured within the Group. The Acquisition will provide the Group with the potential to access new markets as Russell Castings has a different customer base from Chamberlin & Hill. The Directors believe that the Acquisition will also provide the opportunity to cross-sell products to the respective customer bases. In addition Russell Castings brings certain technical capabilities and management skills to Chamberlin & Hill whilst the breadth of manufacturing and casting expertise in Chamberlin & Hill will bring benefits to the Russell Castings business.
The Directors intend to explore the synergy opportunities for Russell Castings with Chamberlin & Hill's existing foundries in Walsall, Bloxwich and Scunthorpe. This may involve some potential restructuring and associated cost.
Information on Russell Castings
Russell Castings is one of the principal UK iron foundries involved in the production of high integrity spheroidal graphite ductile iron, austempered ductile iron and grey iron castings primarily in the weight range of 1kg to 500kg.
Russell Castings is a well established business, having traded for over 130 years since formation in 1864. In 1953 Russell Castings was one of the first foundries in the UK to actively promote the sale of ductile iron castings and from that time has been recognised for the commercial development of the full range of ductile iron materials. Today, it operates from a 4.2 acre site in Leicester, which is not being acquired.
Elliott acquired Russell Castings in 1967, initially as a source of castings for its machine tool activities. From the mid 1980's, Russell Castings's strategy has been to diversify its customer portfolio by concentrating upon higher value, more complex castings and the provision of value added packages. More emphasis was put on customer service, delivery times, higher quality castings and added value with the objective of building a stable, higher profit foundry.
The industries served by Russell Castings are diverse, being part of the strategy to avoid over-exposure to any one particular industrial sector. Sectors include commercial vehicles, materials handling, hydraulic valve and motor, railways and water and gas. Russell Castings has over 200 customers, the largest of which accounted for 19.9 per cent. of its turnover in the year ended 30 March 2003.
In common with the UK engineering and manufacturing industries in general, Russell Castings has seen lower demand in the past two years, together with some business lost to competition.
Financial effects of the Acquisition
The Directors of Chamberlin & Hill expect the acquisition of Russell Castings to be earnings enhancing in the year ending 31 March 2005. This statement should not be interpreted to mean that Chamberlin & Hill's future earnings per share will necessarily be greater than its historic published earnings per share.
The Board is proposing to take advantage of Chamberlin & Hill's significant amount of unused debt capacity to finance the Acquisition and any restructuring or related capital expenditure involved.