HMS Group is to acquire a controlling stake in R&D institute focused on compressor technologies and increase its stake in Kazankompressormash

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Group (LSE: HMSG), the leading pump and compressor manufacturer and provider of flow control solutions and related services in Russia and the CIS, announces today that, in a series of transactions, it has acquired 26.14% of the share capital (23.19% of the voting shares) of the leading Russian project and design institute ZAO “NIITurbokompressor named after V.B.Shnepp” (Turbokompressor) located in Kazan, Tatarstan, for total consideration of Rub 87.5 mn (c. US$ 2.8 mn), paid in cash. In the nearest future, the Group intends to increase its interest in Turbokompressor up to controlling stake under the agreements signed with current shareholders.

I. Acquisition of the institute

Artem Molchanov, CEO of HMS Group commented:

“Though a size of the acquisition is relatively small, the institute is a great fit to our strategy in compressor business. Over last 5 years Kazankompressormash, which became an integrated part of HMS Group in 2012, mastered a production of a large set of centrifugal compressor types with electric motors, compressors with gas-turbine motors, multiplicatory and screw compressors produced with the Turbokompressor’s documentation. Currently, around 80% of KKM’s innovative production is based on design documentation prepared by the institute. Thus, on top of our production potential we added the leading project and design facility to create a competitive advantage of the Group in offering of integrated solutions for our customers.

Importantly, in the future we’re going to increase our interest in Turbokompressor’s share capital up to controlling stake, while upon the completion of the acquisition HMS Group debt will remain in line with the internal covenants.”

Turbokompressor was founded in 1957 and now is the leading centre for design of centrifugal, screw and scroll compressors. Since its foundation Turbokompressor prepared a set of project documentation for more than 4,500 centrifugal and 17,500 screw and rotary compressor units, which was a base for compressor units installed across different countries, including Russia, China, US and Turkey. Having excellent R&D potential, 39 unique testing benches and experienced team of 450 professionals, including 250 engineers, 4 Doctors of science and 16 PhDs, Turbokompressor designs 10-12 of new compressor samples annually.

Quality management system of Turbokompressor is certified to international standard ISO 9001:2008.

The institute not only managed to save its scientific potential and successfully passed through challenging 1990s, but also participated in several landmark projects in the Russian gas industry. In early 2000s, the institute was a general project designer for a unified compressor unit GPA-16 “Volga” with capacity of 16 thousands kW*h, designed for Gazprom and installed in the existing gas transportation pipelines. Later on, in order to improve energy efficiency of gas transportation process, the institute designed more than 200 replacement parts of air-gas channels of compressors installed in the Gazprom’s transportation system.

The institute has a solid client base consisting of Russian major oil and energy companies, including Gazprom, Lukoil, Rosneft, Surgutneftegaz, Tatneft, Sibur, Nizhnekamskneftekhim, NLMK and other customers in chemical, petrochemical, coal, metals and mining industries.