KBC announces £9.5 million acquisition of Infochem
KBC Advanced Technologies plc ("KBC" or "the Group") is pleased to announce it has purchased Infochem Computer Services Limited ("Infochem"), a leading provider of specialised software and services to the upstream oil and gas industry, for an enterprise value of £9.5m.
The acquisition of Infochem is the first step in KBC's growth strategy to both expand into the upstream energy industry and increase software sales as a proportion of overall sales. It provides KBC with a leading position in the provision of specialised software used in the development and production segments of the upstream oil and gas industry. This complements KBC's reputation as a leading provider of specialised software and services to the downstream oil and gas market.
Infochem brings to the Group rich software and intellectual property ("IP") in the chemistry of oil and gas fluids that enables accurate modelling of reservoir fluids to maximise production - "flow assurance". The flow assurance market in oil and gas development and production has been buoyant in recent years, with application both in conventional and alternative unconventional oil and gas production.
The combination of KBC's detailed engineering, process simulation and energy management technologies with Infochem's capability and understanding of reservoir and production fluids behaviour will provide the enlarged group with a powerful set of engineering software solutions for use in both the upstream and downstream sectors of the oil and gas industry. The combination of the two companies will also deliver strong synergies by combining their software development and sales functions and through the ability of Infochem's flow assurance models to expand the reach of KBC's Petro‑SIMTM software into the upstream market. The enlarged Group's clients include asset owners, operators, oilfield service companies and EPC contractors.
The acquisition will be earnings enhancing for the Group in 2012.
The acquisition cost for all of the issued shares of Infochem is £10.9m, payable in cash in two instalments: £9.0m paid on completion and £1.9m in 3% guaranteed loan notes which are redeemable 12 months after completion. The initial payment will be funded by existing KBC cash resources and new bank debt of £6.0m repayable over a three year period with an interest rate of 1.75% above Libor. In its last financial year to 31 July 2011 Infochem reported revenues of £1.2m, with profit before tax of £0.6m. At the time of acquisition Infochem held £1.3m cash and net assets were £1.5m. The results of Infochem for the year ended 31 July 2012 are expected to show a substantial increase over the prior year figures, with management figures after the first nine months showing profit before tax ahead of the previous year.
Two of the three founder shareholders of Infochem who remain active in the business will remain with the Group to assure rapid and effective delivery of the integration synergies and to drive the continued development of the IP. Infochem's Managing Director, Philip Birch, will work with KBC for a period of six months on a part-time basis to assist in managing the handover of client relationships.
Philip Birch commented, "KBC's vision of unified simulation from upstream oil and gas through to downstream is a strong fit with Infochem's vision of production and process management integration through high-accuracy compositional modelling. The combination of both companies' technology creates a unique suite of thermodynamics, flow assurance, process simulation and energy management technologies and services that provides a step change for the oil and gas sector. In addition, access to KBC's significantly larger global network to market and distribute Infochem's software will deliver significant growth opportunities."
George Bright, KBC's Chief Executive, also commented, "We are very pleased to be able to add Infochem's well-regarded and sought-after technology in upstream oil and gas to the existing suite of KBC software in order to expand our activities into the upstream energy industry and secure a further technology advantage in the rapidly growing flow assurance market sector. The acquisition of Infochem demonstrates KBC's commitment to being a key software supplier to the energy industry from oil and gas extraction through downstream processing."
Cenkos Securities plc acted as financial advisor to KBC on the acquisition of Infochem.