Chinese strategic buys UK subsea vehicle business from PE
CSR Corporation, best known as China’s largest manufacturer of metro cars, has agreed to buy UK-based subsea vehicle maker Specialist Machine Developments (SMD) from Inflexion Private Equity for an enterprise valuation of GBP120 million ($184 million).
CSR is making the acquisition via its Hong Kong-listed subsidiary Zhuzhou CSR Times Electric, which specializes in the development of electric traction technology and converter technology for a variety of industrial applications, including locomotives and rapid transit vehicles.
Inflexion bought SMD in 2008 when the founder decided to step away from the day-to-day management and focus on product development. The PE firm worked with the founder to bring new team members as well as improve engineering and procurement processes, invest in R&D, and support international expansion. Inflexion said in a statement that investment will deliver a return of 2.2x.
CSR Times Electric said in a regulatory filing that it would up to GBP108.3 million, with GBP10.1 million held in escrow with Bank of China's London branch to paid based on certain performance targets being met. The acquisition is intended to extend CSR Times Electric's core technology to cover deep-sea robots and related equipment.
SMD is the leading privately-owned designer and manufacturer of subsea remotely operated vehicles (ROVs) globally. These are typically used at depths and in conditions inaccessible for human divers, performing functions such as laying subsea cables and pipelines. It is claimed that 90% of the world's fiber-optic network has been laid by vehicles manufactured by SMD.
SMD reported turnover of GBP76 million in 2013, down from GBP128.7 million the previous year. Net losses came to GBP6.7 million and GBP5.6 million in 2013 and 2012, respectively. As of December 2014, the company was carrying shareholder loans of GBP84.3 million.
CSR Times Electric's revenue reached RMB8.86 billion ($1.4 billion) in 2013, up from RMB7.25 billion in 2012. Net profit rose from RMB1.23 billion to RMB1.47 billion over the same period.
Inflexion is a mid-market private equity firm headquartered in the UK and with portfolio support offices in Brazil, China and India.
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