November 11, 2021
ATS Automation Tooling Systems Inc., a major automation solutions provider, recently announced it has entered into a definitive agreement to acquire SP Industries, Inc., a designer and manufacturer of high-grade biopharma processing equipment, life sciences equipment, and lab apparatus products for US$445 million (~C$550 million), subject to customary post-closing adjustments, representing 15.3x SP's trailing 12 month adjusted EBITDA or 11.9x post synergies.
"SP greatly expands our capabilities and offerings through the addition of its aseptic and non-aseptic lyophilization portfolio and its fill-finish solutions and enhances our position in the pharmaceutical drug development and production end-markets," said Andrew Hider, CEO of ATS. "SP participates in highly attractive segments where growth is driven by a robust pharma drug pipeline, rising usage of biologics and increasing lyophilization of products. Notably, the combination of ATS and SP will allow us to better support the needs of our customers throughout the lifecycle of pharmaceutical development and production, as well as in diagnostics, broader life sciences and applied sciences applications. With its proven track record and talented team, SP will be a strong contributor to the ATS family offering compelling sales synergy potential with our life sciences businesses including Comecer."
Founded in 1982 and based in Warminster, Pennsylvania, SP offers a broad portfolio of research and commercial lyophilizers, aseptic fill-finish equipment and systems, life sciences equipment, and attractive and meaningful recurring revenues through its labware and glassware business. In the trailing 12-months ended September 30, 2021, SP generated revenues of US$179 million and adjusted EBITDA of US$29 million. Approximately 70% of its revenues are derived from customers in North America, 14% from Europe, and the remainder from other regions. SP derives approximately 73% of its sales from biopharma processing equipment and life sciences equipment, including services, and approximately 27% from specialty lab and glassware products. SP employs approximately 700 employees spread across its nine manufacturing facilities and locations in the US, UK and Spain.
SP will continue to be led by its CEO, Brian Larkin, who remarked, "We have observed ATS in action over the years and recognize its life sciences leadership and dedication to value creation for customers, some of whom are also customers of SP. As part of ATS, we will be able to grow to the next level with a focus on customer-driven innovation and further enhancing our value proposition in our targeted end-markets."
The transaction is expected to close in the fourth calendar quarter of 2021, but no later than the first calendar quarter of 2022, pending the completion of customary regulatory filings. ATS plans to fund the acquisition by drawing on its revolving credit facility.
Attractive Synergy Opportunity
ATS expects to realize approximately US$3.5 million in annual cost synergies within three years of acquisition, inclusive of material cost savings and production process optimization. ATS also expects revenue synergies to generate approximately US$5.0 million of additional EBITDA within three years. These synergies will be achieved by leveraging the combined ATS and SP technology portfolios to provide expanded turnkey customer solutions. The transaction is expected to be accretive to ATS' earnings and cash flow per share metrics in the first year following the acquisition. ATS expects to achieve double digit return on invested capital (ROIC) by year four following completion of the acquisition.
Conference Call and Webcast
ATS hosted an analyst conference call and accompanying webcast to discuss the transaction at 8:30 a.m. EDT on Monday November 8, 2021. A replay of the conference is available on the ATS website. Alternatively, a telephone recording of the call is available for one week (until midnight November 15, 2021) by dialing (416) 764-8677 and entering passcode 045577 followed by the number sign.
