OTTAWA, April 19 /PRNewswire-FirstCall/ -- Allen-Vanguard Corporation (the "Company" or "Allen-Vanguard") (TSX: VRS) of Ottawa, Canada announced today that it has signed a letter of intent to acquire all the shares of Hazard Management Solutions Ltd. and its wholly-owned U.S. subsidiary ("HMS") in an all-cash transaction valued at up to $40 million. All figures are expressed in Canadian dollars unless otherwise noted.
HMS (http://www.hazmansol.com/), privately owned and headquartered in Shrivenham, UK, is a leading developer and supplier of counter-IED services including consulting, training, and analysis. Its client base includes U.S.
and European military, and police forces as well as insurance, media, oil and other commercial companies. In the current year, it is expected that more than three quarters of HMS's revenues will be generated from the U.S., where its wholly owned U.S. subsidiary has offices near Washington, DC. HMS also publishes the highly regarded "Triton Report" which tracks and analyses IED and other terrorist incidents around the world. Triton is widely used by governments and the defense industry as a key source of independent research on IED incidents and provides proprietary research, analysis and specialized database services to clients around the world.
Under the terms of the all-cash agreement Allen-Vanguard will pay approximately $20 million at closing, plus up to $20 million over the next three years, $12 million of which is in the form of vendor loan notes contingent on continued employment of the three HMS principals, and $8 million of which is tied to HMS's EBITDA performance. These figures are all based on the current exchange rate of 2.256 Canadian dollars to one pound sterling. The acquisition will be funded from the proceeds of the $53 million bought deal equity offering which closed on March 9, 2007. The transaction is expected to close around June 13, 2007, and is subject to the completion of satisfactory due diligence by the Company, regulatory approvals and other conditions customary for a transaction of this nature.
In five years, HMS has grown from a start-up operation to a highly regarded industry player with revenue of 6.6 million pounds sterling, and EBITDA of 1.5 million pounds sterling in its fiscal year ended January 31, 2007. With revenue comprised of multi-year programs, and an order backlog that already exceeds all of last year's revenue, HMS's revenue and earnings growth outlook is highly visible. It is anticipated that HMS revenue for its fiscal year ended January 31, 2008, could be more than double its 2007 result. The transaction is expected to be immediately accretive to earnings of Allen-Vanguard. At January 31, 2007, HMS had assets of approximately 2.6 million pounds sterling and the company was debt-free.
"Technology and soldier training are becoming more tightly coupled in the fight against the IED threat," said David E. Luxton, President and CEO of Allen-Vanguard. "HMS is therefore a strategic addition to our IED-defeat capability, allowing us to provide an integrated set of solutions for the multi-billion dollar counter-IED market. The market for counter-IED services and training is developing as a strong, long-term opportunity. The problem of IEDs has been widely reported as the primary threat to forces deployed in areas of conflict, and is expected to remain the case for many years. U.S. military authorities have stated that counter-IED skills and knowledge will become a core competency of every soldier "just like shooting a rifle."
"HMS personnel which include expert and highly experienced former military and police bomb disposal operators and investigators, are highly regarded among users for their counter-IED expertise, training and support services," commented Mr. Luxton. "Their intimacy with the IED problem and customer needs is highly significant to our technology and product development programs, especially in electronic counter-measures (ECM), surveillance and bomb disposal robots."
HMS was founded by Roger Davies and Mike Dolamore, both former senior British Army officer bomb specialists who have successfully commercialized their counter-IED knowledge and skills into unique data and training products and established a strong reputation on both sides of the Atlantic. The HMS brand has attracted other talented bomb specialists and grown to a staff of 40 augmented by an extensive floating pool of numerous additional specialists operating under contract to the firm.
"This transaction is exactly in line with our strategy announced with our first quarter results, when we established two operating divisions, Defence Electronics and Protective Products & Services," said Mr. Luxton. "At that time, we said that our business lines in the Protective Products & Services division provided a predictable earnings base with steady growth, but that they were under-represented in North America and they would also gain more value with scale. We noted that we would seek to gain significant scale from companies that are a strategic fit and have product or market synergies, established earnings, solid management, and involve minimum integration. We have achieved all of these objectives with this very attractive and accretive acquisition, and the financial structure to the transaction calibrates to very reasonable valuation metrics. We are very pleased that the transaction could be structured on performance-driven terms which satisfied the owners and principals of HMS, while at the same time reducing acquisition risk for our shareholders. This demonstrates the confidence of both parties in HMS's ability to realize strong earnings growth over the next few years."
Allen-Vanguard has no plans to relocate or change HMS operations following completion of the transaction, and HMS will continue to operate under its existing highly recognizable brand names. "We expect significant and sustained growth at HMS, building from its base of multi-year programs for outsourced training and services and related information products in the U.S. and within NATO," said Mr. Luxton. "The capital requirements to support that growth are low and well within our present means."
"We at HMS are excited at the prospect of joining Allen-Vanguard in our common purpose of preparing military forces and first responders to counter the deadly threat of IEDs," commented Roger Davies. "Allen-Vanguard and HMS have known each other and collaborated on specific opportunities for some years. Both companies share an entrepreneurial, customer-focused culture driven by innovative thinking. The combination of Allen-Vanguard technology, and HMS training and analytical services adds up to a unique and powerful offering for security forces in the long fight against IEDs, and Allen-Vanguard provides the kind of strong financial and operating platform that will enable HMS to pursue larger opportunities in the future."
Allen-Vanguard will be hosting an investor and analyst conference call and webcast at 9:00 am Eastern, April 19, 2007. Dial-in numbers: 1-800-731-5774 or 1-416-644-3419.
For those unable to listen to the call live, a replay will be available for two week period beginning at 11:00 on April 19, 2007. The replay phone number is 877-289-8525 and the access code is 21227721#.
Allen-Vanguard Corporation and its subsidiaries worldwide operate under the brand "Allen-Vanguard". The Company develops and markets technologies, tools and training for defeating and minimizing the effects of hazardous devices and materials, whether Chemical, Biological, Radiological, Nuclear or Explosive (CBRNE). The Company's equipment is in service with leading security and military forces in more than 120 countries. Products include Electronic Counter-Measures ("ECM") equipment for jamming remote detonation of terrorist devices, specialty security equipment for Explosive Ordnance Disposal ("EOD"), remote intervention robots for hazardous applications, vehicle barrier systems, and personal protective wear for use in dealing with bio-chemical agents. Allen-Vanguard is the sole, worldwide licensee and/or developer of patented technologies such as the Universal Containment System and CASCAD Foam for blast mitigation and decontamination of bio-chemical warfare agents. Head office operations are located in Ottawa, Ontario, Canada, with manufacturing operations in Stoney Creek, Ontario; Tewkesbury, U.K.; and Cork, Ireland, and sales offices in Canada, the U.S., the U.K. and Asia. The Company's shares are listed on The Toronto Stock Exchange (TSX: VRS).
This press release contains forward-looking statements, which reflect Allen-Vanguard's current expectations regarding future events. These forward-looking statements are neither promises nor guarantees, but involve risks and uncertainties that may cause actual results to differ materially from those in the forward-looking statements. Allen-Vanguard disclaims any obligation to publicly update or revise any such statements.
This is cache, read story here
