SRJ Technologies Group PLC (ASX:SRJ) will acquire UK-based company STATS (UK) Limited, a market leader in the provision of innovative, technology-led pressurised pipeline integrity solutions.
SRJ is looking to raise A$142 million to fund the purchase and provide working capital for the combined group.
While the acquisition is subject to shareholder approval, it should go through without a hitch as STATS provides the company with complementary business streams and extra revenues.
STATS generated revenue of A$78.9 million (£42.5 million) and EBITDA of A$11.3 million (£6.1 million) in FY2020 and has more than 317 personnel and eight offices in key target markets including UK, Canada, USA, Middle East and the Asia Pacific.
Due diligence is now underway.
Acquisition benefits
Demand for SRJ’s solutions is being driven by industry tailwinds, a growing addressable market with ageing assets, increasing regulatory pressure on energy sector operators and energy transition opportunities.
The acquisition creates a perfect storm to capitalise on these events.
The acquisition will bring:
- Management team & culture. Highly skilled management team with significant global experience in the oil and gas industry with complementary ‘solutions-led’ culture.
- Intellectual property. Portfolio of registered intellectual property with 30 patent families totalling 139 applications, of which 126 are granted patents and 13 pending applications across 20+ countries.
- Competitive advantage. Solutions-led approach complemented by a suite of innovative asset integrity management products and solutions providing customers with an integrated, end-to end approach to managing asset integrity.
- Sales leverage. Strategically aligned with global partners, providing access to blue-chip clients in North America, Europe, Middle East and the Asia Pacific together with a consulting team that establishes credibility with customers and provides visibility of existing and emerging problems facing the Combined Group’s customers.
Transitioning to green
STATS brings with it a portfolio of disruptive technologies that are well-positioned to capitalise on global energy market growth and the transition to green energy.
“SRJ’s vision is to become a global leader in asset integrity solutions for the energy industry and this transaction will add value, differentiation and scale to SRJ,” SRJ CEO Alexander Wood said.
“It will drive long-term growth with meaningful revenue synergy opportunities whilst delivering a highly responsive, solutions-led service to our clients.”
It is expected that STAT’s BISEP® and Tecno Plug® products will accelerate SRJ’s strategic priorities in the asset integrity market.
SRJ will also leverage STAT’s global presence to exploit cross-selling opportunities of SRJ’s disruptive products and technologies, whilst also looking to capture the significant growth opportunities in the energy transition sector with its broader range of asset integrity solutions.
Strategically attractive opportunity
The acquisition will not only improve revenue and assets but will also help SRJ accelerate its market position by expanding global client relationships and locations.
The overall strategic benefits include:
- Environmental focus. With the increased emphasis on Environmental, Social and Governance (ESG), pledges have been made on environmental performance with emission monitoring being a key focus. SRJ and STATS’s leak containment solutions in combination with digital monitoring will assist in ensuring emission release is minimised.
- Greater industry regulations. Energy operators are now required to comply with a range of safety, environmental, emissions and material standards. This tighter regulatory framework provides opportunities for the combined group’s asset integrity solutions.
- Grid decarbonisation. The anticipated exponential rise of renewable energy sources and repurposing of global assets to reflect this shift has already commenced, alongside asset abandonment. The combined group can assist with asset repurposing involving pipeline tie-ins to existing infrastructure, removal and replacement of old equipment with those more suitable to CO2/hydrogen services and modifying process pipework to enable safe transportation of gases. Asset abandonment work will include isolation and line plugging.
- Renewables. Together with clean energies, renewables are expected to grow significantly, and facilities required for renewable energy production will follow a familiar path from design through to decommissioning. Once repurposed, these will likely experience similar maintenance issues to existing energy facilities, which are expected to generate an emerging market for the combined group.
- Digitalisation. This enables large amounts of data to be collected and analysed which can provide the information required to manage assets more effectively. With the availability of reliable low-cost sensors and wireless technology, large amounts of data can be monitored in real-time to detect sources of fugitive emissions, pipework corrosion and machinery performance degradation; all areas that can be supported by the combined group.
The acquisition of STATS will bolster SRJ’s suite of asset integrity management products and solutions and enable it to provide its customers with a wider and integrated approach to managing asset integrity.