Leeds-based engineering services group Renew Holdings said it will acquire QTS Group, a specialist independent rail contractor based in Strathaven, Scotland, for £80 million in cash.

Renew Holdings also announced a share placing to raise £45 million to part-fund the acquisition.

“The acquisition and placing are expected to be materially earnings enhancing; the return on investment is expected to comfortably exceed Renew’s cost of capital … ” said Renew Holdings.

“Numis, on behalf of Renew, has placed 12,676,056 new ordinary shares of 10 pence each at a price of 355 pence per share with new and existing investors, raising £45.0m (approximately £43.4m net of placing costs) and representing approximately 20% of the company’s existing issued share capital.”

Renew CEO Paul Scott said: “We are delighted to welcome the management and staff of QTS to the Renew group.

“This is a very complementary and earnings enhancing acquisition that aligns with our established and proven strategy, strengthening our position in the UK infrastructure market.

“QTS has grown to become a leading and well respected brand in the rail sector and we very much look forward to supporting its ambition for continued growth including opportunities via collaboration across our expanded range of services in this sector.”

Alan McLeish, managing director of QTS, said: “QTS is delighted to be joining the Renew Group and we very much look forward to the future as part of a larger group.

“The transaction will provide opportunities to expand our market share and benefit from the synergies with their existing successful brands working in highly regulated sectors.

“It was important to attract an owner with relevant expertise to support our growth ambitions without compromise to customer service or staff loyalty, the Renew business model fits perfectly with these aspirations.“