Bodycote buys $145m US businesses, opens LA facility

Bodycote, the Macclesfield-based heat treatment and thermal processing giant, has announced the acquisition of two US-based specialist technology focussed businesses for $145 million and outlined plans for the opening of a new Hot Isostatic Pressing (HIP) facility in Southern California.

Bodycote said it agreed to acquire Lake City Heat Treating (Lake City HT) based in Warsaw, Indiana, a medical market HIP and vacuum heat treatment business primarily supplying the orthopaedic implant market as well as civil aerospace customers.

Bodycote also agreed to acquire Stack Metallurgical Group (SMG), based in the Pacific Northwest of the United States, a key provider of HIP, heat treatment and metal finishing services primarily for the civil aerospace, defence and energy markets.

SMG operates a HIP plant in Albany, Oregon, and heat treatment plants in each of Portland, Oregon, Spokane, Washington and Salt Lake City, Utah.

The businesses are highly complementary to Bodycote’s existing operations and will both expand our geographic footprint in North America and provide additional customer reach,” said the Macclesfield firm.

“The businesses comprise two HIP and three heat treatment sites, which will be integrated into Bodycote’s existing specialist technologies business and aerospace, defence and energy classical heat treatment business respectively.

The combined gross consideration for the acquisitions is $145m (£119m) on a cash and debt free basis and will be subject to customary closing adjustments.

“After expected tax benefits worth at least $15m, the net economic consideration is approximately $130m (£106m). The combined acquisition multiple is less than 9x expected 2024 EBITDA, taking into account tax benefits and synergies.

The businesses delivered strong growth in H1 2023, with revenues rising by 29%. A broadly similar rate of growth is expected for H2 2023, with FY 2023 forecast revenues expected to be around $45m (£36m).

“This growth reflects the ongoing recovery in the civil aerospace market, strong growth in the medical market and new customer wins, which provide a solid foundation for the future.

Completion of the acquisitions is subject to regulatory clearance and will be funded out of existing group credit facilities.

“They will be accretive to group margins and earnings per share from the first year post completion and are expected to exceed Bodycote’s cost of capital in 2025.

“Post acquisition, the group’s leverage will be comfortably within our target range, providing continued balance sheet strength to support the execution of the group’s strategy.”

Bodycote also announced plans to open a new HIP plant utilising one of the group’s existing sites in greater Los Angeles.

“This capacity will become operational during 2024 and will support the rapid growth in space and civil aviation markets in the Los Angeles area,” said the firm.

Bodycote CEO Stephen Harris said: “These investments are an important and exciting enabler of our strategy to further enhance and grow our specialist technologies businesses.

“In addition, they will also expand our footprint in aerospace and medical heat treatment on the West Coast and in Indiana in the US.

“The acquisitions will enhance group margins, are accretive to earnings per share and allow us to further capitalise on the structural growth opportunities in the space, civil aerospace and medical markets.

The proposed new HIP plant in greater Los Angeles will allow Bodycote to take advantage of the burgeoning HIP market in space and civil aerospace in the region.

“It will require only modest investment as it utilises an existing Bodycote site and existing HIP vessels that are immediately available for installation.

Optimal allocation of capital to drive shareholder value remains a top priority for the group and these investments reflect this.”

Lazard acted as exclusive financial advisor to Bodycote on the acquisition of Lake City HT and Stack Metallurgical Group.

With more than 165 accredited facilities in 22 countries, Bodycote is the world’s largest provider of thermal processing services.