BABCOCK International is to fund its acquisition of debt-laden helicopter services company Avincis with a £1.1bn rights issue, the company said in a statement to the stock exchange.
Shares in FTSE 100 engineer fell 6.6% after it announced the rights issue said that it is buying Avincis for £920m from private equity firms Investindustrial and KKR, while also assuming Avincis’ net debt of £705m.
The deal will be funded through a fully underwritten rights issue of five new shares at 790p each for every 13 existing shares held.
Babcock said the acquisition is expected to be earnings accretive in its first full financial year following the deal, and will achieve a return on invested capital in excess of the current cost of capital from the second full financial year following the deal.
Avincis has high revenue visibility with an order book of approximately €2.3bn, as at 31 December 2013, while the acquisition also diversifies Babcock’s customer base and geographies.
“The proposed acquisition of Avincis meets Babcock’s strategic objectives as it brings into the Babcock Group a market-leading business, delivering mission critical services and complex engineering support to blue-chip customers in multiple geographies,” chief executive Peter Rogers said.
“Avincis already has a strong growth platform and its combination with Babcock will generate even greater expansion opportunities and value creation for Babcock’s shareholders.”