- Allen-Vanguard to pay up to $40 million in all-cash deal for profitable
and growing hazard management services business
- Strategic addition to Allen-Vanguard's capability to counter improvised
explosive devices ("IEDs")
OTTAWA, April 19 /CNW Telbec/ - 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 (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.
To find out more about Allen-Vanguard Corporation (TSX:VRS), visit our
website at www.allen-vanguard.com.
For further information:
For further information: David Luxton, (613) 769-5353