TI bids pounds 267m for EIS group

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The Independent Online
TI, the engineering giant, has the financial firepower to spend another pounds 500m on acquisitions, although it is unlikely to do another deal in the near future, the chairman, Sir Christopher Lewinton said yesterday.

He was speaking after TI launched a pounds 267m agreed offer for EIS, the quoted fluids and aerospace engineering group. If the deal goes through, it will take TI's spending on acquisitions in recent months to about pounds 600m.

However, Sir Christopher pointed out that the company was about to receive a pounds 200m payment for its 50 per cent stake in Messier-Dowty, the landing gear maker, which it sold late last year.

"We've got the capacity to spend pounds 500m and we're going to use it," Sir Christopher said, pointing out that the group always had three or four targets in its sight. "You just don't know when they're going to pop up."

"If the ideal situation came up we would be able to move on it," he said, though he added that he thought such a scenario was "unlikely".

Sir Christopher said that EIS fits well with TI's existing strategy, describing it as a "double bolt-on". EIS's couplings and fluid technology business will be integrated with the group's John Crane business, while the aerospace side can slot into TI's Dowty division.

TI said the priority would be to offer EIS's products to its customers around the world, and to improve the group's margins, which have traditionally been around 6 per cent. TI currently makes margins of 12 per cent.

EIS has grown quickly in recent years through an aggressive acquisition policy. Among others it bought Aerostructures Hamble, the aerospace design consultancy which suffered a disastrous flotation in 1995. However, investors were concerned about the group's propensity for issuing shares to pay for acquisition and EIS's share price had suffered.

Before yesterday, they had slipped from a high of 441p to 346p. They put on 144p to close at 500p yesterday.

Bill Laule, TI's recently appointed chief executive, said EIS had a collection of good businesses but they had not been integrated properly. "They've got good products which are good quality, but they haven't been able to globalise as fast as their customers wanted," he said.

TI has recently pursued a strategy of introducing global business units, allowing it to serve its customers all around the world. The acquisition of EIS is the latest in a string of bolt-on deals. The company recently spent pounds 212m on S&H, a fluid handling manufacturer. It also bought Sealol, a mechanical seals maker, for pounds 62m.

Analysts broadly welcomed the acquisition. "It looks as if most of it sits reasonably tight with what TI does." said Rory Sweetman, analyst at Greig Middleton. "It looks financially a very shrewd deal and it shows that TI is getting much more aggressive in its whole growth strategy now that it has got the new chief executive and a whole new team." However, the shares dropped 16p to 587p.

Sir Christopher accepted that investors might be worried that the company was taking on too many acquisitions. TI has grown aggressively under his control, and almost all the businesses the company now controls are less than 10 years old.

However, he pointed out that the appointment of Mr Laule as chief executive in January allowed him to spend more time pursuing acquisitions. "Bill runs the business and I do the deals," Sir Christopher said.