Marlowe acquires H2O chemicals

Marlowe, the support services group focused on acquiring and developing companies that provide critical asset maintenance services, announced on Thursday that it has acquired H2O chemicals for £2.8m.

Founded in 1992 and headquartered in Leeds, H2O provides water treatment and hygiene services and employs 84 staff from three offices around the UK. According to the board, the company has a strong presence in the Midlands and Yorkshire with a base of over 600 customers. The board also feels that the firm's services are complementary to those offered by another firm that was acquired by the group in April this year, called WCS.

The newly acquired firm reported audited revenues of £6.1m and adjusted EBITDA of £0.6m.

The board believes the acquisition will double the size of the group’s current treatment division, attract a new customer base with a significant proportion of recurring revenues, create an enhanced platform for further buy-and-build growth and enhance earnings in its first full year of ownership.

Chief executive Alex Dacre said: "The acquisition of H2O will significantly expand Marlowe's water treatment activities and marks the next step towards fulfilling our strategic objective of providing national coverage in each of our sectors."

The board plans to finance the acquisition through an extension of the company’s existing debt facility with Lloyds Bank by an additional £2.5m.

In addition to this, the company is also announcing a placing and subscription with certain institutional investors and existing shareholders to raise around £10m. The placing and subscription were oversubscribed with the price of 170p per share representing a premium of 1.5% of the mid-market closing price per share of 168p on the day prior to this announcement.

The company will also issue 211,765 new ordinary shares of 50p each (consideration shares) at the issue price to the H2O managing director who will become a senior executive of the group's Water treatment division.

According to the board the new ordinary shares of 50p each at 170p per share will generate a placing of approximately £4.4m before expenses through the issue of 2.5m ordinary shares. For the same share prices a subscription will generate approximately £5.6m before expenses through the issue of 3.2m ordinary shares. The board believe the proceeds will provide the firm with the financial resources to pursue further acquisition opportunities.

The share price rose 10.45% to 185p at 1001 BST on Thursday.