Shore Capital sees 'strategic rationale' in Spectris' US acquisition

Analysts at Shore Capital took a fresh look at instrumentation and controls supplier Spectris on Tuesday morning after the Surrey-based firm announced that intended to acquire Revolutionary Engineering for $19m on a cash/debt free basis.

Revolutionary Engineering, an automotive testing provider in Detroit with locations in China and Germany, specialises in drivetrains, e-motors and hybrids.

Ben McSkelly and Robin Speakman of Shore pointed out that the acquisition, which will bolt on to Spectris' Millbrook facility, would address the group's lack of US presence and reliance on combustion engine testing,

"The strategic rationale is immediately apparent in our view," the analysts said.

"Clearly Automotive testing is focus for large scale investment for the group. Millbrook has been part of the Spectris group since September 2016 and has subsequently had significant CAPEX investment, which we expect to see drive top line growth in the next year," Shore's research note concluded.

The analysts reiterated their 'buy' rating on Spectris, as well as its target price of 2,700p.