Market Overview

MSA Safety to Acquire Latchways for £11/Share


Global safety equipment manufacturer MSA Safety Incorporated (MSA) today announced the terms of a proposed cash acquisition of United Kingdom-based Latchways plc (OTC: LCWYF), a provider of innovative fall protection systems and solutions, for £11 per share.

Transaction Highlights

Represents a key step in the execution of MSA's corporate strategy by expanding its investment in one of the largest and fastest growing product segments of the global safety market.
Doubles MSA's global fall protection business, positioning MSA as one of the largest fall protection providers globally.
Proposed acquisition is valued at approximately £124 million, or approximately $191 million(a) USD, implying an enterprise value(b) for Latchways of £114M, or approximately $176 million(a) USD.
Acquisition is consistent with MSA's well-balanced capital allocation strategy that includes an ongoing dividend, a recently announced share repurchase program, and investments in both organic and inorganic growth. The transaction will be funded with existing cash balances held outside the U.S. and incremental borrowing with an after tax cost of less than 2 percent.
Transaction is expected to be accretive to earnings in 2016, the first full year of ownership.
Investment is expected to return in excess of MSA's cost of capital by year three.

Founded in 1974, Latchways is a global market leader of permanent engineered fall protection systems, which includes both horizontal lifelines and vertical lifelines. Headquartered in Devizes, U.K., and listed on the London Stock Exchange plc, Latchways reported revenues of £33.1 million, or approximately $51.2 million(a) USD, for the financial year ended March 31 2015. Latchways has approximately 250 employees.

a. Converting GBP into USD at an exchange rate of 1.546

b. Equity value minus Latchways' net cash position of £9.812 million as of March 31,2015.

This acquisition, which is expected to close in October of this year, will strengthen MSA's position in one of the largest and fastest growing segments of the sophisticated safety products market. In addition, it promises to broaden and enhance MSA's existing line of fall protection products, thereby positioning MSA as a meaningful player in the fall protection market, which is estimated to be between $1.5 and $2.0 billion globally.

"This acquisition accelerates a key element of our corporate strategy and our core product focus in that it extends our fall protection product offerings, particularly within the area of engineered systems," said William M. Lambert, MSA Chairman, President and CEO. "Equally important, MSA stands to benefit from Latchways' innovative products and technology, which ultimately strengthens our combined new product development pipeline. Collectively, these benefits will broaden our opportunities in the utilities, telecom, construction and aircraft market segments, further balancing MSA's market strengths in the oil and gas and fire service industries," he said.

Latchways' product portfolio includes horizontal lifelines, personal rescue devices, WinGrip® products for aircraft maintenance, and a range of patented self-retracting lifelines (SRLs) – all of which complement MSA's product segments. Further, MSA's product development capabilities will be strengthened through the addition of Latchways' team of engineers, who have a demonstrated track record of driving innovation of engineered fall protection solutions.

Mr. Lambert added that the acquisition also complements and strengthens the market coverage and geographical footprint of both organizations. "I fully expect the combination of our customer relationships, engineering capabilities, marketing expertise and distribution networks will provide great new opportunities for our combined organization," Mr. Lambert said.

Since the acquisition relates to the shares of an English company that is not registered under the U.S. Securities Exchange Act of 1934, it is intended that the acquisition will be implemented by means of a court-sanctioned scheme of arrangement under part 26 of the U.K. Companies Act 2006. Mr. Lambert noted that due to United Kingdom regulations, there is certain information regarding the transaction that MSA cannot disclose at this time. He added that more information will be made available after the transaction closes. The acquisition is conditional on, among other things, the approval of Latchways shareholders.

In connection with the transaction, Lazard is acting as a financial advisor to MSA, and Reed Smith LLP is legal counsel.

Posted-In: News M&A Press Releases


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