Tuesday 23 May 2017

Cork's Kentech close to selling stake in €30m deal

Cork based specialist engineering firm Kentech is thought to be close to selling a stake to a major international private equity group.
Cork based specialist engineering firm Kentech is thought to be close to selling a stake to a major international private equity group.
Nick Webb

Nick Webb

Cork based specialist engineering firm Kentech is thought to be close to selling a stake to a major international private equity group.

The group is planning to raise €30m in equity and debt "to support growth and recapitalise the balance sheet," according to a document circulated to potential investors. The fundraising round is codenamed 'Project Kilkenny'.

The company headed by Sarah Kent is one of Ireland's most low-profile international success stories.

Dating back to 1919, the firm now employs 3,000 people around the world and specialises in providing electrical, instrumentation, control and telecommunication servicing primarily in the oil and gas industry. The company has worked with large industrial and oil groups ranging from Shell, Chevron, Siemens and Petrofac in countries ranging from Russia, Kazakhstan, Mexico and the UAE.

Investec Corporate Finance is advising the company, having helped sell rival oil services firm Kentz last year, and is said to have held talks with international private equity and institutional investors.

A deal to bring in a new investor is thought to be close. Danske Bank's exit from Ireland also prompted the firm to seek new banking facilities.

Kentech needs to be recapitalised to fund its ambitious growth and expansion plans. The firm is ramping up its maintenance business which is seen as less risky and also provides steady revenues over longer term projects.

There is a "growing proportion of lower risk reimbursable work with increasing focus on brownfield and maintenance," according to the document.

The Cork company forecasts a major spike in earnings over the next three years, doubling from about €10.6m this year to a projected €22m in 2017. Revenues are pegged to increase from €134m to €205m by 2017 as the oil and gas sector continues to grow.

Kentech has faced a bitter shareholder dispute in recent years, which has prompted it to raise funding from external sources including banks and equity investors.

In 2011, John Murphy, a director with a shareholding of more than 20pc, brought proceedings against four other directors: Michael Kent, founder of the company; Sarah Kent, CEO since 2008, John Kent and John Gilley. Parent group Josar ltd is 73pc owned by Sarah, John and Michael Kent, according to most recent company filings.

The case was settled in late 2012 with shareholders agreeing to buy Murphy's stake for $11m (€9.7m). However the full payment of this settlement was delayed, leading to further legal skirmishes last year.

Sarah and John Kent had argued that an order for the execution of a number of judgments would put the company in "immediate peril" on grounds including a risk Danske Bank would call in a $7m overdraft facility plus $4.5m of outstanding bonds.

A stay on these judgments was granted to give the company time to arrange for new funding arrangements. It is believed that all shareholders are now working together to try to bring in the new investors, which will see Murphy's stake sold.

The success of rival Irish firm Kentz - sold for $1.97bn last year - has thrust the oil services sector into the spotlight. The growth potential in the industry prompted Canadian firm SNC-Lavalin to purchase the Irish company at a huge premium.

Sunday Indo Business

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