Capital Steel: Hill & Smith's Strategic Fit

Capital Steel Service
Capital Steel ServiceImage Source: Capital Steel Service

Synopsis:

Hill & Smith PLC, an English infrastructure services provider, has finalized the acquisition of Capital Steel Service LLC. The initial cash consideration amounts to $6.3 million ($5 million GBP), with an additional $1.2 million contingent upon Capital Steel's financial performance over two years. This strategic move expands Hill & Smith's presence in the US utility sector, expecting positive earnings impact this year.

 

Article:

Hill & Smith PLC, a leading provider of sustainable infrastructure products and services headquartered in Solihull, England, has successfully concluded the acquisition of Capital Steel Service LLC. The acquisition involves an initial cash payment of $6.3 million (approximately £5 million GBP) and includes a potential additional payment of up to $1.2 million, contingent upon Capital Steel's financial performance over the upcoming two years.

Executive Chair Alan Giddins highlighted the significance of this acquisition, stating, "Capital Steel operates within one of our most promising end markets, aligning perfectly with our strategy of acquiring businesses demonstrating robust long-term growth potential." He further emphasized the synergy between Capital Steel's offerings and Hill & Smith's high-growth US utility business.

Hill & Smith Holdings PLC (LSE:HILS) formally announced the acquisition, revealing that shareholder Robert Hickman, the head of Capital Steel, will retain his role within the New Jersey-based business post-acquisition. The acquisition marks the fourth addition to Hill & Smith's portfolio in the past year, expanding its geographical reach, presenting cross-selling opportunities, and augmenting manufacturing capabilities.

This strategic move comes at a time when Capital Steel reported a revenue of $8.1 million for the fiscal year ending August, with adjusted pre-tax earnings reaching $1.0 million. Hill & Smith anticipates this acquisition to significantly enhance its earnings in 2024 and assures that the transaction was conducted on a debt-free basis.

The acquisition aligns with Hill & Smith's overarching strategy of diversification and expansion within promising sectors, leveraging robust growth prospects in the US utility domain. The addition of Capital Steel is expected to fortify Hill & Smith's position in the market, bolstering its portfolio and contributing positively to its financial performance.

Conclusion:

The acquisition of Capital Steel by Hill & Smith marks a strategic move to strengthen the latter's presence in the infrastructure sector, particularly in the US utility market. This acquisition, characterized by an initial cash payment of $6.3 million and a potential additional consideration based on future performance, showcases Hill & Smith's commitment to expanding its foothold in sectors demonstrating significant growth potential.

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