Medserv plc - Acquisition of METS Group

Thursday, October 8th, 2015

On 8 October, Medserv plc announced that, through a newly formed subsidiary Medserv M.E. Limited, it will be acquiring the METS Group for USD46 million by 23 February 2016. The METS Group comprises a number of subsidiaries which provide and operate a comprehensive threading, repair, inspection and storage service for oil country tubular goods (OCTG). The METS Group maintains three certified sites in Sharjah (UAE), Sohar (Oman) and Basra (Iraq) having a total area of 292,000 square metres. The METS Group has total gross value of assets of USD24 million as at 30 April 2015 and during the financial year ended 30 April 2015 generated a net profit of just over USD3 million.

The consideration for the acquisition of the METS Group is USD46 million to be financed through a mix of debt and equity financing. The announcement explains that USD3 million has already been paid by Medserv M.E. Limited. This deposit will be forfeited by Medserv M.E. Limited if it fails to get shareholder approval and raise the necessary funding by the completion date of this acquisition, i.e. 23 February 2016. On the other hand, the sellers (owners of the METS Group), will refund this deposit if they fail to restructure the organisation of the METS Group as agreed by both parties and fails to procure two identified key senior management personnel for the next two years.

The Directors of Medserv explained that the acquisition is in line with its long-term strategy of increasing its geographical and product spread as well as continuing to grow its customer portfolio of international oil and gas companies and subcontractors. In fact, this acquisition presents an opportunity for the Medserv Group to increase its scope of services and at the same time penetrate the well-established Middle-Eastern oil and gas service industry – a region where extraction costs are comparatively low. The acquisition will also lead to cross-selling opportunities whereby Medserv will be looking to offer services offered by the METS Group in markets in which Medserv already has a presence and vice-versa. The Directors also noted that, although the METS Group is focused on the onshore oil and gas industry whereas Medserv is concentrated on the offshore oil and gas industry, synergies can be created through the combination of the two groups.

In due course, Medserv plc will be convening an Extraordinary General Meeting (EGM) to ask shareholders to approve the aforementioned acquisition. In this respect, the Company shall also be issuing a circular to shareholders including all the relevant information.

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