Wood Group has bought a coatings specialist which helped to repaint the Forth Rail Bridge in a deal thought to have valued the company at around £30 million.
The acquisition of Pyeroy will allow Aberdeen-based Wood Group to extend the range of services it provides for firms in the North Sea where oil and gas firms are ramping up activity.
Based in Gateshead, Pyeroy has carved out a lucrative niche working for organisations which own assets that need protecting from the ravages of the weather.
Staff from the firm spent 10 years applying a protective coating to the venerable Forth Rail Bridge under a £20m 10-year deal that completed in December 2011.
Pyeroy is working with partners on a £120m contract for the Royal Navy which involves painting the new Queen Elizabeth class aircraft carriers that will be assembled at Rosyth in Fife, where it has worked on refits.
The client base also includes oil and gas firms operating offshore. Pyeroy's other services range from fitting insulation to industrial pipework to providing scaffolding and access equipment.
The company made £4.6m earnings before interest, tax, and amortisation (EBITA) on £88.9m sales in the year to December 31.
Robin Watson, chief executive of the Wood Group PSN arm which works on existing assets, said the acquisition marked a strategic move into specialist coatings, access services and fabric maintenance which broadens its service offering to oil and gas customers.
"These services are particularly relevant for extending the life of existing infrastructure, and for decommissioning projects. As an example Pyeroy's expertise on the Forth Rail Bridge refurbishment can be transferred into the oil & gas sector," said Mr Watson.
Wood Group expects there to be strong demand for Pyeroy's services in the North Sea. Oil and gas firms are investing heavily in trying to boost production from and extending the life of existing assets and develop new ones.
It is thought that Wood paid around £30m for Pyeroy.
Analysts at Liberum Capital told clients: "We expect the consideration was £30m to £40m. At around 10 times EBITA, that price would look fair to full."
Sector watchers at Deutsche bank described the deal as a bolt-on. Wood Group has completed a series of such acquisitions to extend its service offering and its geographic footprint.
Wood paid about £630m for PSN in December 2010, in a deal that increased its position in the North Sea maintenance market.
Bob Keiller, the former head of PSN, succeeded Allister Langlands as chief executive of Wood Group in November.
"Strategically this is a lower margin business and one less at the high-value end of oil & gas engineering services so may be viewed as a touch disappointing, but given size it is nothing major," analysts at Deutsche bank said.
However, they said Wood's acquisition track record is solid and Wood Group's shares remained excellent value.
The deal will generate a big windfall for Bob Thompson who founded Pyeroy in 1973 to focus on painting work in the shipyards of north east England.
Earlier this year the company was reported to have appointed brokers to advise on a planned flotation on the Aim market. This was expected to release millions of pounds for Mr Thompson, who had retained a majority stake.
Pyeroy employs around 1800 people at eight locations in the UK and Ireland including Rosyth.
Wood Group said Pyeroy will still be led by managing director Hugh Pelham. It will operate in the Wood Group PSN division.
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