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Diploma Plc

Diploma PLC Acquisition of Virginia Sealing Products

Diploma PLC (LON:DPLM), the international group supplying specialised technical products, technical services and value-add services, has today announced the acquisition of the assets and trade of Virginia Sealing Products, Inc. (“VSP”). 

VSP is a leading supplier of high-quality gaskets and fluid sealing products, as well as customised solutions, to the industrial MRO market.  The business specialises in customers processing and transporting hazardous and corrosive materials, along with those in other industrial markets, including power generation, pulp and paper and marine.  VSP is built on strong, long-standing customer and supplier relationships supported by value-add servicing.  The business is based in Virginia, with operations throughout the southern United States. 

Prior to acquisition, VSP was owned by Paul and David Malgee, together with minority shareholdings held by key members of the Executive management team. Following the acquisition, the Executive management team will remain with the business in their current roles.

In the year ended 31 December 2018, VSP reported audited revenues of £35.7m (US$44.6m) and profit before tax of £5.8m (US$7.3m). Gross assets at 31 December 2018 were £10.2m (US$12.8m). After adjusting for finance costs and certain non-recurring expenditure, adjusted operating profit for the year ended 31 December 2018 was £6.4m (US$8.0m).  The initial cash consideration, before acquisition costs, is £56.0m (US$70.0m), subject to minor working capital adjustments and represents a multiple of ca. 9x adjusted historic operating profit. Further deferred consideration of up to a maximum of £8.0m (US$10.0m) and consistent with the initial transaction multiple, may be payable in late 2020 subject to achievement of operating profit targets. 

The acquisition will be funded through existing cash resources and new debt facilities. Diploma PLC will continue to maintain a strong balance sheet with Net Debt:EBITDA unlikely to exceed 0.5x, following this transaction.

We expect this acquisition to be immediately earnings enhancing for the Group and will be reported as part of the Seals Sector activities.

Johnny Thomson, Chief Executive Officer of Diploma PLC said:

“We are delighted to welcome VSP into the Diploma Group. The business has an excellent management team, a strong service culture, and an impressive customer and supplier base.  The acquisition is consistent with our strategy and provides an exciting opportunity to extend our Seals activities in North America.”