Sheffield Forgemasters sold to Ministry of Defence in £2.58m deal
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The major city employer announced today it will be entirely refinanced by the Government in a £2.56m deal to “secure its future.”
In a statement, the MoD claims it will invest up to £400m for “critical” upgrades to the factory’s plan, equipment and infrastructure so it can support defence outputs.
The immediate cost of the acquisition is £2.56 million for the entire share capital of the company plus debt assumed.
The company’s main driver of revenue and profitability over recent years has been manufacturing specialist forgings and castings for submarine platforms and surface vessels as a supplier to Rolls-Royce, BAE Systems and Babcock International, who have reportedly provided guarantees to support the financing of the company.
With the company’s existing credit facilities due to expire in December, the company says significant investment is required for it to be a reliable supplier into MoD.
David Bond, CEO at Sheffield Forgemasters, said: “The agreement to bring the company under the ownership of the MoD provides a more secure future for the business and its people.
“The MoD’s intention is to invest up to £400m over the next 10 years to replace defence-critical equipment and infrastructure as we recapitalise our productive capacity, positioning the company to retain and create new highly skilled manufacturing jobs within the Sheffield City region.
“Sheffield Forgemasters and its shareholders are not able to fund an investment of this size and so this acquisition marks the culmination of a process, started two years ago, that enables us to be a reliable and secure supplier to defence for the long-term. I am grateful to my colleagues on the Board and throughout the business who have supported us on this journey.”
Steve Hammell, CFO, added: “The board of directors at Sheffield Forgemasters is unanimous in its support for the terms of the acquisition and is strongly of the view that the deal is in the long-term interests of all stakeholders of the business, including shareholders, employees, customers, suppliers, the local community and the Sheffield City region.
“We have secured the support of our major shareholders, who have agreed to sell their shares to the MoD at a price of 121 pence per share, equating to total consideration of £2.56m.
“The transaction also involves a refinancing of the company’s credit facilities with the financial guarantees provided by Rolls-Royce, BAE Systems and Babcock falling away. We will now enter an approved offer period with completion of the deal to follow in three weeks time.”
Sheffield Forgemasters will operate under the leadership of its current executive directors and senior management, supplemented by the appointment of two further non-executive directors including one from UK Government.
Mr Bond said: “Although the MoD’s priority is to secure defence outputs, we will continue to operate in commercial markets with our existing equipment and will also look to exploit opportunities that may arise from the UK Government’s net zero carbon agenda, including Off-shore Wind projects and the Civil Nuclear market.
“Sheffield Forgemasters has now established a base for a sustainable future. These are exciting times for the company as we enter a new chapter in its 200 year history alongside the Ministry of Defence.”