The FTSE 250-listed firm, which provides multiple services including prison and immigration facilities for the UK government, said it will pay US$225mln (£173mln) for Alion’s Naval Systems Business Unit (NBSU), which offers naval design, systems engineering and support to a number of armed forces such as the US and Canadian navies as well as the US Army.
The acquisition is expected to complete in the second half of 2019, with the business forecast to contribute around US$370mln in revenues in its first year of ownership.
Serco said the purchase would be funded by a mixture of debt and equity, of which Thursday’s share placing would form a part.
Rupert Soames, Serco’s chief executive, said the acquisition would materially add scale to the firm’s existing US defence business and would place it as a “top tier supplier” to the US Navy.
Soames also said that they saw “long-term and growing demand” for the combined business after the US Navy announced plans to increase its fleet size to 355 ships from 280 by 2034.
In a separate announcement, the company said it would place around 111mln new shares with both existing and new institutional investors, with the placing price to be decided at the end of a bookbuild process which would begin immediately.
In a note to clients, analysts at Shore Capital estimated that the acquisition would boost Serco’s revenues in North America by 75% and increase its overseas revenue share to nearly 70%, lessening pressure on its UK arm.
The news of the acquisition sent the shares surging 8.8% to 131.8p in late-afternoon on Thursday.
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