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November 8, 2012 8:05 pm
Ricardo, the engineering consultancy, has agreed to pay £18m in cash for the remnants of AEA Technology, the privatised business spun out of the UK Atomic Energy Authority in 1994 and floated in 1996.
The deal, pegged to a pre-pack administration for AEA invoked on Thursday, follows several years of rising debt and pension liabilities at the former publicly owned business.
Despite being hit by government spending cuts, AEA had continued to describe itself as “the principal low-carbon energy adviser to the UK government and European Union for the past 30 years”.
But, in July, the company said, after several deals with Lloyds Banking Group to amend covenants on its bank loans, it was “unable to achieve a long-term solution to the existing levels of net debt”, which last year stood at £34.3m, and the cost of servicing its £165.5m pension liability.
It also said any successful refinancing deal with the bank would “result in little or no value for shareholders”.
Since then, AEA shares have generally traded below 1p, valuing the company’s equity at less than £1m.
The move into administration is the last controversy to have surrounded the privatised venture in its 16-year history.
AEA was sold by the government for £228m in 1996, but its shares soared from an issue price of 280p to more than 650p in two years – valuing the business in excess of £550m.
The government’s apparent failure to secure a full price for the business at the point of privatisation led to the banks involved – Cazenove and Schroders – being criticised by the National Audit Office for their role in advising on the sale.
But as nuclear work declined, a move into general engineering and environmental consulting – including work on road and rail transport – failed to buoy demand for AEA’s services.
Thursday’s deal will see Ricardo, which specialises in advising motor manufacturers on design, take on 400 UK-based staff but none of the debt or pensions liability of the previous AEA business.
The company declined to comment on the future handling of its defined pension scheme, closed to new members in 2003, beyond stating that the trustee was expected to issue an update statement to its members in the next few days.
According to Ricardo, the takeover will bring it assets valued at £11m and a business that generated operating profits of £3.3m from revenues of £39m in the year to March 2012.
Analysts at Investec have maintained their “buy” recommendation on Ricardo, saying the AEA deal will diversify its business, and allow it to exploit “market demand for emissions reduction and general environmental consulting”.
Shares in Ricardo rose by 0.5p to 357.75p.
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