In a statement on Monday, Forge said the $US43 million acquisition price was less than three times Taggart’s forecast earnings for the next financial year.
The engineering and construction services company said its acquisition is expected to be earnings per share accretive in fiscal 2014.
In addition to the $43 million initial cash payment, Forge will make further payments of up to $25 million if certain earnings milestones are met in the next three financial years.
Forge said the upfront payment was expected to be funded through a new debt facility.
Pennsylvania-based Taggart Global is an engineer and constructor of environmentally friendly coal washing and loading plants.
Forge said Taggart had some of the world’s leading blue chip companies in the coal, clean coal, power utilities and broader minerals sectors, with a solid order book of $465 million consisting of a majority of longer term asset management contracts.
Forge managing director David Simpson said the acquisition was consistent with the company’s long-term growth and diversification strategy.
“With more than 70% of Taggart’s revenue coming from the US, Forge Group is very well-placed to benefit from the recovering US economy,” Simpson said.
“This acquisition gives us a large asset management and industrial maintenance capability in the US and we see significant growth prospects in this market, especially in the coal, clean coal and power utilities sectors.
“There is a major opportunity to organically grow Taggart’s asset management capabilities in the US and this will be a priority for Forge Group.”
Simpson also highlighted Taggart’s operations in Africa and China and said the company planned to capitalise on these burgeoning markets.
“Additionally, Taggart’s well-regarded [engineering, procurement and construction] coal processing and materials handling operations in the US have excellent growth prospects in that market and they present Forge Group with an opportunity to offer these services to coal and clean coal technology customers on the east coast of Australia,” he said.
Taggart’s senior management team have committed to staying with Forge after the acquisition is completed, which is expected to be on July 1 following certain conditions being met.
“Forge is well-placed for the remainder of FY2013 and with a more diverse geographical footprint, revenue base and order book of more than $1.4 billion, the group is positioned for continued success into FY2014,” Simpson concluded.
Taggart, formerly Sedgman USA, has performed work for coal producers in the US, Canada, China, Russia, Ukraine, Poland, Turkey and Brazil, while its senior personnel have been involved in projects in Colombia and Indonesia.
Taggart has provided feasibility studies, design, erection and/or commissioning of coal preparation and handling facilities for most major coal producers including Peabody, Consol, SUEK, Mittal, Anglo Coal, Datong and Shenhua.
