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Renew buys rail contractor QTS for £80m

Engineering services group Renew Holdings has acquired Scottish railway contractor QTS in a deal worth £80m.

Renew said it had agreed to buy the £72m-turnover contractor to capitalise on increased rail sector spending over the coming years.

Both firms will officially complete the deal tomorrow, with Renew raising £45m to fund the purchase by selling new shares in the business, in a so-called share placing deal.

The remaining £35m will be raised through new debt facilities provided by Renew’s bank, HSBC.

Renew said the acquisition was partly driven by Network Rail’s increased budget for CP6, which will see the client spend £48bn between 2019 and 2024, up from £41bn in CP5.

The majority of this investment is earmarked for operations, maintenance and renewals – areas in which QTS specialises and in which spending is expected to grow by 25 per cent in CP6.

QTS was founded in 1992, growing to a £72m business that last year posted a pre-tax profit of £8.8m.

The South Lanarkshire-based firm employs 300 staff across eight operational bases in the UK, with 90 per cent of its work coming from Network Rail through asset management, earthworks, drainage and specialist plant hire contracts.

Renew has said it will retain QTS’s management team and brand, intending to run it as a standalone subsidiary.

Renew chief executive Paul Scott said: “QTS has grown to become a leading and well-respected brand in the rail sector and we very much look forward to supporting its ambition for continued growth, including opportunities via collaboration across our expanded range of services in this sector.”

Leeds-based Renew is a holding company which owns eight standalone subsidiaries working in a number of infrastructure markets including rail, nuclear, water and land remediation.

Last year Renew had a turnover of £560m for the year to 30 September 2017, with a pre-tax profit of £25m.

The past decade has seen it acquire several firms including Hartlepool’s Seymour Civil Engineering Contractors in 2007, Welsh contractor Lewis Civil Engineering in 2014 and engineering services firm Forefront Group in 2015.

In 2011, it bought Barnsley-based contractor Amalgamated Construction (AMCO) in a deal worth £19.8m.

Last year AMCO was Network Rail’s eighth biggest supplier by spend, with the contractor winning £183m of work for the year to 31 March 2017. 

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