Scottish rail firm snapped up in £80m acquisition

● Founder boss and family scoop bonanza from selling 90% of QTS

A Lanarkshire rail contractor was snapped up for £80 million yesterday by Renew Holdings, an engineering services group heavily involved in UK infrastructure work.

The deal for Drumclogbased QTS will see a cash bonanza running into tens of millions of pounds for founder and managing director Alan Mcleish and his family, who before yesterday owned 90 per cent of the company’s share capital.

However, Mcleish will be staying on with QTS, which employs more than 300 workers supplemented by sub-contractors to provide renewal and maintenance engineering services to the UK rail sector.

The Scottish company, in line with Renew Holdings’ operating model, focuses on “non-discretionary operating expenditure budgets”, and in the financial year to endmarch 2018 more than 90 per cent of QTS’S revenue was ultiour mately derived from Network Rail (NR).

NR is responsible for the bulk of the UK’S rail network including rail, bridges, signalling and stations.

Aim-quoted Renew, whose HQ is in Leeds, and which is concentrated on energy, environmental and infrastructure, also completed a £45m placing of shares with institutional investors yesterday to partfund the acquisition.

The placing price for 12.7m new shares was 355p and represents 20 per cent of Renew’s existing share capital.

Renew said: “This complementary transaction is seen as an excellent fit for Renew’s proven strategy, materially earnings enhancing and is expected that the return on investment will be comfortably ahead of (our) cost of capital.”

Mcleish, who founded his company in 1992, said: “QTS is delighted to be joining Renew and we very much look forward to the future as part of a larger group.

“The transaction will provide opportunities to expand market share and benefit from the synergies with their existing successful brands working in highly regulated sectors.

“It was important to attract an owner with relevant expertise to support our growth ambitions without compromise to customer service or staff loyalty, and the Renew business model fits perfectly with these aspirations.”

Services provided by QTS include civil asset management, geotechnical and earthworks, fencing, devegetation, drainage, specialist plant hire and training.

Paul Scott, chief executive of Renew, said: “This is a very complementary and earnings enhancing acquisition that aligns with our established and proven strategy, strengthening our position in the UK infrastructure market.

“QTS has grown to become a leading and well respected brand in the rail sector.”

In its latest year, QTS made an operating profit of £9.2m on revenues of some £69.6m. Accountant and business advisory group EY acted as exclusive M&A advisor to QTS.