Industrial services group Brammer (LSE: BRAM) is buying a rival Midlands-based supplier of industrial components, bearings and power transmission products.

The Wythenshawe-based company is paying up to £9.5m for CBS Rotary Power Motion and says the deal will give it “the leading market position in the Midlands in the provision of bearings, power transmission, and fluid power”.

It also said the acquisition would strengthen its UK management team and reinforce its leadership as the only supplier capable of servicing major pan-European customers.

There is a minimum consideration of £5.8m payable over three years, equivalent to £4.4m net of the £1.4m which CBS has in the bank.

The first tranche payment is £3.5m cash, and is payable on completion. The second payment of £0.9m is payable on the first anniversary of completion with two further payments of £0.7m payable on the second and third anniversaries.

The earnout is dependent on the financial performance of the business and will result in a maximum payment of £3.7m payable from 2012.

CBS, which has 6 branches across the Midlands and employs 52, had net sales of £7.2 million in the year to 31 October 2007. Ebit to October 2007 was £0.7m, net assets were £1.5m at the year end and gross assets were £3.4m. Brammer expects it to be earnings enhancing from completion.

David Dunn, Brammer’s chairman, said: “We are delighted to announce the acquisition of CBS which further extends Brammer’s European market leadership. It strengthens our position in the UK and gives us a base from which to grow earnings through greater market penetration in the UK, building on the current momentum. This transaction fits our stated strategy of acquiring quality businesses which closely fit Brammer’s established product portfolio and business strategy in order to complement the organic growth opportunities in our key account and pan-European businesses.”

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