UPDATE 2-SGS boosts vehicle inspection with 180 mln euro buy

* SGS buying FCC’s ITV units in Spain, Argentina

* SGS to pay 180 mln euros in its biggest buy in years

* Estimated revenues for ITV are 64 mln euros in 2010

* Deal seen as step towards 2014 targets

* Shares rise 0.2 pct, slightly weaker than Swiss market

(Adds analyst comments, shares, details, background)

By Silke Koltrowitz and Katie Reid

ZURICH, Dec 13 (BestGrowthStock) – The world’s largest inspection
services company SGS (SGSN.VX: ) took its first step towards
reaching its ambitious mid-term targets with a 180 million euros
($238 million) acquisition, its biggest buy in years.

SGS is buying FCC’s (FCC.MC: ) Spanish and Argentinean ITV
units, bolstering its vehicle inspection business as well as its
presence in these countries.

The Geneva-based group expects the transaction to be
completed by the end of the year and said ITV should have
consolidated revenues of 64 million euros this year.

SGS, whose activities include checking toy safety and
inspecting London’s black cabs, has done many small buys in the
highly fragmented testing market recently but needs to quicken
its pace of growth to meet its target of almost doubling
revenues by 2014.

“SGS has to turn more aggressive in terms of acquisitions
than in the past,” Helvea analyst Chris Burger said in a note,
adding the leverage potential of ITV was limited due to its
local nature.

SGS shares, which have gained over 25 percent so far this
year, were up 0.2 percent at 1048 GMT, slightly underperforming
the rest of the Swiss market (.SSMI: ) as some analysts said the
deal was quite expensive.

“The price paid is relatively high: 2.8 times sales but
about 13.5 times earnings before interest and taxes for margins
estimated at above 20 percent,” Laurent Brunelle at Exane BNP
Paribas said.

SGS’s deal comes after French rival Bureau Veritas (BVI.PA: )
earlier this year bought British commodities testing firm
Inspectorate for 450 million pounds ($710 million) and
investment firm 3i (III.L: ) snapped up material testing company
Stork for 130 million pounds.

SGS Chief Executive Chris Kirk told Reuters in a recent
interview acquisitions were part of the group’s mid-term
strategy and that the bulk of the buys should be done in the
next couple of years. [ID:nLDE6AO0RG]

The deal proved SGS was able to accelerate the pace of
acquisitions, Vontobel analyst Jean-Philippe Bertschy said,
adding ITV was a high margin and steady cash flow contributor
for SGS.

Moving into more profitable businesses is one of the
strategies SGS wants to put in place to achieve a 20 percent
operating margin by 2014, SGS said when it unveiled its mid-term
goals in September. [ID:nLDE68J020]

SGS, which also competes against Britain’s Intertek
(ITRK.L: ), has said it is aiming to add 700 million Swiss francs
($711.6 million) of revenue by 2014 thanks to bolt-on buys.
(Editing by Louise Heavens, Mike Nesbit)
($1=.7559 euros)
($1=.6335 pounds)
($1=.9837 Swiss Francs)

UPDATE 2-SGS boosts vehicle inspection with 180 mln euro buy