The Seven Group is buying the rest of equipment hire group Coates Hire, about 53%, for $517 million, as the company expands its industrial services division and reduces its reliance on media assets.
The deal with the US-based private equity firm Carlyle Group will be funded via existing debt facilities and available cash, including proceeds from the sale of WesTrac China, about $516 million after tax.
The acquisition, which comes with net debt of $1.04 billion, provides the Seven Group with increased exposure to the Australian and East Coast infrastructure sector.
Seven sees Coates Hire, Australia’s leading equipment hire company with more than 200 branches, as a “low risk opportunity to obtain control of an attractive asset”.
The company’s industrial services division includes WesTrac, the sole authorised Caterpillar dealer in Western Australia, New South Wales and the ACT. In Media, Seven has a 41% shareholding in Seven West Media, the owner of television and newspaper assets.
“The move to full ownership of Coates Hire will enhance SGH’s position as a leading operator of industrial services businesses, with a strong macroeconomic environment and a positive outlook providing the potential for significant opportunities to be realised,” says CEO Ryan Stokes, the son of billionaire chairman Kerry Stokes.
After the acquisition, Seven’s industrial services division will contribute about 73% of group EBIT (earnings before interest and taxes), further shrinking exposure to media to 17% of earnings from 24%.
Here’s how earnings will change:
The diversified mining, machinery, energy and media holding company last month reported an underlying profit net profit after tax of $187.1 million, a 10% rise. Revenue was 2% higher at $2.28 billion.
After significant items, including Seven’s $128.4 million share of impairments at Seven West Media, after tax net profit was down 77.4% to $44.5 million.