Berkshire Hathaway firm swoops on Freo Group

Warren Buffet-backed Canadian company Sterling Crane has acquired Western Australian business Freo Group and its Queensland subsidiary Global Crane in a deal likely to be worth about $160 million.

The sale represents a big pay-day for Perth’s Canci family, which established Freo Group in 1974.

The business generated a net profit of $13.9 million in the year to June 2011, up from $7.8 million in the previous year, according to accounts lodged with the Australian Securities & Investments Commission.

The terms of the sale were not disclosed, however private sales of this kind are normally based on a multiple of earnings before interest, tax, depreciation and amortization (EBITDA).

Freo Group’s EBITDA was $31.8 million in the 2011 financial year, up from $21.1 million in the previous year.

A common earnings multiple for private business sales is five times. For instance, Tox Free Solutions recently agreed to pay 5.0 times EBITDA for Dolomatrix International’s waste business while Global Construction Services paid 5.1 times ‘normalised’ EBITDA for labour hire firm Global Industrial Services last year.

Assuming the same multiple applied to Freo Group (and assuming Sterling judged the 2011 earnings to be sustainable), the business would have sold for nearly $160 million

The deal will see Freo and Global acquired by Sterling, whose parent company is Marmon Construction Services, part of Mr Buffet’s Berkshire Hathaway investment group.  

Sterling, which was established in Canada in 1954, said Freo Group’s crane fleet would help it build a global crane fleet of more than 800 units, covering three continents.

“Freo Group and Global Cranes are an excellent fit with our organisation as we expand globally,” Marmon Construction president David Snyder said in a statement.

“We have much in common. Sterling Crane, Freo Group and Global Cranes have all earned reputations for safe, dependable and flexible service at job sites requiring highly engineered lifts and expert operators, often in remote and rugged environments.”

Freo Group managing director Tony Canci will continue in his role under the new ownership.

''We are pleased to join an organization that shares our values of reliable, responsible service,” Mr Canci said.

“Sterling Crane and Marmon have the resources and expertise to help our business continue to grow and prosper. We are excited about the future."

The Henderson-based company was established in 1974 by Mr Canci’s father, Michele.

It had total revenue of $139.3 million last year, split between crane hire revenue of $117.8 million and construction revenue of $21.5 million.