Coote Industrial Ltd has continued its strategy of rapid expansion by acquisition, agreeing to purchase specialist engineering firm Drivetrain Australia for $12.1 million.
Coote Industrial Ltd has continued its strategy of rapid expansion by acquisition, agreeing to purchase specialist engineering firm Drivetrain Australia for $12.1 million.
Coote has completed seven acquisitions over the past 18 months, most recently agreeing in September to buy Bassendean firm Industrial Powertrain for $5 million.
A Coote announcement is pasted below:
COOTE INDUSTRIAL (CXG) ACQUIRES DRIVETRAIN AUSTRALIA
Significant expansion of Coote Industrial's Australasian and South-East Asian footprint
Continues strong SERVICE focus in Mining, Marine, Defence and Heavy Transport with strong barriers to entry
Highly complementary to recent acquisition Industrial Powertrain and the Engineering Services Division
Earnings accretive for CXG
Coote Industrial is pleased to announce that it has executed a Share Sale Agreement to
acquire 100% of Drivetrain Australia.
Drivetrain specialises in heavy off-road transmission maintenance, re-manufacturing and application engineering services, new heavy drivetrain components and systems, hydraulic products and marine propulsion. The business will form a significant part of the Engineering Services division.
Market Leadership with Barriers to Entry and Close Strategic Alignment
Since current Managing Director Noel Brown established Drivetrain with his wife Louise in 1987, the business has risen to clear market leadership. Customers include many of the largest heavy equipment users, Defence contractors and heavy equipment manufacturers in Coote Industrial's target segments.
The business has branch operations in Sydney, Melbourne, Brisbane, Mackay, Mt Isa, Adelaide, Perth, Singapore, Manila and Auckland. Local service operations support other centres including Newcastle.
Drivetrain is the exclusive authorised Australian and South-East Asian Distributor and Service Centre for Dana Off-Highway Powertrain components and electronic controls. This relationship with one of the world's largest transmission companies has been in place for a decade and grown from strength to strength. Brands include Dana Spicer, Clark-Hurth, Kirkstall, Comaxle and Sige. The company is also licensed by Dana to manufacture specialised heavy axles in Australia.
Recently acquired Coote Industrial business, Industrial Powertrain is strongly focused in the maintenance and repair of Dana-Spicer and Clark-Hurth transmissions. Coote Industrial expects to realise revenue and cost synergies whilst extending significant benefits to our customers from each business unit.
Drivetrain's other exclusive Australasian distributorships include Axletech (formerly Rockwell-Meritor), PRM Marine Transmissions, Ultrajet Water Propulsion, Comer transmissions and "Innovation, Dedication, Reliability" Williams throttle controls. Hydraulic distributorships include Eaton, Duffield, Boston, Weatherhead, Everflex and Long Manufacturing brands.
The Drivetrain business also brings an efficient national parts distribution system with centralised warehousing, freight consolidations and sophisticated inventory management, offering synergy with the existing Coote Industrial operations and development plans.
Substantially Autonomous Management Model and Continuous Leadership
Noel Brown will continue with Coote Industrial and deliver increased growth in the Drivetrain business with particular focus on the exciting revenue synergy targets identified. Noel stated: "Drivetrain is a strong, reputable company with loyal and professional staff, quality services and products, and multi-national infrastructure. These assets have created a very solid base on which to build the next level of expansion.
Coote Industrial and Drivetrain share common business philosophies, providing an ideal context for market penetration, services and products diversification and very importantly the ongoing personal and career development of our employees.
The sale of Drivetrain is a significant event for Louise and I and we take this opportunity to thank each one of our employees for their loyalty, hard work and professionalism over the past twenty years, which has made Drivetrain Australia the reputable, ethical and professional organisation it is today".
The Drivetrain business meets all of Coote Industrial's strategic acquisition criteria, providing a strong strategic fit; stable, high, recurring earnings; long term growth with high probability; and barriers to entry.
Transaction
The purchase price is $12.09M plus settlement of retained earnings, satisfied by payment in cash and $0.5M in shares. The shares will be issued subject to shareholder approval.
Drivetrain is expected to deliver FY08 NPAT of $2.65M before acquisition costs, on a turnover of $38.9M.
