Emeco ends takeover talks

29/06/2015 - 09:55

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Plans by Emeco Holdings to diversify and accelerate its growth through M&A deals have come to naught, after the mining equipment supplier announced today its agreed takeover of Perth company RentCo and its merger discussions with Queensland competitor Orionstone had both been terminated.

Emeco ends takeover talks
Emeco managing director Ken Lewsey.

Plans by Emeco Holdings to diversify and accelerate its growth through M&A deals have come to naught, after the mining equipment supplier announced today its agreed takeover of Perth company Rentco and its merger discussions with Queensland competitor Orionstone had both been terminated.

In a statement, Emeco said the Rentco acquisition, which was pitched at $75 million in March, was terminated after both parties were unable to agree to certain terms of the deal, following a review period that was extended in April.

Emeco had postponed the Rentco purchase after Orionstone pitched a nil-premium merger proposal in early April, with the Queensland company also pushing for Emeco to scrap the Rentco deal.

In addition, two of Emeco's largest shareholders – Black Crane Asia and First Samuel – opposed the acquisition of Rentco, which specialises in truck and trailer rentals. 

However, Emeco said today that, after due diligence, an agreement on a proposal that represented fair value for its shareholders could not be reached with Orionstone, and discussions were finished.

“A financing solution to facilitate the combination of the two businesses has also not been developed,” Emeco said.

Chairman Alec Brennan said the company was disappointed not to have been able to agree reasonable terms to merge the businesses.

“However, we must remain disciplined in the use of our shareholders capital, the financing we assume and ensure that any transaction provides Emeco shareholders with fair value,” he said.

“We are encouraged by the positive steps the business has made in the second half of FY15 and look forward to continued recovery in FY16.”

Managing director Ken Lewsey said Emeco was focused on strengthening its cash flow generation through its core business by maintaining high utilisation levels and reducing costs.

“Operationally, we have had a number of important contract wins in the first half of the financial year with current utilisation of 74 per cent compared with 51 per cent at the same time last year,” he said.

“As part of our ongoing business improvement program, measures have been implemented that are expected to realise a $14 million reduction in Emeco’s cost base in FY16 with additional initiatives expected to achieve savings in excess of this figure going forward.”

Macquarie Capital acted as financial adviser to Emeco.

Emeco shares were 2.7 per cent lower to 7.2 cents a share at 9:50am.

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