29/04/2015 - 15:24

Emeco enters Orionstone talks

29/04/2015 - 15:24

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Emeco Holdings has entered merger discussions with Queensland-based Orionstone, three weeks after the rival mining equipment supplier proposed a nil-premium merger.

Emeco enters Orionstone talks
Emeco chief executive Ken Lewsey.

Emeco Holdings has entered merger discussions with Queensland-based Orionstone, three weeks after the rival mining equipment supplier proposed a nil-premium merger.

Osborne Park-based Emeco also disclosed today it had postponed its acquisition of truck and trailer rental business RentCo for a second time, to July 31.

The two transactions are intertwined, as Orionstone has proposed that the RentCo deal should, if possible, be terminated.

Emeco’s two largest shareholders, First Samuel and Black Crane Asia Opportunities Fund, have also lobbied for the RentCo deal to be scrapped, arguing the terms are overly generous and that Emeco should focus on improving its core business.

Emeco, led by chief executive Ken Lewsey, is already familiar with the privately held Orionstone business, as it was one of the acquisition opportunities Emeco had looked at over recent months.

It said today it had “entered into active discussions with Orionstone to assess the benefits of a potential transaction”.

It claimed this was in line with the company’s strategic plan and was part of its ongoing capital management program.

The market reacted positively to today’s news, with Emeco shares up 0.8 cents to 9.8 cents.

The company’s stock peaked at a recent high of 14.2 cents after the RentCo deal was announced in mid-March, before sliding to a low of 8.7 cents this month.

Emeco promoted the RentCo deal as an opportunity to diversify its business outside the mining sector.

The acquisition was worth up to $75 million, including a three-year earn-out period based on future earnings.

Macquarie Capital is advising Emeco, while JP Morgan is advising Orionstone.

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