Emeco in $80m east coast buy

Emeco Holdings has made its fifth big acquisition in the past three years, acquiring Queensland-based Matilda Equipment for $80 million while also announcing a $90 million capital raising to fund the purchase.

Matilda is a mining equipment business specialising in low-hour and late-model equipment.

The acquisition represents a 3.3 earnings multiple.

The news comes after Emeco bought Force Equipment in October last year for about $70 million, while a merger with east coast-based Orionstone and Andy’s Earthmoving was finalised in March 2017.

The company also announced a deal to buy Rentco for $75 million early in 2015, but shelved those plans a few months later. 

Matilda has fleet of 83 pieces of mining equipment, which have an average age of 9,300 hours compared with the existing Emeco portfolio average of 25,000 hours.

Matilda Equipment typically sells its equipment as it approaches the end of its first component life.

Emeco managing director Ian Testrow said the acquisition represented an attractive opportunity for both companies.

“Matilda Equipment provides Emeco with a niche equipment rental business, allowing it to provide customers an additional service offering,” he said

“By specialising in low-hour, late-model, in-demand ancillary mining equipment, Matilda Equipment generates strong earnings before interest, taxes, depreciation and amortisation margins and cash, which is in line with Emeco’s deleveraging strategy.

“Combining Emeco and Matilda Equipment also provides Matilda Equipment with a disposal channel as its equipment reaches the end of its first component life, whilst giving Emeco an additional channel for refreshing and sustaining our fleet of ancillary equipment.”

Matilda generated third quarter annualised operating revenue of $34 million and operating Ebitda of $24 million.

Emeco will fund the acquisition via a fully underwritten $90 million entitlement offer, which is expected to be completed in early July.

Under the non-renounceable offer, eligible shareholders will be able to subscribe for one new share for every 7.8 existing shares at 25 cents each.

The company will issue about 360 million shares with Macquarie Capital and Morgans Corporate acting as joint lead managers and underwriters to the offer.

Macquarie is also acting as Emeco’s financial adviser to the acquisition, while Baker McKenzie is acting as legal adviser.

Emeco shares last changed hands at 28 cents each.