Emeco postpones Rentco purchase

Emeco Holdings has postponed the $75 million purchase of truck rental business Rentco, as it seeks to address criticism of the deal from some of its biggest shareholders.

In a brief statement today, Emeco said completion of the Rentco acquisition had been postponed by one month, to April 30.

“Deferral of the completion has been agreed by the parties to allow for satisfaction of outstanding conditions precedent,” the company said.

Emeco said its board had confirmed its full support for the Rentco acquisition, which was part of its strategy of diversifying beyond mining services and creating a more resilient business.

“However, the board is engaging in discussions with shareholders who have raised issues with a view to addressing their concerns,” the statement said.

Melbourne-based First Samuel, which has a 16.9 per cent stake in Emeco, and Hong Kong-based Black Crane, which this month lifted its stake to 6.9 per cent, have jointly criticised the planned acquisition.

While endorsing the underlying strategy, they have criticised the timing and valuation of the deal.

If the deal proceeds, they have also threatened to requisition a shareholder meeting to spill the current board, which has been chaired by former CSR chief executive Alec Brennan since 2006.

An Emeco spokesman said the company would not speculate on possible outcomes from the discussions, but emphasised the acquisition would proceed.

The spokesman said the board would engage with shareholders “to better explain the structure of the deal and address their concerns”.

The Rentco acquisition, announced on March 13, involves a minimum consideration of $51.9 million, comprising cash and scrip paid over three years.

In addition, the Rentco vendors – brothers Bob and John Shier – may earn a further $23 million, dependent on earnings performance over the next three years.

After adding in Rentco’s debt, the acquisition is based on an enterprise value of $82 million.

Rentco was established in Western Australia in 1994 and has grown to have a national fleet of 1,500 trailers, 185 prime movers, and ancillary equipment.

In the 2014 financial year, Rentco generated revenue of $45 million and EBITDA of $19 million.

Emeco’s share price was unchanged today at 12 cents.

It had jumped to 14 cents after the Rentco announcement, before slumping to 11.5 cents after criticism of the deal.