As counter-intuitive as it may seem, listed automotive and aerospace equipment developer Orbital Corporation has made the first major move in its diversification strategy by buying a mine site safety product spun-out of a resources-focused electrical and engineering contractor.
Orbital has paid $5 million for a 50 per cent share in Remsafe, buying out Nick Bertucci's ICM Group and valuing the business at $10 million.
Orbital CEO Terry Stinson agrees that the purchase, assisted by the approval of a $7 million convertible note offer by shareholders, had doubters within the company who needed to be convinced the deal fitted a new growth strategy.
Mr Stinson said while mining companies were cost cutting, the Remsafe product had big benefits in terms of productivity – a key buzzword in the sector that has been beset by high labour costs.
The Remsafe remote isolation system quickly and safely isolates bulk materials-handling plant, minimising lost production time for conveyors, reclaimers, ship-loaders and similar equipment by replacing a dangerous and time-consuming manual task.
Remsafe managing director Mike Lane, who holds the other 50 per cent of Remsafe, believes payback can take as little as a few days by introducing speed and flexibility into the process, which removes the risk of potentially catastrophic arc flash, an electrical explosion.
Mr Lane puts the potential market in Western Australia at more than $500 million, with conveyor belts alone representing a big part of that. He and Orbital believe there’s potential in oil and gas, as well as logistics and processing well beyond the state’s shores.
The federal government supported the Remsafe commercialisation project with an industry assistance package.
Mr Stinson said he had already seen enthusiasm for the product’s potential in the LNG sector and believed Remsafe, which has 14 employees, had the capacity to become a bigger business than Orbital is with its current workforce of 100.
“We have met with oil and gas people and the big industry players; there is a lot of interest in this system,” he said.
Mr Stinson said Orbital offered significant capacity in terms of financing Remsafe’s development as well as a deep understanding the intellectual property processes required.
The purchase fits Orbital’s stated goal in September to pursue resources-related opportunities that could deliver growth.
And even though the new business seems far removed from Orbital’s best known pursuits, such as fuel injection systems for snow mobiles and propulsion units for unmanned aerial vehicles, the listed company does have an engineering business already.
