Kwinana-based industrial services provider Tox Free Solutions Ltd announced its agreement to acquire Henderson-based Specialized Tank Cleaning Services for a maximum $7.5 million, one week after Tox Free announced its takeover of GrimeFighters FluidClean.
Kwinana-based industrial services provider Tox Free Solutions Ltd announced its agreement to acquire Henderson-based Specialized Tank Cleaning Services for a maximum $7.5 million, one week after Tox Free announced its takeover of GrimeFighters FluidClean.
The acquisition, to be funded from bank finance, will consist of an initial purchase consideration of $4.4 million, with a final payment to be calculated according to profit, capped at $3.1 million. Tox Free will receive all profits from the business during the managment period.
In a letter to the stock exchange, Tox Free chairman Ian Burton said the acquisition would provide a platform for the company to enter the eastern states market. STCS provides industrial services including bilge and tank cleaning, confined space entry, high pressure water jetting and vacuum loading.
The full letter from Tox Free is pasted below:
Tox Free Solutions Limited ("Tox Free") is pleased to announce it has entered into an agreement to acquire Specialized Tank Cleaning Services Pty Ltd ("STCS"). The acquisition is expected to be completed on 1 July 2006. The acquisition further cements Tox Free's position in the Industrial Services and Waste Management sector particularly in the commercial ship maintenance and port infrastructure services market in Western Australia. STCS also has operations in New South Wales which will provide Tox Free with an entry into the Australian east coast market to launch the full compliment of Tox Free's integrated services. The details of the acquisition are described below. Specialized Tank Cleaning Services (STCS) STCS provide industrial services including bilge cleaning, tank cleaning, confined space entry, high pressure water jetting and vacuum loading. They have been in operation for 17 years and have developed a niche business based around the commercial ship maintenance and port support industries. The main clients of STCS include the Australian Navy and the commercial shipping sector. STCS recently commissioned a new, state of the art facility in the Australian Marine Complex in Henderson, Western Australia. The facility includes a licensed liquid waste treatment plant. The Australian Marine Complex is an integrated industrial estate servicing the defence, marine, mining and petroleum sectors. It is rapidly gaining an international reputation as the nation's leading industrial facility for marine-related industries. The STCS facility is strategically located to service the ongoing needs of the area. STCS physical assets, including land and buildings, have an estimated value of $2,500,000. Financials provided to Tox Free indicate STCS is presently earning profits of $500,000 (EBITDA) pa. With the commissioning of the new premises management of STCS are confident they can develop and grow the business over the coming 2 years to produce a profit far in excess of the 2006 financial year. In consideration of this Tox Free has structured a purchase price based on the performance of STCS management over the next two years.
The initial purchase consideration for the acquisition is $4,400,000 of which $2,500,000 is for the assets. Over the next two years existing STCS management will continue to manage the business under the control of Tox Free and will be paid a final payment based on average pre tax profit achieved during this time. The final payment is calculated at 4 times the average profit achieved per annum over the two year period minus $900,000. The final payment is capped at $3,100,000 million. During the management period, Tox Free will receive all profits from the business. Commentary on recent acquisitions Commenting on Tox Free's recent acquisitions, Mr Ian Burton, Chairman of Tox Free, stated "The acquisitions are particularly strategic for Tox Free. Together with our other subsidiaries Delvex Industrial Services, Tox Free (Kwinana) and Oil Energy Corporation, the acquisitions cement our position in the Western Australian niche sector of industrial and hazardous waste management, tank cleaning and industrial services. The company is well placed with a solid base to grow organically to increase its market presence. The STCS acquisition also provides a platform for Tox Free to enter the eastern states market whilst the recently announced Grime Fighters acquisition in the Goldfields opens up a new geographical area for Tox Free to expand. These are exciting times for Tox Free and our young management team is aggressive and confident in managing the business going forward". The acquisition of STCS has been funded by bank finance and as such will not dilute existing Tox Free shareholder.
