28/11/2006 - 21:00

Wesfarmers' $500m gas buy

28/11/2006 - 21:00

Bookmark

Save articles for future reference.

Western Australian industrial giant Wesfarmers Ltd has well and truly hit the acquisition road again, agreeing to buy its second bolt-on business in three months with a $500 million deal to purchase Linde Gas Australia.

Wesfarmers' $500m gas buy

Western Australian industrial giant Wesfarmers Ltd has well and truly hit the acquisition road again, agreeing to buy its second bolt-on business in three months with a $500 million deal to purchase Linde Gas Australia.

Despite all the talk of overheated markets and competition from private equity, Wesfarmers has announced deals worth $1.2 billion since early September, when it paid $700 million insurance broker OAMPS, which it plans to merge with its existing insurance business.

The Linde specialty gas business was bought from The Linde Group following an undertaking given to the Australian Competition & Consumer Commission as a result of its global merger with The BOC Group plc.

The Wesfarmers purchase will also need to be ratified by the ACCC. If it goes ahead, the Perth-based conglomerate said it was likely to seek more capital from investors through a dividend reinvestment scheme.

Wesfarmers managing director Richard Goyder said in a statement that the potential acquisition would be part of the company’s newly constituted Wesfarmers energy division.

“With our coal interests housed in a separate operating division, Wesfarmers energy now has responsibility for the company’s gas production, distribution and power generation businesses,” he said.

“In late September we announced a $138 million investment to develop a liquefied natural gas project at Kwinana. If the transaction we are foreshadowing today proceeds, it will bring further scale to the energy division led by managing director, Tim Bult.

Wesfarmers’ four decade involvement in the WA industrial gas sector has largely been through its 40 per cent interest in Air Liquide WA Pty Ltd. The potential acquisition of Linde Gas Australia provides a good opportunity to expand our investment in the sector.”
Linde Gas Australia is a major participant in the Australian industrial gas market. It produces oxygen, nitrogen, argon and hydrogen at its Port Kembla operations and distributes these and a broad range of other gases for industrial, medical and specialty applications.

Wesfarmers said Linde Gas Australia achieved sales of approximately $100 million and EBITDA of $37 million – excluding royalties to The Linde Group – in the financial year ended December 31.

Revenue for the 10 months to October 31 increased about 7 per cent to $88 million, and Wesfarmers said there was substantial scope for growth.

Linde has a planned roll out of new liquefaction capacity and other minor capital projects during 2007, costing about about $20 million, which Wesfarmers believes will create additional opportunities for earnings growth over the short to medium term.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

Subscription Options