Perth-based WestStar Industrial has increased its service capabilities with the acquisition of oil and gas-focused steel fabricator Alltype Engineering.
The company announced today it has acquired 100 per cent of Alltype in an all-scrip transaction worth around $5.9 million, with deferred consideration of up to $2.5 million – subject to Alltype hitting certain FY20 targets.
WestStar said it would gain $1.6 million in cash and $3.8 million worth of property and plant equipment from the deal, along with a 7,000 square metre fabrication workshop.
It said the acquisition would also provide WestStar with an expanded national customer base and increased access to oil and gas, water and power generation sectors.
WestStar chief executive Robert Spadanuda said the deal de-risks the company’s operations by broadening its service offering.
“What we’re trying to do with this transaction is give us a bigger market sector to perform in,” Mr Spadanuda told Business News.
“There is a lot of expertise now in the group to be able to take on a lot of different scope.”
Established in 1985, Alltype provides workshop fabrication, site installation, construction and maintenance services to the oil and gas sector and other industries.
Mr Spadanuda said the acquisition would allow the company to perform a lot of fabrication works in-house rather than sub-contracting the works.
“Alltype has got a lot of capability and speciality in maintenance services, which we see as a market for us to be growing into,” he said.
“The reason for that is it gives us the ability to try and get recurring revenue in the business as opposed to just going out and pricing work.
“The diversity gives us the ability to expand into industries as they evolve or change in a changing economic environment as well.”
Mr Spadanuda said the deal would also strengthen WestStar’s balance sheet.
In FY19, Alltype delivered revenue of around $30 million – about half of WestStar and Alltype’s combined revenue – and an EBITDA of $2 million.
“We’re looking to grow on that organically in the short to medium term,” Mr Spadanuda continued.
“It’s about buckling down and making sure the businesses deliver, and that’s probably our pure focus over the next six to 12 months – ensuring that those business units or subsidiaries deliver the profits that we know they can deliver.”
Mr Spadanuda said Alltype would trade independently, due to its established name and client base, but would still be run under WestStar.
“It will be business as usual for them, but will certainly bring a group balance sheet and group management to the equation, and sharing the expertise."
Alltype’s executive management team, including managing director Kelvin Andrijich and chief operating officer Colin Heitman, will join WestStar to continue to manage the Alltype business.