Mercer to buy automation firm Haden & Custance for $2.25M

Wednesday 9th November 2016

Mercer Group plans to buy Hastings-based Haden & Custance for $2.25 million as the unprofitable stainless steel fabricator transitions to a food processing and packaging business.

The Christchurch-based company entered into a conditional deal to buy H&C's shares, which will add a robotics system used to prepare bulk products such as cheese and butter for processing, and offices in Melbourne and Wisconsin, US, it said in a statement. The deal would be funded through a placement of new shares or debt.

Mercer is currently raising $7 million through an underwritten rights issue, though chief executive Richard Rookes says the acquisition would need new funding.

The company wants to reposition the steel business's focus to food processing and packaging technology, giving it exposure to higher-value export business.

"H&C fits very very well into that stated strategy," Rookes told BusinessDesk.

Adding the US office is expected to help sell Mercer's Titan slicer and Beta cheese processing products, with the acquisition projected to deliver "material" savings and set up "the platform for sustainable profitability".

Rookes said there was an opportunity to roll-up medium-sized food processing and packaging exporters generating revenue of $10 million-to-$20 million which struggle to achieve scale, and while Mercer doesn't have any other acquisitions on the cards, it is open to more.

Mercer's existing 2.25-for-1 rights issue, which is underwritten by interests associated with director Humphrey Rolleston, will go towards repaying debt and providing the firm with working capital.

The company also has a question mark over the cost caused by the collapse of a silo at Fonterra Cooperative Group's Edendale factory. The bill has been put at as much as $45 million, though Mercer is unsure how much would be covered by its professional indemnity and public and products liability insurance.

The shares last traded at 1.3 cents, having plunged 70 percent so far this year.

BusinessDesk.co.nz

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