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Southern Cap's new direction

By Chris Hutching

Friday 14th March 2003

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Southern Capital executive chairman Graeme Wong said yesterday the company's property development assets would remain within the group and continued to be managed and sold down in the normal way despite the transformation to a hire-equipment owner.

It bought half of Dunedin-based Hirequip late last year for $17 million from GS Private Equity, an institutional investor that boasted a compound annual return of 35% over the life of the investment. Hirequip is about twice the size of its nearest competitor.

Now Southern Capital proposes to buy the other half from founder and managing director Stuart McKinlay, who will continue to run the division, and the listed company will probably change its name to reflect the Hirequip acquisition. Mr Wong said "things sort of evolved" after the initial tranche was purchased and Southern Capital discussed future possibilities with Mr McKinlay.

The back door listing of Hirequip avoids shareholder scrutiny of the purchase, which will be funded by the issue of 29.77 million shares to the Stuart McKinlay Family Trust at 60c a share. Following the transaction, on a fully diluted basis, the trust will hold 26.7% of the company and be the largest single shareholder.

Southern Capital founder Howard Paterson, also of Dunedin, is understood to have been behind the latest moves and the appointment to the board of Trevor Scott, one of the Tartan Mafia of Dunedin.

The company is also bidding for another hire equipment operator, Hirepool owned by Owens Group, understood to be worth $40-50 million to be funded by sales of property assets as they mature. Southern Capital has received Commerce Commission approval for the proposed purchase and has entered a tender for the company in competition with other bidders.

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