Monday 26th August 2013
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Mainfreight will drop a compensation claim against the former owners of Wim Bosman in exchange for an 8.2 million euro payment after the European transport business lost a key customer shortly after being acquired in 2011.
Mainfreight has reached "an amicable agreement" to settle the dispute, it said in a statement today. The settlement comes two months after the Auckland-based transport and logistics group said it would mount a compensation claim over the loss of customer Giant Europe BV.
Mainfreight bought Wim Bosman in 2011 for 110 million euros plus earning-outs tied to earnings if targets were met. Under the terms of the settlement, the former owners have agreed they aren't entitled to any earn-outs under the 2011 deal, while making a payment to Mainfreight as an adjustment to the purchase price.
While the new business was expected to lift earnings, Mainfreight lost key trading accounts in its first 12 months of ownership while having to cope with poor trading conditions in the face of a European recession and bedding in the operations.
In the year ended March 31, sales revenue in Europe was little changed at 244.7 million euros while EBITDA tumbled 43 percent to 9.46 million euros. And in May, managing director Don Braid said he was "impatient" to fix Europe.
The agreement with the former owners will also see Mainfreight lease additional land adjoining its logistics operations in 's-Heerenberg, the Netherlands, which is itself on leased land. Mainfreight will pay an additional 200,000 euros a year between April 1, 2016, and March 31, 2021, and in return, the former owners have agreed not to build a planned new warehouse on the site.
"Mainfreight intends to continue to focus its efforts on positioning its European business for growth and improved profitability," Braid's statement said.
Its shares last traded at $10.29 and have declined about 13 percent this year. The stock is rated a 'buy' based on the consensus of six analysts surveyed by Reuters, with a median price target of $11.20.
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