Thursday 23rd June 2016
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Hellaby Holdings is to buy maintenance and engineering contractor TBS Group for $45 million plus $6 million of earn-outs in a deal that needed an NZX waiver because of links between TBS's biggest shareholder and Hellaby managing director Alan Clarke
The deal was subject to a waiver from NZX listing rules because TBS chairman Christopher Ross, whose family interests own 46 percent of the company, is also a trustee of the Clarke Family Trust, the family trust of Hellaby's Clarke, and was therefore judged to be a related party.
The NZX regulation decision to grant the waiver shows that TBS was put up for sale by its owners with information about the sale circulated to a limited number of potential buyers, including Hellaby. Two non-binding offers were made by Hellaby, in December 2015 and then in April 2016. Due diligence began after the second offer.
Hellaby chief financial officer Richard Jolly led the negotiations with Clarke excluded from all board meetings when the purchase was discussed from May 18, 2016, according to the decision. The non-executive directors have certified that Clarke took no part in the decision to enter the transaction and the company wasn't influenced in its decision to buy TBS by the relationship between Clarke and Ross.
Hellaby will pay $40.5 million in cash and $4.5 million in Hellaby ordinary shares. If the earnout is achieved, it will be paid in cash and through the issue of new shares.
TBS has a 45-year history and employs around 450 people. Its website states it has bases in Auckland, Northland, Tauranga, New Plymouth, Wellington and Christchurch, with assets of $18 million. It has worked on projects including strengthening the Auckland Harbour Bridge, repairing wind turbines in Wellington and restoring the Makatote railway viaduct in the central North Island.
It's expected to contribute $85 million in revenues and around $8 million in earnings before interest and taxation for the company's full-year results for 2017, Hellaby said.
Clarke said the deal would fit alongside its other businesses: "We see TBS Group complimenting our existing Contract Resources business and enhancing our combined service offering, both in New Zealand, and ultimately, internationally ... (It) will assist in dampening the earnings volatility the Resource Services Group has experienced in recent times".
The transaction is due to settle on July 1.
Hellaby has also appointed Ivor Ferguson as the new chief executive of its Resource Services Group and will begin work at the beginning of next month. He comes from Perth in Western Australia, where he was the chief executive of Clough Amec, which services the oil and gas industry.
Shares in Hellaby Holdings fell 0.8 percent, or 2 cents, to $2.47. Shares in Hellaby are currently at their lowest level since January 2012 and are down 11 percent on a year ago.
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