Investment holding company Hellaby says its acquisition of industrial services business Contract Resources is the first of more investments it plans to make.
Hellaby said yesterday it would spend $73 million on an 85 per cent stake in Contract Resources as well as taking on its $30 million debt.
The other 15 per cent will remain in the ownership of two senior managers and chief executive Andrew Wells putting a total enterprise value of $116 million on the company.
Hellaby managing director John Williamson said he liked the business because of its management team, geographic spread and potential for growth .
Until now, less than 5 per cent of Hellaby's earnings have come from outside New Zealand. Its acquisition of Contract Resources will increase its overseas earnings to 25 per cent, Williamson said.
He said the acquisition would take it a long way towards a goal of earning at least a third of its income overseas by 2015.
Contract Resources will become Hellaby's largest investment and is expected to generate sales of $150 million in the year to March 31, 2014, with earnings before interest, tax, depreciation and amortisation of more than $20 million.
While one-off transaction costs were likely to offset the first three months' earnings attributable to Hellaby, the acquisition would be earnings per share accretive for the Hellaby financial year to June 2014, Williamson said.
Contract Resources provides specialised niche services to oil refineries, gas processing and petrochemical plants through catalyst handling and mechanical services as well as environmental services.
It operates internationally - Australia is its biggest market - and Caltex, Shell, Exxon Mobil and NZ Refining are some of its customers.
Williamson said he was not concerned about the downturn in Australia's resources sector as Contract Resources primarily operated in the oil and gas sectors.
"It's more aligned to oil refining. This business is very strong in Australia and has a very strong market share in its niche."
Contract Resources had recently expanded into the Middle East and was keen to further that expansion as well as growing the business in the US.
Williamson said the it was comfortable with the business's debt level, and the acquisition would be funded out of Hellaby's banking facilities.
Williamson said the acquisition was the first the company had made since its restructure but it would not be the last.
"We intend to acquire more businesses."
The company did not have a timeframe on when those acquisitions would be made but Williamson said it was looking at two to three businesses at any one time.
"There has been a good pipeline of opportunities."
Hellaby bought 50 per cent of Contract Resources from Wellington investment firm Rangatira and 35 per cent from former and existing management shareholders.
The deal is conditional on due diligence and the finalisation of funding within the acquisition vehicle, and is due to settle on March 31.
Shares in Hellaby closed up 15c at $3.20 yesterday.
What is Hellaby?
*An NZX listed investment company.
*Owns businesses in the automotive, packaging, equipment and footwear sector in New Zealand and Australia.
*Brands include Hannahs and Number One Shoes.