The $40m deal to join Hirequip and Projex was a logical decision, reports GEOFF SENESCALL.
Two of this country's largest hire equipment companies are merging in a transaction thought to be worth nearly $40 million.
The merger follows the sale by Viking Pacific, formerly Skellerup Group, of Projex to a joint venture group including Dunedin-based Hirequip and a private equity fund of merchant banking firm Grant Samuel.
Once completed, the enlarged business will have total assets of almost $50 million and annual sales revenue of $40 million from its 36 hire depots dotted across both islands, making it the biggest hire equipment company in the country.
The Projex deal is the largest asset sale by Viking since the manufacturing company restructured in 1998 after nearly collapsing.
At the time of these troubles, several parties, including Hirepool, had been rumoured to be kicking the tyres of Projex.
Viking's chief financial officer, Andrew Powers, said it had not actively sought buyers for Projex. "Someone approached us wanting to buy it," he said, noting that Viking was under no financial pressure.
"We are an investment company. Businesses are worth the cash they generate. If someone comes along and pays you cash at the equivalent of a number of years of earnings, then you have to look at it. So it is just a very cold, rational decision."
It was hard to deny the logic of merging the two assets, Mr Powers said.
The proceeds from the sale of Projex would be used to accelerate repayment of Viking's debt, which in December stood at $90.5 million.
Hirequip, which operates out of 16 depots in the South Island, is owned and operated by Stuart McKinlay. It is a similar size to Projex and both companies rent out equipment such as excavators, generators, general tools and party equipment.
"Our own customers have been wanting an equipment hire company with national capability," Mr McKinlay said.
"We are now able to offer the benefits to both smaller and larger customers of having a much larger rental fleet and national coverage."
The merger would not result in any depot closures, as there was no duplication.
Grant Samuel director Simon Cotter saw good prospects for growth in integrating the two businesses, both through opening new depots and pursuing new initiatives.
He also said that a sharemarket listing was a possibility. As in any leveraged transaction listing was one method of realising the investment.
Projex chief executive Brendon Lyons will head the enlarged group.
Equipment firms tie knot
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