JBWere fund takes chunk of Hirepool

By PAUL PANCKHURST

A consortium led by a JBWere private equity fund swooped yesterday to buy equipment hire business Hirepool from Owens Group for $46.4 million.

JBWere New Zealand Private Equity No. 1 Fund will take a 51 per cent stake.

Prominent business couple Sharon Hunter, the co-founder of PC Direct, and Tenby Powell, the former chief executive of Projex Equipment, will take 24.5 per cent through the company Hunter Powell Investments.

The third partner is Owens Group itself, which will retain a 24.5 per cent stake, to be held by a subsidiary, Owens Industrial Services.

The deal is subject to shareholder approval.

Wellington-based investment company Southern Capital, which obtained Commerce Commission approval to buy Hirepool, said last week that it had not been able to meet the price expectations of the Owens board.

Asked about the price, JBWere head of private equity Paul Chrystall said: "We're happy and they're happy."

Some analysts had predicted that the business could fetch $50 million.

Asked why Owens had opted for the halfway house of partial ownership, chief executive David Ritchie said the company needed capital to invest in expanding its logistics and supply-chain business.

However, retaining a part stake meant continuing to reap benefits from a strong business.

The purchase price of $46.4 million is made up of $36 million in cash, $7.5 million in unsecured capital notes to be issued by the new joint venture company, and $2.9 million in retained earnings of Hirepool.

It also involves a chunk of the company's after-tax earnings until the completion of the sale.

The joint venture company making the purchase, Rakino Group, will have a paid up capital of $5 million.

Owens Industrial Services' will pay $1.225 million for its 24.5 per cent stake of Rakino.

Deduct that money from the purchase price and the company clears $45.175 million from the deal.

Hirepool is the ninth company to be acquired by the JBWere private equity fund, which has now invested about $11.5 million of $22 million.

Borrowing enables the fund to buy big assets.

In December, the fund paid more than $45 million for the remains of the old Skellerup business empire, a family of seven companies previously owned by Viking Pacific Holdings.

That collection included Masport, the lawnmower and home heating firm. It earlier invested in payment terminals maker Cadmus Technology.

On the attraction of Hirepool, Chrystall said: "It's got a very good growth history, but it's also got, we believe, a lot of growth left in it."

He said the investment also diversified the private equity fund away from mainly manufacturing exporters and into a domestic company without foreign exchange risks.

Hirepool was extensively marketed for five to six months.

A statement from JBWere said the consortium partners were "compatible and committed to growing Hirepool from an instantly recognisable brand name in Auckland and Wellington to a leading nationwide equipment hire business".

The purchase price is a shade under Owens Group's market capitalisation - yesterday $51 million.