Impetus from full ownership of Coates Hire: Seven Group Holdings Ltd (ASX: SVW) surged about 8.8% on September 20, 2017, while the group has bagged a binding agreement to acquire the remaining 53.3% of securities in Coates Hire (equipment hire company) that it does not already own from Carlyle and other minority owners. The acquisition deal will be supported by Seven’s existing debt facilities, earnings and cash flow, including proceeds from the sale of WesTrac operations, and is expected to be worth $517 million. Seven Group said the deal results in a 15% accretion to full year 2017 underlying earnings per share, a 91% increase in free cash flow per share on 2017 basis, and will increase pro-forma FY17 EBITDA from $328 million to $611 million and pro-forma EBIT from $297 million to $415 million. It is still subject to satisfactory waivers from Coates Hire’s existing lending syndicate.
Seven had acquired almost half of Coates Hire in 2008; and with the latest move, Seven Group will continue its focus on becoming the operator of industrial services businesses in Australia and driving efficient capital allocation across the portfolio. Primarily, Seven Group will now be in a position to have an increased exposure to the Australian and East Coast infrastructure sector, and is expected to benefit from Coates Hire’s number of projects and the resultant demand for construction equipment and machinery.
Trading Update and Outlook by Coates Hire and Seven (Source: Company Reports)
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