Hirequip NZ To Sell Equipment To PES Finance
Hirequip NZ To Sell Equipment To PES Finance
Listed hire company Hirequip New Zealand Limited (“Hirequip”) today announced the conditional sale of its equipment hire and related businesses (“the Hire Business”) to PES Finance Limited, a wholly owned subsidiary of Pacific Equipment Solutions Limited (being companies associated with Nikko Principal Investments Limited).
The purchase price payable under the transaction is $165 million, on a cash and debt free basis, with the ability for Hirequip to receive an additional amount of up to $7.5 million contingent upon the earnings of the business through to 30 June 2007(“the Earn-out Adjustment”). The Earn-out Adjustment will be calculated on the EBITA of the Hire Business to 30 June 2007and apportioned on a straight line basis on EBITA above $16.7 million up to $18.56 million, which is the budgeted EBITA of the Hire Business for this period.
In considering the Earn-out Adjustment, it is relevant to note that for the first four months of the current financial year, revenue and EBIT for the Hire Business did not achieve budget, although both were ahead of the previous corresponding period. The Board has confidence that the remainder of the year will provide substantial opportunities to achieve at least some of the Earn-out available.
Hirequip Chairman Graeme Wong said, “The Directors believe that the price obtained is a fair market price for the Hire Business, achieved following a competitive tender process run by First NZ Capital. PES Finance Limited emerged from that process with the best value proposition for Hirequip’s shareholders.”
The Directors unanimously support the proposed sale and intend to vote shares under their control in favour of the sale at the shareholder meeting referred to below.
The transaction is subject to the
• the approval of the transaction by the board of Nikko Principal Investments Japan Limited on or before 12 December 2006;
• the approval of the transaction by the investment committee of Nikko Principal Investments Limited on or before 12 December 2006;
• the consent of the Overseas Investment Office;
• Hirequip shareholder approval by way of an ordinary resolution at meeting to be convened for 18 December 2006;
• no event occurring which would entitle the financiers of the purchaser to withhold finance to fund the settlement of the purchase (a “no material adverse change” type clause will be included within the purchaser’s financing documents in accordance with common market practice).
Subject to the first three conditions referred to above, approval from Hirequip’s shareholders will be sought at a meeting to be held in Dunedinon 18 December 2006. At the same meeting, shareholders will be asked to authorise the directors continuing to dispose of Hirequip's remaining assets, and to distribute Hirequip's assets to shareholders (including the proceeds of sale of the Hire Business). Hirequip will make further announcements as and when the above conditions are satisfied. Settlement of the transaction will occur on 20 December 2006.
Following settlement of the sale of the Hire Business, Hirequip will move to distribute the funds held as soon as practicable, with the first distribution targeted for February 2007.
With respect to Hirequip's 'legacy assets', Hirequip has recently announced the sale of its interest in Tasman Farms Limited for $9.6 million. Hirequip has also reached agreement with the purchaser of its interest in the land for the proposed PegasusBaytownship to accept $14 million in cash now, rather than wait for the eventual completion and sale of the developed lots at an unknown date in the future.
The Tasman Farms transaction has settled and settlement on Pegasus is expected shortly.
of the sale of the Hire Business, Hirequip's 'legacy assets'
• its interests in the last remaining part of the subdivision at OmahaBeach, north of Auckland;
• a portfolio of minority interests in biotechnology stocks, including BLIS Technologies, Botry-Zen and Pharma-Zen;
• a 22.6% interest in Clifford Bay Marine Farms Limited – a proposed 460-hectare mussel farm at CliffordBay, Marlborough;
• the leasehold and freehold interests in Hirequip sites owned by Hirequip Property Limited and leased back to Hirequip Limited, one of the companies being acquired by PES Finance Limited.
The Board’s current assessment of the net asset value of Hirequip is between $1.18 and $1.24 per share depending on the Earn-out adjustment and realisation of Hirequip's legacy assets.
Distributions may be in cash or in specie by way of dividends, share buyback or in the course of winding up Hirequip.
Full details of the sale of the Hire Business and the proposals for distributions to shareholders will be contained within an Information Memorandum which is expected to be mailed to shareholders of Hirequip on or around 1 December 2006.
At that time a Notice will also be given for Hirequip's Annual Meeting to be held on the same date, and at the same place, but immediately following the Special Meeting in respect of the announced sale.