Hirequip Goes Public

Hirequip Goes Public

Hirequip co-owner Stuart McKinlay of Dunedin today announced his intention to sell his family’s 50 percent interest in Hirequip to publicly listed company, Southern Capital Limited, which already owns the other half.

The proposed sale price of $17.86 million is the similar price at which Southern Capital bought its half share of Hirequip last year from GS Private Equity Pty Ltd. The transaction will see Southern Capital issue 29.77 million shares to the McKinlay Family Trust at 60¢ each. The McKinlay family trust would end up with 26.7% of Southern Capital, on a fully diluted basis, making it the largest single shareholder. After the transaction is completed, Southern Capital will have 110.5 million fully paid ordinary shares on issue.

Southern Capital executive chairman, Graeme Wong, said, “This represents a significant and fundamental change of direction for Southern Capital from a diversified investment company to a predominantly industrial company with operating cash flow and earnings”.

Southern Capital’s Board fully endorses the proposed transaction and will be seeking shareholder approval at an extraordinary general meeting, the date for which has yet to be fixed. Shareholder approval is required to issue the new shares and to waive the requirements of the Takeovers Code for the McKinlay Family Trust to make a full bid for Southern Capital. The Board also plans to seek shareholder approval to appoint Messrs Stuart McKinlay and Trevor Scott to the Board of Southern Capital and to rename the public company as Hirequip Limited, consistent with the change of direction from being an investment company to that of a focused industrial company.

“Since its formation in late 1997, Southern Capital’s assets and particularly its land development assets have matured considerably with the result that Company in its present state can best be described as ‘asset rich’. We have been delighted with the performance of Hirequip since buying into it last year and the Board considers that Southern Capital’s shareholders will be served best by the Company focussing on the growth opportunities available in the hire equipment industry”, Mr Wong said.

Southern Capital’s land development assets include interests in the 117-hectare top-end subdivision at Omaha Beach, north of Auckland, the 338-hectare new town site of Pegasus Bay, north of Christchurch and the 7.7-hectare Canterbury Supa Centa at Belfast in Christchurch.

The Company is awaiting the Environment Court’s judgment on its application to rezone 45 hectares of land in Waimakariri District for a commercial development. The judgment is due at the end of April. The Environment Court will also hear the appeal of an associate company’s coastal permit for a 460-hectare mussel farm at Clifford Bay, Marlborough, in the week beginning 24 March.
Southern Capital has a portfolio of biotechnology stocks, including BLIS Technologies (10.47%), A2 Corporation (8.88%), Botry-Zen (4.27%) and Pharma-Zen (5.63%). It also owns 21.75% of Tasmanian dairy farmer, Tasman Farms Limited, which is quoted on the NZ unlisted securities facility.

The new Hirequip (ex Southern Capital) will continue to add value to its existing portfolio of property and stocks prior to their disposal. The proceeds from the sale of these assets will be reinvested in the core hire equipment or related businesses. It is envisaged that ultimately the head office will be moved to Dunedin.

Hirequip is New Zealand’s only nationwide general and specialist equipment hire company, and currently operates from 37 locations throughout the country. It was established in Dunedin in [the late 1960s], and from there expanded throughout the South Island. In September 2000, Hirequip acquired Projex, which itself had been operating in the North Island since the early 1950s. With that acquisition, Hirequip became the country’s largest hire company at around twice the size of its nearest competitor. Its revenues now exceed $50 million annually.

Recently Owens Group Limited announced its intention to sell its 100% owned subsidiary Hirepool. On 7 March, the Commerce Commission gave Southern Capital Limited clearance to acquire Hirepool. The Commission concluded that, were the acquisition to proceed, it would not have nor would it be likely to have the effect of substantially lessening competition in the heavy construction, building and ‘do it yourself’ equipment hire services markets.

Mr. Wong said: “The initiatives we are to put to our shareholders in respect of Hirequip are independent of any investment we might make in Hirepool. There is a price at which buying Hirepool makes sense but if we don’t win the bid for that company then there are plenty of other opportunities in the hire equipment industry that we can and will pursue.

“Southern Capital will have a strong balance sheet after buying the balance of Hirequip and the issue of new shares to the McKinlay family trust. The purchase of Hirepool can be financed without the issue of further equity.”

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