Perth based construction and services company, SRG is betting the company somewhat in a $33 million deal that will take it across the continent and Tasman Sea and into New Zealand.
The company told the ASX yesterday that it had struck a deal to buy New Zealand industrial contractor, TBS from automotive products company Bapcor.
And to fund this deal (SRG’s market value before the deal was just $111.6 million) SRG said it would conduct a $24 million capital raising to help fund the acquisition.
TBS specialises in maintenance and remedial services in such industries as oil and gas, transport infrastructure, energy, renewables, steel and dairy. It has 450 employees and Bapcor picked up when it bought NZ group, Hellaby Holdings in 2017.
According to SRG’s release, TBS is expected to achieve fiscal 2018 revenue of $70 million and earnings before interest and tax of $6 million to $6.4 million.
“TBS provides us with further international geographic expansion and a platform for future growth in New Zealand,” SRG managing director David Macgeorge said.
“We have significantly enhanced our exposure to asset maintenance services and believe there are significant opportunities to be unlocked including various cross-sell opportunities across both Australia and New Zealand.”
Under the capital raising, SRG will place $20 million shares with institutional investors at $1.60 each and will raise up to $4million from retail investors at the same price.
Given that SRG shares last traded at $1.68, the issue is pitched a pretty small discount, especially when you consider the size of the deal to SRG’s market value.
SRG said the "The debt component of the transaction will be funded through SRG’s existing debt facility from National Australia Bank Limited.”
It estimated that when the deal completes, SRG will have debt of around $5.9 million 9it has no net debt at the moment and around $15 million in cash and liquid securities).
If TBS goes wrong it would cause a pretty big hole in SRG’s balance sheet and profit and loss account.
