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POTA to buy South Spur Rail Services for 16m


Coote Industrial Ltd has entered into a Binding Terms Sheet for the sale of Coote’s South Spur Rail Services business with POTA Holdings.
 
POTA’s shareholders include ASX-listed KFM Diversified Infrastructure and Logistics Fund, Kaplan Equity Limited (“KEL”) and DP World (formerly P&O Ports).
 
POTA will acquire 100% of the issued capital of South Spur Rail Services Pty Ltd, the entity that conducts South Spur Rail Services business. POTA will pay $16m in cash.
 
Under the terms of the sale, Coote will provide maintenance services to POTA to support the South Spur rolling stock fleet, as well as POTA’s existing fleet. The consideration for the sale includes a pre-payment for maintenance work of $1m.
 
The sale is conditional upon completion of satisfactory due diligence, board approvals and formal documentation consistent with the Binding Terms Sheet. Completion of the sale is expected to occur by end of April 2010.
 
The managing director of Coote, Michael Coote, said: “The sale of South Spur Rail Services is consistent with Coote’s stated objective to focus its activities on the significant growth opportunities present across its core technical based businesses servicing the resources, maritime, defence, rail and power generation markets.
 
“The sale will deliver a financially positive outcome for Coote shareholders and also represents an excellent opportunity for POTA to broaden the operations of its P&O Trans Australia logistics business. Coote has recently executed term contracts with three substantial customers enhancing value in the business.”
 
Under the terms of the sale, Coote and POTA will work together to determine the rolling stock fleet requirements for the South Spur business. POTA has the right to return surplus rolling stock under lease under a return procedure to be set out in the definitive documents, with a limit on the maximum amount of equipment that can be returned.
 
South Spur will continue to lease its retained rolling stock fleet from Coote subsidiary Greentrains Ltd in accordance with long-term lease agreements which are already in place between South Spur and Greentrains (subject to amendments to be agreed between South Spur and Greentrains).
 
Mr Coote said: “We are pleased that South Spur, with the backing of a financially robust owner and operator in POTA, will continue to have an ongoing relationship with Greentrains.”
 
“As previously announced, the board continues to pursue a re-capitalisation of Greentrains to de-consolidate that entity from Coote and settle on the second tranche of rollingstock that Greentrains has committed to acquire from Gemco Rail. We believe that the sale of South Spur to POTA, coupled with the opportunity to broaden the customer base through leasing of any returned Greentrains rolling stock, should materially enhance Greentrains’ value and the prospects of successfully concluding a re-capitalisation on appropriate terms.”

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