Automotive Holdings Group Limited (ASX: AHE) has entered into a binding agreement to acquire Scott’s Refrigerated Freightways (SRF) and has entered into a heads of agreement to acquire Bradstreet Motor Group.
Acquisition of Scott’s Refrigerated Freightways (including JAT)
Headquartered in Sydney, SRF is a national cold logistics business providing refrigerated road and rail line haul, local refrigerated distribution and cold store warehousing. SRF was established in 1952 and has long established relationships with major customers on the east coast of Australia.
The managing director and major shareholder, Bruce Scott, and the existing SRF management team will continue to manage the SRF business. In conjunction with AHG’s acquisition of SRF, SRF will acquire the remaining interests in JAT Refrigerated Road Services (JAT) that it does not already own. JAT is a specialist chilled/frozen transport company based in Cairns, Queensland.
In combination with AHG’s existing Rand and Harris operations, the acquisition of SRF (including JAT) is said to consolidate AHG’s position as the largest provider of transport and cold storage operations in Australia with national route coverage and an integrated network of cold store facilities.
AHG says the acquisition will expand its customer base and product expertise and will diversify its exposure to seasonal peaks in fresh produce, allowing for more efficient use of infrastructure across the year. SRF (including JAT) is forecast to generate FY14 revenue of approximately $237 million and EBITDA of approximately $25 million.
In addition, cost synergies of approximately $4 million per annum are expected to be realised by the end of FY16 from the rationalisation of cold storage facilities in Perth, Adelaide and Melbourne, harmonising supply contracts and specific operating savings.
AHG managing director Bronte Howson said: “The acquisition of SRF and JAT will create the largest temperature controlled carrier in Australia. SRF and JAT are trusted service providers with strong relationships that will diversify our existing business and expand our customer service offering.”
The purchase price of approximately $116 million comprises:
$71 million of cash to be paid to the vendors;
4.3 million AHG shares to be issued to the vendors ($15 million in total);
the assumption of approximately $30 million of finance leases.
Independently at the same time, AHG has also entered into a heads of agreement to acquire Bradstreet Motor Group for $68 million in cash.
Bradstreet Motor Group comprises 13 automotive dealerships located in and around Newcastle, New South Wales and represents seven manufacturers – Toyota, Mazda, Holden, Nissan, Kia, Subaru and Great Wall. In FY13, Bradstreet Motor Group generated revenue of $449 million and net profit before tax of $14 million.
Mr Howson said: “This is a strategic addition to our NSW dealership network. The dealerships operate from well-maintained properties on long-term leases and require no significant capital expenditure. They also complement our established Newcastle truck hub, giving AHG a very strong presence in the Newcastle region.”
The addition of the Bradstreet Group dealerships would take AHG’s network to 169 franchises at 96 dealership locations in Australia and New Zealand.