Purchase an important step for purchaser as it seeks to diversify
Mining equipment rental company Emeco had bought fellow Western Australian firm and transport rentals operation Rentco for $53 million.
The sum gains Emeco, which also has a presence in Canada and Chile and is seeking to diversify beyond mining, an Australia-wide fleet of 185 prime movers and1,500 trailers along with ancillary equipment that has had an average utilisation rate of 78 per cent for the past three-and-a-half years.
It has depots in Perth, Brisbane, Townsville, Darwin, Melbourne, Sydney and Adelaide offering 24-hour support services.
Rentco generated revenue of $45 million and earnings before interest and tax (EBITDA) of $19 million in the previous financial year and the deal provides it with an enterprise value of $82 million.
“Rentco is one of the few players in the sector that has the scale, national presence and a solid reputation, particularly for its asset reliability, as well as a strong brand,” Emeco managing director Ken Lewsey says.
He adds that road freight, “and more specifically the rental sector, has a number of favourable attributes that are reflected in Rentco’s strong consistent growth and high utilisation rates over extended period.
“Road freight volumes have grown at a compound annual growth rate of approximately 3.5 per cent over 10 years, and Rentco can capitalise on this with its large customer base, which includes some of Australia’s biggest transport companies, a broad range of fleet and e3xposure to different market sectors.”
Rentco will operate on a standalone basis and the brand retained, with co-founders and equal shareholders John and Bob Shier remaining on with fixed contracts.
Managing director Bob Shier will stay for a minimum of three years while John Shier will work part-time in administrative and finance roles.
Bob Shier describes the combined business, once finalised at the end of the month, as a “formidable force in equipment rental across Australia and a range of industries and sectors”, while extolling the greater scale and financial strength he will have at hand.
“We’ve identified a number of growth opportunities and being part of a bigger listed group ives us a much better ability to capitalise on those,” he says.