Automotive Holdings Group says unsolicited approach came with the right price
Automotive Holdings Group (AHG) is in the process of selling its refrigerated logistics division to Chinese investment firm HNA Group (International) for $400 million in cash and debt.
The sale involves ownership of Rand, Harris, Scott’s and JAT passing to HNA-owned firm CC Logistics (Australia), with AHG gaining $280 million and HNA ultimately assuming $120 million in finance lease liabilities.
“HNAI has indicated a commitment to growing and continuing to invest in the refrigerated logistics sector, both internationally and in Australia,” AHG CEO and MD John McConnell says.
“As an experienced participant in the logistics sector, HNA will continue to deliver quality services to customers and we strongly believe that the business will have a very positive future under its new owners.”
AHG Logistics CEO Stephen Cleary will remain with the Refrigerated Logistics business as CEO and will be supported by the existing management team and employees of the business.
“AHG has previously announced it would explore all opportunities to maximise shareholder value from the Refrigerated Logistics business,” AHG chairman David Griffiths says.
“Although the restructuring initiatives are delivering a significantly improved financial performance, the sale provides AHG with the opportunity to realise a certain value for shareholders that reflects this continuing improvement.
“The sale also provides AHG with both the resources for further growth in our automotive operations and scope for capital management.”
Completion is slated for the first half of next year, subject to regulatory approval.
This is the third high-profile HNA-related investment locally this year, with the Hong Kong-headquartered firm with roots in Hainan Island having picked up 19 per cent in and an alliance partnership with Virgin Australia and being involved in an eastern state office tower-focused real estate investment trust.
HNA-owned aviation services firm Swissport is also buying Australasian ground handling company Aerocare and subsidiaries Skycare, Carbridge and EasyCart from local private equity firm Archer Capital for an undisclosed sum.
Aerocare has been the subject of a Transport Workers Union (TWU) conditions campaign this year.
AHG’s assets are destined for HNA Modern Logistics, the operations of which include trailer services, air, land and sea equipment finance and leasing, along with other services FleetCare (not to be confused with Australian leasing firm Fleetcare), FleetProtect, and FleetIntelligence.
That HNA arm will gain a former AHG division that is showing the benefit of a sustained restructuring.
“Whilst AHG did not initiate a sale process for Refrigerated Logistics, the sale allows AHG to realise a value that reflects the expected increase in profitability from these initiatives in an accelerated time frame,” the company says in explaining the sale’s rationale.
“The sale of Refrigerated Logistics will also provide AHG with significantly greater financial capacity and management resource to continue to grow its market leading Automotive Retail division.
“The sale of Refrigerated Logistics is not expected to have any material impact on AHG’s Automotive Retail division or non-refrigerated logistics operations.”
It adds that proceeds from the disposal will enhance AHG’s financial capacity to continue to grow its Automotive Retail operations, a move that will be seen as a vindication by critics who questioned the company’s involvement in transport and logistics given its recent modest returns and the strength of retail.
The deal comes at what appears to be a sensitive time for HNA, with reports that the company has been used debt to fund the equivalent of $65 billion in purchases over the past two years, with repayment deadlines looming.
For AHG, the months to completion and beyond involve providing a range of transitional services, including IT and head office support functions, to Refrigerated Logistics for up to 12 months following completion on arm’s length commercial terms.
There is also a five-year refrigerated logistics non-compete clause.