By Gareth Vaughan
Westpac and ASB's parent Commonwealth Bank of Australia (CBA) are the banks funding Mainfreight's up to 120 million euro (NZ$224 million) acquisition of the Wim Bosman Group of the Netherlands.
The acquisition is the biggest yet by Mainfreight, which was founded by Bruce Plested in 1978 with NZ$2,700 and a 1969 Bedford truck. Mainfreight is paying for the deal by increasing its bank loans, saying this is a cheaper option than funding the deal by issuing new shares.
The company has taken out new five-year loans with CBA and Westpac and is lifting its gearing ratio of net debt to net debt plus equity to 48% from 17.5%.
Mainfreight will seek shareholder approval for the deal at a special meeting in Auckland on March 24. It requires shareholder approval under the Companies Act, because the deal would see it both acquire assets and take on liabilities worth more than half Mainfreight's assets prior to the acquisition. As of December 31, 2010 Mainfreight's total assets on a company only basis (as opposed to a consolidated basis) had a book value of NZ$338.8 million. It will take on about NZ$224 million of bank debt to fund the deal.
As of December 31 Mainfreight had a long-term revolving loan facility of NZ$75 million plus US$50 million with Westpac, established in July 2009 and is due to expire on June 30 next year. It also had a NZ$50 million facility with CBA, which was also due to expire on June 30 next year. Combined the two facilities were drawn down to NZ$106.6 million at December 31.
Mainfreight's new loans, to fund the Wim Bosman deal, establish multi currency revolving facilities of NZ$228 million with Westpac for a five year term, and NZ$187 million with CBA also for five years. This sees Mainfreight able to borrow up to NZ$415 million.
"The agreed interest margins and line fees are more favourable than those applicable under Mainfreight's existing banking arrangements and the covenant package will be less restrictive, reflecting Mainfreight's strong credit quality," Mainfreight says.
The company says it's confident the cash flows its generates with the Wim Bosman Group onboard will be sufficient to service the interest costs on the debt and repay it over time.
"Mainfreight does not have any current intention to enter into additional debt facilities, but will retain the flexibility to do so, provided it is in compliance with its financial covenants and other undertakings to its existing financiers."
Mainfreight is buying the Wim Bosman Group, which was founded in 1963, from its founder Wim Bosman and other shareholders. The company has 14 branches in six European countries, more than 1,000 trucks, 275,000 square metres of warehouses and cross docking facilities and about 1,414 staff.
In 2010 the Wim Bosman Group's turnover was about 240 million euros (NZ$453.5 million) with earnings before interest, tax, depreciation and amortisation (ebitda) of 19.4 million euros (NZ$36.6 million). In the year to March 2010 Mainfreight's revenue was NZ$1.1 billion with ebitda of NZ$75.8 million.
Mainfreight has agreed to initially pay 110 million euros with the potential for up to another 10 million euros to be paid as an earn out if the Wim Bosman Group achieves ebitda of at least 20 million euros for the year to December 31, 2011.
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