5 October 2016, Written by James Perkins


BAPCOR Limited (ASX:BAP) has bought the diesel wholesale business of MTQ Engine Systems for $17 million as it waits to see if its takeover of New Zealand's Hellaby Holdings is successful.

The Melbourne-based company, which owns brands such as Autobarn, Midas, ABS and Opposite Lock, is targeting growth in its wholesale business and sees MTQ as the right fit for its expansion.

The price is 6.1 times MTQ's EBITDA in the 12 months to 30 September 2016, which was $3 million.

Bapcor CEO, Darryl Abotomey (pictured), says the purchase is consistent with the company's strategy to grow its specialist wholesale business, where it will now be ranked one or two in the category.

"The expansion into the diesel and turbo charger area is very complementary to the current range offered in our specialist businesses and is a key segment we have been striving to be present in," says Abotomey.

"It expands the breadth of our offering to our current customers and extends the range of customer groups to who we can offer our extensive range of products and services.

"The price paid for the business is in line with industry benchmarks that have been transacted in recent years.

"MTQES will contribute positively to earning from the date of acquisition."

With the acquisition, Bapcor will realise its $200 million annual sales target for its specialist wholesale business.

Bapcor will continue to grow by targeting new locations for its offering in the wholesale automotive market.

Bapcor is also chasing New Zealand-based Hellaby Holdings (NZX:HBY) and has launched an equity raise to fund the purchase, for which it is offering NZ$3.30 cash for each ordinary share valuing the company at NZ$322 million.

Of the purchase, AUD$185 million will be funded by institutional and existing retail shareholders of Bapcor, leaving NZ$126 million to be funded by cash and existing debt facilities.

Should the takeover be accepted by Hellaby shareholders, Bapcor intends to deliste the company and divest "non-core" assets such as its mining services and footwear businesses.

The acquisition, if successful, will be completed in December. The Hellaby independent directors have described the takeover offer as "opportunistic" and have advised shareholders to "do nothing" until the company makes a formal response to the offer.

While Bapor says it has 30% of Hellaby shares locked up, the company says most of those belong to a single shareholder, Castle Investments.

"Hellaby's board has formed a committee of independent directors, chaired by Steve Smith, to consider the proposed offer and to oversee Hellaby's response obligations under the Takeovers Code," Hellaby chairman Steve Smith says in a letter to shareholders released to the NZX on 4 October.

It is understood that if the Hellaby purchase is unsuccessful, Bapcor will pursue other avenues of growth in New Zealand.

Bapcor is trading up 2.13 per cent this morning at $6.23 per share.


Author: James Perkins Connect via: Twitter LinkedIn





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