Australia-based heavy equipment rental company Emeco Holdings has agreed to a three-way merger with two other Australian rental companies, Orionstone and Andy’s Earthmovers. Emeco signed a binding restructuring support agreement with the company’s financiers and the shareholders and creditors of Orionstone and Andy’s.
The restructuring agreement establishes a framework for the proposed recapitalization of emeco. Emeco expects to refinance its asset-backed loan facility that matures in December 2017.
The transaction will provide Emeco with a sustainable capital structure for the long term with reduced leverage, improved interest coverage and extended maturity to fiscal 2022. The increased scale, expanded equipment portfolio and operating efficiencies resulting from the merger leaves Emeco well placed to operate, Emeco said, generating cost synergies and reducing Emeco’s capital expenditure requirements going forward.
“The transaction is an important step forward for Emeco and provides the company with significantly improved credit metrics and puts in place a longer term sustainable capital structure,” said Peter Richards, chairman of Emeco. “With significantly lowered leverage, improved interest coverage and greater cash generation, Emeco has the financial platform to grow the business whilst continuing to provide our customers a quality service.”
Richard said the Emeco board spent considerable time evaluating a range of alternatives to ensure the transaction represents the best available value for shareholders.
“The strategic rationale underpinning the combination of Emeco, Orionstone and Andy’s is compelling,” said Ashley Fraser, CEO and founder of Orionstone. “The merger of the three companies creates a business with the opportunity for significant operational enhancement, improved productivity and a lower cost base.”
“The growth outlook of the combined group is stronger than any of the three companies individually and I look forward to working with Ian and Ashley to deliver our customers with a significantly enhanced value proposition,” added Andy Hoare, managing director and founder of Andy’s Earthmovers.
Emeco will merge with Orionstone, based in Mackay, Queensland, a privately owned heavy earthmoving equipment supplier with a fleet of more than 200 machines located across the country. Orionstone generated fiscal year 2016 EBITDA of A$26.3 million.
Andy’s is a privately owned equipment rental business based in Bendigo, Victoria, operating in South Australia, Victoria, New South Wales, Western Australia and the Northern Territory. Andy’s, with a fleet of 145 machines, generated A$14.9 million in fiscal 2016 EBITDA.
The combined group generated A$95.4 million in fiscal 2016 (about U.S. $73 million). It will have more than 800 machines in its rental fleet.
