Ahern’s Xtreme Manufacturing Agrees to Acquire Majority Interest in Snorkel

Continuing his remarkable comeback from bankruptcy, Don Ahern and Xtreme Manufacturing has acquired majority ownership of aerial work platform manufacturer Snorkel from U.K. parent company Tanfield Group. Tanfield will retain a 49-percent stake in the struggling aerial work platform maker that was severely in need of capital.

Xtreme, makers of a wide range of highly engineered telehandlers, will take a majority ownership interest in the newly formed Snorkel International Holdings. Xtreme has committed to making significant working capital facilities available to Snorkel to deliver its growth forecast, estimated by Xtreme to require between $35 million and $50 million in working capital and to deliver other strategic benefits and synergies to Snorkel.

Ahern, who owns 97 percent of Ahern Rentals and 96.6 percent of Xtreme, has long been an admirer of the Snorkel product line and has annually purchased a large number of aerial work platforms for Ahern Rentals’ rental fleet as one of Snorkel’s largest global customers. Ahern had to lessen his purchases of Snorkel equipment because the company was unable to meet order and delivery requirements according to Tanfield.

There are some synergies to the deal that should benefit both Snorkel and Xtreme. Snorkel has long competed in the aerial work platform industry without a telehandler line, and the transaction gives Snorkel access to the Xtreme brand. Xtreme, which has primarily marketed and sold its units in the United States, now will make its line of material handlers available to Snorkel’s global distributor network, creating valuable export opportunities for Xtreme, and enabling Snorkel to compete more effectively. The alliance between Xtreme and Snorkel should reduce overheads, and increase supply chain efficiencies, Tanfield officials said.

“Snorkel International Holdings intends to pursue global sourcing to reduce product costs, whilst enhancing product quality, using the global supply networks of the Snorkel Division and Xtreme,” said Tanfield in a statement.

Xtreme and Snorkel intend to pursue potential sharing or combining of facilities, administrative functions, insurance programs and personnel to reduce overhead expenses. Xtreme and Snorkel also intend to pursue sharing joint technology advances wherever common solutions mutually enhance both product lines, the statement added.

Also, with 75 locations in 22 states, Ahern Rentals will use its nationwide network to represent Snorkel’s product lines in its rental branches for retail sales, replacement parts and service support, and to facilitate immediate aftermarket response, also making available its fleet of mobile service repair trucks and mechanics to support Snorkel’s existing population of products.

Tanfield’s board stated that it believes a properly funded Snorkel Division, with an improved product portfolio, enhanced North American sales channels, and reduced overheads will be well positioned to deliver benefits to the company’s shareholders.

According to the agreement, if Snorkel reaches an EBITDA of at least $25 million for any prior 12-month period within five years of completion of the deal, Tanfield can demand payment of preferred interest of $50 million, to be paid when Snorkel International Holdings can fund the payment and its net debt/EBITDA ratio is less than 2, ultimately reducing Tanfield’s interest in the company to 30 percent and increasing Xtreme’s interest to 70 percent.

Tanfield began looking at a potential sale of its Snorkel division in February and examined a wide range of options, having discussions with a number of companies considering acquiring it. However, given the working capital required to enable Snorkel to recover, the board determined that an acquirer or investor willing to fund Snorkel’s recovery, whose own business is in a related industry that could support the recovery and also be willing to enable Tanfield to benefit from the upside would be preferable to an outright sale. In 2012, Snorkel posted losses of £14.6 million.

Current Snorkel management will remain in place. Subject to the completion of the transaction, chief executive Darren Kell, finance director Charles Brooks and operations director Brendan Campbell will resign from the board of Tanfield to transfer to the new Snorkel International Holdings.

The transaction is subject to approval from Tanfield’s shareholders at a general meeting Oct. 7.