Hellaby buys for offshore income

Hellaby Holdings has made its first major purchase as the company seeks to generate more of its income from offshore.

The company yesterday announced it had conditionally agreed to buy an 85% majority shareholding in the specialised industrial services Contract Resources Holdings Ltd from Wellington-based investment firm Rangatira Ltd (50%) and a group of existing and former management shareholders. The purchase was conditional on confirming due diligence and the finalisation of funding.

The purchase was due to be completed on March 31.

Contract Resources was valued at $116 million with Hellaby's 85% shareholding equating to a purchase price of about $73 million.

Hellaby chief executive John Williamson told the Otago Daily Times from France he was ''really happy'' with the purchase of Contract, which ticked all the boxes.

''For the last 18 months we have been looking to get off the island in a geographic sense. We have 5% of our revenue generated offshore and for the last 18 months we have told the market we wanted up to a third of our revenue generated offshore by 2015.''

The purchase would mean 25% of revenue being generated offshore, ''quite a change'' from 5%, he said.

Hellaby businesses were mainly mature and either one or two in their respective markets. Contract Resources had been growing for the past five years and Hellaby had bought the business with expectations of further growth.

One of the positive signs was the shareholdings retained by Contract Resources management. Chief executive Andrew Wells and two other senior executives, Trevor Penny and Gray Gardner, each retained a 5% shareholding, Mr Williamson said.

Contract Resources was a New Zealand success story. With about 90% of revenue generated offshore, it offered the portfolio and geographic diversification Hellaby had been seeking. The company was heavily exposed to the oil and gas sectors which Hellaby had identified as strategically attractive. It also offered good intellectual property, he said.

''The company leads the industry in Australia, the Middle East, the United States and New Zealand. The company is expected to quickly have a positive impact on Hellaby's earnings.''

For the 12 months to March 31, 2014, the company was forecast to achieve revenue of about $150 million and operating earnings greater than $20 million. In the year to June 30, 2012, Hellaby generated revenue of $498 million and operating earnings of $37 million.

The purchase would be debt-funded with no need to raise equity, Mr Williamson said.

While Hellaby was making the purchase on sound business practices, it also meant a New Zealand company was kept in New Zealand ownership.

''That makes us feel pretty good. There was a chance it could have been sold offshore.''

Asked if more purchases were likely in the future, Mr Williamson confirmed that Contract Resources was the first but not the last acquisition for Hellaby.

Rangatira chief executive Ian Frame said in a statement that Rangatira had not been looking to sell Contract Resources but it had grown to represent more than a third of its unlisted investment portfolio.

''With some of our initial partners selling and Hellaby's offer for control at an attractive level, we have decided it is an appropriate time to realise the funds of just over $50 million for reinvestment into other growth opportunities.''

In the half-year report, Rangatira indicated to shareholders that the net asset value of its shares, including the mid-point of their assessment of the unlisted companies, was $9.26 at September 30 compared to $8.77 at March 31.

Assuming the Contract Resources sale became unconditional, the net asset value of Rangatira's shares at March 31, 2013, was likely to exceed $10.

---

Contract Resources
• Founded in New Zealand.
• Is an international specialised industrial services company. Provides specialised niche services to oil refineries, gas-processing and petrochemical plants. Also: broad range of environmental and industrial services, including tank maintenance and environmental services.
• Operates internationally in Australia (its largest market), New Zealand, the United States, the Middle East, Asia and South America.

---

- dene.mackenzie@odt.co.nz