Engineering and mining firm Downer EDI Limited has announced a $300 million agreement to acquire all of the shares in Australia-based contractor Tenix Holdings.
Downer’s move to acquire Tenix comes amid renewed interest in contractors, with several large infrastructure projects scheduled in the coming decade.
Grant Fenn, the Chief Executive Officer of Downer, said the purchase of Tenix was an excellent strategic move for the company.
“We have said consistently that we are interested in opportunities that are strategic, grow our capability and the right price. The acquisition of Tenix achieves all of these goals,” Mr Fenn said.
“Tenix is a leader in the electricity, gas and water sectors in Australia and New Zealand. There is little overlap between the two companies and Tenix will be the foundation for a new core Utilities business for Downer.”
Tenix is a family owned, low capital intensity business that operates on long term operations and maintenance contracts and has been working with many of its customers for over a decade. The company comprises of two divisions: infrastructure services and a unit that provides end-to-end traffic and parking compliance management programs.
Tenix Chairman Paul Salteri said the decision to sell the business was in the best interest for everyone involved.
“The decision to sell the business to Downer Group has been difficult for shareholders, as we believed the business is well positioned in its markets to take advantage of exciting growth opportunities. Our decision to change from our strategy to raise external capital funding via either an equity sell-down or IPO was a difficult one but ultimately in the best interests of the company and the employees,” Mr Salteri said.
Mr Fenn said Tenix had strong, long term relationships with some of the largest utility businesses in Australia and New Zealand.
“Importantly, there are strong prospects for future growth. Tenix has played a leading role in driving efficiency from the privatisation of electricity networks in Victoria and South Australia and is well placed to do the same in other States as power distribution assets are privatised,” Mr Fenn said.
“Tenix also designs, constructs and maintains water and waste water treatment plants for a number of municipal councils and has developed a reputation for providing leading solutions for its customers in this sector.”
According to the ASX announcement by Downer, the acquisition will be funded through a $300 million committed bank debt facility and is expected to be completed on 31 October 2014.
The acquisition will be earnings per share accretive in the first year.
“Tenix has high quality people, a focused safety culture, strong market positions, high levels of secured revenue and, together with Downer, excellent growth opportunities,” Mr Fenn said.
“I look forward to welcoming the Tenix team and working with them to build a stronger Downer Group.”
