Paul Salteri, chairman of Tenix, a provider of services to the electricity, water, wastewater and industrial sectors across Australia and New Zealand, admitted the decision to sell had been “difficult” for shareholders.
“We believed the business is well positioned in its markets to take advantage of exciting growth opportunities,” he said.
“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.”
Downer Group is a leading Australia player in the engineering and services sector, and discussions between Salteri and Downer CEO Grant Fenn indicated that the new owner would be looking at Tenix as a strategic growth platform into the power, gas and water sectors.
“Accordingly this will create exciting opportunities for all Tenix staff,” Saltieri said.
Tenix is involved in CSG and renewable energy, plus water and waste water treatment plant design, construction, operations and maintenance, and capital works programs.
Its FY14 revenue was $791.1 million, though FY15 is expected to be lower due to the completion of resources projects.
The acquisition of Tenix will be funded through a $300 million committed bank debt facility. As a result, Downer’s on balance sheet gearing is projected to be around 10% by June 30, 2015. The transaction will be completed on October 31; and the acquisition will be earnings per share accretive in the first year.
Tenix started in 1956 when Italian-born engineer Carlo Salteri co-founded Transfield, which became one of Australia's most successful construction companies. In 1997, the Salteri family formed Tenix, which in 1999 entered the utility infrastructure services businesses with the acquisition of Enetech.
Through acquisitions and organic growth, Tenix has expanded its capabilities, and now provides services across Australia, New Zealand and the Pacific, employing more than 1600 industry specialists based across more than 90 offices, depots and operational sites.
According to Fenn, Downer had consistently said it was interested in opportunities that were strategic, grew its capability and were priced right.
“The acquisition of Tenix achieves all of these goals,” 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.”
Fenn also noted that Tenix had strong, long term relationships with some of the largest utility businesses in Australia and New Zealand; and was a low capital intensity business that operated on long term operations and maintenance contracts and had been working with many of its customers for more than a decade.
“Importantly, there are strong prospects for future growth,” Fenn said.
“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.
“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.”
Tenix’s Power and Gas, and Water businesses contribute about 85% of total revenue; while the Resources and Energy business contributed about 15% of revenue. It focuses primarily on gas and renewable energy, which fits well with Downer’s existing capability in these markets.
“Tenix has high quality people, a focused safety culture, strong market positions, high levels of secured revenue and, together with Downer, excellent growth opportunities,” Fenn said.
