Austin Engineering has acquired Austbore in Mackay, Queensland for more than $10.3 million – if certain targets are met in the 2007-08 year. Also in Queensland, Western Australian engineer RCR Tomlinson has bought Eagle Engineering for $21 million.
Both RCR and Austin have been pursuing a growth through acquisition approach. Austin has picked up John’s Engineering and Cranes in Perth, followed by Kaldura Industries and now Austbore, while RCR’s most recent gains include Applied Laser Group, Boilergenics, JG Engineering, VRBT Group and Australian Crusher Repairs.
For Austin, the Austbore acquisition brings it an expanded machining capability and another set of facilities just five minutes from its Kaldura fabrication operation in Mackay.
Austin national marketing manager Tony Reeves told Australia’s Mining Monthly the Austbore business had some advanced machining equipment.
Austbore boasts a Computer Numerically Controlled floor borer, a CNC lathe and a gantry mill. The company also has six mobile line boring units located in the Bowen Basin and Indonesia.
One of Austbore’s key customers is the giant Freeport copper and gold mine in Indonesia, a link Austin may be able to exploit.
Reeves said Freeport would send all of the work it could not do to Austbore. “Austbore has a permanent line boring team based there,” he said. “This gives us an opportunity to present our other product lines to Freeport.”
Besides the Freeport potential, Reeves said the Austbore purchase fitted well with Austin’s plans of providing a one-stop engineering shop with facilities in key regional areas servicing the mining sector.
Austbore’s purchase price is $10.3 billion plus inventory and work in progress. The price represents an earnings multiple of 3.4 times earnings before interest and taxation. The sellers can earn a further $500,000 if Austbore achieves the agreed target over the next 12 months. They have agreed to stay with the business for a year.
Austin will fund the acquisition through a mix of bank debt and its own cash resources.
While Austin is preparing to bed down its Austbore purchase, it is also carrying out a $3 million expansion of its Kaldura facility. It has also recently won an order to supply 20 dump truck bodies and four large excavator buckets for use at Fortescue Metals Group’s Pilbara mine. The order is worth $7.2 million with delivery between July 2007 and February 2008.
RCR’s purchase of Eagle Engineering gives it a bigger presence in the construction and maintenance market in the Queensland and New South Wales coal industry.
Eagle is based in Gladstone, Queensland and employs about 180 staff. It conducts dragline and face shovel shutdowns in the Bowen Basin and Hunter Valley regions. It also provides structural steel and pipework fabrication; bucket repairs; and construction and shutdown services to the local aluminium smelters, chemical plants, oil refineries and coal handling facilities in the Gladstone area.
RCR has kept Eagle’s former owners on board to help grow the business in Queensland and New South Wales. The additional capabilities and capacities available through RCR’s Site Construction and Maintenance business unit and workshop facilities of the Wacol operation will complement the Gladstone facility and business.
The $21 million purchase price for Eagle is split between a $15 million cash payment followed by two annual payments of $3 million in either cash or scrip over the two-year earn-out period. The two annual payments are subject to an earn-out arrangement dependent on Eagle achieving earnings before interest and taxes of no less than $4.25 million a year over the earn-out period.
RCR Tomlinson’s growth strategy is to gain companies that can help it build its maintenance capabilities to the mining sector.
