Your Thoughts/Comments?? Downer EDI’s $300m Tenix deal sets up power privatisation plays SERVICES group Downer EDI has set itself for a larger role in the planned privatisation of Queensland and NSW electricity networks to offset declines in mining services with a $300 million deal to acquire the Tenix Holdings Australia business from the Salteri family. The purchase will add a company that generated revenue of $791.1m and earnings before interest and tax of $29.4m in 2013-14 as a provider of operations and maintenance services to power and water industries. Downer cautioned that reported revenue and earnings were likely to fall this financial year due to the completion of some projects, but said the deal would still add to earnings in the first year. Downer chief executive Grant Fenn said the business had strong growth prospects. “There is little overlap between the two companies and Tenix will be the foundation for new core utilities business for Downer,’’ he said. The deal comes a year after the second generation of the Salteri family that founded the giant Transfield engineering business began investigating options for the business including the sale of a cornerstone stake and an initial public offering. “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,’’ Tenix chairman Paul Salteri said in a statement. “Our decision to change from our strategy to raise external capital funding via either an equity selldown or IPO was a difficult one, but ultimately in the best interests of the company and the employees.’’ Tenix was created in 1997 out of the split of the Transfield business between the founding Salteri and Belgiorno-Nettis families and entered the utility infrastructure services businesses with the acquisition of Enetech in 1999. Its defence contracting business was sold to BAE Systems in 2008 for $775m. Tenix operates services across Australia, New Zealand and the Pacific and employs more than 1600 across 90 sites. Adding Tenix gives Downer another revenue stream to add to its role as the largest provider of roads maintenance and rail servicing. It also provides an opportunity to pick up contracts with electricity and transmission business in NSW and Queensland being readied for privatisation. Downer plans to fund the deal through a $300m committed bank facility that will lift net debt to about 10 per cent by June 2015. Shares of Downer rose 14c to $4.99, continuing a recovery from a 12-month low of $2.75.
Posted on: Mon, 20 Oct 2014 19:01:39 +0000
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