Next Capital pulls Hirepool IPO as fund managers baulk at after-market support
By Jonathan Underhill
June 24 (BusinessDesk) - Hirepool's 64 percent owner, Australian private equity firm Next Capital, has abandoned plans
to sell shares in a $262 million initial public offering after concern from institutional investors that on market
support for shares of the unprofitable equipment rental company wouldn't be strong enough.
Next and fellow shareholders Macquarie Group holds 21 percent. Hunter Powell Investments were to have reduced their
combined holdings to between 20 percent to 35 percent of the company in the IPO of up to 120.1 million new shares and
83.5 million existing shares at between $1.10 and $1.50 apiece. Some institutions are understood to have struggled to
put even a 90 cent valuation on the stock.
There had been good demand from retail investors but institutional investors weren't confident there would be enough
support for the stock after it listed, especially with Next remaining a relatively large shareholder. The IPO would have
come amid a swathe of stock sales, including Serko, Gentrack, ikeGPS and Scales Corp, giving investors plenty of choice
on where to put their funds.
Existing shareholders are happy to remain owners of Hirepool, given the outlook for the economy and the business.
Hirepool is projecting profits from 2015, after years of losses, having squeezed out costs since buying major rival
Hirequip out of receivership last year and using its initial public offering to pay down debt, according to its
prospectus.
Hirepool is forecasting a net profit of $25 million for the year ending June 30, 2015, from a pro forma loss of $17.8
million in the current year, according to the company’s prospectus. After adding back finance costs, depreciation and
amortisation of Hirepool and Hirequip, pro forma aggregated earnings before interest, tax, depreciation and amortisation
are forecast at $34.5 million this year and $60.5 million in 2015.
Hirepool alone has posted net losses each year from 2009, according to the prospectus, mostly reflecting finance costs.
Hirequip achieved a profit in 2012 and for the 10 months to May 6 2013, following three years of losses, the figures
show.
Following the merger, Hirepool is the nation’s only generalist hire equipment company, although it has only about 19.6
percent of the market based on last year’s application to the Commerce Commission to buy Hirequip. Those figures
included an estimate that the building hire industry generated $780 million of equipment hire revenue in 2013, while
Hirequip’s revenue was $153 million.
The company had planned to cut interest bearing debt to $85 million on listing from $203.6 million at June 30.
Deutsche Craigs, Macquarie Securities (NZ) and UBS New Zealand were joint lead managers with ANZ Bank New Zealand as
co-manager for the sale. Advisers were Cameron Partners.
(BusinessDesk)