Emeco Holdings Limited raises capital for new $80 million acquisition

Earthmoving vehicles rental company Emeco Holdings Limited (ASX: EHL) announced the acquisition of Matilda Equipment for $80 million.

Matilda’s niche business – renting a fleet of about 80 vehicles, mostly Caterpillar dozers, to the mining and construction sectors – is complementary to Emeco’s service offering.

Emeco CEO Ian Testrow commented: “By specialising in low hour, late model, in demand ancillary mining equipment, Matilda Equipment generates strong EBITDA margins and cash, which is in line with Emeco’s deleveraging strategy.”

In fact, the acquisition is expected to reduce Emeco’s leverage – calculated as the net debt EBITDA ratio – from 2.5 to 2.1 in FY18, and below 1.5 in FY20, allowing the company to refinance its debt on improved terms.

The acquisition will be financed through a $90 million capital raising at an offer price of $0.25 per share, representing an 11% discount to the last traded price of $0.28 on 27 April 2018. Meanwhile, the company requested a trading halt until May 2.

Shares in Emeco gained 250% over the past year, on the back of various acquisitions and a solid revenue stream from its mining services business.

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Motley Fool contributor Tommaso Autorino has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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