Emeco Cancels Orionstone Merger and Acquisition of Rentco
Australian heavy equipment rental specialist Emeco said it has concluded discussions with competitor Orionstone regarding a potential merger of the two businesses and also pulled the plug on a previously announced acquisition of truck rental specialist Rentco.
Emeco said after high-level due diligence it could not reach an agreement with Orionstone that represents fair value for Emeco shareholders.
“We are disappointed not to have been able to agree reasonable terms to merge the businesses, however, we must remain disciplined in the use of our shareholders’ capital,” said Emeco chairman Alec Brennan, adding that Emeco is encouraged by “positive steps the business has made in the second half of FY15 and look forwared to continued recovery in FY16.”
Emeco CEO Ken Lewsey said, “We are continuing to see positive trends in the business. Operationally, we have had a number of important contract wins in the first half of financial year 2015 with current utilization of 74 percent compared with 51 percent at the same time last year.” Lewsey added that cost-cutting measures resulted in a $14 million reduction in costs, achieving a similar savings that would have been gained from synergies proposed by Orionstone.
Orionstone also said the merger agreement with Emeco ultimately was not satisfactory to its shareholders, but added that consolidation in the mining services industry remained inevitable.
Emeco said its proposed acquisition of the Rentco truck rental business also would not go ahead because conditions precedent had not been met.
“Emeco is focused on strengthening its cash flow generation through its core business by maintaining the improved utilization levels and significantly reducing costs to serve our customers,” said Lewsey.
Emeco, headquartered in Perth, Australia, has heavy equipment rental operations in western Canada, Chile, Indonesia and Australia.
About the Author
Michael Roth
Editor
Michael Roth has covered the equipment rental industry full time for RER since 1989 and has served as the magazine’s editor in chief since 1994. He has nearly 30 years experience as a professional journalist. Roth has visited hundreds of rental centers and industry manufacturers, written hundreds of feature stories for RER and thousands of news stories for the magazine and its electronic newsletter RER Reports. Roth has interviewed leading executives for most of the industry’s largest rental companies and manufacturers as well as hundreds of smaller independent companies. He has visited with and reported on rental companies and manufacturers in Europe, Central America and Asia as well as Mexico, Canada and the United States. Roth was co-founder of RER Reports, the industry’s first weekly newsletter, which began as a fax newsletter in 1996, and later became an online newsletter. Roth has spoken at conventions sponsored by the American Rental Association, Associated Equipment Distributors, California Rental Association and other industry events and has spoken before industry groups in several countries. He lives and works in Los Angeles when he’s not traveling to cover industry events.