As foreshadowed in the ASX release of 22 December 2010, Resource Equipment Limited (RQL) is pleased to announce the acquisition of Dewatering Services Australia Pty Ltd and DSA Plant Co Pty Ltd, collectively referred to as “DSA”. Completion of the acquisition is expected to occur within the next two business days, subject to REL shareholders ratifying the recent placement of 18,367,347 shares at the Shareholder meeting to be held on 25 February 2011.
DSA is a specialist contracting business which designs, installs, tests and commissions HDPE pipelines (commonly referred to as polythene pipe) and retails associated products. The business was founded in Kalgoorlie in 2003 and has a strong presence throughout the Goldfields, with operations expanding into the North-West in recent years. It is highly systemized and uses a range of specialist equipment to deliver a turnkey service to its clients. REL has an established working relationship with DSA, utilising DSA’s services on projects where HDPE pipeline installation is required.
With an expanding national profile, REL Chief Executive Officer, Mr James Cullen, said that the acquisition of DSA was a well timed opportunity for the Company to increase its service offering to clients through this vertical integration strategy. “There are several compelling reasons for the Parties to proceed with this transaction” he said. “Firstly, DSA has a well established customer base to whom REL can now offer its services; secondly, REL will offer DSA’s specialist pipeline installation services to its customers and expand the DSA business outside of Western Australia to REL’s East Coast operations; and thirdly, as the installation of HDPE pipeline infrastructure on mine sites is generally performed well before the selection of pumping equipment, DSA’s services will facilitate an earlier introduction of REL’s pumping system solutions than is presently being achieved.”
The purchase price for DSA is comprised of an initial component, a deferred component and a contingent component, all on the basis of 60% shares and 40% cash as follows: $7m initial component payable at settlement, comprising: the issue of 10,646,651 shares at 43 cents (the Company’s share price when price negotiations were finalised), with half of the shares subject to six months voluntary escrow and half subject to twelve months voluntary escrow; and the payment of $2,385,373 cash; $1.5m deferred component payable on finalisation of the 30 June 2011 accounts and subject to the 30 June 2011 EBITDA exceeding the 2010 EBITDA (of $3,088,000), comprising: the issue of 1,162,790 shares at 43 cents; and the payment of $1,000,000 cash.
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