Brambles Limited has announced an agreement to combine its Oil & Gas container solutions businesses – Ferguson Group (Ferguson) and CHEP Catalyst & Chemical Containers (CCC) – with Hoover Container Solutions to create an independent joint venture company – Hoover-Ferguson Group (HFG).
The joint venture will be 50% owned by Brambles and 50% owned by Hoover shareholders. Hoover’s major shareholder is First Reserve, a global private equity and infrastructure investment firm exclusively focused on energy. Brambles anticipates that the transaction will complete during October 2016, subject to regulatory clearance and customary conditions precedent.
HFG is expected to have the ability to serve customers worldwide with a footprint in North America, the North Sea, Latin America, Middle East, Australia and South-East Asia. Its network consists of 78 dedicated facilities, a fleet of more than 110,000 rental units and approximately 500 employees. Brambles has reported that in the 12 months ended 31 December 2015 on a pro-forma basis, before synergies, HFG would have had sales revenue of US$217m and EBITDA of US$86m.
The joint venture will operate under the leadership of Hoover Chief Executive Donald Young and an eight-member board of directors, with equal representation from Brambles and Hoover shareholders. The HFG CFO will be a Brambles nominee.
The transaction is expected to be neutral to Brambles’ underlying earnings per share in FY17, prior to transaction costs (US$7m over FY16 and FY17), and accretive as cost and revenue synergies are realised. HFG is targeting annual cost and capital expenditure synergies of US$5-10m within three years and will also seek to maximise substantial revenue opportunities related to cross selling services and products globally.
The company reports that HFG will target an independent funding facility as soon as capital market conditions are conducive – enabling full repayment of the Brambles’ shareholder loan and allowing HFG to be self-funding.
Brambles’ CEO, Tom Gorman, said, “Our interest in HFG will enhance our position in the Oil & Gas and Chemicals container logistics sector without the need for additional capital deployment, and creates a strong capital structure for the venture while enabling us to maintain strategic optionality over our future investment.”