Carlyle exits Australia's Coates Hire to Seven Group

Seven, which already had a 46.7% interest in Coates, has taken out positions held by Carlyle Asia Partners II and company management, according to a filing. Coates' existing cash and debt – amounting to net debt including derivatives of A$1.04 billion as of June – will remain in place.

Carlyle and National Hire Group acquired the company in late 2007 for A$2.2 billion, with each party committing A$339 million in equity for a 47% stake. National Hire's equity contribution included the transfer of its rental business to the acquisition vehicle. Seven owned a substantial portion of National Hire at the time and in 2011 it completed a buyout of the business.

Carlyle and Seven commissioned a strategic review of Coates in late 2012 – having earlier abandoned plans for an IPO due to weak capital markets – but decided against pursuing an exit and refinanced the debt instead.

Coates was established in 1885 as a small engineering company based in Melbourne. It is now Australia's market-leading equipment hire company with more than 200 branches nationwide. Engineering and construction accounted for about one-third of revenue in the 12 months ended June 2017, followed by real estate (17%), manufacturing (12%) and mining and resources (10%).

The company was hit by the commodities downturn; in response it reduced the size of its fleet by disposing of assets and cutting headcount. Revenue came to A$918 million in the 2017 financial year, a 5% year-on-year increase, but down on the A$1.24 billion generated in 2013. Similarly, the 2017 EBITDA figure of A$308 million represents a small gain on the previous year but still trails the A$534 million posted in 2013.

Seven said that taking full ownership of Coates would boost its industrial services division. The company wants more exposure to the infrastructure sector, based on expectations that an increased number of projects will drive demand for construction equipment and heavy machinery.

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• Topics
• Australasia
• Trade sale
• Industrials
• Australia
• The Carlyle Group
• Commodities
• Logistics