Australia's Next Capital to buy NZ Bus from Infratil
Australian mid-market buyout firm Next Capital has agreed to buy NZ Bus, a local bus service operator in New Zealand, from infrastructure investment manager Infratil.
The transaction is expected to generate adjusted proceeds of NZ$218-240 million ($147-162 million), Infratil said in a filing. This includes the provision of a vendor loan of NZ$20-30 million, repayable within five-and-a-half years. Infratil acquired NZ Bus in 2005 and announced a strategic review of the investment in February.
NZ Bus provides public transport services in Auckland, Wellington, and Tauranga. There are around 720 buses that operate from 13 depots with 1,400 staff. The Auckland contracts have an average term of nine years and a total contract value of NZ$1 billion, compared with 10.8 years and NZ$323 million in Wellington. Its market share in the two cities is 36% and 28%, respectively. The company won a tender to provide services in Bay of Plenty, where Tauranga is the main city, in April 2018.
The book value of NZ Bus' assets is estimated at NZ$300 million. The business contributed NZ$218.7 million in revenue for the year ended March 2018, down from NZ$227.8 million 12 months earlier. Over the same period, EBITDA fell from NZ$43.7 million to NZ$33.4 million, while a net profit of NZ$2.7 million turned into a loss of NZ$3.2 million.
"Next Capital considers that the bus industry provides the core public transport function in New Zealand's dynamic metropolitan environments and is excited about its re-entry into this important sector, following prior successful investments in GoBus in New Zealand and Forest Coach Lines in Australia," said John White and James Murphy, partners at Next, in a statement.
The private equity firm is currently deploying its third fund, which closed at A$256 million ($181 million) in 2016. Next targets expansion capital and small to mid-market buyout opportunities in Australia and New Zealand, typically investing in businesses valued at A$50-200 million.
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