Next to buy Australia hospitality equipment business

The private equity firm will pay A$0.70 per share via several related vehicles through a scheme of implementation, according to a filing. The price presents a 126% premium to the stock’s last closing price but a 30% discount compared to a tentative offer made by Next in April. The stock was trading at A$0.69 as of midday July 4.

Terms of the acquisition also provide Next with exposure to half the net proceeds generated by Silver Chef’s GoGetta equipment financing unit until mid-2021. Silver Chef announced early last year that it would offload GoGetta in order to streamline its overall business, which is suffering from significant debt burdens. Next’s potential upside is subject to outstanding debt repayments by the subsidiary and therefore considered unquantifiable to date.

Silver Chef, which sources new and used equipment for restaurants and coffee shops across Australasia and Canada, had A$342.7 million in interest-bearing debt as of mid-2018. This represented 84% of the value of the company’s rental assets. In the meantime, Silver Chef has sought a number of waivers to extend unmet repayment obligations and failed to realize a sub-debt solution.

Next’s decision to lower its offer price followed extensive due diligence and negotiations with Silver Chef’s financiers. Silver Chef said its board had unanimously agreed to recommend the latest privatization scheme, taking into account “a constrained funding environment and the urgent need to cure the covenant breaches to ensure the ongoing support of the company’s financers.”

Silver Chef declared a net loss of about A$49 million for 2018, compared to a profit of A$20.2 million the prior year. Revenue was steady during 2018 at around A$287 million. The company said that debt-related constraints on its operating cash flows and cash reserves were expected to have material adverse impacts on its financial results for both 2019 and 2020.

Next Capital specializes in small to medium-sized enterprise buyouts valued in a range of A$50-200 million. It claims to have completed about 50 deals since inception in 2005 and currently has about $600 million in funds under management and capital available for new investment. Recent activity includes an agreement to acquire NZ Bus, a New Zealand transportation services company.

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• Topics
• Australasia
• Buyouts
• Support services
• Consumer
• Australia
• Next Capital