14.06.2007

Hewden gets out of tools

After months of rumours, Hewden Stuart has agreed to sell the business and assets, excluding real estate, of its UK tool hire division to a wholly owned subsidiary of Speedy Hire, for £115 million.

The completion of the transaction is subject to various closing conditions and adjustments and is expected to close on or about July 31, 2007.

The deal includes 188 Hewden Hire locations, around half of which are in properties owned by Hewden, with the balance being leased premises. Annual revenues in the tool hire business are around £90 million or 30 percent of Hewdens total.

The purchase price excludes the owned properties which have an estimated market value of between £25 to £30 million. Hewden is planning to dispose of these properties in an orderly fashion.

Hewden will be left with 102 locations which will focus on the plant hire/general rental, access and crane hire.

The sale price, net of taxes and transaction costs is roughly equal to the net book value of the tangible assets and goodwill associated with the tool rental business.

Hewden will incur restructuring and other costs associated with the sale of approximately £2 million after tax.

Brian Sherlock head of Hewden Stuart said:
“The sale of Tools, which is a result of a company-wide strategic review, is a positive step for the business, its staff and customers".

"Our strategy is to focus on markets where we are, or can be, the leaders through a combination of the highest quality equipment and superior, specialist services. At Hewden, 96 percent of our plant-hire customers are within one hour of our nationwide network of depots,”.

“The sale will signal changes in the organisational structure of the business as it becomes a leaner, more market focussed structure. Hewden will retain more than 100 locations and 2,000 plant rental professionals. It will, however, be reducing staff numbers in the back office areas of the business and a consultation process is now in progress”.

“The job losses are likely to total around 100, many of which Hewden hopes will come from voluntary redundancies and natural wastage.

Andy Fraser, managing director of the Finning UK Group said:
"Hewden remains the U.K.'s number one plant hire company. We intend to build on our core strategy of providing customers with instant availability of a comprehensive range of high quality plant, supported by the best customer service offering in the industry,"

"Hewden will focus on those markets where we are, or expect to be, the leading provider of rental and related services".

Doug Whitehead, president and CEO of Hewden's parent - Finning added:
"Narrowing Hewden's business lines will allow us to focus our financial and management resources on those areas most closely associated with our Caterpillar equipment related core strengths."

"This transaction is the second significant sale of a portion of our U.K. operations in the last year. Combined with the anticipated property sales and the disposition of the Materials Handling business last September, these transactions will generate approximately C$500 million of gross proceeds”.

“Finning remains committed to the U.K. market with our remaining business lines both at Hewden and at our Caterpillar dealership operation. Finning will continue to have a total of 128 locations and approximately 3,400 employees in the U.K."

Finning has warned that there will be disruption to Hewden associated with the sale, which it says will have a short-term negative impact on earnings. Disruption will it says include: “changing customer relationships and product line changes, as well as the general adjustment of business flow at Hewden”.

It has also warned that its 2007 earnings per share are now expected to be at the lower end of its initial guidance range.


Proceeds from the sale will initially be used to repay short-term debt.


Vertikal Comment

Over the past few years Hewden has been the subject of constant restructuring with hardly a quarter going by without its parent, Finning, announcing another change or initiative.

This sale to Speedy has been on the cards for months and has caused some uncertainty at the company’s other divisions. Hewden managers will now be looking forward to a period of stability in order to allow them to restructure the business around the remaining activities.

Finning now needs to leave its UK managers alone to get on with building a solid, homogenous equipment rental business.

Even after this latest move, Hewden is by far and away the UK’s largest Telehandler rental company, the fourth largest powered access rental company and the second largest crane rental company.

A very substantial business, in addition of course it has a major earthmoving rental business.

Looking at Speedy, this cements its leading position in the UK/Ireland tool hire business and coudl take its revenues up over £400 million putting it on target to pass Loxam this year to become Europes largest rental company.

It will though have its work cut out integrating the Hewden business into Speedy. No details have been given concerning location overlaps but there are sure to be a good number of them.

Depending on how well Speedy manages the merger there will be opportunities for other tool hirers to benefit, such as HSS, Hire Station and Brandon, not to mention local or regional operators.