VENTURES: Forktech Is Going French
Recent Western Cape Business News
CRANE hire firm SA French – now under the influence of Cape Town-based investment bankers Afrasia Corporate Finance – has acquired control of local forklift truck supplier Forktech.
Parow-based Forktech is owned by the Van Tonder family and has a rental fleet of around 400 forklifts and ‘rough terrain equipment’ that range from 1500 kg - 4500 kg capacities to cater for all industries.
The Forktech deal will add much needed diversity to SA French, which currently is badly exposed to the construction industry in its crane business.
And diversity can’t come soon enough. SA French’s crane business – still in the throes of a tough turnaround programme – managed only a small profit of around R220 000 in the year to end December 2011.
The terms of the deal will see SA French – which looks likely to be renamed Safhold in order to reflect its ambitions to transform into a diversified industrial supplies and services company – will pay Forktech’s prime mover Johann van Tonder R15 million for 100% of the company.
Interestingly Van Tonder – who serves as MD of Forktech – has agreed to be settled for R11.5 million of the purchase price by the issue of new SA French shares. Van Tonder then becomes a major shareholder in SA French, which does provide some reassurance around future commitment to the enlarged company’s cause.
The deal is also subject to profit warranties, which require Forktech to achieve R5 million in net profit after tax in the year to end June 2014. The issue of SA French shares to Van Tonder will also be subject to a two year lockup.
What CBN will be keenly watching in the next few months are initiatives to expand Forktech. Currently the company principally operates in the coastal regions of SA in providing forklift solutions to the farming, infrastructure, construction and logistics sectors.
Naturally a push into the lucrative Gauteng market can be expected. It seems reasonable to assume revenue synergies could be unlocked for both SA French and Forktech – the latter having access to SA French’s established presence and customer base in Gauteng and the former accessing Forktech’s established presence and customer base in the coastal regions of SA.
Outlining the rationale for the deal, SA French reported that the acquisition followed a “well-developed and achievable” expansion plan that had been developed for Forktech. SA French reckoned this expansion plan should materially enhance earnings going forward as cost synergies can be achieved between SA French and Forktech through shared distribution centres and service technicians. Certain back office costs could also be eliminated.
One important development to note is that the acquisition of Forktech will coincide with SA French raising R20 million in fresh capital. Provided SA French can convince vendors to accept its paper, CBN suspects there may be a slew of deals brokered by the industrious brains-trust at Afrasia.
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