Waco International sold to CCMP Capital ASIA
The shareholders of Waco International Limited (“Waco”), a leading industrial services business with hire, sales and manufacturing operations in Australasia, South Africa and the UK, today announced that they have concluded a sale for R5.4 billion to CCMP Capital Asia (“CCMPA” formerly known as JP Morgan Partners Asia) and the senior management team led by Royden Vice, CEO of the company.
CCMPA will be investing through its Asia Fund. JP Morgan Partners Global Fund, managed by JP Morgan Partners, (“JPMP”) is also investing in the deal.
This transaction constitutes the largest private equity deal in South Africa and Australia to date and highlights a significant flow of capital into South Africa.
CCMPA and JPMP will join with the management team to expand and grow Waco’s market leading position in its two chosen lines of business of forming, shoring and scaffolding and relocatable modular buildings. The structure of Waco, its subsidiaries, management and staff will remain intact with management keeping a stake in the business. No redundancies are expected as a result of the sale and there are no expected changes in the executive team led by Royden Vice. The company’s headquarters will remain in Johannesburg.
Royden Vice, CEO, said: “We are pleased with the value this transaction has unlocked for shareholders. As previously stated, we were looking to list, but after reviewing CCMP Capital’s offer we had to review that decision. There will be a considerable inflow of foreign capital into South Africa as a result of the transaction. This substantial investment by CCMP Capital reflects confidence in the South African investment climate.”
Stephen King, a Partner of CCMPA, said: “Over the last three years, Waco has successfully developed itself into a well established and focused industrial services business. Our investment into this company demonstrates our confidence that their excellent financial performance is set to continue. This is our first investment on the African continent and we look forward to rewarding returns. We support Waco’s strong growth agenda and anticipate our investment continuing to grow.”
Management’s significant transformation of Waco. In 2000, Ethos Private Equity led a consortium buyout of Waco with an enterprise value of R2.4 billion, which, at the time was the largest pure private equity transaction in South Africa. The company has undergone major change, realignment and transformation since that date. A new management team under Royden Vice was appointed in 2002 and in 2003 that team introduced a co-ordinated optimisation programme aimed at overhauling Waco’s performance.
Danie Jordaan, Senior Partner at Ethos Private Equity noted that: “The subsequent exceptional performance by Waco management has produced equally exceptional revenue and earnings growth through an acquisition strategy, strong management focus and continuous expansion growth.”
The disposal of non-core assets was also completed and by the beginning of 2004, the success of these initiatives allowed Waco to pursue a new strategy more focused on growth. This strategy included the pursuit of new customers in new sectors, geographical expansion and extension of product and service offerings into complementary fields. Recent important acquisitions include:
- Interlink Support Services, a leading UK R&MB company
- Cape Contracts, a leading South African integrated maintenance service provider
- Australasian Pacific Limited, a New Zealand scaffolding and forming business
Waco earns its revenues primarily through its rental business. The hiring of equipment provides a more predictable stream of income and cash flow than Waco typically generates from its sales business. It is a company with leading positions in attractive markets and well established and recognised brands, which have been in existence for over 40 years. In terms of financial performance, Waco delivered compound annual growth in EBITDA (earnings before interest, tax, depreciation and amortisation) of 27.7% to 30 June 2005 (excluding the US operations, which were recently sold). This healthy financial performance has led to strong cash flows providing a strong base from which to pursue its growth strategies.
CCMPA and the Waco management team will expand and grow Waco’s leading market position in its two chosen lines of business of forming, shoring and scaffolding and relocatable modular buildings.