Northbridge Industrial Services PLC (LON:NBI) , the industrial services and rental company, announced that it has entered into an agreement to acquire a complete and complementary oil tool rental fleet based in Asia, as a result of the liquidation of a competitor group. The purchase price is up to a maximum of US$4.0 million (£3.0 million) which represents a substantial discount to the current full replacement cost.
This opportunity has arisen due to the insolvency of the Petroleum Pipe Company Ltd and the liquidation or expected liquidation of some of its group and associated companies.
The fleet to be acquired is based in the Far East and is similar in size and scope to Tasman Oil Tools’ own hire fleets in the region. It complements the recently formed JV in Malaysia and will expand Northbridge’s oil tools rental activities further into Singapore, Thailand and Vietnam. The fleet will also be available to other Tasman locations in the Asia Pacific and Middle Eastern regions. The Group already has depots and staff in most of these locations and any additional operating costs will therefore be limited. A proportion of the equipment is on hire to third party customers, including to the Group’s own JV in Malaysia.
Completion of the acquisition is conditional upon certain further logistical steps being taken to verify the assets and their certificates of conformity and is expected to take place within the next ten days.
Funding will be provided partly from existing cash resources raised from the Group’s equity placing in June 2018, and partly from an increase of £1.5 million in the Group’s current three-year loan facilities with RBS, which have recently been extended to May 2021.
The majority of the hire fleet to be acquired was originally purchased between 2014 and 2016, is in good condition, and has been only lightly utilised over recent years. The purchase price payable by the Group of up to a maximum of $4.0m represents a substantial discount to the current full replacement value of circa $10.0m, and will reduce the need for significant further capital expenditure in the Group’s oil tools rental business over the next two to three years. The acquisition will also allow Tasman Oil Tools to expand its geographic reach across the region, as the oil industry continues to recover from the downturn.
The benefits that will accrue to Northbridge through this acquisition are expected to include:
· Facilitating the orderly exit of a competitor from the market
· Giving access to a large hire fleet at a significant price discount
· Enabling a substantial increase in broad availability of hire fleet to our customers
· Reducing the costs of cross hire to our JV in Malaysia
· Increasing the expected revenue to our other locations, assuming external customers are retained
· Reducing future capital expenditure at Tasman Oil Tools, without restraining further organic growth
· Reducing the average age of the combined hire fleet
