Kerry Stokes has gone Father Christmas to shareholders in the micro-cap National Hire Group.
The Seven Network chief or, more accurately, his WesTrac Equipment will inject $25 million into the equipment hire group.
For that sort of money Stokes will emerge with 60 per cent of National Hire, which is effectively controlled by interests associated with managing director Stephen Donnelley.
The Christmas cheer was shown where it matters, on the stock exchange, where National Hire scrip jumped as much as 43 per cent to 30¢, before closing 8.5¢ higher at 29.5¢.
As well as getting the money from the 100 million share placement at 25¢ apiece, which will help finance expansion of the equipment fleet, National Hire will be rolling out Cat Rental stores in NSW.
That is where the new link-up assumes some force as the Stokes company is the Caterpillar dealer for Western Australia and, from April 9 next year, it will also handle Caterpillar in NSW.
"It's a wonderful transaction for the company (and) I think it is very good for the shareholders and it will continue to make us more and more relevant in the business," said managing director Donnelley yesterday.
And so what did he think of the share price jump yesterday?
"I hadn't really thought about that too much because I'm a long-term player. We've never been a seller of any of the shares and we just want to grow the business . . . we've got a vision of where the business can be," he said.
"I guess it reflects peoples' views on where we can, with WesTrac's assistance, take our business," he added.
Donnelley controls about 30 per cent of the share register before the placement to Stokes; which means he will effectively hand over control to the new shareholder. Asked whether he had known Stokes for long, Donnelley responded: "No, I don't know him at all."
Noting that WesTrac would become the Caterpillar dealer for NSW from April, he said: "One of Caterpillar's platforms these days is to roll out a rental business that they call Cat Rental stores."
"We will become the Cat Rental store business in NSW. And the other relevant thing is that Caterpillar is a wonderful product and it's a product that we can put into our hire fleet and we can rent a lot of that product out."
He said the equipment hire industry was a capital-intensive business and it was an industry that was growing at 4 or 5 per cent per annum.
"We're a small business, a $30 million business in an industry that's about a $2 billion a year industry. So, for us to grow, we need to continue putting machinery in and you need to get that from capital; and we need to have a much broader distribution to service our customers better and a broader product supply.
"You can only do that by retained earnings, debt or equity really. So, here is a way of us being able to leverage up and get more relevance, better scale and really participate in a growing industry," he said.
Following the placement, which requires shareholder approval, the Stokes camp will have a majority of directors on a five-man board.
Donnelley has agreed to a new three-year contract.
The deal will come as good news to National Hire shareholders. The company went public at 50¢, and recently it had a six-for-five issue at 15¢. Yesterday, the scrip rocketed 43 per cent to 30¢, valuing it at $20 million.
A lovely Christmas present from Kerry Matthew Stokes.
NHR Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
