Stokes's Westrac, G&G back in talks over Caterpillar saleBy...

Stokes's Westrac, G&G back in talks over Caterpillar sale
By Wendy Frew
June 11 2003


Kerry Stokes . . . the deal would add another $360 million in sales to his dealership.

Kerry Stokes's private company Westrac has reopened negotiations to buy NSW business Gough & Gilmour and its lucrative Caterpillar heavy equipment dealership.

The deal, which could cost Seven Network chairman Mr Stokes as much as $150 million, would add another $360 million in sales to his Caterpillar dealership, which reportedly earns about $1 billion a year.

A sale by Gough & Gilmour principals Harcourt Gough and Tony Gilmour has been held up in the courts for over 2 years because of a contractual dispute between the NSW company and Caterpillar, the world's No.1 heavy equipment manufacturer.

A judgement handed down last week in the NSW Industrial Relations Commission gave Gough & Gilmour until September to decide if it wanted to sell the dealership to a party nominated by Caterpillar.

If it chooses not to, Caterpillar can terminate the arrangement with 26 weeks' notice.

Gough & Gilmour, Caterpillar and Mr Stokes have all declined to comment but it is thought that Westrac remains Caterpillar's preferred buyer.

It is understood the West Australian company, which also holds Caterpillar dealerships for north-east China, wrote to Gough & Gilmour after last week's judgement, suggesting the two parties discuss a sale.

Talks broke down in 2000 when the two parties could not agree on a price.

Court documents show Mr Stokes initially considered paying about $182 million for the business but after months of due diligence dropped his conditional offer several times.

Any price paid would reflect an amount for net assets plus a premium for the goodwill attached to Gough & Gilmour, which has held an exclusive sales and service arrangement for NSW and the ACT with Caterpillar since 1989.

The premium was to be calculated by multiplying an average earnings before interest and tax (EBIT) figure by seven. The average EBIT figure was a key issue of dispute, with estimates ranging from $18.8 million to $26.2 million a year.

There was also a dispute about the outlook for the company.

Expert witnesses called by the commission put Gough & Gilmour's net asset value as high as $67 million, excluding goodwill.