Scott Technology expects to accelerate expansion once JBS gets OIO sign-off

UPDATED: Scott Technology [NZX: SCT] wants to accelerate its growth plans, which could include bigger acquisitions once the Overseas Investment Office signs off on Brazilian meat processor JBS taking a majority stake in the industrial automation firm.

The Dunedin-based company has unveiled a potential purchase of a German engineering firm it competes within the appliance manufacturing area, which managing director Chris Hopkins said it will fund from its existing balance sheet. Scott held cash and equivalents of $7.3 million as at February 29, which was swelled by a $9.9 million operating cash inflow in the six months through to the end of that month.

The acquisition would give Scott a foothold in Europe where it's starting to grow its customer base, and continue on a buying spree that's seen the company's revenue treble since 2008.

The pending deal comes as Scott is waiting on OIO approval for JBS Australia to take a 50.1% stake in the firm before getting High Court sign off on the scheme of arrangement. Scott lodged its application in September last year and expects to get an answer next month.

Once JBS gets approval, Scott will access $41 million of new capital from JBS and existing shareholders who participated in a rights issue, which Mr Hopkins said will let the company speed up expansion.

"Obviously, the acquisition will need to beef up and maybe increase the size of what we're looking for," Hopkins told BusinessDesk. "At the moment, there's a natural cap on the size of acquisitions we can undertake in order to fund and absorb them. With additional capital behind us, it makes it easier."

Because JBS's shareholding hasn't been finalised, Scott needed to keep its incoming investor abreast of the German acquisition, and also an increase in the first-half dividend which will use up imputation credits that would otherwise have been lost on the ownership change.

"We've got a very good relationship with JBS, so tit's up to date with our strategy and what we're doing," Mr Hopkins said. "JBS isn't there to dictate business and the way that we operate but to add to it. So it's happy for us to carry on with our strategy and plans for the business."

German company in sights
Separately, Scott said it was in final negotiations to buy certain assets of a German engineering company that operates within Scott's appliance manufacturing sector, with a conditional agreement expected shortly.

"This acquisition, if it completes, will assist our planned strategic expansion through a stronger presence in our key international markets," the company said.

"Current indications are that this business will have a solid forward workload and there will be further opportunities to expand the business to deliver and support Scott's engineered solutions into the European market."

Details are still being finalised but Scott expects to employ 40 staff with an annual turnover of up to €8 million.

The shares rose 3.6% to $1.45, above the $1.39 price JBS is paying for control of the company.

(BusinessDesk)

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