Eroad chief executive Steven Newman. Photo / Supplied
Eroad chief executive Steven Newman. Photo / Supplied
In a departure from the trend of large foreign firms picking up promising New Zealand tech companies, NZX-listed Eroad has bought Auckland-based Coretex for $188.3 million.
Last month, US private-equity giant KKR took a majority stake in Dunedin-based Education Perfect in a deal that valued the firm at$435m.
In May, another Dunedin company, appointment software firm Timely, was snapped up by Denver-based EverCommerce.
March saw three major offshore sales with Kumeu mobile game developer Ninja Kiwi sold to Sweden's MTG for $203m, Auckland-based retail software firm Vend going to NYSE-listed Lightspeed for $450m, and Christchurch geologic 3D modelling company, Seequent, was acquired by Nasdaq-listed Bentley Systems for $1.45 billion.
Coretex's $188m price tax includes a payment of $30.6m, which is contingent on Coretex meeting certain performance milestones.
Eroad chief executive Steven Newman said that on the surface, both companies were milar in that they are involved in telematics - the technology used to monitor a wide range of information vehicle fleets.
"But when we look at what each company does we approach telematics quite differently," Newman told the Herald.
"From the Eroad side we are very much about transport, regulation and compliance.
"We deliver solutions covering health and safety, road user charges, driver fatigue and we have a lot of general telematic commercial products really applying to any kind of commercial vehicle or truck," he said.
"What Coretex does is they go into large vehicles used for refrigerated transportation, construction - particularly around concrete - or waste and recycling," he said.
"They get deeply into customer businesses to help them get work done.
"In the case of concrete, they have turned that into a bit of a science - being able to measure how much water is being put with the dry contents that go into the concrete truck," he said.
"They count the number of rotations and can therefore measure how well the concrete is mixed, how long it has been mixed, and how much water was used, which all relates to the strength of the concrete.
"They are masters of being able to manage that manufacturing process and of delivering it to where it needs to be delivered.
On the refrigeration side, there is an awful lot that they can do around food safety - making sure that both refrigerated and frozen goods are transported safely.
Coretex's customers in the US include the major food brands such as McDonalds, Starbucks and Taco Bell.
Newman said the two had very complementary technology platforms.
He said the deal means Eroad will go from having 35,000 vehicle connections in the US to 86,000. In Australia, the number will go from 3,000 to 12,000.
"It's quite transformative in a few different ways," Newman said.
Coretex has 161 staff 34 in North America and six in Australia.
The rest of its team are based in Newmarket - the company's engineering base.
Newman said both Eroad and Coretex were similar in that they are involved in telematics. Photo / 123RF
Eroad has 320 staff and a research and development centre on Auckland's North Shore.
The combined research and development capability of the companies will exceed 200.
"We will have the scale and capability to compete with the best telematic providers in the world," he said.
As part of the transaction, Coretex shareholders will become significant Eroad shareholders.
Coretex had received funding from Milford Asset Management and investment firm Movac.
"This transaction is incredibly different to the normal story that we, unfortunately, see from a New Zealand perspective," he said.
"Nearly every week we see that another high-tech company has been bought by someone offshore," he said.
"This acquisition may be a bit bigger than what the market may have been expecting but it is extremely complementary and transformational for Eroad."
Eroad is conducting an underwritten conditional placement to raise $64.4m and a share purchase plan to raise $16.1m to partly fund the purchase.
The remainder of the purchase price will be funded internally.
Coretex has connected units in North America, Australia and New Zealand. Its focus is on growth verticals of less than a truck load (LTL), refrigerated transport, construction, and waste and recycling.
Eroad said Coretex has a well-advanced pipeline of North America Enterprise customers.
The acquisition is expected to complete in early in the second half of 2022 and is subject to conditions, including Commerce Commission clearance in relation to Coretex's New Zealand business, Overseas Investment Office approval and Eroad shareholder approval.
