Eroad said its board had retained Goldman Sachs to help it assess the offer - which would be weighed against “work under way on reviewing partnership options to contribute some combination of market access, expertise and capital to drive further growth in the North American market and other alternatives”.
EARLIER: Eroad shares were placed in a trading halt before the NZX opened this morning. “Trading will remain suspended while the considers a non-binding indicative offer,” a statement said.
The potential buyer was not named, but the halt came on the heels of a disclosure that Brillian had taken an 18 per cent stake in Eroad.
Brillian has been buying up Eroad shares since May. The bulk of its holding was bought on June 21 for $1.30 or a 69 per cent premium on Eroad’s Wednesday closing price of 77c. So far, Brillian has spent a total of $23.68m building its stake.
Brillian - an Australian holding company - is part of Volaris Group, a self-described “buy and hold” investor in software companies that is ultimately owned by Toronto Stock Exchange-listed Constellation Software - which has a market cap of C$59.9 billion ($69.7b).
Eroad shares hit an all-time high of $6.61 in July 2021 but a series of disappointing results saw them slide all the way to 52 cents before signs of a turnaround appeared with the firm’s full-year result, delivered in May.
If a takeover goes ahead, it will be Eroad’s second major deal in 18 months. In December 2021, the firm took over rival Coretex in a $158m deal.
Mike Heine - who took over from longtime CEO Steven Newman shortly after the deal closed - was candid about what he saw as a lack of investment, which had seen Eroad fall behind in the key North American market. He saw the Coretex acquisition as the vehicle for quickly filling product gaps and catching up in North America.
“FY2023 was a year of transition after what was a pretty challenging FY2022, when we did lose focus on cost and customers and innovation,” Heine told the Herald in May, soon after his firm delivered its full-year result.
The telematics firm had cut $10m in costs, with measures that included a reduction in headcount from around 650 staff to around 450.
The firm’s net loss narrowed from the year-ago $9.6m to $3m, in line with guidance. Heine said Eroad is aiming to be cashflow neutral by FY2025 and cashflow positive by FY2026.
Revenue was up 52 per cent to $174m as Eroad booked its first full year of Coretex earnings.
“We were focusing less on hardware and more on services. We slowed down our hardware journey. We probably didn’t invest as much there from 2017 to 2019 as we should have,” Heine said.
At its full-year result in May, Eroad said it added 404 customers for its fleet management technology in North America (for a total of 2625 subscriptions), 290 in Australia (for 1699 total) and 1556 in New Zealand (for a total of 13,387).
The firm did not announce any big deals today, but Heine reiterated a 9000-truck deal with US food services giant Sysco, first announced in November last year. The CEO said Sysco’s rollout was now under way.
He also underlined the 500-tanker deal that Eroad signed with Fonterra in January. Eroad technology will be used for telematics, video surveillance with high-resolution dual cameras (with one lens on the driver, the other on the road), and calculating road user charges.
The dairy co-operative is currently piloting its first electric milk tanker.
Heine saw the broader global shift to electric vehicles as a positive for Eroad. The transition to EVs means governments will lose petrol and diesel tax revenue, shifting focus to road-user charges.
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is technology editor and a senior business writer.
