The vet industry has attracted some private equity investment. Photo / 123RF
Aussie private equity firm Pemba Capital Partners has swooped on New Zealand animal-care business Veterinary Specialists Aotearoa (VSA), taking a 66 per cent stake.
Pemba, a mid-market PE firm, took control of VSA on October 31, according to Companies Office records, with its acquisition vehicle, Bailey Bidco NZ, revealed as the new shareholder.
VSA has two animal hospitals in Auckland and one in Christchurch, providing a full suite of veterinary services.
Some of the company’s veterinarians retain shares in the business, together making up the remaining 34 per cent of the share register.
They include former Waikato rugby player Richard Jerram and his wife Carron (a former Silver Fern netballer), who jointly hold 10.9 per cent of Bailey Bidco, Alastair and Erin Coomer of Christchurch (also 10.9 per cent) and Aucklanders Abigail and Damien Chase with 6.14 per cent.
The pet-care industry is regarded as highly attractive for buyout firms in this part of the world.
NZX-listed Ebos has demonstrated how profitable the sector is, most recently capturing a 24 per cent lift in underlying profit from its animal-care business following investment in a new pet food manufacturing facility.
The company co-owns Animates, which is a major pet-food player in New Zealand.
Pemba was this year reportedly weighing options for its Australian pet clinic business Vets Central, which it established by rolling up individual vet practices across the country with a nationwide support office in Queensland.
Pemba was established in 1998 to invest in small and mid-sized private businesses in Australia and New Zealand. Local investments include a 60 per cent stake in Hamilton-based industrial manufacturer Tira (formerly NDA Group), the largest stainless steel and alloy fabricator in Australasia.
The owners of MediaWorks have appointed Goldman Sachs to help with refinancing the business after it revealed a nearly $10 million loss in its 2022 financial year.
The Australian’s DataRoom column reported that private equity funds Oaktree Capital Management and Quadrant Private Equity had called in the investment bank.
It reported that options could include a possible separation of its out-of-home advertising business QMS from its radio operation, with the potential aim of selling off the advertising arm.
A MediaWorks spokeswoman confirmed it had been working with Goldman Sachs in connection with its ongoing refinancing discussions, but said a sale was not on the cards.
“The board is not considering an imminent sale of MediaWorks in whole or part. MediaWorks is entirely focused on delivering outstanding results for its customers, audiences and employees.”
MediaWorks operates popular music radio stations including The Breeze, More FM, The Edge, The Rock and Mai.
Its advertising business includes 5500 outdoor touchpoints. The Australian reported that potential buyers of the advertising business could include New Zealand Herald-owner NZME and digital billboard company Lumo.
Michael Boggs, NZME’s chief executive, said it was always open to looking at new opportunities to deliver increased value for shareholders.
“We don’t comment on rumour or speculation but as you’ll know, as a listed company we’re required to notify the market of anything material as we comply with our continuous disclosure requirements.”
Last month, MediaWorks reported financial results which showed it had total revenue of $214.9m – a 5.9 per cent increase on the previous year – and EBITDA of $34.4m.
However, operating costs were up 9.1 per cent in 2022, “largely due to the impact of 7.2 per cent inflation in New Zealand, as well as increased investment in our people and technology”.
The net loss for the year after tax and other items was $9.7m.
It also made a one-off impairment of $110.1m, reflecting the write-down of goodwill and “alignment of asset value to current global trends”.
Despite the impairment and financial challenges, MediaWorks chief executive Wendy Palmer told Media Insider last month there were no plans to sell any assets or split the company.
“We think we are stronger together in terms of the current structure,” Palmer said.
“The breadth of our portfolio is really great – it’s great for our clients and great for our teams internally. There’s nothing on the radar in terms of any change.”
Transport is often seen as a bellwether for the economy, and recent results from Freightways and Port of Tauranga have pointed to a slowdown.
However, Mainfeight’s first-half result, while down sharply, has muddied the waters somewhat.
“Freightways and Port of Tauranga are really good indicators because they are solely New Zealand,” said Craigs Investment Partners senior research analyst Mohandeep Singh.
“Freightways has about 40 per cent market share of the small parcel market around New Zealand and Port of Tauranga is our biggest port,” he said.
Both their recent results pointed to lower volumes for the start of the first quarter.
As expected, Mainfreight’s first half was well down on the previous comparable periods because the earlier figure was inflated by the post-Covid effect.
“But they actually talked about volumes being good in New Zealand and in Australia, which was a bit of a surprise, relative to Freightways and Port of Tauranga,” he said.
“Freightways and Port of Tauranga clearly show the economy is slowing, which is what we would expect given where the Reserve Bank is in terms of its interest rate cycle.
“Mainfreight - which is a bit more global - has muddied the message a little bit.
“Their profits are down 40 per cent but that year was such an anomaly.”
Mainfreight’s share price rallied by $4.95 or 8.6 per cent to $62.54 soon after its result, in contrast to Freightways and Port of Tauranga, which sank after they reported.
“Their [Mainfreight’s] commentary was a bit more positive, saying volumes were holding up a bit better for them, and that’s why we saw the share price reaction.”
Freightways now sees a risk that its earnings will be at or below last year’s level.
Port of Tauranga said that in the three months to 30 September, total trade was down 9 per cent in volume compared to the same period last year.
In its result, Mainfreight said its first half was one of its toughest.
“Whilst the macro trading environment continues to be slow, our level of sales activities and opportunities provide confidence, as does the domestic trade improvements in Australasia,” it said.
Scott Technology looks to be getting a free ride from the takeover of MHM Automation.
The high price offered for NZX-listed MHM Automation is being seen as a positive for the valuation of Scott Technology. The company’s capital structure has been put up for review by its majority owner, Brazil’s JBS.
Scott’s automated technology is widely used in meat and other food processing plants, and in logistics centres.
MHM Automation, one of Scott’s smaller peers, last week entered a scheme of arrangement whereby US-based Bettcher Industries would buy all the shares at $1.70 apiece.
The price represented an 86.8 per cent premium to MHM’s previous closing price on November 2.
Brokers Forsyth Barr said the MHM takeover reinforced its view that Scott remained undervalued.
“Applying the same multiple to our EBITDA estimates for Scott (SCT) yields an implied valuation of NZ$4.73, 26 per cent ahead of the current price,” Forsyth Barr said in a research note.
“MHM’s takeover bid could crystallise SCT’s value for potential acquirers, especially given our view that SCT has: 1) superior profitability, 2) greater scale and geographical diversification, and 3) more robust growth prospects relative to MHM,” Forsyth Barr said. Meanwhile, JBS, the world’s biggest meat company, has plans to list on the New York Stock Exchange this year.
Scott has lately hit $3.90, up from $3.73 just before the MHM bid.
MHM, with a market capitalisation of $141.5m, is much smaller than Scott ($316.6m), but the two operate in similar categories.
The MHM takeover follows closely on the heels of its result for the June year, which saw record results.
The company enjoyed revenue growth of 43 per cent to $96.7 million and EBITDA growth of 107 per cent to $9.9 million.
The year saw continuing demand for automation and modernisation of equipment across MHM’s customer base.
”This is being driven by scarcity of people, a requirement to improve efficiencies to remain competitive, and an increasing focus on health and safety as well as food safety,” MHM said at the time.
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Demand for bonds may well stay strong, but there's a catch.