GE announced that it is pursuing acquisitions of two underground mining equipment manufacturers in support of the global expansion of its mining business. GE has entered into an agreement to acquire 100 percent of Australia-based Industrea Limited, a provider of safety and productivity-enhancing mining equipment and services. The transaction is valued at approximately A$700 million, which represents a 5.5x EBITDA multiple based on full-year financial data as of Dec. 31, 2011. The company also signed a binding Letter of Intent (LOI) to acquire Fairchild International, an independently owned and operated underground mining equipment manufacturer located in Glen Lyn, Virginia. Terms of the agreement were not disclosed.
The combination of the two entities expands GE's product offering to address approximately 35% of the underground mining value chain. Industrea Ltd. and Fairchild International together are well positioned in dynamic growth regions for mining, including Australia, China (Industrea), and the United States (Fairchild). GE will enable these regionally focused enterprises to reach a global customer base with enhanced products based on GE's clean propulsion systems, energy storage offering, and world-class system integration capabilities. Both Industrea Ltd. and Fairchild International will benefit from GE's lean manufacturing and effective global supply chain management.
Both companies will become part of GE Transportation's global mining business which utilizes the people, technologies, and products from across GE to help its customers solve their toughest mining challenges. GE helps mines work better by providing innovative solutions in critical areas such as power, water, and productivity.
Industrea Ltd.
With more than 700 employees, seven Australian locations, and a significant presence in China, Industrea Ltd. is well positioned for growth across its four divisions: Mining Equipment (flame- and explosion-proof underground mining vehicles and equipment), Mining Technology (drill guidance systems and collision avoidance systems), Gas Management (specialized underground in-seam drilling and gas drainage services) and Mining Services (integrated contract mining services).
With the proposed acquisition of Industrea, GE makes a strategic investment in expanding its manufacturing footprint to Australia and contributing to a strong industrial manufacturing base in the country. In addition, GE expands its product portfolio to underground mining and increases its presence in key mining regions Australia and China. Industrea Ltd. can benefit from GE's global footprint and customer relationships, and mining technologies.
Lorenzo Simonelli, President and CEO of GE Transportation said: "Industrea has built an attractive business supplying major mining companies in growth regions. The company has developed a solid record of helping customers increase production while continually implementing safety improvements.
"We believe that Industrea's business can grow more rapidly by expanding its product suite and geographic reach combined with GE's technical expertise and global customer relationships. GE's equipment experience, battery and hybridization technologies, propulsion system offering and global distribution capability will help us expand the Industrea business. It will also improve the environmental performance of Industrea's products by lowering fuel use and emissions. We see this as a way to bring the reality of Ecomagination to the world of mining," Simonelli said.
Globally, mining equipment is a $61 billion industry driven by dynamic, global infrastructure growth as well as several structural factors such as increasing automation, and heightened safety and environmental requirements.
Robin Levison, Managing Director and CEO of Industrea Ltd. said: "GE's resources, technical expertise and global customer relationships are expected to accelerate the growth of Industrea's businesses, building on the company's strong reputation for products and services that enhance the safety and productivity of mining companies. New career opportunities will open up for our people, and customers will be able to benefit from increased resources devoted to product development and innovation."
The transaction will be subject to shareholder approval. Industrea Ltd. shareholders will vote on the offer in the second half of 2012. The transaction is also subject to customary conditions including relevant regulatory approvals. The transaction is expected to close later in 2012.
Fairchild International
GE Transportation signed a binding Letter of Intent (LOI) to acquire Virginia-based, independently owned and operated Fairchild International. The company employs approximately 150 people and manufactures a wide range of underground mining equipment, including diesel and battery-powered scoops, continuous miners, haulage systems, shield haulers, and maintenance vehicles.
With this acquisition, GE will expand its product offering to underground mining and grow Fairchild's customer base beyond its core U.S. market to serve mining customers worldwide. With its electric propulsion and state-of-the-art energy storage systems, GE will be able to deliver higher efficiency and productivity to mining customers worldwide while lowering fuel use, emissions, and life-cycle cost.
Lorenzo Simonelli, President and CEO of GE Transportation said: "With the acquisition of Fairchild International we will combine nearly fifty years of leading industry knowledge and expertise in designing, building and servicing underground mining equipment with GE's global reach, technology leadership in clean propulsion and energy storage systems, and world-class system integration capabilities. We will bring the next generation of top performing underground mining equipment to mining customers around the globe."
Myrleen Fairchild, President of Fairchild International said: "This is an exciting time for Fairchild International, our employees, my family, and for me. I want to thank all our customers and suppliers for their trust and support over the past decades. I'm confident that our people and products will continue to flourish under the leadership of GE for the benefit of our customers."
The transaction is expected to close in the third quarter of 2012. Terms of the agreement were not disclosed.
Source: General Electric