KUALA LUMPUR (Aug 14): Sime Darby Bhd will acquire Cavpower Group, a distributor of Cat equipment in South Australia and Broken Hill in New South Wales, Australia, for A$500 million (RM1.49 billion) cash.

In a bourse filing on Monday (Aug 14), the conglomerate said its indirect wholly owned subsidiary Sime Darby Industrial Machinery Australasia Pty Ltd had entered into a share sale agreement to buy Kuxton Pty Ltd and 98.9% of Kagera Pty Ltd’s share capital from vendors RRC Nominees Pty Ltd (ATF The Walkerville (1978) Trust), RRC Nominees Pty Ltd (ATF The Devonshire (1978) Trust), and Alistair Cavill.

Kagera is the holding company of a group of companies that operate Cavpower Group, the South Australian dealer of Caterpillar (Cat) industrial machines and vehicles, with nine branches throughout the region and seven parts stores, while Kuxton holds a 1.1% stake in the company.

RRC Nominees Pty Ltd (ATF The Walkerville (1978) Trust) holds 98.8% of Kagera, while Cavill owns the remaining 0.1%.

According to Sime Darby, the A$500 million consideration is the agreed enterprise value, and was arrived at on a willing buyer, willing seller basis.

Moreover, the price is deemed reasonable and justified, after it considered the financial forecast and cash flow projections of Cavpower, the discounted cash flow and maintenance earnings of its dealership business, and the assessed valuation of its remaining assets.

“The acquisition of Cavpower complements our existing portfolio, and provides geographic expansion to position our Industrial division in high-growth infrastructure and commodity areas of the Australian market,” Sime Darby group chief executive officer Datuk Jeffri Salim Davidson said in an accompanying statement on Monday.

Sime Darby said it plans to leverage the demonstrated performance of the Cavpower and Cat brands, which are firmly established in South Australia, in managing across the growing resources, infrastructure and energy sectors. 

The sale is contingent on receiving the approval of the Australian Foreign Investment Review Board, the consent of the Australian Competition and Consumer Commission, and third parties such as suppliers, customers, and landowners for its leasehold properties, and no occurrence of material adverse change events affecting the target companies.

“The transaction is expected to be finalised in the coming weeks once final conditions are met,” said Sime Darby.

At the noon break on Monday, the counter had risen one sen or 0.46% to RM2.18, giving Sime Darby a market capitalisation of RM14.86 billion.