Pumping equipment company Waterco (ASX: WAT) has inked a deal to purchase all of the shares in water solutions company Davey Water Products from GUD Holdings Limited. The acquisition is set to cost around $64.9 million, with some adjustments as per the terms of the SSA. Waterco plans to finance this acquisition through bank loans.
The merger of Davey and Waterco creates a diversified group, capitalising on their complementary product strengths. Waterco excels in pool systems, filtration, and water treatment, while Davey leads in manufacturing residential and commercial pumps in Australia. This partnership opens up growth opportunities, allowing the duo to leverage their strengths in various regions like Europe, the USA, the Middle East/Africa, and Asia.
As a result of the merger, the combined businesses will gain a significant presence in global water treatment markets, comprising pool systems, water transfer solutions, and water treatment categories. This merger also paves the way for improvements in efficiency and capabilities.
Managing Director of GUD, Graeme Whickman, commented, “Waterco is, in our view, the natural owner of the Davey business, and we are optimistic about the prospects for the combined businesses. I would like to thank Davey’s CEO, Valentina Tripp and the entire team for their significant contribution to Davey and the wider GUD Group.”
GUD Holdings Limited, the seller, is primarily engaged in the manufacturing, importation, distribution, and sale of automotive products, pumps, pool and spa systems, and water pressure systems. By exiting Davey, GUD solidifies its ambition to focus solely on its automotive business, while also allowing it to repay significant debt through the acquisition sum.
The acquisition will be completed in September 2023, subject to meeting standard transaction conditions outlined in the SSA. Security holders’ approval is not required for this deal.
Waterco, founded in 1981, is a reputable manufacturer and distributor of various products for the global swimming pool and water treatment markets. In addition to this, Waterco serves as the franchisor for Swimart, a pool and spa retail network in Australia and New Zealand. Moreover, the Company distributes Zane Pool Heating solutions through a network of dealerships across Australia.
Davey, with a history of over 88 years, specialises in designing and manufacturing products that ensure clean drinking water, protect against fire and floods, and provide enjoyable and pristine pools and spas. Its head office and manufacturing facility are based in Melbourne, Australia.
GUD Chair, Graeme Billings, said, “The sale provides a favourable outcome for the Group and our shareholders. It is pleasing to see Davey, an iconic Australian brand, with a long history in this country and abroad, combining with an Australian listed business that also shares a strong heritage in the Water sector.”
The acquisition of Davey is expected to add approximately $120 million per annum to the Company’s sales revenue. In H1 FY23, the Company’s revenue stood at $70.4 million (with its sales revenue making up $68.4 million), up from $63.7 million in H1 FY22. If the numbers remain consistent, the Davey acquisition could essentially double Waterco’s sales revenue.
Plus, Davey’s significant presence in Australia should help Waterco rejig its performance here. In H1 FY23, its EBIT in the Australia and New Zealand division declined by 51% to about $2.1 million.
Evidently, both GUD and Waterco stand to gain significantly from this transaction, which is expected to complete on September 1, 2023.
Alinda is a Business Reporter for The Sentiment
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