11.11.2010

Essex acquires Coast Crane

Essex Crane has announced that it is the successful bidder to acquire, the assets of Coast Crane from chapter 11 bankruptcy.

Essex will pay around $80 million for Coast's assets, approximately $48 million of which will be financed by a new credit facility for the acquired business. Essex will also assume ‘certain’ Coast Crane liabilities. The acquisition price reflects a significant discount to the replacement value of Coast's assets.

The transaction has been approved by Essex's board of directors and is expected to close by the end of the year.

Once the transaction is completed, Essex will operate the acquired business through a new, wholly-owned subsidiary to be named Coast Crane Company, independent of Essex Crane Rental Corp. Coast's management team will continue to be led by chief executive Dan Goodale.

In the 12 months to the end of September, Coast generated revenues of $85 million, and so will more than double Essex’ revenues which are currently well down on its 2008 peak to between 40 and $50 million.

Essex chief executive Ron Schad said: "We believe that the acquisition of Coast will deliver a variety of strategic and economic benefits to Essex. We share the same bare rental business model characterised by medium- to long-duration leases. The asset mix of both companies is primarily comprised of those with long economic lives, which supports the Return on Capital business model under which our companies operate. Coast has earned a reputation for quality and dependability over its 40-year history, and we look forward to partnering with Dan and his team to grow and enhance our operations."

"Strategically, Coast will broaden our product offering to include rough terrain cranes, a wide range of self-erecting and stationary tower cranes, elevators and hoists, boom truck cranes and other lifting equipment used in heavy construction. We have no asset overlap, but instead, Coast's assets are complementary to our fleet of crawler cranes.”

“The introduction of a broader product and service portfolio will allow us to leverage the customer and project overlap that the two companies share, and drive higher asset utilisation. The acquisition also expands Essex's geographic reach into Western North America, Alaska, Hawaii, Guam and the South Pacific where Coast has well-established customer relationships and a strong brand name."

Goodale added, "Throughout the reorganisation process we have conducted business as usual, remaining focused on our customers, providing them with the industry's best products and services, while working diligently to support our employees. With Chapter 11 behind us, we intend to capitalise on the improving market conditions and grow our market position while remaining focused on our customers' needs, and generating sustainable value over the long-term.”

“Additionally, I believe the prospect of drawing upon the highly qualified people and best practices found at both Coast and Essex will provide opportunities for growth for all of our employees while increasing our ability to better serve our customers."

At the end of October Essex arranged a private offering of 3,300,000 shares at a price of $4.30 a share, generating $14,190,000. The closing of the offering and issuance of the new shares is contingent on the completion of the Coast acquisition. The proceeds will be used along with cash on hand, to fund the cash portion of the purchase price for Coast's assets.