13.06.2007

HSS sale confirmed

As we predicted earlier this week private equity company 3i has sold its interests in UK rental company HSS to a group of investors lead by Archie Norman, the ex MP and ex Asda CEO.
See 3i to exit HSS

3i has netted £310 million for its shares which have been purchased by an ‘affiliation’ of Och-Ziff Capital Management Group, usually referred to as a hedge fund, but which labels itself as a “global institutional asset management firm” and Aurigo, the investment fund headed by Archie Norman.
Please register to see all images

Archie Norman, ready for anything in an HSS aerial lift

The deal is backed by Perry Capital, HBOS and RIT, as well as the HSS management team.

The new investors intend to back HSS’ existing growth strategies and to drive through the transformation of its business.

Chris Davies, chief executive officer of HSS said: “The strength of HSS is the knowledgeable, skilled people who work here. The combination of great people, great customer service and the partnership with Archie Norman, Aurigo and Och Ziff is truly compelling.”

HSS is shifting its focus from being a pure ‘hirer’ of tools to being “a logistical and technical partner to trade customers” who currently make up 90 percent of the revenues.

In order to achieve this the company is investing in its depot network to provide “enhanced delivery logistics”, improved availability of stock and, investing in its web presence through which customers can order and pay for equipment without visiting a branch.

Norman commented: “We look forward to working with HSS’ very strong leadership team to support the business on the next phase of its transformation. We see great potential in HSS and the people who work for it.”

Vertikal Comment

This is a great deal for HSS turning a £145 million investment into £310 million in less than three years. It could also be a good one for HSS employees?

The upside is that any uncertainty of ownership should have been abated and with Archie Norman appearing to be ready to get personally involved in the business this could bring some strong experience into the business as well as helping lock in an owner.

The downside is that HSS will now be saddled with even more debt which it almost certainly will have to service. Private Equity businesses have recently had a very mixed track record with investments in rental companies on both sides of the Atlantic.

The key will boil down to the intentions of these two funds, are they looking for a quick buck or do they see this as a long term investment?
Have they researched the market thoroughly? Are their expectations of short term returns realistic?

The involvement of Archie Norman on a personal front and possibly becoming non executive chairman is a good sign. If he can help bring a little of the ‘magic’ that he imparted during his early days at Asda to HSS who knows where it could go?

HSS is up against a formidable opponent in Speedy which, if half the rumours are true, is set to acquire Hewden’s tool hire operations taking further out in front. But then again perhaps in comparison to an Asda/Tesco fight the rental market is a cakewalk?