NZ Hire Business Set For Consolidation?

Array
(
    [0] => Array
        (
        )

    [1] => Array
        (
        )

)

Rumours that New Zealand building equipment hire firm Hirepool may soon be up for sale have surely placed Hirequip New Zeeland (HQP.NZ) in a quandary.

On Credit Suisse’s calculations, Hirepool could be available for between NZ$55m and NZ$100m, with the analysts estimating Hirequip "could pay up to NZ$87m for the equity in Hirepool without any negative impact on earnings," and these numbers assume no synergies from any potential deal.

However, it may not be all plain sailing for Hirequip, as the analysts point out that Coates Hire (COA) is another potential buyer.

This deal, if it were to materialise, could potentially create two problems for Hirequip, the analyst say, firstly with Coates’ backing Hirepool would be seen as a "significantly more difficult competitor," and if the deal was done, given potential Commerce Commission concerns, the analysts are of the view that the "potential for a Coates acquisition of HQP is reduced."

However, the analysts have cut their recommendation on the stock to Neutral, given recent relative share price movements.

ABN Amro still rates the stock a Buy as it expects the strong management team to take advantage of the company’s dominant market position in the New Zealand hire business. (see previous story)

Click to view our Glossary of Financial Terms