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HNA buys AHG refrigerated logistics business for $400m

Steve Rogerson
December 5, 2017



Australia’s Automotive Holdings Group (AHG) is selling its refrigerated logistics business to China’s HNA Group for an enterprise value of A$400m. The group comprises the operations of Rand, Harris, Scott’s and JAT.
 
HNA is buying the business through its wholly owned Australian subsidiary CC Logistics.
 
The consideration will comprise approximately A$280m in cash and the assumption by HNA of approximately A$120m in finance lease liabilities associated with refrigerated logistics.
 
"AHG has previously announced it would explore all opportunities to maximise shareholder value from the refrigerated logistics business,” said David Griffiths, chairman of AHG. “Although the restructuring initiatives are delivering a significantly improved financial performance, the sale provides AHG with the opportunity to realise a certain value for shareholders that reflects this continuing improvement. The sale also provides AHG with both the resources for further growth in our automotive operations and scope for capital management."
 
Stephen Cleary, the current chief executive officer of AHG Logistics, will remain with the refrigerated logistics business as CEO and will be supported by the existing management team and employees of the business. Completion of the transaction is expected in the first half of 2018 and remains subject to the satisfaction of regulatory approvals and to other customary conditions.
 
"HNA has indicated a commitment to growing and continuing to invest in the refrigerated logistics sector, both internationally and in Australia,” said John McConnell, CEO and managing director of AHG. “As an experienced participant in the logistics sector, HNA will continue to deliver quality services to customers and we strongly believe that the business will have a very positive future under its new owners.”
 
AHG’s refrigerated logistics business has established a national footprint through the development of cold storage facilities, fleet investment and a number of strategic acquisitions. Early this year, AHG started a restructuring programme aimed at improving the division's operating efficiency through investment in information technology and integration of the three operating businesses to realise the benefits of scale.
 
While AHG did not initiate a sale process for the refrigerated logistics business, the sale allows AHG to realise a value that reflects the expected increase in profitability from these initiatives in an accelerated time frame. The sale will also provide AHG with significantly greater financial capacity and management resource to continue to grow its automotive retail division.
 
The sale is not expected to have any material impact on AHG's automotive retail division or non-refrigerated logistics operations.
 
For the year to 30 June 2017, the refrigerated logistics business generated operating EBITDA of approximately $35m, with an expected improvement in financial performance in 2018 driven by growth in revenue and the continued positive impact of the previously announced restructuring initiatives.
 
AHG will retain all profits and cash flow generated by the business prior to completion of the sale.
 
AHG will provide a range of transitional services including IT and head office support functions to the refrigerated logistics business for up to a year following completion on arm's length commercial terms. AHG has also agreed that it will not operate a refrigerated logistics business for five years from completion.
 
AHG is a diversified automotive retailing and logistics group with operations in every Australian mainland state and in New Zealand. The company is Australia's largest automotive retailer, with operations in Western Australia, New South Wales, Queensland and Victoria.
 
The logistics businesses operate throughout Australia via subsidiaries Rand Transport, Harris Refrigerated Transport, Scott’s Refrigerated Freightways and JAT Refrigerated Road Services (transport and cold storage), AMCAP (motor parts and industrial supplies distribution), VSE (vehicle storage and engineering), Genuine Truck Bodies (body building services to the truck industry), Higer Bus (bus and truck importation and distribution), and KTM Sportmotorcycles and HQVA (KTM and Husqvarna motorcycle importation and distribution in Australia and New Zealand).
 
HNA is a global Fortune 500 company focused on tourism, logistics and financial services. Since its founding in 1993, it has evolved from a regional airline based on Hainan Island in southern China into a global company with approximately $145bn of assets, over $90bn in annual revenues, and an international workforce of 410,000 employees, primarily across America, Europe and Asia.