Fatal crash casts doubt on transport float
It has emerged that McAleese Transport's oil hauling business, a division called Cootes Transport - the owner of the tanker that crashed - contributes up to a third of the group's overall revenues.
Fund managers expressed doubts on Monday about whether this week's McAleese Transport book-build would get off the ground, with one describing as a "deal breaker" news that 36 more trucks were grounded over the weekend in Victoria.
But a spokesman for McAleese Transport confirmed the company was sticking to its plan to raise $155 million from investors this week, before pushing to list on the stock exchange in November.
"The company is continuing with its planned schedule," a spokesman said.
The fact the trucks' mechanical problems had emerged gave investors the chance to reassess the transport company before the float, he said.
But Geoff Wilson, from Wilson Asset Management, said the problems besetting the company's trucks did not change his view of the McAleese management team, nor of the potential benefits of investing in the company.
He said he would be participating in the offer this week.
"There's obviously some mechanical problems [with the trucks], and I think it's incredibly important that the company gets on top of them," Mr Wilson said.
"But Mark Rowsthorn [McAleese chairman] is a seasoned professional in the transport industry so he would know exactly what needs to be done and [then] do it."
Mr Wilson said McAleese had an investment program that aimed to bring down the average age of the company's fleet of trucks.
The book-build is being backed by Credit Suisse, JP Morgan and Macquarie, none of which could be reached for comment.
NSW authorities released new figures on Monday, saying eight trucks had been grounded in the state following the crash.
The NSW Roads and Maritime Services released an updated defects list saying 211 heavy vehicles from Cootes Transport had been inspected, 174 notices issued with about a third for major defects such as brake, steering and suspension faults.
A Roads and Maritime Services spokesman said state authorities did not know if anyone would be held responsible for the accident at this stage.
"Roads and Maritime Services and NSW Police are continuing investigations into Cootes Transport heavy vehicle defects on NSW roads," the spokesman said.
"When investigations are complete, prosecutions will be considered for breaching vehicle standards requirements."
Frequently Asked Questions about this Article…
A tanker explosion in Sydney's north killed two people and involved a vehicle owned by Cootes Transport, McAleese Transport’s oil hauling division. Despite the crash and subsequent safety concerns, McAleese confirmed it was proceeding with plans to raise $155 million from investors this week and aims to list on the stock exchange in November.
Cootes Transport, the division that owned the tanker involved in the crash, contributes up to a third of McAleese Transport’s overall revenues, making it a material part of the group’s business and a focal point for investors assessing the float.
Yes. The book-build for McAleese Transport is being backed by Credit Suisse, JP Morgan and Macquarie, although the article notes none of those banks could be reached for comment at the time.
NSW authorities inspected 211 heavy vehicles from Cootes Transport, issuing 174 notices. About a third of those notices were for major defects such as brake, steering and suspension faults. NSW Roads and Maritime Services said eight trucks had been grounded in the state and that Roads and Maritime Services and NSW Police were continuing investigations, with prosecutions to be considered when investigations are complete.
Fund managers expressed doubts about whether the McAleese book-build would proceed after further trucks were grounded (36 reported in Victoria over the weekend). One manager described the developments as a 'deal breaker.' However, some investors, like Geoff Wilson of Wilson Asset Management, said the mechanical problems did not change their view of the management team and that he would participate in the offer.
A McAleese spokesman said the company was continuing with its planned schedule and that the emergence of mechanical problems gave investors a chance to reassess the company before the float. Geoff Wilson noted McAleese had an investment program aimed at lowering the average age of its truck fleet and highlighted chairman Mark Rowsthorn’s industry experience in tackling such issues.
The article says NSW Roads and Maritime Services and NSW Police are continuing investigations into Cootes Transport heavy vehicle defects on NSW roads. It also states that when investigations are complete, prosecutions will be considered for breaching vehicle standards requirements, which could be a material regulatory risk for the company and its float.
Everyday investors should consider the operational and safety issues highlighted by the tanker crash and subsequent inspections (including dozens of grounded trucks and many defect notices), the significance of Cootes Transport to group revenues, the ongoing regulatory investigations, and management’s plans to address fleet age. These factors affect risk and upside and give investors an opportunity to reassess the company before the planned $155 million raise and November listing.
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