Hills boss keen to exit capital-hungry steel business
As part of this, Hills on Tuesday sold its controlling 48 per cent stake in scaffolding and piping group Korvest, which raised $26 million.
Also on the block is its Orrcon tube and pipe unit and its steel fabrication unit Fielders.
"There is a good level of interest," Mr Pretty said of these two assets, which generate around $600 million in revenues annually.
Unlike other pipe makers, Orrcon was profitable, Mr Pretty said, with Fielders "coming back" in line with the broader construction industry.
The steel sector units are capital intensive and also tie up a large amount of capital in inventory. A sale would ease those pressures.
The Korvest shares were sold at $6.50 each, a modest discount to their market price, with the proceeds to reduce debt.
Mr Pretty said this would help give Hills significant flexibility either for capital management initiatives such as share buy-backs or dividends, or to fund acquisitions.
Any acquisition preferably would have intellectual property which could offer synergies to Hills' existing communications and security assets, or give it with entry to a new industry.
Shares in Korvest closed at $7.20 on Tuesday, down 91¢ but finishing at a handy premium to the Hills sale price. Hills closed up 5¢ at $1.095.
Frequently Asked Questions about this Article…
Hills boss Ted Pretty says the steel units are capital‑intensive and tie up large amounts of capital in inventory. Selling them would ease those pressures, allow the group to reduce debt and give Hills flexibility for capital management such as share buy‑backs, dividends or acquisitions.
Hills sold its controlling 48% stake in scaffolding and piping group Korvest, raising $26 million. The Korvest shares were sold at $6.50 each, a modest discount to market.
Hills has put its Orrcon tube and pipe unit and its Fielders steel fabrication unit on the block. Together those assets generate around $600 million in revenues annually and could account for a large portion of the group’s steel exposure.
Yes — a sale would reduce the capital tied up in inventory and the capital‑intensive nature of the steel businesses, helping Hills reduce debt and free up cash for other uses. Ted Pretty has indicated the proceeds would give the company significant flexibility.
According to Ted Pretty, Orrcon was profitable, while Fielders is ‘coming back’ in line with the broader construction industry, suggesting improving conditions for that business.
Ted Pretty signalled he may dispose of as much as 55% of group revenues by quitting the steel operations, so exiting steel could materially change Hills’ revenue mix.
Hills plans to use sale proceeds to reduce debt and to provide flexibility for capital management initiatives such as share buy‑backs or dividends. The company could also fund acquisitions, preferably those with intellectual property that offers synergies with Hills’ communications and security assets or that provide entry to a new industry.
Korvest shares closed at $7.20, which was down 91 cents but still a premium to the Hills sale price of $6.50. Hills shares closed up 5 cents at $1.095 on the day of the transaction.
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