Hills boss keen to exit capital-hungry steel business
HARD on the heels of the decision to write up to $110 million off asset values, Hills Holdings boss Ted Pretty has signalled he wants to dispose of as much as 55 per cent of group revenues by quitting its steel operations.
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.