GUD Divest Dexion

Industrial products supplier GUD Holdings has finally cleaned up the embarrassing $83 million mistake that was the 2010 takeover bid for storage company Dexion.

But it will still be left with another big loss for the current financial year that could see GUD another losing year in July at worst, or a smaller profit at best (after losing $43 million in 2015-16 after taking a big hit against Dexion of more than $75 million).

In its announcement, GUD said:

"Consistent with its stated strategy and after an extensive process, GUD Holdings Limited today announced that it has entered into an agreement to sell the Dexion warehouse racking products and systems business to Tech-Link Storage Engineering for net proceeds of around $7.5 million.

"Tech-Link is a Singapore-based business active in the procurement, manufacture and marketing of storage, distribution and materials handling products and systems. Tech-Link was incorporated in 1988 and has operations in South East and North East Asia.

“GUD expects the transaction to complete on 1 June 2017,” the statement concluded.

The bid, seven years ago this month, saw GUD sell around $55 million in new shares to fund the offer.

While it boasted at the time that it could comfortably fund the $83.8 million offer from existing cash and bank facilities, it decided to raise new equity to maintain balance sheet strength and fund future growth.

It conducted a $40 million institutional share placement, and looked to raise around $15 million from a non-underwritten share purchase plan for retail investors..

“For our shareholders, the enlarged GUD will be a more balanced and diversified business, with a strong presence in both commercial and consumer markets,” GUD managing director Ian Campbell said seven years ago.

Well, last Friday the company sold Dexion to Singapore interests for $7.5 million, around a year after it wrote down the value of the business by more than $75 million. It follows the sale 13 months ago of the last stake in its once solid consumer products division built around the Sunbeam appliances range of products. That is now in the hands of US interests. In July 2016, GUD revealed that it had taken a $75.7 million pre-tax write down against the value of Dexion.

That Dexion with a book of $44 million as at June 30 2016 (when the division lost $3.8 million). The Dexion business had a small loss in the six months to last December, but that was a $2 million earnings turnaround compared with a year earlier.

So now depending on the level of actual earnings and netting off against the $7.5 million purchase price, GUD is looking at booking a $30 million loss from finally ridding its balance sheet of its Dexion entanglement.

Dexion shares are higher than when it bought Dexion (they were around $8.65) and yesterday closed down 2.4% at $12.000.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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