Aggreko buys GE rentals for £111m

Published on Wednesday 27 September 2006 00:59

AGGREKO, the Scottish temporary power supplier, has expanded its generator fleet by almost a third with the "milestone" acquisition of General Electric's energy rentals arm for £111 million.

Glasgow-based Aggreko said the cash deal would provide a springboard into new markets such as Mexico and Chile, as well as adding scale in the United States, Europe, the Middle East, Asia and Australia.

The group is banking on an 18.5m rise in its operating profits within the next three to four years.

Aggreko, which hires out generators and air-conditioning units for major events such as the Olympic Games, is taking over the bulk of US-based GE Energy Rentals. The disposal will leave the GE division with only its large gas turbine activities.

Aggreko chief executive Rupert Soames said the acquisition would increase the size of the company's electricity generator fleet by 31 per cent, measured on a capacity basis, while the chiller fleet would be increased by 28 per cent.

He said: "This is a big move for us. It is a milestone in the implementation of our strategy of driving the growth of our core business through capital investment in new fleet, geographic expansion and acquisitions."

Soames said the group had been "quietly stalking" the GE business for the past two to three years.

Aggreko said it was looking to retain many of the 240 staff directly employed by GE Energy Rentals, but pointed to "very large synergies" and cost-savings from the removal of duplicate operations and overheads.

"We can run the combined business more efficiently than the two ran separately," Soames said. "Customers want to have the right equipment available when they need it, and that is easier to provide from a large fleet than a small fleet."

The additional scale will allow the Scottish firm to bid for bigger contracts.

With a global headcount of more than 2,000, Aggreko operates from more than 100 locations in 28 countries.

This month Aggreko unveiled a 78 per cent leap in first-half profits to 29.6m and said its North American business would outstrip its performance last year, despite benefiting last time from the clear-up following destructive US hurricanes.

The GE deal, which is subject to regulatory clearance, is being funded through a new 370m debt facility, replacing existing arrangements and at better rates than before.

Shares in Aggreko, which have outperformed the UK support service sector by about a fifth over the past year, ended the day 2.4 per cent higher at 332.25p, valuing the company at 894m.

The company said the GE deal would be earnings per share neutral in 2007.