Aggreko powers to qualification for Brazil’s 2014 World Cup finals

AGGREKO raised its presence in the fast-growing South American market on Monday by acquiring a rival operator in a deal worth up to £161 million.

The Glasgow-headquartered company has agreed to buy temporary power provider Poit Energia which is based in Brazil but also operates across Argentina, Chile and Peru.

The combined business will have a total of 36 service centres across the region – double Aggreko’s currently tally – and revenues of £193m.

Sao Paulo-based Poit Energia rents equipment including generators, lighting towers, transformers and switchgear and employs more than 450 people across 18 service depots.

Its customers are mainly in the sugar ethanol, wind farm and construction industries in Brazil.

Aggreko said the acquisition was in line with its strategy of expanding its local business arm in fast-growing economies.

It said the deal will “materially strengthen” its business in South America by both widening geographic coverage and giving it access to industry sectors where it currently has limited exposure.

Chief executive Rupert Soames said South America has been one of the fastest-growing markets for Aggreko over the past three years.

“This is the fifth acquisition we have done in the local business in the last four years and we are confident that Poit Energia, like the others, will add value to Aggreko,” he said.

The £140m price agreed will be paid in cash with a further £21m due if performance targets for the year to 31 December are met. The deal will be funded from Aggreko’s existing debt facilities.

Analysts reacted positively to the announcement.

Caroline de La Soujeole of Seymour Pierce described it as “a particularly well-timed acquisition” given the upcoming football World Cup and Olympics in a market expected to see strong GDP growth in the five years ahead. The broker has a buy rating on the stock with a £25 target price.

Although Peel Hunt noted Aggreko’s “strong management, excellent global positions and inherent cash generation capabilities” and said its shares warranted a premium, it believes that, at current levels – close to record highs – the shares justify a “hold” rating.

For the calendar year 2011, Poit Energia had revenues of £46m with profits of £15.3m. Over the past three years the business has delivered a compound annual growth rate in revenues of 45 per cent and trading margins in excess of 20 per cent.

Wilson Poit, founder and executive chairman of Poit Energia, said he had “long admired” Aggreko and that the companies had similar values.

“Poit Energia has now come to the point at which its further development is best done within a larger group which will allow our customers and staff to benefit from the resources and opportunities Aggreko can bring”.

Earlier this month Aggreko said it was confident of strong growth in the first half of this year, but added that it was “more cautious” about the second half, given tougher comparatives. Shares in Aggreko closed up 28p at 2,270p.