Mainfreight has expanded its European operations with a more than $200 million acquisition of a private Netherlands-based transport company with 14 branches in six European countries.
Mainfreight's debt levels have subsequently almost doubled, from 17.5% to 48%, but the listed company said the cash flow from Wim Bosman Group would be "more than sufficient to service interest costs and debt reduction".
Shares in Mainfreight were up 4.2%, or 34c, to $8.46 after the announcement.
Mainfreight has recently refinanced its existing bank debt facilities, which are five-year multicurrency facilities allowing for borrowing of up to $NZ415 million.
"Mainfreight has elected to debt fund the [Wim Bosman Group] acquisition in preference to an equity raising due to significant balance sheet capacity and the lower cost of debt relative to the cost of equity," the company said in a statement yesterday.
Craigs Investment Partners broker Peter McIntyre saw the purchase as positive; as did investors buying up stock yesterday, pointing to several synergy gains with combining the international freight companies.
While debt levels will be up, the Wim acquisition would immediately make a positive benefit to Mainfreight's bottom-line.
Earnings per share are subsequently forecast to rise a total 36.5% over the financial years 2012 and 2013, he said.
Forsyth Barr broker Peter Young said the purchase, which is yet to be approved by shareholders, was good as it fitted into Mainfreight's global-growth plans.
"[However] If approved there is to be a significant increase in gearing ratio to 48%, which may worry some investors," Mr Young said.
Mainfreight paid 110 million ($NZ205 million) for Wim but there is a further earn-out payment of up to 10 million if Wim meets an earnings before interests, tax, depreciation and amortisation target of 20 million for its full-year to December 2011 result.
In its early-February report of nine months' trading to December, Mainfreight said its offshore sales accounted for 70% of total revenue.
Of an 18% increase in earnings before interest, tax, depreciation and amortisation to $66.9 million, almost 50% was earned from offshore operations.
The international component underpinned a strong result for Mainfreight with total group revenue breaking through the $1 billion barrier, up 20% on the corresponding period a year ago at $1.01 billion.
There was a 27% increase in after-tax profit at $34.6 million, which included $7.7 million in heldover bonuses from last year.
