Codan announced to the Australian Securities Exchange this morning it had agreed to sell 100 per cent of its wholly-owned subsidiary Minetec Pty Ltd to Caterpillar Holdings Australia for about $18 million ($US14 million).
It comes just weeks after Codan finalised the acquisition of two US companies in a bid to boost its Communications division.
Minetec provides unique, high-precision tracking, productivity and safety solutions for underground hard rock mines.
It previously entered into a global licensing and technology development agreement with Caterpillar, the world’s leading manufacturer of construction and mining equipment, in 2018 to improve the underground capabilities of the Caterpillar MineStar suite.
Minetec delivered $5.8 million in revenue for Codan in the six months to December 2020 but was overshadowed by the company’s booming communications ($33.6 million) and metal detection ($155.1 million) that contributed 97 per cent of the company’s total revenue for the half.
The sale to Caterpillar is expected to complete in July and includes a volume-based earn out over the next five years.
“Under Codan’s ownership, the Minetec business has not scaled to a level that supports the ongoing investment required for a technology-based business,” the company said in its ASX statement today.
“As a result, the board undertook a strategic review of the business.
“While the technology developed by Minetec is world-class, the board concluded that Codan was not the best owner and therefore the decision was made to sell the business to Caterpillar.”
Codan last month announced it had completed a $114 million deal to buy US-based Domo Tactical Communications from a private equity firm. It followed a May 7 announcement it had finalised its acquisition of Zetron from JVC KENWOOD corporation for $59 million.
Codan Managing Director Donald McGurk said the transfer of the Minetec business to Caterpillar was a logical progression following the partnership agreement put in place in 2018.
“We believe that Caterpillar is the more appropriate owner, as they continue to be the market-leading supplier to the mining industry, with an extensive global dealer network covering 172 dealers across 190 countries,” he said.
“Caterpillar saw the benefits of an integrated business under their ownership.”
Based on the expected sale price of $18 million, Codan expects a one-off gain before tax in the order of $3 million. It said the funds received would be used to pay down its loan facility, following the recently announced acquisitions.
“The sale of Minetec will allow Codan to focus on continuing to grow its core businesses and, in particular, maximise the performance of the recently announced acquisitions of Domo
Tactical Communications and Zetron,” the company statement said.
It has been a huge 12 months for Codan, which posted a record $64 million profit for the 2019-20 financial year on the back of record sales in its metal detection and communications divisions totalling $348 million.
The company also announced a record profit for the first half of the 2020-21 financial year of $41.3 million in February.
Codan’s share price has almost tripled from $6.76 on June 1 last year to $19.00 at 11am this morning, giving it a market value of more than $3.34 billion.
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