RPM Automotive Group Ltd (ASX:RPM) has entered into an agreement to acquire all the assets of Traralgon Tyre Service (TTS).
TTS is a market leader in the supply, fitting and servicing of passenger (PCR), commercial (TBR) and industrial (OTR) tyres in the Gippsland region of Victoria.
With 25 years’ experience in the tyre industry and a reputation for quality service and supply, TTS has built a diverse and unique business model servicing the trucking industry, forestry, agriculture and farming, retail passenger market as well as major mining operations in the region.
“Perfect strategic fit”
RPM executive director Lawrence Jaffe said: “I am delighted to announce that we have entered into a transaction with Traralgon Tyre Service, a perfect strategic fit for the RPM Group and a business that could be the blueprint for our future acquisitions with its involvement in mining, agriculture, forestry and trucking industries.”
TTS will fit very neatly into RPM’s Repairs and Roadside Division, joining the five existing businesses to gain operational synergies and the ability to offer more services to existing and new clientele.
The transaction will be subject to normal mandatory conditions and successful due diligence.
Operational synergies
TTS operates in a very similar space to Air Anywhere and Gully Mobile Tyres, RPM’s subsidiaries in its Repairs and Roadside Division.
The company believes that the companies will be able to leverage off each other’s resources, expertise and contacts to expose and take advantage of synergies and opportunities.
As a part of the deal, Tony Mann, the owner of TTS, will remain as the company’s director, in charge of the operation.
Mann said, “We provide solutions to applications, our customers charge us with problems that they face and it is our responsibility to solve those problems and provide long-term workable solutions.
“This is what we pride ourselves on and, therefore, we have been able to retain our customers’ loyalty for so many years.”
Jaffe said: “We look forward to welcoming Tony into our organisation.”
Transaction details
Due to confidentiality arrangements, the company is unable to make full disclosure but said TTS had reported FY20 revenue of $4.25 million with a 9% EBIDTA.
The agreed business valuation was around 3.8 times of EBITDA and the purchase price of $1.47 million is made up of 50% script and 50% cash.
This price is subject to adjustments and excludes any possible GST.
The business is expected to swell to $6.5 million in FY2022 with the recent securing of specific contracts in regional Victoria.
Last summer’s bushfires and the COVID-19 pandemic have impacted the business, but the resilience and diversity of TTS offerings have ensured that it not only survived but thrived while many of its competitors suffered.
Shares are up more than 7% to 22.5 cents.