GUD (ASX:GUD) is set to become a pure-play automotive products company after the $65 million sale of its pumps company, Davey Water Products, to Sydney-based Waterco.
Instead of future-proofing its water business, as the company seemed to be doing at one stage, GUD says the sale of the Davey business “crystallises GUD’s ambition to be a pure-play Automotive business.”
The company expects to net $56 million from the sale after costs and working capital settlements, which will be used to pay down debt.
GUD has owned Davey pumps since acquiring the Melbourne-based business in 1996.
GUD CEO, Graeme Whickman, said in Monday’s statement: “This transaction simplifies the GUD Group by becoming an automotive pure-play and strengthens the Group’s balance sheet by materially reducing net debt.”
“It also represents an important strategic step towards supporting GUD’s growth aspirations in 4WD Accessories and Trailering, Lighting and Power Management, Undercar, Powertrain, and Electric Vehicles.
“The Group remains focused on growing these key prospective automotive categories both organically and via financially and strategically compelling acquisitions.
“While the pipeline of acquisition opportunities is rich, as previously communicated, the Group remains focused on delivering APG’s business case before considering any transformative acquisitions.”
Sydney-based Waterco said it will fund the cost with bank loans.
“The combination of Davey and Waterco builds a diversified group with a focus on complimentary product strengths – Waterco is a leader in pool systems, filtration, and water treatment systems,” Waterco said in its statement on Monday.
“Davey is the leading manufacturer of residential and commercial pumps in Australia.
“Growth opportunities include leveraging geographical strengths across growing markets in Europe, USA, Middle East/Africa, and Asia.
“The merged businesses will have a share of global water treatment markets across pool, water transfer, and water treatment categories. The merger creates the opportunity for efficiency and capability enhancements.”