Retail update: United Tools

Stealth Global buys United Tools Limited

As a distributor of industrial MRO (maintenance, repairs and operations) supplies and related products, Stealth is expanding its retail footprint in Australia with this acquisition

WA-based, ASX-listed Stealth Global Holdings announced it has acquired all the shares in United Tools Limited (UTL) for $24,000 cash plus a deferred market subsidy of $1.25 million over two years. Stealth subsidiary, C&L Tool Centre, is a licensee member of United Tools.

Additional details of the transaction include:

  • United Tools FY2021 revenue $8 million, EBITDA $0.3 million
  • Under Stealth's ownership, United Tools will pay to its members excluding C&L Tools, a marketing subsidy of $1.25 million over two years, 50% payable in March 2023 and the balance in March 2024
  • Assets to be transferred to Stealth on completion includes ~$1.22 million net cash
  • Expected to be accretive to adjusted earnings in the first year after closing
  • United Tools' network of 33 physical stores and two online marketplaces will be added to Stealth Group's 33 physical stores and two online marketplaces.

    The addition of United Tools to Stealth will boost its position as a major distributor in the Australian industrial MRO supplies marketplace. The company's store network will double from 33 to 66 across Australia, a combination of company-owned and independent retail outlets. Mike Arnold, Stealth Group managing director and CEO said:

    The rationale for this acquisition and merger with United Tools is compelling. It complements Stealth's existing business and delivers strong outcomes to our shareholders and stakeholders with our enhanced attractive business model.
    United Tools is highly synergistic, with a robust product offering and value-added service capabilities, an extensive MRO-specific distribution store network throughout Australia and an experienced salesforce that enhances the strong team Stealth has in place. Combined, it significantly enhances our scale, market position and further strengthens our buying power to accelerate profitable growth...
    Preferred suppliers will significantly benefit as we plan to consolidate arrangements held by United Tools and all Stealth subsidiaries into a new master buying and wholesale distribution business unit. This initiative will drive deeper commercial engagement, brand reach and create more value by leveraging group wide buying power potential identified to be more than $200 million.
    The MRO segment is large, fragmented and highly valued by Stealth in an estimated $40 billion marketplace as reported by the company at its AGM held 29 November 2021. This provides potential for significant shareholder value creation over the longer term. I'm looking forward to helping maximise each company's growth potential so they can be the best in their market.

    Completion of this acquisition is expected 1 March 2022 and is subject to United Tools' shareholder approval.

    Related: C&L Tool Centre is operating under different ownership.

    Brisbane's C&L Tool Centre acquired by Stealth Global in late 2020 - HNN Flash #31, February 2021

    About United Tools

    United Tools is headquartered in Melbourne (VIC) and operates under multiple banners, including the United Tools brand and independently owned brands. All stores are locally owned and operated and focused on the sale and service of a large range of big-name brand industrial and trade related products.

    About Stealth Group

    In mid-2021, Stealth-owned subsidiary Heatley Sales (Heatleys) purchased Skipper Transport Parts (STP) from Eagers Automotive firm AMCAP for $4.2 million.

    STP is a WA distributor of industrial maintenance, repair and operating, automotive, truck and trailer, mining, bus and agriculture products. The acquisition includes branch locations in Perth, Albany, Esperance, Karratha and Port Hedland, onsite store operations across WA and Queensland, along with around 1,250 customers and 300 suppliers. At the time, Mr Arnold told the ASX:

    ...The STP purchase and merger is transformational in terms of a significantly expanded product and high-touch solutions offering, distribution supply chain infrastructure, e-commerce platform and deeper customer and supplier relationships.
    STP's physical branch and onsite stores network will allow us to enter new geographic markets to strengthen our market position and provide an endless assortment product offering suitable for customers of all sizes...
    The depth of STP's wide-ranging Industrial MRO products in the customer markets of automotive, truck and trailer, bus, agriculture and mining, complemented with Stealth's existing business, will give the merged group significantly more scale and leverage from its distribution platform, branch store footprint, network reach, buying power and its broad in-stock product offering where Stealth can hold an advantaged market relevant position.
    Importantly, comprehensive value is created by offering our customers an endless assortment of brands, products and solutions that deliver better customer experiences with more touch points instore, onsite, online, click & collect and delivery options, supported by experienced sales, service, technical and distribution professionals.

    Stealth was founded in 2014 but only listed on the ASX in October 2018.

    In its most recent trading update, Stealth stated that given the most recent sales growth and the acquisition of United Tools, it expects its annual revenue from its Australian operations to exceed $100 million when a full year of United Tools operations is incorporated into Stealth's financial results. Stealth targets an underlying EBITDA margin target of ~6% before significant item costs relating to acquisitions and the full integration of United Tools and STP.

  • Sources: Stealth Group, Fully Loaded and Kalkine Media
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