Howard Smith Ltd of Australia announced on August 10 that it had signed heads of agreement for the sale of its A Goninan & Co Ltd rolling stock business to engineering company United Group Ltd. Expected to generate proceeds of A$130m for Howard Smith, the sale is due to be completed this month, subject to the purchaser raising A$45m in equity. Of this, A$20m is being subscribed by GE Equity to give it a 14% share in United Group, which has agreed a three-year deal to allow Goninan to continue as GE’s Australian licensee for locomotive technology.
Dr Ken Moss, Managing Director of Howard Smith Ltd, said that the sale of Goninan was part of ’a major restructuring of our portfolio’. The proceeds would be used to reduce debt and provide better support for Howard Smith’s distribution and towage activities, he added. Recent contracts obtained by Goninan include maintenance of 107 locomotives for Freight Victoria over 10 years for A$120m, and supply of 109 wagon bodies to BHP Iron Ore at Port Headland for A$6·5m. BHP has recently taken delivery of eight GE AC6000 locomotives in a deal worth A$36m to Goninan including long-term support.