Xtreme Manufacturing, Las Vegas, the telehandler manufacturing company owned by Don Ahern, owner of Ahern Rentals, Las Vegas, has reached an agreement with the Tanfield Group, Washington, Tyne & Wear, U.K., to take a 51 percent majority ownership of Snorkel, Elwood, Kan.
In the deal announced on Sept. 20, Tanfield Group said it will retain a 49 percent share of the business while Snorkel will be transferred to a new company, Snorkel International Holdings. Tanfield also retains a preferred interest position of $50 million, which may be subject to adjustment in exchange for Xtreme’s controlling interest in Snorkel International Holdings.
Subject to Snorkel making profit targets within five years, Tanfield will be paid the $50 million and its share in the company would then be reduced to 30 percent. It would have the option to sell its remaining share in the company at 5.5 times EBITDA earnings.
Tanfield published a circular for its shareholders on Sept. 20 to explain why the company’s independent directors consider the transaction to be in the best interests of the company and its shareholders. Shareholders are expected to vote on the deal in a general meeting on Oct. 7.
After consulting its major shareholders in February, Tanfield’s board agreed to examine the potential disposal of the Snorkel Division to reduce Tanfield’s exposure to Snorkel’s ongoing working capital requirements and to help protect its investment in Smith Electric Vehicles.
Tanfield’s board said it believes the transaction provides a solution to the working capital needs of the Snorkel Division and provides an opportunity for its shareholders to benefit from the potential upside value of Snorkel from its links with Ahern’s businesses.
Xtreme Manufacturing has proposed a staged acquisition of Snorkel via Snorkel International Holdings, a limited liability company in Nevada. Tanfield will retain its holding until the consideration terms are met.
According to Tanfield, Xtreme has committed to making working capital facilities available to Snorkel of between $35 and $50 million to deliver its growth forecast and certain other strategic benefits and synergies.
Tanfield said in the year ended Dec. 31, 2012, the losses of the Snorkel Division were about $23.4 million and it had net assets of $37.6 million.