Finning International Inc.

Finning International Inc.

May 05, 2010 09:27 ET

Finning Sells Hewden, its UK Equipment Rental Business

VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 5, 2010) - Finning International Inc. ("Finning") (TSX:FTT) announced today that it has sold Hewden, its UK equipment rental business, for gross proceeds of GBP 110.2 million or approximately C$171 million to an affiliate of Sun European Partners, LLP ("Sun European Partners"), the European adviser to Sun Capital Partners, Inc. ("Sun Capital"). The sale was completed today and the consideration comprises cash of GBP 90.2 million, an interest bearing 5-year loan note receivable of GBP 20 million and a 5% equity warrant subject to certain conditions being met. Finning will use the proceeds primarily to reduce debt.

"After a comprehensive review, we have determined that for strategic and financial reasons, it is in our shareholders' best interest to divest Hewden," said Mike Waites, president and chief executive officer of Finning International Inc. "While we believe that Hewden's broad product offering combined with our recent restructuring and national accounts focus will serve it well in the future, owning a large, short-term rental business operating separately from our UK dealership does not align with our strategic objectives. Finning remains fully committed to the UK Caterpillar dealership and its employees who are strongly positioned to serve the construction, mining and power systems markets."

The impact of the transaction will be accretive to shareholder return on equity, but will result in a second quarter accounting loss of approximately $247 million or $1.44 per share. The $247 million loss includes the realization of $101 million of foreign exchange losses relating to the investment in Hewden which was previously recorded in Accumulated Other Comprehensive Income, and a $68 million charge relating to the recognition of the unfunded pension liability which the buyer has assumed. After taking this into account, the balance of $78 million or $0.45 per share is the loss on Finning's net carrying value of Hewden, net of tax. Hewden will be reported as a discontinued operation in the second quarter of 2010.

"Going forward, Finning's UK dealership will continue to work closely with our plant hire customers to place Caterpillar equipment into the UK equipment rental market," added Andy Fraser, managing director of Finning UK Group. "Our market approach is to provide total solutions with extraordinary service and Caterpillar world class products. We are confident we can demonstrate the value of Finning to Hewden's new owners and maintain a productive commercial relationship with Hewden."

"This is a continuation of our journey towards a new Finning and the final step in rationalizing our UK operations. Combined sale proceeds from this transaction, Hewden Tools, and the dealership's Materials Handling divisions total almost $600 million," noted Mr. Waites. "We have a great business model going forward and are completely focused on driving the operating performance and value potential of Finning."

Hewden covers 63 locations in the U.K. and has 1,300 employees. The existing Hewden commercial centre in Manchester is proposed to be the new head office for Hewden. Finning has agreed to provide transitional services to Hewden.

Finning UK will continue to operate 20 branches in the U.K. with 1,470 employees serving Caterpillar dealership customers throughout the UK based from its head office in Cannock, Staffordshire.

Investor Conference Call

Finning will hold an investor conference call at 11:00 am Eastern Time today, May 5, 2010 to discuss this transaction in further detail.

To access the conference call please dial one of the following numbers:

1-866-223-7781 (within Canada and the US)

416-695-9748 (for participants dialing from the Toronto area and overseas)

The call will be webcast live at and subsequently archived on the Finning website. A playback recording will be available at 1-800-408-3053 from 1:00 pm Eastern Time on May 5, 2010 until the end of business day on May 12, 2010. The passcode to access the playback recording is 3061423 followed by the number sign.

Finning International Inc. is the world's largest Caterpillar equipment dealer delivering unrivalled service to customers since 1933. Finning sells, rents and services equipment and engines to help customers maximize productivity. Headquartered in Vancouver, B.C., the company operates in Western Canada, Chile, Argentina, Bolivia, Uruguay, and the United Kingdom.

Sun European Partners, LLP, is the European adviser to Sun Capital Partners, Inc., a leading U.S.–based investment firm focused on investments in market–leading companies that can benefit from its in–house operating professionals and experience. Sun Capital affiliates have invested in and managed more than 215 companies worldwide since Sun Capital's inception in 1995, with combined sales in excess of Pounds Sterling 19 billion (US $37 billion). For more information, please visit

Forward-Looking Disclaimer

This report contains statements about the Company's business outlook, objectives, plans, strategic priorities and other statements that are not historical facts. A statement we make is forward-looking when it uses what we know and expect today to make a statement about the future. Forward-looking statements may include words such as aim, anticipate, assumption, believe, could, expect, goal, guidance, intend, may, objective, outlook, plan, project, seek, should, strategy, strive, target, and will. Forward-looking statements in this report include, but are not limited to, statements with respect to: expectations with respect to the economy and associated impact on the Company's financial results; the estimated annualized cost savings and anticipated restructuring charges related to actions taken by the Company in response to the economic downturn; expected revenue levels and EBIT growth; anticipated effective tax rate; anticipated generation of free cash flow (including projected net capital and rental expenditures), and its expected use; anticipated defined benefit plan contributions; and expected target range of Debt Ratio. All such forward-looking statements are made pursuant to the 'safe harbour' provisions of applicable Canadian securities laws.

Unless otherwise indicated by us, forward-looking statements in this report describe our expectations at May 5, 2010. Except as may be required by Canadian securities laws, we do not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

Forward-looking statements, by their very nature, are subject to numerous risks and uncertainties and are based on several assumptions which give rise to the possibility that actual results could differ materially from our expectations expressed in or implied by such forward-looking statements and that our business outlook, objectives, plans, strategic priorities and other statements that are not historical facts may not be achieved. As a result, we cannot guarantee that any forward-looking statement will materialize. Factors that could cause actual results or events to differ materially from those expressed in or implied by our forward-looking statements include: general economic and credit market conditions; foreign exchange rates; commodity prices; the level of customer confidence and spending, and the demand for, and prices of, our products and services; our dependence on the continued market acceptance of Caterpillar's products and Caterpillar's timely supply of parts and equipment; our ability to continue to implement our cost reduction initiatives while continuing to maintain customer service; the intensity of competitive activity; our ability to raise the capital we need to implement our business plan; regulatory initiatives or proceedings, litigation and changes in laws or regulations; stock market volatility; changes in political and economic environments for operations outside Canada. Forward-looking statements are provided in this report for the purpose of giving information about management's current expectations and plans and allowing investors and others to get a better understanding of our operating environment. However, readers are cautioned that it may not be appropriate to use such forward-looking statements for any other purpose.

Forward-looking statements made in this report are based on a number of assumptions that we believed were reasonable on the day we made the forward-looking statements. Refer in particular to the Market Outlook section of the MD&A. Some of the assumptions, risks, and other factors which could cause results to differ materially from those expressed in the forward-looking statements contained in this report are discussed in the Company's current Annual Information Form (AIF) in Section 4.

We caution readers that the risks described in the AIF are not the only ones that could impact us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also have a material adverse effect on our business, financial condition, or results of operations.

Except as otherwise indicated by us, forward-looking statements do not reflect the potential impact of any non-recurring or other unusual items or of any dispositions, mergers, acquisitions, other business combinations or other transactions that may be announced or that may occur after the date hereof. The financial impact of these transactions and non-recurring and other unusual items can be complex and depends on the facts particular to each of them. We therefore cannot describe the expected impact in a meaningful way or in the same way we present known risks affecting our business.

Contact Information