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Futuris sold to US private capital fund

New owner: Elders has agreed to sell its Futuris automotive arm to US-based Clearlake Capital for $69 million.

Australia’s largest automotive parts supplier sold to US equity group

1 Aug 2013

A US private equity group has purchased Australia’s largest homegrown automotive parts supplier, Futuris Automotive, for $69 million.

Parent company Elders Ltd put its automotive subsidiary on the market about 12 months ago. The buyers is Clearlake Capital Group, a private equity fund with around $1.4 billion in assets under management.

Futuris is Australia’s biggest supplier of car seats, car interior trim (including door cards and carpets), steering columns and pedal systems.

Elders has taken a heavy loss on the Futuris sale. When directors released the interim results in March, they wrote down the value of the Futuris property, plant and equipment by $47.2 million and the value of intangibles (principally goodwill) by $119 million.

Elders, best known for its more than 175-year old rural services operations, is selling both its automotive and its forestry operations in a bid to get back to being a single-purpose rural service company.

“The sale of Futuris is a good outcome for Elders,” said managing director Malcolm Jackman this week. “Both in terms of our priority to focus capital on a “pure play” rural services business and the ability to further reduce our debt.”“It is also a very positive result for Futuris, its employees, customers and the Australian automotive industry as it represents a vote of confidence in both Futuris and the Australian industry,” he said.

“Futuris is a strong business with globally recognised innovation, design and manufacturing capabilities. Under Clearlake’s ownership, Futuris will have access to fresh capital to pursue growth opportunities around the world.”

The sale to Clearlake is seen in many quarters as a good outcome for Futuris.

If it had been purchased by another parts supplier, such as John Controls or Lear Corporation, it may have been restricted as to which markets it could enter, or which products it could make.

It is believed this year’s decision by Ford to cease vehicle manufacture in Australia in 2016 was a major hurdle for the Futuris sale, as Ford Australia was one of the biggest Futuris customers.

When Ford made its announcement, Mr Jackman said the business with Ford Australia represented around 25 per cent of Futuris’ annual sales and employed around 220 of Futuris’ employees.

Clearlake was one of three suitors who lodged binding offers for the company.

It has investments in many sectors, including automotive.

“Given the rapidly expanding international footprint of Futuris Auto and its growing global reputation as a highly regarded advanced manufacturer of automotive interior systems, it is an appropriate time for us to look at options for the business,” Mr Jackman told Elders shareholders.

“With manufacturing operations in Australia, China, Thailand, USA and South Africa, the interests of customers, shareholders and staff will be best served by an owner focused on the global auto sector.”

In the six months to March 31, Futuris contributed earnings of $5 million (previously $5.4 million) on revenues that increased 3 per cent.

Mr Jackman said the Futuris result reflected increased sales overseas, which were offset by lower-vehicle build volumes in Australia.

“This is considered a strong result in light of the prevailing industry conditions.”

GoAuto is awaiting further comment from Futuris managing director Mark de Wit.

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