Stealth Global United Tools acquisition

by | Jan 18, 2022

Stealth GlobalStealth Global Holdings Ltd has doubled the size of its national retail store network after recently acquiring United Tools (UTL).

As a leading distribution group of Industrial Maintenance Repair Operations (MRO) supplies and other related products and solutions, Stealth Group Holdings (SGI) has agreed to buy United Tools (UTL) for $24,000 cash plus a deferred market subsidy of $1.25 million over two years.

United Tools is a well-known buying and distribution co-operative of independent retailers, and the strategic addition of United Tools to Stealth is expected to significantly boost Stealth’s position as a premier distributor in the Australian industrial MRO supplies marketplace.

Stealth’s physical store network will increase from 33 to 66 across Australia, with six online marketplaces, making it one of the largest distribution networks of company-owned and independent retail combinations in Australia.

Stealth Group Managing Director and Chief Executive Officer, Mike Arnold said the rationale behind the acquisition and merger with UTL is compelling.

“It complements Stealth’s existing business and delivers strong outcomes to our shareholders and stakeholders with our enhanced attractive business model,” Mr Arnold said.

“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.”

“Stealth continues to develop as a business and further enhance its value-added proposition to customers. This includes better experiences through wider ranges, best prices, national distribution footprint, robust eCommerce channels, deeper supplier relationships and unmatched service.”
“Preferred suppliers will significantly benefit as we plan to consolidate arrangements held by UTL 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,” Mr Arnold said.

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 in November last year, and the acquisition will provide the potential for significant shareholder value creation over the longer term, according to Mr Arnold.

“I am looking forward to helping maximise each company’s growth potential so they can be the best in their market,” he said.

The transaction is expected to close on March, 1 2022 and is subject to UTL shareholder approval.

Stealth recently provided a preliminary trading update of revenue achieved ahead of releasing its final reviewed results for 1H FY2022 in late February 2022.

According to the update, provisional sales figures indicate Stealth achieved record growth in the half-year with 1H22 sales of ~$46.5 million, up 53 per cent on 1H21 and 18.5 per cent on 2H21.
Given the most recent sales growth and the acquisition of United Tools, Stealth expects annual revenue from its Australian operations to reach more than $100 million when a full year of United Tools operations is incorporated into Stealth’s financial results, and before the full extent of revenue growth synergies are realised.

Stealth is targeting an underlying EBITDA margin target of ~6 per cent, before significant item costs relating to acquisitions and the full integration of United Tools and Skippers Transport Parts. The company remains committed to achieving its target of > eight per cent EBITDA in FY2025.

An address and a presentation on the acquisition will be given by Mr Arnold at the group’s strategy and outlook meeting on Tuesday February 8.