Takeover target Coote Industrial has entered a binding agreement to sell its South Spur Rail Services subsidiary to logistics company P&O Trans Australia for $16 million cash.
The sale may trigger a defeating condition in Elph's proportional takeover offer for Coote, which said the condition may be waived.
Elph has previously been critical of Coote's delay in the sale of South Spur however Coote managing director Michael Coote today said the company had demonstrated its strategy to grow its technical based sales and services business.
"Given the sale of South Spur is consistent with Coote's more focused corporate strategy, has been flagged to the market for some time and was the subject of specific discussion in Elph's bidder statement, we call on Elph to support the transaction and waive the condition of its offer as it relates to the sale," he said.
Under the sale agreement, P&O will acquire 100 per cent of issued capital of South Spur for $16 million cash, which includes a pre-payment for maintenance work of $1 million which Coote will provide.
South Spur will also continue to lease its rollingstock fleet from Coote subsidiary Greentrains.
"We are pleased that South Spur, with the backing of a financially robust owner and operator in POTA, will continue to have an ongoing relationship with Greentrains," Mr Coote said.
"As previously announced, the board continues to pursue a re-capitalisation of Greentrains to de-consolidate that entity from Coote and settle on the second tranche of rollingstock which Greentrains has committed to acquire from Gemco Rail.
"We believe that the sale of South Spur to POTA, coupled with the opportunity to broaden the customer base through leasing of any returned Greentrains rollingstock, should materially enhance Greentrains' value and the prospects of successfully concluding a re-capitalisation on appropriate terms."
