Vancouver’s Finning International Inc. (TSX: FTT) will soon be the official Caterpillar dealer in Saskatchewan, following the announced acquisition of a Regina dealer for $230 million in cash.
Finning is the world’s largest Caterpillar dealer. Kramer is a family owned business that has been an official Cat dealer since 1944. The owners are retiring, after 70 years in business.
Finning generates 50% of its revenue from B.C., Alberta, Northwest Territories and the Yukon, and 35% from its South American operations. The Kramer acquisition will give Finning access to the Saskatchewan market, where agriculture, uranium and potash mining and the oil and gas sectors generate significant sales of heavy equipment.
“This will allow us to be the Cat dealer in Saskatchewan, so it extends our Western Canadian reach,” said Finning CEO Scott Thomson.
The acquisition will add 475 Kramer employees to Finning’s Canadian workforce and roughly $275 million in annual revenue.
The addition of 475 employees roughly equals the number of employees that Finning laid off earlier this year in response to a sudden drop in sales in the Alberta oil patch. The reduction of 500 employees announced in February represented 9% of Finning’s Canadian workforce.
According to Finning’s most recent quarterly financial statements, the company’s net income was down from $67.9 million in the first quarter of 2014 to $53.1 million in the first quarter of 2015.
However, with $211 million of cash on the books at the end of the first quarter, no debt is needed to finance the acquisition.
“The acquisition will be funded by cash,” Thomson said.
Finning’s shares were up 3.7% in mid-day trading to $25.40 per share.
By Nelson Bennett [email protected]