SeaLink inks new $113m-plus deal to buy WA’s Go West Tours

SeaLink is continuing to bulk up with a $113m-plus WA acquisition that provides inroads into the resources sector.

New electric buses at the SeaLink-operated Leichhardt depot in NSW. Picture: Flavio Brancaleone

ASX-listed South Australian transport giant SeaLink is buying the Go West Tours business in Western Australia, it told investors after market close overnight.

The terms of the deal include an enterprise value of $84.7m for Go West Tours and an earn-out component of up to $25m.

SeaLink chief executive Clint Feuerherdt.

Strategic property assets worth $3.8m are included in the deal, which makes a specialist bus operator servicing the WA resources sector part of SeaLink, already among the country’s largest bus services operators.

Go West provides transportation services to top-tier clients such as BHP, Rio Tinto, Fortescue and Chevron through its strong presence in key WA regions.

Established more than 35 years ago, Go West Tours, which has about 181 staff, also provides public and school bus services in regional WA under contracts with the Public Transport Authority.

The all-cash deal, expected to be completed in early July, is being funded from existing cash reserves and undrawn senior debt facilities.

SeaLink/Transit System buses in operation in NSW. Picture: John Appleyard

Valued at more than $2bn on the share market, SeaLink’s new purchase gives it a “unique opportunity” to expand into a new market that is highly complementary to existing Australian bus transport capabilities, SeaLink chief executive Clint Feuerherdt said.

“Go West has valuable contract counterparties and delivers an essential service for these clients,” he said.

“The operations of Go West were unaffected by the COVID-19 pandemic and continued at near 100 per cent levels throughout, keeping their communities and worksites connected.”

“Our intention is to retain the well-recognised and established Go West brand and continue to work with, and support, Go West’s existing client base.

“We are very excited about the growth opportunities this acquisition provides SeaLink and look forward to welcoming all of Go West’s employees to the group.” 

JP Morgan analyst Wei-Weng Chen updated performance expectations in response to the Go West deal as well as positive commentary on the recovery of the marine and tourism businesses.

The trading update said domestic tourism appears to be recovering well with the cessation of JobKeeper having little impact on performance ahead of a few upcoming transport tender decisions.

“The stock’s appeal to us is reinforced by the fact that the vast majority of group revenues are generated from low risk, long-term, government-backed, CPI-indexed service contracts with no fare-box risk – important given the current backdrop of a global pandemic,” Mr Chen said in a note to investors.

“Transit System’s strong track record of contract wins and renewals position the company well to be able to secure additional, individually meaningful bus contracts.

“We also modestly increase our Marine and Tourism estimates to reflect positive commentary in SLK’s FY21 trading update.”

The news of the spending spree comes amid market talks that SeaLink is also a potential buyer of Ritchies buses in New Zealand.

SeaLink, which snapped up Australian bus operator Transit Systems Group for $635m more than a year ago, is also expected to take delivery of the country’s first two hydrogen-powered buses.

Importer TrueGreen, which plans to manufacture the buses in NSW in a couple of years, is expected to take delivery of the vehicles from Chinese company Foton, with SeaLink set to reveal road use details subsequently.