Aggreko, the power generator rental company, is targeting lucrative contracts for the London and Beijing Olympic Games after it snapped up its largest competitor, GE Energy Rentals, in a $212m (£112m) deal.
Aggreko has purchased the second-largest player in the temporary power market from conglomerate General Electric but does not anticipate any regulatory problems. "This is a very, very competitive market," Rupert Soames, chief executive of Aggreko said.
GE Energy Rentals has had exclusive rights to temporary power contracts for the Olympic Games up to 2012 as a result of a wider sponsorship deal between General Electric and the International Olympic Committee signed in 2003. That exclusivity has lapsed as a result of the Aggreko deal.
"The Olympics has been off limits for three years. This deal opens up that market to us. That was one of the things in the equation that makes this a good deal," Mr Soames said. Aggreko previously supplied generators to the Atlanta and Barcelona Olympics and Salt Lake City Winter Olympics. It also provided power for last week's Ryder Cup in Ireland.
Aggreko supplies temporary power generators, cased in distinctive orange boxes, used for emergency power in disaster areas, large construction projects or major events. Mr Soames said that Aggreko needed rapidly to increase its fleet of generators to sustain its growth strategy. The deal to buy GE Energy Rentals satisfies this need and bolsters its staff numbers and customer base.
Mr Soames said Aggreko had been stalking the GE business for around two-and-a-half years. He expects to cut between $13m and $15m a year in costs to improve profitability at the acquired business and wants a $35m operating profit within four years.
Aggreko will look to dispose of some GE assets after the deal closes. It will fund the acquisition through debt, having negotiated a new £370m facility this year.Reuse content