Johannesburg - Austro Group, a woodworking equipment distributor, concluded an agreement yesterday to buy New Way Motor and Diesel Engineering for R200 million.
Austro will settle R100 million in cash and the remaining amount by issuing a total of 40.5 million new Austro shares to vendors at a cost of about R2.47 a share.
Austro chairman David Brouze said New Way and Diesel Engineering were complementary business.
"We are in the business of importing, readying up and delivering heavy industrial equipment to our customers and backing up our offerings with extremely high levels of services," he said.
New Way provides heavy machinery for commercial, industrial, mining and public sectors, and distributes industrial diesel engines and generators for brands such as John Deere and Mitsubishi.
Austro said New Way would enhance its strategy of being a major player in strategic niche markets in the construction and related sectors.
"Strategically, it's a good fit too," said Brouze.
"Both businesses are essentially distributorships, with a reputation for supplying best of breed products backed by some strong international brand names."
The group also expects the demand for alternative power in the industrial and construction sectors to increase in line with the activity for 2010.
"The demand side of the construction and infrastructure sector is growing exponentially as we move towards 2010, which leaves us extremely well positioned for future growth," said Brouze.
Early in the year, New Way and Diesel Engineering established a new company, Genesis Alternators, to supply generating equipment for prime peak and standby applications to its sub-Saharan African market.
Brouze said New Way and Diesel Engineering had a huge reputation in the generator business, which was currently showing exceptionally strong growth.
"It is more a question of the physical constraints on meeting demand than it is of orders," Brouze added.
Austro, which listed on the JSE in February, projected revenue of R219 million for the year to August with an operating profit of R46 million.
About 70 percent of the group's revenue is derived from the distribution of premium imported woodworking equipment.
Austro shares fell 2.41 percent to R2.83 yesterday.