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Specialist lighting group FOS Capital (ASX: FOS) is powering up a $3.7 million capital raise to fund the acquisition of the street lighting assets of Aldridge Traffic Systems from its embattled owner Traffic Technologies (ASX: TTI), which was placed into administration earlier this year.
FOS Capital is paying $3.1 million for Aldridge Traffic Systems, which manufactures traffic signals, hardware and pedestrian push buttons as well as a range of data-enabled LED road lighting and related equipment.
The acquisition of the street lighting business follows a $700,000 deal early last month by FOS Capital for Melbourne-based specialist lighting design consultancy Glowing Structures.
The deal announced today for Aldridge Traffic Systems was struck with administrators who were appointed to Traffic Technologies in April. The traffic solutions group found itself in a parlous financial state after suffering a massive shortfall of commitments to a $2.8 million capital raise announced late last year.
Aldridge Traffic Systems specialises in “Smart City” control systems and LED road and streetlights, as well as the design, manufacture and installation of traffic signals, urban traffic controllers, pedestrian countdown timers, electronic road signs, emergency telephones and road lighting products.
FOS Capital’s interest in Aldridge centres on its expertise in designing and manufacturing energy-efficient LED road lighting and solar-powered LED luminaires for off-grid and remote locations. The division also provides intelligent transport systems that monitor traffic and display important information to motorists.
The $3.1 million being paid for Aldridge comprises plant and equipment of about $900,000, inventory of $500,000 million and intellectual property of $1.7 million.
“The acquisition of Aldridge Traffic Systems further expands our presence in the Australian lighting solutions market,” says FOS managing director Con Scrinis.
“This is an attractively priced asset to which we can add significant value, further building on our track record of recent acquisitions."
FOS plans to leverage its track record in successful turnarounds to restore Aldridge Traffic Systems “to its former position within two years of acquisition following a period of declining sales due to limited execution, focus and capital”.
Despite being placed into administration, Traffic Technologies noted at the time that demand for its products and services remained strong with the business largely impacted by capital constraints.
The Aldridge street-lighting business generated sales of $6 million in FY24, and among the key contracts announced by Traffic Technologies earlier this year was the supply of Smart City IoT-ready LED streetlights to Sydney City Council.
The contract, for an initial period of five years and up to a maximum of nine years, was estimated to be worth between $3 million and $5 million.
As part of the acquisition announced today, FOS is also buying Traffic Technologies’ Deneefe, Sunny Signs, L&M and QTC business assets which the company says are non-core to its operations and will be either sold or closed down after the deal is finalised.
The sale of the surplus businesses is expected to yield between $500,000 and $1 million which FOS Capital plans to apply to working capital to fund the restoration and expansion of the Aldridge business.
FOS Capital describes the acquisition as being in line with its “ongoing acquisition strategy” which has seen the company bed down six deals since it was founded in 2019.
The company envisages that Aldridge Traffic Systems will help it continue scaling while accessing new markets, generating operating leverage and supporting government infrastructure spending.
The acquisition also bolsters FOS Capital’s presence in the road lighting industry through its Eclatec product range, which includes P-Category products manufactured at its Brisbane facility.
Shares being offered in the capital raising are priced at 30c each, which is a discount to the company’s last closing price of 31c last Friday.
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