SYDNEY, AUSTRALIA: Hancock & Gore Limited (H&G), a diversified investment company, has announced that it has reached an in principle agreement to acquire an additional 40.3% stake in Mountcastle, a manufacturer, distributor and retailer of customised uniforms, from its shareholder partner.

The deal will increase H&G’s ownership in Mountcastle to 89.8%, with a clear strategic path to 100% ownership and alignment with the remaining executives.

Mountcastle is a leading player in the Australian uniforms market, supplying more than 1,000 schools and businesses across the country.

It has recently completed the acquisitions of Argyle Schoolwear, a leading provider of school uniforms in New Zealand, and Moorebank Uniforms & Embroidery, a Sydney-based supplier of over 65 schools.

These acquisitions add scale, new geographical reach and significant synergy opportunities to Mountcastle’s vertically integrated supply chain.

The consideration for the 40.3% Mountcastle equity acquisition comprises a cash component of $5.0 million upon completion; issuance of 15 million H&G shares at 35 cents per share; transfer of H&G’s unencumbered equity in Hyde Rd Trust to the shareholder partner requiring a loan repayment to the Trust’s lender of $3.47 million by 31 March 2024 and interest; and a deferred cash consideration of $5.0 million payable 1 year after completion. H&G is aiming to complete the acquisition by 1 November 2023. At completion, the shareholder partner will hold 100% of the Hyde Rd Trust.

The acquisition is subject to entering into definitive legal agreements, lender approvals, ASX consultations and other commercial conditions precedent.

Hancock & Gore Limited (H&G) said that the acquisition will significantly enhance its financial performance and growth prospects, contributing to cash profit growth and future dividends.

It also said that Mountcastle’s executive team, led by Executive Chairman Steve Doyle (former CEO of Lovisa and Managing Director of Super Retail Group Leisure Division), have agreed to invest $2.5 million equity into Mountcastle and continue driving its growth.

H&G is exploring opportunities to roll that equity commitment and remaining Mountcastle shareholders into H&G scrip to move to 100% ownership and create further alignment.

Mountcastle reported record FY23 (June year-end) revenue of $53 million and EBITDA of $10.5 million. On a pro-forma FY23 basis including the acquisitions, combined Mouncastle Group revenue would be approximately $66 million with EBITDA of approximately $13 million.

H&G said that the effect of these transactions is expected to yield a significant unrealised profit and a notable Net Tangible Asset (NTA) uplift for its financials for the year ending September 30, 2023. This impact is contingent upon successful completion of the acquisition and other factors.

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