Rig Maker Gefco Offered for Sale by Astec Industries
Just after the National Ground Water Association’s Groundwater Week 2019 event in Las Vegas, Astec Industries Inc. announced plans to sell Enid, Oklahoma-based Gefco Inc. In a release announcing the plans, Astec CEO Barry Ruffalo says a sale “aligns with our vision for the future of Astec Industries.” That vision involves a tighter focus on that company’s core business: designing and manufacturing road building equipment.
Vince Trotta, Gefco president, says he looks forward to “the possibility of becoming part of an organization that more broadly participates and invests in the markets we serve.” He’s optimistic any potential buyer would retain Gefco’s 150 employees, who Trotta applauded for their dedication.
To find out more about what the sale would mean for Gefco, subsidiary King Oil Tools and their clients, we spoke with Trotta. Our conversation here is edited for space and clarity.
Q. I know it’s probably just speculation, but do you have any sense of what buyers might be available and out there?
A. We think there’s a variety of buyers that are out there. There are those that are purely in the water well industry segment that would be interested in the water well business, which is the largest piece of Gefco by far — and it’s also growing significantly. As you may have seen at the Groundwater show last week, we’ve got some significant new products that we’ve invested in. So that segment is growing nicely.
You have the oil and gas piece, with these large double pumpers that we make, and King Oil Tools, which are related to the oil and gas industry. That would, in all likelihood, be a different buyer. It’s very unlikely we’ll find someone that has both water well and oil and gas as strategic missions in their company. We actually anticipate some sort of a multiple sale or some sort of a multiple transaction that occurs at the same time. But the buyers could be anywhere from existing equipment suppliers in these segments, to people that supply complementary goods into the water wall segments that are looking for a larger play in water well in their investment. It’s probably some combinations we haven’t quite thought of, where folks are looking to increase their exposure into water well and into international opportunities as well.
Q. What does this mean for existing clients? I’m sure people will wonder, “Am I going to be supported 5 years from now?”
A. We’ve already contacted our major clients, anyone that has existing business with us ... to explain that we intend to be in the industry for a very long time, as we have been. This is actually the fifth time Gefco has been sold. As a business, we’ve been through this multiple times and each time I think we grow stronger and we continue to maintain our customer relationships through those periods. We fully intend to find a buyer for our businesses that shares our vision and thoughts for the future with our products. Also, in talking to customers ... we just reaffirmed our current delivery schedule for the next few quarters with our new products that we showed last week (at Groundwater Week). We’re actually scheduling visits of those customers to come on in, and we’re doing proposals tied to those new products. For us, we expect it to be business as usual supporting our customer base.
Q. Is there anything else that customers should know about the sale itself or when you expect it to happen?
A. It’s very early [in the process]. Astec has stated they would like to close and expect to close a transaction by the end of June. But, as these things go, it could take half that time or could take a couple months beyond that time. It’s very hard to predict. ... Prior to the announcement, we actually have had a couple discussions already, and are in those discussions. But now we’ll also be contacting additional companies and responding to other inquiries.
Q. You’ve been with Astec for six or seven years. Why now?
A. Astec appointed a new CEO earlier this year, in June I believe — Barry Ruffalo. With Barry coming in, along with several new board members that have come on board at Astec over the last six to nine months, the parent company Astec has taken a real effort now to look at simplifying the business. That is probably the number one part of this that kicks in, is they’re looking to simplify the business and enhance their shareholder value through businesses that are aligned with concrete plants, asphalt plants, cement plants and the other parts of the Astec company. It’s the new CEO that has triggered it, along with the board.
Q. Do you expect this to affect the breadth of your product lineup? Are you going to slim down in the near future or scale up?
A. We actually are expanding the product portfolio. At the Groundwater show last week, we introduced a new model at the lowest end of our product size range and a new model at the highest end. So we’re actually expanding our breadth, and I would expect that to continue, particularly the small end. It’s opening up a whole new set of customers for us that really our traditional Gefco 30, 40, 50K rigs were too expensive for them to buy new. They [those customers] were always on the used market. ... Now, we’ll have products for that new market. I really don’t see a new buyer wanting to pare that down.