Stobart Group (Stobart), a UK-based provider of multimodal transport and logistics solutions, has taken a controlling interest in newly formed Stobart Biomass Products (SBPL) together with AW Jenkinson Forest Products (AWJFP), a supplier of wood related biomass in the UK.
The new company has been created to source and distribute, on a long-term contractual basis, supplies of biomass fuel to the UK renewable energy market, which has the potential to grow ten-fold in the next three to four years, Stobart said.
In addition, Eddie Stobart has secured a major transportation contract with AWJFP for the next ten years. This contract is expected to generate an additional pre tax profit of GBP19.25m over the first five years. The investment and new contract together will provide substantial strategic synergies across the Stobart Group, the company added.
Separately, Stobart expects to benefit from GBP30m per annum transport revenues from SBPL within three years. As per the terms of the deal, Stobart will take a controlling interest in the new venture for GBP30m comprised of GBP15m cash and the remainder by the issue of 11,278,195 new ordinary shares in Stobart Group, which will be subject to a lock-in arrangement for a period of 12 months from completion.
SBPL already has its first contract to supply up to 750,000 tonnes of biomass fuel per year to ten potential sites over the next 20 years. In addition, it has received contract inquiries for a further 14 million tonnes of biomass fuel over the next five years with all new contracts going through SBPL.
Andrew Tinkler, CEO of Stobart Group, said: “This investment and transport contract together are a strategic building block for the Stobart Group on many levels. Firstly, it is expected to be earnings enhancing from day one with an expected GBP19m net profit for the core business in the next five years and an additional benefit of GBP30m revenue per annum for the new company within three years.
“Secondly, it gives us access to, and income from, the higher margin renewable energy market, which has the potential to grow ten-fold in the next five years, driven by governmental and societal pressures for the green agenda.”