Private equity types like to think of themselves as bold investors with the right combination of bravery and smarts to cut deals where others fear to tread.Apollo Tourism & Leisure rents out and sell motorhomes, campervans and the like to tourists and grey nomads. Well, here's an idea that would put that to the test.Street Talk understands restless bankers have been pitching a tourism sector roll-up to anyone cashed up and courageous enough to look through the COVID-19 pain that has decimated the industry.The idea is simple enough. It involves taking out ASX-listed recreational vehicle company Apollo Tourism and Leisure and combining it with its NZX-listed counterpart Tourism Holdings, to create an Antipodean RV powerhouse.On face value, the two companies appear to be a decent fit. Both rent and sell motorhomes, campervans and the like to tourists and grey nomads in their home markets and overseas. Apollo also has manufacturing operations that produce and assemble RVs for its rental fleet and the retail market. If you put the two together, you would be looking at about a $120 million company at the earnings line based on FY19 numbers. Add likely synergies, and it's a chunky starting base.Of course, FY20 earnings will look nothing like 2019's, and the question is how quickly the tourism sector can bounce back from the crippling COVID-19 blow. (Analysts tip Apollo's earnings to plummet from $62 million in fiscal 2019 to $27.5 million this financial year). The first move in the roll-up would be to acquire Apollo, whose shares are trading down more than 20 per cent this year to have only a $70 million market capitalisation, compared to $350 million in early 2018.Fund managers reckon the big hurdle would be convincing Apollo's majority owners, the Trouchet family which owns 53 per cent of the company, to sell-out. Partnership deal, perhaps?From there, a buyer would have to then quickly go about sorting out Apollo's debt mountain, much of which is financing on its rental vehicles and was sitting at $364 million as of June 2019. The suitor would also have to have deep pockets and be willing to pump cash into the business, which might need additional liquidity to see it to the other side of the tourism downturn.To be clear, this column is not suggesting any offer has been made at either Apollo or Tourism Holdings, but it is known that bankers have been in the ears of buyout firms trying to convince them to at least do some desktop due diligence.Aside from PE outfits, the play could be a good one for a company looking to grab a piece of the tourism industry. NRMA and its Victorian cousin RACV have both been acquisitive in the sector.
ATL Price at posting:
36.5¢ Sentiment: Buy Disclosure: Held
