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Sydney mid-market specialist Alceon Private Equity is betting on geopolitical demand for naval fleets to remain strong, acquiring a majority stake in Victoria’s Shadbolt Group which has its name on every heavy navy shipbuild in Australia since the Anzac class in 1993.

Street Talk can reveal Alceon, on Tuesday evening, signed a deal to acquire 70 per cent of Shadbolt from founder Warren Shadbolt, who will retain the rest and continue to provide strategic input at the board level.

Shadbolt, founded in 1981, is an engineering fabrication and services provider to defence primes – industry parlance for a carefully vetted list of contractors that sell to the Department of Defence. It was most recently staffed on 149-year-old German shipbuilder Luerssen’s team for the Royal Australian Navy’s order of SEA 1180 offshore patrol vessels to replace the ageing Armidale-class patrol boats.

The business is understood to be making about $50 million in annual revenue, and sees a $1 billion-plus-a-year addressable market across navy and natural resources. In addition to scoring a role on every Australian navy ship build since the Anzac class in 1993, it has worked on supply vessel platforms and sustainment services.

Its private equity backer would be looking to repeat its success at specialist contractor Eptec, which provided maintenance services to the likes of Collins-class submarines. Alceon netted its backers more than 20 per cent in internal rate of return within three short years, when it sold Eptec to Next Capital in 2020.

Read the full story tomorrow and more on the Street Talk page.

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There are plenty of big question marks over Regional Express, the embattled carrier better known as Rex. But one of the biggest unknowns is what PAG Asia Capital will do next, a major lender to the regional airline which has handed over some $150 million to allow Rex to expand into capital city routes and compete against Qantas, Jetstar and Virgin Australia.

A sharp sell-off in the mining giants dragged the Australian sharemarket lower on Tuesday.

Click here for the latest equity market wrap.