The Motley Fool

Cover-More Group Ltd announces $138 million Travelex acquisition

This morning travel insurance business Cover-More Group Ltd (ASX: CVO) announced the $138 million acquisition of US-based Travelex Insurance Services as it attempts to deepen its North American footprint.

Travelex is reportedly the third-largest retail travel insurer in the US market and Cover-More will fund the deal via a $73.3 million capital raising that will be offered to both retail and institutional investors. The balance of the $72.7 million required to complete the deal will come from bank debt facilities, with Cover-More carrying an expected pro forma net debt to EBITDA ratio of 2x if the deal is completed.

Cover-More advised that on a pro forma basis it expects Travelex Insurance to generate EBITDA of US$9.5 million for the year ending June 30 2016. That places the purchase price of US$105 million on a valuation around 11x the annual pro forma EBITDA of Travelex Insurance. The company expects the deal to be low-single-digit earnings per share accretive with $0.5 million to $1.5 million in cost savings to be extracted in future years.

Cover-More shares have slumped some 35% over the course of 2016 after the group reported declining earnings and margins for FY16 and today updated the market that it expects FY17 EBITDA in the range of $48.1 million to $52.9 million. This would be around a 10% lift over the $44.6 million posted in FY16.

Travel insurance is a competitive space with other operators like Flight Centre Travel Group Ltd (ASX: FLT), Insurance Australia Group Ltd (ASX: IAG) and Suncorp Group Ltd (ASX: SUN) all having subsidiary operations that offer products to consumers. Cover-More Group than looks to be operating in a competitive environment with plenty of work ahead to successfully integrate its proposed acquisition.

NEW. The Motley Fool AU Releases Five Cheap and Good Stocks to Buy for 2020 and beyond!….

Our experts here at The Motley Fool Australia have just released a fantastic report, detailing 5 dirt cheap shares that you can buy in 2020.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading over 40% off it's high, all while offering a fully franked dividend yield over 3%...

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click here or the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.


Motley Fool contributor Tom Richardson has no position in any stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.