The BINGO Industries Ltd (ASX: BIN) share price is on watch this morning after the company announced the completion of its planned acquisition of Dial-a-Dump Industries (DADI) late yesterday afternoon.
What was involved in the Dial-a-Dump acquisition?
Bingo announced it had completed the acquisition to the satisfaction of regulatory requirements associated with the ACCC's approval of the deal.
DADI is a fully-integrated recycling and waste management services provider in New South Wales with operations from collection to recycling, landfill and recycled product sales.
BINGO announced in August 2018 that it expected to acquire DADI for an enterprise value of $577.5 million, with the $377.5 million cash consideration for the deal having been partially funded through a $425 million underwritten entitlement offer at $2.54 per share.
BINGO management said that the scrip consideration of 78,740,154 newly issued BINGO shares at $2.54 per share, given the current share price of $1.49 ($1.475 at yesterday's close) represents an $83 million reduction in acquisition book value.
Is the acquisition good news for BINGO?
The BINGO share price is down 19% this year which includes a 49% one-day drop in mid-February after significant downgrades to the company's full-year underlying earnings before interest, tax, depreciation and amortisation (EBITDA) figures.
Management expects to see underlying EBITDA of $92 – $96 million in FY19, down 11% – 18% on the previously quoted $108 million – $112 million guidance.
The company hopes that by acquiring DADI it can realise the value of the supply chain synergies, particularly in the Commercial and Industrial (C&I) waste segment of the market.
Given the company's share price has fallen more than 50% since August last year and it currently trades at a 20x P/E multiple, I think BINGO might be a little on the expensive side, even accounting for potential synergies from the DADI deal.
The waste management company offers a 2.5% dividend yield, but I really don't think that's enough of a value-add to justify its current $859 million valuation.
For those looking for long-term growth options, this top-rated stock is well-placed to capture a large chunk of a booming $22 billion industry and could be the perfect buy in 2019.
