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M&A: Qube share price could fall on logistics company acquisition

The Qube Holdings Ltd (ASX: QUB) share price could be set to fall lower this morning after announcing a $135 million acquisition at market close on Friday.

What did Qube announce on Friday?

Qube said that through its subsidiaries it has acquired LCR and its subsidiaries (LCR Group) for total consideration of $135 million.

The funds used came from the company’s existing undrawn debt facilities with COO Paul Digney saying that it provides Qube with the ability to deliver enhanced broad spectrum mining and industrial services to its existing and future customers.

LCR is a leading specialist provider of outsourced industrial logistics services, operating across mining, heavy transport, mobile crane and renewable energy industries including Oil and Gas.

Management said that Qube and LCR Group are aligned in their business models in what the company hopes will cement its place as the largest integrated provider of import and export logistics services in the country.

Is the Qube share price in the buy zone?

The Qube share price is up 14.7% so far this year to marginally outpace the S&P/ASX200 Index (ASX: XJO) on the back of decent half-year results and broadly strong economic sentiment.

The stock is currently yielding a fully-franked 2% but I would be wary of betting on franking credits given the potential for changes if a Federal Labor Government is elected in the coming weeks.

In terms of the logistics sector, Qube’s share price performance in 2019 has trailed that of key peers including the likes of Aurizon Holdings Ltd (ASX: AZJ) and Transurban Group (ASX: TCL) which are both up 17% year-to-date.

I would think that the weaker Aussie dollar should support Australian exports in the short-term despite the negative impact of the ongoing US-China trade war, which should continue to boost the logistics industry higher throughout the second half of the year.

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Motley Fool contributor Lachlan Hall has no position in any of the stocks mentioned. 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 Scott Phillips.

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