The Link Administration Holdings Ltd (ASX: LNK) share price is rocketing today after the company announced it has acquired Pepper European Servicing for A$266 million. At the time of writing, Link shares up by 9.58% in morning trade to be going for $6.81.
Why are Link Administration shares popping today?
Pepper European Servicing (PES) is a subsidiary of Pepper Group, which provides end-to-end loan servicing, advisory and asset management across both residential and commercial segments.
Link Administration is to acquire 100% of PES for A$266 million with a further A$56 million in contingent consideration.
The transaction will be financed from existing cash and bank facilities, but further share buybacks will take into account Link's increased leverage.
PES is well-established across the UK and Ireland with a growing presence in Spain, Greece and Cyprus.
At 31 December 2019, PES had total assets under management (AUM) of ~A$65 billion and generated income of ~A$149.9 million. The upfront acquisition price implies an enterprise value to earnings before interest, tax, depreciation and amortisation (EBITDA) multiple of 8.2x.
Link Administration sees the transaction as being 10% accretive to its operating earnings per share in year one and a further 5% to 6% with anticipated synergies over the medium term.
The transaction is subject to regulatory approvals and expected to be completed in the second half of 2020. PES will be integrated with Link Group's banking and credit management (BCM) business.
Link Administration shares are worth keeping an eye on today as the market continues to digest the acquisition news.
How has the company's share price performed recently?
The Aussie financial administration platform has had a difficult run in the markets in recent times. Link Administration shares crashed lower in late May 2019 after downgrading its FY19 operating EBITDA and operating NPATA expectations.
Prior to today's gains, the company's share price was down 13.03% in the last 12 months and 9.61% in the last 5 years. However, this includes a rebound of 32.69% since mid-August and that positive momentum has continued into 2020.
