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Computershare shares higher on $142 million acquisition

Acquisition

The Computershare Limited (ASX: CPU) share price is pointing higher this morning after the company announced its acquisition of US-based registered agent services company Corporate Creations. Following the announcement, the Computershare share price was up as much as 3% in early trade.

Corporate Creation acquisition

Founded in 1993, Corporate Creations is a growing business providing registered agent and related filing services with a national network across the US.

The acquisition is subject to regulatory filing and other customary closing conditions. The transaction is expected to close in Q1 CY2020.

Registered agents play an integral role in the US entity compliance landscape. In the US, companies are required by law to register their entities in every State where they operate. Each entity requires a registered agent.

Computershare has been partnering with Corporate Creation for the last 3 years to provide registered agent services and has developed a strong understanding of their operations and capabilities.

Computershare views Corporate Creations as a strong strategic fit and believes that it will accelerate its Issuer Services growth strategy in the complementary, large and growing US registered agent market.

Strong track record in the US

Computershare describes Corporate Creations as a capital-light business with majority recurring revenues. Corporate Creations has a strong track record of recurring revenue growth, servicing over 14,000 small, medium and large US entities. The company has also achieved a 3-year total revenue compound annual growth rate (CAGR) of 24%.

Combined with its current capabilities, Computershare believes it is now better placed to be able to deliver an enhanced and integrated product suite, and improved service proposition to clients that require US registered agent and entity management services.

The transaction purchase price is reported as $142.9 million. The purchase will be funded from existing cash balances and undrawn debt facilities. The post-transaction net debt/EBITDA ratio has been reported to remain within Computershare’s target range of 1.75x to 2.25x.

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Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Computershare. 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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