Why the GUD (ASX:GUD) share price will be on watch this morning

The GUD (ASX: GUD) share price will be on watch this morning following the company’s update regarding a number of acquisitions.

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GUD Holdings Limited (ASX: GUD) shares will be on watch this morning following the company’s update regarding its acquisition of several businesses.

At market close yesterday, the GUD share price finished the day 0.16% lower at $12.78.

What did GUD announce?

In yesterday’s announcement, GUD advised it has entered into an agreement to acquire Australian Clutch Services and its subsidiaries, XCLUTCH USA Inc and ACS NZ Pty Limited. The total value of the takeover is $32 million, subject to customary price adjustments.

GUD noted that ACS alone recorded normalised earnings before interest and tax (EBIT) of $5.7 million in FY20.

It will be interesting to see how the GUD share price performs today after the company advised it anticipates all three businesses positively impacting the group’s earnings. The earnings per share (EPS) metric is also forecast to increase as a result.

The company will fund the acquisition using its undrawn debt facilities. Completion of the deal is expected to be finalised on 1 March 2021.

What did management say?

GUD managing director and CEO Mr Graeme Whickman touched on the company’s latest takeover, saying:

This is a strategic acquisition of a strongly performing business which complements GUD’s automotive portfolio. This acquisition, at a compelling multiple of 5.6 times follows in close succession to GUD’s acquisition of companies formerly comprising AMA’s ACAD business, is further demonstration of GUD’s growth strategy.

Commenting on local business ACS, Mr Whickman went on to add:

ACS has a diverse customer base and is a leader in the traditional manual clutch, and the growing higher value dual clutch transmission replacement/repair markets. The business is an excellent complement to Disc Brakes Australia (DBA). ACS and DBA together will form GUD’s Friction-based businesses, to be led by Mr Gideon Segal, currently Executive General Manager of DBA.

How has the GUD share price been performing?

Over the last 12 months, the GUD share price has delivered modest gains of 2.16%.

The company’s shares hit a multi-year low of $7.12 in March, before rebounding in the following months. GUD shares reached a 52-week high of $13.66 in October 2020.

Based on the current GUD share price, the company commands a market capitalisation of close to $1.2 billion.

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