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The ARB (ASX:ARB) share price moving up on $40 million acquisition

Acquisition

The ARB Corp Ltd (ASX: ARB) share price is inching upwards today after the motor vehicle accessory maker announced an acquisition.

At the time of writing, the ARB share price is up 2.52% to $34.53. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is jostling around the negative 1% mark.

Breaking into the UK

Following the recent successes of ARB’s New Zealand acquisitions, the company now is breaking into the UK market.

This morning ARB announced the acquisition of Auto Styling Truckman Group Limited, commonly referred to as Truckman. Similarly, Truckman makes and distributes auto accessories throughout the United Kingdom.

As aligned with the company’s strategy, Truckman also brings product diversification to ARB. Due to the fact that they mainly focus on rear vehicle accessories (canopies, bed liners, etc.)

All staff and management will be retained as operations continue as per usual.

The deal struck for the acquisition comes to a maximum net cash purchase price of GBP$21.9 million. In other words, roughly A$39.3 million. Approximately A$14.2 million of the maximum acquisition price is subject to performance hurdles.  Truckman’s management will need to meet these over the next 3 years.  

Impacts on ARB’s future performance

ARB stated that the acquisition is being funded from existing cash reserves. Given the company’s cash levels were around $85 million at the end of December, there should still be plenty of cash left to spare. Additionally, ARB reported solid revenue and profit growth in its recent half-year results, so the money should keep flowing in.

ARB’s ownership began on 2 March, with Truckman being immediately profitable.

Share price snapshot

The ARB share price has performed exceptionally in the past 12 months – climbing 102%. Border restrictions left many to explore more locally, possibly veering off the beaten track. Hence, money being spent on accessorising the adventure vehicle of choice certainly experienced a bump. 

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia has recommended ARB Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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