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Why the ALS (ASX:ALQ) share price is surging over 6% higher today

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The ALS Ltd (ASX: ALQ) share price is charging higher on Monday morning.

At the time of writing, the global testing, inspection, and certification company’s shares are up 6.5% to $10.12.

Why is the ALS share price charging higher?

Investors have been buying ALS shares today following the announcement of an acquisition and the release of a trading update.

According to the release, the company has acquired pharmaceutical testing business Investiga for an undisclosed fee.

Investiga is a pharmaceutical testing business with operations in Brazil and the east coast of the United States. It currently has 360 employees and generated A$20 million of revenue in FY 2020.

The release explains that Investiga specialises in the cosmetic and personal care market, providing services to a portfolio of major global clients. Management intends to integrate the business into the existing ALS Life Sciences network, with a particular focus on growing in the USA. It notes that this represents over a quarter of the global market.

ALS will acquire Investiga at a multiple of 11x adjusted FY 2020 EBITDA, on a deferred basis, paid from existing debt facilities. There is no requirement for shareholder approval.

ALS Managing Director and CEO, Raj Naran, commented “Growing the Life Sciences division is a key part of the ALS strategy and Investiga significantly increases our presence in the Pharmaceutical market. We have a strong track record of integrating acquisitions into our existing Life Sciences network and Investiga provides us with the platform to grow our cosmetic and personal care offering, particularly in the USA.”

Trading update

Also giving the ALS share price a boost this morning has been the release of a positive trading update.

According to the update, ALS continued to trade resiliently in the third quarter and early in the fourth quarter despite the uncertainty created by the COVID-19 pandemic.

Life Sciences volumes have been stable, with laboratories providing their essential services to clients in major markets.

In addition, the Commodities division is starting to benefit from the improving cycle. Geochemistry sample flows increased by 13% in the third quarter, with this momentum continuing in the fourth quarter.

Management notes that major miners, as well as junior and intermediate miners, have contributed to this growth.

Finally, in the Industrial division, Tribology saw some improvement in the third quarter, whilst the trading environment for Asset Care remained challenging.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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