Why the Infomedia (ASX:IFM) share price is on the rise today

The Infomedia (ASX: IFM) share price is heading higher in morning trade. We take a look at the company’s latest acquisition announcement.

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Infomedia Limited (ASX: IFM) shares are heading higher today after the company provided an acquisition update. At the time of writing, the Infomedia share price is trading at $1.64, up by 4.13% for the day so far.   

Infomedia provides software and data insights solutions to the global automotive industry. Below we take a look at the company’s acquisition announcement.

What acquisition did Infomedia announce?

The Infomedia share price is in the green today after the company reported its wholly owned subsidiary, IFM Americas Inc, has entered into an agreement to acquire SimplePart.

SimplePart is an e-commerce platform based in the United States. It designs and manages e-commerce programs for some of the world’s leading car manufacturers, enabling them to sell directly to consumers.

Infomedia has agreed to pay an upfront consideration of US$24.5 million (AU$31.4 million), plus an earn-out of up to US$20.5 million over 3 years.

Infomedia will pay the US$24.5 million upfront consideration from its existing cash reserves. It said it will pay the earn-out in cash while maintaining the right to pay up to 20% of earn-out payments in its shares.

SimplePart revenue came in at approximately US$10 million over the 12 months to 31 March. According to the release, SimplePart is forecast to achieve low double-digit growth rates in 2021 and 2022 “before synergies”.

The Infomedia share price opened almost 5% higher following the company’s update but has since partially retreated to its current level.

Commenting on the acquisition, Infomedia CEO Jonathan Rubinsztein said:

This is a very exciting acquisition as auto e-commerce is a strategic extension of our core global offering. SimplePart enables Infomedia to further penetrate the automaker parts ecosystem and transforms our presence in the Americas.

SimplePart founder Cole Getzler added:

This transaction is a unique opportunity for SimplePart to partner with a global leader in parts and service software that shares our philosophy of developing and delivering innovative, industry-leading fixed operation solutions. We are looking forward to sharing our solutions globally.

The transaction is expected to be completed by 30 June, subject to the customary conditions being met. 

Infomedia share price snapshot

It’s been a bit of a rollercoaster for shareholders this year, with the Infomedia share price now up 4.5% over the past 12 months. By comparison, the All Ordinaries Index (ASX: XAO) is up 35% over that same time.

Year to date, Infomedia shares are down by around 14%.

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Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Infomedia. The Motley Fool Australia has recommended Infomedia. 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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