GUD Holdings Ltd (ASX: GUD) has hit the pause button on the trading of its shares today as the company announced an acquisition and equity raising.
Before they were put on ice, GUD shares were set to open the session at $12.03, down 3% from a week ago. Let’s take a closer look at what the company announced today.
What’s got the GUD share price halted today?
GUD advised that it has entered into a share purchase agreement to acquire Auto Pacific group for a total consideration of approximately $744.6 million.
The release highlights that APG is a designer and manufacturer of “high-quality, engineered and functional automotive and lifestyle accessories”. APG is “highly complimentary” to the company’s GUD 4-wheel drive and commercial vehicle accessories (G4CVA) platform, per GUD.
It is also “best in class” with respect to its research and development, whereas GUD is also impressed by APG’s “strong financial performance and future growth potential”.
GUD reckons that its latest acquisition is forecast to pull in $80-$84 million of earnings before tax and amortisation (EBITA) in CY22F. The acquisition also has the potential to deliver net synergies of around $7 million per annum according to the company.
GUD made the purchase on a valuation of 9.1X EVB/CY22F EBITA, and after synergies it values the company at 8.4X.
The company expects the deal to be accretive to its earnings per share (EPS), and expects a “low double digit EPSA accretion in pro forma CY22F”.
To finance the deal, GUD is completing a fully underwritten $405 million equity raise. It will also undertake another $282 million of debt and will issue $75 million worth of new GUD shares to vendors associated with the transaction.
Why did GUD buy APG?
According to the release, the acquisition will see the group make a meaningful step towards its vision of becoming an “integrated leader in 4WD accessories and trailer in Australia and New Zealand“.
The deal will also make a positive contribution to the group’s earnings, as it claims APG is the “undisputed market leader in towing with strong brands at market positions across a diverse range of [4WD accessories]”.
Commenting specifically on the acquisition, GUD’s CEO Graeme Whickham said:
4WD accessories and trailering is a cornerstone of GUD’s automotive vision. This acquisition represents the culmination of management and the board’s work in creating GUD’s portfolio vision. We are excited by the opportunity for GUD to expand its existing 4WD and commercial vehicle businesses with complementary products, customers and capabilities. APG is an industry leading designer, manufacturer and distributor of high quality, engineered and functional automotive and lifestyle accessories that are suitable for all combustion and electric vehicle applications.
GUD share price snapshot
The GUD share price has struggled these past 12 months after posting a gain of just 7% in that time. Over the year to date, it has climbed just 2.5%.
Despite landing on the green for these 2 time frames, GUD shares are down 1% in the past month and have slipped another 3% this past week.