The share price of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) is edging into the green in early trading today amid news of an acquisition.
The forward movement comes despite the NASDAQ 100 Index (NASDAQ: NDX) falling overnight. The S&P/ASX 200 Index (ASX: XJO) has also started off today with difficulty.
Soul Pattinson’s latest acquisition
The ASX share owns a diversified portfolio of listed businesses and private businesses.
One of Soul Pattinson’s holdings is the business Ampcontrol.
Ampcontrol says that it delivers integrated electrical, electronic, and control solutions to improve safety and efficiency in mining, renewables, infrastructure, and industrial applications. Soul Pattinson notes that Ampcontrol’s mining sector presence is “strong” with products and services.
At the end of the first half of FY22, Soul Pattinson owned a 42.9% stake in Ampcontrol.
However, now Soul Pattinson has moved to buy all of Australia’s largest privately-owned electrical engineering business, according to the Australian Financial Review.
The newspaper reports that Soul Pattinson has paid to buy the entire business on an enterprise value basis of around $200 million. The other shareholders were reported to be the founders of the business – Keith Grant, Peter Cockbain, Tony Studdert, and Neville Sawyer.
How much revenue and profit does Ampcontrol generate? The AFR noted that, in FY21, the business generated $256.5 million of revenue and $44.9 million of earnings before interest, tax, depreciation and amortisation (EBITDA).
It was also reported that Ampcontrol was a possible contender to list with the help of Bell Potter and Morgans, but it wasn’t able to make a listing happen.
How big of a deal is this?
A $200 million valuation may sound like a lot of money but on the ASX that would only count as a small cap company. Soul Pattinson’s market capitalisation is more than $9.5 billion at the time of writing.
At the end of the ASX share’s FY22 first half, its total portfolio value was $9 billion after the merger with the listed investment company (LIC) Milton Corporation. A $200 million valuation is, therefore, a small percentage of the overall portfolio.
However, at 31 January 2022, Soul Pattinson’s private equity portfolio was worth $650 million. So, Ampcontrol’s value will be a sizeable part of Soul Pattinson’s private business portfolio.
In the half-year result, the ASX share noted that it has “ample liquidity available for new investments due to a strong working capital position.”
Soul Pattinson share price snapshot
Since the start of 2022, the Soul Pattinson share price has dropped by more than 10%.
It’s down almost 13% in the past 12 months.