The WiseTech Global Ltd (ASX: WTC) share price is on the move on Friday morning.
At the time of writing, the logistics solutions company's shares are down 3.5% to $56.51.
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Why is the WiseTech share price falling?
Investors have been selling down the WiseTech share price this morning after weakness in the tech sector offset news of a blockbuster acquisition.
According to the release, WiseTech has acquired Blume Global for US$414 million (A$600 million) from funds managed by Apollo, EQT, and other minority shareholders.
Blume Global is a provider of a leading solution facilitating intermodal rail in North America.
The release notes that North America is the world's largest domestic logistics region and Blume manages intermodal containers and chassis on behalf of 6 of the 7 Class 1 US railroads, ocean carriers, and other intermodal equipment providers. This includes global freight forwarders and Beneficial Cargo Owners (BCOs).
Much like WiseTech itself, Blume is a high-growth recurring revenue business and is expected to generate FY 2024 revenues in the range of US$65 million to US$70 million, which represents annual growth of 45% to 55%.
Before operational synergies, on a standalone basis, Blume expects to achieve FY 2024 EBITDA margins of approximately 10% and be cash flow breakeven by the end of FY 2024.
Deal funding
WiseTech revealed that it will fund the acquisition through a combination of cash, debt, and shares.
This will comprise US$134.8 million from existing cash reserves, US$155 million of debt from new facilities, and US$124.2 million new WiseTech shares. This represents a funding mix of 70% cash and 30% WiseTech Global shares, with the latter to be escrowed for 12 months.
'Strategically significant'
Founder and CEO of WiseTech Global, Richard White, believes the acquisition is strategically significant. He said:
This is another strategically significant acquisition that follows our acquisition of Envase Technologies last month. It further extends our capability in one of our six key CargoWise development priority areas, integrating rail into our landside logistics offering in North America, the most complex and largest logistics region in the world. Blume also brings significant new talent, a portfolio of other valuable product capabilities, and further enhances our product development skill set. This transaction demonstrates WiseTech's continued investment in its CargoWise ecosystem, improving visibility and process efficiencies end-to-end across the supply chain for our customers.
