You won't find Johns Lyng Group Ltd (ASX: JLG) shares in any top gainers or losers lists today.
Shares in the integrated building services company entered a trading halt before the start of trading this morning. At the time of writing, the company's shares remain halted at yesterday's closing price of $5.43.
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Why are Johns Lyng shares halted?
First hitting the wire before 9:00 am this morning, the trading halt request provided investors with their first hint at what would transpire.
As stated in the request, the reason was linked to proposed transactions and an accompanying capital raise. The company later revealed the details in subsequent announcements that followed not too long after the original trading halt request.
According to the release, Johns Lyng has signed binding share purchase agreements to acquire two companies in the 'essential home services' market — Smoke Alarms Australia (SAA) and Linkfire. The deal will see Johns Lyng acquire 100% and 70% of the respective companies.
Smoke Alarms Australia is a Sydney-based national provider of essential property services, including testing and maintenance of smoke alarms. Meanwhile, Linkfire provides fire and essential safety services throughout Victoria and Newcastle in New South Wales.
The total upfront cash consideration to acquire the two businesses is $61.8 million. However, an additional $17.25 million earn-out could be payable depending on future performance. The deal values the two combined at 7.2 times FY23 forecast earnings before interest, taxes, depreciation, and amortisation (EBITDA).
Commenting on the transactions, Johns Lyng Group CEO Scott Didier said:
The services provided by Smoke Alarms Australia and Linkfire are highly complementary to our current activities — particularly our Strata Services offering. The Acquisitions set the foundation for JLG's 5th Strategic Growth Pillar – "Essential Home Services", which we will continue to build out going forward.
The acquisitions are expected to boost the Johns Lyng bottom line immediately. Once settled, management expects a 5% earnings per share (EPS) bump from the additions.
How is it being funded?
On the hook for nearly $62 million, shareholders might wonder where the funding will come from. Rather than tap into its $82.6 million in cash, as of 31 December 2022, management has elected to conduct an equity raise.
The main component is an underwritten $65 million institutional share placement priced at $5.00 or the price determined by the bookbuild — whichever is highest.
Up to another $5 million could be raised via a separate share purchase plan (SPP) for eligible shareholders. Further details regarding the SPP will be available to investors 'on or around 12 July 2023'.
Finally, new Johns Lyng shares from the SPP are expected to be issued on 2 August 2023.
