WiseTech Global Ltd (ASX: WTC) shares have been pushing higher this week.
This has been driven by a positive reaction to the announcement of a major acquisition.
In case you missed it, WiseTech has signed an agreement to acquire U.S.-based E2open (NYSE: ETWO) for US$2.1 billion (A$3.25 billion).
The cloud-based e2open platform connects more than 500,000 manufacturing, logistics, channel, and distribution partners as one multi-enterprise network tracking over 18 billion transactions annually.
Founder, executive chair, and chief innovation officer, Richard White, said: "Acquiring e2open is a strategically significant step in achieving our expanded vision to be the operating system for global trade and logistics."
What are brokers saying?
The team at Goldman Sachs has been running the rule over the deal and likes what it sees. It commented:
The proposed acquisition would deliver a step change in WTC ability to deliver on its goal of being the operating system for global trade and logistics (prior global logistics), with ETWO bringing significant and complementary product and customer relationships, allowing WTC to broaden its Cargowise platform across the entire logistics ecosystem, to pursue the US$57bn global supply chain/logistics market (2029, +16% CAGR), per the company.
Goldman believes that the deal could be as much as 10% accretive to FY 2027 earnings on a pro forma basis. It explains:
We estimate the transaction to be +8% to 10% accretive to WTC FY27E EPS (pro-forma). Key assumptions include (1) E2 SBC expensed, in line with WTC; (2) we assume no revenue synergies & $60mn of cost synergies vs. at least $50mn guidance, and WTC's announced expectation that merge-co would eventually achieve > 50% margins – with ETWO requiring $130mn opex savings to have achieved this in FY25; and (3) 5-6% cost of debt in-line with our tech coverage. On this basis, WTC leverage would be 1.9X ND/EBITDA by end FY27E.
Should you buy WiseTech shares?
According to the note, Goldman Sachs has reaffirmed its buy rating with a trimmed price target of $126.00. Based on its current share price of $107.19, this implies potential upside of almost 18% for investors over the next 12 months.
The broker concludes:
We remain positive on WTC ability to execute on its organic growth outlook, noting that with only 1 month left, FY25 guidance was reiterated, and that WTC remains comfortable timing of CTO launch will not be impacted by this M&A. We do not factor in the proposed transaction into estimates pending completion, but we lower FY26-27 EBITDA by -3% to -2%, to reflect the previously announced delay in CTO launch to FY26 (we now forecast +28% CW rev growth in FY26E). Our 12m TP is -2% to A$126. Buy.
