Industrials company GUD Holdings (ASX: GUD) went into a trading halt this morning before announcing plans to acquire a leading provider towbars and trailer, AutoPacific Group for $745m, and will resume normal trading on Wednesday, 1 December.
Given that the deal looks to be at 8.4 times earnings (after synergies), while GUD trades at around 10.5 times, the acquisition is expected to be share price accretive from day one.
Plans to fund AutoPacific include a $405m equity raising - via a share placement and non-renounceable rights issue – which follows a $70m placement last year to acquire AMA Groups (AMA) bull bars and other automotive parts business ACAD.
Management believe AutoPacific as a great strategic fit for the company based on the company’s large and growing addressable market, ‘blue-chip’ customer base, ‘best-in-class’ R&D, and large-scale manufacturing and distribution capabilities.
GUD has reiterated previously provided FY22 guidance and remains confident of delivering underlying earnings of between $112m-116m, excluding any contribution from VisionX and AutoPacific.
Management expects AutoPacific – which is forecast to deliver $80-$84m of earnings 2022 - to deliver synergies of around $7m annually.
While there’s a consensus Buy on recommendation on GUD, the stock continues to trade well below its mid-2018 peak of around $14.62.
New car sales have been knocked around by chip shortages and covid lockdowns.
Before being placed on a halt today, GUD shares were set to open the session at $12.03.
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