On 24 March 2019, LogiCamms Limited (ASX: LCM) a provider of multidiscipline engineering, project management and asset management services to various mining and mineral, hydrocarbon, infrastructure and specialist industries, announced the signing of the binding Share Sale and Purchase Agreement with OSD Pty Limited. Within the agreement, LogiCamms Ltd and OSD Pty Ltd have agreed to a proposed merger to create a strong ASX-listed mid-tier engineering business.
OSD Pty Limited is an Australian proprietary company and was established in 1992. It is engaged in providing multi-discipline engineering, project delivery, commercial, as well as operational services to various industries such as oil, gas, mining and petrochemical across Australia and abroad. OSD has a robust financial performance matrix through the economic cycle and was driven by its key strengths. The key strengths include its specialization in pipelining for oil and gas, water as well as hydro-transport. It further includes associated facilities essential for operation. Apart from this, OSD has sustained solid, long-term relationships with several big, as well as mid-tier clients. The senior management of OSD is experienced and have invested their own money in the business. OSD uses disciplined cost management techniques and has efficient processes with high levels of accountability. The company also has a motivated and a base of engaged employee.
With the signing of the binding Share Sale and Purchase Agreement, the current shareholders of the company will own 41%, and the existing shareholders of OSD will be holding 59% of the merged business.
Based on the merger of the two businesses, the company expects the revenue for FY2019 to be around $120 million and pro forma FY19 normalized EBITDAI of nearly $6.7 million. By January 2019, the aggregate work in hand from the combined business was worth $57 million.
Once the merger gets completed, LogiCamms expects that its balance sheet will get strengthened. Another benefit of this merger includes complementary expertise with aligned cultures and operating methods. The merger will also be helping in expanding the client base along with the greater ability to win, as well as service larger and more complex projects.
Both the parties have identified that there will be an initial cost synergy of ~$3 million per annum. The merger has the potential for future revenue synergy. Further, the merger will act as a catalyst for driving improved employee engagement and satisfaction.
After the completion of the merger, the structure of the board will be as follows:
- Mr Peter Watson will step down as Chairman.
- Mr Charles Rottier will hold the position of the independent Chairman
- Mr Brian O’Sullivan, AM and Mr Linton Burns would be joining the board as executive directors.
- Mr Richard Robinson will maintain his position as an independent director.
- There will be a selection of an additional independent director, for providing complementary capabilities and experience.
The announcement also covered the indicative merger timetable where the distribution of the Explanatory Memorandum and notice of the meeting will be declared in late April 2019. An Extraordinary General Meeting will be held in late May 2019, and the merger is expected to complete by June 2019.
On 4 March 2019, the LCM declared to the market that it has almost concluded the Due Diligence for the proposed merger with OSD Pty limited.
In the previous six months, the stock has generated a negative return of 5.56%. However, the stock has given a decent return of 41.67% in YTD. By the closure of the trading session on 25 March 2019, the price of the shares of LCM was A$0.180, up by 5.882% as compared to its previous closing price. The company has a market capitalization of A$14 million and approximately 82.33 million outstanding shares.
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