Today, on 23rd May 2019, LogiCamms Limited (ASX: LCM) presented highlights on its merger with OSD Pty Ltd. OSD is a privately-owned company established in 1992. Its service portfolio includes oil and gas pipelines and facilities engineering. It has a specialised pipeline training business and has expertise in water and hydrotransport. Its average annual EBITDA for the period stood at $0.8 million in a period of weak trading conditions in oil and gas and mining markets from FY15 to FY17. In the period from FY12 to FY14, OSD’s annual EBITDA averaged $4.7 million. Both LogiCamms and OSD complement each other in expertise and geographical presence.
In the Investor Presentation, LCM highlighted the strategic rationale for the merged entity, where it will be positioned to be a leading mid-tier engineering services business with breadth and depth of technical capability, diverse client base and revenue streams. Under the substantial cross-selling opportunities, LCM highlighted the increased scale and complementary service offering across multiple jurisdictions and industries.
Looking at the cost synergies, approximately $3 million per annum initial, low-risk synergies will result in increased pricing flexibility and a higher probability of winning work and will lead to a reduction in corporate costs to the industry norms. The strengthened competitive position will allow LCM to bid and secure larger and more complex projects. The merged LCM will benefit from OSD’s strong cash position of $6.9 million net cash as on March 22, 2019. The merger will act as a catalyst to improve employee engagement and satisfaction, with high-quality leadership from both LCM and OSD senior management. The complementary expertise, aligned cultures and operating methods will underpin the transition plan to deliver benefit to customers, employees, and shareholders.
Moving to the transaction summary, acquisition of OSD by LogiCamms include the issuance of 118,469,070 consideration shares of LCM to OSD shareholders; and issuance of 4,780,229 LCM options to prescribed OSD executives (and cancel existing OSD Options). The merged LCM ownership structure will comprise 59% interest by OSD shareholders with 118,469,07 shares, and 41% interest by LCM shareholders with 82,325,964 shares. LogiCamms’ directors unanimously consider this transaction to be in the best interests of LogiCamms shareholders, and therefore, have recommended shareholders to vote in favour of the Resolutions, in the absence of a superior proposal.
FY19 pro forma forecast for merged LCM estimates revenues to be around $120 million and normalised EBITDAI of $6.7 million. As on January 2019, the work-in-hand project was estimated to be worth $57 million.
On the stock information front, at market close (on May 23, 2019), the stock of LogiCamms was trading at $0.170, up 9.677% with a market capitalisation of $12.67 million. Today, it reached day’s high at $0.170 and day’s low at $0.160, with a daily volume of 227,452. Its 52 weeks high price stands at $0.225 and 52 weeks low price at $0.115, with an average volume of 126,133 (yearly). Its absolute returns for the past one year, six months and three months are -22.50%, 3.33%, and -6.06%, respectively.
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