Service Stream today announced the acquisition of private company Comdain Infrastructure at the purchase consideration of $161.7 million subject to adjustments.
Comdain Infrastructure is positioned as a market leading provider of integrated asset lifecycle services to the gas and water utility sectors in the eastern Australian states. The company specializes in engineering and asset management services including design, construction, operations and maintenance for utility sector.
Service Stream Managing Director, Leigh Mackender, stated “In line with Service Stream’s strategy to diversify the Group’s revenues across adjacent, familiar and growing markets, the acquisition of Comdain Infrastructure follows an extensive search and detailed assessment process.”
The purchase consideration of $161.7 million reflects the implied enterprise value of Comdain on a cash and debt free basis that equates to an attractive FY19F EV/EBITDA multiple of 7.4x. As agreed by both the parties, if the transaction goes through, Service Stream will pay $93.7 million in cash and $68.0 million in Service Stream’s shares to Comdain shareholders. Further, Service Stream informed that cash consideration will be funded through a combination of cash-on-hand and bank borrowings of $60 million, while the share consideration will be delivered by the issuance of approximately 40.2 million new SSM shares based on the 1-month VWAP of $1.692 per share.
In Fiscal 2019, Comdain Infrastructure expects to generate approximately $320 million in revenue and $22 million in EBITDA and has a solid pipeline of contract opportunities to support ongoing future growth. Comdain Infrastructure has extensive long-standing customer relationships with utility asset owners and operators throughout Victoria, New South Wales and Queensland.
Mr. Mackender further stated that the transaction will enable Service Stream to sit on the top position among the Australia’s utilities and telecommunication service providers with the revenue of approximately $1 billion. The combination of Service Stream’s and Comdain Infrastructure’s capabilities will allow the business to provide its utility clients with a comprehensive and compelling asset life-cycle value proposition.
On the completion of the transaction, Comdain Infrastructure’s Chairman, Tom Coen will be seen on Service Stream’s Board in the role of Non-Executive Director of the company. Moreover, Mr. Peter Coen will remain in his current role as the head of Comdain Infrastructure’s operations to support ongoing growth and integration of the business. Subject to satisfaction of certain conditions, this transaction is slated to be completed on 2 January 2019 or 1 February 2019.
Following the news of Comdain’s acquisition, Service Stream shares started trading on higher level. Currently, 3 December 2018 (2:53 PM AEST), the share price has gone up by 1.124% to trade at $1.800 with PE of 15.770 x. Over the past one year, the stock of Service Stream Limited (ASX: SSM) has witnessed a positive performance change of 28.99%.
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