Computershare (ASX:CPU) shares halted after announcing major US$750m acquisition

The Computershare Ltd (ASX:CPU) share price is in a trading halt while it raises funds to complete a major US$750 million acquisition…
The post Computershare (ASX:CPU) shares halted after announcing major US$750m acquisition appeared first on The Motley Fool Australia. –


The Computershare Ltd (ASX: CPU) share price won’t be going anywhere this morning.

This follows the request for a trading halt by the stock transfer company prior to the market open.

Why is the Computershare share price in a trading halt?

Computershare requested a trading halt this morning so that it could undertake a capital raising to partly fund a major new acquisition.

According to the release, the company is aiming to raise $835 million (US$634 million) via an underwritten pro-rata accelerated renounceable entitlement offer with retail rights trading. Management believes this structure will deliver fairness to all eligible shareholders.

Under the entitlement offer, eligible shareholders will be able to subscribe for 1 new Computershare share for every 8.8 shares held on the record date of 29 March 2021 at a price of $13.55 per new share. This represents a 9.6% discount to its last close price.

What is Computershare acquiring?

Computershare has entered into an agreement to acquire the assets of Wells Fargo Corporate Trust Services (CTS). It is a leading US based provider of trust and agency services to government and corporate clients.

The two parties have agreed a purchase price of US$750 million (A$983.2 million), which represents an EV/LTM EBITDA acquisition multiple of 8.9x pre synergies.

However, after including stand-up capex, regulatory capital requirements, and full run-rate synergies, it represents an EV/LTM EBITDA acquisition multiple of just 5.9x.

The company expects the acquisition to be at least 15% management earnings per share accretive on a pro forma FY 2021 basis including full run-rate synergies.

Furthermore, based on ongoing organic growth and cost savings, it believes there is a clear pathway to CTS generating 15%+ return on invested capital by FY 2025.

The acquisition remains subject to regulatory approvals and other customary closing conditions. These are expected to be obtained during the second quarter of FY 2022.

What is CTS?

The release explains that CTS has over 80 years of experience in the corporate trust sector and is currently appointed to administer corporate trust services to ~26,000 mandates across a range of securities and bond issuances. It notes that this enables the business to generate growing fee income and high quality, recurring revenue streams.

Management believes CTS is a highly strategic fit with Computershare’s existing Canadian and US corporate trust operations and its growth strategy.

The combination is expected to accelerate the company’s position in the attractive US corporate trust market to a top 4 position. In addition, with enhanced scale, the acquisition is expected to allow Computershare to have greater exposure to positive, long term structural growth trends in trust and securitisation products.


Computershare’s CEO, Stuart Irving, revealed that the company is delighted with the acquisition.

He said: “We are delighted to announce the acquisition of Wells Fargo Corporate Trust Services. It is a clear fit with our successful Canadian corporate trust operations and existing US operations. CTS provides scale with a top four market position, a platform for ongoing growth and increased leverage to long term growth trends and interest rates.”

“The Acquisition allows us to integrate CTS’ deep client relationships and market expertise to deliver additional recurring fee revenue. We also see the potential for improved returns and margin expansion through new product development and innovative technologies, Computershare’s core competencies. We welcome the proven and experienced CTS team to Computershare, and we look forward to working with them as we deliver on our growth strategy.”

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Computershare (ASX:CPU) shares halted after announcing major US$750m acquisition appeared first on The Motley Fool Australia.

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