Southern Cross share price shot up by 7% after announcement of a strategic acquisition of Trivantage this morning
The post Why did the Southern Cross (ASX:SXE) share price shoot up 7% this morning? appeared first on Motley Fool Australia. –
Southern Cross Electrical Engineer Ltd (ASX: SXE) today announced it has acquired Trivantage for up to $53.5 million. The engineering company says the acquisition will bolster its service and maintenance capabilities, and enable it to enter new markets.
The announcement follows a trading halt on Southern Cross shares earlier this morning. Trade has since resumed and the Southern Cross share price is currently up 6.52% at 49 cents.
What’s the deal?
Trivantage is a Melbourne-based electrical solutions company that supplies and provided maintenance services on switchboards, CCTV, refrigeration, light and power. The company has a revenue base of low-risk maintenance and contracting work. It reported $116 million of revenue and a profit before tax of $8.2 million in the 2020 financial year. Its revenue guidance for the 2021 financial year is $130 million, with earnings before interest and tax of (EBIT) of $10.8 million.
Southern Cross will pay $25 million in cash on completion, and a further $10 million in cash and $5.5 million in Southern Cross’ shares after achievement and confirmation of Trivantage’s 2021 financial year targets. Further cash payments will be payable subject to performance hurdles in the 2022 and 2023 financial years.
About the Southern Cross share price in 2020
The Southern Cross share price has lost 15% on a year-to-date basis. The company paid a dividend yield of 6.12% in October, and it has paid a consistent dividend in 8 of the past 10 years. The company already has $330 million of secured project work in FY21, which accounts for 80% of the revenue target. At the current market price of 49 cents, it commands a market cap of $114 million.
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Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.