The Codan Ltd (ASX: CDA) share price is setting new all-time highs today on news of an acquisition. We take a look at the details.
The post Why the Codan (ASX:CDA) share price is smashing all-time highs appeared first on The Motley Fool Australia. –
In morning trade, the communications equipment and metal detector manufacturer’s shares touched record highs, at one point hitting $13.64 a share. At the time of writing, the Codan share price has pulled back slightly to $13.28, up 6.84%.
What has the Codan share price setting new highs?
Codan acquires US-based communications supplier
In an announcement released to the market this morning, Codan has entered into an agreement to acquire US-based Domo Tactical Communications (DTC). DTC provides high bandwidth wireless communications, specialising in MIMO Mesh networks. Through the use of multiple antennas and software, MIMO networks are self-forming and self-healing.
DTC is a long-term and trusted supplier of more than 20 US government agencies and ‘Five Eyes’ intelligence communities. DTC’s products enable wireless transmission of data for its customers, including border control, first responders, broadcasters, military, and special forces.
The acquisition comes with an initial A$114 million price tag. An additional USD$16 million earn-out payment may be made, depending on targets being met in 2021. Codan will fund this acquisition with existing cash reserves, while potentially leveraging its current banking facility. The company’s cash balance as of the end of June 2020 was A$92.83 million.
Expected contribution to the business
Furthermore, Codan outlined its expectations for DTC in its first full year of ownership, stating: “It will be earnings-per-share accretive from day 1.”
The company expects DTC to add $90 million in sales, $14 million in earnings before interest, tax, depreciation and amortisation (EBITDA), and A$9 million in profit before tax.
Codan chief executive Donald McGurk said the acquisition demonstrated Codan’s strategic growth plan for its tactical communications business:
This acquisition fills a technology gap and will be able to leverage Codan’s global distribution channels into the developing world.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of February 15th 2021
Motley Fool contributor Mitchell Lawler 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.