DGL share price slips on strategic $6.2 million acquisition

The DGL Group Ltd (ASX: DGL) share price is heading south today.

This comes despite the chemical company announcing it has expanded its manufacturing capabilities following the recent acquisition.

At the time of writing, DGL shares are down 1.15% to $2.59 apiece.

It’s worth noting that its shares have lost more than 8% in the last two days.

DGL strengthens service offering to customers

According to its release, DGL advised it has strategically acquired silicone-based manufacturer, Flexichem Australia for $6.2 million.

Based in the Adelaide, Flexichem is a family-owned business specialising in the development and manufacturing of silicone and non-silicone chemicals. These are used in a number of diverse industries such as food processing, printing, automotive, agrochemical, mining and personal care.

The agreed purchase price represents a valuation of 4.5 times the last twelve months of Flexichem’s normalised EBITDA.

The deal is expected to be funded by $4.65 million in cash and $1.55 million in DGL shares.

DGL stated that Flexichem will vertically integrate into DGL’s manufacturing operations and strengthen service to its customer base.

It is estimated the acquisition will add 1,200 of additional chemical manufacturing capacity.

DGL founder and CEO, Simon Henry commented:

The acquisition of Flexichem expands our manufacturing capabilities into South Australia, adds talent and IP on silicone-based manufacturing into DGL, and also opens up new export markets.

While the release is positive in nature, the DGL share price is tracking the S&P/ASX 200 Industrials (ASX: XNJ) sector’s fall.

The index is down 1.09% to 6,252.6 points today after chopping and changing the past few days.

DGL share price summary

It’s been an impressive time since DGL debuted on the ASX in late May with a $1 price tag.

The company has made strong progress over the 14 months which has been reflected in the DGL share price.

When looking from this time last year, its shares are up by more than 80%.

On valuation grounds, DGL presides a market capitalisation of roughly $770.57 million.

The post DGL share price slips on strategic $6.2 million acquisition appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended DGL Group Limited. The Motley Fool Australia has recommended DGL Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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