The Codan Limited (ASX: CDA) share price will be on focus this morning following the company’s acquisition announcement. At yesterday’s market wrap, the technology company’s shares finished the day at $15.44.
Can the Codan share price go higher?
It will be interesting to see if investors drive the company’s shares higher following its latest announcement to the ASX.
According to this morning’s release, Codan advised it has entered into an agreement to acquire Zetron, Inc. (Zetron) from JVCKenwood Corporation.
Founded in 1980, Zetron is an American company that manufactures mission-critical communication technologies. Products include voice dispatch, emergency call-taking including next-generation 911 (NG911), mapping, computer-aided dispatch, and fire station alerting. The business operates in an array of industries such as public safety, transportation, utilities, natural resources, healthcare, and academic institutions. Zetron has offices in the United States, Australia, and the United Kingdom.
The acquisition will see Codan make an upfront cash payment of US$45 million for 100% of Zetron’s issued share capital. Codan will use existing cash reserves as well as tap into its recently approved debt facility to fund the takeover.
It’s expected that the sale will be completed before the end of this month, subject to usual customary conditions.
Once under Codan ownership, Zetron is anticipated to contribute roughly $67 million in sales for the next financial year. In addition, earnings before interest, tax, depreciation and amortisation (EBITDA) is forecasted to be at $8 million for FY22. This in turn will make Zetron an earnings-per-share accretive business.
Management commentary
Codan managing director and CEO Donald McGurk commented:
The acquisition of Zetron is in line with Codan’s well-publicised strategy to transform our Communications businesses from products to solutions. This acquisition allows us to capitalise on Zetron’s extensive distribution network, brand strength and customer loyalty.
Codan president for critical communications Scott French added:
…By combining Codan’s Land Mobile Radio products and solutions with Zetron’s Command & Control capability, we will be in a position to better serve the growing NG911 market, whilst maximising value and choice for our customers.
The Codan share price has jumped to almost 180% since this time last year, reflecting positive investor sentiment.
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Motley Fool contributor Aaron Teboneras 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.
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