Codan Limited

ASX:CDA

Codan Limited

ASX:CDA
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$16.30 (+0.7%)
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#14
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26
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Reports (7) My Report Forum Investors
Forum Topics CDA CDA ASX Announcements

Pinned straw:

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lankypom
Added one year ago

A very positive announcement that the company is acquiring Eagle, a UK first responder communications business as a carve out from its parent organisation. The products are 100% complementary with Codan's existing Zetron business, itself a very successful acquisition from only a few years ago, and have great market penetration, with two thirds of the UK police forces using Eagle's products. The total acquisition costs are expected to be $25m, funded from debt so no share dilution. The acquired business has revenue of $22m and EBITDA of $3m so this looks like a very good deal. The only questions in my mind is who will be running this business, since there was no mention of any key personnel from Eagle who may or may not continue to lead the business in the UK. Also how will Codan integrate two different product sets which address the same market opportunity. Exciting times.

25
Solvetheriddle
Added one year ago

@lankypom sound write up, with CDA at $1.4b market cap this is a bolt on. the Zetron CEO sounded revved up maybe he will be running it. appears incremental add on in adjacency , so + at this stage

22
Rocket6
Added one year ago

Agree with you both @lankypom @PortfolioPlus

As stated by @Solvetheriddle this is merely a bolt on at 22-25m, with Codan rightly commanding a market cap of more than 1b. I was a little relieved to see this to be honest (not a whopping large acquisition), but most importantly the bolt on seems to make sense -- continued investment into Codan's more reliable business segment and further evidence of diversifying their income stream. It will allow them to establish a strong market position in the UK and enhances their reach into Europe and the Middle East.

I think the comms part of the business will be placed at the forefront for Codan (evidence of this already, but pushing towards an 80/20 split etc) with the metal detection part of the business to remain high quality (still market leading) but cyclical and less predictable.

23
Solvetheriddle
Added one year ago

@Rocket6 at least not a downgrade into earnings, see what they come up with

13
Karmast
Added one year ago

Fingers crossed its as wise an acquisition as the past two have been. Based on the last two additions, management have done a good job allocating capital and growing the business profitably. The debt to equity ratio is only about 22% at present and they have about 80 times current interest payments covered by earnings, so personally I'd rather see some more debt added first rather than diluting existing shareholders with a cap raise (depending on the size of acquisition of course).

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