Pinned straw:
01-Feb-2024: GNG-Acquisition-of-WA-Based-Process-Controls-Business-(Paradigm-Engineers).PDF
GR Engineering Services Limited (ASX:GNG) announced this morning that its wholly owned subsidiary, Mipac Holdings Pty Ltd (Mipac) has entered into an agreement to acquire Paradigm Engineers Pty Ltd (Paradigm), a provider of control systems and electrical engineering, automation and technology services based in Western Australia.
Transaction Highlights
- This transaction enhances Mipac’s control system and electrical design capabilities and expands its existing footprint in Western Australia. Paradigm has significant expertise working across a range of commodities, including iron ore, gold and battery minerals.
- Paradigm is forecasting FY24 revenue of $16 million and an EBITDA margin % consistent with Mipac. Similar revenue is anticipated for FY25, supported by Paradigm’s current order book and pipeline. The combined Mipac and Paradigm business is expected to generate revenue of approximately $50 million on a proforma basis.
- Paradigm’s current management team have agreed to continue in their roles post-completion.
- The purchase price is $9 million, with 50% payable in cash and 50% payable in GR Engineering scrip, subject to voluntary escrow. It is anticipated that the transaction will be immediately earnings per share (EPS) accretive.
This is a small bolt-on acquisition that does NOT require a CR, and is immediately EPS accretive. All good! GNG don't do M&A very often, but when they do make an acquisition, it tends to be a good strategic fit, for a good price.
Paradigm Engineers | Control systems and electrical engineering company
GR Engineering - Global Mineral Processing Solutions (gres.com.au)
GR Engineering Services Limited - Mipac - Engineering Consultants and Contractors (gres.com.au)
Disc: I hold GNG shares (both here and in a real money portfolio).
Agree strongly - great bolt on acquisition, just as Mipac was in 2021.
Looks like they are retaining 50 of the 55 Pradigm staff - as 125 at the AGM report and 175 on amalgamation.
Gives us better exposure to Iron Ore and 50% scrip payment at $2.40 sets a new benchmark. Maybe the SP meandering below $2 is now over. Oh well, it was a good trading gig while it lasted. This is just such a great franked dividend payer, but I'd rather leave the money with the company with a ROCE of 58% in FY23. Though I suspect @Rick will be disappointed at the McNevin view on value.
Taylor Collison distributed an update to their clients on GNG on Feb 6th concerning the Paradigm Engineering Acquisition:
https://www.taylorcollison.com.au/wp-content/uploads/2024/02/GNG-Acquisition-Paradigm.pdf
TC have an "Outperform" call on GNG and a $2.52 TP (target price). GNG closed yesterday at $2.37. Here's page 1 of TC's update:
That's page 1. They have a Summary of their Forecasts on page 2, and page 3 contains a Company Overview and sections titled "How does GNG get work and make money?" and "GNG – Oil & Gas". You'll find a section titled "Revenue Generation & Current Projects" on page 4, then "Risks" on page 5 followed by their Disclaimer and disclosures on pages 6 and 7.
Disclosure: I hold GNG both here and in a real money portfolio.