StrongPoint: Accretive UK expansion - ABG

Air Link acquired for GBP 9.5m (~NOK 115m)
2021 numbers imply EV/EBITDA of ~4x
EPS estimate up 11% for ‘23e

Acquires Air Link for ~NOK 115m
StrongPoint announced on 14 Feb that it had signed a non-binding term sheet to acquire Air Link Group (ALS), with final terms and pricing to be negotiated. On Friday, StrongPoint announced the final agreement has been signed, with an estimated purchase price of ~GBP 9.5m. This will be financed 80% by cash (~NOK 92m, already covered), and 20% by consideration shares with 24-month lockup. Based on the current share price, this would correspond to ~1m consideration shares, of which StrongPoint can cover 0.5m from already held treasury shares. Final closing will be in Q2, following legal approval of a corporate reorganization of Air Link (moving all related companies into ALS).

Accretive deal: ’21 EV/EBITDA of ~4x
ALS is a UK-based company that provides installation and service for retail solutions (grocery lockers, self-checkout, vending systems, etc.). To our understanding, the key rationale for the acquisition is to broaden StrongPoint’s geographical footprint. ALS has a strong grocery retail client base (e.g. Tesco, Asda, Sainsbury’s and Carrefour) in the UK and Ireland, and this should provide a good base for selling StrongPoint’s solutions into these markets. ALS had 2021 revenues of ~GBP 24m and an EBITDA margin of 10%, which implies a ’21 EV/EBITDA multiple of ~4x, which compares to StrongPoint at ~12x for ‘22e prior to our estimate changes and the announcement.

EPS estimate up 11% for ‘23e
We still have limited historical financials for ALS, but use the 2021 figures as a reference point. We have assumed a lower contribution in the near term (EBITDA contribution of ~NOK 21m for ‘23e), as we expect increased investments in sales and marketing capacities to drive sales of StrongPoint’s product portfolio in the UK to Air Link customers. Based on this, we increase ‘23e EBITDA by ~20%. With ~NOK 12m/year in PPA amortisation (assuming 40% ...
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