WiseTech Global has once again raised investor concerns about its appetite for big deals after revealing its second multi-million-dollar US buy in three weeks.
By gobbling up intermodal rail solutions provider Blume Global for $US414 million ($A603m), WiseTech has taken the value of the two deals to nearly $1 billion.
The US-based company is being acquired from funds managed by Apollo, EQT and minority shareholders.
The company paid $US230 million or $A325 million in late January for US transport management system software company Envase Technologies
“This is another strategically significant acquisition that follows our acquisition of Envase Technologies last month,” WiseTech Global founder and CEO Richard White said on Friday, referring to January purchase.
But WiseTech shares slid 3% on Friday because, once again, the company is tapping shareholders for the money to pay for the deal.
This will comprise $US134.8 million from existing cash reserves, $US155 million of debt from new facilities, and $US124.2 million new WiseTech shares. This represents a funding mix of 70% cash and 30% WiseTech Global shares, with the latter to be escrowed for 12 months.
WiseTech said 70% of the Envase deal was funded by cash on hand (US$161 million), while the other 30% was paid with new WiseTech Global shares (US$69 million).
That’s a total for the two deals of $296 million in cash on hand, $US155 million in new debt and more than $US193 million of new shares.
WiseTech reveals its December interim financials next week (February 22), and founder and CEO Richard White can expect additional questions on the acquisition stream and whether any more are planned for this year.
Since listing on April, 2016, WiseTech has been a highly acquisitive and has now done more than 42 deals.
Before the Envase deal in January, WiseTech had picked up a number of companies in the past couple of years – the US’s Shipamax, SISA Studio Informatic of Switzerland, Ready Korea from South Korea, Depot Systems from the US, Xware from Sweden, Norway’s Systema and Containerchain from Singapore.
Its flagship software CargoWise is a global logistics management platform, designed to help companies manage tariffs, regulation and taxes across the world.
Blume and Envase’s technology will mesh with the CargoWise global network.
From what WiseTech has said in the two announcements, Envase and Blume are compatible.
Blume Global is a provider of a leading solution facilitating intermodal rail in North America. Blume manages intermodal containers and chassis on behalf of 6 of the 7 Class 1 US railroads, ocean carriers, and other intermodal equipment providers. This includes global freight forwarders and Beneficial Cargo Owners (BCOs).
Envase is a New Hampshire-based provider of transport management system software for intermodal trucking, drayage (container haulage), and landside logistics.
WiseTech said in Friday’s statement that Blume is a high-growth recurring revenue business and is expected to generate FY 2024 revenues in the range of US$65 million to US$70 million, which represents annual growth of 45% to 55%.
Before operational synergies, on a standalone basis, Blume expects to achieve FY 2024 EBITDA margins of approximately 10% and be cash flow breakeven by the end of FY 2024.
WiseTech said in its late January announcement that Envase is expected to generate approximately US$35 million of revenue for the calendar year 2023 with an EBITDA margin in the low to mid 20% range.
WiseTech shares are now below the January 27 close of $57.58, having peaked at $63.53 on February 2. It was as though the shares surged after the Envase announcement and then sold off for no reason – and then we got the Blume statement on Friday.
Still, on Friday’s closing price, WiseTech was worth more than $18.5 billion, well above the $16.82 billion of Brambles – the more established global logistics and pallets giant – and the vastly more profitable Qantas’s $11.9 billion.
Friday’s unease will probably disappear if Tuesday’s results meet forecasts and justify the early 2023 outperformance. The shares are up around 15% year to date, more than double the near 6% rise in the ASX 200.
Tuesday’s results announcement will also give investors the chance to see if this high valuation (and a P/E of 90) are justified.
