This is why the Hansen share price is rocketing on a big new acquisition

Hansen Technologies Limited (ASX: HSN) is buying Sigma Systems.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Hansen Technologies Limited (ASX: HSN) share price is up 19% to $3.67 after the software billing provider announced it is to acquire rival software provider Sigma Systems for an enterprise value around CAD$157 million or A$116.7 million.

The deal is being priced on an EV/ EBITDA multiple of 8.3x Sigma's calendar year EBITDA adjusted for the fact it capitalises (rather than expenses) research and development costs. This can have the effect of artificially inflating EBITDA at a software business as costs are not taken upfront, but capitalised over a number of years.

Hansen will fund the deal with a bank debt facility underwritten by RBC Capital Markets worth up to A$225 million.

Sigma currently has more than 70 enterprise software customers worldwide with 56% of its revenues from North America, 29% from EMEA, and 15% from the Asia Pacific.

The acquisition is expected to be earnings per share accretive in FY20 excluding amortisation of acquired intangibles which you'd expect given it's being funded by bank debt that will admittedly incur significant new interest costs.

However, the market has probably sent the stock higher this morning as Hansen's management has a good track record of completing acquisitions without diluting the share base or blowing up capital.

Arguably the stock was also undervalued at below $3 in recent months.

Tom Richardson has no position in any of the stocks mentioned. You can find Tom on Twitter @tommyr345 The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Hansen Technologies. The Motley Fool Australia has recommended Hansen Technologies. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

A smiling businessman in the city looks at his phone and punches the air in celebration of good news.
Broker Notes

These ASX 200 shares could rise 50% to 60%

Brokers believe these shares could deliver big returns for investors.

Read more »

A girl is handed an oversized ice cream cone with lots of different flavours.
Best Shares

8 ASX All Ords shares that tripled in value in FY25

Just 8 out of the 500 companies making up the ASX All Ords achieved share price growth of 200% or…

Read more »

Broker written in white with a man drawing a yellow underline.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

Woman with a scared look has hands on her face.
Broker Notes

Bapcor shares fell more than 30% yesterday. Should investors buy in the dip?

Is this a value opportunity?

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Broker Notes

Broker raises price targets on 2 ASX 200 shares to buy

Ord Minnett has just upped its 12-month share price targets on 2 buy-rated ASX 200 stocks.

Read more »

Man with rocket wings which have flames coming out of them.
Share Gainers

Guess which ASX All Ords stock just rocketed 34% on strong earnings growth

Investors just sent this ASX All Ords stock surging 34%. Here’s what’s happening.

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why DroneShield, Gentrack, Metals X, and Northern Star shares are tumbling today

These shares are ending the week in the red. But why?

Read more »

A businessman looking at his digital tablet or strategy planning in hotel conference lobby. He is happy at achieving financial goals.
Share Gainers

Why Dimerix, Newmont, Regal Partners, and Titomic shares are storming higher

These shares are having a good finish to the week. Let's see why.

Read more »