The Citadel Group Ltd (ASX: CGL) share price has had a very positive start to the week.
In afternoon trade the secure enterprise information management company's shares are up 5% to $4.49.
Why is the Citadel share price storming higher today?
Investors have been buying the company's shares today after it announced an agreement to acquire all of the share capital of Noventus Pty Ltd.
Noventus is a private multi-disciplinary company specialising in servicing the Defence, Government, Telecommunication and Transportation sectors.
According to the release, management expects the acquisition to deliver proven systems integration capability to expand Citadel's service offering and achieve revenue synergies from new opportunities, particularly in the Defence and National Security (DNS) vertical.
The release explains that Noventus' capabilities include systems integration and software development, systems engineering, integrated logistics support, and project management.
Citadel's CEO, Darren Stanley, explained the rationale for the acquisition.
He said: "Citadel has a successful track record of acquiring strategic bolt-on businesses that are readily integrated into the group in order to provide additional customer-centric solutions, leveraging our significant software engineering expertise. The acquisition of Noventus is consistent with our traditional approach to acquisitions and increases the scale of Citadel's DNS offering, which remains a key industry focus of the Group."
He also appeared confident that the acquisition would strengthen its leading position in the DNS vertical.
Mr Stanley added: "With proven systems integration capabilities, Noventus will reinforce our position as a leading supplier to the DNS vertical. Furthermore, Noventus has successfully attained panel access to a number of niche procurement environments in recent years, which will now place Citadel in a strong position to win further significant Government Enterprise Information Management contracts."
What are the terms?
Citadel will pay $5.7 million in cash to acquire Noventus, with 50% of the consideration to be paid on completion and the remaining 50% expected to be paid in approximately three months.
This represents an acquisition multiple of 2.7 times FY 2018 EBITDA of $2.1million, which was achieved off revenues of $17.5 million. The acquisition is expected to be immediately earnings per share accretive.
It remains subject to certain conditions precedent concerning Defence Panel Memberships, but completion is expected within the next four weeks.
Citadel isn't the only tech share charging higher today. In afternoon trade the Appen Ltd (ASX: APX) share price is up 3.5% and the WiseTech Global Ltd (ASX: WTC) share price is up 3%. This has helped drive the S&P/ASX 200 Info Tech index 1% higher today.
