Here's why the SeaLink (ASX:SLK) share price is charging higher today

The Sealink Travel Group Ltd (ASX:SLK) share price is charging higher today after announcing a new acquisition…

| More on:
two businessmen shake hands amid a backdrop of tall buildings, indicating a share price movement or merger between ASX property companies

Image source: Getty Images

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 SeaLink Travel Group Ltd (ASX: SLK) share price is charging higher on Thursday morning.

At the time of writing, the travel and transport company's shares are up 3.5% to $10.18.

Why is the SeaLink share price charging higher?

Investors have been buying the company's shares this morning following the release of an acquisition announcement.

According to the release, SeaLink has entered into binding agreements to acquire 100% of the Western Australia-based Go West Tours for an enterprise value of $84.7 million. The deal also includes an earnout component of up to $25 million. In addition to this, SeaLink revealed that it will purchase strategic property assets comprising three depots for $3.8 million.

The deal will see the company pay an upfront consideration of $72.4 million on completion, a deferred contingent consideration of $16.1 million payable in equal tranches over two years (provided current earnings levels are maintained in FY 2022 and FY 2023), and an earn-out consideration up to $25 million. The latter is based on exceeding specific financial hurdles over the period to 30 June 2023.

Management advised that the acquisition will be funded from existing cash reserves and existing undrawn senior debt facilities. It expects the deal to be high single-digit earnings per share accretive in the first full year.

What is Go West?

The release explains that Go West is one of the largest specialist bus operators serving the resources sector in Western Australia. It has a modern bus fleet of approximately 287 buses across 9 depots and approximately 181 employees.

Management notes that Go West has enjoyed strong growth in recent years. It has won multi-year contracts with leading mining companies and other regional services such as school bus transfers.

The bus operator generated approximately $46.2 million of revenue in the 12 months to 30 September 2020 and maintains an attractive tender pipeline of new contract opportunities in the state.

SeaLink's Chief Executive Officer, Clint Feuerherdt, said, "The acquisition of Go West provides SeaLink with a unique opportunity to expand into a new market that is highly complementary to our existing Australian bus transport capabilities."

"Go West has valuable contract counterparties and delivers an essential service for these clients. The operations of Go West were unaffected by the COVID-19 pandemic and continued at near 100% levels throughout, keeping their communities and worksites connected."

"The Go West team has built a high-quality business focused on providing great service whilst maintaining high safety standards for their clients. Our intention is to retain the well-recognised and established Go West brand and continue to work with, and support, Go West's existing client base. We are very excited about the growth opportunities this acquisition provides SeaLink and look forward to welcoming all of Go West's employees to the Group," he concluded.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Mergers & Acquisitions

two men in business suits sit across from each other at a table with a chess board on it. Both hold their hands to their chins and look down in serious contemplation of their next move.
Resources Shares

'Not ruled out': Could BHP still buy Anglo-American?

This mega-deal might not be as dead as it looks.

Read more »

Happy couple looking at a phone and waiting for their flight at an airport.
Travel Shares

Flight Centre share price higher on acquisition news

The travel agent is betting big on cruises. Here's what you need to know.

Read more »

A young woman with her mouth open and her hands out showing surprise and delight as uranium share prices skyrocket
Consumer Staples & Discretionary Shares

Myer and Premier Investments shares jump on huge merger news

The two retailers are combining some of their operations. Let's dig deeper into the plan.

Read more »

a woman drawing image on wall of big fish about to eat a small fish
Mergers & Acquisitions

Guess which $9 billion company is acquiring another ASX stock

This big fish is looking to acquire a small fish in a $45 million deal.

Read more »

Two male ASX investors and executives wearing dark coloured suits sit at a table holding their mobile phones discussing the highest trading ASX 200 shares today
Mergers & Acquisitions

TPG Telecom shares rise on $5.2b asset sale to Vocus

The telco is unlocking value by divesting assets. Here's what's happening.

Read more »

A man slumps crankily over his morning coffee as it pours with rain outside.
Technology Shares

Why are Appen shares sinking today?

Let's see what is going on with this high-flying tech stock today.

Read more »

A silhouette shot of two business man shake hands in a boardroom setting with light coming from full length glass windows beyond them.
Mergers & Acquisitions

Rio Tinto share price rises on $10b Arcadium Lithium takeover deal

Management believes the deal makes it a global leader in energy transition commodities.

Read more »

A man has a surprised and relieved expression on his face. as he raises his hands up to his face in response to the high fluctuations in the Galileo share price today
Mergers & Acquisitions

Arcadium Lithium shares rocket 46% on Rio Tinto takeover approach

The mining giant could soon become the third largest lithium supplier.

Read more »