The Codan Limited (ASX: CDA) share price is down 2.46% in morning trade, currently at $9.50 per share.
The S&P/ASX 200 Index (ASX: XJO) is struggling as well, down 0.6%.
Below we take a look at the acquisition announcement from the ASX communications and tech share.
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What acquisition was announced?
The Codan share price is sliding after the company reported that its subsidiary, Domo Tactical Communications (DTC), has acquired 100% of the shares in Broadcast Wireless Systems Limited (BWS) from its founders.
The United Kingdom-based BWS' technology portfolio encompasses wireless video camera links and video broadcast products.
Commenting on the acquisition, Paul Sangster, president of Domo Tactical Communications, said:
The quest for improved production quality, cost efficiencies and the challenges caused by the pandemic are fuelling the transition of broadcasters to adopt remote production capabilities and the combined offering of DTC and BWS will enable this.
DTC's customers will now be offered a low-latency, high performance solution which has been validated in critical and challenging operations such as the opening ceremony for the Olympic Games in Japan and some of the world's most prestigious and demanding motor racing events.
Codan reported it will fund the acquisition via its consisting debt facility. It will pay $3.7 million upfront and potentially up to $4.8 million more "if certain earn-out targets" are reached over 3 years.
The company said that the total assets it's acquiring are approximately equal to the purchase price, and it expects no change to Codan's shareholder equity.
Codan also expects the acquisition to immediately be earnings-per-share accretive. For the financial year ending 30 June, BWS delivered earnings before interest and taxes (EBIT) of $600,000. And the company notes its financial performance during that year was hampered by the global pandemic.
Codan share price snapshot
The Codan share price is down 15% in 2021. That compares to a year-to-date gain of 10% posted by the ASX 200.
Over the past month Codan, shares have dropped 5%.
