The OFX Group Ltd (ASX: OFX) share price is taking off today after the company announced that it's agreed to acquire a Canadian foreign exchange service provider.
The company is set to purchase Firma Foreign Exchange Corporation, which offers its services to corporations, for $98 million.
At the time of writing, the OFX share price is $2.20, 17.65% higher than its previous close.
Let's take a look at today's news from the multicurrency payment services and solutions provider.
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OFX share price soars on $98 million acquisition
The OFX share price is roaring higher on news of the company's first major acquisition – set to increase its revenue from North America by 121%.
Firma has around 9,600 corporate customers and 9 offices in Canada, Australia, the United Kingdom, and New Zealand.
According to OFX, the acquisition will significantly increase its volumes in major currency pairs. Such pairs include United States Dollars to Canadian Dollars and United States Dollars to Great British Pounds.
OFX expects it will also bump its underlying earnings per share (EPS) by more than 20% in the first year of ownership and by more than 30% in the second year.
Additionally, it should bring at least $5 million of pre-tax cost and revenue synergies in financial year 2025.
OFX will partly fund the takeover with cash and partly use an underwritten debt facility.
It expects to pay the debt back in less than 4 years. To do so, it will be putting its share buy-back program on hold.
The acquisition should be finalised in the first quarter of financial year 2023.
Firma's $98 million price tag represents 9 times its earnings before interest, tax, depreciation, and amortisation (EBITDA) for the 12 months before 30 September 2021.
What did management say?
OFX CEO and managing director, Skander Malcolm commented on the news driving the company's share price today, saying:
This is our first major acquisition and very much aligned with our strategy of building scale in the corporate segment and growing the North American region. Firma generates strong earnings from a high-quality customer base and has an excellent service culture, so there is a lot of alignment with OFX…
Our business is continuing to perform well, with the positive trends we drove in the first half continuing into the third quarter. With the addition of Firma we can accelerate that growth by combining our infrastructure and risk culture with their customer base and service excellence, delivering further profitable growth, and value accretion for OFX shareholders.
