Listed company Core Services Group has announced plans to acquire civil engineering and construction contractor Marcon Group, formerly Marsh Civil, in an all-scrip transaction worth up to $10.1 million.
The deal is effectively a back-door listing of the Marcon Group, which changed hands last October when it was acquired by Core Equities Pty Ltd, an entity that has three common directors with CSG.
The acquisition deal will see CSG issue just over $3.5 million in shares immediately, with further payment to take the total up to $10.1 million worth of shares, subject to Marcon’s performance.
The maximum payment equates to 3.0 times Marcon's expected 2013 earnings before interest and tax (EBIT).
If the maximum number of shares are issued, the vendors - including CSG directors Stephen Zurhaar, Steve Dropulich and Vincent Goss - will own 34 per cent of the listed company (not counting any shares they own or purchase separately).
Marcon is expected to contribute around $35 million to CSG’s revenue in the first full year of ownership.
It was established in 1967 as Marsh Civil, and is now trading as MCore Services.
Marcon employs around 96 workers and owns a fleet of plant and equipment valued around $5.2 million.
The company counts BHP Billiton, Rio Tinto and Fortescue Metals Group among its repeat clients.
Perth-based CSG adopted its current name in March, having previously traded as Connxion. The former business fell into administration last year and was subsequently restructured, under a deed of company arrangement (DOCA).
The acquisition remains subject to due diligence and shareholder approval.
CSG said it would now launch a $5.5 million share placement to partially fund the transaction and repay a $2.5 million convertible note debt to the Marcon Group.
At 12:45PM, WST, CSG shares were down 1 per cent, trading at 44.5 cents.