SRG snaps up ALS offshoot for $80m

Engineering services firm SRG Global is set to buy ALS subsidiary Asset Care for $80 million by raising $51 million in new equity, as it reports an upswing in half-yearly revenue and profit.

The companies told the market this morning they had entered a binding agreement under which SRG will acquire 100 per cent of asset integrity and reliability services outfit Asset Care, a wholly owned subsidiary of ALS.

The business has 13 locations across Australia and more than 600 employees on its books, who will be brought over to SRG as part of the deal.

It comes nearly 12 months after SRG bought West Perth-based rival WBHO Infrastructure as part of a $15.2 million deal following the company's collapse in 2021.

SRG chief executive David Macgeorge told investors the engineering firm had been tracking the business for five years and the transaction would bring two complementary businesses together.

“Asset Care is a business that we have followed for some time and see a significant opportunity to create value by combining our complementary asset maintenance services, portfolios of tier one clients, core end markets, strategic locations Australia wide, and market leading technologies and systems,” he said.

“The acquisition will enhance SRG Global’s capabilities to provide a full end-to-end asset lifecycle sustainability solution.”

SRG will pay $80 million for Asset Care, with the transaction bankrolled predominantly by a $51.4 million equity raising and share purchase plan led by Barrenjoey Markets, Shaw & Partners Ltd and Euroz Hartleys.

There are up to 64.4 million SRG shares on offer to institutional investors at 72 cents apiece, a 6 per cent discount on the stock’s five-day volume-weighted average price.

The remaining funds will come from a $30 million bank loan and existing cash.

SRG is anticipating additional revenues of $135 million for FY23 by taking on Asset Care.

As well as announcing the acquisition, SRG posted a 28 per cent lift in revenue for the first half of the 2023 financial year, from $297 million to $380 million.

Net profit after tax was higher by 31 per cent compared to this time last year at $13.2 million and the group has lifted its EBITDA guidance for FY23 to between $72 million and $75 million.

The company will also shell out an interim 2 cents per share fully-franked dividend.

EBITDA margins were compressed slightly to 9 per cent.

Barrenjoey Capital Partners is the sole underwriter to the placement and acted as financial adviser to SRG.

PwC was accounting and tax adviser and Herbert Smith Freehills legal adviser.

SRG shares are still in a trading halt and last changed hands at 76 cents.